Financial Times: I Squared Targets UK With Recent Acquisition
I Squared Targets UK With Recent Acquisition
Great FT story today on I Squared Capital. Here’s an excerpt:
A US infrastructure fund is buying Viridian, the Irish power company, in a €1bn deal that will serve as a springboard to enter the turbulent UK energy market.
I Squared Capital, which owns renewable energy assets in the US and India, and Viridian, an integrated utility spanning the Republic of Ireland and Northern Ireland, will announce the deal on Tuesday.
The company, owned by Bahrain-based Arcapita since 2006, provides 20 per cent of domestic energy supply across Ireland, and owns gas-fired power stations and wind farms.
I Squared, which was founded in 2012 and has $3.8bn of assets under management, will use the Viridian acquisition, believed to be worth €1bn, to push into Britain.
“That’s certainly one thing that we would actively consider,” said Gautam Bhandari, a partner at I Squared. “It’s a buyer’s market at the moment.”
He added the company is weighing whether to buy an existing energy provider or push into the market organically.
“There is a need for new contenders in the UK power market, where customers are looking for solutions other than the Big Six.”
Customer satisfaction with Britain’s largest suppliers — British Gas, EDF, Eon, RWE’s Npower, ScottishPower and SSE — has fallen sharply in recent years, and the number of consumers turning to independent energy providers has risen.
I Squared will also consider buying energy generation assets in the UK and has a war chest of €1bn to spend on further deals.
The company plans to enter Europe as well but will push into the UK first in a process that will take “at least a year”.
The fund is advised by Ofwat chairman Jonson Cox, who brings expertise to the group but whose presence prevents it from buying any water companies.
I Squared’s success in wooing Viridian will come as a blow to Centrica, the owner of British Gas, which had reportedly been preparing a bid for the Irish group in order to access its customer base.
Centrica was part of a consortium that bought Bord Gáis, the Irish energy company, for a similar amount last year.
Viridian supplies 56,000 households, according to its most recent accounts. It entered the domestic market in 2014 through the Energia brand.
Last year the company made a pre-tax loss of £13m on sales of £1.5bn. Although the company made an operating profit of £112m, it was pushed into the red by £152m of financing costs.
Mr. Bhandari said I Squared will pay down £145m in debt once the deal completes.
Ian Thom, Viridian chief executive, said: “Over the past decade, Viridian has cemented its position as Ireland’s leading independent integrated energy business. We are excited by the opportunity to work with I Squared Capital, which brings a proven track record of successfully operating and helping to expand businesses such as Viridian.”