Chinese mull bid for National Grid’s gas networks: report

Two Chinese investors are mulling a bid for National Grid’s gas distribution networks, the Telegraph has reported.

China Gas and the conglomerate Fosun are thought to be considering a consortium bid for the business – estimated to be worth £11 billion by some analysts.

The pair are understood to be up against two rival consortia: one led by the Canada Pension Plan Investment Board and the other by the infrastructure arm of the Australian bank Macquarie. The exact make-up of the groups remains unclear.

The former has at different points been reported to include investment firm Hermes, Canadian pension fund Borealis, the UK’s Universities Superannuation Scheme, Wren House – a subsidiary of the Kuwait Investment Authority – and the Abu Dhabi Investment Authority. The Ontario Teachers’ Pension Plan was also reported to have been part of this consortium although there have been suggestions it has pulled out.

The latter has been said to include German financial services firm Allianz, the Amber Infrastructure Group and the sovereign wealth fund China Investment Corporation.

The news comes after the government revealed last week it would implement “a new legal framework for future foreign investment in Britain’s critical infrastructure” as it announced its decision to press ahead with Hinkley Point C.

Following a surprise of review of the deal over the summer, it revised the terms to prevent EDF from selling a controlling stake in the nuclear plant without the prior approval of ministers. It will also take a “special share” in all future nuclear project to ensure they cannot be sold without its say-so.

The sale of National Grid’s gas distribution networks was announced by the firm in its half-year results in November. It said it expected the process to conclude in early 2017 and that it would “return substantially all of the net proceeds to shareholders”.

A response to a consultation with stakeholders was published by the firm in April, and in May it said had made “good progress on the activity needed to create a standalone business” as it reported its full-year results.

It began the process of auctioning of a 51 per cent stake in the networks in early August, Bloomberg reported at the time. National Grid was said to have sent information on the business to prospective buyers and asked first-round bids to be submitted by the end of this month.

The gas distribution arm consists of four networks in the East Midlands, West Midlands, North West England and East of England (including North London), which serve around 11 million customers.  It made an operating profit of £878 million in the 2015/16 financial year – an increase of 6 per cent on the previous year. 

A spokesman for National Grid said: “We will not speculate on the identity of potential bidders. Regardless of their identity, all bidders will have to go through the same rigorous approval process.

“The new owner will have to be approved by regulators  and operate under the relevant requirements. Networks are subject to strict rules and criteria in terms of security, reliability and availability and any buyer will need to prove to Ofgem and government that they can meet these criteria.”