Dalkia Polska, the Polish district heating business owned by global investment manager IFM, has signed an agreement following the privatisation of an 85% stake from the City of Warsaw in Przedsiębiorstwo Stołeczne Energetyki Cieplnej (SPEC SA) – the largest district heating network in the European Union. This privatisation falls on the one year anniversary on which IFM increased its investment in the Dalkia Polska business to 40 per cent.
This privatisation increases IFM’s investment in the regulated district heating sector in Poland which will make Dalkia Polska the pre-eminent district heating providers covering three of the four largest cities.
Dalkia Polska holds a portfolio of integrated regulated district heating networks and co-generation plants with regulated heat tariffs in the cities of Lodz and Poznan. It owns over 1,670 kilometres of heating networks, and generates and supplies heat to over 1.1 million residents through its subsidiaries Dalkia Łódź, Dalkia Poznan and Dalkia Term.
The privatisation is subject to final approval by the City Council of the City of Warsaw and the European Commission and is expected to close in the last quarter of 2011. Following completion of the transaction, Dalkia Polska’s market share in the Polish district heating sector will increase from 11% to 25%.
Dalkia Polska intends to invest in modernising the existing network as well as developing new connections in cooperation with the City of Warsaw.
IFM Head of Infrastructure for Europe, Christian Seymour, said IFM was attracted to this project because of Poland’s strong economic fundamentals and the fact that it provides IFM’s institutional investors the potential for greater exposure to a regulated and growing energy sector.
"The investment in the district heating network of Warsaw will provide investors in our global infrastructure fund access to a leading energy asset in a stable and growing economy. This investment complements our existing portfolio and strategy of responsibly acquiring core, operating infrastructure investments for the long term across Europe and North America.
"Poland has shown resilience during the economic downturn by continuing its positive GDP growth. Based on our analysis, we expect the country to outperform its peers in Central and Eastern Europe with a forecast GDP growth of 4% in the coming years. This trend provides greater certainty to our investors in our long term commitment to core infrastructure in this region and more importantly addresses local infrastructure needs while supporting economic development in Poland,” Seymour says.
According to Frederic Michel-Verdier, Executive Director for IFM in London, this privatisation provides sizeable assets with appropriate returns for investors.
“This privatisation significantly strengthens the position of IFM in Poland and is a great example of the ability to leverage IFM’s global financial and sector expertise to create the capacity for greater returns to investors and lead the world in developing genuine energy solutions for a cleaner future.
“The heating network in Warsaw is the largest in the European Union with more than 1,700km of pipelines. It supplies 80% of buildings in the city and has been developed dynamically over the last 20 years. With a forecast of increasing demand for district heating as a result of population growth and increased urbanisation, IFM has a solid investment case which presents some significant upside potential for our investors,” Michel-Verdier says
IFM’s core infrastructure assets in Poland dates back to March 2006, when it acquired a stake in Dalkia Lodz. In July 2010, IFM acquired a 40% stake in Dalkia Polska through a share swap in Dalkia Lodz and a further equity contribution.