KKR and Macquarie Group have been in talks to buy the UK’s largest power distributor UK Power Networks from companies controlled by Hong Kong’s billionaire Lee family, two people with knowledge said.
A joint deal led by two investment firms, backed by investors including the Ontario Teachers’ Pension Plan, could set the business at around £ 15bn and provide a new sign of the private investment industry’s appetite for infrastructure infrastructure in the UK.
CK Infrastructure Holdings of Hong Kong billionaire Li Ka-shing, which acquired the business in 2010, said on Friday in a stock exchange filing that unnamed parties had expressed interest in all or part of its shares in UK Power Networks.
He said the approach “has not yet been properly analyzed” and there is no certainty that the deal will progress further. Bloomberg first reported on the parties’ interest. KKR, Macquarie and OTPP declined to comment.
The move is a sign of a “completely different strategy” compared to private equity acquisitions, said one person familiar with the potential deal.
KKR is not “considering repairing it and selling it in a few years,” the man said. Instead, the group can hold it for a decade or more. At that time they “would receive commissions on his ownership and management, and every few years they could take a dividend” by taking on a company-level debt, they added.
UK Power Networks is the UK’s largest electricity distribution network operator, supplying electricity to 8.3 million homes and businesses in the South East and East of England, and earning about a quarter of total revenue in the sector. The company came under pressure after thousands of customers were left without electricity during storms in recent months.
It is one of six monopoly network companies that operate the UK’s pipelines and wires, generating their revenues from energy bills, which are soaring as a result of rising gas prices linked to Russia’s invasion of Ukraine. In April, average bills will rise by 54% to almost £ 2,000 a year for most households.
According to the regulator in the Ofgem industry, about one-fifth of household bills go to electricity and gas networks.
The appetite for infrastructure assets, which provide stable long-term income supported by the government, soared during the epidemic during a period when other sectors such as retail and leisure suffered.
Last year, National Grid agreed to acquire PPL Corp’s electricity distribution business in the UK for £ 7.8 billion, while Macquarie acquired a majority stake in the shares. Southern waters, One of the largest water monopolies, for a billion pounds.
KKR was Expand its operations in the UK. Last year it agreed to a £ 2 billion purchase deal for British infrastructure investor John Laing.
In the year to 31 March 2020, UK Power Networks provided a pre-tax profit of £ 614.8 million on £ 1.76 billion in revenue, paying £ 237 million in dividends as well as £ 76.9 million in interest on owner loans. Li Ka-shing’s empire bought UK Power Networks from France’s EDF in 2010 for £ 5.5 billion.
Ofgem said it plans to cut yields for the sector when the next price control arrangement begins next year. The proposals will affect SSE, ScottishPower, Northern Powergrid, Electricity North West and Western Power Distribution as well as UK power grids.
KKR and Macquarie in talks to buy UK Power Networks Source link KKR and Macquarie in talks to buy UK Power Networks