Australian asset manager Macquarie, along with another shareholder, is considering selling part of its stake in Cadent for a total value of £1.3 billion as the UK gas network prepares for the energy transition.

A source close to the process said City AM that Macquarie is considering selling almost five percent of its stake in Cadent, which operates around half of the UK’s local gas distribution networks.

The company currently owns a 26 percent stake in Cadent and is in talks with fellow shareholder Federated Hermes, which is seeking to offload 4.6 percent of its 13 percent stake, according to the source.

The sale process, which is said to be at a “very early stage”, comes at a time when the UK plans to achieve net-zero carbon emissions by 2050, impacting investment in the country’s natural gas infrastructure.

Macquarie, the UK’s largest investor in infrastructure, has been taking a larger stake in the country’s gas utilities in recent years. The company acquired its stake in Cadent in 2017 before agreeing to buy a 60% stake in National Grid’s gas transmission and metering business in 2022.

The government initiated a review of the latter agreement in August 2022 under the National Security and Investment Act, which was approved last January.

Macquarie increased its stake in National Grid’s gas transmission unit to 80 percent last year and plans to take full ownership of the company “in due course.”

Cadent has made preparations to convert its network to hydrogen, the combustion of which does not emit carbon dioxide. However, the National Infrastructure Commission has asked the government not to promote the large-scale use of hydrogen to heat homes and to give preference to electric heat pumps instead.

The government plans to make a decision on the use of hydrogen to heat homes in 2026 following a series of tests. Two potential tests in Whitby and Redcar were cancelled last year due to local opposition.

A Macquarie spokesman said City AM: “Cadent plays a critical role in the UK energy system. We are a committed long-term shareholder in Cadent and support significant investment across the network to maintain the safe and reliable supply of gas to 11 million homes and businesses.”

Macquarie increased average annual investment in Cadent to £830 million between 2018 and 2024, up from £536 million between 2014 and 2017.

City AM has asked Federated Hermes for comment.

The Financial Times was the first to report on the possible sale.