Investor bonanza after National Grid sells holding

National Grid has pledged to return £4 billion to shareholders after agreeing to sell a 61 per cent stake in a major gas pipe network to a team of global investors.

The National Grid deal centres on the gas pipe network division. Picture: Contributed

The deal will see a consortium led by Australian investment bank Macquarie, and including China’s sovereign wealth fund, take control of the network serving 11 million homes and businesses.

In addition to the bumper investor return, National Grid has pledged to hand out a £150 million payment to benefit UK energy customers.

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It will receive £3.6bn in cash for the stake in its gas business, which is valued at about £13.8bn overall, as well as a further £1.8bn in debt financing.

While National Grid will retain a 39 per cent stake in the operation, it is also in talks with the consortium over the sale of a potential further 14 per cent holding.

It comes after the UK government launched a review in September of how overseas investment in UK infrastructure is scrutinised and whether ministers should have stronger powers to intervene.

John Pettigrew, chief executive of National Grid, said: “The consortium will have exactly the same obligations going forward in terms of security, reliability and safety as National Grid has had.

“It involves a group of investors who have a long track record of investing in critical infrastructure in the UK.”

National Grid has some 82,000 miles of pipeline, which delivers gas to regions including London and the east of England, the West Midlands and north-west England. It employs some 5,700 staff.

Pettigrew said the gas network management team will remain in place, while staff will see their terms, conditions and pension rights honoured.

The firm plans to return most of the £4bn to shareholders through a special dividend in the second quarter of 2017 and will work alongside industry regulator Ofgem to decide how best to use the £150m payout to benefit energy customers.

The auction for the gas network has been running for about a year and saw the Macquarie consortium fight off a raft of competitors.

For the bid, Macquarie teamed up with China Investment Corporation – a subsidiary of China’s sovereign wealth fund – as well as the Qatar Investment Authority, Allianz Capital Partners, Hermes Investment Management and fund managers Dalmore Capital and Amber Infrastructure Limited/International Public Partnerships.