SDCL buys US district energy business – SDCL Energy Efficiency Income Trust has agreed to acquire a 100% equity interest in a commercial district energy system, RED-Rochester, LLC for an equity cash consideration of approximately $177m.
RED is one of North America’s largest district energy systems with 117 MW of steam turbine generators plus boilers, chillers and other equipment that provide exclusive utility services to commercial and industrial customers within the 1,200 acre Eastman Business Park, located in Rochester, New York. The park’s origins date back to 1891 when Kodak started manufacturing film and paper in four newly constructed buildings and is now host to a diversified base of commercial and industrial businesses including manufacturing, chemicals, pharmaceuticals and food and beverages.
As the exclusive provider of utility services to the park, RED offers 16 on-site services including electricity, steam, chilled water, wastewater, compressed air, nitrogen, lake water treatment, industrial water distribution and high purity water distribution. This “plug-and-play” set of utility services is a key attraction of the park, providing simple integration for new customers and allowing existing customers to expand their operations.
RED has over 100 commercial and industrial customers, typically contracted on a 20-year fixed-term basis with automatic five or ten year renewals, linked to their tenancy on the Eastman Business Park. The contracts provide stable and predictable cash flows with substantial mitigation against volatility in demand. Some two thirds of the value of RED’s offtake contracts are derived from investment grade or equivalent counterparties. RED’s cost base is relatively fixed, providing good visibility of cashflows.
Since 2016, RED has delivered 40+ energy efficiency projects across its operations that have resulted in annual savings of over $4m and carbon savings of over 50%. SDCL Energy Efficiency’s manager has identified a further pipeline of initiatives that it believes can deliver additional cost and carbon savings.
The acquisition will be funded from existing cash reserves and the revolving credit facility. RED’s existing project debt finance facilities, which are equivalent to about $83m, will remain in place.
The investment is being bought from a fund managed by an affiliate of Stonepeak Infrastructure Partners.
SEIT : SDCL buys US district energy business