OTPP and PSP Investments Ready €7 Billion Sale of Cubico
Canada’s Ontario Teachers’ Pension Plan and PSP Investments are about to kick off the sale of renewable energy company Cubico Sustainable Investments, according to people with knowledge of the matter.
The two pension funds are working with Bank of America Corp. and Canadian Imperial Bank of Commerce on a potential transaction, the people said. The owners are considering seeking a valuation of €7 billion ($7.6 billion) or more for London-based Cubico, the people said. They are prioritizing a full divestment, although some potential bidders could be interested in only some of the assets, the people said, asking not to be identified as the plan isn’t public.
Cubico operates clean-energy assets in Spain, Italy, Greece, the UK, the US, Mexico, Uruguay, Colombia and Australia. The company will likely draw interest of large sovereign wealth funds, one of the people said. A formal process could start within weeks, according to the people.
Deliberations are ongoing and details could still change, the people said. Representatives for OTPP, PSP, Bank of America and CIBC declined to comment, while Cubico didn’t respond to requests for comment.
Renewable energy companies have attracted strong interest from investors who are seeking more exposure into the sector amid the push for greener sources of power. Brookfield is seeking to acquire a majority stake in Neoen SA with a view to launch a takeover offer that would value the French renewable energy developer at about €6.1 billion. KKR & Co. offered in March to acquire German renewable-power producer Encavis AG in a €2.8 billion deal.
Cubico was launched in 2015 by the current owners alongside Spain’s largest lender, Banco Santander SA, which sold its stake a year later. The company operates different technologies, including onshore wind, solar, batteries and transmission lines, according to its website. Its asset portfolio has 2.8 gigawatts of installed capacity in total, plus 450 megawatts under construction and a development pipeline of over 17 gigawatts. Cubico has more than 500 employees globally.
Cubico Sustainable Investments is a powerhouse in renewable energy which PSP Investments and Ontario Teachers' acquired back in 2016 from Santander:
LONDON, MONTREAL AND TORONTO (July 22, 2016) — The Public Sector Pension Investment Board (PSP Investments) and Ontario Teachers’ Pension Plan (Ontario Teachers’), two of Canada’s largest pension investment managers, today announced that they will acquire, in equal proportions, Banco Santander, S.A.’s (Santander) indirect interest in global renewable energy and water infrastructure company Cubico Sustainable Investments Limited (Cubico). As a result, PSP Investments and Ontario Teachers’ will remain the sole ultimate shareholders of Cubico, on a 50-50 basis. Both parties are fully committed to supporting Cubico in achieving its investment mandate. The company’s assets and investment activities will continue to be managed by Chief Executive Officer Marcos Sebares and his seasoned leadership team.
“Our increased participation in Cubico is aligned with PSP Investments’ long-term investment approach and strategy to leverage industry-specific platforms and develop strong partnerships with liked-minded investors and skilled operators,” commented Guthrie Stewart, Senior Vice President and Global Head of Private Investments at PSP Investments. “We look forward to continuing supporting Cubico’s growth strategy by providing the company with access to capital to facilitate development initiatives,” Mr. Stewart added.
“We remain committed to supporting Cubico’s management team as they execute on their strategy of delivering high returns in the renewables sector. Ontario Teachers’ is proud to be supporting the continued conversion from hydrocarbons to clean and renewable sources of power. Cubico's flexible investment and acquisition approach fits well with Ontario Teachers’ approach to private investments,” commented Andrew Claerhout, Senior Vice-President, Infrastructure at Ontario Teachers'.
Headquartered in London, Cubico was established in May 2015. Its initial portfolio included 18 wind, solar and water infrastructure assets previously owned by Santander, representing a net capacity of 1.2 gigawatts (GW). Since inception, Cubico opened regional offices in London, Milan, Sao Paulo and Mexico City. It also successfully completed four acquisitions spanning four different countries, growing its total net capacity to 1.62 GW. The company’s portfolio now comprises 22 wind, solar and water infrastructure assets in operation, construction or under development across eight countries (Brazil, Italy, Ireland, Mexico, Portugal, Spain, United Kingdom and Uruguay).
“Global investment in sustainable clean energy reached a new record in 2015, and Cubico’s excellent local market knowledge and strong relationships will allow us to continue to create and capitalize on attractive growth opportunities,” commented Marcos Sebares, Chief Executive Officer, Cubico. “We see Ontario Teachers’ and PSP Investments’ joint acquisition of Santander’s position as an important endorsement of our strategy and capabilities. We look forward to collectively leveraging our relationships and expertise to create value through the acquisition and operating excellence of renewable energy assets.”
The closing of the transaction is subject to customary closing conditions.
Andrew Claerhout who I consider to be one of the better infrastructure investors in Canada was part of that deal and in eight years, both PSP and OTPP have supported the growth of Cubico and are now looking to realize on their investment.
Why sell such a coveted asset? First, demand for prized renewable energy assets is high. Second, and more importantly, it allows both pension funds to shore up liquidity and focus their attention on other opportunities that interest them at this time.
Now, this story isn't really new.
Recall, last August I wrote about how OTPP and PSP Investments were looking to unload Cubico for $6 billion.
A year later, the price tag went up to $7.6 billion (€7 billion) and that's because Cubico has been growing its operations nicely, expanding its enterprise value.
Last year I noted that according to sources, the reported sale price of USD $6 billion is about 10 times its earnings before interest, taxes, depreciation, and amortization (EBITDA) of $641 million in 2022.
I don't have the latest figures but they've obviously grown EBITDA and are growing nicely.
If OTPP and PSP Investments do manage to sell Cubico for €7 billion ($7.6 billion) or more, then they will both realize great returns on this asset.
I would invite my readers to visit Cubico's newsroom here to see the latest developments there.
Like I said, this is one of the more successful joint ventures among Canadian pension funds.
Below, Davide Romano, Head of Operations at Cubico Sustainable Investments Italy, shared his experience working with BaxEnergy.
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