Terra Firma, the private equity firm led by Guy Hands, has gone head-to-head with investment group 3i in the £112 million takeover battle for Novera Energy, one of the UK's biggest renewable energy groups.

Novera, which has a mix of landfill gas, hydro-electric and wind farm energy developments, confirmed yesterday that Infinis, the landfill gas outfit backed by Terra Firma, had approached the group. Last month, 3i Infrastructure confirmed it was behind a takeover approach for Novera, the latest move in a spate of consolidation activity within the sector. 3i has built up a 10 per cent stake in Novera.

Mr Hands is one of the UK's most successful private equity magnates, and is best known for his takeover of EMI last year.

Novera, which reports annual results today, said in a statement that it was “continuing negotiations with 3i Infrastructure concerning a possible cash offer for ... Novera at a price of 90p per share”, valuing the company at £112 million.

“The Board of Novera also announces that on February 18 2008 it received an approach from Infinis Acquisitions,” the company said.

A takeover of Novera would be a major filip for Infinis, also one of Britain's biggest renewable energy players, which has ambitious expansion plans. It was speculated yesterday that Infinis had also made an approach for Novera at 90p after 9.4 million Novera shares were bought at that price. However, Andrew Shepherd-Barron, an analyst in KBC Peel Hunt, said at 90p, any bid was “opportunistic” and that an offer of 149p was more realistic. “Alternative energy is valuable, particularly at times of high fossil fuel prices,” Mr Shepherd-Barron said. The shares closed yesterday at 88p, a rise of 5.4 per cent.

Neither 3i nor Infinis can make a formal offer for Novera until the alternative energy group settles a disagreement with Waste Recycling Group, on whose landfill sites it operates. A court hearing on the dispute is due to be heard next month. Novera can generate about 122MW of power and plans to increase capacity to 250MW by 2011.

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