One of the UK's leading waste management companies
Waste Recycling Group (WRG) was one of the leading waste management companies and the leading waste disposal operator in the UK, handling approximately 15 million tonnes of waste per annum.
Asset-Backed: WRG owned approximately 30% of the UK space that had planning consent for use as landfill and operated 30 waste ‘transfer stations’ and 71 ‘civic amenity’ sites. The biogas business had 57MW of installed capacity at acquisition, enough to power 76,000 homes.
Requiring Fundamental Change: The UK’s landfill sector had difficulty attracting capital because of apprehension regarding EU regulation that would lead to a gradual scale down of this method of waste disposal.
- It was recognised that WRG had the ability to offer a complete waste management solution, encapsulating alternative waste disposal methods such as large-scale incinerators as well as the ability to identify good capital projects that would provide acquisition opportunities.
- WRG’s business strategy was refocused to optimise landfill void through higher prices and less volume. Capital expenditure was enhanced and procurement management improved.
- The biogas division was demerged into a standalone business and renamed Infinis. Infinis is now the UK’s largest independent renewable energy generator with biogas, wind and hydro portfolios.
- WRG’s organisational and management structure was rationalised.
- WRG’s historic acquisitions were fully integrated, cost savings realised, operating practices standardised and operations centralised at a new head office in Northampton.
- Within Infinis, the management team was strengthened with a new CEO, CFO, Commercial Director and Head of Wind, as well as a Head of Development to accelerate the investment programme.
Developing through capital expenditure
- WRG’s platform gave it the opportunity to engage in large capital projects which could diversify the business and create value. WRG’s existing sites also provided options for new facilities as it was easier to obtain planning permission on land already used for waste management than for greenfield sites.
- WRG developed alternative waste disposal options through Allington – a €225m, 500,000 tonne per annum incinerator in Kent – and the refurbishment of its existing 150,000 tonne Eastcroft facility, giving it approx. 25% of the UK’s incinerator capacity.
Building through mergers and acquisitions
- Within 12 months of WRG’s acquisition, Terra Firma acquired the UK landfill assets of Shanks, adding 80m cubic metres of space with planning consent for use as landfill to WRG’s 130m cubic metres of existing capacity creating a business with around 30% share of the UK waste disposal market.
- The Shanks assets also extended the average life of the portfolio to 17 years (on expected use), the longest life of a portfolio in the UK waste industry at the time.
Lowering the cost of capital to create extra upside
- In December 2004, WRG completed the largest ever sterling high yield debt issue at that time, returning significant funds to shareholders.
Status of Investment: The WRG investment has been realised. In September 2006, Terra Firma sold the waste disposal business of WRG to a Spanish construction company. The sale comprised all WRG’s activities, other than the biogas business which had been de-merged into an independent company, Infinis, which Terra Firma sold in two transactions in 2016 and 2017.