terra firma facts 2010

8/8/2019 Terra Firma Facts 2010

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The Facts 2010


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From the Chie Executive 02

From the Chairman 04

Terra Firma Portoio 06

Annington 08

AWAS 10

CPC 12

Deutsche Annington 14

EMI 16

EverPower 18

Innis 20

Odeon & UCI 22

PNG 24

Tank & Rast 26

Contact Inormation 28

Terra Firma aims To beThe leading conTrarianinvesTmenT Firm responsibly deliveringsuperior reTurns overThe long Term

CONTENTS

UK residentiahousing saes and rentapage 08

US wind powerpage 18

UK renewaeenergypage 20

Pan-Europeancinema operatorpage 22

Northern Ireandnatura gasdistriution andsuppypage 24

Germanautoahnservicespage 26

Wordwideaircrat easingpage 10

Austraiancatte armingpage 12

Goa musicpuishing andrecorded musicpage 16

Germanresidentiahousing saesand rentapage 14


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2 TERRA FIRMA: THE FACTS 2010

Thank you or taking the time toook at this rochure. Its intentionis to expain Terra Firma and, inparticuar, the readth o theusinesses in which we invest.

Since 2002, when the team wasestaished independenty as TerraFirma, we have grown sustantiay.We now have a highy diverse teamo fnancia, operationa, ega, taxand structuring experts who seekto identiy opportunities thatare overooked y others and tocapture hidden vaue in usinesses.

Our peope make the dierencewith their readth o experiencerom industry, fnance, consutancy,private euity, aw and a ccountancy.We come rom 23 countries andspeak over 20 anguages.

Terra Firma acts as a controinvestor using its operationaexpertise and pro-activemanagement to transormusinesses in need o change andcreate vaue or a stakehoders.

We identiy macro trends andmicro-management strategies thatenae us to deveop investmentperspectives that dier rom the

market consensus. This work,comined with our creativity anda wiingness to take a contrarianapproach, eads us to fndopportunities oten overookedy others.

Our range o speciaist skis enaesus to oth identiy and invest inasset-acked companies where wecan eect change and sove theirstrategic, structura and reguatorychaenges.

We are dierent ecause it is thisapproach and these attriutes,rather than a sector specifc ocus,which determine where Terra Firmainvests and where our proessionasdedicate their expertise.

Our business has 90 people basedin London, Guernsey and Frankurt

Our investors include pension unds,insurance companies, sovereign wealthunds and endowments rom aroundthe world

Our investors commit capital or up to10 years reecting our strategy to growcompanies over a number o yearsto the point where they are leadersin their sector

Normally our investments are heor fve years or more reecting oapproach to building companies long term growth and sustainabi

Despite the extremey chaengenvironment, we have achievedsignifcant miestones in thedeveopment o our usiness ain each o our portoio usinesand ook orward to uiding othis positive momentum in 201and eyond. We hope you enjoreading aout our successes inthe coming pages.

Yours sincerey

Tim PryceChie Executive

www.terrafrma.com

FROM THE CHIEF EXECUTIVE

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


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Terra Firmas strategy is a simpeone. We ocus on generatingexceptiona returns y investing inasic industries with underpricedassets, where we can create vauey re-positioning those assets othoperationay and strategicay. Givencurrent uncertain times, this ocushas never een more undamentato creating rea and asting vaue.

Since our inception in 1994 underNomura, we have made investmentswith an enterprise vaue totaing43 iion on eha o neary 200investors, incuding pension unds,insurance companies, sovereignweath unds and endowments romaround the word. The success oTerra Firmas usinesses heps toprovide enhanced income or aour investors, and we are keenyaware o our fduciary duty tothem and our wider duties to aour stakehoders.

Even as we continue to grow anduid an institutiona inrastructurein order to manage and take onmore portoio usinesses, weremain entrepreneurs at heart,aways seeking new and innovativestrategies to drive higher eves operormance at the companies inwhich we invest.

We add vaue through eing directyinvoved in the companies we uyand appying hands on expertise.Our Operationa Managing Directorsring with them many yearsexperience in arge, mutinationacorporations and are supportedy an in-house group o operatingproessionas.

This readth o in-house expertisegives us a strategic advantage overother private euity or strategicuyers. It has repeatedy enaedus to identiy successuyimprovements that can e madeto potentia portoio companies.

beore we acuire, we identiyindustry trends and sectors frstand then fnd specifc investmentopportunities to which we can appyour aiity to change usinesses.This macro to micro approach oidentiying investment opportunities

underpins our investment strategy.

Post acuisition, we depoy our teamo amost 70 proessionas who drawon their vast experience not onyrom the private euity and theproessiona words ut aso directyrom a variety o industries.

Our portolio businesses operatein over 60 countries, employing14,000 people

Our portolio currently numbers investments covering: housing,entertainment, motorway serviceagriculture, energy and transport

Our investments in energy makeus one o the largest independeninvestors in green energy in the w

Our investments in housing makeus the largest private landlordin Germany

Our investments in entertainmenmake us owner o one o the largcinema chains in the world and thlargest in Europe

In the current uncertain times,operationa improvement, theessence o what we do, hasnever een more important.

