The Facts 2010

CONTENTS

Terra Firma aims to be From the Chief Executive

From the Chairman
02
04

the leading contrarian Terra Firma Portfolio 06

investment Firm – Annington 08

responsibly delivering AWAS

CPC
10
12
superior returns over Deutsche Annington
EMI
14
16
the long Term EverPower 18
Infinis 20
Odeon & UCI 22
PNG 24
Tank & Rast 26

Contact Information 28

UK residential US wind power

housing – page 18
sales and rental
page 08

Worldwide UK renewable
aircraft leasing energy
page 10 page 20

Australian Pan-European
cattle farming cinema operator
page 12 page 22

German Northern Ireland

residential natural gas
housing – sales distribution and
and rental supply
page 14 page 24

Global music German

publishing and autobahn
recorded music services
page 16 page 26

1

Our achievements since 1994 include:
€17 billion of equity funds raised
€13 billion of equity capital invested in businesses
€43 billion of total enterprise value
€12 billion of cash returned to our investors
www.terrafirma.com
2 TERRA FIRMA: THE FACTS 2010
FROM THE chief EXECUTIVE
Thank you for taking the time to
look at this brochure. Its intention
is to explain Terra Firma and, in
particular, the breadth of the
businesses in which we invest.
Since 2002, when the team was
established independently as Terra
Firma, we have grown substantially.
We now have a highly diverse team
of financial, operational, legal, tax
and structuring experts who seek
to identify opportunities that
are overlooked by others and to
capture hidden value in businesses.
Our people ‘make the difference’
with their breadth of experience
from industry, finance, consultancy,
private equity, law and accountancy.
We come from 23 countries and
speak over 20 languages.
Terra Firma acts as a control
investor using its operational
expertise and pro-active
management to transform
businesses in need of change and
create value for all stakeholders.
We identify macro trends and
micro-management strategies that
enable us to develop investment
perspectives that differ from the
market consensus. This work, Normally our investments are held
combined with our creativity and for five years or more reflecting our
a willingness to take a contrarian approach to building companies for
approach, leads us to find long term growth and sustainability
opportunities often overlooked
by others. Despite the extremely challenging
environment, we have achieved
Our range of specialist skills enables significant milestones in the
us to both identify and invest in development of our business and
asset-backed companies where we in each of our portfolio businesses
can effect change and solve their and look forward to building on
strategic, structural and regulatory this positive momentum in 2010
challenges. and beyond. We hope you enjoy
reading about our successes in
We are different because it is this the coming pages.
approach and these attributes,
rather than a sector specific focus, Yours sincerely
which determine where Terra Firma
invests and where our professionals
dedicate their expertise.
Our business has 90 people based
in London, Guernsey and Frankfurt
Our investors include pension funds,
insurance companies, sovereign wealth
funds and endowments from around Tim Pryce
the world Chief Executive
Our investors commit capital for up to
10 years reflecting our strategy to grow
companies over a number of years
to the point where they are leaders
in their sector
3

Key Statistics
our portfolio businesses operate in over
60 countries with revenues of €4.5 billion
14,000 people employed in our portfolio businesses
 round 200 investors including pension funds,
A assets, where we can create value
insurance companies, sovereign wealth funds
and endowments from around the world
Institutional infrastructure with 90 people including
operational, legal, tax and structuring experts
www.terrafirma.com
4 TERRA FIRMA: THE FACTS 2010
FROM THE CHAIRMAN
Terra Firma’s strategy is a simple
one. We focus on generating
exceptional returns by investing in
basic industries with underpriced
by re-positioning those assets both
operationally and strategically. Given
current uncertain times, this focus
has never been more fundamental
to creating real and lasting value.
Since our inception in 1994 under
Nomura, we have made investments
with an enterprise value totalling
€43 billion on behalf of nearly 200
investors, including pension funds,
insurance companies, sovereign
wealth funds and endowments from
around the world. The success of
Terra Firma’s businesses helps to
provide enhanced income for all
our investors, and we are keenly
aware of our fiduciary duty to
them and our wider duties to all
our stakeholders.
Even as we continue to grow and
build an institutional infrastructure
in order to manage and take on
more portfolio businesses, we
remain entrepreneurs at heart,
always seeking new and innovative
strategies to drive higher levels of
performance at the companies in
which we invest.
We add value through being directly
involved in the companies we buy
and applying ‘hands on’ expertise.
Our Operational Managing Directors
bring with them many years’
experience in large, multinational
corporations and are supported
by an in-house group of operating
professionals.
This breadth of in-house expertise
gives us a strategic advantage over
other private equity or strategic
buyers. It has repeatedly enabled
us to identify successfully
improvements that can be made
to potential portfolio companies.
Before we acquire, we identify
industry trends and sectors first
and then find specific investment
opportunities to which we can apply
our ability to change businesses.
This macro to micro approach of
identifying investment opportunities
underpins our investment strategy.
Post acquisition, we deploy our team
of almost 70 professionals who draw
on their vast experience not only
from the private equity and the
professional worlds but also directly
from a variety of industries.
Our portfolio businesses operate
in over 60 countries, employing
14,000 people
Our portfolio currently numbers 10
investments covering: housing,
entertainment, motorway services,
agriculture, energy and transportation
Our investments in energy make
us one of the largest independent
investors in green energy in the world
Our investments in housing make
us the largest private landlord
in Germany
Our investments in entertainment
make us owner of one of the largest
cinema chains in the world and the
largest in Europe
In the current uncertain times,
operational improvement, the
essence of what we do, has
never been more important.
Yours sincerely
Guy Hands
Chairman and
Chief Investment Officer
5
 Terra Firma Portfolio

