REG - National Grid PLC - Sale of majority interest in NGGT and Metering

National GridAnnouncement

28/03/2022 07:01

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220328:nRSb1479Ga&default-theme=true

RNS Number : 1479G  National Grid PLC  27 March 2022

 

National Grid PLC

27 March 2022

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE
A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

FOR IMMEDIATE RELEASE

Sale of majority interest in NGGT and Metering

National Grid plc ("National Grid") today announces that it has agreed to sell
a 60% equity interest in its UK gas transmission and metering business ("NGG")
to a consortium (the "Consortium") of long-term infrastructure investors (the
"Transaction"). The Consortium is comprised of Macquarie Asset Management, a
global asset manager and the world's largest infrastructure manager, and
British Columbia Investment Management Corporation ("BCI"), one of Canada's
largest institutional investors. As announced in March 2021, the Transaction
forms part of National Grid's strategic pivot towards electricity and follows
last year's acquisition of Western Power Distribution ("WPD"), the UK's
largest electricity distribution business, and announced sale of The
Narragansett Electric Company ("NECO") in the US.

The terms of the Transaction imply an enterprise value for NGG of
approximately £9.6 billion 1  (#_ftn1) . On completion, National Grid will
receive approximately £2.2 billion in cash consideration (subject to
customary completion adjustments) 2  (#_ftn2) . Following the Transaction,
National Grid will own a 40% minority equity interest in NGG via a new holding
company called "GasT TopCo". In addition, National Grid will also receive
approximately £2.0 billion from additional debt financing at completion. As
at March 2022, NGG's regulated asset value is estimated to be approximately
£6.6 billion and its net debt is estimated to be approximately £3.8 billion.

National Grid has also entered into an option agreement with the Consortium
for the potential sale of the remaining 40% of equity in GasT TopCo (the
"Further Interest"). The option may be exercised by the Consortium between 1
January 2023 and 30 June 2023 (subject to change depending on the timing of
the closing of the Transaction). If the option is exercised, the consideration
for the Further Interest is expected to be paid in cash to National Grid on
broadly similar terms to the Transaction, subject to adjustment for dividends
paid in the business at the time of exercise. Further details will be
announced if the option is exercised.

Completion of the Transaction will be subject to certain antitrust and
regulatory conditions. Subject to these clearances, National Grid expects that
the Transaction will complete in the second half of calendar year 2022.

On completion, the Transaction together with the proposed sale of NECO, will:

 ·                     Increase the balance of National Grid's portfolio towards electricity, with
                       the proportion of the Group's assets in electricity growing from c.60% to
                       c.70%;
 ·                     Significantly enhance National Grid's central role in the delivery of the UK's
                       net zero targets;
 ·                     Underpin National Grid's 6 to 8% asset growth target for longer;
 ·                     Enable National Grid to maintain a strong balance sheet with its strong
                       investment grade credit rating, supporting its sustainable dividend policy.

 

 John Pettigrew, Chief Executive of National Grid, said:

"This transaction further enhances our role in delivering the UK's energy
transition, pivots our portfolio towards electricity, whilst ensuring the
security of the energy supply for the country. Alongside our plans to invest
up to £35 billion in energy infrastructure over the next five years, the
series of transactions announced last March will strengthen our long-term
growth prospects, and drive long-term value for shareholders.

Today's announcement is a strong result for all our stakeholders, including
employees and customers. The Consortium has a long-term commitment to the UK
with significant experience in owning and operating infrastructure assets. I
look forward to our partnership and continuing to deliver safe and reliable
gas service at the least cost to consumers. I would also like to thank my
colleagues in Gas Transmission and Metering for their hard work that has
helped us reach this important milestone."

 

Martin Bradley, Head of Macquarie Asset Management's Real Assets team in EMEA,
said:

"The national transmission system is a critical enabler of the UK's energy
transition, providing the flexibility and reserve energy needed in the
electricity system as the deployment of renewable sources of generation
accelerates. However, if the UK's net-zero by 2050 target is to be met, the
country must have a next-generation transmission backbone to power homes and
businesses with renewable energy.

Backed by our significant investment, the transmission system will play a
leading role in making the network ready for this transition. In doing so it
will support the expansion of hydrogen's role in the energy mix to deliver a
competitive edge to the UK and its industry, while working closely with the
Government and Ofgem to maintain security of supply."

 

Lincoln Webb, Executive Vice President and Global Head of Infrastructure &
Renewable Resources at BCI, said:

"This investment aligns well with our diversified portfolio of regulated
utilities that securely deliver critical services to customers. We believe
National Grid's innovative decarbonisation strategy will ensure the business
plays a leadership role in supporting the UK to achieve net zero carbon
emissions on target by 2050, while meeting consumer demand for reliable
networks."

 

Following completion of the Transaction, National Grid intends to use proceeds
of approximately £4.2 billion towards repayment of the bridge financing
facility that was drawn as part of the acquisition of WPD. For the purposes of
Listing Rule 10.4, NGG's gross assets as at 30 September 2021 were £6.1
billion. For the period 1 April 2020 to 31 March 2021 NGG group generated
profit before tax of £406 million.

