Terra Firma eyes Infinis exit

The firm hopes to sell a whole or partial stake in a deal that could be worth around £455 million

After realising part of its value through an IPO late last year, private equity firm Terra Firma said yesterday it is mulling a whole or partial sale of its 68.6 percent stake in UK renewable energy producer Infinis, worth about £455 million ($711 million; €572 million) at current market prices, PEI sister publication low carbon energy investor has reported.

“Given that Terra Firma owns a significant majority stake, it believes there is merit to exploring potential interest in the stake as a whole alongside other options, including the potential for market sell-downs,” the firm said in a statement. 

It added that the sale of its stake to a single buyer would probably trigger a mandatory offer on Infinis’ remaining shares, unless the regulator ruled otherwise. Terra Firma also stressed that it may end up not selling its holding in the renewable energy producer. 

Infinis chairman Ian Marchant said, in response to the Terra Firma announcement: “Since our IPO, Infinis has made good progress on its organic growth plans and has delivered on its commitments to investors, providing a combination of stable dividend income and earnings growth. We believe that Infinis continues to offer a compelling investment story.” 

Infinis listed at the bottom of its expected range late last year, trading at 260 pence a share and netting Terra Firma £234 million. The IPO valued the company at £780 million, but its current market cap is closer to £660 million. The stock closed at 222 pence per share yesterday. Infinis’ results have also taken a hit, with pre-tax profit for the six months to 30 September down to £2 million compared to £2.4 million for the same period last year. 

Terra Firma chairman Guy Hands has been quite critical of UK renewable energy policy, especially what he calls the government’s “bias” against onshore wind. In a recent opinion piece posted on Terra Firma’s website, Hands said: “The cost of electricity generated by onshore wind has been falling fast and is now close to parity with gas. 

The government itself has confirmed that onshore wind generation will be the cheapest form of new-build electricity within a few years. Spooked by opposition from a loud minority who don’t like wind turbines, the Conservatives have made clear that, if they are in power after the next election, they will slam the brakes on expansion. “Instead, the government is putting its faith – and public money – in expanding offshore wind and the potential of shale gas. It is a decision which owes more to prejudice and wishful thinking than a sensible energy policy.” 

Terra Firma is currently raising a renewables-focused fund targeting $2 billion. Infinis generates some 574 megawatts (MW() of renewable energy, primarily from using landfill gas to generate electricity. Its 336MW portfolio of biogas generation makes it the UK’s largest such producer, with 40 percent of the market. Its second biggest source of energy is wind, accounting for 221MW, followed by small-scale hydro at 17MW.