In return, the National Grid has agreed to sell The Narragansett Electric Company to PPL for £2.7 billion.
National Grid has also announced that later this year it intends to sell a majority stake in National Grid Gas plc, the owner of the national gas transmission system.
The National Grid says that these transactions will strategically pivot its UK portfolio towards electricity. The proportion of the Group’s assets in electricity will increase from around 60 per cent to around 70 per cent.
Electricity distribution is expected to see a high level of asset growth as a result of the ongoing energy transition and this new strategy will enhance National Grid’s central role in the delivery of the UK’s net zero targets and deliver shareholder value.
The CEO and CFO of Western Power Distribution 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.
Completion of the WPD Acquisition, which will be funded by fully committed bridge facilities, is expected to occur within the next four months and completion of the NECO Sale is expected to occur before the end of the first quarter of 2022. National Grid expects to launch the sale process for NGG in the second half of this year and complete the sale approximately a year later.
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.”
He added: “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.”