Macquarie and BCI / National Grid gas transmission and metering
| Case Outcome | Mergers - phase 1 clearance |
| Decision Date | 27 September 2022 |
| Date | 27 September 2022 |
| Subject Matter | Mergers |
| Court | Competition and Markets Authority (EW) |
Anticipated acquisition by Macquarie
Infrastructure and Real Assets (Europe)
Limited and British Columbia
Investment Management Corporation of
a 60% shareholding in the gas
transmission and gas metering
business of National Grid plc
Decision on relevant merger situation and substantial
lessening of competition
ME/7004/22
The CMA’s decision on reference under section 33(1) of the Enterprise Act 2002 given on
22 November 2022. Full text of the decision published on 29 December 2022.
Please note that [] indicates figures or text which have been deleted or replaced in
ranges at the request of the parties or third parties for reasons of commercial
confidentiality.
SUMMARY
1. Pursuant to an acquisition agreement signed on 27 March 2022, Luppiter Bidco
Limited (Bidco), which is jointly owned by British Columbia Investment Management
Corporation (BCI) and Macquarie Infrastructure and Real Assets (Europe) Limited
(MIRAEL) (ultimately controlled by Macquarie Group Limited (Macquarie), has
agreed to acquire a 60% shareholding in the gas transmission and gas metering
business of National Grid plc (National Grid) (National Grid Gas) (the Merger).
National Grid Gas, Macquarie and BCI are together referred to as the Parties.
2. The Competition and Markets Authority (CMA) believes that it is or may be the case
that each of MIRAEL (and Macquarie), BCI and National Grid Gas is an enterprise;
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that each of MIRAEL (and Macquarie as its ultimate owner) and BCI will cease to be
distinct from National Grid Gas as a result of the Merger; and that the turnover test
is met. Accordingly, arrangements are in progress or in contemplation which, if
carried into effect, will result in the creation of a relevant merger situation.
3. Macquarie and National Grid Gas are both active in the gas sector in the UK. BCI is
not active in the energy sector in the UK.
4. National Grid Gas’s core activities of relevance to the CMA’s merger investigation
are:
(a) National Grid Gas is the licensed owner and operator of the gas national
transmission system (NTS) in Great Britain. As the transmission owner (TO)
and system operator (SO) of the NTS, National Grid Gas owns, builds and
operates the NTS, provides new connections to the NTS and has day-to-day
responsibility for balancing supply and demand on the NTS.
(b) National Grid Gas, through National Grid Metering (NGM), manages a portfolio
of traditional gas meters.
(c) Through its Pipelines Maintenance Centre (PMC), National Grid Gas provides
certain specialist services with respect to new customer connections. These
services include flow stopping; ‘hot-tap’ connection; welding and fabrication;
non-destructive testing and pressure testing; mains laying; construction, design
and management. National Grid Gas’s PMC also supplies certain emergency
and non-emergency asset maintenance services.
5. Macquarie’s core activities of relevance to the CMA’s merger investigation are:
(a) Macquarie, through its asset management division, is part of a consortium of
investors that owns Cadent Gas Limited (Cadent). Cadent is the licensed
owner and operator of four of the eight gas distribution networks (GDNs) in
Great Britain.
(b) Macquarie owns Corona Energy and Macquarie Bank, which are both licensed
gas shippers and suppliers in Great Britain.1
(c) Macquarie, through its specialised and asset finance division, manages a
portfolio of smart and traditional gas and electricity meters (Macquarie
Metering).
1 Corona Energy is a supplier of electricity and gas to UK I&C customers and a wholly owned subsidiary of Macquarie
Bank. Corona Energy (through various group entities) and Macquarie Bank are licensed gas shippers and suppliers in
Great Britain. See List of all gas licensees including suppliers | Ofgem.
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6. These activities give rise to a number of horizontal overlaps and vertical
relationships between Macquarie and National Grid Gas. The CMA considered each
of these in turn in order to assess the competitive effects of the Merger:
(a) National Grid Gas and Cadent both provide connections to gas networks in
Cadent’s licensed area. The evidence here showed: (i) only a very small
number of customers can choose between connecting to the NTS (owned and
operated by National Grid Gas) and Cadent’s GDNs and (ii) the Parties have
limited ability to flex the factors that affect customer choice (where it exists).
This is consistent with the fact that no customers or GDN operators indicated
that the Parties compete with each other for connections. Therefore, the CMA
believes that the Parties do not currently compete with each other to win
customers to any material degree.
(b) The CMA considered the vertical relationship between National Grid Gas as
TO and Cadent as the owner and operator of four GDNs in Great Britain. The
CMA considered whether there is competition between GDN operators to win
new customers. However, the CMA found that only a very small number of
customers have a choice between connecting to Cadent and other GDNs.
Furthermore, GDN operators have limited ability to flex the factors that affect
customer choice. The CMA has received no evidence that GDN operators
compete with each other to win customers. Accordingly, the CMA considers
that any post-Merger decisions that might favour Cadent would not impact
competition downstream.
(c) The CMA considered a further vertical relationship, in relation to National Grid
Gas’s activities (through its PMC) as a supplier of asset maintenance services
to independent gas transporters (IGTs) and IGTs’ provision of new
connections in Cadent’s licensed area. The evidence shows IGTs have a
range of alternative providers to National Grid Gas for these services. As such,
the CMA believes that the Merged Entity will have no ability to foreclose rival
IGTs in Cadent’s licensed geographic area.
(d) The CMA also considered the vertical relationship between National Grid
Gas’s activities (through its PMC) as a supplier of specialist services for new
connections and rival suppliers of new connection works in Cadent’s licensed
area. The evidence indicates that for most connection works, rivals do not
require these specialist services and, where they do, there are alternative
providers. As such, the CMA believes that the Merged Entity will have no
ability to foreclose rival providers in Cadent’s licensed geographic area.
(e) The CMA considered the vertical relationship between National Grid Gas as
SO and TO of the NTS and Macquarie’s gas shippers active in the wholesale
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