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Rutland makes 4x on power station sale

UK turnaround specialist Rutland Partners has sold power station owner Carron Energy to a Deutsche Bank-backed company for £125m.

UK lower mid-market turnaround specialist Rutland Partners has sold its entire interest in Carron Energy, the owner of Uskmouth Power Station, in a £125 million transaction (€180 million; $222 million).

Market conditions and the added value we were seeking were achieved in a fairly short space of time. We’re selling a very different proposition to the one we bought.

Mike Harris, partner, Rutland Partners

Rutland Partners has sold Carron Energy to a new company backed by Deutsche Bank, New York-based distressed debt and high yield specialist fund manager Strategic Value Partners and London-based hedge fund Trafalgar Asset Managers.

Uskmouth is a 363 MW coal-fired power station near Newport in South Wales, with three independent coal-fired units, 240 acres of land and a 1,250 MW connection to the power grid.

Rutland Partners originally acquired Carron Energy in July 2004 from receivers after recommissioning problems and delays had led to the asset being left in the hands of bank lenders for more than two years. The private equity firm invested £23.2 million in an all-equity investment to acquire the asset, recommission the power station and build a management team and infrastructure for the business.

Following repayment of outstanding bank debt, transaction-related costs and the equity participation of Carron’s management, the sale has returned proceeds to The Rutland Fund of £95 million, representing a 4.1 times money multiple and an IRR of 150 percent.

“Our strategy in general is to add value to the operational side of a business and when that is achieved and proven out, we look to move the asset on,” said Mike Harris, partner at Rutland Partners, in an interview with PEO. “In this case, market conditions and the added value we were seeking were achieved in a fairly short space of time. We’re selling a very different proposition to the one we bought.”

Harris confirmed that Carron Energy is the third full disposal from The Rutland Fund, which closed on £210 million in March 2001, although the firm has made several partial exits from other investments.

Harris: third disposal from £210m Rutland Fund

The two previous exits were Edinburgh Woollen Mill, sold to management in a £68 million transaction backed by Bank of Scotland Integrated Finance in November 2002; and Interfloor Group in a £84 million secondary buyout to European Acquisition Capital in August 2005. The Rutland Fund is now approximately two thirds invested, said Harris.

Rutland also recently announced its intention to float UK pawbroker H&T Group on AIM. The flotation is expected to occur in early May 2006.