Summary
- PPL is looking to sell its UK electricity distribution network, Western Power Distribution, to focus solely on the US regulated market.
- WPD could be valued at an EV/EBITDA multiple of around 9.5-10.5x, roughly equivalent to a 49-64% premium to its regulated asset value (RAV).
- This could raise somewhere between $7.4 billion and $9.0 billion in cash for PPL - that is before any potential tax implications from the sale.
PPL Corporation (PPL) is looking to sell its UK electricity distribution network, Western Power Distribution (WPD), as it seeks to focus solely on the US regulated market. In this article, I'm going to take a look at how much cash the sale could actually raise for the group and the future of PPL following its exit from the UK.
Historic Valuations
Valuing WPD as a standalone asset can be quite tricky as there aren't any publicly-listed pure-play distribution network operators or any recent publicly-reported sales data to go by. In fact, PPL's acquisition of Central Networks from Germany's E.ON in 2011 is the most recent transaction that we have detailed information on.
PPL paid £3.5 billion in cash and assumed £500 million of debt, which valued E.ON's unit at a 42% premium to its regulated asset value. Central Networks has since been merged with PPL's other electricity distribution networks in the South West of England and the South and West Wales area - and is today a part of PPL's Western Power Distribution.
In an even earlier transaction, a consortium led by Cheung Kong Infrastructure purchased EDF's electricity distribution network in the south and east England for £5.8 billion in 2010. This valued the business at 8.1x EBITDA and at about a 27% premium to RAV.