Yours sincerey

Guy HandsChairman andChie Investment Ofcer

www.terrafrma.com

FROM THE CHAIRMAN

KEY STATISTICS

OUR PORTFOlIO bUSINESSES OPERATE IN OVER60 COUNTRIES WITH REVENUES OF 4.5 bIllION

14,000 PEOPlE EMPlOYED IN OUR PORTFOlIO bUSINESSES

AROUND 200 INVESTORS INClUDING PENSION FUNDS,INSURANCE COMPANIES, SOVEREIGN WEAlTH FUNDSAND ENDOWMENTS FROM AROUND THE WORlD

INSTITUTIONAl INFRASTRUCTURE WITH 90 PEOPlE INClUDINGOPERATIONAl, lEGAl, TAX AND STRUCTURING EXPERTS


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Terra Firma Portoio


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ANNINGTON

LargestprivateLyownedresidenTial housingplaTForm in The uK

16,000homessoLdinengLandandwaLes

60%homesaLestofirstTime buyers

13mofdiscountsprovidedTo service and ex-servicepersonnel

anningTon is a housing

business ThaT acQuired57,600homesfromtheuKs minisTry oF deFence

Nick Vaughan, Barry Chambers and

James Hopkins

THE bUSINESSAnnington is the leading and largestprivately owned residential housingplatorm in the UK. Whilst its primarybusiness is the reurbishment andsale o second-hand homes, it alsoprivately lets a number o propertiesand occasionally redevelops sitesor builds new homes. Annington isheadquartered in London, conductsall o its business within the UK andemploys around 50 people.

INVESTMENT RATIONAlETerra Firma ormed Annington Homesin 1996 to acquire the Ministry oDeences Married Quarters Estateo 57,600 properties across Englandand Wales. Through this transactionAnnington became the largestresidential property owner in the UK.The properties are leased back tothe MoD on a 200-year lease at a58% discount to market rent with t heMoD retaining responsibility or themanagement and maintenance othem. Properties that are no longerrequired by the MoD are releasedto Annington.

At the time, Terra Firma identied thatthe Government-backed rental cashfow rom the Annington estate, alongwith proceeds rom the sale o

properties released by the MoD, couldbe securitised to reduce the initialinvestment needed to purchase theportolio. Terra Firma also had the viewthat market rents and house priceswould rise more substantially and thatthe MoD would release more propertiesor sale than was suggested duringthe acquisition process. All o theseinvestment theses have since provento be correct.

PARTNERSHIP WITHTERRA FIRMAWith Terra Firma, Annington has builtits business on stable rental revenues,an eective property sales strategyand timely development projects. Overthe years Annington has developed acost-eective ormula or substantiallyimproving the properties released to itand incentivising people to buy them.A key lesson in this process was theunderstanding that, with the sort oproperties Annington handles, it wasmore important to sell the locationand the environment rather than whatwas internal to the property itsel.Annington now routinely brings newlie to local communities throughdevelopments and by enhancingsurrounding environments.

Since acquisition, Annington hasinvested time, money and expertisein regenerating thousands o homesand returning them to the nationalhousing stock. To date, it has helpedover 16,000 homebuyers, many owhom were rst time buyers, Servicesor ex-Services Families or key workerswho had previously been priced outo home ownership.

Annington also looks or opportunitiesto develop some o the sites it owns,

or sale or market rental, on its ownor in partnership. Within the portolio,as properties and estates are released,there is invariably vacant land on whichit can inll or carry out newdevelopments.

A key management challenge is thatAnnington cannot infuence the MoDsproperty release plans and, thereore,is not able to predict its level o stock

in advance. In order to deal with Annington has a fexible operatinmodel and a conservative nancstructure. The companys extensiuse o out-sourcing allows it to counctions according to the releaso properties by the MoD. It is abto meet all o its operating costs adebt servicing requirements romrental income alone.

CORPORATE RESPONSIbIlThe Annington Trust was establis1996 or the benet o service amliving on the patch (military housestates), with the objective osponsoring community activities projects. Since then, the trusteesinclude the chairmen o the threeServices Families Federations, hadisbursed some 185,000 to supover 300 projects. The grants havvaried in size rom a ew hundredpounds or pre-school activities osports clubs, to major awards o sthousand pounds to provide mucneeded support or amilies at a twhen the services are heavily engin overseas operations.

www.annington.co.uk

ANNINGTON 2,600MINITIAl INVESTMENTIN 1996


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AWAS

$5bnassetvaLueofc.200awasownedaircraft

over90customersinapproximaTely 45 counTriesLeaseawaspLanes

4.1yearsaverage lease expiry

7.9yearsaverageage oF aircraFT FleeT

117aircraftonorderfordeLiveryupto2014

awasisoneoftheworLdsleading aircraFTleasing companies

AWAS 2,200MINITIAl INVESTMENTIN 2006; MERGEDWITH PEGASUS(2,700M 2007)

THE bUSINESSAWAS, which employs approximately120 people, is one o the top aircratleasing companies in the world.Headquartered in Dublin, with ocesin New York, Miami and Singapore,AWAS has a feet o over 200 commercialaircrat, with a value o over US$5 billion,on lease to over 90 customers inapproximately 45 countries. AWAS alsohas a urther 117 aircrat on order romAirbus and Boeing.

The average age o the feet is 7.9 yearsbut will be signicantly younger asthe new pipeline o aircrat is delivered.The average lease expiration term inthe feet is our years, which oers someprotection during this period omacroeconomic turmoil as most leasesare still locked in at rates abovepresent market.

INVESTMENT RATIONAlEIn 2006, Terra Firma acquired theAWAS aircrat leasing business romMorgan Stanley when the businessconsisted o approximately 150 Boeingand Airbus aircrat. AWAS was anon-core asset or Morgan Stanley andhad been starved o new investmentsince 2001 with no new addition oaircrat and an ageing feet. The annualcash yield on the feet, however, wasattractive and the business had strongand relatively stable cash fows.