6 TERRA FIRMA: THE FACTS 2010 7

ANNINGTON
ANNINGTON IS A HOUSING
BUSINESS THAT ACQUIRED
57,600 HOMES FROM THE
UK’S MINISTRY OF DEFENCE
• L argest privately owned
residential housing
platform in the UK
• 1
 6,000 homes sold in
England and Wales
• 6
 0% Home sales to first
time buyers
• £
 13m of discounts provided
to service and ex-service
personneL
8 TERRA FIRMA: THE FACTS 2010
The Business
Annington is the leading and largest
privately owned residential housing
platform in the UK. Whilst its primary
business is the refurbishment and
sale of second-hand homes, it also
privately lets a number of properties
and occasionally redevelops sites
or builds new homes. Annington is
headquartered in London, conducts
all of its business within the UK and
employs around 50 people.
Investment Rationale
Terra Firma formed Annington Homes
in 1996 to acquire the Ministry of
Defence’s Married Quarters’ Estate
of 57,600 properties across England
and Wales. Through this transaction
Annington became the largest
Annington €2,600m
residential property owner in the UK.
The properties are leased back to
initial investment the MoD on a 200-year lease at a
in 1996
58% discount to market rent with the
MoD retaining responsibility for the
management and maintenance of
them. Properties that are no longer
required by the MoD are released
to Annington.
At the time, Terra Firma identified that
the Government-backed rental cash
flow from the Annington estate, along
with proceeds from the sale of
properties released by the MoD, could
be securitised to reduce the initial
investment needed to purchase the
portfolio. Terra Firma also had the view
that market rents and house prices
would rise more substantially and that
the MoD would release more properties
for sale than was suggested during
the acquisition process. All of these
investment theses have since proven
to be correct.
Partnership with in advance. In order to deal with this,
Terra Firma Annington has a flexible operating
With Terra Firma, Annington has built model and a conservative financial
its business on stable rental revenues, structure. The company’s extensive
an effective property sales strategy
and timely development projects. Over
the years Annington has developed a
use of out-sourcing allows it to control
functions according to the release
of properties by the MoD. It is able
cost-effective formula for substantially
improving the properties released to it
to meet all of its operating costs and
debt servicing requirements from
and incentivising people to buy them. rental income alone.
A key lesson in this process was the
understanding that, with the sort of Corporate Responsibility
properties Annington handles, it was The Annington Trust was established in
more important to sell the location 1996 for the benefit of service families
and the environment rather than what living on ‘the patch’ (military housing
was internal to the property itself. estates), with the objective of
Annington now routinely brings new sponsoring community activities and
life to local communities through projects. Since then, the trustees, who
developments and by enhancing include the chairmen of the three
surrounding environments. Services’ Families Federations, have
Since acquisition, Annington has
disbursed some £185,000 to support
over 300 projects. The grants have
invested time, money and expertise varied in size from a few hundred
in regenerating thousands of homes
and returning them to the national
pounds for pre-school activities or
sports clubs, to major awards of several
housing stock. To date, it has helped thousand pounds to provide much
over 16,000 homebuyers, many of needed support for families at a time
whom were first time buyers, Services when the services are heavily engaged
or ex-Services Families or key workers
who had previously been priced out
in overseas operations.
of home ownership. www.annington.co.uk
Annington also looks for opportunities
to develop some of the sites it owns,
for sale or market rental, on its own
or in partnership. Within the portfolio,
as properties and estates are released,
there is invariably vacant land on which
it can infill or carry out new
developments.
A key management challenge is that
Annington cannot influence the MoD’s
property release plans and, therefore,
is not able to predict its level of stock
Nick Vaughan, Barry Chambers and
James Hopkins
9
AWAS

AWAS is one
of the world’s The Business quickly to introduce proprietary Terra Firma’s strategy is highly

LEADING aircraft
AWAS, which employs approximately investment tools and supply/demand distinctive from the competition as it
120 people, is one of the top aircraft analysis for the various assets. This emphasises a rigorous, investment-led
leasing companies in the world. has enabled AWAS to improve its approach to all leasing and asset

leasing companies Headquartered in Dublin, with offices

in New York, Miami and Singapore,
AWAS has a fleet of over 200 commercial
asset leasing and trading decisions.

Terra Firma had to act quickly to

• $
 5bn asset value of c. 200
AWAS owned aircraft
• Over 90 customers in
aircraft, with a value of over US$5 billion,
on lease to over 90 customers in
approximately 45 countries. AWAS also
has a further 117 aircraft on order from
Airbus and Boeing.
The average age of the fleet is 7.9 years
but will be significantly younger as
the new pipeline of aircraft is delivered.
The average lease expiration term in
the fleet is four years, which offers some
protection during this period of
macroeconomic turmoil as most leases
are still locked in at rates above
present market.
Investment Rationale
In 2006, Terra Firma acquired the
AWAS €2,200m
AWAS aircraft leasing business from
Morgan Stanley when the business
initial investment consisted of approximately 150 Boeing
and Airbus aircraft. AWAS was a
in 2006; merged non-core asset for Morgan Stanley and
with Pegasus had been starved of new investment
since 2001 with no new addition of
upgrade the management team and
within a few months replaced the Chief
Executive Officer and 80% of the
senior management team. It moved
the headquarters and management
to Ireland, taking advantage of a lower
corporate tax compared to the US
or UK.
Terra Firma also moved to upgrade
the quality of reporting and put in
place appropriate performance
monitoring systems. It redefined Key
Performance Indicators and introduced
appropriate investment appraisal tools
and processes, which are used today
for all lease, divestment or acquisition
decisions. New risk management tools
and policies were also introduced
with the use of a Proprietary Credit
Grading scale mapped to Standard
& Poor’s ratings.
In 2007 AWAS acquired Pegasus, a
US-based aircraft leasing platform
www.awas.com
trading decisions looking particularly
at return on invested capital and the
optimisation of the capital structure
of the business. This is complemented
by proactive asset trading based on a
proprietary and differentiated view of
prospective movements in the aircraft
cycle and also on the credit and capital
markets.
Corporate Responsibility
AWAS supports numerous charities
throughout the world. These include
ChildFund Alliance, a worldwide
organisation whose members provide
assistance to more than 5.5 million
impoverished children and families in
over 50 countries.
AWAS has also sponsored a water and
sanitation project in Kiboga, Uganda.
The project will increase community
access to clean water for 30 vulnerable
households (150 direct beneficiaries)
and two schools with 3,000 students.

