Vauban Infrastructure Partners and Caisse des Dépôts’ (CDC) proposed joint acquisition of French district heating company Coriance shows that distributed heat could play an increasingly significant role in the energy transition, sources said. 

District heating involves distributing heat generated in a centralised location through insulated pipes. It was tipped as a system to watch immediately after the Russian invasion of Ukraine. “The climate urgency is accelerating the need to develop efficient urban heating networks," one source familiar with the situation said.  

Last week, the Vauban-CDC consortium announced it had entered exclusive talks to acquire Coriance from Igneo Infrastructure Partners. It beat rival bidder Quantum Pacific Group, the investment firm of Israeli billionaire Idan Ofer in the final round. 

Other bidders lined up for the auction included Sweden-headquartered EQT Infrastructure, Canadian pension fund CDPQ, New Zealand fund manager Morrison & Co and Australian Macquarie Asset Management. 

To beat other bidders, the French infra fund Vauban and the state-controlled investment bank CDC showcased their proven track record in managing long-term concession projects, sources said. This includes the deployment of France’s high-speed broadband infrastructure since 2009.

Vauban-CDC's experience in sealing concessions in France's mid-sized cities added value to the joint bid, one source said. 

Vendor Igeneo Infrastructures Partners received an offer setting Coriance’s enterprise value at around EUR 1.6bn as previously reported. Vauban-CDC will invest an additional sum of around EUR 22bn in Coriance’s growth strategy to adapt to climate change and win new markets, one source said. 

Vauban, which also acquired 20% stake in French recycling and waste specialist Paprec Holding last year, is better placed to interact with local authorities to operate Coriance’s around 40 district heating and cooling concessions in France and Belgium and acquire new ones, this source added. 

To meet carbon neutrality targets in France and within the EU by 2050 and ensure “stable and attractive price for users, (…) heating and cooling networks are set to experience strong growth in the coming years” according to CDC and Vauban’s joint press release last week. 

The total volume of deals in the European district heating space has reached EUR 2.1bn across six deals in the year to date (YTD) so far, according to Mergermarket data. The total volume is already double YTD22, with total volume of EUR 1bn across 11 deals.

The YTD deal volumes for 2023 are already the second-highest full-year value since 2018 after record year 2021, in which 14 deals were completed for volumes of EUR 7.7bn. 

Local bidders in focus

New acquisition opportunities may emerge in the French heating district space and long-term local investors will be the bidders to watch, sources said. However, fiercely fought auctions could be a thing of the past, they added.

The combined effect of inflation, restricted access to debt and heightened state scrutiny means that foreign bidders' appetite for long-term concession assets could be substantially tamed in France, one of the sources said.

Dalkia, an energy services business that operates some heating network assets, is expected to be put up for sale in the wake of the nationalisation of its parent EDF [EPA:EDF], sources said.  

Idex, a French energy network operator owned by Antin Infrastructure since 2018, could also come to market soon and garner specific interest for its heating network assets, one of the sources said. Idex has a score of 54, according to Mergermarket's Likely to Exit (LTE) predictive algorithm.*

Dalkia, EDF, Idex and Antin declined to comment.

In the longer term, incoming regulations on individual oil-boiled heating systems, and even a possible ban, could favour district heating in France, market experts said. Expect much more activity in the years ahead.

*Based on a number of key industry, holding behaviour, and dealflow criteria, Mergermarket's next-generation platform assigns a Likely to Exit (LTE) score to each exit opportunity, with a higher score corresponding to a higher likelihood for an imminent transaction.