National Grid to Sell Majority Stake in British Gas Distribution Business
Britain's National Grid Plc has put a majority stake in its 8.5 billion pound ($12.8 bln) gas distribution business up for sale as it shifts focus to better-performing assets such as its U.S. networks, it said on Tuesday.
The gas and electricity network operator also reported a 21 percent rise in first-half adjusted pretax profit to 1.37 billion pounds, supported by a strong performance of its U.S. business.
Shares in the company were up 1.7 percent in London at 1403 GMT, one of the biggest gainers on the FTSE 100 index.
"The UK gas distribution is a mature business that continues to require some investment but not enormous investment," said Steve Holliday, National Grid's long-serving chief executive who will leave the company next year.
The company said it expected the sale to complete in late 2016 and increase its annual asset growth rate from 5 percent to 7 percent. It did not specify the size of the stake.
The British gas distribution business is currently growing at a rate of about 2 percent, Holliday said.
"The sale of a majority stake in gas distribution assets will no doubt excite the market. Effectively National Grid is monetising these assets," said analysts at Jefferies, who rate National Grid shares as a hold.
Barclays, Morgan Stanley (MS) and Robey Warshaw have been appointed as financial advisers on the deal, a person familiar with the situation said.
Barclays equity analysts estimated the unit's enterprise value at about 10.6-11.5 billion pounds, based on a 25-35 percent premium to its regulated asset value of 8.5 billion pounds.
National Grid also said it expected that tightening electricity margins meant it could issue around seven requests for emergency capacity this winter.
Last Wednesday it issued a request to Britain's energy industry to increase electricity supply backup for the first time since 2012 after breakdowns at some power plants and low wind energy output.
The company, which warned in July that this winter would see the tightest supply margin for power since 2009, added it expected to connect around 11GW of new generation between 2013 and 2021, less than half the new capacity it had forecast for that period in 2013.
(By Mamidipudi Soumithri and Karolin Schaps, Additional reporting by Freya Berry)