approximately 45 countries (€2,700m – 2007) aircraft and an ageing fleet. The annual with a younger fleet and consolidated

lease AWAS planes cash yield on the fleet, however, was

attractive and the business had strong
and relatively stable cash flows.
• 4
 .1 years average Partnership with
Terra Firma
lease expiry Terra Firma recognised early on the
weakness of the existing organisational
structure at AWAS (where senior
• 7
 .9 years average age management was scattered across
of aircraft fleet multiple time zones) making
communication and decision making
sub-optimal and most business
processes inefficient. AWAS did not
• 1
 17 aircraft on order buy or sell aircraft and was unable
to fully manage and/or exploit the
for delivery up to 2014 aviation cycle. Terra Firma moved
the two businesses to achieve at least
US$15 million of synergies post-
acquisition. That acquisition transformed
AWAS into one of the largest aircraft
leasing companies in the world.
As the business transitions through the
downward swing of the cycle, value has
been protected by an aggressive focus
on the minimisation of the costs of
default and operating cash flow. AWAS
is well positioned to take advantage of
the airlines’ shift in demand to new fuel
efficient and environmentally friendly
aircraft as well as emerge with growing
profitability when the aviation cycle
moves into an upswing phase.
Lorenzo Levi, Werner Seifert

10 TERRA FIRMA: THE FACTS 2010 11

CPC
CPC IS THE
SECOND LARGEST The Business
Consolidated Pastoral Company
BEEF PRODUCER
(‘CPC’) is the second largest beef
producer in Australia with approximately
350,000 head of cattle. Its operations
IN AUSTRALIA include breeding and grass fattening
cattle on its 16 properties, which are
located in the north of Australia, from
the Kimberleys in Western Australia
across Northern Territory and into
Queensland. The properties together
comprise 5.6 million hectares, which
represents around 0.7% of Australia’s
land mass (or by way of comparison
about 40% of the size of England).
CPC employees fluctuate from around
30 people in the wet season to 200
during the busy mustering and branding
season, with operations run out of the
Newcastle Waters Cattle Station in the
Northern Territory.
Investment Rationale
CPC was acquired by Terra Firma in
April 2009. The strategic rationale
underlying the acquisition of CPC
• 350,000 head of cattle CPC initial
was driven by a number of recognised
global macroeconomic themes, in
particular, global population growth,
investment €220m
• 16 properties in 2009
a shift in Asian diets towards higher
protein consumption and the limited
supply of productive land. Specifically,
Australia is attractive as a source of
• 5
 .6 million hectares (0.7% beef supply because of the quality and
of Australia’s landmass) cost efficiency of its grass-fed cattle,
and its ability to reliably supply large
quantities into the global market.
• 7
 0% of sales are exported Partnership with
Terra Firma
to the Indonesian market Terra Firma has identified a number
of operational improvement options
at CPC. These range from growing
the earnings of the business through
selective capital investment to finding
higher value activities for parcels
of land within the portfolio. Steps
to improve productivity include the
deployment of more sophisticated
herd management techniques to
increase the numbers of new calves
12 TERRA FIRMA: THE FACTS 2010
(branding rate) and reducing mortality
rates. Nutrition, timing of joining bulls
Corporate Responsibility
Alongside local government, CPC is
with cows and pregnancy testing are a supporter of environmental and
all being more closely monitored. conservation initiatives, to encourage
biodiversity as CPC properties in
At present, approximately 70% of CPC’s northern Australia are located on
cattle are exported live to Indonesia,
where they are fattened and sold into
landscapes that are largely unchanged
from their native state. For example,
the local market. CPC has a long- initiatives on the Newry and Humbert
standing working relationship with River stations support conservation
Indonesian partners and owns a 50% of endangered species such as the
interest in two feedlot operations in Gouldian Finch and the Purple-crowned
Indonesia. These were recently Fairy-wren. CPC also undertakes
expanded, increasing capacity from sustainable management of the Lake
21,000 head of cattle to 33,000. As CPC Woods wetlands, the largest freshwater
expands its operations in Australia, this lake in Northern Territory.
additional capacity will prove vital in
enabling CPC to sell its increased The individual cattle stations work
production into the Indonesian market. closely with the local communities
in which they operate.
Since its acquisition by Terra Firma, CPC
has made three bolt-on acquisitions, CPC’s joint venture in Indonesia
including Wrotham Park a large property operates a Breeder Centre which
in Queensland, which added in excess provides training for local farmers
of 55,000 cattle to the CPC herd. to learn improved cattle husbandry
techniques which will assist local
Terra Firma has also taken steps to
increase herd carrying capacity at the
Indonesian farmers in maintaining
their own herds.
existing properties through selected
capital investment. Shortly after
completing the acquisition of CPC,
www.pastoral.com
a doubling of CPC’s 2009 capital
investment programme was approved
from A$6 million to A$12 million. This
will enable the business to proceed
with a significant number of property
improvements, including building new
fencing, improving water facilities and
clearing overgrown land. These
initiatives have increased the number
of cattle that the existing properties
can support by approximately 17,000
increasing both the value of the
properties and ultimately the number
of cattle CPC is able to produce.
CPC is led by its Chairman and CEO,
Ken Warriner, who is a shareholder
alongside Terra Firma. Ken has worked
in the Australian beef cattle industry
for over 40 years.
Geoff Warriner, Jak Andrews, Ken Warriner
13
DEUTSCHE ANNINGTON
DEUTSCHE ANNINGTON
IS GERMANY’S LEADING
HOUSING COMPANY
• L argest residential landlord
in Germany with 192,000 units
• 1
 2 million square metres
of living space
• €
 156 million modernisation
and maintenance work
undertaken in 2009
14 TERRA FIRMA: THE FACTS 2010
The Business
The Deutsche Annington Immobilien
Group (‘DAIG’), headquartered in
Bochum, Germany, is the largest
residential property company in
Germany by number of units. It offers
apartments to rent and to purchase
and is a modern service company
which strengthens its competitiveness
by providing industry-leading levels
of customer-oriented services.
Investment Rationale
Terra Firma created DAIG in 2000 to
acquire ten regional housing companies
with approximately 65,000 flats. This
original housing portfolio was occupied
mainly by current or retired railway
workers and their families who were
entitled to stay in the housing as part
of their contractual employment rights.
This tenant base gave the business a
strong and predictable rental stream.
Deutsche
The apartments were owned and
managed by each of the ten regional
Annington housing companies which historically
had operated independently on a
€2,250m initial not-for-profit basis. This situation
transaction presented a range of opportunities to
run the portfolio more efficiently and
size in 2000 to create value through new initiatives. investment in the future and for its
Partnership with
Terra Firma
Through Terra Firma’s leadership,
DAIG aims to deliver profitable and
sustainable growth via three areas of
business: i) long-term, value-enhancing undertaken throughout the portfolio,
management; ii) selective privatisation
of units in a socially acceptable manner, saving measures, such as the thermal
primarily to tenants; and iii) strategic insulation of walls and roofs and the
acquisition of housing portfolios.
Since its creation, DAIG has acquired
additional portfolios with the help and
co-operation of Terra Firma. Following
