Terra Firma builds UK gas pipe platform

Terra Firma Capital Partners, the London-headquartered private equity firm that earlier this week made headlines by agreeing to buy Viterra, a German residential real estate portfolio for €7 billion, is making progress with a consolidation play in the UK’s gas transportation sector.

Terra Firma said yesterday it was buying the gas transportation business of Centrica, the UK’s largest household energy supplier, in a deal valued at £90 million.

The private equity firm is buying the business alongside East Surrey Holdings, the infrastructure business Terra Firma agreed to buy in April of this year. That deal is due to complete in late June.

To buy the Centrica division, which has 140,000 gas connections in the UK and orders for another 35,000 pipelines, Terra Firma and East Surrey have set up a special purpose vehicle called Kellen Ventures. Under the deal, Terra Firma will own 75 percent of Kellen, with East Surrey holding the balance.

Terra Firma is funding the purchase using equity from Terra Firma Capital Partners II, the €2.4 billion buyout fund closed in February 2004.

The firm was advised by Citigroup, the bank that also played a critical role in the purchase of Viterra earlier this week.