Exclusive: Borealis in pole position in UK gas auction

A process for British utility SSE to sell a holding in SGN, which could be worth up to £1bn, is likely to close before the sale of National Grid completes.

Borealis, the infrastructure arm of Canada’s Ontario Municipal Employees Retirement System, is seen as the favourite in a competitive process for 17 percent of Scotia Gas Networks, according to people with knowledge of the matter.

The stake is being put on the block by SSE, the UK’s second-biggest energy supplier, through an auction that is currently in its second round. Sources told Infrastructure Investor that the transaction is likely to complete ahead of the sale of National Grid, which is looking to offload a majority stake in its own £8.5 billion ($11.2 billion; €10 billion) UK gas network business.

Borealis is already an investor in the business alongside the Ontario Teachers’ Pension Plan, having formed a consortium with SSE to acquire SGN from National Grid Transco – as National Grid was then called – for £3.2 billion in 2005. Borealis and OTPP each own 25 percent of the company, with SSE holding the remaining 50 percent.

SGN operates two regional gas networks in Scotland and Southern England which together consist of 74,000km of pipelines and serve a population of 17.4 million, according to Borealis’ website. Analysts at Jefferies have reportedly said the sale could raise about £1 billion, based on a 20 percent premium to SGN’s regulated asset base.

SSE declined to comment, while Borealis did not respond to a request for comment. OTPP could not be reached before press time. Sources say third-party bidders are also in the running for the asset.