the original acquisition, in 2003 the
company acquired Heimbau AG in Kiel,
which managed approximately 10,000
flats. At the end of 2004, DAIG
purchased 4,500 flats from the RWE
Corporation. In August 2005, the
company acquired Viterra from E.ON
AG with 138,000 flats, nearly tripling
the size of the company. Since the
Viterra acquisition, DAIG has selectively
pursued a growth strategy having
acquired nearly 14,000 flats between
2007 and 2009 most recently through
the acquisition of 4,400 apartments in
Berlin in November 2009.
Today, DAIG is the largest private
housing company in Germany. In total,
it manages nearly 192,000 owned
apartments, 44,000 garages, parking
spaces and other units as well as 1,500
commercial units. Furthermore, the
company manages nearly 27,000
apartments for other owners. At year
end 2009, DAIG owned units
representing over 12 million square
metres of living space. In order to
maintain the quality of the flats, the
company continues to invest in its
portfolio. For example, DAIG invested
approximately €340 million in 2008 and
2009 alone. For the company, this is an
tenants it is proof of the company’s
promise of quality. DAIG directs a large
proportion of its investment into
energy-saving measures. In 2008 and
2009, a modernisation and
maintenance programme was
the main focus of which was on energy
fitting of new windows.
DAIG’s strategy has been highly
successful even in the recent more
challenging environment and the
company has proven its ability to create
sustainable growth in the German
property market. It is now the prime
consolidator of housing portfolios
in the German market, with the
company’s acquisition platform
sustaining year-on-year growth by
opportunistically replenishing the
portfolio and building an ever-growing
rental asset base that provides stable,
recurring cash flows. A key element of
DAIG’s success is the ability to adjust
to a developing environment, flexibly
adjusting the strategy to realize the
opportunities available in the market.
In 2009, DAIG raised rents by an
average of 1.3%. With Terra Firma’s
backing, the company is well
positioned to capitalize on market
opportunities.
Corporate responsibility
The Deutsche Annington Foundation
supports initiatives in the local
communities in which it owns housing
with a view to improving community
life. The projects sponsored include
kindergartens, education programmes
to encourage reading and writing skills,
media competence courses for children,
the provision of instruments for
children to encourage learning music
and a community support centre.
www.deutsche-annington.com
Wijnand Donkers, Manfred Püschel
15
EMI
EMI is one of the
world’s largest
music companies
• Employs 3,200 people
• Operates directly in 32
countries with a further 40
licensees around the world
• 24 Grammy Awards (2010)
• 8 Brit Awards (2010)
16 TERRA FIRMA: THE FACTS 2010
The Business
Acquired by Terra Firma in 2007, EMI
is one of the biggest music companies
in the world. Headquartered in London
and New York, EMI employs 3,200
people and operates directly in 32
countries with approximately 40
licensees around the world.
The business comprises two divisions:
EMI Music Publishing and EMI
Recorded Music.
EMI Music Publishing acquires, protects around costs and investment decisions.
and represents the musical composition With respect to EMI Music Publishing,
rights on behalf of songwriters across
the world, and earns its revenue from
creating commercial and licensing
opportunities from one of the world’s
greatest catalogues of songs. The
catalogue contains well over a million
contemporary and classic titles
including some of the best known
songs ever written, such as ‘Bohemian
Rhapsody’, ‘I Heard It Through The
Grapevine’, the James Bond theme,
‘Every Breath You Take’, ‘New York,
New York’, ‘We Will Rock You’ and
‘Somewhere Over the Rainbow.’ EMI
EMI initial
Music Publishing is the world’s leading understand better where it was making
publisher of popular music and for each and losing money and to focus the
year since Terra Firma’s acquisition,
investment
€5,900m in 2007
the company has been recognised as
Music Week’s Publisher of the Year in
the UK, and Billboard’s Publisher of
the Year in the United States.
EMI Recorded Music signs, nurtures
and markets performers and recording consumer relationships. At the same
artists, and distributes recorded music
to retailers and licensed commercial
music users. EMI Recorded Music has
a catalogue of over three million tracks. consumers, enabling it to better deliver
Top performing artists include an
impressive list of new and established
names including The Beatles, Pink
Floyd, David Bowie, Kylie Minogue,
Robbie Williams, the Beach Boys,
Snoop Dogg, Katy Perry, Gorillaz,
David Guetta, Lady Antebellum,
Corinne Bailey Rae, Lily Allen and
Tinie Tempah.
Investment Rationale
When evaluating the acquisition of
EMI, Terra Firma observed that music
consumption was growing among
consumers – albeit in new ways – but
that EMI Recorded Music, as well as
the rest of the recorded music industry,
clung to an old model with a cost
structure not appropriate to the future
of the business. Terra Firma believed
it could create value by refocusing the
business on the consumer and
implementing controls and discipline
the focus was on continuing to diversify
income streams, reducing the cost
base, streamlining back office
operations and identifying growth
opportunities.
Partnership with
Terra Firma
Since acquiring EMI, Terra Firma has
embarked on a major restructuring
of the EMI Recorded Music business
into three global business units: new
music, catalogue and music services.
This has enabled the business to
business on more effectively marketing
and representing its rich catalogue
of recorded music assets and to
significantly diversify its revenue
streams. The business is run with
greater efficiency, freeing management
to focus on important artist and
time EMI has pioneered a granular,
rigorous and totally new approach to
segmenting and understanding music
the products and services that fans
demand in this rapidly changing
marketplace.
In addition, EMI Music Publishing has
moved away from a reliance on
declining physical products and
increased its exploitation of new
revenue streams. The music publishing
business is principally comprised of
Mechanical Income (royalties from
CD sales and digital downloads),
Performance (royalties due from
any public performances of a
composition) and Synchronisation
(royalties associated with the use
of music in TV, film, advertisements).
Whilst recent economic pressures
have created challenges for the music
industry as a whole EMI has retained
its strong market position in music
publishing versus competitors. The
company has reworked the product
mix to increase the take up of
royalties income from performance
and synchronisation and to focus
on reducing costs designed to
improve EBITDA margin. The results
have continued to show remarkable
improvement at the operating level,
creating a highly cash generative
business.
EMI continues to reap the rewards
of its restructuring in the context of
an evolving music industry which it
is helping to redefine. It is now
well-positioned as an efficient, cash
generative and lower risk enterprise.
In EMI Recorded Music, the business
is focused on connecting its artists with
consumers. In EMI Music Publishing,
the business is focused on connecting
its songwriters with users of music such
as broadcasters, advertising agencies,
film makers and games manufacturers.
EMI continues to adapt rapidly at
every level to take advantage of new
opportunities and grow as a structured
and innovative artist and artist-focused
rights management business.
Corporate Responsibility
EMI targets communities and focuses
on the issues of youth and music. One
of the best known initiatives in this area
is the EMI Music Sound Foundation
which was established by EMI in 1997
and has since become the largest
single sponsor of specialist performing
arts colleges in the UK.
www.emimusic.com
17
EVERPOWER

