National Grid sells 61% stake in its gas unit to foreign investors

National Grid said it would sell a majority stake in its gas pipe network to a foreign investor consortium led by Australian investment bank Macquarie, backed by Chinese and Qatari sovereign wealth fundsalong with fund managers including Hermes and Allianz, in a deal valuing the business at about £13.8billion.

The UK’s power network operator will keep a 31% stake in the business, while the consortium will acquire 61% shareholding in the gas division. Macquarie and China Investment Corporation (CIC) will hold the two largest stakes, at 14.5% and 10.5% respectively, followed by Allianz with a 10.2% stake. The Qatar Investment Authority (QIA) will hold an 8.5% stake.

National Grid will receive £3.6billion cash for the stake in its gas arm, as well as a further £1.8billion in debt financing. It will return £4billion to shareholders after the deal and hand out a £150million payment to benefit British energy consumers. It will also work with Ofgem, the government regulator for gas and electricity markets in Great Britain, to decide how best to use the £150million payout to benefit energy customers.

However, trade unions have questioned the involvement of Macquarie, which specializes in infrastructure deals. The Australian bank has been criticized for its ownership of Thames Water, Britain’s biggest water company, which it bought in 2006 and is now selling.

“When Macquarie ran Thames Water, the end result was poorer customer service, higher bills, massive debts, complex tax structures and profits siphoned off to its parent company in Australia,” the union said.

“Unison fears a similar fate lies in store for the UK’s network of gas pipelines and the country’s consumers more generally.”

The deal stillneeds clearance from the European Commission to go ahead. Assuming it is not blocked, National Grid expects the transaction to complete on or before the end of March 2017.

National Grid’s distribution arm comprises four UK gas networks. National Grid’s 82,000 miles (132,000km) of pipeline delivers gas to approximately 11million households and businesses. The gas arm employs nearly 5,700 staff.