SSE plc has signed a sale and purchase agreement with DIF Infrastructure IV to dispose of the equity interest in its three remaining UK PFI street lighting special purpose entities (SPEs).
The SPEs in Leeds, Stoke on Trent and Newcastle and North Tyneside are funded through a mix of senior debt and equity. The sale of SSE’s equity interest would have reduced SSE’s net debt at 31 March 2016 by around £138m through the removal of project-related senior debt together with the cash consideration, although the exact amounts will not be finalised until completion of the sale of each of the SPEs due to their continued operation and trade.
It is expected that the disposal will be completed later in FY 2016/17 following agreement with the relevant local authorities, the joint venture partner Royal Bank Leasing Limited and Senior Debt funders.
It will conclude SSE plc’s two-year value programme announced in 2014 to dispose of assets not core to its future plans, which result in a disproportionate burden, or which could release capital for future investment. Including this disposal, this programme is expected to secure proceeds and debt reduction of over £1.1bn to support future operations, investment and capital expenditure as part of SSE plc’s long-standing strategic commitment to efficiency and disciplined investment.
The street lighting SPE projects have 25 year agreements for the replacement, operation and maintenance of the street lighting assets with their respective local authorities and these operational responsibilities will continue to be carried out by SSE Contracting Limited under a parallel 25 year sub-contract with the SPEs.
Gregor Alexander, Finance Director of SSE, said:
"This disposal marks a significant milestone in our value programme announced in 2014 which should now achieve proceeds and net debt reduction in excess of £1.1bn and exceed its objectives. This is a good deal for both SSE and DIF Infrastructure IV with SSE Contracting Limited continuing to manage the operation and maintenance services for the life of the PFI contracts whilst releasing capital for SSE to invest in a balanced range of energy assets in the future.”