EverPower is a
US wind energy The Business Investment Rationale EverPower is well positioned to

development
EverPower is focused on the Terra Firma acquired the business in capitalise upon the current dislocation
development and management of order to profit from the demand for in the renewables market in the US
wind energy generation assets across renewable energy in the US at a time given the regulatory environment,

and management the United States. The business

employs some 40 people and is
headquartered in New York, with
when regulatory changes, a lower
energy price environment, and
financing challenges were reducing
low energy price environment, and
lower-leverage financing markets – all
of which are stalling the development

company satellite offices in Pittsburgh,

Pennsylvania and Portland, Oregon.
the supply of new generating assets
into the market.
of generation assets by EverPower’s
competitors.

EverPower has an extensive portfolio Partnership with Corporate Responsibility

• First wind farm started
commercial operation
in Autumn 2009
of wind assets spread across the
development cycle. This portfolio
includes a significant number of
near-term development opportunities
which are largely concentrated in the
attractive North East and West Coast
US power markets and which
EverPower is focused on developing
over the next few years. Additionally,
EverPower currently has one wind
farm facility, located in Pittsburgh,
Pennsylvania, which commenced
commercial activity in 2009 with a
62.5 MW operating capacity. The
EverPower initial
output from this facility is sold to a
licensed off-taker, in what is effectively
investment €220m a business-to-business transaction.
in November 2009 On the development front, EverPower
Terra Firma
The acquisition by Terra Firma was
accompanied by an equity commitment
of approximately US$200 million for
the development of the pipeline. The
availability of this capital commitment
has allowed the team at EverPower
to progress the development of its
portfolio of near-term assets, with the
aim being to build and substantially
increase its operating capacity over
the next couple of years. In addition to
this, a variety of positive changes have
been made to the business, such as the
hiring of a Chief Commercial Officer,
and the implementation of appropriate
corporate governance protocols which
include the appointment of an
independent Non-Executive Chairman
EverPower invests in projects that
enhance the communities in which
its wind farms are located, aiming
to strengthen partnerships with its
stakeholders and create a positive
impact on the lives of people in these
regions. In order to maximize its
involvement on a local level, EverPower
provides both cash and in-kind
donations to local civic organizations
and school groups and encourages its
employees to contribute their skills to
improve the communities where they
live and work. For instance, employees
volunteer their time serving as board
members of cultural organizations, as
athletic coaches and in various other
community positions.

develops its portfolio of wind sites in
order to progress them to a build-ready
• 62.5 MW operating capacity stage. This involves taking the site
through the wind determination, land
acquisition, and permitting phases
• 8
 00 MW near term including environmental approvals.
Once a site is build-ready, EverPower
development opportunities secures debt financing, orders turbines,
manages site construction and secures
a commercial solution for the sale of the
• 3,000 MW capacity PIPELINE site-generated energy and renewable
credits. On the management front,
EverPower ensures that a wind farm
is operating at its maximum potential
once it has been built out. This is
achieved through on-site monitoring,
combined with constant interaction
with the turbine service and
maintenance providers.
and Non-Executive Director. All of www.everpower.com
these appointments have extensive
experience of the US power markets
and will assist the management team
in developing their growth objectives.
While EverPower is still an early stage
business in its development phase
with a single operating asset, it has
assembled a dynamic development
team with experienced energy
professionals engaged in greenfield
development across the US. In addition,
Terra Firma’s experience in growing
one of the strongest renewable energy
businesses in the UK (Infinis) will provide
EverPower with a clear commercial and
development capability to accelerate
the firm’s growth plan both organically
and through well timed acquisitions.
Damian Darragh, Charles Williams

