Macquarie explores cutting stake in Cadent as gas network prepares for net zero transition

Australian asset manager Macquarie is exploring a sale of part of its stake in Cadent alongside another shareholder worth a combined £1.3bn as the UK gas network readies for the renewable energy transition.

A source close to the process told City A.M. that Macquarie was looking at selling nearly five per cent of its stake in Cadent, which runs around half of Britain’s local gas distribution networks.

The firm currently has a 26 per cent stake in Cadent and is in talks with fellow shareholder Federated Hermes, which the source said was trying to offload 4.6 per cent of its 13 per cent stake.

The sale process, said to be in “the very early stages”, comes as the UK plans to reach net zero carbon emissions by 2050, affecting the investment case for country’s natural gas infrastructure.

Macquarie, the largest investor in UK infrastructure, has taken a bigger share of the country’s gas utilities in recent years. It took its stake in Cadent in 2017, before agreeing to acquire a 60 per cent stake in National Grid’s gas transmission and metering business in 2022.

The government launched a review of the latter deal under the National Security and Investment Act in August 2022, which was cleared last January.

Macquarie rose its stake in National Grid’s gas transmission unit to 80 per cent last year and plans to take full ownership of the business “in due course”.

Cadent has made preparations to transition its network to hydrogen, which does not emit carbon dioxide when burnt, although the National Infrastructure Commission has urged the government not to back hydrogen for home heating at scale and prioritise electric heat pumps instead.

The government plans to make a decision on hydrogen for home heating in 2026 after a series of trials. It scrapped two potential trials in Whitby and Redcar last year after local opposition.

A Macquarie spokesperson told City A.M.: “Cadent plays a vital role in the UK’s energy system. We are a committed long-term shareholder in Cadent and are supporting significant investment across the network to maintain the safe, secure and reliable supply of gas to 11m homes and businesses.”

Macquarie increased average annual investment in Cadent to £830m between 2018 and 2024, up from £536m between 2014 and 2017.

City A.M. approached Federated Hermes for comment.

The Financial Times first reported news of the potential sale.