SSE has agreed to sell its entire 33.3% stake in gas distribution operator Scotia Gas Networks (SGN) to a consortium comprising existing SGN shareholder Ontario Teachers’ Pension Plan Board and Brookfield Super-Core Infrastructure Partners.
The transaction is based on an effective economic date of 31 March 2021 and is for a consideration of £1.225bn in cash.
It is expected to complete within the current financial year and is conditional on certain regulatory approvals.
SSE initially acquired a 50% equity share in SGN in 2005 for a total of £505m, before selling a 16.7% stake to a wholly owned subsidiary of the Abu Dhabi Investment Authority (ADIA) in 2016.
The new consortium has also agreed to acquire the 16.7% stake in SGN owned by ADIA.
SGN includes Scotland Gas Networks and Southern Gas Networks, two of the eight regulated gas distribution networks in England, Wales and Scotland, in addition to SGN Natural Gas, which provides gas to customers in the west of Northern Ireland, as well as other non-regulated ancillary businesses.
This deal will conclude SSE’s £2bn plus disposals programme announced in June 2020, with total proceeds amounting to over £2.7bn.
The programme has realised significant value from non-core assets while intensifying SSE’s strategic focus on its core low-carbon electricity businesses and the transition to net zero.
SSE’s strategy is to create value for shareholders and society in a sustainable way by developing, building, operating, and investing in the electricity infrastructure and businesses needed in the transition to net zero.
Its strategic focus is on renewables and regulated electricity networks, businesses which have strong, net zero-aligned growth potential with common skills and capabilities in the development, construction, procurement, financing, and operation of highly technical electricity assets.
The other businesses retained in the SSE group are highly complementary to this low-carbon core.
The disposal proceeds will reduce net debt in the short term and will help support the delivery of SSE’s capital investment plans. As indicated in May, SSE will provide an update on these plans at its interim results in November.
Gregor Alexander, finance director of SSE, said: “SGN has been a hugely successful investment for SSE during the past 16 years – it is a strong business delivering consistently for customers and will have a key role to play in the future development of the hydrogen economy.
“However, it has become purely a financial investment for SSE as we have sharpened our focus on our low-carbon electricity core, and it is therefore the right time for SGN to continue to thrive under new ownership.
“Completion of our disposals programme will leave SSE more streamlined and strategically aligned than ever before, with a business mix that is very deliberate, highly effective, fully focused and well set to prosper on the journey to net zero and beyond.”
In total, Ontario Teachers’ will acquire an additional 12.5% of SGN and Brookfield will acquire a 37.5% stake in SGN.
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