SSE has entered into an agreement to sell a 16.7% equity stake in Scotia Gas Networks Limited (SGN) to wholly owned subsidiaries of the Abu Dhabi Investment Authority (ADIA), for a headline consideration of £621 million (US$758 million) based on an effective economic date of 1 April 2016.
The transaction is expected to be completed by the end of this month, with the consideration being settled in cash. The sale follows a review announced by SSE in May 2016. SSE will retain a 33.3% equity stake in SGN.
When it announced the review, SSE said that should a sale be completed it would expect to use the proceeds to return value to its shareholders or to invest to create value for shareholders, should there be the right opportunity. SSE will set out its intentions with regard to the proceeds in its interim results statement on 9 November 2016.
SSE acquired a 50% equity stake in SGN in 2005 for a total of £505 million (US$616 million). SGN owns and operates two economically-regulated networks which distribute gas to almost six million properties in Scotland and the South of England; it also undertakes other gas-related commercial activities.
Following completion of the sale, and including its remaining equity stake in SGN, SSE will have an ownership interest in five economically-regulated energy networks with an estimated total Regulated Asset Value of over £7 billion (SSE share). Through continuing investment, this is expected to increase to almost £8.5 billion by March 2018.
Alistair Phillips-Davies, Chief Executive of SSE, said:
"Over the last decade, SGN has become a leading gas distribution business for the benefit of customers and investors alike. The sale of a 16.7% stake confirms SSE’s ability to deliver value for shareholders through focused, timely disposals while at the same time retaining a diverse range of regulated and unregulated businesses in order to support long term dividend growth. We look forward to working with all of SGN’s shareholders to support the continued success of the business in meeting the needs of customers and earning a return for investors.”