Firmus Gas Distribution Network

Investment size: £78 million (including co-investment capital)

Financial close: February 2019

This project comprises the acquisition of Firmus Energy in Northern Ireland (NI) – a fast-growing, natural gas network that facilitates distribution from Northern Ireland’s National Transmission Network to end consumers.

Gas distribution deals with the intermediate medium- and low-pressure gas mains that convey gas to individual customers throughout the licensed areas within NI.

Firmus Energy (Distribution) Ltd (FED) owns and operates the Greater Belfast and Ten Towns distribution licensed areas. It is a natural monopoly and operates under an exclusive and perpetual licence. It was established in March 2005 and since then it has invested over £135 million in developing its distribution network. It is one of three natural gas distribution businesses operating across NI. Domestic, industrial and commercial end users are serviced through a network of 1,350km of (largely polyethylene) pipes with 37,380 connections, as of December 2017. The network covers an area of 200km2 extending across 16 areas of NI.

FED also owns Firmus Energy (Supply) Ltd. It is the largest gas supply business in the FED licence area and the number two gas supply business in Greater Belfast.

FED operates within an attractive, well-understood and low-risk regulatory framework, similar to the standard RAB-WACC methodology already well established for Great Britain (GB) networks. Its revenue cap price control ensures an attractive, low-risk, inflation-linked return with no volume or commodity risk. There are a host of incentive mechanisms to reward opex and capex savings and encourage network buildout.

The regulatory agenda is driven by the fuel poverty reduction and decarbonisation strategy in NI (gas:oil-powered heating in NI is 25:75 vs 85:15 in GB).

The NI Utility Regulator has a statutory duty to promote the development of the gas industry in NI and is therefore incentivised to both protect returns to private-sector investors and ensure predictability in prices for customers. Natural gas supports the NI environmental policy objectives, as it is the cleanest-burning fossil fuel, emitting approximately 30% less CO2 than heating oil and 45% less than coal.

Benefits for customers go beyond price, and include increased energy efficiency, continuous supply, lower price volatility and greater ease of use.