National Grid's £7.8 Billion Acquisition of Western Power Distribution
Company Details: Acquirer – National Grid plc
Founded: 1990
CEO (as of 2024): John Pettigrew
Industry: Energy Infrastructure and Utilities
National Grid plc is a leading electricity and gas utility company headquartered in London, UK. Formed during the 1990 restructuring of the UK electricity sector, it initially operated the electricity transmission system in England and Wales and has since expanded across the UK and the US. The company owns and operates critical energy infrastructure, delivering electricity and gas to over 20 million customers.
In the UK, National Grid holds a regulated monopoly over the high-voltage (275kV and 400kV) electricity transmission network, operating under Ofgem’s RIIO framework. In the US, its operations span key northeastern states including New York, Massachusetts, and Rhode Island.
In recent years, the company has pivoted toward electricity infrastructure, divesting over £10 billion in gas assets to support its net-zero strategy. Its current five-year capital plan exceeds £60 billion, targeting grid modernization, clean energy, and low-carbon investments.
Company Details: Target – Western Power Distribution (WPD)
Founded: Consolidated between 1998 and 2011 under PPL Corporation
CEO (at time of acquisition): Phil Swift
Industry: Electricity Distribution
Western Power Distribution (WPD) was the UK’s largest electricity distribution network operator at the time of acquisition. Owned by US-based PPL Corporation, WPD was built through acquisitions of regional UK electricity companies between 1998 and 2011, covering the Midlands, Southwest England, and South Wales.
It served around 8 million customers across 55,500 sq km, managing 220,000 km of cables and 185,000 substations—about 20% of the UK market. WPD was known for exceptional performance, being the only DNO to receive fast-track approval across all regions under Ofgem’s RIIO-ED1 framework.
With a regulated asset value of ~£8.8 billion and annual EBITDA of ~£1.25 billion, WPD was not only the largest but also one of the most efficiently operated DNOs in the UK, making it a highly attractive acquisition target.
Acquisition / Points of Contention
Deal Overview and Structure
The £7.8 billion acquisition of Western Power Distribution by National Grid, announced on March 18, 2021, was a landmark moment in the UK utility sector. It marked the country’s largest ever electricity distribution deal and reshaped the landscape of energy infrastructure ownership. The enterprise value of the transaction reached approximately £14.2 billion, with the £7.8 billion figure representing the equity purchase price.
Simultaneously, National Grid announced it would divest its Rhode Island-based Narragansett Electric Company to PPL Corporation for $3.8 billion. This dual-transaction structure served two purposes: it provided an asset swap to balance National Grid’s geographical and asset risk exposure and eased regulatory scrutiny by demonstrating strategic realignment rather than unchecked expansion.
Regulatory Challenges and Legal Mechanisms
Despite the scale and implications of the transaction, National Grid managed to secure regulatory approval with remarkable efficiency. Shareholder approval was secured by April 2021, and the acquisition was legally completed on June 14, 2021, even though a regulatory review by the Competition and Markets Authority (CMA) was still pending. Final clearance from the CMA was granted on September 1, 2021.
One point of contention was the vertical integration of transmission (already operated by National Grid) and distribution (operated by WPD). This integration raised concerns about market dominance and potential anti-competitive behaviour. To mitigate these risks, the CMA issued an Initial Enforcement Order (IEO) on June 9, 2021, requiring National Grid and WPD to remain operationally separate pending review.
Remarkably, the CMA concluded that the vertical integration posed minimal competition risks and chose not to escalate the matter to a Phase 2 investigation. This decision rested on the evidence of efficiency gains, enhanced innovation capabilities, and the pressing need to accelerate grid investment to meet climate goals.
Advisors and Legal Structure
National Grid was legally advised by Herbert Smith Freehills in the UK and Cravath, Swaine & Moore for US components. Financial advice was provided by Barclays, Goldman Sachs, and Robey Warshaw. The transaction featured a £150 million break fee, bridge financing secured via Clifford Chance, and was later refinanced through proceeds from the Rhode Island divestiture. These steps demonstrated a high degree of financial sophistication and market confidence in the deal’s long-term value.
