From The Wall Street Journal
LONDON—U. K. natural-gas and electricity network operatorNational Grid PLC is seeking buyers for a majority stake of its domestic gas-distribution business to rebalance its portfolio and create extra value for shareholders.
Analysts value the business, which comprises four of the U.K.’s eight regional distribution networks which deliver gas to around 10.9 million customers, at £10 billion ($15 billion) to £11 billion.
Investor demand should be strong from infrastructure funds, pension funds and sovereign-wealth funds seeking stable returns with bonds yields hovering near record lows.
National Grid Chief Executive Steve Holliday said on the Tuesday that the disposal would help the company meet the higher end of its target to deliver 5% to 7% asset growth a year.
‘The gas distribution networks are a good business, but a mature business. We believe selling a majority stake moves our assets toward the higher end of growth.’
—National Grid Chief Executive Steve Holliday
“The gas distribution networks are a good business, but a mature business. We believe selling a majority stake moves our assets toward the higher end of growth,” Mr. Holliday said on a conference call.
National Grid’s other businesses, such as its U.K. electricity networks and U.S. business are set to show asset growth of around 5% to 6% and 7% a year respectively, while the gas distribution business has relatively lower growth of around 2% a year. “The judgment of myself and colleagues is that now is the right time [to sell],” Mr. Holliday said.
The sale process is due to start in the first quarter of next year and will most likely be completed in late 2016, early 2017, he said.
National Grid’s announcement of the planned sale came as it reported a 14% rise in adjusted operating profit to £1.84 billion in the six months to Sept. 30 from the same period a year ago.
Infrastructure funds and pension funds are likely to be interested in the stable returns generated by energy-infrastructure assets, particularly considering how low returns on bonds have fallen, and considering the U.K.’s stable regulatory environment.
“There is a very healthy appetite for U.K. regulated assets,” said Dominic Nash, equity analyst at Macquarie.