National Grid has announced that it has agreed to acquire PPL WPD Investments Limited the holding company of Western Power Distribution ("WPD"), the UK’s largest electricity distribution business, from PPL WPD Limited, a subsidiary of PPL Corporation ("PPL") for an equity value of £7.8 billion.
National Grid has also agreed to sell The Narragansett Electric Company ("NECO") to PPL Energy Holdings, LLC, also a subsidiary of PPL, for an equity value of US$3.8 billion (£2.7 billion).
In addition, National Grid has announced that it will commence a process later this year for the sale of a majority stake in National Grid Gas plc, the owner of the national gas transmission system
The company says these transactions will: ·
· strategically pivot National Grid’s UK portfolio towards electricity. The proportion of the Group’s assets in electricity will increase from c.60% to c.70%; ·
· strengthen National Grid’s long-term growth outlook by ensuring a significant scale position in electricity distribution through the acquisition of WPD, the UK’s largest electricity distribution business.
· significantly enhance National Grid’s central role in the delivery of the UK’s net zero targets, ·
· deliver shareholder value as the transactions are expected to be significantly earnings accretive from year one, generate a return in excess of National Grid’s cost of capital and, taken together with the proposed NGG Sale, continue to be earnings accretive in the longer term;
· underpin National Grid’s 5 to 7% asset growth target for longer, further supporting National Grid’s updated dividend policy to deliver annual dividend per share growth in line with UK CPIH inflation, while expecting to maintain its current overall strong investment grade credit rating; ·
· maintain the Group’s geographic and regulatory diversity, with c.40% of the Group assets in the US after the sales of NECO and stake in NGG; ·
· generate attractive shareholder value through the sales of NECO and a majority stake in NGG; and ·
· ensure management continuity and focus: the CEO and CFO of WPD will lead the UK distribution business as part of the enlarged Group. National Grid, recognising the importance of WPD to the communities it serves, intends to maintain the WPD headquarters in Bristol and offices in other key locations.
John Pettigrew, chief executive of National Grid, said:
"These transactions will be transformational for our UK portfolio. The acquisition of WPD is a one-off opportunity to acquire a significant scale position in UK electricity distribution. WPD has a high quality, fast growing asset base and an excellent track record of customer satisfaction, operational performance and financial returns. We have received a premium valuation for our Rhode Island business and I am confident that we will also deliver attractive shareholder value from the NGG Sale in due course. In combination with the continued successful execution of our strategy in the US, establishing National Grid as the leading electricity transmission and distribution operator in the UK will strengthen our long-term growth prospects, enhance our role in the UK’s energy transition and drive long term shareholder value. Following the completion of these transactions, we will continue to have a diversified portfolio of assets across the UK and US, with a strong asset growth profile that will further underpin our dividend policy for the longer term
Our vision for National Grid remains unchanged, to be at the heart of a clean, fair and affordable energy future. With increased exposure to the UK’s electricity sector, these transactions enhance our role in the progress towards net zero, underpinning our core ambition which is to enable the energy transition for all. We look forward to constructive engagement with Ofgem and policymakers, on how best to achieve these common goals in the best interests of all our customers and wider stakeholders."