DIF Infrastructure IV has announced the signing of a sale and purchase agreement with SSE Plc to acquire a 100% interest in three UK PFI street lighting special purpose entities (SPEs). The SPEs in Leeds, Stoke on Trent and Newcastle and North Tyneside (UK) are funded through a mix of senior debt and equity. The projects are availability based and have all been operating for over 5 years.
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.
This sale will conclude SSE’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 £1.1 billion (US$1.4 billion) to support future operations, investment and capital expenditure as part of SSE plc’s long-standing strategic commitment to efficiency and disciplined investment.
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.
DIF is being advised by Operis (Financial), WSP (technical) and Osborne Clarke (Legal).
Paul Nash, DIF’s head of Infrastructure, stated:
“We are pleased to enter into this partnership with SSE, which we consider to be a high quality developer, owner and operator of UK streetlighting projects, which is a sector that DIF understands well and that will provide long term and stable cash flows to DIF’s investors as part of DIF’s growing asset portfolio”.
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 £1.1 billion (US$1.4 billion) 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.”