TIDMSSE
RNS Number : 2118H
SSE PLC
02 August 2021
SSE plc
SSE AGREES SALE OF STAKE IN SGN FOR GBP1.225BN
2 August 2021
SSE has agreed to sell its entire 33.3% stake in gas
distribution operator Scotia Gas Networks Ltd (SGN) to a consortium
comprising existing SGN shareholder Ontario Teachers' Pension Plan
Board (Ontario Teachers') and Brookfield Super-Core Infrastructure
Partners (Brookfield) (the Consortium).
The transaction is based on an effective economic date of 31
March 2021 and is for a consideration of GBP1,225m in cash. It is
expected to complete within the current financial year and is
conditional on certain regulatory approvals.
SSE initially acquired a 50% equity share in SGN in 2005 for a
total of GBP505m, before selling a 16.7% stake to a wholly owned
subsidiary of the Abu Dhabi Investment Authority (ADIA) in 2016.
The Consortium has also agreed to acquire the 16.7% stake in SGN
owned by ADIA.
SGN includes Scotland Gas Networks plc and Southern Gas Networks
plc, two of the eight regulated gas distribution networks in
England, Wales and Scotland, in addition to SGN Natural Gas Ltd,
which provides gas to customers in the west of Northern Ireland as
well as other non-regulated ancillary businesses. SGN is focused on
sustainability, having committed to ensuring all its business
operations are net zero by 2045, and is taking a leadership role in
supporting the transition to a hydrogen economy.
This deal will conclude SSE's GBP2bn plus disposals programme
announced in June 2020, with total proceeds amounting to over
GBP2.7bn. The programme has realised significant value from
non-core assets while intensifying SSE's strategic focus on its
core low-carbon electricity businesses and the transition to net
zero.
SSE's strategy is to create value for shareholders and society
in a sustainable way by developing, building, operating, and
investing in the electricity infrastructure and businesses needed
in the transition to net zero. Its strategic focus is on renewables
and regulated electricity networks, businesses which have strong,
net zero-aligned growth potential with common skills and
capabilities in the development, construction, procurement,
financing, and operation of world-class, highly technical
electricity assets. The other businesses retained in the SSE group
are highly complementary to this low-carbon core.
The disposal proceeds will reduce net debt in the short term and
will help support the delivery of SSE's capital investment plans.
As indicated in May, SSE will provide an update on these plans at
its interim results in November.
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.
"We see significant growth opportunities in our core networks
and renewables businesses in the transition to net zero and 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."
In total, Ontario Teachers' will acquire an additional 12.5% of
SGN and Brookfield will acquire a 37.5% stake in SGN. StepStone
Clients are participating in both the Brookfield and Ontario
Teachers' investments. This means following completion of both
transactions, SGN's direct shareholders will comprise Ontario
Teachers' (37.5%), Brookfield (37.5%) and OMERS Infrastructure (25%
unchanged).
The Transaction constitutes a class 2 transaction for the
purposes of the UK Financial Conduct Authority's Listing Rules and,
as such, does not require SSE shareholders' approval. At 31 March
2021, SGN had a regulated asset value (RAV) of GBP6,003m, and SSE's
interest in SGN had a carrying value of GBP744.4m and contributed
GBP88.6m to the Group's profits after tax for the year then
ended.
Morgan Stanley and Credit Suisse acted as financial advisers and
CMS Cameron McKenna Nabarro Olswang LLP as legal advisers to SSE.
Nomura acted as financial adviser and Freshfields Bruckhaus
Deringer LLP acted as legal advisers to ADIA. Evercore acted as
financial adviser to Ontario Teachers' and Linklaters acted as
legal advisers to the Consortium.
ENDS
About SSE
SSE has the largest renewable electricity portfolio in the UK
and Ireland, providing energy needed today while building a better
world of energy for tomorrow. It develops, builds, operates and
invests in low-carbon electricity infrastructure needed in the
transition to net zero, including onshore and offshore wind, hydro
power, electricity transmission and distribution grids, and
efficient gas, alongside providing energy products and services for
businesses. UK listed, SSE is a major contributor to the UK and
Ireland economies, employs around 10,000 people and is real Living
Wage and Fair Tax Mark accredited.
About SGN
SGN is the second largest UK gas distribution network ('GDN') in
the UK and owns Scotland Gas Networks plc and Southern Gas Networks
plc, two of the eight regulated gas distribution networks in
England, Wales and Scotland, operating under a license from Ofgem
to distribute gas through their infrastructure network. SGN Natural
Gas Ltd provides gas to customers in the west of Northern Ireland.
SGN also includes other non-regulated ancillary businesses relating
to metering, real estate development, heat networks and renewables
amongst others. The derived EBITDA from these non-regulated
activities in the year to 31 March 2021 was GBP21m.
SGN is a leader in the development and use of green hydrogen for
heating and is delivering a suite of innovative projects that will
help to make hydrogen the backbone of the UK's future gas network.
SGN plans to repurpose its existing gas network for Scotland's
north-east and central belt, as well as its network across southern
and south east England, into 100% renewable energy systems,
primarily through the use of hydrogen. By 2023, SGN's pioneering
H100 Fife project in Scotland aims to put several hundred customers
on to its network using hydrogen; this is the neighbourhood part of
the UK government's hydrogen programme.
In addition to working to decarbonise the UK's gas network, SGN
is reducing the environmental impact from its own operations and is
targeting a net-zero carbon footprint by 2045. Its key initiatives
include reducing leakage from its network pipes, using 100%
renewable energy and rolling out zero-emission vehicles.
Contact:
Media: media@sse.com | +44 (0)345 0760 530
Investors: ir@sse.com | +44 (0)345 0760 530
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END
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