PARTNERSHIP WITHTERRA FIRMA

Terra Firma recognised early on theweakness o the existing organisationalstructure at AWAS (where seniormanagement was scattered acrossmultiple time zones) makingcommunication and decision makingsub-optimal and most businessprocesses inecient. AWAS did notbuy or sell aircrat and was unableto ully manage and/or exploit theaviation cycle. Terra Firma moved

quickly to introduce proprietaryinvestment tools and supply/demandanalysis or the various assets. Thishas enabled AWAS to improve itsasset leasing and trading decisions.

Terra Firma had to act quickly toupgrade the management team andwithin a ew months replaced the ChieExecutive Ocer and 80% o thesenior management team. It movedthe headquarters and managementto Ireland, taking advantage o a lowercorporate tax compared to the USor UK.

Terra Firma also moved to upgradethe quality o reporting and put inplace appropriate perormancemonitoring systems. It redened KeyPerormance Indicators and introducedappropriate investment appraisal toolsand processes, which are used todayor all lease, divestment or acquisitiondecisions. New risk management toolsand policies were also introducedwith the use o a Proprietary CreditGrading scale mapped to Standard& Poors ratings.

In 2007 AWAS acquired Pegasus, aUS-based aircrat leasing platormwith a younger feet and consolidatedthe two businesses to achieve at leastUS$15 million o synergies post-acquisition. That acquisition transormedAWAS into one o the largest aircratleasing companies in the world.

As the business transitions through thedownward swing o the cycle, value hasbeen protected by an aggressive ocuson the minimisation o the costs odeault and operating cash fow. AWASis well positioned to take advantage othe airlines shit in demand to new uelecient and environmentally riendlyaircrat as well as emerge with growingprotability when the aviation cyclemoves into an upswing phase.

Terra Firmas strategy is highlydistinctive rom the competition aemphasises a rigorous, investmenapproach to all leasing and assettrading decisions looking particuat return on invested capital and toptimisation o the capital structuo the business. This is complemeby proactive asset trading basedproprietary and dierentiated vieprospective movements in the aicycle and also on the credit and cmarkets.

CORPORATE RESPONSIbIlAWAS supports numerous charitithroughout the world. These inclChildFund Alliance, a worldwideorganisation whose members proassistance to more than 5.5 millioimpoverished children and amiliover 50 countries.

AWAS has also sponsored a watesanitation project in Kiboga, UgaThe project will increase communaccess to clean water or 30 vulnehouseholds (150 direct beneciarand two schools with 3,000 stude

www.awas.com

Lorenzo Levi, Werner Seiert


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CPC

350,000headofcattLe

16properties

5.6miLLionhectares(0.7% oF ausTralias landmass)

70%ofsaLesareexportedTo The indonesian marKeT

cpc is Thesecond largesTbeeF producerin ausTralia

THE bUSINESSConsolidated Pastoral Company(CPC) is the second largest beeproducer in Australia with approximately350,000 head o cattle. Its operationsinclude breeding and grass atteningcattle on its 16 properties, which arelocated in the north o Australia, romthe Kimberleys in Western Australiaacross Northern Territory and intoQueensland. The properties togethercomprise 5.6 million hectares, whichrepresents around 0.7% o Australiasland mass (or by way o comparisonabout 40% o the size o England).CPC employees fuctuate rom around30 people in the wet season to 200during the busy mustering and brandingseason, with operations run out o theNewcastle Waters Cattle Station in theNorthern Territory.

INVESTMENT RATIONAlECPC was acquired by Terra Firma inApril 2009. The strategic rationaleunderlying the acquisition o CPCwas driven by a number o recognisedglobal macroeconomic themes, inparticular, global population growth,a shit in Asian diets towards higherprotein consumption and the limitedsupply o productive land. Specically,Australia is attractive as a source obee supply because o the quality andcost eciency o its grass-ed cattle,and its ability to reliably supply largequantities into the global market.

PARTNERSHIP WITHTERRA FIRMA

Terra Firma has identied a numbero operational improvement optionsat CPC. These range rom growingthe earnings o the business throughselective capital investment to ndinghigher value activities or parcelso land within the portolio. Stepsto improve productivity include thedeployment o more sophisticatedherd management techniques toincrease the numbers o new calves

(branding rate) and reducing mortalityrates. Nutrition, timing o joining bullswith cows and pregnancy testing areall being more closely monitored.

At present, approximately 70% o CPCscattle are exported live to Indonesia,where they are attened and sold intothe local market. CPC has a long-standing working relationship withIndonesian partners and owns a 50%interest in two eedlot operations inIndonesia. These were recentlyexpanded, increasing capacity rom21,000 head o cattle to 33,000. As CPCexpands its operations in Australia, thisadditional capacity will prove vital inenabling CPC to sell its increasedproduction into the Indonesian market.

Since its acquisition by Terra Firma, CPChas made three bolt-on acquisitions,including Wrotham Park a large propertyin Queensland, which added in excesso 55,000 cattle to the CPC herd.

Terra Firma has also taken steps toincrease herd carrying capacity at theexisting properties through selectedcapital investment. Shortly atercompleting the acquisition o CPC,a doubling o CPCs 2009 capitalinvestment programme was approvedrom A$6 million to A$12 million. Thiswill enable the business to proceedwith a signicant number o propertyimprovements, including building newencing, improving water acilities andclearing overgrown land. Theseinitiatives have increased the number

o cattle that the existing propertiescan support by approximately 17,000increasing both the value o theproperties and ultimately the numbero cattle CPC is able to produce.

