Scotland's gas pipelines sold to Canadian consortium
- Published
SGN includes the gas pipelines supplying homes and businesses in Scotland and in the south-east of England
A vital part of Scotland's infrastructure, its gas supply pipeline network, has been wholly bought over by a Canadian consortium.
SSE, the energy firm based in Perth, announced it has sold its one-third stake for £1225m, to focus on renewable electricity.
The future owners, with 37.5% each, will be Brookfield investment fund and the Ontario teachers pension fund.
The latter held 25% until this SSE transaction.
A further 25% stake continues to be held by Omers, another Canadian pension provider.
SGN includes the gas pipelines supplying homes and businesses in Scotland and in the south-east of England, including Oxfordshire and parts of London.
These are two of the eight regulated gas pipeline regions on the British mainland.
A further division of it supplies gas to the western part of Northern Ireland.
SSE bought half the company 16 years ago for £505m, and sold one sixth of the total shareholding to Abu Dhabi Investment Authority in 2016. That 16.5% stake is also being sold to the Canadian consortium.
It has dropped its branding as Scottish/Southern Gas Networks.
'Sharpened focus'
The sale of the SGN stake is part of an SSE plan to raise £2bn from sale of assets, to reduce debt and focus its investment on renewable power.
Gregor Alexander, finance director of SSE, 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.
Waseem Hanif, spokesman for SGN, commented: "We look forward to working with all our shareholders (new and existing) in helping the UK on its journey towards net-zero, through the development and deployment of safe, modern decarbonised gas networks, using hydrogen and other energy vectors."
Gas pipelines are vital, but a bit boring in business terms. They deliver a steady, modest income, but with prospects for income growth constrained by heavy regulation.
They are the kind of infrastructure that pension funds like to hold. Canada's seem to be happy to have a reputation for boring income streams.
The country's public sector pension schemes manage many of their funds in-house. Ontario Teachers Pension Plan had Can$221bn (£127bn) under management at the end of 2020.
And it keeps buying bits of Britain and Europe; Birmingham, Bristol and London City airports, plus those in Brussels and Copenhagen. It has a share of Italy's largest private gas distributor, Finland's largest electricity firm, and a stake in Britain's second biggest private crematorium operator.
PSP is the pension fund for Canada's civil service, armed forces and the Mounties police. It has a majority stake in Forth Ports, including Grangemouth, Leith, Dundee and Tilbury..
But the investment in gas pipelines is not risk-free. The pressure of public policy towards net zero carbon puts a question mark over the future use of gas in heating homes and businesses.
SGN is already engaged in pilot projects to feed hydrogen through its pipelines, and to invest in district heating schemes, transferring excess heat from industry into other uses. But that technology is commercially unclear and the future is uncertain.
That helps explain why SSE got out of gas networks, as well as retail supply of power and gas, to focus much more strictly on renewable electricity.
- Published7 December 2022
