Photographer: Chris Ratcliffe/Bloomberg

National Grid Said to Start Auction for U.K. Gas Network Stake

  • Sale could value regional gas assets at over 10 billion pounds
  • Canadian pension group, Allianz consortium show interest

National Grid Plc, the U.K. electricity and natural gas network operator, has started an auction to sell a controlling stake in its domestic gas network that could value the business at more than 10 billion pounds ($13.3 billion), people with knowledge of the matter said.

National Grid, which is selling 51 percent of its four regional gas distribution networks, has sent information on the business to potential buyers, according to the people. The company has asked for first-round bids to be submitted by late September, the people said, asking not to be named because the deliberations are private.

Canada Pension Plan Investment Board is considering joining a consortium of Canadian investors and Middle Eastern sovereign wealth funds interested in the assets, one of the people said. Another group including Allianz SE, the infrastructure arm of Australian investment bank Macquarie Group Ltd. and Amber Infrastructure Group may also bid, the people said. 

Chinese investors, including sovereign fund China Investment Corp., may also join groups pursuing the assets, they said. Talks with potential bidders are ongoing, and the final makeup of the groups bidding could still change, according to the people.

The stake sale will be one of the first major tests of overseas buyers’ appetite for U.K. utility assets since the country voted to leave the European Union in June. A deal would add to the $82.6 billion of U.K. acquisitions by foreign buyers announced this year, according to data compiled by Bloomberg. 

Representatives for Allianz, Macquarie, CPPIB, Amber Infrastructure and National Grid declined to comment. A Beijing-based spokeswoman for CIC couldn’t immediately comment.

National Grid shares fell 1.3 percent to 1,061.50 pence at the close in London on Wednesday. The stock has risen 13 percent this year.

British utility assets historically attract foreign companies that favor steady income generation, such as pension funds and other asset managers. Canada’s Brookfield Asset Management Inc. bought PNE Wind AG’s U.K. project pipeline last year for as much as 103 million pounds. A consortium backed by Hong Kong billionaire Li Ka-shing in 2012 acquired Wales & West Utilities Ltd., a gas distributor serving 2.5 million customers, for 645 million pounds.

National Grid has said it expects the sale of a majority stake in the domestic gas grid to be completed early next year and that it will return “substantially all” of the net proceeds to shareholders. The company’s gas business, which comprises four of the U.K.’s eight regional gas distribution networks, serves about 11 million businesses, schools and homes, its website shows.

— With assistance by Scott Deveau, Oliver Suess, Ruth David, and Rachel Morison

    Before it's here, it's on the Bloomberg Terminal.