18th Mar 2021 09:07
(Alliance News) - National Grid PLC on Thursday unveiled a series of transactions to shift its portfolio focus towards electricity and away from gas.
Shares in the London-headquartered electricity and gas network operator were 2.4% lower in London on Thursday morning at 811.80 pence each.
National Grid will buy the UK's largest electricity distribution business for GBP7.8 billion and will offload a majority stake in the UK national gas transmission system.
The company, which manages the UK's power infrastructure, will buy PPL WPD Investments Ltd, the holding company of Western Power Distribution, from PPL WPD Ltd, a subsidiary of US energy giant PPL Corp.
In a separate transaction, National Grid will sell its Rhode Island utility business - Narragansett Electric Co - to PPL for USD3.8 billion.
National Grid said it will launch a process later this year to sell a majority stake in National Grid Gas as it looks to boost its electricity assets to about 70% from around 60% of its overall portfolio.
John Pettigrew, chief executive of National Grid, said: "These transactions will be transformational for our UK portfolio. The acquisition of WPD is a one-off opportunity to acquire a significant scale position in UK electricity distribution."
He added: "With increased exposure to the UK's electricity sector, these transactions enhance our role in the progress towards net zero, underpinning our core ambition which is to enable the energy transition for all."
The WPD deal will be funded by fully committed bridge facilities and is expected to occur within the next four months. Completion of the Narragansett Electric sale is expected to occur before the end of the first quarter of 2022.
National Grid expects to launch the sale process for NGG in the second half of this year and complete the sale approximately a year later.
"Given the strategic nature of its business coupled with its central position in a transition towards a hydrogen economy, it will continue to play a vital role in the UK's energy system. We expect strong interest when the sale process begins, likely to be in the second half of this year," Pettigrew said.
He added: "In combination with the continued successful execution of our strategy in the US, establishing National Grid as the leading electricity transmission and distribution operator in the UK will strengthen our long-term growth prospects, enhance our role in the UK's energy transition and drive long term shareholder value.
"Following the completion of these transactions, we will continue to have a diversified portfolio of assets across the UK and US, with a strong asset growth profile that will further underpin our dividend policy for the longer term."
The moves, National Grid said, will strengthen its long-term growth outlook by ensuring a significant scale position in electricity distribution.
"Electricity distribution is expected to see a high level of asset growth as a result of the ongoing energy transition," it explained.
As a result, National Grid believes the deals underpin its 5% to 7% asset growth target and supports its updated dividend policy to deliver annual dividend per share growth in line with UK CPIH inflation. CPIH is the consumer price index including owner-occupiers' housing costs.
By Paul McGowan; [email protected]
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