UK private equity giant Terra Firma is considering the possibility of selling its 68.6% stake in renewable energy company Infinis Energy.
In a regulatory filing to the London Stock Exchange today, Terra Firma, which has €11 billion ($13.7 billion) of funds under management, said 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."
It added, however, that "there can be no certainty that a sale of all or any of Terra Firma's shareholding in Infinis will take place."
The announcement follows a posting on the Terra Firma website last week by chairman Guy Hands in which he attacked the energy policies of the Conservative party – the leading party in the coalition government.
"The cost of electricity generated by onshore wind has been falling fast and is now close to parity with gas," he wrote. "But rather than support this success, the onshore wind industry finds itself under attack from government.
"The Conservatives have made clear that, if they are in power after the next election, they will slam the brakes on expansion."
Instead, it 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," he said.
Infinis is one of the largest generators of renewable energy in the UK, producing around 7% of the country's renewable generation last year. It currently has 319MW of installed biogas capacity, 274MW of installed onshore wind capacity and 17 MW of hydro capacity.
The company was floated on the stock exchange in November last year and, for the six months ended 30 September, it reported revenues of £105 million ($164 million), down from £107 million in the same period of 2013, and pre-tax profit of £2.0 million against £2.4 million. It blamed below-average wind speeds for the decline.
The company has paid Terra Firma £8.3 million in dividends since July.
In response to the Terra Firma announcement, Infinis chairman Ian Marchant said: "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 shares fell 2.7% in early trading today to £2.13 – well below the flotation price of £2.60.
One fund manager, who asked not to be named, said it was possible that Infinis was delisted from the London market as a result of the sale, pointing out that any company that buys more than 30% of a firm was obliged to make an offer for all of it.
"I would not like to be an Infinis shareholder," he said. "They could have bought at £2.60p and could end up seeing the price dragged down through a lower sale, and have no say in the matter."
He added it was possible that Terra Firma had only recently begun discussions with other parties about a sale and had been advised to make a statement by the Takeover Panel.
Graham Cooper
