UK competition watchdog clears National Grid acquisition of WPD

·Contributor
·2 min read
Electricity pylons carry power away from Dungeness nuclear power station in Kent as the National Grid warned that a record low demand for electricity during the UK's coronavirus lockdown could lead to windfarms and power plants being turned off to avoid overloading the electricity grid. (Photo by Gareth Fuller/PA Images via Getty Images)
WPD supplies power to the Midlands, South Wales and South West, although it does not sell directly to end users. Photo: Gareth Fuller/PA via Getty

The UK’s competition regulator has given the green light to National Grid’s (NG.L) proposed $11bn (£8bn) acquisition of British firm Western Power Distribution (WPD).

The Competition and Markets Authority (CMA) said on Wednesday that there would not be a lengthy Phase 2 investigation into the purchase, despite initial concerns the merger would result in the two firms "ceasing to be distinct".

The deal for Britain's largest electricity distribution company was first announced in March this year in a bid to transition from gas to electric power. 

WPD supplies power to the Midlands, South Wales and South West, although it does not sell directly to end users. Its distribution network operators deliver electricity to around 7.9 million customers and it employs more than 6,500 staff. WPD also made profits of £750m ($1bn) last year.

National Grid confirmed that it would maintain the WPD headquarters in Bristol.

Read more: National Grid pivots to electricity in £7.8bn deal

As part of National Grid's move to pivot its portfolio away from fossil fuels, Rhode Island-based Narragansett Electric Company (NRGSP) was sold to PPL Energy (PPL), the vendor of WPD, for £2.7bn. National Grid also disposed of its stake in the UK’s gas pipeline network in its shift to cleaner energy.

The FTSE 100 company also plans to sell a majority stake in National Grid Gas, which owns the UK's national gas transmission network.

The deals will increase the proportion of electricity assets in the company's portfolio from 60% to 70%.

National Grid shares were higher on Wednesday on the back of the news. Chart: Yahoo Finance
National Grid shares were higher on Wednesday on the back of the news. Chart: Yahoo Finance

According to government projections, around 27% of the UK’s energy needs will be met by electricity or renewables by 2035, compared to 23% in 2018. In 2019, Britain became the G7 first member to set a net zero target for 2050.

National Grid said it was “pleased” the regulator had given the deal its stamp of approval. It now plans to update investors and analysts on the next stages for WPD, and the wider group, at a capital markets day event on 18 November.

Shares in National Grid were 0.8% higher in London on Wednesday.

Watch: Top tips for helping the environment on a tight budget

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting