I Squared sells Cube Hydro to Canadian utility

The Miami-based firm has realised more than $2.8bn from the exits of three platform companies formed through its first infrastructure fund.

I Squared Capital has agreed to sell hydroelectric power company Cube Hydro Partners to Canadian utility Ontario Power Generation after building it into a 385MW platform, according to Adil Rahmathulla, a founding partner at the firm.

I Squared, a Miami-based infrastructure manager, is selling Cube Hydro for an undisclosed amount after creating the business in 2015 with the purchase of a single 6MW hydro asset in Pennsylvania, Rahmathulla told Infrastructure Investor. The firm has realised more than $2.8 billion after selling Cube Hydro and two other portfolio companies over the last year, he added.

Cube Hydro began as a portfolio company for I Squared to acquire and develop small-to-mid-sized hydro plants, primarily in the US. Five years later, Cube Hydro manages a portfolio of 19 assets located on 10 river systems in five US states.

“Through multiple acquisitions and extensive hands-on asset management by our investing/operating teams, we create extremely well-run, large and specialised platform companies that are operated by outstanding management,” Rahmathulla said. “This results in a significant value premium compared to the price we pay for individual assets that are folded into the platforms over time.”

Rahmathulla explained that I Squared’s strategy to build platform companies out of standalone assets allows the firm to buy hydro projects at a lower entry price and improve them over time. For Cube Hydro, he said the firm invested in “robust” capital expenditures that “optimised” the assets, with an eye to exiting Cube Hydro as a whole entity down the road.

The exit is the third full realisation for the I Squared Global Infrastructure Fund I, which closed on $3 billion in 2015. In April, the firm agreed to sell Singapore-based rooftop solar company Amplus Solar to Petronas, a Malaysian state-owned energy company. In August, I Squared sold onshore wind developer Lincoln Clean Energy to Danish company Ørsted.

The firm closed its latest infrastructure fund, ISQ Global Infrastructure Fund II, on $7 billion in September.

Rahmathulla founded I Squared in 2012 alongside Sadek Wahba and Gautam Bhandari, all former executives at Morgan Stanley. The firm targets energy, utilities and transport assets in the US, Europe and select high-growth markets.

Ontario Power Generation was not available for comment at the time of publication.