National Grid announces £7.8 billion acquisition of Western Power Distribution

In: Grid
National Grid plc has announced its acquisition of Western Power Distribution, the UK’s largest electricity distribution business, from PPL Corporation for an equity value of £7.8 billion.

In parallel, with PPL wishing to expand its presence in the US, National Grid has agreed to PPL acquiring The Narragansett Electric Company, National Grid’s electric and gas business serving customers in Rhode Island, for an equity value of $3.8 billion (£2.7 billion).

As part of the announcement, National Grid has also announced that it will look to sell a majority stake in its National Grid Gas Transmission business in the UK.

The transactions are conditional upon the approval of National Grid shareholders at a General Meeting. In addition, completion of the Western Power Distribution acquisition and the Narragansett Electric transaction are conditional on regulatory approval, which is expected within four months in the case of Western Power Distribution and 9-12 months in the case of Narragansett Electric.

WPD is the UK's largest electricity distribution business with its four distribution network operators (DNOs) delivering electricity to approximately 7.9 million customers and employing over 6,500 staff. WPD's network comprises approximately 90,000 kilometres of overhead lines, 135,000 kilometres of underground cable and 188,000 transformers.

These transactions are expected to allow National Grid to pivots its UK portfolio towards electricity. The proportion of the Group's assets in electricity will increase from c.60% to c.70%. National Grid also looks to strengthen its 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. Electricity distribution is expected to see a high level of asset growth as a result of the ongoing energy transition.

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.

"As we move our portfolio to higher growth assets, we have taken the decision to sell a majority stake in NGG. Given the strategic nature of its business coupled with its central position in a transition towards a hydrogen economy, it will continue to play a vital role in the UK's energy system. We expect strong interest when the sale process begins, likely to be in the second half of this year.

"The acquisition of WPD brings great people and outstanding experience to National Grid and I am hugely excited about building the future together. 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."

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