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SSE disposes of SGN stake for £1.225 billion

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SSE has agreed to sell its remaining 33.3% stake in gas distribution operator Scotia Gas Networks Ltd (SGN) for £1.225 billion to a consortium of the Ontario Teachers’ Pension Plan Board (which is already a shareholder in SGN) and Brookfield Super-Core Infrastructure Partners.
The Consortium has also agreed to acquire a 16.7% stake in SGN owned by the Abu Dhabi Investment Authority (ADIA), which acquired it from SSE in 2016.

At 31 March 2021, SGN had a regulated asset value (RAV) of £6,003 million. SSE’s interest in SGN had a carrying value of £744.4 million and contributed £88.6 milliom to its profits after tax.

The transaction is expected to complete within the current financial year, assuming it wins regulatory approval. SSE said it would mark the end of a £2 billion disposals programme announced in June 2020, with total proceeds amounting to over £2.7 billion. The disposal proceeds will reduce net debt in the short term and will help support the delivery of SSE’s capital investment plans.

SSE initially acquired a 50% equity share in SGN in 2005 for £505 million. SGN includes Scotland Gas Networks plc and Southern Gas Networks plc, two of the eight regulated gas distribution networks in England, Wales and Scotland, in addition to SGN Natural Gas Ltd, which provides gas to customers in the west of Northern Ireland as well as other non-regulated ancillary businesses.

Gregor Alexander, Finance Director of SSE, 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.”

In total, Ontario Teachers’ will acquire an additional 12.5% of SGN and Brookfield will acquire a 37.5% stake in SGN. Following completion of both transactions, SGN’s direct shareholders will comprise Ontario Teachers’ (37.5%), Brookfield (37.5%) and OMERS Infrastructure (25% unchanged).