18 TERRA FIRMA: THE FACTS 2010 19

INFINIS

Infinis is the UK’s

leading INDEPENDENT The Business
Infinis is the second largest player in
Investment Rationale
Infinis started out as the small landfill
same period to around £100 million.
Headcount has also steadily increased

purely renewable
the renewable electricity generation gas-to-energy division within WRG, the from 150 at the time of its spin-out
sector in the UK. It delivers about 10% waste management company acquired from WRG to 450 today.
of the UK’s renewable electricity supply by Terra Firma in 2003. It was spun

energy generator through its landfill gas, on-shore wind

• 4
 5% of UK landfill
energy supply
• Some 10% of UK’s renewable
energy supply and 0.7% of
farm and hydro generation activities
and approximately 0.7% of the UK’s
total electricity consumption. Its strong
overall renewables market position is
closely linked to its leadership position
in the UK landfill gas market where it
has a 45% share of total supply. Infinis
is headquartered in Northampton and
employs some 450 people. It has a
total of 136 generation sites (123 LFG
sites, 3 wind farms and 10 hydro sites).
Infinis generates and sells renewable
electricity to licensed off-takers in
the UK using a variety of renewable
feedstocks. In its landfill gas division,
it captures the gas through its
captive extraction infrastructure on
the landfill site and converts the gas
into electricity in its site-based
Infinis was spun
combustion engine plants. It manages
the gas fields on behalf of landfill
out of WRG (waste operators who are required to meet
stringent environmental compliance
management regulations which aim to minimize
company acquired amounts of landfill gas, a very harmful
greenhouse gas, being released into
by Terra Firma in the atmosphere. Through its wind
out of WRG and re-branded ‘Infinis’
in 2006 when Terra Firma sold WRG
to a Spanish construction group. Terra
Firma’s strategy was to transform an
under-resourced orphan business
within WRG into a leading renewable
energy supplier. Terra Firma spotted
the strategic opportunity after the UK
introduced the Renewable Obligation
Certificate regime in 2002, thereby
offering attractive financial incentives
for renewable generators investing in
new generation capacity.
Partnership with
Terra Firma
Terra Firma enabled Infinis to fully
build out its capacity to convert WRG’s
landfill gas into electricity and then
encouraged the company to acquire
a number of competitors to become
the undisputed leader in the landfill
gas market. Currently in the second
phase of its development, the company
is now broadening its portfolio of
renewable activities by focusing on wind
and hydro opportunities as well. It is
doing so both through internal
development efforts (wind development
Infinis is ideally positioned to capture
the growth opportunities in the UK
renewables sector. It is a well-funded
mid-sized operator with a clear
strategy, an ability to react to
developments in the market and led
by a proven management team.
Corporate Responsibility
Infinis believes in supporting charities
in the communities where their
workforce lives and works. The ‘Infinis
Charity Challenge’ was launched in
2009 with this objective in mind and
Infinis donates into a fund designed
to support charities and causes
nominated by employees. In March
2009 the company launched the
‘Infinis Energy Challenge’ whereby
17 schools in the Northamptonshire
area worked closely with Infinis
volunteers to develop creative ways
to save energy for a prize of £500.
The company won 3rd place in the
Sunday Times Best Green Companies
Awards in 2010 for its approach to
the environment. Infinis also received
a Gold award from the Royal Society

the UK’s total electricity
consumption
2003) in 2006 farms and hydro plants, it harnesses
the natural elements to produce
renewable electricity.
Infinis has a total installed renewable
pipeline of 300–500 MW) and external
acquisitions (Novera, Ardrossan wind
for the Prevention of Accidents for its
approach to health and safety.
farm). Underpinning this transformation
has been Terra Firma’s vision to invest www.infinis.com
in high levels of operational excellence

• Output provides power for generation capacity of 438 MW split

between its landfill gas (346 MW), wind
the equivalent of a city of (75 MW) and hydro (17 MW) operating
plants. A pure business-to-business
1 million users operator, it sells all its output to a
handful of licensed off-takers, the
majority of which are large integrated
• 1
 1m tonnes of CO2 prevented electricity utilities such as EDF, SSE
and E.ON.
from release into the
atmosphere in 2009/10
in order to achieve utility-type reliability
while strengthening the company’s
commercial capabilities to fully grasp
the revenue opportunities in the
rapidly expanding renewables sector.
Under Terra Firma ownership, installed
capacity (including acquisitions) grew
from 55 MW in 2003 to the current
438 MW, while sites under management
more than doubled from 55 to 136
today. EBITDA grew six-fold over the
Robbie Barr, Jane Aikman, Eric Machiels

20 TERRA FIRMA: THE FACTS 2010 21

ODEON & UCI

Odeon & UCI Cinemas

group is the market The Business Once the platform was established, the largest operator of this technology

leader in europe
• Europe’s largest
cinema chain
• 1,845 screens at 204 sites
Odeon and United Cinemas
International (UCI) were acquired as
separate businesses in 2004 and
merged into one group. Odeon & UCI
Cinemas is now firmly established as
Europe’s number one cinema chain
with a total of 1,845 screens at 204 sites
across the UK and European markets.
The business is the number one
operator in the UK, Spain and Italy with
a significant presence in Germany,
Austria, Portugal and Ireland. Corporate
headquarters is in London, to take
advantage of the film community whilst
UK operations are run from Manchester.
Each European territory has its own
management and in total there is a
workforce of 9,000 people.
Investment Rationale
The investment thesis was to acquire
a large position in a consolidating
sector in both the UK and across
Europe and deploy capital to further
Odeon initial
grow the business from this strong
platform. At the time of acquisition
investment €650m Odeon had no clear strategic direction.
It was managed by a collection of
in 2004, merged shareholders with different plans for
with UCI initial the business and this non-alignment
of interest meant the company was
investment not operating to its full potential. UCI
Odeon & UCI moved forward with
acquisitions in Spain, Italy and
Germany. In 2009 alone the Group
added eight new cinemas to its
network – five new builds and three
existing cinemas acquired from
competitors. Odeon & UCI continues
to review further opportunities for
growth, through opening new sites,
acquiring cinema businesses and
taking over lease agreements for
selected existing sites.
A major strategic initiative for Odeon
& UCI relates to the deployment of
digital projection technology which
provides the platform for 3D and also
enables alternative content, such as
sports events and music concerts, to
be more easily shown. Agreements
on funding arrangements have been
signed by Odeon & UCI with all six
major Hollywood studios in the UK
and this has enabled a full roll-out of
digital projection to commence which
will be completed by 2012. Odeon &
UCI is the first business in the UK
which has been able to conclude these
agreements directly and the first major
chain to commence a full roll-out.
In continental Europe, the Group has
signed agreements with four of the
in the UK, with a total of seven screens.
Odeon & UCI has developed
opportunities to further improve its
retail offer. For example, the company
is now the largest franchisee of Ben &
Jerry’s ice cream in the world and is
rolling out a highly successful network
of Costa Coffee houses in the UK, with
10 units already in operation and
further units in the pipeline.
Odeon & UCI Cinema Group was
awarded International Exhibitor of
the Year 2009 at the Annual Cine
Expo Global Industry Conference
in Amsterdam.
Corporate Responsibility
Odeon supports a number of charities
including the NSPCC and the Variety
Club in the UK. Odeon & UCI works
hard at reducing its environmental
impact in all territories: this has
included initiatives to reduce power
and water consumption, recycle
cardboard packaging and a recent
move to customer ownership of 3D
glasses to reduce wastage.
www.odeon.co.uk

