Engineering news
National Grid has entered into an agreement to sell a 61% equity interest in its UK gas distribution business to a consortium of infrastructure investors from the UK as well as Australia and China, but energy unions have urged caution about flogging the UK’s ‘infrastructure crown jewels’ overseas.
The consortium comprises UK firms Allianz Capital Partners, Hermes Investment Management and Amber Infrastructure Limited/International Public Partnerships and Dalmore Capital as well as Australian company Macquarie Infrastructure and Real Assets (MIRA), Chinese state-owned CIC Capital Corporation and Qatar’s state-owned Quatar Investment Authority.
The terms of the transaction have been estimated at an enterprise value of approximately £13.8 billion. On completion National Grid will receive a payment of £3.6 billion in cash from the consortium and will own a 39% minority equity interest in a new holding company for its UK gas distribution business (NGGD) called GasD HoldCo. In addition, National Grid will receive £1.8 billion from additional debt financing. A total of 5,700 employees are involved in the in scope of sale, while 130,000km of pipes are being transferred.
Following completion of the transaction, National Grid intends to return £4 billion of net proceeds to shareholders through the combination of a special dividend (together with a share consolidation) and share buy-backs. At least 75% of the net proceeds are expected to be returned via a special dividend in Q2 of calendar year 2017.
Completion of the transaction is conditional on the receipt of merger clearance from the European Commission, but it is expected to be completed by 31 March 2017.
National Grid and the consortium have also expressed an interest in relation to the potential future sale and purchase of an additional 14% of equity in GasD HoldCo on broadly equivalent financial terms. Further details will be announced if agreement is reached.
In conjunction with the transaction the National Grid board has agreed a voluntary distribution of £150 million for the “benefit of energy consumers”.
John Pettigrew, chief executive of National Grid, said: “Today’s announcement follows a highly competitive sale process. It represents an important milestone in the evolution of National Grid and is a good outcome for our customers, employees, and shareholders.
“The consortium, has a long-term commitment to the UK with significant experience in owning infrastructure assets, and we look forward to working with them as the gas distribution business continues to deliver a safe and reliable service.
“On completion, National Grid’s portfolio will be rebalanced towards higher growth assets, whilst maintaining a strong balance sheet and supporting our sustainable dividend policy.”
However, GMB remains concerned over the foreign ownership of a key piece of national infrastructure.
Stuart Fegan, GMB national officer, said: "The government must be mindful infrastructure crown jewels like this are more than just a cash cow to be flogged the highest foreign bidder – they are paramount to Britain’s industry and security.”
Earlier GMB called on Theresa May to put the sale on hold until proper safeguards were in place. The Prime Minister delayed the go ahead for the recent Hinkley Point C deal while the Enterprise Act underwent a review.
GMB said it strongly cautions the funding of new developments and said they must be separate from regulation and design of industry. It added: “Chinese pop-up power stations are not a solution to our energy problems.”