BCI Consortium Acquires Big Stake in National Grid’s Gas Transmission and Metering Business
The Canada Pension Plan Investment Board is investing US$205 million as an anchor investor in IndoSpace’s new real estate fund in India.
The investment marks the first close for IndoSpace Logistics Parks IV, the real estate company’s fourth development vehicle, which is targeting US$600 million of total equity commitments. In 2017, the CPPIB and Indospace established a joint venture. It now owns the largest portfolio of stabilized modern logistics assets in India. Following the latest investment, the partnership will exceed US$1 billion in assets.
Logistics Parks IV will add an additional 25-30 million square feet to the IndoSpace portfolio. It will focus on India’s largest logistics real estate markets: Ahmedabad, Bangalore, Chennai, Delhi, Hyderabad, Kolkata, Mumbai and Pune. Its establishment follows the first three development funds, which have a combined total of 56 million square feet of modern logistics real estate in India.
In a press release, Hari Krishna V, the CPPIB’s managing director and head of real estate in India, said the investment organization sees strong demand in India as the manufacturing sector continues to grow and the e-commerce sector matures. “We are pleased to be working with our longstanding partner IndoSpace to further capitalize on opportunities in this space and believe this investment will deliver strong risk-adjusted returns for CPP contributors and beneficiaries.”
In other investment news, National Gas has completed an acquisition of a multinational utility company partially owned by the British Columbia Investment Management Corp.
The acquisition follows the completion of the sale of a 60 per cent equity stake in National Grid’s gas transmission and metering business, led by the BCI and Macquarie Asset Management. As part of the deal, announced in March 2022, the consortium has an option to acquire the remaining 40 per cent stake in the business.
According to a press release, the organization will invest in innovation to future proof the U.K., including by repurposing existing assets working in collaboration with government and industry partners to deliver a hydrogen “backbone” for Britain.
“BCI strongly supports National Gas’ innovative decarbonization strategy, which involves transitioning away from fossil fuels while still offering a secure, safe and reliable network at least cost to consumers,” said Lincoln Webb, executive vice-president and global head of infrastructure and renewable resources at the BCI, in the release. “Our investment in National Gas is a testament to our support of the U.K.’s commitment to net-zero carbon emissions by 2050.”
Last week, I covered how CPP investments is investing US$205 million as an anchor investor in IndoSpace’s new real estate fund. You can read my insights here.
Today, I will cover how BCI and Macquarie Asset Management recently sold a 60% equity stake in National Grid’s Gas Transmission & Metering business to the UK's National Gas:
January 31, 2023
National Gas (“the Company”), today becomes the owner & operator of Britain’s gas transmission network with an extensive metering portfolio.
It follows the completion of the sale of a 60% equity stake in National Grid’s Gas Transmission & Metering business. The acquisition, led by Macquarie Asset Management and British Columbia Investment Management Corporation (BCI) (“the Consortium”), was successfully completed after all conditions relating to the sale were met.
National Gas is comprised of two organisations – National Gas Transmission and National Gas Metering. National Gas Transmission will own and operate the UK’s 7,600 km-long National Transmission System (NTS) and continue to ensure the safe, reliable and affordable transportation of gas needed to heat homes, power industry and generate electricity.
As the UK’s largest gas meter asset manager, National Gas Metering, will continue to provide industry-leading maintenance and management services for over 7 million domestic, industrial and commercial gas meters.
The business will invest in innovation to future proof the UK, including by repurposing existing assets working in collaboration with the UK Government and industry partners to deliver a hydrogen “backbone” for Britain. Through connecting industrial clusters around the country and leveraging the UK’s world-leading offshore wind industry for hydrogen production, we will provide a base of infrastructure that will decarbonise power generation and heavy industry, boost domestic energy resilience with hydrogen storage and underpin millions of future green jobs.
The Company will be led by an experienced Management Team and Board, headed by Jon Butterworth who resumes his role as Chief Executive Officer having previously held the position of CEO of National Grid Gas Transmission & Metering. Jon and his team have played a key role in overseeing the development of the NTS into one of the safest and most reliable gas networks in the world with 100% reliability achieved in every year since 2020.
Jon Butterworth, CEO of National Gas, commented: “Today is a truly historic day for the UK’s gas industry and I’m delighted to be part of an organisation that sits at the heart of our energy industry.
Our network plays a fundamental role providing energy security for over 23 million homes and 210,000 businesses across the country, as well as the gas-fired power stations that keep the UK’s lights on by providing nearly 40% of our electricity annually.
We’re so excited by the opportunity to play a leading role in the UK’s decarbonisation journey by seamlessly transitioning the network from natural gas to hydrogen and unlocking the full potential of the UK’s net zero economy in the process”.
