Brookfield sells Enwave Energy for $4.1bn in two transactions

IFM Investors and OTPP partnered to purchase the Canadian portion of the district energy business, while QIC and Ullico acquired the US-based assets.

The publicly listed infrastructure unit of Brookfield Asset Management has sold Enwave Energy, the largest district energy business in North America, in two separate transactions which, on an enterprise value basis total $4.1 billion.

In one transaction, Brookfield Infrastructure Partners agreed to sell the Canadian portion of Enwave’s business to Australian infrastructure manager IFM Investors and Ontario Teachers’ Pension Plan for C$2.8 billion ($2.19 billion; €1.82 billion). IFM and OTPP will each take a 50 percent stake in a portfolio that provides thermal energy for heating and cooling to 320 customers in Toronto, London, Windsor and Charlottetown, according to a statement. They will continue operating the business under the Enwave brand.

“The customer base is diversified,” IFM’s global head of infrastructure Kyle Mangini, told Infrastructure Investor, noting it includes hotels, government buildings, a data centre, as well as residential customers. “Enwave has a great environmental story, but it’s also attached to a very good business. It’s a business that makes a lot of sense,” he said.

The second transaction, for an estimated $1.91 billion, has the Australian firm QIC and Washington, DC-based insurer Ullico forming a joint venture to purchase Enwave’s US-based business, which serves more than 340 clients in eight states. The more than 400 buildings it serves, include universities, such as Syracuse University and Louisiana State University, school districts and hospitals, QIC said in a statement.

The portfolio also includes North America’s largest thermal ice storage facility, based in Chicago, and the continent’s largest sewer heat recovery system in Denver. Neither QIC nor Ullico disclosed the equity split of their joint venture.

“There is an increasing need for building owners – from convention centres and data centres to university campuses – to provide clean energy solutions and energy efficiency savings,” Christian Schmid, QIC’s sector lead for utilities, told Infrastructure Investor. “From a thematic approach, we believe in the potential of distributed energy as providing sustainable, long-term energy solutions to buildings and their operators.

“Investing in Enwave is an excellent opportunity to further our footprint in the US and to own a local business that is represented across most major markets that will continue its growth with our support.”

Brookfield acquired Enwave for C$480 million in 2012, when the Canadian company served a small number of hospitals, data centres, offices and residential buildings in downtown Toronto. Over the course of Brookfield’s ownership, the company added 135 new customer buildings and realised a compounded annual EBITDA growth rate of over 20 percent, BIP chief executive Sam Pollock said in a letter to unitholders announcing the firm’s Q4 2020 results on Wednesday.

“We will earn an IRR of over 30 percent on our investment and a multiple of invested capital of over six times,” he said.

Proceeds from the transactions, both are expected to close mid-year, will “fund a large component of our annual growth investment target of $2 billion”, Brookfield said in the statement, announcing the two deals.

Additional reporting by Daniel Kemp.