National Grid is poised to sell gas network to Beijing

By Peter Campbell for the Daily Mail
Updated: 17:04 EDT, 22 December 2011

The National Grid is poised to sell off its four remaining UK gas distribution networks to the Chinese government early in the new year.

Talks between the British distributor and the State Grid Corporation of China are in the final stages, according to sources with knowledge of the situation.

Selling the four gas networks that the National Grid owns is understood to be one of two options on the table, with an official announcement expected early in January.

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Red alert: The National Grid could sell four of its remaining UK gas distribution networks to the Chinese government in the new year

In 2004, the National Grid sold four gas distribution networks, retaining four. If the sale went through, the Grid would still own the gas National Transmission System – the high-pressure network that links to the eight regional distributors.

The second option is for the National Grid to make the State Grid Corporation a major shareholder in it by issuing a fresh wave of stock.

Either deal would help to raise billions of pounds of capital, as well as marking the latest example of an Eastern entity investing heavily in British utilities.

The Chinese state-run grid is said to be keen to invest in UK infrastructure and operations, and the National Grid’s ability to sell its networks is an opening for the giant. The first option would see the Grid sell off each network to the Chinese.

A price-tag of between £1billion and £2billion per network is understood to be the most likely sum agreed, sources said.

When the four previous networks were sold in 2004, the total amount raised was £5.8billion.

The second option, which sources say is the more likely to be chosen, would make SCG a major investor in the National Grid.

The issue of 10 per cent of National Grid’s total shares, valued at around £2.2billion, would be given to the Chinese company in a private deal, making it the largest shareholder.

In 2004, three buyers snapped up the four available National Grid networks.

A consortium fronted by SSE purchased the South of England and Scotland networks for £3.2billion.

The Wales and the West network went to the Macquarie European Infrastructure Fund for £1.2billion.

The North of England network was bought by a consortium led by Li Ka Shing’s Cheung Kong Infrastructure Holdings for £1.4billion.

No one at the National Grid was available for comment.