National Grid to sell 60 per cent of its gas business
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National Grid has announced it will sell a 60 per cent equity interest in its UK gas transmission and metering business to a consortium.
The deal was first announced in March 2021 and forms part of National Grid’s shift towards investing more into its electricity business following last year’s acquisition of Western Power Distribution (WPD). The Competition and Markets Authority (CMA) gave the green light for the £7.8bn takeover of WPD in September after an investigation over the deal’s potential impact on the market.
Once the sale of its gas business has gone through, National Grid will receive approximately £2.2bn in cash and will continue to own a 40 per cent minority equity interest. It will also receive approximately £2bn from additional debt financing at completion.
Like the WPD purchase, completion of the sale will be subject to certain antitrust and regulatory conditions, but National Grid said it expects the transaction to be completed by the second half of 2022.
It added that the deal will help “significantly” enhance National Grid’s role in the delivery of the UK’s net zero targets.
John Pettigrew, National Grid chief executive, said: “This transaction further enhances our role in delivering the UK’s energy transition, pivots our portfolio towards electricity, whilst ensuring the security of the energy supply for the country.
“Alongside our plans to invest up to £35bn in energy infrastructure over the next five years, the series of transactions announced last March will strengthen our long-term growth prospects, and drive long-term value for shareholders.”
The consortium of buyers includes Australia’s Macquarie Asset Management and British Columbia Investment Management Corporation from Canada.
Pettigrew said that the new owners have lots of experience owning big infrastructure and a “long-term commitment to the UK”.
Macquarie Asset Management’s Martin Bradley said: “The national transmission system is a critical enabler of the UK’s energy transition, providing the flexibility and reserve energy needed in the electricity system as the deployment of renewable sources of generation accelerates.
“However, if the UK’s net-zero by 2050 target is to be met, the country must have a next-generation transmission backbone to power homes and businesses with renewable energy.
“Backed by our significant investment, the transmission system will play a leading role in making the network ready for this transition. In doing so it will support the expansion of hydrogen’s role in the energy mix to deliver a competitive edge to the UK and its industry, while working closely with the Government and Ofgem to maintain security of supply.”
Following completion of the Transaction, National Grid intends to use proceeds of approximately £4.2bn towards repayment of loans it took out as part of the WPD acquisition.
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