The Transaction constitutes a class 2 transaction for the purposes of the UK
Financial Conduct Authority's Listing Rules and, as such, does not require
National Grid shareholders' approval.

Following completion, National Grid's interest in GasT TopCo will be accounted
for under the equity method of accounting.

 

National Grid was advised by Barclays, Goldman Sachs, and Robey Warshaw.

 

About National Grid Gas

National Grid Gas owns and operates the regulated gas National Transmission
System (NTS) in Great Britain, and also owns a regulated gas metering
business.

As both the transmission owner and system operator, NGG owns, builds and
operates the high-pressure NTS with day-to-day responsibility for balancing
supply and demand in real time and facilitates the connection of assets to the
transmission system. National Grid Gas transmission network comprises
approximately 7,660 kilometres of high-pressure pipe and 23 compressor
stations connecting to 8 distribution networks and other third-party
independent systems.

NGG also owns and operates an independent metering business, the largest owner
of traditional gas meters in the UK with approximately 8.4 million domestic
and commercial meters as of March 2021. The business' activities broadly
cover: asset procurement and logistics management; meter installation,
maintenance, exchange and removal; and, customer service provision.

 

Inside Information

This announcement is being disclosed in accordance with the Market Abuse
Regulation (EU596/2014) which is part of domestic UK law pursuant to the
Market Abuse (Amendment) (EU Exit) Regulations (SI 2019/310) and has been
determined to contain inside information in line with the definition therein.

 

Enquiries and contacts

National Grid Investors and Analysts

 Nick Ashworth   +44 (0) 7814 355 590
 Angela Broad    +44 (0) 7825 351 918
 James Flanagan  +44 (0) 7970 778 952
 Jonathan Clay   +44 (0) 7899 928 247

 

Media

 Molly Neal             +44 (0) 7583 102 727
 Danielle Dominey-Kent  +44 (0) 7977 054 575

 

 

 Barclays Bank PLC, acting through its Investment Bank ("Barclays")  +44 (0) 20 7623 2323
 Lead Financial Advisor and Corporate Broker
 Alisdair Gayne
 Iain Smedley
 Neal West
 Osman Akkaya
 Vera Kaufmann

 

 Goldman Sachs International  +44 (0) 20 7774 1000
 Financial Advisor
 Karen Cook
 Brian O'Keeffe
 Rachana Harrington

 

 Robey Warshaw           +44 (0)20 7317 3900
 Lead Financial Advisor
 Simon Robey
 Philip Apostolides

 

 Teneo
 Financial PR Advisor
 Charlie Armitstead    +44 (0) 7703 330 269

 

About National Grid

National Grid lies at the heart of a transforming energy system, spanning the
UK and the US. Our businesses supply gas and electricity, safely, reliably and
efficiently to millions of customers and communities. But we also drive change
through engineering innovation and by incubating new ideas with the power to
revolutionise our industry.

National Grid is pioneering ways to decarbonise the energy system; from
building interconnectors to allow the UK to share clean energy with our
neighbours in Europe, to investing in renewable energy generation in the
United States. As one of the largest investor-owned energy companies in the
world, National Grid is at the centre of a clean, fair and affordable energy
future, where tackling climate change and reaching net zero is a key priority.

National Grid in the UK:

·    We own and operate the electricity transmission network in England
and Wales, with day-to-day responsibility for balancing supply and demand. We
also operate, but do not own, the Scottish networks. Our networks comprise
approximately 7,200 kilometres (4,474 miles) of overhead line, 1,500
kilometres (932 miles) of underground cable and 342 substations.

·    We own and operate the gas National Transmission System in Great
Britain, with day-to-day responsibility for balancing supply and demand. Our
network comprises approximately 7,660 kilometres (4,760 miles) of
high-pressure pipe and 618 above-ground installations.

·    As Great Britain's System Operator (SO) we make sure gas and
electricity is transported safely and efficiently from where it is produced to
where it is consumed.  Since April 2019, Electricity System Operator (ESO)
has been a standalone business within National Grid, legally separate from all
other parts of the National Grid Group. This provides the right environment to
deliver a balanced and impartial ESO that can realise real benefits for
consumers as we transition to a more decentralised, decarbonised electricity
system.

 

About Macquarie Asset Management

Macquarie Asset Management is a global asset manager that aims to deliver
positive impact for everyone. Trusted by institutions, pension funds,
governments, and individuals to manage more than £403 billion in assets
globally, we provide access to specialist investment expertise across a range
of capabilities including fixed income, equities, multi-asset solutions,
private credit, infrastructure, renewables, natural assets, real estate, and
asset finance.

Macquarie Asset Management is part of Macquarie Group, a diversified financial
group providing clients with asset management, finance, banking, advisory and
risk and capital solutions across debt, equity, and commodities. Founded in
1969, Macquarie Group employs approximately 17,000 people in 33 markets and is
listed on the Australian Securities Exchange.

All figures as at 31 December 2021. For more information, please visit
macquarie.com.

