TPG throws weight behind global green energy strategy of SMi-Enerpro


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Private equity powerhouse TPG Capital is backing the global expansion plans of a Montréal-based specialist in energy efficiency.

SMi-Enerpro, a division of The SM Group International (SMi), provides customized approaches for lowering energy consumption in the real estate sector. Deploying a proprietary toolbox of more than 50 technologies aimed at retrofitting building energy systems and optimizing their thermodynamic equations, it has for more than 20 years helped clients achieve cost savings while simultaneously reducing carbon footprints.

SMi-Enerpro’s goal, in short, is smarter, greener buildings that get more out of energy dollars.

According to SMi founding president Bernard Poulin, the company’s energy efficiency platform has proved effective with a wide variety of building structures, from high-rise office towers, hotels and cruise ships to universities, data centres, hospitals and museum complexes.

In fact, SMi-Enerpro has to date realized average energy and cost savings of 40 percent per project. This track record has translated into steadily rising revenue streams for the business. For example, in 2013, annual revenues showed a 36 percent year-over-year gain.

“SMi-Enerpro is selling green for a profit,” Poulin told peHUB Canada.

Not surprisingly then, SMi-Enerpro perceived the possibility of growth beyond its existing base of mostly North American and European customers. However, doing this required a partner that could provide upfront risk capital, as well as networks and operational expertise.

Poulin said the company spent “a year of hunting” for the right partner among Canadian and U.S. financial institutions and investor groups. Finally, in July 2013, it had a favourable encounter with TPG Special Situations Partners (TSSP), the investment arm of the US$66 billion, Fort Worth, Texas-based PE firm TPG.

While TSSP is primarily focused on special situations and opportunistic credit investments, U.S.-domiciled mid-market loans and collateralized loan obligations, the group’s investment pros took a shine to SMi-Enerpro.

That was because of the size of the market opportunity. Data compiled by the United Nations Environment Programme show that buildings account for up to 40 percent of the world’s energy use and produce up to 30 percent of greenhouse gas emissions. They are also prodigious users of the world’s water supply. Increasingly, the commercial real estate industry is seizing on these issues, concerned about the inefficiencies of existing building stock, which may lead to higher operating costs in the long run.

TSSP agreed last December to enter into a joint venture with SMi-Enerpro. Announced this past spring, the deal included a significant investment by TSSP that launched the company on a multi-year international strategy of undertaking new energy efficiency projects, scaling its platform and conducting sales and marketing activity in new markets.

Jean-Simon Venne, vice president of SMi, said related travels have taken the company to “all parts of the globe.” Recent destinations have included Dubai and Abu Dhabi in the United Arab Emirates, where an agreement was signed with an important new customer in the region’s construction and infrastructure sector.

Venne said that part of the opportunity in the SMi-Enerpro-TSSP joint venture is to move the business from a strictly project-to-project operational model to “master deals” with major clients that possess substantial and diversified real estate assets.

Indeed, TSSP is providing invaluable assistance in this regard, said Poulin. Along with funding, it is fostering strategic introductions between SMi-Enerpro and TPG’s partners in the institutional investor community who “manage huge real estate portfolios.”

Poulin and Venne said that at the conclusion of the SMi-Enerpro-TSSP joint venture, the next step for the privately held company might well be an initial public offering.

The SM Group International, which is focussed on the delivery of integrated scientific, engineering and IT solutions, was founded by Poulin in 1972. The company has more than 1,600 professionals and specialists active in projects valued at $15 billion in more than 30 countries.

SMi-Enerpro was created as a result of an acquisition completed in 2009.

Photos of green urban buildings courtesy of Shutterstock