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STAR Capital Partners acquires pipeline gas transporter business from TotalFinaElf

20 August 2001

STAR Capital Partners Limited, a new European private equity fund specialising in the acquisition and development of capital-intensive businesses, announces the acquisition of TotalFinaElf Connect ("Connect") and TotalFinaElf Pipelines ("TPL") from TotalFinaElf Midstream UK Ltd. These acquisitions are the first investments of the STAR 1 fund, which had a first closing at €272 million in February 2001.

Connect and TPL install, maintain and own pipelines connecting UK domestic households to the gas supply. The two businesses trade as separate entities for regulatory reasons, with TPL owning the assets, while Connect is the service company, constructing connections and maintaining them over their life.

Connect/TPL was one of the first to challenge Transco's monopoly position as a Public Gas Transporter ("PGT"). Connect/TPL, which mainly targets new housing developments, is now one of the leading independent PGTs, with a market share of approximately 35%. It currently serves over 135,000 households and has contracts for a further 110,000 still to be connected. Its competitive strength stems from its technical knowledge, high quality service and marketing expertise. As at the end of 2000, the Company, which is based in Cardiff and employs 103 people, had total assets of about £60 million.

TPL and Connect, under the ownership of Star Capital, have become part of a new group named Inexus. Going forward, Inexus intends to take advantage of new business opportunities created through the deregulation of other utility markets.

Peter Nicholls, Senior Vice President of TotalFinaElf Midstream (UK) Limited, said:

"We are very pleased with the outcome of the sale we have concluded with STAR. Connect and Pipelines are successful businesses holding market leadership in their sector, but the laying of largely domestic gas infrastructure is not core to the business of TotalFinaElf in the UK, and a decision was taken to seek for the companies new ownership which would allow Connect and Pipelines to develop their full potential."

The equity was principally provided by STAR, supported by an investment from the management team. The bank debt was provided by the Royal Bank of Scotland. Additional facilities to support future capital expenditure and other commitments are being provided by the Royal Bank of Scotland.

Lehman Brothers and PricewaterhouseCoopers acted as financial advisors to STAR Capital and ABN Amro led the team advising TotalFinaElf.

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