Perth-based energy giant SSE is to sell its stake in gas firm Scotia Gas Networks (SGN) in a £1.2 billion deal.
SSE’s decision to sell its 33.3% stake will allow it to focus on low carbon activities.
The £1.2bn transaction 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 £505 million.
It then sold 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 and Southern Gas Networks, two of the eight regulated gas distribution networks in England, Wales and Scotland.
It also includes SGN Natural Gas, which provides gas to customers in the west of Northern Ireland as well as other non-regulated ancillary businesses.
This deal will conclude SSE’s £2bn plus disposals programme announced in June 2020, with total proceeds amounting to over £2.7bn.
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.
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.
The right time to sell SGN stake, says SSE
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.
“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.
“The capital we are releasing will help enable us to maximise the delivery of our low-carbon electricity orientated strategy.
“This will 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.”
In total, Ontario Teachers’ will acquire an additional 12.5% of SGN and Brookfield will acquire a 37.5% stake.
When the deal is complete, SGN’s shareholders will comprise Ontario Teachers’ (37.5%), Brookfield (37.5%) and OMERS Infrastructure (25% unchanged).