Rating agency Moody’s Investors Service has changed its outlook on National Grid Gas plc to stable from negative after National Grid plc concluded the sale of a 60% majority stake to a consortium of Macquarie Asset Management and British Columbia Investment Management Corporation. The £9.6 billion sale was first announced in March 2022. It includes National Gas Tranmission also had 7.6 million domestic and commercial meters, as of March 2022, through its subsidiary National Grid Metering, which provides installation and maintenance services to energy suppliers in the regulated market in Great Britain.
The Consortium also has an option agreement with National Grid for the potential acquisition of the remaining 40% stake in the business on broadly similar terms, subject to necessary adjustments.
Moody’s said the revised outlook for the gas company, which will be renamed National Gas Transmission plc, reflects its new financing structure. Moody’s has affirmed National Gas Transmission’s ratings because it has “continuing credit strengths”, first as the monopoly owner and operator of the high-pressure gas transmission system and second because of the sector’s “ well-established and transparent regulatory regime”. The price control period for gas transmission began in April 2021 and will last until 2026.
Following the acquisition, Moody’s said National Gas Transmission has “more concentrated ownership and higher tolerance for financial risk”, which are negative governance considerations under Moody’s ESG principles. But these risks are mitigated by regulatory licence conditions that protect the independence of the operating company and prescribe a minimum credit rating, supplemented by new cash-trapping covenants in certain financing documents.
The rating agency said National Gas Transmission “continues to have high carbon transition risk because of government decarbonisation objectives”.
In March 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 “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.”