Terra Firma to sell Infinis landfill gas assets to 3i Infra

The Guy Hands-led firm first floated parent company Infinis Group in 2013 and subsequently rebought the shares.

Terra Firma Capital Partners has agreed to sell Infinis plc, the landfill gas assets of Infinis Group, to 3i Infrastructure, according to statements from the firm.

3i Infrastructure has agreed to invest around £185 million ($225 million; €206 million) to acquire 100 percent of the company. The sale is expected to close by the end of November.

Infinis Group will continue to own and operate its portfolio of more than 400MW of operational and in-construction onshore wind assets.

Terra Firma acquired Infinis Group – the non-core energy division of Waste Recycling Group – in 2003 through the €2.1 billion Terra Firma Capital Partners II. The company’s growing focus on alternative energy sources and a strong regulatory regime marked it out as a promising investment, the firm said. The division was spun out from WRG as Infinis in 2006.

Under Terra Firma’s ownership, Infinis Group invested heavily in the roll-out of its gas collection systems and engines, increasing its landfill gas generation capacity from 57MW in 2003 to more than 300MW in October 2016. The company also expanded into onshore wind and revamped its site operations, establishing in-house operational and maintenance capabilities.

“Terra Firma transformed the Infinis Group from a non-core and largely outsourced unit within a waste management company into one of the UK’s leading independent renewable power generation companies,” said Terra Firma chairman and chief investment officer Guy Hands in a statement.

“Our focus on operational excellence means we have built not only the largest landfill gas business in the UK, but also an independent power platform of very high quality. Given the current appetite for stable, cash-yielding infrastructure assets, we saw a good opportunity to generate value for our investors through the sale of the landfill gas business.”

Terra Firma floated Infinis Group in 2013, pricing its shares at 260 pence, which valued the business at £780 million. According to media reports at the time Terra Firma raised £234 million from the sale, in which it reduced its stake to 69 percent.

Infinis Group’s share price took a hit following regulatory changes affecting subsidies for onshore wind in 2015, after which Terra Firma decided to repurchase the shares at 185 pence per share, according to media reports.

This is not the first time that one of Terra Firma’s portfolio companies has drawn the interest of infrastructure investors. Last September the firm completed the sale of German motorway service area firm Tank und Rast to a consortium of buyers made up of Allianz Capital Partners, OMERS-backed Borealis Infrastructure, ADIA-owned Infinity Investments, and MEAG, the asset manager for German insurance firm Munich Re in a deal worth €3.9 billion and delivering a cash-on-cash multiple of 7.5x to Terra Firma and fellow owner Deutsche Asset & Wealth Management.

Infinis Group is one of the last remaining assets in Fund II. In July Terra Firma agreed to sell Odeon and UCI Cinemas Group to US cinema chain AMC Theatres, which is backed by Chinese conglomerate Dalian Wanda, in a deal valuing the businesses at around £921 million ($1.22 billion; €1.1 billion), as reported by PEI.

The fund still holds Infinis’ onshore wind assets business and aircraft leasing business AWAS, which is also held by Fund III.