Ofgem warns bidders National Grid gas business earnings are not guaranteed

Jessica Morris
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Price controls set out how much networks can earn over an agreed period (Source: Getty)

Ofgem has warned bidders who are vying for a majority stake in National Grid's gas unit that their earnings would not be guaranteed.

It published an open letter to potential buyers saying that any premium they pay above existing values may not be compensated when Ofgem sets new price controls for the period after 2021.

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The agreements between Ofgem and energy networks effectively stipulate how much the latter can earn over a certain period. This can affect consumer's bills because networks generate revenues by charging suppliers.

"Any assumptions that bidders make about future regulatory behaviour are at their own risk," it said.

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"Bidders should be clear that we will not provide compensation for any premium paid over the regulatory asset values, nor will we take into account any particular financing arrangements that might be adopted when setting future price controls."

Hong Kong billionaire Li Ka-shing, a Chinese consortium including Fosun and the state behemoth China Gas, a group led by the Canada Pension Plan Investment Board and another led by the Australian bank Macquarie are thought to be bidders.