Centrica has announced the acquisition of the Isle of Grain liquified natural gas terminal ('Grain LNG') in partnership(1) with Energy Capital Partners LLP ('ECP') from National Grid group for an enterprise value of £1.5 billion. After taking into account approximately £1.1 billion of new non-recourse project finance debt, Centrica’s 50% share of the equity investment is approximately £200 million.
Key highlights
- Grain LNG delivers vital energy security for the UK, providing critical LNG import/export, regasification and rapid response gas storage capacity to balance the energy system
- Aligned with Centrica’s strategy of investing in regulated and contracted assets supporting the energy transition, delivering predictable long-term, inflation-linked cash flows, with 100% of capacity contracted until 2029, >70% until 2038 and >50% until 2045
- Opportunities for efficiencies to create additional near-term value, and future development options including a combined heat and power plant, bunkering, hydrogen and ammonia
- Highly efficient funding structure, with Centrica’s equity investment of approximately £200 million alongside non-recourse project financing
- Strong life of asset returns aligned with Centrica’s financial framework, with an expected unlevered IRR(2) of around 9% and an equity IRR(2) of around 14%+
- Underpins delivery of £1.6 billion end-2028 EBITDA target(3) – Centrica’s share of EBITDA expected to be approximately £100 million per annum and cash distributions expected to be around £20 million on average per annum for 2026-2028, representing an attractive yield on Centrica’s equity investment
- Partnership with ECP (part of Bridgepoint Group plc), one of the largest private owners of natural gas generation and infrastructure assets in the U.S. with direct experience in supporting grid reliability
Chris O'Shea, Group Chief Executive, Centrica plc, said:
'The Isle of Grain terminal is a strategic asset that will support the UK’s energy security for many decades to come, keeping energy flowing reliably and affordably to households and businesses across the country as we transition to net zero. That’s why we are so pleased to be investing, continuing Centrica's pivot towards long-term, predictable infrastructure cash flows, underpinning our medium-term guidance and creating valuable future options.
'We are delighted to be partnering with ECP, a highly experienced investor in energy infrastructure around the world. We look forward to working with them and Grain LNG’s management team to deliver on the full potential of this unique asset for customers and the country.
'Our decision to commit £3bn of capital in both Sizewell C and the Isle of Grain demonstrates the attractiveness of the UK as an investment location underpinned by supportive government investment policies'
Tyler Reeder, President and Managing Partner, ECP, said:
'As one of the largest private owners of natural gas generation and infrastructure assets in the U.S., ECP has long understood that natural gas is indispensable to keeping grids resilient and advancing the transition to a lower-carbon future. With the emergence of the U.S. as the global leader in low-cost LNG supply and the growing need for reliable natural gas supply across the UK and Europe, we believe Grain LNG will increasingly be relied upon as critical infrastructure to deliver dependable energy to local markets.
'We are thrilled to be partnering with Centrica, who bring a wealth of knowledge and experience in the UK energy markets, as we execute our joint vision to optimise this world class asset and set up Grain LNG for success for decades to come.'
Background
1. Centrica and ECP each own 50% of Garden Topco Limited (“Topco”). Garden Bidco Limited (“Bidco”) is a wholly owned subsidiary of Topco.
2. Nominal, post-tax, assuming life of asset hold period.
3. Adjusted EBITDA including Centrica’s share of EBITDA from joint ventures and associates. £1.6 billion is the mid-point of a £1.3 billion - £1.9 billion range.
Source: Centrica
