Macquarie, the world’s biggest infrastructure investor, has increased its stakes in Britain’s Gas Transmission Network as it bets the future of hydrogen and natural gas.
The Australian infrastructure giant, along with its consortium partner British Columbia Investment Management Corporation, has purchased a 20 percent stake in National Gas.
The two purchased a 60% stake in the company that owns and operates 7,600kms of gas pipelines throughout Britain for £4.2bn this year. They retain the option to purchase the remaining 20% next year.
Martin Bradley, European Head of Infrastructure Real Assets at Macquarie said that the deal “underscores our commitment to National Gas, and its critical role in the UK energy system”.
The agreement highlights different visions for how Britain’s energy systems will evolve as a result of the massive transformation needed to reduce carbon dioxide emissions.
National Grid, a FTSE 100 firm in Britain, is refocusing on electricity networks due to the “electrification”, or expected electrification of the economy as a result of the UK’s legally-binding goal of zero net carbon emissions.
The UK government is aiming to ban the sale of petrol and diesel vehicles in 2030.
National Grid paid £7.8bn last year for Western Power Distribution – Britain’s biggest electricity distribution network – as well as selling its gas transmission stake.
Macquarie is betting that hydrogen will play a larger role in Britain’s Energy System as natural gas usage is reduced.
Macquarie announced its 60% purchase in December last year. The deal was finalized in January of this year. Macquarie stated that it would “ensure that the UK’s hydrogen opportunities are maximized”.
National Gas has plans to adapt its network to transport hydrogen. It wants to use its “Project Union” to repurpose approximately 2,000km in pipelines for industrial sites, among others.
The burning of hydrogen does not emit CO2.
It is still unclear how much it will be used due to high costs, technical challenges, and other competing technologies.
This month, the UK government announced that it would not proceed to a large-scale trial in Whitby near Chester due to local objections.
Ministers will instead consider a Redcar trial, in north-east England. Cadent Gas was running the proposed Whitby test, which is owned by Macquarie and Cadent Gas.
Macquarie, the largest infrastructure manager in the world, manages $590bn of assets worldwide, including a major stake in Southern Water, a British company.
National Gas said that the £700mn from the sale of the 20% additional stake in National Gas will be used to pay off debt and for other purposes.
John Pettigrew said, “We are pleased to have reached the next milestone in this project and will continue to work with the consortium.”
National Grid shares climbed 2.1 percent to £10.35 during morning trading in London.