CPC is led by its Chairman and CEO,Ken Warriner, who is a shareholderalongside Terra Firma. Ken has workedin the Australian bee cattle industryor over 40 years.

CORPORATE RESPONSIbIlAlongside local government, CPCa supporter o environmental andconservation initiatives, to encoubiodiversity as CPC properties innorthern Australia are located onlandscapes that are largely uncharom their native st ate. For exampinitiatives on the Newry and HumRiver stations support conservatio endangered species such as thGouldian Finch and the Purple-croFairy-wren. CPC also undertakessustainable management o the LWoods wetlands, the largest reshlake in Northern Territory.

The individual cattle stations worclosely with the local communitiein which they operate.

CPCs joint venture in Indonesiaoperates a Breeder Centre whichprovides training or local armersto learn improved cattle husbandtechniques which will assist localIndonesian armers in maintainingtheir own herds.

www.pastoral.com

Geo Warriner, Jak Andrews, Ken Warriner

CPC INITIAlINVESTMENT 220MIN 2009


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DEUTSCHE ANNINGTON

LargestresidentiaLLandLordingermanywith192,000units

12miLLionsquaremetresoF living space

156miLLionmodernisationandmaintenanceworkundertakenin2009

deuTsche anningTonis germanys leadinghousing company THE bUSINESS

The Deutsche Annington ImmobilienGroup (DAIG), headquartered inBochum, Germany, is the largestresidential property company inGermany by number o units. It o ersapartments to rent and to purchaseand is a modern service companywhich strengthens its competitivenessby providing industry-leading levelso customer-oriented services.

INVESTMENT RATIONAlETerra Firma created DAIG in 2000 toacquire ten regional housing companieswith approximately 65,000 fats. Thisoriginal housing portolio was occupiedmainly by current or retired railwayworkers and their amilies who wereentitled to stay in the housing as parto their contractual employment rights.This tenant base gave the business astrong and predictable rental stream.The apartments were owned andmanaged by each o the ten regionalhousing companies which historicallyhad operated independently on anot-or-prot basis. This situationpresented a range o opportunities torun the portolio more e ciently andto create value through new initiatives.

PARTNERSHIP WITHTERRA FIRMAThrough Terra Firmas leadership,DAIG aims to deliver protable andsustainable growth via three areas o

business: i) long-term, value-enhancingmanagement; ii) selective privatisationo units in a socially acceptable manner,primarily to tenants; and iii) strategicacquisition o housing portolios.

Since its creation, DAIG has acquiredadditional portolios with the help andco-operation o Terra Firma. Followingthe original acquisition, in 2003 thecompany acquired Heimbau AG in Kiel,

which managed approximately 10,000fats. At the end o 2004, DAIGpurchased 4,500 fats rom the RWECorporation. In August 2005, thecompany acquired Viterra rom E.ONAG with 138,000 fats, nearly tr iplingthe size o the company. Since the

Viterra acquisition, DAIG has selectivelypursued a growth strategy havingacquired nearly 14,000 fats between2007 and 2009 most recently throughthe acquisition o 4,400 apartments inBerlin in November 2009.

Today, DAIG is the largest privatehousing company in Germany. In total,it manages nearly 192,000 ownedapartments, 44,000 garages, parkingspaces and other units as well as 1,500commercial units. Furthermore, thecompany manages nearly 27,000apartments or other owners. At yearend 2009, DAIG owned unitsrepresenting over 12 million squaremetres o living space. In order tomaintain the quality o the fats, thecompany continues to invest in itsportolio. For example, DAIG investedapproximately 340 million in 2008 and2009 alone. For the company, this is aninvestment in the uture and or itstenants it is proo o the companyspromise o quality. DAIG directs a largeproportion o its investment intoenergy-saving measures. In 2008 and2009, a modernisation andmaintenance programme was

undertaken throughout the portolio,the main ocus o which was on energysaving measures, such as the thermalinsulation o walls and roos and thetting o new windows.

DAIGs strategy has been highlysuccessul even in the recent morechallenging environment and thecompany has proven its ability to createsustainable growth in the German

property market. It is now the priconsolidator o housing portolioin the German market, with thecompanys acquisition platormsustaining year-on-year growth bopportunistically replenishing theportolio and building an ever-grorental asset base that provides strecurring cash fows. A key elemeDAIGs success is the ability to adto a developing environment, fexadjusting the strategy to realize topportunities available in the mar

In 2009, DAIG raised rents by anaverage o 1.3%. With Terra Firmbacking, the company is wellpositioned to capitalize on markeopportunities.

CORPORATE RESPONSIbIlThe Deutsche Annington Foundasupports initiatives in the localcommunities in which it owns houwith a view to improving communlie. The projects sponsored inclukindergartens, education programto encourage reading and writingmedia competence courses or chthe provision o instruments orchildren to encourage learning mand a community support centre

www.deutsche-annington.com

Wijnand Donkers, Manred Pschel

DEUTSCHEANNINGTON2,250M INITIAlTRANSACTIONSIzE IN 2000


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EMI

empLoys3,200peopLe

operatesdirectLyin32countrieswithafurther40LicenseesaroundtheworLd

24grammyawards(2010)

8britawards(2010)

emi is one oF TheworLdsLargestmusic companies

THE bUSINESSAcquired by Terra Firma in 2007, EMIis one o the biggest music companiesin the world. Headquartered in Londonand New York, EMI employs 3,200people and operates directly in 32countries with approximately 40licensees around the world.

The business comprises two divisions:EMI Music Publishing and EMIRecorded Music.

