Strategic Shift to Renewable Electricity by UK's National Grid
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The UK's National Grid Plc stated that it would sell 60% stake in its gas transmission and metering business (NGG) to a consortium of Macquarie Asset Management and BCI
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NGG's enterprise value is estimated at around £9.6 billion ($12.6 billion) based on the terms of the deal
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Subject to certain antitrust and regulatory approvals, the transaction is planned to be completed in the second half of 2022.
Strategic Shift to Renewable Electricity by UK's National Grid
Strategic Shift to Renewable Electricity by UK's National Grid
- The UK's National Grid Plc stated that it would sell 60% stake in its gas transmission and metering business (NGG) to a consortium of Macquarie Asset Management and BCI
- NGG's enterprise value is estimated at around £9.6 billion ($12.6 billion) based on the terms of the deal
- Subject to certain antitrust and regulatory approvals, the transaction is planned to be completed in the second half of 2022.
On March 27, 2022, the UK's National Grid Plc (National Grid), an energy utility that transmits and distributes electricity and natural gas, stated that it would sell 60% stake in its gas transmission and metering business (NGG) to a consortium of long-term infrastructure investors. The consortium includes Macquarie Asset Management, a global financial services group, and British Columbia Investment Management Corporation (BCI), one of the largest asset managers in Canada. The deal is part of National Grid's strategic shift to renewable electricity.
Details of the National Grid Deal
By 2050, National Grid intends to reduce its greenhouse gas emissions to zero. As part of this target, the company acquired PPL Corp.'s UK electricity business, Western Power Distribution PLC, for £7.8 billion ($10.24 billion) in the previous year. The innovative strategy of National Grid to reduce carbon emissions will position the company as a leader in low carbon emission segment in the UK. Currently, National Grid operates its business through four segments: US Regulated, UK Electricity Transmission, UK Gas Transmission, and National Grid Ventures (NGV). The company generates the majority of its revenue from US Regulated (62%), followed by UK Electricity Transmission (27%). Mounting pressure from investors and activists on National Grid regarding its fossil fuel businesses led the company to consider rapidly transitioning to clean energy business.
National Grid's gas transmission business comprises a 7,660-kilometer pipe network across the UK, which facilitates transporting the gas required to heat homes, power industries, and generating energy. This unit is valued at around £9.6 billion ($12.6 billion) based on the terms of the deal. As part of the acquisition, National Grid will receive £2.2 billion ($2.89 billion) in cash and about £2 billion ($2.63 billion) in additional debt financing after the completion of the deal. Consequently, National Grid will own 40% minority equity stake in NGG through a new holding company called "GasT TopCo." The company has the option to sell the remaining 40% stake to the consortium.
Moving towards clean energy
Climate change is one of the world's most pressing challenges, prompting governments and business entities to seek sustainable solutions. Oil & gas companies and utility companies began to invest in clean energy strategically. Energy utility corporations remain committed to achieving net-zero emissions. However, the shift from fossil fuels to clean energy will be challenging because of the heavy investment by energy utility companies in their fossil fuel infrastructure. The total number of deals by oil & gas companies in the renewable sector reached 134 in 2021, which showed an annual increase of 80%. However, the value of the deals declined due to the pandemic.
Recently, Woodside Petroleum, an Australian oil and gas producer, invested in Heliogen, a renewable energy technology company. Woodside Petroleum targeted an investment of $5 billion in new-energy products by 2030. BP Plc, the UK oil and gas company, announced that it would build a renewable energy capacity of 20 gigawatts by 2025 and 50 gigawatts by 2030. Shell Plc, a multinational oil & gas company, will invest around $6 billion annually in renewable energy to accelerate its transformation into a net-zero-emissions energy product and service provider.
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