Macquarie to acquire full control of Britain’s core gas transmission network in £700-M deal

Macquarie, the world’s largest infrastructure investor, is set to take full control of Britain’s core gas transmission network in a deal valued at roughly £700 million.

This move signifies the Australian bank’s confidence in the future of gas pipelines despite the UK’s ongoing shift towards renewable energy sources.

Macquarie acquisition details and background

Macquarie has exercised its option to buy the remaining 20 percent stake in National Gas, which owns the 7,660-km network, from National Grid, a company listed on the FTSE 100.

This latest acquisition builds on Macquarie’s previous purchases, which included a 60 percent stake acquired for £4.2 billion in 2022, alongside its consortium partner British Columbia Investment Management Corporation, and an additional 20 percent stake last year.

The total investment now culminates in Macquarie taking full control of National Gas, underlining a significant strategic position within the UK’s energy infrastructure. The completion of this transaction is anticipated in the first quarter of 2025.

Strategic timing amid UK infrastructure changes

This acquisition comes at a critical juncture for UK infrastructure. The new Labour government is pushing for asset managers and pension funds to increase their investments in the sector, aiming to enhance the country’s infrastructure resilience and development.

Despite the UK’s broader energy strategy to phase out natural gas — which supplied approximately 38 percent of the nation’s energy in 2022 — in favor of reducing carbon dioxide emissions to achieve its net-zero goal by 2050, Macquarie’s investment highlights a different vision for the future energy landscape.

Betting on hydrogen and the future of gas pipelines

Macquarie’s strategy appears to be betting on hydrogen playing a more substantial role in the future of energy. National Gas has been developing plans to
adapt its network to carry hydrogen instead of natural gas.

This move is seen as forward-thinking, considering the potential of hydrogen to replace fossil fuels in heavy industry and transportation sectors.

Colm Gibson, managing director of regulated assets at Berkeley Research Group, commented on this strategy:

People have been quick to dismiss hydrogen, but it could play a major role in decarbonising the UK, and Macquarie has positioned itself to take advantage of that; it may also be banking on the fact that the transition timetable is unclear and may take longer than people think.

The National Infrastructure Commission, which advises the UK government, supports a role for hydrogen in the industrial sector and emphasizes the need for core networks to transmit and store hydrogen and carbon by 2035.

However, it has advised against backing hydrogen for home heating, raising questions about the future use of gas distribution networks for residential areas.

Macquarie’s extensive infrastructure portfolio

Macquarie’s investment in National Gas is part of a broader strategy within its extensive infrastructure portfolio.

The company already owns a significant stake in Cadent, which operates half of the UK’s local gas distribution networks.

Recently, Macquarie and another shareholder have been selling a combined £1.3bn stake in Cadent, although Macquarie will retain a 20 percent stake, ensuring a continued influence over the distribution network that serves 11 million homes and businesses in England.

Controversies around Macquarie

Macquarie’s ownership of infrastructure assets has not been without controversy. The company was previously the owner of Thames Water, the UK’s largest water utility.

During its ownership from 2006 to 2017, Thames Water’s debt increased significantly from £3.4 billion to £10.8 billion, accompanied by substantial dividend payouts and loans, which have drawn criticism.

Macquarie, however, has defended its tenure, citing an £11bn investment in infrastructure funded by customer bills.

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