EMI Music Publishing acquires, protectsand represents the musical compositionrights on behal o songwriters acrossthe world, and earns its revenue romcreating commercial and licensingopportunities rom one o the worldsgreatest catalogues o songs. Thecatalogue contains well over a millioncontemporary and classic titlesincluding some o the best knownsongs ever written, such as BohemianRhapsody, I Heard It Through TheGrapevine, the James Bond theme,Every Breath You Take, New York,New York, We Will Rock You andSomewhere Over the Rainbow. EMIMusic Publishing is the worlds leadingpublisher o popular music and or eachyear since Terra Firmas acquisition,the company has been recognised asMusic Weeks Publisher o the Year inthe UK, and Billboards Publisher othe Year in the United States.

EMI Recorded Music signs, nurturesand markets perormers and recordingartists, and distributes recorded musicto retailers and licensed commercialmusic users. EMI Recorded Music hasa catalogue o over three million tracks.

Top perorming artists include animpressive list o new and establishednames including The Beatles, PinkFloyd, David Bowie, Kylie Minogue,Robbie Williams, the Beach Boys,Snoop Dogg, Katy Perry, Gorillaz,David Guetta, Lady Antebellum,Corinne Bailey Rae, Lily Allen andTinie Tempah.

INVESTMENT RATIONAlEWhen evaluating the acquisition oEMI, Terra Firma observed that musicconsumption was growing amongconsumers albeit in new ways butthat EMI Recorded Music, as well asthe rest o the recorded music industry,clung to an old model with a coststructure not appropriate to the utureo the business. Terra Firma believedit could create value by reocusing thebusiness on the consumer andimplementing controls and disciplinearound costs and investment decisions.With respect to EMI Music Publishing,the ocus was on continuing to diversiyincome streams, reducing the costbase, streamlining back oceoperations and identiying growthopportunities.

PARTNERSHIP WITHTERRA FIRMASince acquiring EMI, Terra Firma hasembarked on a major restructuringo the EMI Recorded Music businessinto three global business units: newmusic, catalogue and music services.This has enabled the business tounderstand better where it was makingand losing money and to ocus thebusiness on more eectively marketingand representing its rich catalogueo recorded music assets and tosignicantly diversiy its revenuestreams. The business is run withgreater eciency, reeing managementto ocus on important artist andconsumer relationships. At the sametime EMI has pioneered a granular,rigorous and totally new approach tosegmenting and understanding musicconsumers, enabling it to better deliver

the products and services that ansdemand in this rapidly changingmarketplace.

In addition, EMI Music Publishing hasmoved away rom a reliance ondeclining physical products andincreased its exploitation o newrevenue streams. The music publishingbusiness is principally comprised oMechanical Income (royalties rom

CD sales and digital downloads),Perormance (royalties due romany public perormances o acomposition) and Synchronisatio(royalties associated with the useo music in TV, lm, advertisemen

Whilst recent economic pressurehave created challenges or the mindustry as a whole EMI has retaiits strong market position in musipublishing versus competitors. Thcompany has reworked the produmix to increase the take up oroyalties income rom perormancand synchronisation and to ocuson reducing costs designed toimprove EBITDA margin. The reshave continued to show remarkabimprovement at the operating levcreating a highly cash generativebusiness.

EMI continues to reap the rewardo its restructuring in the context an evolving music industry whichis helping to redene. It is nowwell-positioned as an ecient, cagenerative and lower risk enterprIn EMI Recorded Music, the businis ocused on connecting its artisconsumers. In EMI Music Publishithe business is ocused on conneits songwriters with users o musias broadcasters, advertising agenlm makers and games manuactEMI continues to adapt rapidly atevery level to take advantage o nopportunities and grow as a strucand innovative artist and artist-orights management business.

CORPORATE RESPONSIbIl

EMI targets communities and ocon the issues o youth and music. o the best known initiatives in this the EMI Music Sound Foundatiwhich was established by EMI in 1and has since become the largestsingle sponsor o specialist peroarts colleges in the UK.

www.emimusic.com

EMI INITIAlINVESTMENT5,900M IN 2007


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INFINIS

45%ofukLandfiLLenergy supply

some10%ofuksrenewabLeenergysuppLyand0.7%ofThe uKs ToTal elecTriciTyconsumpTion

outputprovidespowerforThe eQuivalenT oF a ciTy oF1miLLionusers

11mtonnesofco2 prevenTedFrom release inTo Theatmospherein2009/10

inFinis is The uKsleading independenTpureLyrenewabLeenergy generaTor

THE bUSINESSInnis is the second largest player inthe renewable electricity generationsector in the UK. It delivers about 10%o the UKs renewable electricity supplythrough its landll gas, on-shore windarm and hydro generation activitiesand approximately 0.7% o the UKstotal electricity consumption. Its strongoverall renewables market position isclosely linked to its leadership positionin the UK landll gas market where ithas a 45% share o total supply. Innisis headquartered in Northampton andemploys some 450 people. It has atotal o 136 generation sites (123 LFGsites, 3 wind arms and 10 hydro sites).

Innis generates and sells renewableelectricity to licensed o-takers inthe UK using a variety o renewableeedstocks. In its landll gas division,it captures the gas through itscaptive extraction inrastructure onthe landll site and converts the gasinto electricity in its site-basedcombustion engine plants. It managesthe gas elds on behal o landlloperators who are required to meetstringent environmental complianceregulations which aim to minimizeamounts o landll gas, a very harmulgreenhouse gas, being released intothe atmosphere. Through its windarms and hydro plants, it harnessesthe natural elements to producerenewable electricity.

