AXA weighs new infrastructure fund in 2010

* Next fund could exceed current 1.1 billion euro fund

* 300 million euros of second fund left to invest

* Sees E.ON's Italian gas network as "nice opportunity"

* Would consider teaming up for French power grid RTE

By Simon Meads and Greg Roumeliotis

LONDON/AMSTERDAM, Oct 9 (Reuters) - AXA Private Equity (AXAF.PA) is considering raising a 1 billion euro-plus ($1.48 billion) infrastructure fund in 2010 when the fundraising climate eases, its head of infrastructure said.

New fundraisings in both private equity and infrastructure have become sparse in the wake of the credit crisis as cash-strapped investors steer clear of making new investments.

The alternative-investment arm of the French asset manager AXA, the third largest private equity investor in Europe, has made no firm decision on the launch.

But Head of Infrastructure Mathias Burghardt said there was a good case for it, as investor appetite improves and as competitors who are "queuing" to raise capital complete fundraisings by early 2010.

"I think it should make a lot of sense to come to the market some time, probably next year," Burghardt told Reuters.

Just $6.8 billion has been raised in 2009 so far in infrastructure, compared with $34.3 billion in all of 2008, leaving many firms still seeking investor commitments, data from industry analyst Preqin shows.

Goldman Sachs (GS.N) is targeting $7.5 billion for its second infrastructure fund, while Alinda Capital Partners is seeking 5 billion for U.S. focused investments. Macquarie (MIG.AX) and RREEF, the alternatives arm of Deutsche Bank (DBKGn.DE), are also both in the process of raising 3 billion euro European funds, said Preqin.

"We believe that we should go for a larger fund than the current one," said Burghardt.

But the credit crisis has shown that very large funds are not necessarily the best option, he added.

For its second 1.1 billion euro fund it is targeting an average internal rate of return of 12 to 14 percent, he said, adding that AXA has a strategy of holding onto assets over the longer term of its 20-year fund.

But this requires ensuring cash flows are shielded from inflation and interest rate movements. Burghardt said AXA had a conservative strategy whereby 75 percent of its debt was hedged on a long-term basis.

ON THE LOOKOUT FOR DEALS

AXA has around 300 million euros left to invest out of its second 1.1 billion euro infrastructure fund following a wave of investments in over the last six to nine months, said Burghardt.

The fund has completed two major deals this year: the acquisition of 80 percent of Enel Rete Gas in Italy together with investment fund F2i and the takeover of the 163 megawatt Kallista wind portfolio of Babcock & Brown in France.

With some infrastructure funds making distressed asset sales and many utilities putting power grids and gas businesses on the block, AXA is looking at several opportunities, including E.ON's gas distribution network in Italy.

"It's not a must-have but it's a nice opportunity and for the right price it makes a lot of sense," said Burghardt when asked about E.ON's business.

AXA does not regard the sale of EDF's UK power distribution business as a priority but would consider teaming up with public and private investors if its French power grid RTE came to the market, an asset it knows extremely well, Burghardt said.

AXA is looking to close a 2 billion euro tram-train project with Bouygues (BOUY.PA) in the Indian Ocean island of Reunion by the end of the year and is pursuing opportunities in France's high speed rail sector, where it has teamed up with Vinci (SGEF.PA), Burghardt said.

It also pursuing opportunities in European wind farms and Italian hospitals, he added. ($1=.6767 Euro) (Editing by Hans Peters)