Gas giant mulls £1bn meter sale

UTILITY giant National Grid Transco, which delivers gas and electricity to every home in the country, is considering the sale of its £1bn gas-metering arm.

The company, which also provides gas meters to 20m homes, has appointed investment banks NM Rothschild and JP Morgan to advise on a possible sale. A decision will be taken by directors in September.

The news comes only weeks after NGT said it would return £2bn to shareholders following the £5.8bn sale of four of its local gas networks. The idea of selling the business is thought to have arisen in 2002 when regulator Ofgem scrapped NGT's monopoly of the installation and maintenance of gas meters.

Until then, NGT's regulated metering arm, Transco Metering, had supplied and maintained all the meters for Britain's households. It also provided meter-reading services for all the major utilities.

In 2003, NGT set up Onstream, a non-regulated business able to bid for new contracts from gas suppliers, but rivals such as United Utilities and German engineering firm Siemens were quick to enter the market. This raised fears that NGT would lose much of its historic market dominance.

But Onstream won four regional contracts from British Gas. Now, NGT is in the process of merging Onstream with its regulated meter business to cut costs.

The group is awaiting the results of an industry-wide consultation on the merger plan. Industry insiders said that a single division would have huge muscle to compete for new contracts.

Private equity firms believe metering has good growth prospects while offering relatively secure cashflow from the millions of meters already installed.