Billionaire to strengthen UK gas holdings

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A GROUP of companies controlled by Hong Kong billionaire Li Ka-Shing has agreed to buy UK gas company Wales and West Utilities for £645m, the latest acquisition by the octogenarian tycoon that will boost his gas portfolio in the UK.

Mr Li has been expanding his business empire by buying into regulated infrastructure and utilities assets in developed countries, especially Britain – which is open to foreign ownership of its infrastructure assets.

He is already the majority owner of Leeds-based Northern Gas Networks, which employs 1,200 people and has annual revenues of £375m.

Blue-chip property developer Cheung Kong (Holdings) Ltd said it had formed a joint venture with Cheung Kong Infrastructure Holdings Ltd, Power Assets Holdings Ltd and the Li Ka Shing Foundation Ltd to buy the company, which is involved in the management of gas transportation assets and gas distribution in Wales and the South West.

“We are pleased to have the opportunity to acquire another high-quality asset, which is poised to extend our growth momentum and generate recurring profit contributions similar to that of our other infrastructure projects,” said Kam Hing-lam, group managing director of Cheung Kong Infrastructure.

Wales and West Utilities’ distribution network area supplies 7.4 million customers in an area of 42,000 square kilometres, or almost one-sixth the area of the UK, while the total length of the main gas pipeline is about 35,000 kilometres.

The consortium involved in the deal, which is expected to be completed at the end of September subject to European Commission approval, said it agreed to buy the British firm from several investment and fund management companies including Macquarie Global Infrastructure Funds.

Wales and West Utilities would add to Mr Li’s assets in Britain, where he agreed to buy utility Northumbrian Water Group last August for £2.41bn and further cement his reputation as a savvy deal-maker, which has earned him the nickname “superman” in Hong Kong media.

In 2010, Cheung Kong Infrastructure and Mr Li’s other investment arm, Power Asset Holdings, agreed to buy the British electricity distribution networks of France’s EDF, which provide power to London and the South East, for £5.8bn.

The news comes as Cheung Kong Infrastructure, which is controlled by Mr Li’s conglomerate Hutchison Whampoa Ltd and is leading the consortium, plans a share placement.

Northern Gas Networks was created in 2005 after the Cheung Kong Group paid National Grid £1.5bn for the networks which cover parts of Cumbria, the North East and most of Yorkshire.

It delivers gas to 2.6m homes and businesses through a pipeline network which is long enough to stretch from Leeds to Sydney, Australia and back again.

Utilities in the UK are attractive to some investors because they offer a stable regulatory environment, a common law jurisdiction and predictable returns in a volatile world.