Target Information

Infracapital, the infrastructure equity investment arm of M&G Plc, has finalized the sale of its 100% stake in Duon to UCED, a subsidiary of CREDITAS Group. Duon is recognized as a leading independent gas infrastructure platform in Poland, specializing in the distribution and supply of liquefied natural gas (LNG) as well as grid gas primarily to industrial customers in regions lacking gas pipeline access. The company boasts an extensive network of over 800 kilometers of gas pipelines, 21 regasification plants, and operates 24 cryogenic semi-trailers. Duon significantly contributes to Poland's greenhouse gas (GHG) emissions reduction efforts by facilitating the transition from coal to gas.

Previously a subsidiary of GGE a.s., a Slovak heat and electricity distributor, Duon was acquired by Infracapital in 2017. Under Infracapital's ownership, the company has undertaken several strategic initiatives that have led to notable achievements including high double-digit EBITDA growth and improved profitability. Duon has prioritized its focus on market-responsive products and positioned its infrastructure to support the ongoing energy transition towards biomethane and partial hydrogen. Additionally, it has played a crucial role in providing eco-friendly solutions to high-emission clients, enabling them to transition from coal to gas.

Industry Overview in Poland

Poland's energy sector is undergoing a significant transformation, driven by governmental regulations aimed at reducing carbon emissions and increasing reliance on renewable energy sources. The country is actively working to reduce its dependence on coal, which has historically been its primary energy source. As part of its energy strategy, Poland is focusing on diversifying its energy mix to include more natural gas and renewables, including wind and solar power, to meet EU climate targets.

Natural gas has emerged as a pivotal player in Poland’s energy transition. The government has implemented policies to enhance gas infrastructure and expand pipeline networks, aiming to ensure energy security and provide cleaner alternatives to coal. The increased adoption of LNG is critical in meeting both industrial demand and environmental standards, thus supporting the ongoing transition in the energy landscape.

Simultaneously, Poland is investing in upgrading its energy infrastructure, which includes modernizing supply chains and improving distribution networks. This investment signifies a shift towards sustainable energy solutions and increased efficiency. As the demand for cleaner energy grows, companies positioned in the gas distribution sector like Duon are set to experience significant growth opportunities.

The Polish government has also partnered with various industries to foster innovation in energy technologies, further spurring development in this sector. The focus is now on creating a more resilient and adaptive energy system capable of meeting the dynamic needs of consumers while minimizing environmental impacts.

Rationale Behind the Deal

The key motivation for this acquisition stems from the ongoing transformation in Poland’s energy sector. As the nation intensifies its efforts towards cleaner energy, UCED identified Duon as a vital asset that aligns with its strategic objectives and growth initiatives in the energy market. Acquiring Duon allows UCED to enhance its capacity in managing energy supplies and distribution effectively, thus playing a significant role in the regional energy transition.

Infracapital's decision to sell Duon follows a successful tenure during which the company significantly improved its operational metrics and positioned itself favorably for the future. This transaction represents not only a successful exit for Infracapital but also an infusion of resources and expertise into Duon under new ownership, promoting further advances in Poland's energy landscape.

Information About the Investor

UCED is the energy division of CREDITAS Group, which has been active in the energy sector since 2013. As the fourth largest energy distributor in the Czech Republic, UCED focuses on energy production, heat generation, and the provision of balancing services in both the Czech Republic and Slovakia. The division's strategic focus on expanding its energy footprint positions it well for growth in a rapidly evolving market.

Under its ownership, UCED aims to leverage Duon’s established infrastructure and expertise to improve service delivery, enhance operational efficiencies, and capitalize on increasing demand for cleaner energy solutions. The integration of Duon into UCED's operations represents a significant opportunity to bolster its competitive position in the energy sector.

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The acquisition of Duon by UCED may prove to be a commendable investment in light of Poland’s ongoing transition towards a cleaner energy future. Duon’s existing infrastructure, coupled with its strategic focus on eco-friendly solutions, aligns seamlessly with UCED’s growth objectives within the energy sector. Additionally, the overarching trend towards reducing GHG emissions bodes well for the long-term viability of companies engaged in natural gas distribution and associated services.

Furthermore, Infracapital's successful track record in enhancing Duon's operational efficiency during its ownership further suggests that the company is well-prepared to maximize its potential under UCED's oversight. This historical growth trajectory indicates the possibility of sustained success and profitability going forward.

However, the transaction is subject to merger control clearance, which must be thoroughly navigated to avoid any potential regulatory complications. Once cleared, the merger is likely to catalyze additional growth opportunities within the context of Poland's evolving energy policies.

Ultimately, this acquisition could emerge as a strategic move for both UCED and Duon, allowing for the combined entity to thrive within a market increasingly characterized by the demand for sustainable energy solutions.

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