The company behind Scottish Coal has agreed to sell two of its renewable energy businesses to an operation controlled by multi-millionaire financier Guy Hands� investment vehicle Terra Firma.

The company behind Scottish Coal has agreed to sell two of its renewable energy businesses to an operation controlled by multi-millionaire financier Guy Hands' investment vehicle Terra Firma.

The sale price was not disclosed, but sources tell The Herald that the deal between Scottish Resources Group and Terra Firma subsidiary Infinis is worth around £10m.

Infinis, which is based in Northampton and bills itself as UK's largest "purely renewable energy generator", yesterday announced the proposed acquisition of Scottish BioPower and Scottish BioFuel.

Asked if the deal could be described as a distressed sale, given Scottish Resources' recent financial woes, one source said: "Absolutely not, it turned out that Dacre Purchase, Scottish Resources' managing director, went to college with Infinis' head of planning, and the two happened to be chatting. From there, a deal was done."

The company said the deal, which also includes the transfer of four staff, was part of its strategy to benefit from the rapid growth of the renewable energy market.

Infinis said it intends to develop in excess of 125MW biomass power generation assets and more than 125MW of wind farms in central Scotland, subject to planning and regulatory approvals.

Under the terms of the deal, Infinis will take over the development of Scottish BioFuel's planned £100m processing plant at Westfield in Fife, adjacent to a proposed power station to be fuelled by wood.

The new plant will process willow and forestry waste for that power station, and will also produce wood pellets for the domestic heating markets and is planned to be in production by 2010.

Alan Lovell, chief executive of Infinis, said: "We expect to spend about £125m and we're certainly up for the investment."

The biofuel market is being driven by legislation that makes it a requirement that 25% of any wood fuel must come from an energy crop by 2009 in order to get a renewable obligation certificate for coal-fired electricity generators. That requirement will rise to 75% by 2011.

Critics, however, believe the concept is flawed because farmers are now reticent to grow willow on their land when the price of grain is at a premium and is continuing to rise.

Nonetheless, Infinis also said options have been taken on a further five sites, all on former mining sites owned by Scottish Resources, which will be considered for wind generation opportunities.

Lovell said: "Our intention has always been to have a diversified portfolio of renewable technologies particularly expanding our biomass and wind capabilities.

"These acquisitions of the established businesses of both Scottish BioPower and SRG's renewable energy assets, including Scottish BioFuel, will help us to create a leading market position in renewable power in Scotland."

Infinis also recently lodged its first application for wind generation on its Greengairs site near Glasgow, where it already produces landfill gas.

Terra Firma acquired Waste Recycling Group in 2003, but 18 months ago demerged Infinis as a separate, renewable energy company.

Since its inception in 1994, Terra Firma has invested more than 7bn of equity and has completed transactions with an aggregate transaction value of more than 30bn.

Scottish Resources, in its last available set of financial accounts from Companies House, unveiled an underlying loss of £11.4m for the year to the end of March 2006, compared with an operating profit of £1.3m the year before.

In a separate development, Scottish Resources yesterday said that Nick Guest, who has held a number of senior finance positions with transport giant Stagecoach, has been appointed as the company's finance director.