UK government's China investment policy to be tested by latest infrastructure sale

National Grid gas distribution business [Provided to China Daily]

UK Prime Minister Theresa May's policy of reviewing Chinese investment in British infrastructure faces a new test with the announcement that a consortium including China's sovereign wealth fund, China Investment Corporation, agreed to acquire a 61 percent stake in National Grid's gas division, that supplies gas to UK homes and businesses.

CIC, Macquarie Bank of Australia, Allianz Capital Partners, Hermes Investment Management, the Qatar Investment Authority, Dalmore Capital and Amber Infrastructure will pay 3.6 billion pounds in cash for the stake. National Grid will retain a 39 percent minority interest in the company, which also supplies gas to some areas on the eastern US seaboard.

CIC's stake will be 10.5 percent and the sale is expected to be completed by March next year.

May's government said it would review future infrastructure deals involving foreign buyers after she approved Chinese investment in an 18 billion pounds French-designed nuclear power station at Hinkley Point in southwest England last year.

Today's deal is also subject to approval by the European Commission.

In a statement, National Grid said it would continue discussions with the winning bidders about them taking a further 14 percent stake in the business.

"It is a well-trodden path in terms of infrastructure investment in the UK," said John Pettigrew, chief executive officer of National Grid.

"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," he added.

Martin Stanley, speaking on behalf of the winning consortium, known as MIRA, said "MIRA has a long-standing operational experience in managing utilities and critical infrastructure in the UK, across Europe and around the world, and we are committed to being a long-term investor in and a responsible custodian of National Grid Gas Distribution."

Justin Bowden, national secretary of the GMB trade union, which represents many of the workers at National Grid, urged Theresa May to intervene in the sale, saying "National Grid is selling a key piece of our infrastructure, vital to our national economy."

Dave Prentiss, general secretary of the UNISON trade union, whose members also include National Grid employees, said he was dismayed by the sale.

He said that when Macquarie ran Thames Water, one of the UK's domestic water suppliers, the result was "poorer customer service, higher bills, massive debts and complex tax structures."

The deal valued National Grid at 13.8 billion pounds, including debt.

Unsuccessful bidding groups included one linking state-owned China Resources with Hastings Fund Management of Australia and Singapore Power.

Another unsuccessful consortium was one led by Fosun, a China-based international conglomerate and investment company. Hong Kong tycoon Li Ka-shing's Cheung Kong Infrastructure dropped out of the bidding earlier.

National Grid said it intended returning about 4 billion pounds to investors after the sale, but gave no further details.

To contact the reporter: chris@mail.chinadailyuk.com