Hong Kong tycoon Victor Li nears $27b sale of UK power assets to private investors

LONDON (BLOOMBERG) - A consortium led by Macquarie Group and KKR & Co is in advanced talks to buy the UK electricity distribution business controlled by Hong Kong tycoon Victor Li, in what could be one of the sector's largest deals this year, sources familiar with the matter said.

The bidder group also includes APG, China Investment Corp, Ontario Teachers' Pension Plan Board and PSP Investments, according to the sources.

A deal could value UK Power Networks at as much as £15 billion (S$27.2 billion) and an agreement may be reached in the coming weeks, they said.

UK Power Networks is jointly owned by the Li family's CK Infrastructure Holdings and fellow group companies Power Assets Holdings and CK Asset Holdings.

Shares in CK Asset Holdings fell as much as 2.8 per cent in Hong Kong on Friday (March 4), touching their lowest level in more than two months, according to data compiled by Bloomberg. CK Infrastructure shares climbed up to 1.6 per cent, while Power Assets rose as much as 1.2 per cent.

Deliberations are ongoing and there is no certainty they will result in a deal, the sources said, asking not to be identified discussing confidential information. The business could also still attract interest from other infrastructure investors and energy companies, the sources said.

A representative for Mr Li's companies said the group often receives offers for different assets, declining to comment further. Representatives for APG, KKR, Macquarie, the Ontario Teachers' board and PSP declined to comment, while a spokesman for China Investment could immediately provide comment.

Formerly owned by France's Electricite de France, UK Power Networks owns and maintains electricity cables across London and the south-east and east of England and serves about 8.3 million homes. It was acquired in 2010 by Mr Li's companies.

Distribution grids are the local networks that feed directly into homes and businesses, putting them at the heart of the energy transition. Higher allocations from pension and sovereign wealth funds and investors' desire for long-term, stable returns have made infrastructure one of the hottest sectors for deal-making.

Last year, National Grid agreed to buy PPL Corp's UK electricity distribution business for £7.8 billion as it prepares for a low-carbon future. As part of this push, the London-listed utility is looking to offload its roughly US$10 billion gas transmission business, which is drawing interest from Macquarie, Bloomberg News has reported.

Elsewhere, SSE has lined up banks to lead the sale of minority stakes in two electricity networks valued at more than £10 billion.