Innis has a total installed renewablegeneration capacity o 438 MW split

between its landll gas (346 MW), wind(75 MW) and hydro (17 MW) operatingplants. A pure business-to-businessoperator, it sells all its output to ahandul o licensed o-takers, themajority o which are large integratedelectricity utilities such as EDF, SSEand E.ON.

INVESTMENT RATIONAlEInnis started out as the small landllgas-to-energy division within WRG, thewaste management company acquiredby Terra Firma in 2003. It was spunout o WRG and re-branded Innisin 2006 when Terra Firma sold WRGto a Spanish construction group. TerraFirmas strategy was to transorm anunder-resourced orphan businesswithin WRG into a leading renewableenergy supplier. Terra Firma spottedthe strategic opportunity ater the UKintroduced the Renewable ObligationCerticate regime in 2002, therebyoering attractive nancial incentivesor renewable generators investing innew generation capacity.

PARTNERSHIP WITHTERRA FIRMATerra Firma enabled Innis to ullybuild out its capacity to convert WRGslandll gas into electricity and thenencouraged the company to acquirea number o competitors to becomethe undisputed leader in the landllgas market. Currently in the secondphase o its development, the companyis now broadening its portolio orenewable activities by ocusing on windand hydro opportunities as well. It isdoing so both through internaldevelopment eorts (wind developmentpipeline o 300500 MW) and externalacquisitions (Novera, Ardrossan windarm). Underpinning this transormationhas been Terra Firmas vision to investin high levels o operational excellencein order to achieve utility-type reliability

while strengthening the companyscommercial capabilities to ully graspthe revenue opportunities in therapidly expanding renewables sector.

Under Terra Firma ownership, installedcapacity (including acquisitions) grewrom 55 MW in 2003 to the current438 MW, while sites under managementmore than doubled rom 55 to 136today. EBITDA grew six-old over the

same period to around 100 milliHeadcount has also steadily increrom 150 at the time o its spin-ourom WRG to 450 today.

Innis is ideally positioned to capthe growth opportunities in the Urenewables sector. It is a well-unmid-sized operator with a clearstrategy, an ability to react todevelopments in the market and by a proven management team.

CORPORATE RESPONSIbIlInnis believes in supporting charin the communities where theirworkorce lives and works. The InCharity Challenge was launched2009 with this objective in mind aInnis donates into a und designto support charities and causesnominated by employees. In Mar2009 the company launched theInnis Energy Challenge whereb17 schools in the Northamptonsharea worked closely with Innisvolunteers to develop creative wato save energy or a prize o 500

The company won 3rd place in thSunday Times Best Green CompaAwards in 2010 or its approach tthe environment. Innis also recea Gold award rom the Royal Socor the Prevention o Accidents oapproach to health and saety.

www.innis.com

Robbie Barr, Jane Aikman, Eric Machiels

INFINIS WAS SPUNOUT OF WRG (WASTEMANAGEMENTCOMPANY ACqUIREDbY TERRA FIRMA IN2003) IN 2006


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ODEON & UCI

europesLargestcinema chain

1,845screensat204sites

1.5mcinemaguestsperweek

5003dcinemascreens

number1operatorinuk, spain and iTaly

THE bUSINESSOdeon and United CinemasInternational (UCI) were acquired asseparate businesses in 2004 andmerged into one group. Odeon & UCICinemas is now rmly established asEuropes number one cinema chainwith a total o 1,845 screens at 204 sitesacross the UK and European markets.The business is the number oneoperator in the UK, Spain and Italy witha signicant presence in Germany,Austria, Portugal and Ireland. Corporateheadquarters is in London, to takeadvantage o the lm community whilstUK operations are run rom Manchester.Each European territory has its ownmanagement and in total there is aworkorce o 9,000 people.

INVESTMENT RATIONAlEThe investment thesis was to acquirea large position in a consolidatingsector in both the UK and acrossEurope and deploy capital to urthergrow the business rom this strongplatorm. At the time o acquisitionOdeon had no clear strategic direction.It was managed by a collection oshareholders with dierent plans orthe business and this non-alignmento interest meant the company wasnot operating to its ull potential. UCImeanwhile was considered a non-coreasset by its two previous shareholdersand had gone through a period ounderinvestment. Both companieswere independently attractive, butthere were clearly even greater benets

to be derived rom a merger oeringthe opportunity to unlock valuethrough integration savings.

PARTNERSHIP WITHTERRA FIRMAAter the merger, the organisation wasrestructured to capture synergies, andestablish clear lines o accountabilitygiving a nancial improvement o morethan 10 million per annum.

Once the platorm was established,Odeon & UCI moved orward withacquisitions in Spain, Italy andGermany. In 2009 alone the Groupadded eight new cinemas to itsnetwork ve new builds and t hreeexisting cinemas acquired romcompetitors. Odeon & UCI continuesto review urther opportunities orgrowth, through opening new sites,acquiring cinema businesses andtaking over lease agreements orselected existing sites.

A major strategic initiative or Odeon& UCI relates to the deployment odigital projection technology whichprovides the platorm or 3D and alsoenables alternative content, such assports events and music concerts, tobe more easily shown. Agreementson unding arrangements have beensigned by Odeon & UCI with all sixmajor Hollywood studios in the UKand this has enabled a ull roll-out odigital projection to commence whichwill be completed by 2012. Odeon &UCI is the rst business in the UKwhich has been able to conclude theseagreements directly and the rst majorchain to commence a ull roll-out.In continental Europe, the Group hassigned agreements with our o thesix Hollywood studios and expectsto commence ull deployment laterin the year.

