The £330m deal struck earlier this month by Engie to acquire Keepmoat’s regeneration arm came as a surprise.
The large French energy group has no track record in property development. The company was one of the bidders for Bilfinger’s building and facilities division and is known in property circles mainly for facilities management (FM) and its work improving the energy efficiency
However, says Engie’s UK and Ireland chief executive Wilfrid Petrie, the synergies are more obvious than they may at first seem.
“We are one of the leaders in energy and FM so moving into building refurbishments and regeneration is a natural extension as we look for ways to develop more integrated and innovative solutions,” he says.
One of the main attractions of the deal for Engie was the relationship Keepmoat’s regeneration team has with local authorities across the UK. This is a market that Petrie says Engie will actively target following completion of the deal, which is expected in the next two months once the competition authorities give the green light.
“Keepmoat has built strong partnerships over the past 30 years and has long-term relationships with more than 170 local councils where we also engage in FM and energy integration, so its portfolio is very complementary to our skills,” he says.
A key aspect of the new relationship will be applying Engie’s energy expertise to Keepmoat’s portfolio.
“Buildings account for approximately 30% of UK carbon emissions so there is a big market out there for ‘green’ housing refurbishments, especially after minimum energy efficiency standards [MEES] changes, and we feel we’re now well placed to target it fully.”
Petrie points to Engie’s future as one “not limited to just energy” but as providing a full range of services through connected devices. As part of a target to become “a major player” in regeneration, there are further acquisitions on the agenda.
“We will look to increase our regeneration capacity wherever the opportunity arises, but the first step is the UK where we have existing expertise,” he says.
“Then we will look to grow in other countries. The UK has more acceptance of how housing associations and local authorities can be innovative in looking for new solutions and the housing market remains remarkably unaffected by Brexit, so we see real opportunities going forward.”
As part of the deal with Keepmoat, Engie will inherit a £1bn order book and a £9bn pipeline across the UK.
Keepmoat’s chief executive Dave Sheridan, who will move to Engie, says the deal will open up more opportunities for the business, which will continue to be branded as Keepmoat Regeneration.
“The stronger balance sheet that Engie brings opens us up to more strategic longer plays with local authorities and beyond,” says Sheridan.
“There are huge opportunities in new and existing stock in several sectors. Once we’re fully integrated we can start looking at investing in hospitals, student accommodation and commercial. It sets us up to become a serious player in UK energy and UK infrastructure.”
>> The evolving role of developers, local authorities and city regions in the urban regeneration and economic development of the UK’s cities will be one of the key themes at Property Week: Regenerate. The event will take place on 15 June 2017 at the QEII Centre, London - book your place at regenerate.propertyweek.com