Protection for investors
Energy firms move control overseas over Labour plan
Firms have switched ownership offshore
Two energy firms have switched ownership of their UK operations overseas in response to Labour’s nationalisation plans.
Perth-based SSE has moved its incorporation to Switzerland while National Grid has set up a holding company in Hong Kong and Luxembourg.
The two companies together own Britain’s entire gas and electricity transmission spine. National Grid runs the electricity transmission network in England and Wales, as well as the main gas transmission pipelines. It has a market value of £31bn.
The moves would not stop them being acquired under Labour’s plans to renationalise swathes of British industry but may offer protection to investors against any move to buy back the firms without paying what they would consider to be the full market value.
Energy companies have been particularly critical of Labour’s plans and have run adverts warning of the cost.
Analysts have already said Labour’s plan would have a negative impact on private shareholders who own shares in the utility firms. Pension funds would also take a big hit if the move failed to restore the full market value of firms taken back into public ownership. Both SSE and National Grid have been prized in recent years for their dependable returns to shareholders.
Labour claims its plan would be cost neutral, help decarbonise the economy faster and create jobs.
A spokeswoman for National Grid said: “Labour’s proposals for state ownership of National Grid would be highly detrimental to millions of ordinary people who either hold shares in the company or through their pension funds – which include several local authority pension funds.
“To protect their holdings, and in line with our legal fiduciary duty to our shareholders, we have established holding companies in Luxembourg and Hong Kong. This has no financial benefit to the company and does not affect its day-to-day operations.”
SSE said it had moved its electricity distribution business – which supplies 3.7 million homes in Scotland and England – to a Swiss holding company. It has also moved its Scottish transmission network business.
The firm, which has a market value of £13.6bn, said Switzerland was party to the Energy Charter Treaty which offered better shareholder protection.
“[This is] an additional safeguard, which SSE does not believe would be required in practice, should SSE’s electricity networks businesses and interests… become the subject of proposed legislation for nationalisation,” a spokesman said.
“In practice, SSE expects that precedent, the principle of fairness and the need to secure future investor confidence in the UK economy means it should be possible to secure fair value from nationalisation.”
Other companies threatened by nationalisation have made similar moves. Water company Anglian and Yorkshire has set up an offshore holding company. Severn Trent is said to be considering a similar move.
In a statement Labour said the energy networks are vital strategic infrastructure.
“The idea that private owners, who have been ripping off the public, would move offshore in an attempt to prolong the rip-off illustrates just why we need the grid back in public hands.”