Chinese interest in National Grid to test May government

UK Prime Minister Theresa May faces a test of the government’s attitude to overseas investment in critical infrastructure as Chinese companies are expressing interest in the prospect of ownership of National Grid’s gas network assets.

The company’s owners are aiming to sell it for about £11bn, according to the Financial Times.
Theresa May
John Pettigrew, chief executive of the UK power system operator, said that there would be safeguards to ensure security of supply regardless of who owns the business, which serves 11 million homes in regions including London, the West Midlands and north-west England.

“There are a large number of these businesses which are owned by US, European or Asian investors. The key is that whoever is successful will have the same obligations as National Grid for security and safety,” Mr Pettigrew said.

China is pursuing investment in electric power infrastructure throughout the world.
Chinese investment has been particularly welcomed in Brazil but in Australia the government stepped in to prevent Chinese acquisition.

Phil Hewitt, director at energy analysts EnAppSys, told Power Engineering International that concerns about Chinese ownership were misplaced. "I think that there is no imminent threat to national security with Chinese infrastructure funds owning the gas network. There is a danger they may pay too much for it," he said.

Rival consortiums for the majority stake in National Grid include Chinese investors, according to knowledgeable sources who spoke to FT.

In September the government had launched a review of how such vital infrastructural deals are scrutinised.

China Investment Corporation, the country’s sovereign wealth fund, China Resources, a state-owned conglomerate, Fosun and Cheung Kong Infrastructure, are among the interested Chinese parties spread among international consortiums expressing interest.

CKI already holds a part share in some British power plants as it stands.

The UK government announced in September that it was looking at whether ministers needed stronger powers to intervene in the sale of critical infrastructure.

National Grid is selling its gas business because it has a lower growth rate than its core electricity transmission network. However, the assets produce reliable cash flows and generated £403m of operating profits in the first six months of this year.

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