I Squared grows district energy portfolio

The New York fund manager has acquired a 100% stake in DTE CoolCo marking its second acquisition of a North American district energy asset.

I Squared Capital (ISQ) has added another district energy asset to its portfolio with the acquisition of DTE CoolCo, a district chilling system in Cincinnati, Ohio, which also marks the second investment the New York-based fund manager has made through its debut fund – ISQ Global Infrastructure Fund – which it is currently raising. ISQ has bought the asset from DTE Energy Services for an undisclosed amount.

DTE CoolCo is a 10,350-ton district chilling system providing cooling services to a large and diverse customer base including commercial offices, retail establishments, hotels, historical landmarks, government buildings and other facilities in the central business district of Cincinnati, the firm said in a statement.

The acquisition of DTE CoolCo as well as the investment made in January in Kendall Green Energy, a 256-megawatt co-generation facility, were realised under a partnership with Veolia Energy North America, created with the aim of both partners deploying up to $1 billion in equity over the coming two years in combined heat and power (CHP) and district energy systems. Under the terms of the agreement Veolia provides operation and management services.

“Acquisition of CoolCo is in line with our strategy of creating a diversified portfolio of district energy assets,” Adil Rahmathulla, a partner at ISQ, said, referring to the latest acquisition. “This deal, as well as the previous deal [Kendall], were both sourced exclusively through our network and through leveraging our industrial partnership with Veolia, not through auctions,” he commented, adding that proprietary deals, in ISQ’s view, carry much more attractive risk-adjusted returns.

An independent infrastructure investment and management firm, I Squared specialises in energy, utilities and transport in the US, Europe and select high-growth economies. It was founded in 2012 by former executives of Morgan Stanley Infrastructure (MSI).

ISQ launched its debut fund last September and according to sources has raised approximately $1.2 billion to date – more than half of the $2 billion total it is aiming to raise.

Denmark’s PKA AIP has committed $125 million to ISQ Global Infrastructure Fund, according to the firm’s 2013 annual report. Established in 2012, PKA AIP advises PKA, the administrator of five independent pension funds in Denmark.

PKA had also committed $175 million to Morgan Stanley Infrastructure Partners which closed on approximately $4 billion in 2008.

Headquartered in New York, the firm has investment and operating teams in Houston, London, Singapore, Hong Kong and New Delhi.