Will Price, Head of Utilities in EMEA, at Macquarie Asset Management added: “Accelerating the decarbonisation of the UK’s energy mix is crucial to deliver the UK’s net zero ambitions. Hydrogen and other green gases offer the quickest and cheapest path to decarbonise home heating and key industrial processes, as well as strengthening the UK’s energy system through seasonal energy storage. National Gas has ambitious plans, and we are delighted to be supporting the business in this journey.”
Lincoln Webb, Executive Vice President & Global Head, Infrastructure & Renewable Resources at BCI, commented: “BCI strongly supports National Gas’ innovative decarbonisation strategy, which involves transitioning away from fossil fuels while still offering a secure, safe, and reliable network at least cost to consumers. Our investment in National Gas is a testament to our support of the UK’s commitment to net zero carbon emissions by 2050.”
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National Gas comprises two businesses, National Gas Transmission and National Gas Metering.
As both the transmission owner and system operator, National Gas Transmission owns, builds and operates the high-pressure NTS with day-to-day responsibility for balancing supply and demand in real time and facilitates the connection of assets to the transmission system. The NTS comprises approximately 7,660 kilometres of high-pressure pipe and 23 compressor stations connecting to 8 distribution networks and other third-party independent systems.
National Gas also owns and operates an independent metering business, the largest owner of traditional gas meters in the UK with approximately 7 million domestic and commercial meters. The business’ activities cover asset procurement and logistics management, meter installation, maintenance, exchange and removal and customer service provision.
About Macquarie Asset Management
Macquarie Asset Management is a global asset manager that aims to deliver positive impact for everyone. Trusted by institutions, pension funds, governments, and individuals to manage approximately £456 billion in assets globally, we provide access to specialist investment expertise across a range of capabilities including infrastructure, green investments, real estate, agriculture & natural assets, asset finance, private credit, equities, fixed income and multi asset solutions.
Macquarie Asset Management is part of Macquarie Group, a diversified financial group providing clients with asset management, finance, banking, advisory and risk and capital solutions across debt, equity, and commodities. Founded in 1969, Macquarie Group employs more than 19,000 people in 33 markets and is listed on the Australian Securities Exchange.
All figures as of 30 September 2022. For more information, please visit Macquarie.com
British Columbia Investment Management Corporation (BCI) is amongst the largest institutional investors in Canada with C$211.1 billion under management, as of March 31, 2022. Based in Victoria, British Columbia, with offices in Vancouver and New York City. BCI is invested in: fixed income and private debt; public and private equity; infrastructure and renewable resources; as well as real estate equity and real estate debt through our independently operated platform company QuadReal Property Group. With our global outlook, we seek investment opportunities that convert savings into productive capital that will meet our clients’ risk and return requirements over time.
BCI’s infrastructure & renewable resources program, valued at approximately C$20.2 billion, invests in tangible long-life assets in the Americas, Europe, and Asia Pacific, including a portfolio of direct investments in regulated utilities, energy, telecommunications, transportation, timberlands, and agri-businesses.
For more information, please visit bci.ca.
A little background. Last March, BCI entered a consortium that bought a majority stake in a UK. natural gas provider:
March 27, 2022
LONDON – Macquarie Asset Management and British Columbia Investment Management Corporation (“the Consortium”) have reached an agreement to acquire a 60 per cent stake in National Grid’s gas transmission and metering business. The terms of the transaction imply an enterprise value for the business of approximately £9.6 billion.
National Grid owns and operates the UK’s regulated national gas transmission system and an independent gas metering business. The 7,660-kilometre transmission system plays a critical role in the UK energy landscape, reliably transporting the gas needed to heat homes and power industry and electricity generation.
The Consortium will partner with National Grid to ensure the national gas transmission system and metering business remain secure, safe, and reliable while enabling the UK to accelerate its transition away from fossil fuels, at least cost to consumers. The Consortium invests on behalf of long-term institutional investors including pension and insurance funds, and intends to remain invested in the business over multiple regulatory periods, having acquired its stake under existing RIIO-2 regulatory obligations.
As part of this transaction, the Consortium has also entered into an option agreement with National Grid for the potential acquisition of the remaining 40 per cent stake in the business on broadly similar terms, subject to necessary adjustments. Further details will be announced if the option is exercised by the Consortium.
Martin Bradley, Head of Macquarie Asset Management’s Real Assets team in EMEA, said: “The national transmission system is a critical enabler of the UK’s energy transition, providing the flexibility and reserve energy needed in the electricity system as the deployment of renewable sources of generation accelerates. However, if the UK’s net-zero by 2050 target is to be met, the country must have a next-generation transmission backbone to power homes and businesses with renewable energy. Backed by our significant investment, the transmission system will play a leading role in making the network ready for this transition. In doing so it will support the expansion of hydrogen’s role in the energy mix to deliver a competitive edge to the UK and its industry, while working closely with the Government and Ofgem to maintain security of supply.”
