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Macquarie has increased its stake in Britain’s gas transmission network as the world’s largest infrastructure investor bets on the long-term future of natural gas and hydrogen.
The Australian infrastructure giant and its consortium partner British Columbia Investment Management Corporation have bought a further 20 per cent stake in National Gas from National Grid.
The two bought a 60 per cent stake in the company, which owns and operates 7,600km of gas pipelines around Britain, for £4.2bn earlier this year, and retain an option to buy the remaining 20 per cent next year.
Martin Bradley, European head of infrastructure real assets at Macquarie, said the deal “underlines our commitment to National Gas and the critical role it plays in the UK’s energy system”.
The deal highlights different visions of how Britain’s energy system will evolve under the huge transformation required to cut carbon dioxide emissions.
FTSE 100 company National Grid is refocusing its business in Britain on electricity networks, given the expected “electrification” of the economy under the UK’s legally binding goal of net zero carbon emissions.
The government wants consumers to move from petrol cars and gas boilers to electric cars and heat pumps powered by clean electricity, with the sale of new petrol and diesel cars set to be banned in the UK in 2030.
As well as selling down its gas transmission stake, National Grid last year paid £7.8bn for Western Power Distribution, Britain’s largest electricity distribution network.
Macquarie, meanwhile, is betting on hydrogen playing a bigger role in Britain’s energy system as the role of natural gas is curbed.
Announcing its 60 per cent purchase last year, which was completed in January this year, Macquarie outlined plans to “ensure the opportunities presented by hydrogen to the UK are maximised”.
National Gas is working on plans to adapt the network to carry hydrogen. Under its “Project Union”, it wants to repurpose roughly 2,000km of pipelines to feed industrial sites and others with the gas.
Hydrogen is being looked at as a potential alternative to fossil fuels in transport, industry and heating, as it does not produce CO₂ emissions when burnt.
The extent to which it will be used is highly uncertain, however, because of high costs, practical challenges and competing technologies.
The potential for hydrogen to be used in home heating in Britain was dealt a blow this month after the UK government said it would not proceed with a large trial in Whitby, near Chester, because of local objections.
Ministers are considering a trial in Redcar, north-east England, instead. The proposed Whitby trial was being run by Cadent Gas, which is also owned by a consortium led by Macquarie.
Macquarie is the world’s largest infrastructure asset manager, with $590bn worth of assets globally, including a majority stake in Britain’s Southern Water.
National Grid said the £700mn proceeds from the 20 per cent further stake sale in National Gas would be put to several uses including paying down debt.
John Pettigrew, chief executive of National Grid, said: “We’re pleased to reach the next milestone in this process, and we’ll continue to work closely with the consortium.”
National Grid shares rose 2.1 per cent to £10.35 in morning trading in London.