The Group has been aggressivelyrolling out a signicant number o

additional 3D screens in order tocapitalise on the strength o the 3Dlm slate this year. So ar this year,the number o 3D screens more thandoubled, with an additional 268screens bringing the total to almost500 screens, meaning that mostmultiplex cinemas in the circuit willhave either two or three 3D screens.In addition, two IMAX screens havebeen added in 2010, making Odeon

the largest operator o this technin the UK, with a total o seven sc

Odeon & UCI has developedopportunities to urther improve retail oer. For example, the comis now the largest ranchisee o BeJerrys ice cream in the world androlling out a highly successul neto Costa Coee houses in the UK10 units already in operation andurther units in the pipeline.

Odeon & UCI Cinema Group wasawarded International Exhibitor othe Year 2009 at the Annual CineExpo Global Industry Conerencein Amsterdam.

CORPORATE RESPONSIbIlOdeon supports a number o chaincluding the NSPCC and the VarClub in the UK. Odeon & UCI wohard at reducing its environmentimpact in all territories: this hasincluded initiatives to reduce powand water consumption, recyclecardboard packaging and a recemove to customer ownership o 3glasses to reduce wastage.

www.odeon.co.uk

Jonny Mason, Lorenzo Levi,

Rupert Gavin, Mayamiko Kachingwe

odeon & uci cinemasgroup is The marKeTleader in europe

ODEON INITIAlINVESTMENT 650MIN 2004, MERGEDWITH UCI INITIAlINVESTMENT350M IN 2004


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PNG

marketLeaderforgassupply in norThern ireland

135,000propertiessuppLiedwithnaturaLgas

8,100newconnectionsin2009aLone

200newcustomersperweeksince incepTion

270ktonnes(estimated)ofco2 emissions saved Throughconversions To naTuralgasin2009

png supplies naTuralgas To The greaTerbelFasT area

THE bUSINESSThe Kellen Group, trading under thePhoenix name, is based in Belast withapproximately 200 ull-time employees.Phoenix is the pre-eminent natural gasdistribution, supply and gas servicebusiness in Northern Ireland.

Since 1996, Phoenix has beensuccessul in introducing natural gas toa new market and establishing a strongand vibrant supporting industry.Phoenix has grown its customer baserom zero to 135,000 over the last 13years, equating to an average o 200new customers per week.

THE INVESTMENT RATIONAlETerra Firma retained Phoenix when itdivested East Surrey Holdings (2006)because it recognised its potential ordevelopment. The opportunity was togrow supply and distribution o naturalgas in the Greater Belast Area. One othe major challenges at that time wasto work with the authorities and agreea mutually satisactory regulatoryramework to allow PNG to developits business urther.

PARTNERSHIP WITHTERRA FIRMATerra Firma and Phoenix managementrestructured the company into twomain divisions as the result oregulatory change: PNG Distributionand PNG Supply.

PNG Distriution is the regulatedbusiness and owner o the gasdistribution network. It is allowed tomake an attractive real return o 7.5%on its assets. Natural gas was made

available to Northern Ireland as analternative to oil and coal in 1996, andas a result there is still substantialpotential to grow the customer basethrough the conversion o customersrom oil and coal to the greener andmore ecient uel which is gas.

The Phoenix network currently extendsto 3,000 kilometres o intermediate,medium and low pressure mains, which

distribute natural gas throughout thelicence area, representing around 50%o the population o Northern Ireland.PNG manages the development oboth the physical network and marketin Greater Belast.

Since 2005, the business has nalisednegotiation o a 40-year licence withthe regulator providing stability andlong-term protection to investors andthe business, and has realised 99million through the sale o itstransmission business. Since acquisition,the RAV (Regulated Asset Value) oPNG distribution has grown rom justover 300 million to more than 400million. RAV is expected to grow tomore than 500 million by 2013. Newconnections have grown rom 89,000 to135,000 under Terra Firma ownership.

Phoenix will continue to invest in aninrastructure that is currently makingthe benets o natural gas available toover 265,000 properties in the Phoenixlicence area in Northern Ireland and itplans to invest approximately 1213million a year in the network in thecoming years.

PNG Suppy is the supplier o gas todomestic, industrial and commercialcustomers in the Belast region. Itsprot margin is regulated in themedium to long term so that it makesa 1.5% margin on gas sales. However,there is volatility in annual earningsdriven by market changes in wholesalegas costs and the timing o tariadjustments agreed with the regulator,which are usually made semi-annually.

The supply division continues toimprove its service delivery toconsumers and to deliver gas at highlycompetitive rates. The success o thesupply division in Northern Ireland ledto the establishment o a newsubsidiary in the Republic o Ireland,whose aim is to initially supply largeindustrial and commercial users withgas with the r st customers alreadybeing secured and capturing around

23% o the Large Industrial EnergUser market rom the State-ownegas company Bord Gis Energy SIn addition, PNG Supply has contto expand the provision o energybalancing services to third partiesAt the same time, the services divcontinues to grow its share o t hedownstream ater-sales market wrepeat business underpinning thesustained growth and new produoerings attracting take-up romnew sectors.

In 2009 Kellen Group/Phoenix warecognised in the Sunday Times lo the 100 Private Equity backedastest growing companies in theUK, as Kellen Groups EBITDA prorose rom 14.6 million in 2006 to29 million in 2009.

