SELECTED TRANSACTIONS BY ECOFIN AND ITS MANAGED FUNDS
The acquisition of a majority stake in Solel Solar Systems Limited and the sale of the company to Siemens A.G. (2008 to 2009)
Solel is an unquoted Israeli company which develops, designs and manufactures the critical equipment used in parabolic trough concentrated solar power (CSP) plants including reflector panels and solar receivers. The company has historically supplied equipment to all of the currently operational solar thermal power plants and is building a 50 megawatt solar plant in Spain.
Funds managed by Ecofin invested a total of $128 million in Solel in January and May of 2008, acquiring 63% of the share capital of the company at a post-money valuation of the company in May 2008 of $215 million. The investment gave Ecofin the right to nominate three of the company’s five directors, including the chairman.
Working with the company’s management, Ecofin focused the company on technology, expanded its product offering, oversaw an expansion of the company’s manufacturing capacity and strengthened the management team and the company’s corporate governance. Ecofin also worked closely with the company to strengthen its relationships with key market participants known to Ecofin and to increase its presence in Spain and the U.S.
In the summer of 2009, Ecofin led a fund-raising exercise for Solel which produced unsolicited offers for control of Solel from a number of strategic investors. An offer from Siemens of $418 million for 100% of Solel was accepted on 15 October, representing an increase in Solel’s valuation from May 2008 to October 2009 of approximately 94%. Over the same period, an index of valuations in the alternative energy sector declined by approximately 46%.
The acquisition of a 16% stake in Airtricity Holdings Limited and the sale of the company’s U.S. operations to E.ON and its remaining European business to Scottish & Southern Energy plc. (2006 to 2007)
Airtricity is an unquoted Irish company which is a developer and operator of wind farms. In June 2006, Airtricity raised development capital through a competitive and fixed-price process which attracted considerable interest from private equity and corporate investors. Ecofin was chosen as the sole, preferred investor due to its specialised knowledge of the sector and its ability to assist Airtricity in the development of its business. Funds managed by Ecofin invested a total of €132.5 million in Airtricity in June and July 2006 for 16% of the company’s share capital.
Ecofin nominated two directors to the board of Airtricity and worked closely with the company and with the management of NTR plc, an unquoted Irish company which owned 51% of Airtricity, to develop a long-term business and financing strategy for the company. In mid-2007, it became apparent that Airticity would need additional capital to pursue its strategy of investing heavily in a pipeline of projects. As a result, it was decided to sell Airtricity’s U.S. assets to finance the continued growth of its business and these were sold to the German multi-utility E.ON for approximately $1,400 million (€993 million) in October 2007. Following the successful sale, the majority shareholders of Airtricity decided to sell the remaining business of the company in light of the premium valuations being paid by strategic buyers at the time and deteriorating conditions in the project finance market upon which Airtricity depended. The remaining business of Airtricity was sold to the British utility Scottish & Southern Energy for €1,080 million in January 2008. Funds managed by Ecofin realised a gain of approximately 100% on their investment in Airtricity.
The acquisition of a 24.6% stake in Séchillienne-Sidec S.A., a quoted French specialist power company, and the progressive sale of the holding (2005 to 2007)
Séchillienne-Sidec is a smaller listed French company which designs, builds and operates steam and electricity plants, principally on the islands of Guadeloupe and Martinique in the Caribbean and on Reunion and Mauritius in the Indian Ocean, where its plants use the residue of sugar cane as fuel to produce power. The company is also a developer of wind farms in Northern France.
In the summer of 2005, the private equity firm Apax acquired 39.5% of Séchillienne at a price of €300 per share and offered the same terms to all of the company’s other shareholders as part of a plan to take Séchillienne private. Ecofin believed that the offer to take Séchillienne private undervalued the company given its long-term prospects. As a consequence, in July funds managed by Ecofin along with some co-investors acquired the Spanish utility Endesa’s 23.6% stake in Séchillienne at a price of €320 per share. In August, Apax increased its offer for the 60.5% of Séchillienne which it did not own to €350 per share and subsequently closed its offer having acquired only 43.7% of the company.
In October 2005, Séchillienne’s management announced that it would commission 95 MW of new biomass power plants on Reunion and Martinique during 2006 along with 32.5 MW of new wind generation in France and that it planned to commission a new 90 MW biomass power station on Mauritius early in 2007. In March 2006, Séchillienne reported that its 2005 earnings per share had grown by 48% over the previous year and announced an increase in its dividend from €7 to €20 per share, an increase of 186%. Late in 2006, funds managed by Ecofin sold 75% of their holdings in Séchillienne on the secondary market following a nearly 80% rise in the company’s share price between July 2005 and the end of 2006. Ecofin further reduced its holding in Séchillienne in 2007 although some funds managed by Ecofin continue to hold shares in the company.
