This valuation draws on MCC Economics' regulatory and financial work in energy networks. PJ McCloskey previously reviewed Phoenix's regulatory cost of capital during work at the UK Regulators Network, and the analysis here rests on the Utility Regulator's price-control determinations, the Competition and Markets Authority's 2014 Phoenix determination, and Northern Ireland's published energy strategy. MCC advises regulators, utilities and infrastructure investors on what regulated assets are worth.
You start from its regulatory asset value, the worth a regulator puts on the pipes and equipment, which sets the base the company is allowed to earn a return on. For Phoenix, we estimate that value at around 760 million pounds, based on the Utility Regulator's model. The buyer paid about the same, 760 million pounds, so there was no premium. Regulated monopolies usually change hands for more than this paper value, because their income is steady and low-risk, so buyers will pay extra for that certainty. Phoenix selling at a multiple of 1.0, meaning price equal to paper value, with a premium of zero, is in our experience about as close as a regulated asset comes to selling at a discount.
The contrast with the last sale makes the point. In 2013 the private equity group Terra Firma sold Phoenix to a buyer acting for the Royal Bank of Scotland pension plan and the Utilities Trust of Australia for about 700 million pounds, a premium of nearly 40 percent over its paper value at the time. Eleven years later the same kind of asset drew no premium at all. Something changed the way investors price a gas network, and that something is the energy transition.
Phoenix Energy, established in 1996, operates with exclusive gas distribution rights across the Greater Belfast area. It was rebranded in 2023, from Phoenix Natural Gas to Phoenix Energy, to reflect renewable energy aspirations (biomethane and hydrogen). This transition aligns with Northern Ireland's energy strategy, which notes a phasing out of natural gas in favour of green alternatives and with the gas companies’ phase-in of green alternatives.
Phoenix Energy’s infrastructure is connected to 250,000 properties, and the projected revenue for 2024 stands at approximately £85 million, as per the Utility Regulator’s (UR) “Pi Model.” Its estimated Total Regulatory Value (TRV), a measure commonly referred to as the Regulatory Asset Base (RAB), Regulatory Asset Value (RAV), or Regulated Capital Value (RCV) in similar circumstances, in 2024 is estimated by UR at around £760 million.
In 2024 CK Infrastructure Holdings (CKI) purchased Phoenix for ~£760 million, which is very close to Phoenix’s TRV. It represents a multiple of just 1.0x and a premium to TRV of 0% - as close as we’ve seen to a discount to a regulated asset value. Does that make it a bargain? Let's take a closer look.
The core reason is the risk of stranded assets, meaning infrastructure that loses its value before the end of its working life because the world stops needing it. Gas burns cleaner than oil or coal but still releases carbon dioxide, so as countries push towards electricity and renewable options like hydrogen and biomethane, a gas network faces a long-term question over how much of its value survives. If electrification moves quickly, pipes laid to last decades may be paid off early or written down, and that possibility pulls down what a cautious buyer will pay today.
The pace of that shift is the single biggest thing driving the value of a gas network, and it varies sharply by place. In Australia, for example, the state of Victoria has banned new gas connections, and the network operator AusNet has told its regulator that the renewable-gas path now looks unlikely for households there, seeking faster depreciation to get its money back sooner. That is the pessimistic end of the spectrum, and it may help explain the caution reflected in the Phoenix price.
Probably less than the price implies, because Northern Ireland's own policy still backs the gas network rather than winding it down. Northern Ireland's energy strategy, published by the Department for the Economy in December 2021, points towards net zero but leans on the region's modern gas infrastructure as part of the route there, including the potential to carry zero-carbon gases. The regulator continues to support new connections, and the current price control even funds a free connection when a property joins, with the cost spread across all consumers over time.
So the picture is the opposite of Victoria. Where Australia is banning connections, Northern Ireland is still giving them away, and Phoenix says its network is adaptable for renewable gas. At the end of 2021 about 308,000 properties had connected, with roughly 247,000 more sitting close to a gas main but not yet connected, which is room to grow. Phoenix also has an unusual regulatory history: in 2014 it successfully appealed a price control, arguing that certain incentive payments should sit inside its asset base and earn a return, which raised its regulatory value. The point is that the network has both growth headroom and a regulator that has historically supported it, neither of which fits a story of terminal decline.
On the evidence, probably yes for the buyer, with a real but arguably overstated risk from electrification. The clearest signal came soon after the deal. Within months, another investor asked MCC for guidance on buying inflation-proof assets with stable income and stable regulation, and said they would pay up to a 30 percent premium over paper value for gas network assets. Set against Phoenix changing hands at no premium at all, that gap suggests the Belfast network may well have been cheap.
The two most recent sales make the shift clear. The same asset that drew a large premium in 2013 drew none in 2024.
Table 1: Phoenix Energy's last two sales, price against regulatory value. Source: MCC Economics, drawing on the figures set out in this publication.
