Target Information

Infinis Group, a prominent player in the UK’s renewable energy sector, has reached an agreement to sell Infinis plc and its subsidiaries, which collectively manage the largest landfill gas assets in the UK, to 3i Infrastructure plc. The deal is anticipated to finalize by the end of November 2016. Infinis plc boasts an impressive landfill gas portfolio, equipped with over 300MW of installed capacity distributed across 121 sites. Furthermore, the Infinis Group will retain ownership and management of its significant portfolio, comprising more than 400MW in operational and in-construction onshore wind assets.

Historically, the Infinis Group emerged as a non-core section of Waste Recycling Group (WRG), a leading waste management firm in the UK, which was acquired by Terra Firma in 2003. Following the acquisition, this operational unit was recognized for its potential in the alternative energy market, leading to its separation and establishment as Infinis in 2006.

Industry Overview

The renewable energy industry in the UK has witnessed substantial growth and transformation over recent years, driven by regulatory support and increasing investments in sustainable energy sources. The government's commitment to reducing carbon emissions and enhancing energy security has catalyzed the expansion of alternative energy initiatives, including landfill gas and wind technologies.

The landfill gas sector has gained prominence as it capitalizes on capturing methane emissions from landfills, converting them into usable energy. This technology not only addresses waste management challenges but also contributes positively to the UK’s energy mix, further bolstered by public and private investments to optimize existing and new energy systems.

With a robust infrastructure in place, UK renewable energy firms are positioned to lead the charge towards a low-carbon future, supported by innovative technologies and evolving market demands. The sector's inherent ability to provide stable returns makes it attractive to infrastructure investors seeking long-term cash yield.

As one of the largest sources of renewable energy generation in the UK, the interaction between landfill gas production and onshore wind developments underscores the importance of diversified revenue streams within the sector, enhancing resilience against market fluctuations.

Rationale Behind the Deal

This transaction aligns with Terra Firma's strategic objective to capitalize on current market trends favoring investment in stable, cash-yielding infrastructure assets. The decision to sell Infinis plc's landfill gas business is predicated on the successful transformation of the unit into a highly profitable entity, which has substantially increased its operational capacity and market share under Terra Firma’s stewardship.

Furthermore, the sale unlocks significant value for investors, allowing Terra Firma to direct resources toward other promising opportunities within its portfolio. It reflects a broader industry trend where established players divest non-core assets to focus on their primary strengths and areas of expertise.

Information About the Investor

3i Infrastructure plc operates as an investment company incorporated in Jersey and is publicly listed on the London Stock Exchange. With a mission to invest in infrastructure assets, 3i Infrastructure focuses on long-term economic projects that yield sustainable returns in developed markets, primarily within Europe.

As a subsidiary of 3i Group plc, 3i Investments plc serves as the investment adviser, providing valuable oversight and guidance to facilitate optimal financial performance and growth. The company is recognized for its commitment to investing in projects that promise long-term yield and capital appreciation, reflecting a dedicated approach to infrastructure investment.

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From an investment analysis perspective, the acquisition of Infinis plc’s landfill gas assets by 3i Infrastructure plc represents a strategically sound decision. Given the ongoing demand for renewable energy sources and the UK’s supportive regulatory environment, the deal could yield favorable returns for 3i as it continues to integrate these assets into its broader infrastructure portfolio.

Moreover, the long-term viability of landfill gas production provides a steady cash flow, essential for financing future green initiatives and allowing for additional investments in complementary projects. With a focus on bolstering economic infrastructure, 3i's investment in Infinis aligns perfectly with their strategic objectives.

While the renewable energy sector is subject to potential regulatory changes and market fluctuations, the established operational excellence and track record of Infinis offer a strong foundation for sustained profitability. If managed effectively, this deal could drive significant value creation and contribute to the growing landscape of sustainable energy in the UK.

In conclusion, the Infinis plc sale to 3i InfraStructure plc stands to be a prudent investment, benefitting from strong market fundamentals and the increasing global emphasis on renewable resource utilization.

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