• 1.5m cinema guests per week
• 500 3D cinema screens
• Number 1 operator in UK,
Spain and Italy
22 TERRA FIRMA: THE FACTS 2010
€350m in 2004 meanwhile was considered a non-core
asset by its two previous shareholders
and had gone through a period of
underinvestment. Both companies
were independently attractive, but
there were clearly even greater benefits
to be derived from a merger offering
the opportunity to unlock value
through integration savings.
Partnership with
Terra Firma
After the merger, the organisation was
restructured to capture synergies, and
establish clear lines of accountability
giving a financial improvement of more
than £10 million per annum.
six Hollywood studios and expects
to commence full deployment later
in the year.
The Group has been aggressively
rolling out a significant number of
additional 3D screens in order to
capitalise on the strength of the 3D
film slate this year. So far this year,
the number of 3D screens more than
doubled, with an additional 268
screens bringing the total to almost
500 screens, meaning that most
multiplex cinemas in the circuit will
have either two or three 3D screens.
In addition, two IMAX screens have
been added in 2010, making Odeon
Jonny Mason, Lorenzo Levi,
Rupert Gavin, Mayamiko Kachingwe
23
PNG

PNG Supplies natural The Business

The Kellen Group, trading under the
distribute natural gas throughout the
licence area, representing around 50%
23% of the Large Industrial Energy
User market from the State-owned
gas company Bord Gáis Energy Supply.

gas to the greater

Phoenix name, is based in Belfast with of the population of Northern Ireland.
approximately 200 full-time employees. PNG manages the development of In addition, PNG Supply has continued
Phoenix is the pre-eminent natural gas both the physical network and market to expand the provision of energy

belfast area
• Market leader for gas
supply in Northern Ireland
• 1
 35,000 properties supplied
with natural gas
• 8
 ,100 new connections
distribution, supply and gas service
business in Northern Ireland.
Since 1996, Phoenix has been
successful in introducing natural gas to
a new market and establishing a strong
and vibrant supporting industry.
Phoenix has grown its customer base
from zero to 135,000 over the last 13
years, equating to an average of 200
new customers per week.
The Investment Rationale
Terra Firma retained Phoenix when it
divested East Surrey Holdings (2006)
because it recognised its potential for
development. The opportunity was to
grow supply and distribution of natural
gas in the Greater Belfast Area. One of
the major challenges at that time was
to work with the authorities and agree
a mutually satisfactory regulatory
framework to allow PNG to develop
PNG was retained
its business further.
by Terra Firma Partnership with
Terra Firma
when it divested Terra Firma and Phoenix management
the parent restructured the company into two
main divisions as the result of
company East regulatory change: PNG Distribution
and PNG Supply.
Surrey Holdings
(ESH) in 2006 PNG Distribution is the regulated
in Greater Belfast.
Since 2005, the business has finalised
negotiation of a 40-year licence with
the regulator providing stability and
long-term protection to investors and
the business, and has realised £99
million through the sale of its
transmission business. Since acquisition,
the RAV (Regulated Asset Value) of
PNG distribution has grown from just
over £300 million to more than £400
million. RAV is expected to grow to
more than £500 million by 2013. New
connections have grown from 89,000 to
135,000 under Terra Firma ownership.
Phoenix will continue to invest in an
infrastructure that is currently making
the benefits of natural gas available to
over 265,000 properties in the Phoenix
licence area in Northern Ireland and it
plans to invest approximately £12–13
million a year in the network in the
coming years.
PNG Supply is the supplier of gas to
domestic, industrial and commercial
customers in the Belfast region. Its
profit margin is regulated in the
medium to long term so that it makes
a 1.5% margin on gas sales. However,
there is volatility in annual earnings
driven by market changes in wholesale
balancing services to third parties.
At the same time, the services division
continues to grow its share of the
downstream after-sales market with
repeat business underpinning the
sustained growth and new product
offerings attracting take-up from
new sectors.
In 2009 Kellen Group/Phoenix was
recognised in the Sunday Times list
of the 100 Private Equity backed
fastest growing companies in the
UK, as Kellen Group’s EBITDA profits
rose from £14.6 million in 2006 to
£29 million in 2009.
Corporate Responsibility
Phoenix has established and continues
to run its own Charitable Trust. The
‘Energy for Children Charitable Trust’
was founded with the objective to
break new ground and reach deeper
into the heart of the local communities
throughout Greater Belfast and beyond
to improve the lives of disadvantaged
children. To date, the trust has helped
well over 3,000 individual children.
www.phoenix-natural-gas.com

in 2009 alone business and owner of the gas

distribution network. It is allowed to
make an attractive real return of 7.5%
on its assets. Natural gas was made
• 2
 00 new customers per week available to Northern Ireland as an
since inception alternative to oil and coal in 1996, and
as a result there is still substantial
potential to grow the customer base
through the conversion of customers
• 2
 70k tonnes (estimated) of from oil and coal to the greener and
CO2 emissions saved through more efficient fuel which is gas.
conversions to natural The Phoenix network currently extends
to 3,000 kilometres of intermediate,
gas in 2009 medium and low pressure mains, which
gas costs and the timing of tariff
adjustments agreed with the regulator,
which are usually made semi-annually.
The supply division continues to
improve its service delivery to
consumers and to deliver gas at highly
competitive rates. The success of the
supply division in Northern Ireland led
to the establishment of a new
subsidiary in the Republic of Ireland,
whose aim is to initially supply large
industrial and commercial users with
gas – with the first customers already
being secured and capturing around
Peter Dixon

