Fluxys, Snam To Buy Out IUK Partner

Belgian gas system operator Fluxys and its larger Italian counterpart Snam have agreed to take joint control of Interconnector UK (IUK), the bi-directional gas pipeline that links the UK to Belgium and mainland Europe.

In a transaction to be completed in the next few days, they will acquire the 33.5% stake from Canadian public pension fund, Caisse de depot et placement du Quebec (CDPQ) for some £75mn.

Fluxys and Snam decided to exercise their proportional pre-emption rights on the CDPQ stake, which is held through two jointly-owned holdings: Gasbridge 1 and Gasbridge 2. Neither company said in their statement to whom CDPQ had initially tried to sell its stake, and nor did CDPQ's website.

Once completed, Fluxys and Snam will have IUK stakes of 76.32% and a 23.68% stake respectively and be its sole shareholders, which they said "confirms their full support to moving the company into the next stage of its development. As the initial 2o-year capacity contracts for the Interconnector pipeline are set to expire in October 2018, the company is preparing for a new market environment in which short-term contracting and commercial flexibility take centre stage."  

IUK told NGW in April 2017 that it has been lobbying to change the UK gas network code that governs capacity allocation so that it can sell its services with greater flexibility, and had only at that time sold 14% of its capacity into the UK post-October 2018, and none in the opposite direction.

Sources close to IUK indicated that it is currently undergoing regulatory changes, with its capacity to be sold through Prisma auctions and, in the current market environment, shippers prefer short-term contracts.

Interconnector UK can carry up to 25.5bn m³/yr from Belgium into the UK (at Bacton), or up to 20bn m³/yr from the UK into Belgium (at Zeebrugge). Nominations at both ends are netted off to produce a prevailing daily flow in one direction, or none at all if they are equal. Originally there were ten shareholders, being a mix of gas producers and utilities, with capacity held in proportion to their shares. 

(Banner photo is courtesy of Interconnector UK)