A consortium that includes China’s main sovereign wealth fund has completed the purchase of the UK’s largest gas distribution network from National Grid, at a time when national-security concerns over matters of critical infrastructure are on the rise.
The £2bn divestment of National Grid’s remaining stake in Cadent, which sends gas to around 11 million UK homes and businesses, will see the Quadgas consortium — led by China Investment Corporation and the infrastructure arm of Australian investment bank Macquarie — take control of the final part of the business, after buying a 61 per cent stake three years ago.
The completion of the sale comes as the UK wrestles with questions over the deepening role of state-backed Chinese companies in its economy. Earlier this year, moves by Downing Street to allow Huawei to build noncore parts of Britain’s 5G network escalated tensions between London and Washington, which has banned the Chinese company from selling its products to US carriers and American suppliers from buying them. The ban has since been temporarily halted.
National Grid declined to comment on national-security matters. Institutional investors and foreign sovereign wealth funds have invested in the utilities sector for some time and are present in multiple European countries. The UK government last year approved a series of landmark measures aimed at encouraging businesses worried about the national-security aspect of foreign takeovers of British companies to raise concerns that could then be investigated. The majority of these proposals were aimed at Beijing, insiders said.
Friday’s deal also comes after the opposition Labour party in May detailed plans to nationalise energy network companies at below-market rates if it comes to power, arguing consumers have been short-changed by the high rates of return earned by foreign investors in the privatised system. Consumer group Citizens Advice has complained of what it calls “eye-watering” and “unjustified” profits, with network distribution costs making up a large part of the average household energy bill.
National Grid said option price mechanisms for the deal were set in March 2017. Labour’s energy policy was first floated later the same year.
Britain is a major recipient of foreign direct investment, which feeds into economic growth and job creation. Earlier this week, official figures showed investment into the UK’s most productive industries fell to a six-year low amid Brexit and trade uncertainty.