24 TERRA FIRMA: THE FACTS 2010 25

TANK & RAST
Tank & Rast holds 90%
of german motorway
concessions for
petrol stations,
shops, restaurants
and motels
• 5
 % of overall German
petrol station market
in terms of fuel sold
• 500 million visitors a year
• 9
 8% customer
satisfaction rating
• 400 sites with 130 tenants
26 TERRA FIRMA: THE FACTS 2010
The Business
Tank & Rast holds the long term
concession rights to around 400 German
motorway sites, which roughly equates
to 90% of the Motorway Service Areas
(‘MSAs’) on the Autobahn – by far the
most developed motorway network in
Europe with approximately 12,200
kilometres of road.
The company has a unique business
model whereby the Service Areas are
operated by approximately 130
third-party tenants and its key revenue
streams are lease income from tenants
and fuel supply commissions from
oil companies, who provide fuel and
branding to the fuel stations but do
not operate them. Tank & Rast is
responsible for the planning,
construction, financing, maintenance
and the leasing-out of the site facilities.
The tenants who run the MSAs are
typically local individuals or small
companies complemented by some
corporate tenants. The fuel companies,
who supply fuel and branding to
the sites but do not operate the fuel
stations, are a mix of global oil
companies and ‘Mittelstand’ German
Tank & Rast
oil companies.
initial investment Tank & Rast has a near universal reach
€1,100m in 2004
across the network with one site for
every 60 kilometre of motorway. Every programme was launched, of which
year, Tank & Rast is host to over 500
million visitors at its 378 restaurants,
345 petrol stations and 50 hotels across construction of new sites, the
its network, representing almost 1.4
million visitors per day. Over 2.5 billion introduction of capital expenditure
litres of fuel are sold across the network driven strategic and consumer
each year, giving Tank & Rast
approximately a 5% share of the overall initiatives include:
German petrol station market.
Investment Rationale
Terra Firma acquired the business in
December 2004 because it believed
that Tank & Rast was more than a
‘property’ business and that it could
capitalise further on its strong position
on the German Autobahn. Terra Firma
was attracted to the business because
of the long term concessions and the
stable cash flows that they generated
(including a significant fixed lease
component) and the large number of
independent sites which represented
a highly diversified low-risk portfolio.
Tank & Rast’s complex operational and
contractual structure offered significant
opportunities for improved asset yield
management, cash generation and
for a potential evolution of its business
model. Terra Firma observed that
Tank & Rask was lagging behind
international performance benchmarks
for motorway service stations in terms
of penetration (how many customers
turn-off the motorway to a Tank & Rast
site); conversion (how many visitors
spend money); and customer
expenditure per visit. Terra Firma
therefore believed that there were
further opportunities to achieve
superior returns through operational
development, particularly capital
investment in customer-focused
initiatives.
Partnership with
Terra Firma
Since the acquisition by Terra Firma
there has been significant investment
designed to improve Tank & Rask’s
performance against international MSA
performance benchmarks. In 2005 a
long term €600 million plus investment
approximately €300 million has been
invested to date to finance the
refurbishment of older sites and the
focused initiatives. Key development
• Agreements with major international
fast food players to provide the
German consumer with more choice
• Premium toilet refurbishment
programme branded ‘Sanifair’ which
introduced a revolutionary ‘voucher-
based pay per use’ system, with
vouchers redeemable against
purchases at Tank & Rask sites
• Agreements from the German
federal and regional governments
to allow branded signage on the
Autobahn, advertising to consumers
the brands that are available at
each MSA
• Rationalisation of the tenant base
from 251 at acquisition to the 130
tenants currently operating the sites,
thereby rewarding the Company’s
most effective tenants by giving
them the opportunity to operate
extra sites offering certain local
economies of scale and supporting
them with further investment to
improve their business performance
Supported by Terra Firma, the
management team at Tank & Rast
continues to work on a number of
additional key growth initiatives: the
re-tendering of its existing fuel supply
contracts; further developments with
Sanifair pricing; expansion of third
party opportunities for Sanifair; and the
introduction of an Electronic Point of
Sale system.
Research has shown that customer
satisfaction levels now reach 98% and
in most of the Europe-wide ADAC
Motorway Services Tests of the last
five years, Tank & Rast was placed first
and was recognized as offering service
levels among the best in Europe.
Terra Firma has, created a culture that
puts customer preferences first and
encourages entrepreneurship among
tenants, thereby transforming the
experience of drivers on the German
motorways.
Corporate Responsibility
Tank & Rast is committed to family
friendly policies and has launched a
number of initiatives to support safe
and responsible travelling including
educating children about road safety
and the importance of taking a break
on the motorways.
www.tank.rast.de
27
CONTACT INFORMATION

Stakeholder Relations Our Offices:

Peter Cornell Terra Firma Capital Partners Limited
Managing Director, Stakeholder Relations 2 More London Riverside
+44 1481 754 695 London SE1 2AP
United Kingdom
Press Enquiries
Andrew Dowler Terra Firma GmbH
+44 7887 607 744 Garden Towers
andrew.dowler@gmail.com Neue Mainzer Strasse 46-50
60311 Frankfurt am Main
OR Germany

David Reno/Jonathan Doorley Terra Firma Capital Management Limited

Sard Verbinnen & Co First Floor, Dorey Court
(212) 687-8080 Admiral Park, St Peter Port
jdoorley@sardverb.com Guernsey GY1 6HJ
United Kingdom

www.terrafirma.com

28 TERRA FIRMA: THE FACTS 2010 29


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