National Grid Sells $13 Billion Gas Unit Stake to Macquarie

(Bloomberg) --

National Grid Plc agreed to sell 60% of its gas transmission business to a consortium including Macquarie Group Ltd. in a deal that will value the asset at 9.6 billion pounds ($12.7 billion). 

The U.K. firm will get about 2.2 billion pounds in cash from Macquarie’s asset management arm and British Columbia Investment Management Corp., it said in a statement on its website Sunday. The U.K. company will also receive 2 billion pounds from additional debt financing when the deal’s completed, according to the statement.

National Grid announced its intention to sell the holding last year as it transitions to a low-carbon future. Under the new ownership structure, the London-based company will hold a 40% stake in NGG via a holding company called GasT TopCo. It has an option to sell that stake to the consortium in the first half of next year on broadly similar terms.

The sale comes as fossil fuel businesses are coming under scrutiny from investors and activists, forcing companies like National Grid to reassess and reduce their exposure to dirty forms of energy. National Grid’s gas transmission business is one of the largest in the U.K. and includes a 7,000-kilometer pipe network across the country.

Under Chief Executive Officer John Pettigrew, the London-listed utility is working to cut its greenhouse gas emissions to net zero by 2050. As part of this push, the company last year agreed to buy PPL Corp.’s U.K. electricity business, Western Power Distribution, for 7.8 billion pounds.

“The national transmission system is a critical enabler of the U.K.’s energy transition, providing the flexibility and reserve energy needed in the electricity system as the deployment of renewable sources of generation accelerates,” Martin Bradley, head of Macquarie Asset Management’s Real Assets team in EMEA, said in a press release. 

Macquarie has been eyeing other U.K. power assets and is leading a consortium with KKR & Co. that’s in advanced talks to buy the U.K. electricity distribution business controlled by Hong Kong tycoon Victor Li, people familiar with the matter told Bloomberg this month. A deal would be one of the sector’s largest this year. 

Barclays Plc, Goldman Sachs Group Inc. and Robey Warshaw LLP advised National Grid on the sale, confirming details of a Bloomberg News report from February. The sale had also drawn interest from infrastructure specialist IFM Investors, Canada’s Public Sector Pension Investment Board and pension fund investor APG Asset Management, people familiar with the transaction told Bloomberg last month.

NGG’s regulated asset value is estimated to be approximately 6.6 billion pounds and it has net debt of approximately 3.8 billion pounds as of March this year, the statement said. National Grid expects that the transaction will be completed in the second half of this year.

Distribution grids are the local networks that feed directly into homes and businesses, putting them at the heart of the energy transition. National Grid’s portfolio comprises 70% electricity and 30% gas following completion of the WPD deal.

The Macquarie-led group will also develop several projects across the national gas transmission system to help maximize opportunities by hydrogen in the U.K. and contribute to plans to build an initial hydrogen “backbone” network as the U.K. looks to reduce its use of fossil fuels, Macquarie said in its release. 

(Updates throughout with transaction details and context)

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