SSE sells SGN stake for £1.2bn

SSE has agreed to sell its remaining 33.3 per cent stake in gas network operator SGN to a consortium of Canadian investment funds for £1.2 billion.

The deal, announced this morning (2 August), sees Ontario Teachers’ Pension Plan (OTPP) increase its investment in SGN, with Brookfield Super-Core Infrastructure Partners also taking a stake.

SSE initially acquired a 50 per cent stake in SGN in 2005 for £505 million, before selling 16.7 per cent of the share to Abu Dhabi Investment Authority (ADIA) in 2016.  The consortium has also agreed to acquire ADIA’s stake.

The deal sees OTPP adding an additional 12.5 per cent to its shareholding in SGN, with Brookfield taking on 37.5 per cent. It means SGN’s direct shareholders is made up of OTPP (37.5 per cent), Brookfield (37.5 per cent) and OMERS Infrastructure, whose 25 per cent stake remains unchanged.

As of 31 March 2021, SGN had a regulated asset value (RAV) of just over £6 billion, with SSE’s interest valued at £744.4 million.

The deal, which does not require SSE shareholder approval, is expected to complete within the current financial year.

SSE said the transaction brings to an end its disposal programme, kicked off in June 2020, which has raised over £2.7 billion.

SSE’s finance director Gregor Alexander said: “SGN has been a hugely successful investment for SSE during the past 16 years. It is a strong business delivering consistently for customers and will have a key role to play in the future development of the hydrogen economy. However, it has become purely a financial investment for SSE as we have sharpened our focus on our low-carbon electricity core, and it is therefore the right time for SGN to continue to thrive under new ownership.

“We see significant growth opportunities in our core networks and renewables businesses in the transition to net zero and the capital we are releasing through our disposals programme will help enable us to maximise the delivery of our low-carbon electricity orientated strategy and ultimately create sustainable long-term value for customers, shareholders and society. Completion of our disposals programme will leave SSE more streamlined and strategically aligned than ever before, with a business mix that is very deliberate, highly effective, fully focused and well set to prosper on the journey to net zero and beyond.”

Nick Jansa, senior managing director for Europe, the Middle East and Africa at OTPP, said:  “Our increased investment in SGN further reflects our commitment to support and capitalize on opportunities created by the transition to a net-zero emissions economy. This investment can contribute to the financial security of our members while also supporting a critical infrastructure asset that will require additional capital to help it transform for a low-carbon future. SGN is well-positioned to play a leading role in helping the UK to transition away from fossil fuels and achieve the nation’s net-zero goal. We look forward to working with our fellow shareholders to support SGN on its journey to create an affordable and sustainable heat and energy network for homes and businesses in the UK.”