Macquarie leads £13.8bn National Grid gas purchase

MIRA has been joined by six other investors including China Investment Corporation, with questions remaining about the UK government’s policy on foreign investment in critical infrastructure.

A consortium led by Macquarie Infrastructure and Real Assets has been named the winner of the UK’s National Grid gas distribution auction in a deal valuing the assets at £13.8 billion ($17.5 billion; €16.2 billion).

MIRA is a 14.5 percent shareholder in the Quad Gas Group consortium, which comprises foreign investors such as China Investment Corporation Capital (10.5 percent), Allianz Capital Partners (10.2 percent) and the Qatar Investment Authority (8.5 percent), and UK-based funds Hermes Investment Management (8.5 percent), Amber Infrastructure (4.4 percent) and Dalmore Capital (4.4 percent).

The transaction will see National Grid receive a £3.6 billion cash payment for the stake while it will also net another £1.8 billion in debt financing.

The group have agreed to buy a 61 percent equity interest in the 130,000 km of pipelines that distribute gas to about half of the UK’s connected households. However, a preliminary deal has been agreed for the consortium to buy a further 14 percent on what they described as “broadly equivalent financial terms”. The two parties said additional details will be announced if such a deal is eventually reached.

Conclusion of the sale remains subject to regulatory approval and it is likely to come under scrutiny following new reforms regarding foreign ownership of “critical infrastructure” proposed by the UK government in the wake of its review of the Hinkley nuclear power plant deal in September. Both the Qatar Investment Authority and China Investment Corporation are state-owned entities. As of press time, the Department for Business, Energy and Industrial Strategy had not responded to requests for comment.

The final deal value was significantly above the original £11 billion the unit was expected to be valued at. National Grid said it would return £4 billion to shareholders in a combination of special dividends and share buybacks, further details of which it explained would be released in due course.

John Pettigrew, chief executive of the company, said that “National Grid's portfolio will be rebalanced towards higher growth assets, whilst maintaining a strong balance sheet and supporting our sustainable dividend policy”.

In its half year results for 2016/17 published last month, operating profits for the gas distribution business fell by 6 percent with National Grid citing increased depreciation as a reason for the fall.

The deal is expected to close during the first quarter of next year.