KKR Backs Energy Service Provider EGC to Decarbonize Real Estate
Alternative asset and private equity investor KKR announced that it has entered into a strategic partnership with German energy service provider EGC, aimed at driving decarbonization in the real estate sector.
Buildings are a key source of global greenhouse gas (GHG) emissions, and also one of the hardest to replace, given their long-term nature. According to the European Commission, buildings account for 40% of the energy consumed in the EU, and for 36% of energy-related GHG emissions. 80% of household energy consumption is used for heating, cooling, and hot water. The EU has set targets for all new buildings to be zero emissions by 2030, and to phase out the use of fossil fuels in building heating systems by 2040.
Founded in 1989, EGC specializes in the decarbonization of heating systems in buildings. The company helps clients plan and develop energy and building technology systems, and with the financing, owning and operating of central heating units and electricity supply networks. EGC manages a real estate portfolio of approximately 2 million square meters for over 100 clients and operates around 800 central heating units.
Under the deal, EGC’s founding family and current shareholders will retain a stake in the company and will remain active members of the management team. Engineering service provider ITG is also part of the EGC group, and is included in the deal. KKR also said that former CEO of European energy service provider GETEC Group, Michael Lowak, will join EGC as Chairman.
Lowak said:
“EGC enables landlords to efficiently plan, implement and finance the decarbonization of their properties. The company is thus making a significant contribution to both the real estate industry and the energy transition in Germany. I look forward to bringing my experience and industry knowledge to EGC and working with KKR to further drive the company’s growth.”
KKR is funding the investment as part of its Global Climate Strategy. KKR launched the strategy in 2023 in its infrastructure unit, which the firm said marked an expansion on its focus on climate investing. KKR recently identified decarbonization, and the large scale “brown-to-green” transition of asset-heavy sectors in particular, as a key “mega-theme” driving investment opportunities.
In a post announcing the transaction, Vincent Policard, Partner and Co-Head of European Infrastructure at KKR, said:
“As a big investor in real estate ourselves, we at KKR are acutely aware of the need to drive energy efficient solutions to tackle the significant emissions this sector generates, and that vertical accordingly features prominently in the list of sectors our new Climate strategy intends to tackle.”
Following the completion of the transaction, KKR said that it would introduce an employee ownership and engagement model, ensuring that all employees are involved in shaping EGC’s future. KKR developed this model in 2011 and has since successfully implemented it globally in 60 portfolio companies with more than 150,000 non-management employees, the firm said.
Ryan Miller, Managing Director in KKR’s European Infrastructure team, said:
“To advance the energy transition in Germany at the necessary pace, we need creative solutions and long-term capital. We are seeing growing interest in contracting solutions and significant potential in what is still a very fragmented market. Together with the management team, we want to develop EGC into the leading decarbonization partner for the real estate industry and drive forward the energy transition in Germany.”