The owners of Electricity North West (ENW) are planning to auction off the company within the next few months, Sky News has reported.
The distribution network operator is jointly owned by infrastructure investment funds managed by JP Morgan Asset Management and Colonial First State.
According to anonymous sources quoted by Sky, bankers at Citi have been enlisted to conduct a strategic review of the business in preparation for the planned sale.
One source said to be close to ENW told the news outlet concerns over the potential renationalisation of energy networks if Labour comes to power have “nothing to do” with the review.
Other sources from within the financial sector suggested the sale could bring in well over £2 billion based on a typical 30 per cent premium on the regulatory asset value of £1.7 billion reported in the company’s most recent financial results for 2017/18.
Electricity North West declined to comment.
The news comes as Ofgem is tightening the noose on network profits for the second set of RIIO price controls, due to begin in 2023 for electricity distribution.
The regulator confirmed plans in July to lower the cost of equity range – the baseline rate of return which it considers necessary and sufficient to attract investment – from between 6 and 7 per cent currently to between 3 and 5 per cent – the lowest level ever proposed for network price controls in Great Britain.
Ofgem estimated the reduction would save consumers more than £5 billion over the five-year price controls.
Citizens Advice, which has claimed energy networks are on course to rake in £7.5 billion of “unjustified profits” during the current price controls, urged the regulator to save consumers another £4.1 billion by lowering the equity beta – a measure of financial risk used to calculate the cost of equity.
In an interview with Utility Week earlier this year, ENW’s chief executive Peter Emery, said: “The networks are a key enabler of decarbonisation and economic growth and if we don’t get RIIO2 right, we’re going to be snatching defeat from the jaws of victory.”