National Grid has agreed to sell a 60% equity interest in its UK gas transmission and metering business to a consortium of Macquarie Asset Management and British Columbia Investment Management Corporation. The plan to divest was first announced in March last year and National Grid described it as part of a “strategic pivot towards electricity”.
The terms of the Transaction imply an enterprise value for the business of £9.6 billion. On completion, National Grid will receive £2.2 billion in cash consideration and will retain a 40% equity interest via a new holding company called “GasT TopCo”. National Grid will also receive £2 billion from additional debt financing at completion.
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, which may be exercised by the Consortium between 1 January 2023 and 30 June 2023.
Among the investors in the consortium is Pantheon Infrastructure PLC, which invested £40 million. Richard Sem, Partner at its investment manager Pantheon Ventures, said: “This is a rare opportunity for investors to access one of the UK’s essential energy infrastructure businesses, providing long-term, inflation-linked cash flows under a stable regulatory framework. There’s an increasing need for investment in transmission networks and supporting infrastructure as these businesses adapt to the need for a lower-carbon energy mix, and we’re excited to announce this next investment as we build out the portfolio.”

Moodys outlook is negative
Rating agency Moody’s has changed its view on National Grid Gas plc (NGGto negative from stable following the acquisition. It said NGG’s financial profile was likely to weaken under the new ownership.
The purchase price is at a significant premium to NGG’s estimated value in March 2022 (£9.6 billion compared with £6,6 billion). This reflects strong investor appetite for regulated networks and the cash generated by NGG’s gas metering business, it said. National Grid Metering provides installation and maintenance services to energy suppliers, with an asset base of 8.4 million domestic and commercial meters as of March 2021.
But Moody’s expects that the new owners will push down around £2 billion of debt used to finance the acquisition into a new holding company above NGG. That higher leverage could constrain NGG’s credit quality. A regulatory framework that claws back revenues when licensees are geared significantly above regulatory gearing assumptions does not apply to holding companies.