SSE plc has entered into an agreement to sell its 50% share in energy-from-waste ventures Multifuel Energy Limited (MEL1) and Multifuel Energy 2 Limited (MEL2) to European Diversified Infrastructure Fund III, an infrastructure fund managed by First Sentier Investors, for a total cash consideration of £995m. The transaction is expected to complete by late 2020 subject to antitrust approval by the European Commission.

MEL1 and MEL2 are 50-50 joint ventures between SSE and Wheelabrator Technologies Inc., consisting of the operational Ferrybridge Multifuel 1 and Ferrybridge Multifuel 2 facilities (MEL1), as well as the Skelton Grange Multifuel development project (MEL2), all in West Yorkshire.

Ferrybridge Multifuel 1 (which entered commercial operation in 2015, SSE share 50%) and Ferrybridge Multifuel 2 (which entered commercial operation in 2019, SSE share 50%) each have an installed capacity of 75MW and are capable of processing around 725,000 tonnes and 675,000 tonnes of waste every year respectively. The proposed Skelton Grange Multifuel facility (SSE share: 50%), which is due to reach financial close around April 2021 and commence commercial operations in 2025, will have an installed capacity of 45MW and will be capable of processing around 400,000 tonnes of waste annually.

In June 2020, SSE identified its interests in MEL1 and MEL2 as an early priority for sale as part of a strategy to secure at least £2bn from disposals of non-core assets by autumn 2021. Today’s announcement follows the sale of SSE’s 25.1% non-operating stake in Walney Offshore Wind Farm to Greencoat UK Wind for £350m and the agreement to sell its 33% equity interest in meter asset provider MapleCo to Equitix, under which SSE will receive net proceeds of around £90m on closing.

The proceeds of these disposals will support the company’s plans to invest £7.5bn in low-carbon energy infrastructure over the next five years, helping the UK to reach net-zero carbon emissions, as well as reduce SSE’s net debt.

Gregor Alexander, Finance Director, said: “This sale marks a major step in our plans to secure at least £2bn from disposals by autumn 2021, with just over £1.4bn now delivered. While these multifuel assets have been successful ventures for SSE, they are non-core investments and we are pleased to have agreed a sale that delivers significant value for shareholders while sharpening our strategic focus on our core low-carbon businesses.  

“Our disposal programme demonstrates how the company can create value from our assets and supports our plans to invest £7.5bn over the next five years in the low-carbon infrastructure needed to stimulate a green economic recovery and help the UK transition to a net-zero future.”

Transaction Details

1.   The consideration for the transaction is £995m in cash (assuming a completion date of 30 November 2020).

2.   The transaction is subject to approval by the European Commission, under the European Union Merger Regulation framework.

3.   The transaction agreement has a long-stop date of 31 March 2021.

Value of Assets

In the 12 months to 31 March 2020, SSE’s share of adjusted operating profit in MEL1 and MEL2 was £30.5m, with reported pre-tax profit of £18.1m. At 31 March 2020, SSE’s share of the gross assets within MEL1 and MEL2 was £344.6m.

Additional Notes

Barclays and Morgan Stanley acted as SSE’s joint financial advisers on this transaction and Freshfields Bruckhaus Deringer acted as SSE’s legal adviser. Morgan Stanley is also Corporate Broker to SSE.

SSE retains its 50% interest in the Slough Multifuel project, which is co-owned with Copenhagen Investment Partners (CIP).

About First Sentier Investors

First Sentier Investors (“First Sentier”) are stewards of over €130 billion in assets managed on behalf of a client base that extends across Asia, Australasia, Europe and North America. With more than twenty years’ experience in infrastructure investment, it is one of the longest established managers of infrastructure assets on behalf of institutional investors and currently manages approximately €10.0 billion of equity invested across assets in the utility, transport and energy infrastructure sectors in Europe, Australia and North America. The transaction represents the first acquisition of First Sentier-managed European Diversified Infrastructure Fund III, a European domiciled, euro-denominated fund. First Sentier operates as a standalone business owned and overseen by the Mitsubishi UFJ Trust and Banking Corporation, a wholly-owned subsidiary of Mitsubishi UFJ Financial Group, Inc.