SGN, the company which owns and manages the entire Scottish gas distribution network, will be wholly Canadian-owned following the sale of a 33.3% stake by Perth-based energy firm SSE in a deal worth £1.22 billion.
SSE said it was offloading its interest in SGN, which employs nearly 3,800 gas network workers at locations throughout Scotland and southern England, to a consortium comprising existing SGN shareholder Ontario Teachers’ Pension Plan Board (OTPPB) and Brookfield Super-Core Infrastructure Partners.
SGN is well-positioned to play a leading role in helping the UK to transition away from fossil fuels and achieve the nation’s net-zero goal.”
Nick Jansa, OTPPB
Toronto-based OTPPB is the administrator of Canada’s largest single-profession pension plan, with £127.4bn in net assets, as of December 31 2020.
The infrastructure investment arm of asset manager Brookfield, also headquartered in Toronto, boasts 6.6 million electricity and gas connections, as well as nearly 1,700 miles of regulated gas pipelines and more than 1,200 of electricity transmission lines globally.
OTPPB and Brookfield have also struck a separate deal to acquire 16.7% of SGN from the Abu Dhabi Investment Authority (ADIA) for an undisclosed sum. SSE, which had owned 50% of SGN since its foundation in 2005, sold the 16.7% interest to ADIA in 2016.
Pension fund giant OTPPB is taking an extra 12.5% stake in SGN as a result of the two deals, lifting its total shareholding to 37.5%. New investor Brookfield will also own 37.5%.
The other shareholder in SGN, formerly Scotia Gas Networks, with an unchanged stake of 25%, will be Omers Infrastructure – the infrastructure investment arm of Toronto-based Omers (Ontario Municipal Employees Retirement System), a pension fund created by statute in 1962 to manage the retirement benefits of all local government employees in the Canadian province of Ontario. Omers is now one of the largest institutional investors in Canada.
SGN owns and manages the second-largest gas distribution network in the UK, covering all of Scotland and southern England, and is also pioneering the repurposing of existing infrastructure into renewable hydrogen energy systems.
Nick Jansa, senior managing director for Europe, the Middle East and Africa, OTPPB, said: “Our increased investment in SGN further reflects our commitment to support and capitalise on opportunities created by the transition to a net-zero emissions economy.
“This investment can contribute to the financial security of our members, while also supporting a critical infrastructure asset that will require additional capital to help it transform for a low-carbon future.
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“SGN is well-positioned to play a leading role in helping the UK to transition away from fossil fuels and achieve the nation’s net-zero goal.
“We look forward to working with our fellow shareholders to support SGN on its journey to create an affordable and sustainable heat and energy network for homes and businesses in the UK.”
SSE’s deal is expected to complete within its current trading year, to March 31 2022. It marks the conclusion of the company’s £2bn-plus disposals programme, announced in June 2020, with total proceeds amounting to more than £2.7bn.
Cash raised by SSE’s latest sale will be used to reduce net debt in the short term and help support the delivery of the firm’s capital investment plans.
SSE finance director Gregor Alexander said: “SGN has been a hugely successful investment for SSE during the past 16 years. It is a strong business delivering consistently for customers and will have a key role to play in the future development of the hydrogen economy.
‘Right time’ to sell stake
“However, it has become purely a financial investment for SSE as we have sharpened our focus on our low-carbon electricity core, and it is, therefore, the right time for SGN to continue to thrive under new ownership.”
Mr Alexander added: “We see significant growth opportunities in our core networks and renewables businesses in the transition to net-zero. The capital we are releasing through our disposals programme will help enable us to maximise the delivery of our low-carbon electricity-orientated strategy and, ultimately, create sustainable long-term value for customers, shareholders and society.
“Completion of our disposals programme will leave SSE more streamlined and strategically aligned than ever before, with a business mix that is very deliberate, highly effective, fully focused, and well set to prosper on the journey to net-zero and beyond.”