The acquisition of 75% of Northumbrian Water Group plc from the Suez Group by an investor group led by Ecofin and the flotation of Northumbrian on the Alternative Investment Market (AIM) in London. (2003)
In early 2003, the French multi-utility Suez S.A. hired the investment bank Morgan Stanley to arrange the sale of its wholly-owned U.K. subsidiary, Northumbrian Water Group, in order to pay down debt. Northumbrian was the U.K.’s fifth largest water company at the time and provides water and sewerage services in the Northeast of England and water services in the East of England.
As UK water companies are effectively prohibited from buying other U.K. water companies, a private equity firm was widely viewed as the most likely buyer of Northumbrian. Ecofin concluded, however, that the natural owners of Northumbrian were U.K. institutional investors, particularly equity income funds. The challenge was how to come up with an approach which would enable passive U.K. institutional investors - as yet unidentified - to participate in the competitive and confidential auction process which was targeted toward private equity investors.
After discussing the Northumbrian sale with a small number of U.K. institutional investors, Ecofin approached the U.K. broker Collins Stewart, the broker to Ecofin’s investment trust, and Deutsche Bank and together the three firms formed a consortium to pursue the acquisition of Northumbrian on behalf of a group of U.K. institutional investors yet to be formed. While conducting due diligence and generally participating in the auction process, the consortium incorporated a bid vehicle, obtained equity commitments from twenty-seven institutional investors under strict conditions of confidentiality and obtained a commitment from Deutsche Bank to underwrite the debt facility required.
As the targeted equity investors could normally invest only in quoted securities, arrangements were made to list the shares of the bid vehicle initially on the Alternative Investment Market (AIM) in London in the event that the consortium’s bid was accepted. While normally used by smaller companies, AIM offered the advantage of being a self-regulated, broker-sponsored market where a listing could be arranged speedily. The consortium also decided to offer Suez the option of retaining 25% of Northumbrian which would allow it to have a commercial relationship with Northumbrian, a continuing involvement in the U.K. water sector and give it the option of selling its 25% holding at a later date when Northumbrian would be valued as a public company.
In May, the consortium succeeded in purchasing 75% of Northumbrian against strong competition from private equity funds and listed the company on AIM at a price of 100p per share. The purchase price valued Northumbrian at an enterprise value of £2,212 million including net debt of approximately £1,202 million. In September 2003, Northumbrian moved its listing from AIM to the main market of the London Stock Exchange. In April 2005, Suez sold its 25% holding in Northumbrian to the Ontario Teachers pension fund.
The transaction, which won a number of awards in 2003 for its innovative approach and use of AIM, was originated by Ecofin and developed jointly by Ecofin, Collins Stewart and Deutsche Bank. Deutsche Bank was the lead financial adviser, co-underwriter of the equity and sole underwriter of the debt. Collins Stewart was sole placing agent and co-underwriter of the equity and the nominated adviser and broker for the AIM listing, Ecofin was the co-financial adviser and co-arranger of the equity. Ecofin Water & Power Opportunities plc, the investment trust managed by Ecofin, was one of the twenty-seven equity investors in the transaction.
The purchase of a 24.6% stake in Bristol Water Holdings, a listed U.K. water company, its financial restructuring and its sale to Aguas de Barcelona S.A. (2002 to 2006)
In February 2002, Ecofin launched an authorised U.K. investment trust, Ecofin Water & Power Opportunities plc, through a placing with U.K. institutional investors. The placing raised £105 million of equity capital and with borrowings the trust commenced its investment activities with gross assets of approximately £170 million.
At its launch, the trust purchased a 24.6% holding in Bristol Water from the French company Vivendi Environnement S.A. (now Veolia) for £23 million in cash and shares in the trust. Bristol Water is a smaller U.K. water company whose service area is in the West of England and whose shares were listed on the London Stock Exchange at the time. Vivendi had purchased its stake in Bristol in 1991 and sold it to the trust as part of a programme to rationalise its many investments in the U.K. As a result of the purchase, Bristol became the trust’s largest investment, accounting for approximately 13% of its gross assets following its launch in February 2002.
Believing that Bristol’s capital structure was relatively inefficient given the low risk nature of its business and the availability of long-term, fixed-rate debt finance on attractive terms, Ecofin began discussing restructuring alternatives with Bristol’s management in early 2003. In July 2003, Bristol’s board announced a plan to increase the company’s gearing and return capital to shareholders while maintaining the company’s dividend. Following a court-sanctioned scheme of arrangement, Bristol returned £50 million of capital to its shareholders in February 2004. In July 2005, Bristol returned an additional £30 million to its shareholders and increased its dividend.
In April 2006, Spain’s largest private water utility, Sociedad General de Aguas de Barcelona S.A. (Agbar), announced a takeover of Bristol after Ecofin, on behalf of Ecofin Water & Power Opportunities plc, had entered into an irrevocable undertaking to accept the offer. The offer valued Bristol at a premium of approximately 40% to its regulated asset value, one of the highest valuations ever paid for a U.K. water company. The trust’s slightly more than four year investment in Bristol earned it a return of approximately 35% per annum, including the dividends and return of capital received from Bristol.