Impact / Precedents Set
Legal and Regulatory Precedents
The CMA’s clearance of the acquisition without imposing structural remedies established a significant legal precedent for vertical integration in the UK utility sector. Historically, vertical mergers involving essential services like electricity have faced tougher scrutiny. In this case, the CMA determined that efficiencies and strategic alignment outweighed theoretical competition concerns. This approach may signal a broader shift in regulatory philosophy where energy policy and infrastructure investment are prioritised over rigid competition orthodoxy.
Additionally, Ofgem’s support for the transaction set an important precedent. WPD’s ownership transition was integrated smoothly within existing RIIO-ED1 and later RIIO-ED2 frameworks. The regulator demonstrated flexibility by allowing the transaction to proceed while maintaining consumer protections and encouraging grid investment.
Sectoral Implications
The transaction catalysed a wave of strategic reassessments across the energy sector. Competing DNOs have since explored partnerships and consolidation to match National Grid’s scale and investment capacity. The deal reinforced the idea that well-capitalised and vertically integrated operators are better equipped to modernise infrastructure and support decarbonisation.
In financial markets, the deal’s premium—up to 64% above WPD’s regulated asset value—reset valuation benchmarks for infrastructure assets. This premium underscored the perceived scarcity and importance of stable, regulated energy assets in a climate-conscious investment environment.
International Relevance
The success of the acquisition, particularly in a post-Brexit context, attracted international attention. It demonstrated that the UK remains a favourable destination for large-scale infrastructure investment. The deal’s alignment with ESG objectives, regulatory adaptability, and investor confidence reinforced the UK’s reputation for stable and progressive utility regulation.
The Future
Adequacy of Current Legal Frameworks
While the acquisition succeeded within the UK’s existing legal framework, it highlighted several shortcomings. Most notably, the UK’s voluntary merger notification system allowed the deal to complete before final regulatory approval. In critical infrastructure sectors like energy, this introduces integration and national security risks that may not be fully addressed by post-completion reviews.
Additionally, current laws lack provisions for assessing climate alignment, cybersecurity risks, and public interest benefits beyond competition. The absence of mandatory decarbonisation conditions, for example, limits the government’s ability to ensure infrastructure acquisitions support national climate goals.
Inspiration from Global Best Practices
Several international models may guide UK reforms. Germany’s integration of Energiewende policies into merger conditions ensures climate goals are legally enforceable. California’s consumer advocacy models offer strong public voice in regulatory proceedings. The EU’s coordination between competition authorities and sector regulators also presents a more holistic approach to merger control in critical industries.
References
Clifford Chance. (2021, March). Clifford Chance advises on the bridge financing for the acquisition of Western Power Distribution by National Grid. Press Release.
Competition and Markets Authority. (2021). National Grid / PPL WPD Investments Merger Inquiry. GOV.UK.
Cravath, Swaine & Moore LLP. (2021). National Grid's £7.8 Billion Acquisition of Western Power Distribution and $3.8 Billion Sale of The Narragansett Electric Company. Press Release.
Current News. (2021). CMA clears National Grid acquisition of WPD.
Current News. (2021). National Grid to acquire WPD as it shifts from gas to a more electrified asset base.
Herbert Smith Freehills. (2021). Herbert Smith Freehills advises National Grid on its £7.8 billion acquisition of Western Power Distribution. Press Release.
Insider Media. (2021). National Grid to acquire Western Power Distribution in £7.8bn deal.
National Grid plc. (2021). Proposed acquisition of Western Power Distribution and strategic portfolio repositioning. Press Release.
National Infrastructure Commission. (2022). Electricity distribution networks: Creating capacity for the future.
PPL Corporation. (2021, June 14). PPL Corporation completes sale of U.K. utility business, resulting in net cash proceeds of $10.4 billion. Press Release.
Reuters. (2021, September 1). UK competition regulator clears National Grid's $11 bln purchase of WPD.
Smart Energy. (2021). National Grid to acquire GB distributor Western Power Distribution.
Utility Week. (2021). CMA clears National Grid's acquisition of WPD.