BG plc plans to restructure in a bid to isolate in law its burgeoning international business from its tightly regulated U.K. gas distribution operation.
Currently, the Transco gas grid, through which BG and third-party gas suppliers deliver gas throughout Britain, is held by the same corporate unit as BG`s international upstream and downstream oil and gas operations.
BG proposes that a new umbrella company, BG Group plc, should be formed with two new divisions: BG Transco Holdings, to operate the U.K. gas grid; and BG Energy Holding, to run the international operations.
BG Chairman Richard Giordano said, "To complement the continuing pursuit of operational efficiency, we have needed to address BG`s capital and structural efficiency and reduce Transco`s cost of capital."
The proposed restructuring would be accompanied by financial rearrangements; BG shareholders would receive new ordinary shares in BG Group and bonds of Transco Holdings in exchange for the ordinary shares in BG plc.
In the changeover, BG plans to issue £1-2 billion worth of long-term corporate bonds for Transco Holdings, to increase Transco`s level of debt and bring its structure in line with prevailing standards for regulated businesses.
BG said the proposed restructuring, which is supported in principle by the government and gas industry regulator Office of Gas Supply, is to increase the transparency and capital efficiency of Transco, to improve the group`s flexibility, and to bolster the growth potential for its international operations.
BG Chief Executive David Varney said, "For BG, with its leading international capability in the integrated development and supply of gas markets, there are plenty of good opportunities for value-enhancing growth-organic and structural-inherent in today`s energy markets. We see the proposed restructuring as providing the basis for a new phase of growth."