After nearly a decade of growth, Brookfield Infrastructure Partners LP is selling Enwave, an urban energy-systems business, to several institutional investors, including Ontario Teachers’ Pension Plan.
The deal splits Enwave’s Canadian business from its U.S. operations. All told, Brookfield says the deal is valued at US$4.1-billion, including the assumption of debt. Brookfield did not disclose the price the buyers are paying for Enwave’s stock.
Teachers, in its own announcement of the transaction, said it and its partner, Australia’s IFM Investors, will acquire the Canadian operations in a transaction valued at $2.8-billion, including assumption of debt.
Enwave Energy Corp. operates in what’s called “district energy” – a network of concentrated heating and cooling systems, usually in an urban downtown core, that allows buildings to share systems and often benefit from greener forms of energy. Enwave traces its roots to Toronto, where it used deep-lake-water cooling from Lake Ontario, which Brookfield says is about 2.5 times more efficient than conventional cooling and leads to a 90-per-cent reduction in energy usage compared with conventional heating and cooling systems.
Brookfield acquired the company in 2012 from its owners, the City of Toronto and Ontario Municipal Employees Retirement System, for $480-million in cash and assumed debt and built it out from Toronto.
Its U.S. business currently serves more than 340 customers in eight cities across eight states, including Seattle, Los Angeles, Las Vegas, Chicago and Houston. The Canadian operations serve 320 customers across Toronto, London, Ont., Charlottetown and Windsor, Ont. In Toronto, TD Centre’s six office towers, Brookfield Place and Toronto General Hospital are all connected to Enwave’s system.
In the third-quarter earnings call for parent company Brookfield Asset Management Inc., Mark Murski, chief operating officer for Brookfield Infrastructure’s business in the Americas, traced Enwave’s history. He said that Brookfield Infrastructure believed it was buying a company with strong cash flows that it could take to other markets and increase sales multiple times over.
“At the time, the business was serving a small subset of hospitals, data centres, offices and residential buildings in the Toronto downtown core, and the growth aspirations were modest and limited to the local market,” Mr. Murski said. “What we had at acquisition was a leading unregulated utility but one that had unutilized capacity due to the lack of a proactive sales culture,” he said.
Since 2012, Mr. Murski said, Enwave’s EBITDA -- or earnings before interest, taxes, depreciation and amortization -- have increased to more than US$200-million from US$26-million – a gain of 21 per cent, compounded annually. Nearly two-thirds of that growth came from the existing businesses, rather than through acquisitions.
“For those less familiar with infrastructure asset class, this level of growth for utility is unparalleled,” Mr. Murski said. “And this was all completed while maintaining an investment-grade rating. Over all, we believe we have generated approximately US$3-billion of value.”
Mr. Murski said Enwave’s district-energy-generation assets are among the most efficient and cleanest in the world. He said the company is North America’s largest recycler of building waste energy, and the operator of the world’s largest commercial deep-lake cooling system, and North America’s largest heating and cooling thermal batteries. He says Enwave operates North America’s largest ice battery, which is used for making and storing ice at night when electricity prices are at their lowest. The chilled water is distributed during the day to cool buildings.
Together, Mr. Murski said, the energy savings of all these technologies are equivalent to the annual energy consumption of 15,000 residential homes.
Teachers will own 50 per cent of the Canadian business along with investment management company IFM Investors, established more than 25 years ago by a group of Australian pension funds. It’s their second deal together; they currently co-own Global Container Terminals, which operates terminals in two principal North American ports.
Dale Burgess, senior managing director of Teachers’ Infrastructure & Natural Resources department, said Enwave “is a prime example of an investment that we believe can be both commercially attractive and contribute to broader sustainability efforts.”
Brookfield sold the U.S. business to Australian investment manager QIC and consortium partner Ullico, which is affiliated with the Union Labor Life Insurance Co., founded in 1927 by U.S. labour leaders including Samuel Gompers of the American Federation of Labor.
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