Vauban marks entry into US with district heating deal

The French manager is investing through its Europe-focused core strategy and has been eyeing investments in the US since 2018.

Paris-based Vauban Infrastructure Partners has marked its first deal in the US, after it agreed to buy DB Energy Assets and Beacon Energy Holdings from Basalt Infrastructure Partners and DCO Energy.

The deal secures the Natixis affiliate a portfolio of eight district cooling and heating systems across the Northeast and Michigan.

The transaction completes Vauban’s search for its maiden US asset, which began in 2018 when it assessed the acquisition of Vicinity Energy, the largest district energy platform in the country, then owned by Veolia, before it was sold in 2019 to Vauban’s compatriot Antin Infrastructure Partners for $1.25 billion.

“We were planning an AssetCo structure with Veolia but they chose to sell the entire portfolio and it made the transaction too big for us at that stage of our development,” Gwenola Chambon, chief executive of Vauban, told Infrastructure Investor. “We then did further mapping of the sector in the US.”

Vauban has pursued a similar structure in the latest deal, with an AssetCo structure that will see DCO Energy retain the operational management of the assets. The platform supplies 190 buildings across education, healthcare, government and retail sectors, with the bulk of the energy coming from non-renewable sources. Vauban will take steps with DCO “in order to make this much more efficient from [an] ESG perspective”, said Mounir Corm, Vauban’s deputy chief executive.

The sector has been much sought after in the region in recent years. Last year, Brookfield Asset Management sold the Canadian arm of district heating unit Enwave Energy to IFM Investors and  Ontario Teachers’ Pension Plan, while QIC and Ullico teamed up to buy Enwave’s US business. The two deals had a total enterprise value of $4.1 billion. Additionally, in November, KKR agreed to buy Clearway Community Energy for $1.9 billion.

Vauban’s deal is being pursued through its core infrastructure strategy, which saw the $2.5 billion closing of its Core Infrastructure Fund III in July. The platform is focused on European markets, although it has 20 percent room to invest in other OECD markets, Chambon added.

“Doing investments in the US just makes sense for us, it’s part of the diversification approach in our portfolio development,” she said. “This is a market where we believe there are lots of interesting opportunities coming.

“There is a major ambition in infrastructure and we know this is going to create very significant dealflow. We remain a Europe-focused asset manager, but we see we can bring more expertise in the sectors we have been developing for a long time.”