China's CIC Joins Bid for UK Gas Arm - Report
The China Investment Corporation (CIC), a sovereign wealth fund, is believed to have teamed up with Allianz, Dalmore Capital and Macquarie to make an offer for a majority interest in National Grid’s gas distribution business, The Sunday Times reported.
National Grid, will in June begin a formal auction of a majority stake in the £12bn (€15.18bn) UK gas network, the report said. It originally suggested it might sell as much as 75% of the network division, the report added. It said that RBC Capital Markets and Macquarie are advising the consortium.
A rival consortium is believed to include the Abu Dhabi Investment Authority, Canadian investment groups Borealis and Canada Pension Plan, the Kuwait government investment company Wren House and the fund management firm Hermes, the report said.
On May 1, the fund management company Hermes has joined a super-consortium with at least five bidders considering for a majority stake in the company, The Daily Telegraph reported.
National Grid's gas distribution business owns the network which supplies 11 million customers and spans England, from north London through the Midlands to northwest and eastern England.
The distribution network has an asset value of £8.5bn, but could be worth as much as £11.2bn, according to analysts at RBC Europe, the report noted. The company reported an operating profit of £428m in the six months to the end of September.
A National Grid spokesperson told NGE: "We are not commenting on any speculation regarding interested parties."
She did however confirm that only the gas distribution assets -- so not National Grid's higher-pressure national gas transmission system of much larger pipelines-- is up for sale.
At interim results in November 2015, then CEO Steve Holliday said: "In the second half of 2015/16 we will begin a process to reshape our portfolio through the potential sale of a majority stake in our UK Gas Distribution business. Following a sale National Grid's portfolio of businesses will have a higher asset growth profile and will remain well positioned to deliver strong returns and a sustainable, growing dividend. The UK Gas Distribution business has been an important part of National Grid and the sale of a majority stake will realise some of the value we have created for our shareholders." John Pettigrew took over as National Grid CEO last month.
In 2011 CIC invested €2.9 billion to acquire minority interests in Engie, including a 30% stake in the French firm's worldwide upstream business. German insurer Allianz has a 30.8% stake (through its Solveig and Silex subsidiaries) in Gassled which owns the 7,975km Norwegian subsea gas pipeline system, making it the asset's second largest owner after the Norwegian state. Allianz and Borealis together own a 50% interest in Czech gas pipeline firm Net4Gas. Macquarie also owns gas network assets in Europe, including Thyssengas in Germany which it is now reportedly in the process of divesting. Also, a year ago KIA's Wren House paid $550mn to acquire a 25% interest in Gas Natural's international power generation business.
Murat Basboga