# National Grid to acquire the UK’s largest electricity distribution business, Western Power Distribution

- Link: https://www.directorstalkinterviews.com/national-grid-to-acquire-the-uks-largest-electricity-distribution-business-western-power-distribution/412969279
- Published: 2021-03-18T07:13:20+00:00
- Author: Amilia Stone

**[National Grid plc](https://www.directorstalkinterviews.com/ftse-company/national-grid/ng.l)**(
LON:NG) has announced that it has agreed to acquire PPL WPD Investments Limited,
the holding company of Western Power Distribution, the UK’s largest electricity 
distribution business, from PPL WPD Limited, a subsidiary of PPL Corporation for
an equity value of £7.8 billion and National Grid has agreed to sell The Narragansett
Electric Company to PPL Energy Holdings, LLC, also a subsidiary of PPL, for an equity
value of US$3.8 billion (£2.7 billion).

In addition, National Grid announces that it will commence a process later this 
year for the sale of a majority stake in National Grid Gas plc, the owner of the
national gas transmission system.

Together these transactions will:

·   strategically pivot National Grid’s UK portfolio towards electricity. The proportion
of the Group’s assets in electricity will increase from c.60% to c.70%;

·   strengthen National Grid’s long-term growth outlook by ensuring a significant
scale position in electricity distribution through the acquisition of WPD, the UK’s
largest electricity distribution business. Electricity distribution is expected 
to see a high level of asset growth as a result of the ongoing energy transition;

·   significantly enhance National Grid’s central role in the delivery of the UK’s
net zero targets, given the complementary nature of transmission and distribution,
providing benefits for customers;

·     deliver shareholder value as the transactions are expected to be significantly
earnings accretive from year one, generate a return in excess of National Grid’s
cost of capital and, taken together with the proposed NGG Sale, continue to be earnings
accretive in the longer term;

·   underpin National Grid’s 5 to 7% asset growth target for longer, further supporting
National Grid’s updated dividend policy to deliver annual dividend per share growth
in line with UK CPIH inflation, while expecting to maintain its current overall 
strong investment grade credit rating;

·    maintain the Group’s geographic and regulatory diversity, with c.40% of the
Group assets in the US after the sales of NECO and stake in NGG;

·      generate attractive shareholder value through the sales of NECO and a majority
stake in NGG; and

·     ensure management continuity and focus: the CEO and CFO of WPD will lead the
UK distribution business as part of the enlarged Group. National Grid, recognising
the importance of WPD to the communities it serves, intends to maintain the WPD 
headquarters in Bristol and offices in other key locations.

Completion of the WPD Acquisition, which will be funded by fully committed bridge
facilities, is expected to occur within the next four months and completion of the
NECO Sale is expected to occur before the end of the first quarter of 2022. National
Grid expects to launch the sale process for NGG in the second half of this year 
and complete the sale approximately a year later.

The WPD Acquisition is a Class 1 transaction under the Listing Rules and is therefore
conditional upon the approval of shareholders at a General Meeting. Accordingly,
National Grid will shortly publish a shareholder circular containing further details
of the WPD Acquisition, a recommendation from its board of directors (the “**Board**“),
and the notice of the General Meeting which is expected to be held by the end of
April 2021. In addition, the Transactions are conditional on certain regulatory 
approvals and the NECO Sale is conditional on completion of the WPD Acquisition 
occurring.

The person responsible for arranging the release of this announcement on behalf 
of National Grid is Justine Campbell, Group General Counsel & Company Secretary.

**Analyst call with Q&A:**

The Group will host an analyst call today at 08.15 GMT. To view the slides and listen
to the audio please visit https://streamstudio.world-television.com/786-1014-27867/
en (pre-registration required).

If you would like to ask a question please also join the conference call using the
following phone numbers:

| Participant access code: | 946437 | 
| United Kingdom (Local) | 020 3936 2999 | 
| United Kingdom (Toll Free) | 0800 640 6441 | 
| United States (Local) | 1 646 664 1960 | 
| All other locations | +44 20 3936 2999 |

> **John Pettigrew, Chief Executive of National Grid, said:**
> “These transactions will be transformational for our UK portfolio. The acquisition
> of WPD is a one-off opportunity to acquire a significant scale position in UK 
> electricity distribution. WPD has a high quality, fast growing asset base and 
> an excellent track record of customer satisfaction, operational performance and
> financial returns. We have received a premium valuation for our Rhode Island business
> and I am confident that we will also deliver attractive shareholder value from
> the NGG Sale in due course.
> In combination with the continued successful execution of our strategy in the 
> US, establishing National Grid as the leading electricity transmission and distribution
> operator in the UK will strengthen our long-term growth prospects, enhance our
> role in the UK’s energy transition and drive long term shareholder value. Following
> the completion of these transactions, we will continue to have a diversified portfolio
> of assets across the UK and US, with a strong asset growth profile that will further
> underpin our dividend policy for the longer term.
> I’d like to take this opportunity to say a heartfelt thank you from all of us 
> at National Grid to all the fantastic Rhode Island colleagues who have worked 
> so hard over the years to deliver the energy needs for our customers across Rhode
> Island. I know that PPL will be an excellent steward for both NECO’s customers
> and colleagues.
> As we move our portfolio to higher growth assets, we have taken the decision to
> sell a majority stake in NGG. Given the strategic nature of its business coupled
> with its central position in a transition towards a hydrogen economy, it will 
> continue to play a vital role in the UK’s energy system. We expect strong interest
> when the sale process begins, likely to be in the second half of this year.
> The acquisition of WPD brings great people and outstanding experience to National
> Grid and I am hugely excited about building the future together. Our vision for
> National Grid remains unchanged, to be at the heart of a clean, fair and affordable
> energy future. With increased exposure to the UK’s electricity sector, these transactions
> enhance our role in the progress towards net zero, underpinning our core ambition
> which is to enable the energy transition for all. We look forward to constructive
> engagement with Ofgem and policymakers, on how best to achieve these common goals
> in the best interests of all our customers and wider stakeholders.”

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