Equitix, Kansai agree to buy ENW 50% stake

29 July 2019 - 12:00 am UTC

Equitix and Japan’s Kansai Electric Power Corporation have agreed to buy 50% of Electricity North West (ENW), scotching fears the sale of the UK regional energy grid had been derailed by worries about nationalisation and Brexit.

 

Equitix and Kansai, which had previously been in a consortium with Equitix’s fellow infrastructure investor Dalmore and GLIL Infrastructure to buy all of ENW before the latter two dropped out, as reported, are buying the stake in equal amounts from First State Investments and JP Morgan Asset Management.

 

First State and JP Morgan will now own 25% each of ENW, which operates the electricity grid in a region covering 2.4m homes, stretching from Manchester to rural Cumbria. The price for the transaction was not disclosed. People following the process said it is likely to value the asset in excess of GBP 2bn, based on a premium to its Regulatory Asset Value of around GBP 1.76bn.

 

The two investors launched the sale of ENW late last year, with Citigroup advising on the process. During the process industry observers said potential buyers were likely to be put off by fears that a Labour government would nationalise the UK’s grid infrastructure, as well as concerns Brexit could hurt overseas investors by triggering a fall in sterling. Electricity grid operators also face the prospect of lower returns imposed by regulator Ofgem. 

 

Equitix has a long history of investing in UK regulated utility assets, most recently buying the much smaller Northern Irish gas grid operator Firmus earlier this year, but Kansai’s involvement is the first investment by a Japanese electric utility company in an overseas major electricity distribution network.

 

Kansai operates grid infrastructure in the region of Japan with the same name and is also involved in other energy activities including thermal and wind power. 

 

Managing executive officer of Kansai’s international business Hiroshi Nakajima said it aims to work with ENW to “address the current challenges to distribution networks which include smart cities, electric vehicles and virtual power.”

 

Aside from the winning consortium, other bidders for ENW included CKI, a Hong Kong infrastructure investor with a strong background in UK infrastructure and Iberdrola’s UK energy group Scottish Power, as reported.

 

Rothschild and Macquarie Capital advised Equitix and Kansai.

 

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