Brownfield Asset Investments
Ennova América’s business strategy aims to create value for investors by developing a diversified, resilient asset portfolio that can withstand economic and political cycles. This portfolio is designed to offer an attractive risk-return balance, while avoiding dependence on any single sector or subsector.
Key Characteristics of Target Assets
- Predictable Cash Flows: Cash flows with multiple sources of income.
- Solid Legal and Financial Structures: Strong legal and financial frameworks for both project development and payment sources (direct, alternate, or guaranteed).
- Stabilized Assets: Assets with established or growing demand that generate social benefits.
- Opportunities for Improvement: Opportunities for operational and maintenance optimization.
Key Elements for Value Creation
- Increase Demand: Drive demand for assets with a user-driven payment model (relying on the number of users).
- Cost Structure Improvement: Improve cost structure through contract compliance & optimization in operation and maintenance.
- Operational and Administrative Efficiency: Enhance efficiency across operations and administrative functions, including the workforce.
- Capital Structure Optimization: Optimize the capital structure of assets.
- Concessions and Public-Private Partnerships: Expand or renew concessions or public-private partnership contracts (extension of terms, service areas, rehabilitation, or improvements).
Asset Identification Criteria
Criteria
Rational
Returns
Investments offering an expected Internal Rate of Return (IRR) of at least double digits (nominal).
Stable Recurring Revenues
Investments with recurring, stable income streams, providing liquidity and a solid foundation for improving investment efficiency. Ennova América aims for at least 60% of portfolio revenues to be from constant recurring sources.
Proven Experience
Investments in assets where an experienced operator with proven success in the field can be hired.
Healthy Sustainable Margins
Ensuring positive and stable cash flows to protect against unforeseen operational issues while creating room to meet obligations.
Transparency
Consistent information from the first engagement to the closing of the deal is key to building investor trust.
Demand Risk
Prioritizing investments with no demand risk (e.g., those backed by a “tolling” or “take or pay” contract). This ensures returns are not dependent on market fluctuations.
Payment Sources
Favoring investments with multiple sources of direct, indirect, or guaranteed payments, or those backed by investment-grade counterparties.
