National Grid has found a buyer for Britain’s gas pipes and meters, as it continues its retreat from the energy source en route to a future exclusively in electricity.
A consortium including Macquarie, claimed to be the world’s biggest manager of infrastructure assets, will pay NG £2.2 billion in cash initially for a 60% stake in the ESO’s National Grid Gas Transmission business, it told investors this morning. Partnering the Australians is British Columbia Investment Management Corporation, a major Canadian manager of public sector funds.
Today’s deal is structured around a new joint-venture vehicle. Subject to regulators’ approval expected by mid-summer, the new owners are committed to offering National Grid an option to buy its remaining 40% between January and June 2023. Before then, on completion of today’s deal, National Grid will receive approximately £2.0 billion from additional debt financing.
Macquarie are the bankers who absorbed in 2017 the financial underpinnings of David Cameron’s failed Green Deal, the first of two mass insulation programmes botched under the Conservatives, when it crashed in 2016.
In March 2021 National Grid signalled its strategy of quitting gas and pivoting exclusively towards electricity. Last year it bought Western Power Distribution, the UK’s largest electricity distribution business.
Today’s terms imply a value for the gas business of approximately £9.6 billion. On completion, National Grid will receive approximately £2.2 billion in cash, plus another £2.0 billion from additional debt financing.
National Grid Group say its gas business’s regulated asset value today is approximately £6.6 billion and its net debt approximately £3.8 billion.
The deal once completed will see around 70% of National Grid Group’s assets being in electricity, up from 60% now, helping it sustain its anticipated 6% to 8% per year growth in asset value.
Proceeds of today’s deal, National Grid Group confirmed today, will go towards paying off bridging-finance needed for last year’s purchase of WPD.
National Grid chief executive John Pettigrew 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 £35 billion 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”.
As both the gas system owner and its operator, the network has day-to-day responsibility for balancing supply and demand in real time across Britain’s 7,660 kilometres of high-pressure pipe and 23 compressor stations. It oversees connections to 8 distribution networks and other third-party independent systems.
NGG is Britain’s biggest owner of gas meters, controlling and monitoring approximately 8.4 million domestic and commercial devices as of March 2021.
This morning’s announcement left National Grid Group’s share price very marginally lower on the FTSE-100, valuing the group at £41 billion. Investors have boosted its market capitalisation over 37% since last year’s declaration of its electricity-only focus.