Lincoln Webb, Executive Vice President and Global Head of Infrastructure & Renewable Resources at BCI, said: “This investment aligns well with our diversified portfolio of regulated utilities that securely deliver critical services to customers. We believe National Grid’s innovative decarbonisation strategy will ensure the business plays a leadership role in supporting the UK to achieve net zero carbon emissions on target by 2050, while meeting consumer demand for reliable networks.”
John Pettigrew, Chief Executive of National Grid, said: “Today’s announcement is a strong result for all our stakeholders, including employees and customers. The Consortium has a long-term commitment to the UK with significant experience in owning and operating infrastructure assets. I look forward to our partnership and continuing to deliver safe and reliable gas service at the least cost to consumers. I would also like to thank my colleagues in Gas Transmission and Metering for their hard work that has helped us reach this important milestone.”
An increased role for hydrogen in the energy mix, and by extension development of the network, is a core element of the UK Government’s Ten Point Plan for a Green Industrial Revolution. Hydrogen offers a flexible, low carbon, and storable source of energy that can also decarbonise hard to abate sectors including heating and key industrial processes.
The Consortium will actively support and develop several projects currently being progressed across the national gas transmission system to ensure the opportunities presented by hydrogen to the UK are maximised. FutureGrid, which is utilising decommissioned transmission assets to demonstrate how hydrogen can be delivered safely and reliably using existing infrastructure, could help unlock plans to build an initial hydrogen ‘backbone’ network through investment to link key production sites and industrial clusters by 2030.
Completion of the transaction will be subject to certain antitrust and regulatory conditions. Subject to these clearances, the Consortium expects that the transaction will complete in the second half of calendar year 2022.
 Includes debt-like items and provisions of approximately £0.2 billion.
Last week, John Butterworth, Chief Executive of National Gas, posted this on LinkedIn:
This is a truly historic moment for us as we rebrand as National Gas and the two world-class businesses areas making up our organisation officially become National Gas Transmission and National Gas Metering. Everyday, over 23 million homes and over 200,000 business rely on us to, safely and reliably, transport the gas supplies that keep homes warm, lights on in schools and hospitals, and power the industry and services that keep Britain running. Gas has never been more at the forefront of people’s minds and conversations as it is today. I am incredibly proud of our teams up and down the country and the herculean efforts they undertake to ensure that Britain keeps moving.
It has been a real privilege to be a part of National Grid, a company that I have worked within for over 20 years. However I’m really excited to be a part of an organisation that is the backbone of Britain’s energy system today, laser focused on playing a leading role in the transition to a clean energy future that works for every home and business. By using our existing infrastructure and expertise, we stand ready to work with the UK Government and industry to deliver the hydrogen transmission system of tomorrow, supporting the growth of our world-leading UK offshore wind industry and maximising the potential of the UK’s energy transition to ensure it is truly cost-effective and socially inclusive.
We have a once in a generation opportunity to deliver a clean energy future for our country and as we move forward with the energy and talent of our people, the backing of our new owners and the collaboration of the wider energy industry, I am incredibly optimistic about what the future holds for us.
All this to say this is a great acquisition for the Consortium which includes BCI as National Gas's two world-class businesses are rebranded into National gas Transmission and National Gas Metering:
National Gas Transmission is the backbone of Britain’s energy system today and will play a leading role in the transition to a clean energy future that works for every home and business. We own and operate the national gas network, delivering energy to where it is needed in every part of the country.
We keep households warm and underpin their quality of life. For business, we fuel growth and innovation, and we are looking to the future by developing the hydrogen transmission system of tomorrow.
National Gas Metering maintains and manages around 7 million domestic, industrial and commercial combined gas assets across the UK. We ensure these assets remain safe, reliable and efficient for homes and businesses. We support new connections and maintain existing installations.
As the largest asset manager of residential, industrial and commercial gas meters in Great Britain, we offer a broad range of metering services to the highest safety and quality standards, while using the most advanced engineering technologies and methods.
I would invite my readers to read more about Natural Gas including the FutureGrid project which will build a hydrogen test facility from a representative range of decommissioned assets here.
This is a great acquisition for BCI and its clients, one that will play a critical role in helping the UK achieve net zero by 2050.
Below, I embed John Butterworth, Chief Executive of National Gas, LinkedIn post which includes a video clip at the end.
Also, Sky News reports how nergy regulator Ofgem has warned the UK is facing a "significant risk" of gas shortages this winter due to the impact of Russia's war with Ukraine. A "gas supply emergency" would be declared if suppliers are unable to get gas to homes and businesses safely.
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