Article by Huzair Latif at The Deal
The U.K. firm in early February captured what it views as a thesis-proving exit of an engineering firm to Saudi Arabian contractor Nesma & Partners, and it looks to pivot the deal into even more aspirational growth stories as it raises its third fund, founding partner Tom Sikorski tells The Deal.
Climate-based private equity firm Bluewater Energy LLP is fresh-off what it views as a thesis-proving exit and has set its sights upon some lofty investment targets for the
years ahead.
The London, U.K.-based firm, which announced the sale of engineering firm Kent to Saudi Arabian construction services company Nesma & Partners Contracting Co. Ltd. in early February, hopes to one day support the energy transition by supporting the $1 trillion market in critical infrastructure across all energy sources with a focus on making such sources cheaper and cleaner, founding partner Tom Sikorski told The Deal.
Bluewater, founded in 2011, sees a $300 billion potential market in the data analytics-driven digital transformation, as well as $100 billion potential market in the global economy’s electrification efforts.
Having raised $1 billion in its most recent fund in 2017 after raising $861 million with its first institutional fund vehicle in 2014, the firm is still a drop in the bucket in comparison with those emerging markets.
For now, Sikorski is confident, though, in his firm’s ability to raise its third fund’s $1.5 billion target and play a significant role in the energy transition. With the next fund’s investments, Bluewater will continue to implement cross-border strategies and technological efficiency upgrades akin to the plan it executed in Kent.
“Investors have previously valued the internationalization that we do, and we plan to keep doing that. But we’re still focused on decarbonization and the coming energy transition as well. But we have a demonstrated track record in decarbonizing traditional industries, which we think has a more immediate impact on energy
transition.”
The firm is interested in Louisiana and Texas as hopeful investment opportunities in the future, but Sikorski cautioned that U.S. companies were generally not as suited to international business when compared to their European counterparts.
“A lot of what we do centers around products and services,” Sikorski said. “So we’re hoping to combine resources from around the world to continue our growth strategy with low-cost human capital from India, design capabilities and existing technology from Europe and potential investors from the Middle East to keep improving those products and services.”
Cross-border Strategy
A key element to the firm’s success has been its ability to geographically expand the companies in which it invests. This strategy, combined with the buy-and-build method of growing its portfolio companies proves effective and lucrative, Sikorski explained.
“Instead of buying a company at 13 or 14 times Ebitda, we buy one in a different region that’s 4 to 6 times Ebitda and then seek to expand it geographically or increase its focus to create a footprint greater than its original specialization.”
Witness Authentix Inc., a Dallas-based company originally oriented around a service where it could alert its customers whether fuel they were using had been tampered with or changed in any way.
After being purchased by Bluewater in 2017, the company acquired Security Print Solutions Ltd. in 2019, Traceless Authentication Group in 2020 and Royal Joh. Enschede in 2023.
These acquisitions expanded the company’s purview to include anti-tampering and anti-counterfeit services in the security, pharmaceuticals, spirits and retail industries. Authentix now has offices in the U.K., Saudi Arabia, Netherlands, Ghana, Singapore, South Africa and Pakistan.
“We’re transitional capital,” Sikorski opined. “We take regional businesses and increase them globally with our cross-border strategies.”
Rooted in the Energy Transition
For over ten years, the firm has operated with the goal of bettering technologies through hardware and software improvements in order to make them cleaner and cheaper.
“Bluewater is firmly rooted in efficiency,” Sikorski said. “A lot of people believe that an energy transition entails going from completely brown energy to completely green energy. It’s really more of an ‘olive’ transition where we get the best processes from each system and make them work together.
Kent, an engineering firm with projects in everything from conventional and renewable energy to water processing plants, is a great example, Sikorski said.
“The reality is that the energy transition is somewhere in the middle between black and green, and that middle area has been a good space for us to enable decarbonization,” Bluewater’s director of investor relations and marketing Frazer Blyth said.
Despite what some may believe the definition of the energy transition to be, renewable energy only accounts for about a third of the work that needs to be done for a greener global economy, Sikorski argued.
The firm specializes in increasing industrial efficiency and security of supply in existing technologies to advance decarbonization, or what Sikorski called the “low-hanging fruit” in the grand road to a carbon-neutral world.
“A lot of what we do is use industrial processes to make hardware greener,” he said. “This way people can get greater amounts of energy from smaller inputs, increasing
efficiency.”
Bluewater acquired Kent in 2015 when the company was working out of Ireland and making about $200 million in annual revenue. Over the course of a little over eight years, Bluewater grew the company’s revenue to $1.4 billion and expanded it globally, with business in the U.S., the U.K., China, India and Australia.
In its eight years of stewardship, Bluewater used a buy-and-build strategy, acquiring the SNC Lavalin’s energy business, dramatically accelerating Kent’s growth and diversifying its holdings across oil and gas, hydrogen, carbon capture and offshore wind and energy from waste. Other financial details of the transaction were undisclosed.
Bluewater typically holds companies for four to seven years, with three to four of those years dedicated to buy-and-build growth.
“COVID really slowed things down as people underinvested in industrials and energy,” Sikorski opined. “Now that investors are starting to regain interest, they don’t necessarily know where to play, and that’s where we come in.”