CORPORATE RESPONSIbIlPhoenix has established and contto run its own Charitable Trust. TEnergy or Children Charitable Twas ounded with the objective tobreak new ground and reach deeinto the heart o the local commuthroughout Greater Belast and bto improve the lives o disadvantachildren. To date, the trust has hewell over 3,000 individual childre

www.phoenix-natural-gas.com

Peter Dixon

PNG WAS RETAINEDbY TERRA FIRMAWHEN IT DIVESTEDTHE PARENTCOMPANY EASTSURREY HOlDINGS(ESH) IN 2006


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TANK & RAST

THE bUSINESSTank & Rast holds the long termconcession rights to around 400 Germanmotorway sites, which roughly equatesto 90% o the Motorway Service Areas(MSAs) on the Autobahn by ar themost developed motorway network inEurope with approximately 12,200kilometres o road.

The company has a unique businessmodel whereby the Service Areas areoperated by approximately 130third-party tenants and its key revenuestreams are lease income rom tenantsand uel supply commissions romoil companies, who provide uel andbranding to the uel stations but donot operate them. Tank & Rast isresponsible or the planning,construction, nancing, maintenanceand the leasing-out o the site acilities.The tenants who run the MSAs aretypically local individuals or smallcompanies complemented by somecorporate tenants. The uel companies,who supply uel and branding tothe sites but do not operate the uelstations, are a mix o global oilcompanies and Mittelstand Germanoil companies.

Tank & Rast has a near universal reachacross the network with one site orevery 60 kilometre o motorway. Everyyear, Tank & Rast is host to over 500million visitors at its 378 restaurants,345 petrol stations and 50 hotels acrossits network, representing almost 1.4million visitors per day. Over 2.5 billionlitres o uel are sold across the networkeach year, giving Tank & Rastapproximately a 5% share o the overallGerman petrol station market.

INVESTMENT RATIONAlETerra Firma acquired the business inDecember 2004 because it believedthat Tank & Rast was more than aproperty business and that it couldcapitalise urther on its strong positionon the German Autobahn. Terra Firmawas attracted to the business becauseo the long term concessions and thestable cash fows that they generated

(including a signicant xed leasecomponent) and the large number oindependent sites which representeda highly diversied low-risk portolio.

Tank & Rasts complex operational andcontractual structure oered signicantopportunities or improved asset yieldmanagement, cash generation andor a potential evolution o its businessmodel. Terra Firma observed thatTank & Rask was lagging behindinternational perormance benchmarksor motorway service stations in termso penetration (how many customersturn-o the motorway to a Tank & Rastsite); conversion (how many visitorsspend money); and customerexpenditure per visit. Terra Firmathereore believed that there wereurther opportunities to achievesuperior returns through operationaldevelopment, particularly capitalinvestment in customer-ocusedinitiatives.

PARTNERSHIP WITHTERRA FIRMASince the acquisition by Terra Firmathere has been signicant investmentdesigned to improve Tank & Rasksperormance against international MSAperormance benchmarks. In 2005 along term 600 million plus investmentprogramme was launched, o whichapproximately 300 million has beeninvested to date to nance theconstruction o new sites, thereurbishment o older sites and theintroduction o capital expendituredriven strategic and consumerocused initiatives. Key developmentinitiatives include:

Agreements with major international

ast ood players to provide theGerman consumer with more choice

Premium toilet reurbishmentprogramme branded Saniair whichintroduced a revolutionary voucher-based pay per use system, withvouchers redeemable againstpurchases at Tank & Rask sites

Agreements rom the Germanederal and regional governmeto allow branded signage on tAutobahn, advertising to consthe brands that are available aeach MSA

Rationalisation o the tenant barom 251 at acquisition to the 1tenants currently operating thethereby rewarding the Compamost eective tenants by givinthem the opportunity to operaextra sites oering certain locaeconomies o scale and suppothem with urther investment timprove their business perorm

Supported by Terra Firma, themanagement team at Tank & Rascontinues to work on a number oadditional key growth initiatives: re-tendering o its existing uel sucontracts; urther developments Saniair pricing; expansion o thirdparty opportunities or Saniair; aintroduction o an Electronic PoinSale system.

Research has shown that customesatisaction levels now reach 98%in most o the Europe-wide ADACMotorway Services Tests o the lave years, Tank & Rast was placedand was recognized as oering selevels among the best in Europe.Terra Firma has, created a cultureputs customer preerences rst aencourages entrepreneurship amtenants, thereby transorming theexperience o drivers on the Germmotorways.

CORPORATE RESPONSIbIl

Tank & Rast is committed to amiriendly policies and has launchednumber o initiatives to support sand responsible travelling includieducating children about road saand the importance o taking a bon the motorways.

www.tank.rast.de

5%ofoveraLLgermanpeTrol sTaTion marKeTin Terms oF Fuel sold

500miLLionvisitorsayear

98%customersaTisFacTion raTing

400siteswith130tenants

tank&rasthoLds90%ofgermanmotorwayconcessions ForpetroLstations,shops,restaurantsand moTels

TANK & RASTINITIAl INVESTMENT1,100M IN 2004


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STAKEHOlDER RElATIONSPeter CornellManaging Director, Stakeholder Relations+44 1481 754 695

PRESS ENqUIRIESAndrew Dowler+44 7887 607 [email protected]

OR

David Reno/Jonathan DoorleySard Verbinnen & Co(212) 687-8080

[email protected]

OUR OFFICES:Terra Firma Capital Partners Limited2 More London RiversideLondon SE1 2APUnited Kingdom

Terra Firma GmbHGarden TowersNeue Mainzer Strasse 46-5060311 Frankurt am MainGermany

Terra Firma Capital Management LimitedFirst Floor, Dorey CourtAdmiral Park, St Peter PortGuernsey GY1 6HJUnited Kingdom

CONTACT INFORMATION

www.terrafrma.com


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terra firma facts 2010

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