IFM to buy Polish utility in $520m deal

The Australian infrastructure investor will take a 40% stake in Dalkia Polska, a Polish supplier of heat and electricity, in a deal that values the firm at $1.3bn. The transaction will be funded by selling down and swapping out IFM’s interest in a Dalkia subsidiary, Dalkia Lodz, plus additional equity.

Australian investor Industry Funds Management will sell-down and swap-out its 40.6 percent stake in Polish utility Dalkia Lodz for a similar-size stake in its holding company, Dalkia Polska, in a $520 million deal expected to give it a “platform” for growth in Eastern Europe’s largest country.

“We are effectively transferring our stake, crystallising out of Lodz itself and applying the proceeds of that into the Polish holding company,” Christian Seymour, IFM’s head of infrastructure, said in an interview.

Seymour added that the deal will give IFM “a platform for future acquisitions and organic growth within Poland”, which IFM did not necessarily have with its interest in Dalkia Lodz, Dalkia Polska’s largest subsidiary.

IFM had been a shareholder in Dalkia Lodz since April 2006, when it bought a 34 percent stake in the company. Last November, IFM upped that stake to 40.6 percent. The ownership in Lodz gave IFM an appreciation of the Polish market, which remains strong.

“We’re really keen on Poland,” Seymour said.

The investment in Dalkia Polska was a negotiated transaction, Seymour said, which is expected to close in the next two months. The transaction will value Dalkia Polska at $1.3 billion, according to an IFM press release, implying a value of $520 million for the 40 percent stake IFM is buying.

IFM will fund the transaction with proceeds from the sale of IFM’s stake in Dalkia Lodz, as well as additional equity that could top $100 million, Seymour said.

Dalkia Lodz owns and operates three power plants in Lodz, serving the heating needs of 70 percent of the 830,000 inhabitants of the city, Poland’s second-largest. It is one of three subsidiaries of Dalkia Polska, which all together generates and supplies heat to over 1.1 million residents.

IFM is buying the stake from Dalkia Polska’s parent Dalkia International, a utility part-owned by French energy and water provider Veolia Environnement.

It is the second European utility IFM will add to its portfolio in the last year. In March, it bought 40 percent stake in Vattenfall, Germany’s third-largest electricity operator, in a deal that valued the company at €800 million.

Vattenfall and Dalkia are both portfolio companies of IFM’s Global Fund, which was launched five years ago and now includes eight assets: five in Europe and three in the US.

IFM has also been investing in Autralia out of a separate Australian fund for 15 years. That fund now has 17 assets.

Overall, 25 percent, or about $7 billion of IFM’s $20 billion in assets under management are infrastructure investments across Australia, Europe, the United States and South America.