Figure 1: How utility assets have traded against their regulatory value over time, showing Phoenix at a premium in 2013 and at a discount in 2024.
MCC's overall read is that this was probably a good-value purchase for the buyer, tempered by genuine long-term uncertainty about how fast electricity replaces gas. What is surprising is that more investors and deal teams did not compete for it, because few monopoly network assets can be bought this cheaply. For anyone active in buying, selling or regulating gas networks, the transaction is a useful marker of how much the energy transition now shapes what these assets are worth.
The sections below give more of the regulatory and market context behind the valuation, for readers who want the fuller picture. The complete publication is available through the preview link on this page.
Phoenix Energy is the sole gas distributor for the Greater Belfast area, established in 1996 and rebranded in 2023 from Phoenix Natural Gas to reflect plans to carry greener gas such as biomethane and hydrogen. Its network connects around 250,000 properties, and its projected 2024 revenue is about 85 million pounds, based on the Utility Regulator's model. As a monopoly, it faces no competitor in its area, which is part of why a buyer values the steady, regulated income it produces. The rebrand matters to the valuation because it signals that the network is being positioned to survive the shift away from natural gas rather than simply wind down with it.
Figure 2: Phoenix (shown as PNGL) set against Firmus Energy and the larger Great Britain gas networks, by regulatory asset value and annual revenue.
Source: MCC analysis of Utility Regulator and Ofgem data, in December 2014 price terms.
Figure 3: How each company's regulatory asset value compares with its annual revenue over time, showing Phoenix's ratio falling towards the level of Great Britain networks.
Source: MCC analysis of Utility Regulator and Ofgem projections.
Figure 4: Relationship between regulatory asset values and revenues
Source: MCC analysis of Utility Regulator and Ofgem projections.
Figure 5: Relationship between expenditure and asset values
Source: MCC analysis of Utility Regulator and Ofgem projections.
Phoenix operates under a price control set by the Utility Regulator, which caps what the network can charge and sets the return it can earn on its regulatory asset value. This framework is what makes the income steady and therefore attractive to an infrastructure buyer, but the piece flags that Phoenix's regulatory model is unusual and old. It has a distinctive way of profiling its cash flows that sets it apart from almost every other gas distribution company, its tax costs are under-funded, and there are questions over how its allowed cost of capital is calculated. These are not minor accounting points. The cost of capital is the single biggest lever in what a regulated network is allowed to earn, so any weakness there feeds directly into what the asset is worth, and a careful buyer would price these issues in.
Because it wanted certain incentive payments counted inside its asset base, where they would earn a regulated return. In 2014 Phoenix successfully appealed a regulatory price control, arguing that these mechanisms belonged in the asset base rather than outside it. Winning the appeal effectively raised its regulatory value, and therefore the return it could earn. This history matters for a buyer in two ways. It shows the regulatory value is not a fixed number but something that can move with regulatory decisions and appeals, and it shows Phoenix has been willing and able to defend its position against the regulator, which is a point in the asset's favour rather than against it.
The International Energy Agency (IEA) notes in its 2023 Energy Outlook report that:
The two are close to opposites, which is the heart of why the piece argues the pessimism may be misplaced. In the Australian state of Victoria, the government has banned new gas connections, and the network operator AusNet has told its regulator that the renewable-gas path now looks unlikely for households, seeking faster depreciation to recover its capital sooner. That is a network being managed towards decline.
In Australia, on 30 September 2024, AusNet submitted a variation proposal to the AER in respect of its gas distribution network in Victoria. AusNet stated that decisions by the Victorian Government including a ban on new gas connections meant that the pace of electrification would accelerate.
Further, AusNet stated:
Northern Ireland is doing the reverse: its energy strategy still leans on the gas network as part of the route to net zero, the regulator supports new connections, and the current price control funds free connections when properties join.
The Utility Regulator recently stated:
In December 2021, the Department for the Economy (DfE) published its new Energy Strategy, “A path to net zero energy.” The strategy highlights the intention to utilise our modern gas infrastructure and the potential to generate and import zero carbon gases as a means of decarbonisation. While work is already underway to facilitate the injection of biomethane into the network, the route to fully decarbonised gas is uncertain and a further consultation has been identified within the Northern Ireland Energy Strategy on decarbonising heat.
In the meantime, as natural gas has lower emissions than oil, the Northern Ireland Energy Strategy continues to support connections to the gas network, while recognising that it is not economic or viable to extend the network to all homes.
While 308,000 properties have connected to the gas network at the end of 2021, there will still be around 247,000 properties close to a gas main which will not have connected (sic). The GD23 price control continues to support connections to the gas network by providing for a free connection when the connection is made, with the cost of the connection paid for by all consumers over a period of time
So while both places face the same long-term transition question, their policy responses point in opposite directions, and a valuation that treats Phoenix like a Victorian gas network may be too gloomy.
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