National Grid has agreed to sell a 60% stake in its UK gas transmission and metering arm to Macquarie and British Columbia Investment Management Corporation (BCI) in a deal that values the business at £9.6 billion.
National Grid will receive £2.2 billion on completion as well as a further £2 billion in debt financing.
The deal includes an option to sell the remaining 40% of the business still held by National Grid to the consortium, which can be exercised in the first half of next year.
Completion is expected to take place in the second half of 2022.
National Grid put the gas business up for sale in March 2021 as part of its “strategic pivot” towards electricity with the acquisition of Western Power Distribution. The latest deal means the proportion of the company’s assets in electricity has grown from c60% to c70%.
The gas transmission network comprises approximately 7,660 kilometres pipes and 23 compressor stations. The metering business owns 8.4 million domestic and commercial meters.
John Pettigrew, chief executive of National Grid, 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.”
He said the consortium had “a long-term commitment to the UK with significant experience in owning and operating infrastructure assets”.
Martin Bradley, head of Macquarie Asset Management’s real assets team in EMEA, 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.”
Lincoln Webb, executive vice president and global head of infrastructure & renewable resources at BCI, said: “This investment aligns well with our diversified portfolio of regulated utilities that securely deliver critical services to customers. We believe National Grid’s innovative decarbonisation strategy will ensure the business plays a leadership role in supporting the UK to achieve net zero carbon emissions on target by 2050, while meeting consumer demand for reliable networks.”