Foresight Environmental Infrastructure (FGEN) has sold its remaining 49% stake in six anaerobic digestion facilities to 3i Infrastructure (3IN) backed Future Biogas for £104m.
This follows the sale of a 51% stake to Guildford-based Future Biogas for £68.1m in August 2024.
Future Gas was the developer, operator and strategic partner for the AD portfolio which generates renewable energy from the breakdown of organic material by micro-organisms inside sealed, oxygen-free tanks called biodigesters.
FGEN acquired the assets for £100.4m between 2017 and 2019. It said the latest transaction was 38% higher than the first disposal and 7.5% above the assets’ latest valuation at 30 June. This takes its total return to 1.9 times its original investment or an internal rate of return of 12.9%.
Fund manager Charlie Wright said the disposal was the “natural next step” in the evolution of the portfolio and its previous work with Future Biogas.
Chair Stephanie Coxon said it was a “positive outcome” and the £545m investment company would use the money for several purposes, ranging from a substantial reduction in the amount drawn on its revolving credit facility, strengthening its balance sheet and funding existing commitments and new opportunities.
3IN, a £3.6bn sister fund to private equity giant 3i Group (III), said acquiring full ownership made it easier for Future Biogas to pursue investment opportunities.
Under chief executive Philipp Lukas, Future Biogas has delivered 21% earnings growth on the six plants since 2024.
3IN said the £104m price tag was consistent with its expectations which it would funded with an equity investment combined with Future Biogas’ cash balance ahead of a refinancing. 3IN expected most of its equity contribution to be returned in the current financial year.
3IN fund manager Bernando Sottomayor said: “The management team has demonstrated its ability to unlock significant value by driving operational improvements. Full ownership of the plants will enable them to accelerate these plans, while simplifying the ownership structure and increasing the sale of the platform.”
FGEN reaffirmed its intention to pay an 8.04p per share fully covered dividend in the current 2027 financial year. It expected a similar level of 1.2-1.3 times cover in 2028 before taking into account the reinvestment of the AD proceeds.
It owns a further five AD facilities worth £76.9m.
FGEN shares rose 1.1% to 88.5p from a 17% discount to net asset value. 3IN firmed 0.4% to 394.2p on a narrower 3% gap to NAV.
Our view
Richard Williams, senior analyst at QuotedData, said: “This is an excellent outcome for FGEN and provides further evidence of the value embedded in its portfolio. The £104m consideration, representing a 7.5% premium to the June valuation, is particularly encouraging given the persistent discounts at which renewable infrastructure investment companies have traded. The disposal also demonstrates the benefits of FGEN’s active asset management approach, with operational improvements helping to deliver a 12.9% return on investment over the holding period. Importantly, the proceeds will substantially reduce borrowing under its revolving credit facility, improving financial flexibility and creating capacity for future investment. This is consistent with the strategic direction outlined last year, which emphasised capital recycling and a focus on new assets offering secure, long-term cash flows. With the dividend expected to remain comfortably covered even before reinvestment of the proceeds, FGEN is in a stronger position to pursue opportunities as they arise. The transaction should also provide investors with further reassurance over the credibility of the trust’s NAV.”
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