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National Grid has agreed to sell a 61 per cent stake in its gas distribution business to a consortium of investors, including Macquarie Infrastructure.
The terms of the deal value National Grid Gas Distribution at approximately £13.8 billion, including debt.
Completion of the transaction is conditional on the receipt of merger clearance from the European Commission. Subject to satisfaction of this condition, National Grid expects that the transaction will complete on or prior to 31 March 2017.
On completion, National Grid will receive a payment of £3.6 billion in cash from the consortium and will own a 39 per cent minority equity interest in a new holding company for National Grid Gas Distribution. National Grid will receive £1.8 billion from additional debt financing.
National Grid also intends to return £4 billion of net proceeds to shareholders through the combination of a special dividend. And, in conjunction with the transaction, the board has agreed a voluntary distribution of £150 million for the benefit of energy consumers.
National Grid and the consortium have also expressed an interest in relation to the potential future sale and purchase of an additional 14 per cent of equity in the gas distribution holding company on broadly equivalent financial terms to the transaction. Further details will be announced if agreement is reached.
National Grid chief executive John Pettigrew 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.”
Analysts at Citi said: “Overall, we believe the transaction price today is an attractive one, especially compared to the NG current share price implied premium to RAV of circa 20 per cent. Following the recent weakness of NG shares, we expect today’s announcement and the cash returns in [the second quarter of] 2017 should support the shares.”
In addition to Macquarie, the consortium comprises Real Assets, Allianz Capital Partners, Hermes Investment Management, CIC Capital Corporation, Qatar Investment Authority, Dalmore Capital and Amber Infrastructure Limited/International Public Partnerships.
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