British Salt, which was backed by LDC in a £100million management buyout from US Salt Holdings in June 2007, originally secured planning permission for the scheme in May last year.

EDF Energy will be developing the project alongside EDF Trading using a revised planning permission designed to take advantage of synergies with the adjacent Hole House Farm gas storage facility.

Under the agreement, ownership of the facility will be transferred to EDF Energy, who will convert a series of pre-existing underground salt caverns for natural gas storage and develop a new gas processing facility at British Salt’s Warmingham site.

The fast cycle facility, which is expected to be fully operational by 2016, will be capable of storing 36 million therms of gas.

All brine extracted during the development process will be used by British Salt as feedstock for its manufacturing plant, which supplies a range of UK and overseas markets from food processing to the production of chemicals such as chlorine.

The deal, which is set to provide a major boost to the local construction and engineering sector once work on the facility gets underway, provides further stability for British Salt, which  employs 125 people and produces over 400,000 tonnes of salt per year.

It also provides additional security of supply in the face of the continued decline of domestic gas production from the North Sea and increasing reliance on overseas markets.

British Salt Chief Executive, Rob Jones, said it was a successful outcome for all parties and a continuation of a strong relationship between British Salt and EDF Trading and its sister company EDF Energy.

He said: "We started developing cavities specifically for gas storage in the mid 1990s, working in partnership with EDF Trading. This scheme is a continuation of that initial project and it is fantastic news that a company like EDF Energy has chosen to invest again in the area."

Martin Lawrence, EDF Energy’s Managing Director Energy Sourcing and Customer Supply, said: "This transaction forms part of our wider commitment to the UK energy sector and will help balance our gas supply position against customer need.

"We have been working for some time with British Salt to bring this transaction to a conclusion and we are pleased this project is being taken forward by EDF Energy with British Salt, an organisation that has been at the heart of the community in Cheshire for many years."

Carl Wormald, Director of LDC, said: "Given the continued imperative to increase natural gas storage capacity in the UK, the scheme represents a valuable and strategically important asset. The sale has been concluded in line with our original investment strategy and represents an excellent outcome for LDC, British Salt and EDF Energy.

"Going forward, EDF Energy is a partner with the necessary skills, expertise and access to capital to successfully develop the facility."

Mr Wormald added: "With continued demand from several fast-growing UK and overseas markets and more than 100 years of salt reserves to exploit, the British Salt business remains well positioned to target growth opportunities for its products and we look forward to continuing our work with the management team."

British Salt and LDC were advised by Deloitte’s corporate finance team in Manchester and a team from DLA Piper in Manchester, led by Neal Shepherd.

Paul Lupton, regional head of corporate finance at Deloitte, said: "This was a complex transaction requiring significant technical input from a multi-disciplinary team across Deloitte. Securing such an excellent outcome in the current climate is testament to the quality of the scheme, the support of LDC, the commitment of EDF Energy and the strength of the advisory team."

LDC notes to Editors:

LDC (Lloyds TSB Development Capital) is part of the Lloyds Banking Group and is authorised and regulated by the Financial Services Authority. LDC has, since 1981, completed over 400 investments, has ongoing interests in over 60 businesses across the UK. LDC back ambitious management teams from UK-based companies seeking between £2m and £100m of equity for management buy-outs, institutional buy-outs or development capital transactions. LDC invests in a broad range of sectors and has particular experience in financial services, healthcare, industrials, IT & software, leisure & media, retail & consumer, and support services.