Wren House eyes core-plus growth after €750m sale

The managing director of the Kuwaiti infrastructure manager brushed off renationalisation threats in the UK, saying it is ‘a country where rule of law exists’.

Wren House Infrastructure is looking to step up its investment activity in the core-plus space following a €750 million sale of unregulated assets held by portfolio company Viesgo.

The infrastructure investment arm of the Kuwait Investment Authority this week sold Viesgo’s energy supply business to Repsol, alongside 700MW of hydropower assets and two combined cycle gas turbine plants with a total installed capacity of 1.6GW. The deal netted the group, and partner Macquarie European Infrastructure Fund 4, a total of €750 million.

The duo will retain the regulated assets of Viesgo, including electricity distribution and renewable power, although Wren House is now looking beyond the core infrastructure space it has typically invested in.

“We’re spending a lot of our time on the core-plus space in healthcare and education infrastructure, on top of the usual core definition of infrastructure,” Hakim Drissi, managing director of Wren House, told Infrastructure Investor.

He added that the group has also been analysing investments in the midstream energy and telecoms sectors, the latter of which saw Wren House attempt to acquire UK-based fibre and cloud-services operator Interoute before its $2.3 billion sale to GTT communications last month.

The moves are attempts to build a portfolio which, since its formation in 2013, has added high-profile assets such as Thames Water, London City Airport and Associated British Ports, teaming up with the likes of Global Infrastructure Partners, Macquarie and CPPIB.

“We could potentially come in where [a fund] will come to maturity and we feel we can be the natural owners of these assets and replace those existing shareholders effectively,” Drissi said. “It’s an alternative.

“[With Viesgo] we felt the value-add of selling this business to Repsol made a lot of sense for the business, for its employees and for our reputation. We’ve passed the baton on to someone who knows the business, who is local, who understands the traditions and who will look after the business.”

Drissi also remains undeterred by some of the risks facing Wren House’s assets, including the prospect of a renationalisation of Thames Water, should the opposition Labour party gain power in the UK.

“As a long-term investor we’ve been comfortable investing in the [water] sector,” he explained. “What you’re seeing today in the political environment that could affect our investments is a point in time. So, if you look at that over a 30-year period, you can take a view that the UK is a country where rule of law exists, where capitalism exists, while at the same time providing services to consumers.”

Drissi also described London City and ABP as “transport assets which are unusually perpetual” compared with others available in the sector and that potential risks posed by Brexit are offset by the strong fundamentals for the assets.

Wren House this year completed its first mezzanine investment, providing a loan to Turkish energy group Zorlu, although Drissi expects equity will remain the dominant part of the business. Wren House has invested about $4 billion of equity and debt since 2013.