 

About BCI

With C$199.6 billion of assets under management as of March 31, 2021, BCI is
one of Canada's largest institutional investors. Based in Victoria, British
Columbia, BCI is a long-term investor that invests across a range of asset
classes: fixed income; public equities; private equity; infrastructure;
renewable resources; real estate; and commercial mortgages. BCI's clients
include public sector pension plans, insurance, and special purpose funds.
BCI's Infrastructure & Renewable Resources program, valued at over C$20.0
billion, invests in tangible long-life assets that include a portfolio of
direct investments in companies across a variety of sectors spanning regulated
utilities, energy, telecommunications, and transportation, as well as
investments in timberlands and agri-businesses. These companies operate in
stable and mature regulatory environments, provide opportunities for future
capital investments, and have the potential to generate steady returns and
cash yields for our clients. The program is diversified across North America,
Asia, Australia, Europe, and South America.

 

CAUTIONARY STATEMENT

This announcement contains certain statements that are neither reported
financial results nor other historical information. These statements are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. These statements include information with respect to
National Grid's (the Company) financial condition, its results of operations
and businesses, strategy, plans and objectives. Words such as 'aims',
'anticipates', 'expects', 'should', 'intends', 'plans', 'believes', 'outlook',
'seeks', 'estimates', 'targets', 'may', 'will', 'continue', 'project' and
similar expressions, as well as statements in the future tense, identify
forward-looking statements. These forward-looking statements are not
guarantees of National Grid's future performance and are subject to
assumptions, risks and uncertainties that could cause actual future results to
differ materially from those expressed in or implied by such forward-looking
statements. Many of these assumptions, risks and uncertainties relate to
factors that are beyond National Grid's ability to control or estimate
precisely, such as changes in laws or regulations, including any arising as a
result of the United Kingdom's exit from the European Union, announcements
from and decisions by governmental bodies or regulators, including those
relating to the RIIO-2 price controls; the timing of construction and delivery
by third parties of new generation projects requiring connection; breaches of,
or changes in, environmental, climate change and health and safety laws or
regulations, including breaches or other incidents arising from the
potentially harmful nature of its activities; network failure or interruption,
the inability to carry out critical non-network operations and damage to
infrastructure, due to adverse weather conditions including the impact of
major storms as well as the results of climate change, due to counterparties
being unable to deliver physical commodities, or due to the failure of or
unauthorised access to or deliberate breaches of National Grid's IT systems
and supporting technology; failure to adequately forecast and respond to
disruptions in energy supply; performance against regulatory targets and
standards and against National Grid's peers with the aim of delivering
stakeholder expectations regarding costs and efficiency savings, as well as
against targets and standards designed to deliver net zero; and customers and
counterparties (including financial institutions) failing to perform their
obligations to the Company. Other factors that could cause actual results to
differ materially from those described in this announcement include
fluctuations in exchange rates, interest rates and commodity price indices;
restrictions and conditions (including filing requirements) in National Grid's
borrowing and debt arrangements, funding costs and access to financing;
regulatory requirements for the Company to maintain financial resources in
certain parts of its business and restrictions on some subsidiaries'
transactions such as paying dividends, lending or levying charges; the delayed
timing of recoveries and payments in National Grid's regulated businesses, and
whether aspects of its activities are contestable; the funding requirements
and performance of National Grid's pension schemes and other post-retirement
benefit schemes; the failure to attract, develop and retain employees with the
necessary competencies and business capabilities, and any significant
disputes arising with National Grid's employees or the breach of laws or
regulations by its employees; the failure to respond to market developments,
including competition for onshore transmission; the threats and opportunities
presented by emerging technology; the failure by the Company to respond to, or
meet its own commitments as a leader in relation to, climate change
development activities relating to energy transition, including the
integration of distributed energy resources; and the need to grow the
Company's business to deliver its strategy, as well as incorrect or unforeseen
assumptions or conclusions (including unanticipated costs and liabilities)
relating to business development activity, including the integration of WPD,
the sale of the Company's Rhode Island gas and electricity business and the
proposed sale of a majority stake in its UK gas transmission business, and
joint ventures. For further details regarding these and other assumptions,
risks and uncertainties that may impact National Grid, please read the
Strategic Report section and the 'Risk factors' on pages 236 to 239 of
National Grid's most recent Annual Report and Accounts, as updated by National
Grid's unaudited half-year financial information for the six months ended 30
September 2021 published on 18 November 2021. In addition, new factors emerge
from time to time and National Grid cannot assess the potential impact of any
such factor on its activities or the extent to which any factor, or
combination of factors, may cause actual future results to differ materially
from those contained in any forward-looking statement. Except as may be
required by law or regulation, the Company undertakes no obligation to update
any of its forward-looking statements, which speak only as of the date of this
announcement.

 

 

 

 1  (#_ftnref1) Includes debt-like items and provisions of approximately £0.2
billion.

 2  (#_ftnref2) Assuming expected completion in the second half of calendar
year 2022.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  DISSEFSFWEESEFD