The stake sale in SGN marks the completion of SSE’s £2bn plus disposals programme that was announced last year to reduce its debt that stands at £8.9bn and support its capital investment plans
Scottish energy company SSE has signed an agreement to sell its entire stake of 33.3% in gas distributor Scotia Gas Networks (SGN) to a consortium of Canadian investors Ontario Teachers’ Pension Plan and Brookfield for £1.2bn in cash.
The consortium partners have also agreed to acquire a 16.7% stake held by the Abu Dhabi Investment Authority (ADIA) in SGN, which is engaged in distributing gas to around 6 million households and businesses across Scotland and the south of England.
SSE initially bought a 50% stake in SGN in 2005 for a total of £505m. Later, it sold a 16.7% stake to a wholly owned subsidiary of ADIA in 2016.
Under the two deals, existing SGN shareholder Ontario Teachers’ will acquire an additional 12.5% stake in SGN to increase its stake to 37.5%, while Brookfield will acquire a 37.5% stake.
Following the completion of the deals, Ontario Teachers’ and Brookfield will each have a 37.5% stake. OMERS Infrastructure will continue to hold a 25% stake in the company.
The stake sale is part of SSE’s efforts to focus on renewables and regulated electricity networks, businesses, which are said to have net zero-aligned growth potential.
The transaction comprises Scotland Gas Networks and Southern Gas Networks, which are among the eight regulated gas distribution networks in England, Wales and Scotland.
It also includes SGN Natural Gas that delivers gas to customers in the west of Northern Ireland and other non-regulated ancillary businesses.
The deal marks the completion of SSE’s £2bn plus disposals programme, which was announced in June last year. Under the programme, the company has raised a total of over £2.7bn.
Earlier this year, SSE completed the sale of its household energy business to OVO for £500m. Last year, it agreed to divest a stake in its energy from waste assets for £1bn.
The company plans to utilise the proceeds from the disposal programme to reduce its debt that stands at £8.9bn and support its 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.
“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.”
Morgan Stanley and Credit Suisse served as financial advisers to SSE on the transaction, while CMS Cameron McKenna Nabarro Olswang acted as its legal advisers.
Subject to certain regulatory approvals, the transaction is expected to complete within the current financial year.