Simon Rigby: The green revolution's Lancashire hot spot

The Business Interview: Spice's founder, a north-country farmer's son, has ploughed its sale proceeds into an eco-energy scheme
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The Independent Online

For some of us, a £22m windfall might look like an opportunity to sit back and enjoy the fruits of one's labours. But Simon Rigby is the archetypal entrepreneur – voluble, energetic, a self-confessed "obsessive". And the founder of Spice, the utility services group sold to private equity investors for £251m this week, is already on to pastures new.

Mr Rigby's latest venture is Farmgen, and those new pastures are actually fields of high-energy crops, which will be eaten by bacteria, producing methane to be turned into electricity.

Farmgen is the green revolution in action, lured by the Government's feed-in tariff to help meet the target for 7.5 per cent of renewable energy to come from anaerobic digestion (AD) by 2020.

"There's going to be a land grab," Mr Rigby predicts enthusiastically, in a broad Lancashire accent. "One thousand acres of maize, put into an AD plant, will produce £1m-worth of electricity."

In part, Farmgen is a natural progression from Spice. Mr Rigby's first company began in 1996 as a 12-person management buyout of parts of Yorkshire Electricity. Mr Rigby was working in one of Yorkshire Electricity's collection departments, and when the newly privatised company decided to outsource whole swaths of its activities and take staff numbers down from 6,000 to 35, he spotted a gap in the market. "I wanted to have a chance to run my own business," Mr Rigby says. "All my family were farmers so they were all self-employed already. I was the only wage slave."

Fourteen years later, Spice is a FTSE 250 stalwart, turning over nearly £400m annually and employing 5,000 people. It is the biggest water meter installer in the country, maintains some 160,000 sub-stations, and is also a major electricity broker, sourcing £1.2bn of power every year for customers including Sainsbury, Marks & Spencer and Sheffield Forgemasters. Even Mr Rigby is surprised by the company's success. "I had no idea it would get this big," he says. "We hadn't even thought much beyond Yorkshire Water, let alone to the 12 area supply boards, let alone to the US."

But Farmgen's beginnings came not only from Spice's insights into the electricity market. As one of six children brought up on a 34-acre farm just outside Preston, the AD venture also takes Mr Rigby back to his roots.

"My hobby for years now has been buying farms," says the proud owner of 2,000 acres of Lancashire, Cumbria and Staffordshire. "I buy them and my brothers farm them, but then about four years ago they were saying for Christ's sake stop buying land because you just can't make anything out of it any more."

Farmgen might be the answer. Ultimately, Mr Rigby's 2,000 acres could fuel at least three AD plants producing 5 megawatts of power every year, or enough to power 5,000 homes. The first facility – at Carr farm – will be finished within weeks and generating electricity by March next year. Construction of a second plant is also set to begin within a month. And the fledgling company already has a 10-year contract with Marks & Spencer to buy the output, as part of the retail group's "Plan A" scheme to be carbon neutral in the UK and Ireland by 2012.

The M&S deal is central to Farmgen's "fiendishly clever" funding structure, under which a bank is lending around 80 per cent of the plants' £3m-plus construction costs, against the future income from the M&S contract. "M&S are going to buy our energy, so I've sold that income stream to the bank to lend me the money to build the AD plant," Mr Rigby says.

But green electricity is not Farmgen's only money-spinner. Even the by-products of AD are useful. The "digestate" left behind by the bacteria can go back on the field to grow more crops. "The only thing you take out of the maize is the methane; everything else is still there, so most of what you've taken out of the land can go back on to it again," Mr Rigby says.

The process also produces around £1m of hot water. Farmgen has not yet decided what to do with it, apart from using some to keep the AD plants at the necessary room temperature. One option is to grow bean sprouts, which need vast quantities of warm water. Another is to use the heat to dry the digestate, turning it into sustainable peat.

Mr Rigby set up the company in 2008, but it has only really taken off since his retirement as chief executive of Spice earlier this year. Although the move was widely interpreted as the fall-out from a profits warning last December, Mr Rigby says it was simply the right time for him to go.

Given his commitments to his various gate-to-plate food initiatives from his farms, his 150-strong buy-to-let property empire, a newly acquired country house hotel, and the rapidly growing Farmgen, Spice was no longer getting the attention it deserved. "When you are running a quoted company, you can't have big hobby jobs as well; it's just not fair on the shareholders," he says.

Within months of Mr Rigby's departure, the private equity group Cinven was sniffing around. And, after two rejections at a lower price, the 70p-per-share deal was finally agreed this week, netting Mr Rigby £22m for his 8.48 per cent stake. "I'm not doing cartwheels, but I'm not unhappy with the price, given the state of the market," Mr Rigby says. "I did vote in favour of the deal, but a big part of that was because I want to move on."

With the equity markets "shut down", the only options were for Spice to "kick its heels for three or four years" or turn to private equity for the funding to help it grow into the massive US market. Neither suited Mr Rigby's temperament. "I'm better off handing Spice on to professional managers," he says. "What I'm good at is growing small companies."

If Farmgen proves even half as successful as Spice, that first AD plant at Carr Farm is just the beginning.

The entrepreneur's CV

* Since February, 48-year-old Mr Rigby has worked full-time at Farmgen, his anaerobic-digestion power company.

* Mr Rigby started out at Yorkshire Electricity after graduating from Hull University and qualifying as an accountant. In 1996, after a management buyout, he turned the company's services arm into Spice.

* He is married, with two children, and lives in a windmill just outside Preston.

* Mr Rigby also owns 150 houses, all but three of which are rented out. His most successful property investment was to buy a bungalow for £31,000, replace one window, and sell it 10 days later for £63,000. "It's a mad, mad world," he says.

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