Arjun Infrastructure Partners has become the latest infrastructure investor to target utility connections for new developments, agreeing to acquire Indigo Pipelines from Scottish Equity Partners (SEP).
Arjun, which is not raising debt for the takeover, is paying just over 20 times Indigo’s GBP 9m EBITDA for the year to March 2018, it is understood.
Arjun’s purchase of Indigo comes the month after fellow infrastructure investor Infracapital bought another IGT, Energetics, from Macquarie for in excess of 25 times EBITDA. Energetics is also one of 14 Independent Distribution Network Operators (IDNOs), which are licenced by Ofgem to operate electricity networks for new developments.
Indigo is one of eight Independent Gas Transporters (IGTs) licensed by UK energy regulator Ofgem to build and operate gas networks for new housing and commercial properties.
In contrast to existing gas and electricity networks, which are divided into regions, IGTs and IDNOs can operate anywhere in the UK where there are new housing or commercial developments. However, like existing networks, the grids operated by IGTs and IDNOs benefit from steady revenue and a monopoly position, making them attractive to infrastructure investors who also hope to benefit from government plans to accelerate housebuilding.
The government announced in December that it plans to build 300,000 new homes a year in England, up from current levels of around 220,000.
Arjun was advised on the acquisition of Indigo Pipelines by RBC (financial) and CMS (legal). SEP was advised by Evercore (financial) and Dentons (legal).
Other infrastructure investors with investments in IGTs and IDNOs include Ancala Partners, whose portfolio includes Leep Utilities, an IDNO that is also seeking an IGT licence, and Hermes Investment Management, which has IGT and IDNO Energy Assets.