A consortium led by KKR and Australia's Macquarie failed to buy Britain's largest power distribution company for £15 billion as rising inflation prompted Li Ka-shing, the owner of Britain's power network, to raise prices at the last minute, according to media reports.

In March, bidders, including Macquarie Group Limited (Macquarie group Ltd.), APG, China Investment Co., Ltd. (China Investment Corp.), Ontario Teachers' Pension Plan Board (Ontario Teachers' Pension Plan Board) and PSP Investment Company (PSP Investments), have held in-depth negotiations on the purchase of British power grid companies.

In October 2010, the Li Ka-shing family, through Power Assets, CKI, Li Ka-shing Foundation and Li Ka-shing overseas Foundation, bought the then-French power company EDF Energy's interest in UK power grid assets for £5.8 billion and set up a new company, British Power Network (UK Power Networks).Today, if you sell for 15 billion pounds, the profit from buying and selling alone will be close to ten billion pounds!

However, two days before the agreement was due to be signed last month, CKI tried to raise its price. KKR and other consortia thought the offer was too high and withdrew from the negotiations.

According to the media, a person familiar with the matter said that CKI chose to raise prices because of a sharp rise in British inflation, and exchange rate movements were also a factor. Britain's current inflation rate is 9.1 per cent, the highest level since the early 1980s.

Another person close to the bidder told the media:

It is unusual to change prices in such a short period of time after a year of due diligence. The seller's price expectations have changed greatly, so we obeyed the cost discipline and chose to leave. "

UK private infrastructure companies such as electricity, gas and water grids tend to benefit from inflation because they are not labour-intensive and their benefits often outweigh the costs associated with rising inflation, such as staff, maintenance and materials.

According to the media, Colm Gibson, managing director of Berkeley Research Group, saidInvestor interest in UK infrastructure assets is likely to remain strong despite the government's threat to impose a windfall tax on some industries such as oil and gas companies and generators.

He said:

Because the asset values and income streams of public utilities are linked to inflation and supported by regulatory guarantees, these industries are seen as safe havens by investors. Given the current inflation outlook, utility assets are more popular with investors. "

British Power Network is the largest distribution network operator in the UK, delivering electricity to 8.3 million households and businesses in the south-east and East Anglia, accounting for about 1/4 of the industry's total revenue. In the year to March 31, 2021, the UK Power Network made a revenue of 1.76 billion pounds and a pre-tax profit of 614.8 million pounds, while paying dividends of 237 million pounds and shareholder loan interest of 76.9 million pounds.