Centrica invests in Grain LNG

National Grid and Garden Bidco Ltd (Bidco), which is ultimately owned 50% by each of Centrica and ECP, have entered into a sale and purchase agreement pursuant to which National Grid has agreed to sell and Bidco has agreed to acquire the entire issued share capital of National Grid Grain LNG Ltd and Thamesport Interchange Ltd which together comprise National Grid’s LNG terminal business at Isle of Grain. Centrica and ECP will hold the investment in Grain LNG through a jointly controlled entity with customary governance provisions, including reserved matters.

Completion is expected to occur in 4Q25, conditional upon certain regulatory approvals being received, including approval under the National Security and Investment Act and certain mandatory anti-trust approvals.

Grain LNG’s cash flows are underpinned by long-term, inflation-linked capacity contracts, with primarily investment grade customers. The terminal is 100% contracted until 2029, >70% contracted until 2038, and >50% contracted to 2045, resulting in highly visible long-term earnings and cash flow, supporting a life of asset expected unlevered IRR of around 9% and an equity IRR2 of around 14%+ underpinned by approximately £1.1 billion of new non-recourse project finance debt.

The Grain LNG management team will continue to operate the terminal as an independent company. Supporting the operation, Centrica can leverage operational knowledge and experience from its existing Barrow and Easington gas processing terminals, which are both upper tier Control of Major Accident Hazards sites with similar technical and operational characteristics as Grain LNG, helping the team to drive operational and capital efficiencies. In addition, Centrica (through its Centrica Energy business) has been one of the largest capacity holders and users of the Grain LNG terminal since 2008, bringing customer insight to its position as an owner of the asset. In the longer term, there are options to develop projects in hydrogen and ammonia and a combined heat and power plant, areas in which Centrica is already active across its broader portfolio.

Centrica will fund its share of the equity investment from existing cash resources. As a highly-contracted energy infrastructure asset in the UK, Grain LNG can be efficiently financed through non-recourse debt at Bidco. Bidco has secured approximately £1.1 billion of committed financing, which will be drawn at closing, to fund a portion of the enterprise value.

Chris O'Shea, Group Chief Executive, Centrica plc, said: “The Isle of Grain terminal is a strategic asset that will support the UK’s energy security for many decades to come, keeping energy flowing reliably and affordably to households and businesses across the country as we transition to net zero. That’s why we are so pleased to be investing, continuing Centrica's pivot towards long-term, predictable infrastructure cash flows, underpinning our medium-term guidance and creating valuable future options.

“We are delighted to be partnering with ECP, a highly experienced investor in energy infrastructure around the world. We look forward to working with them and Grain LNG’s management team to deliver on the full potential of this unique asset for customers and the country.

“Our decision to commit £3 billion of capital in both Sizewell C and the Isle of Grain demonstrates the attractiveness of the UK as an investment location underpinned by supportive government investment policies.”

Tyler Reeder, President and Managing Partner, ECP, added: “As one of the largest private owners of natural gas generation and infrastructure assets in the US, ECP has long understood that natural gas is indispensable to keeping grids resilient and advancing the transition to a lower-carbon future. With the emergence of the US as the global leader in low-cost LNG supply and the growing need for reliable natural gas supply across the UK and Europe, we believe Grain LNG will increasingly be relied upon as critical infrastructure to deliver dependable energy to local markets.

“We are thrilled to be partnering with Centrica, who bring a wealth of knowledge and experience in the UK energy markets, as we execute our joint vision to optimise this world class asset and set up Grain LNG for success for decades to come.”

Read the article online at: https://www.lngindustry.com/liquid-natural-gas/14082025/centrica-invests-in-grain-lng/