National Grid to sell off Lattice's 'last mile' of gas networks

Stephen Foley
Tuesday 22 October 2002 00:00 BST
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National Grid is preparing plans for the break up of Lattice, the gas pipelines business it bought yesterday.

Shares in National Grid Transco, the £14.4bn company created by the merger of National Grid and Lattice, rose 13.5p to 466.75p on their first day's trading yesterday.

Roger Urwin, National Grid's chief executive who maintains that role at the new group, said the pair had "made enormous headway" in integrating their businesses in the six months since the deal was unveiled. The company is widely expected to raise the £100m cost savings target it set at the time. And it is understood that National Grid has decided to sell at least some of the regional gas supply networks that exist within Lattice.

It is said to believe that, while there are synergies between the national gas and electricity networks that form the backbone of the UK's energy transmission system, Lattice's network of pipes into local areas does not fit snugly into the new group.

Ofgem, the gas regulator, has resolved to establish separate price controls for each of eight "local delivery zones". National Grid Transco is planning to dispose of as many of these as possible, as soon as the regulatory framework will allow the market to price them effectively.

Consumer-facing companies such as United Utilities have already signalled there will be buying interest for most regions. National Grid Transco is exploring radical ways of redeploying capital from the UK to the US, where returns are higher. About 60 per cent of the enlarged group's business is in the UK since Lattice has no overseas interests. Mr Urwin hopes to return to a pre-merger situation where the majority of sales come from the US.

Lattice shareholders receive 0.375 National Grid Transco shares for each of their existing shares.

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