thumbnail of Northern Gas Networks

Northern Gas Networks

Return 1.6% IRR
Term 10 years
Total Invested £1m
736  investors
Maturity date 30 Jun 2031
thumbnail of Northern Gas Networks

What does the company do?

Northern Gas Networks (NGN) is a gas distribution network operator, delivering gas from the UK’s high pressure gas national transportation system through, at the time of this investment offer, 37,000 kilometres of pipelines to around 2.7 million homes and businesses in the North East, Northern Cumbria and much of Yorkshire. One of 6 networks, each gas distribution network covers a separate geographical region. As a distribution network, NGN does not generate the gas nor sell the gas to the end-customers. Its role is to transport it through the network of underground pipes. On a day to day basis, its role is to keep the energy flowing by investing in improving the energy infrastructure; working with energy suppliers to look after vulnerable end-customers; and fixing gas leaks if they happen.

In 2021, around 97% of end-customers that are directly connected to its network are domestic users, representing about 60% of the total gas demand. The remaining 3% of end-customers are industrial and commercial clients which, given their larger demand per client, comprises the remaining 40% of the total gas demand. The company employs almost 1,400 people (as of 2021), over half of whom are operational staff that carry out the upgrades and repairs to the network.

NGN is a private company funded indirectly through end-customers’ energy bills. Prices are regulated by Ofgem which sets the network price controls (‘RIIO’).

Why did the company raise money?

The funds raised in this investment partially funded the replacement of Northern Gas Networks’ gas pipe network, reducing carbon emissions and preparing the gas network if hydrogen is introduced in the future.

How does the company expect to repay the investment?

Northern Gas Networks expects to repay investors through the revenue earned from gas shippers who pay to transport gas through the company’s pipe network.

How is the company making an impact?

Reducing carbon emissions from our heating is essential to meeting our NetZero targets, but less progress has been made compared to our electricity network.

Since 2016 Northern Gas Networks has been trialling new infrastructure that allows homes to be heated in zero or low carbon ways using biomethane and hydrogen. The company has been involved in cutting edge research showing how hydrogen can play a role in delivering Net Zero, by displacing and replacing natural gas. Additionally, the company has led a huge project fixing and upgrading its vast network of pipelines from metallic mains to polyethylene. Not only has this prepared the gas network for hydrogen if it’s introduced but it also significantly reduces natural gas leaking and escaping from the the day to day operation of the network thus reducing the company’s emissions today.

NGN’s Hydrogen Home is a demonstration home and gas grid for a 100% hydrogen future. The homes, located near Gateshead, are fitted with 100% hydrogen gas appliances including cookers, hobs, fires and boilers to give customers an insight into a hydrogen-fuelled home of the future.
NGN’s Hydrogen Home is a demonstration home and gas grid for a 100% hydrogen future. The homes, located near Gateshead, are fitted with 100% hydrogen gas appliances including cookers, hobs, fires and boilers to give customers an insight into a hydrogen-fuelled home of the future.

Key terms

Issuer Northern Gas Networks
Return 1.6% IRR
Term period 10 years
Start date 8 March 2021
Maturity date 30 June 2031
Capital repayment Lump sum on maturity
Amount raised £1,000,000.00
Return structure

Interest is paid every 6 months over the life of the investment with the capital repaid as a lump sum on the maturity date.

Secured or unsecured Unsecured
Early repayment options

The company can only make an early repayment of the investment in certain circumstances, such as a change of control of the company (for example, if some or all of the company was sold to a new owner) or a regulatory/tax requirement. In this scenario, investors will be paid any unpaid interest up to the date of repayment and an amount equal to 6 months's interest.

In addition, once a year from 2023, on any day in the month of May, the company will make an offer to investors to redeem up to 5.0% of the outstanding Debentures at the market rate at the time.

See the Debenture Deed for details of all circumstances in which the option for early repayment may be exercised.

Documents

Debenture Deed
Download PDF Together with the key terms, the loan conditions form the legal agreement that define the terms of the investment.

Payment schedule

This table gives a breakdown of what is due to be paid back on this investment, based on an example investment of £1,000.

Payment schedule table
Payment date Capital repayment Interest Total
31 December 2021 £0.00 £8.06 £8.06
30 June 2022 £0.00 £7.93 £7.93
30 December 2022 £0.00 £8.06 £8.06
30 June 2023 £0.00 £7.93 £7.93
29 December 2023 £0.00 £8.06 £8.06
28 June 2024 £0.00 £7.97 £7.97
31 December 2024 £0.00 £8.06 £8.06
30 June 2025 £0.00 £7.93 £7.93
31 December 2025 £0.00 £8.06 £8.06
30 June 2026 £0.00 £7.93 £7.93
31 December 2026 £0.00 £8.06 £8.06
30 June 2027 £0.00 £7.93 £7.93
31 December 2027 £0.00 £8.06 £8.06
30 June 2028 £0.00 £7.97 £7.97
29 December 2028 £0.00 £8.06 £8.06
29 June 2029 £0.00 £7.93 £7.93
31 December 2029 £0.00 £8.06 £8.06
28 June 2030 £0.00 £7.93 £7.93
31 December 2030 £0.00 £8.06 £8.06
30 June 2031 £1,000.00 £7.93 £1,007.93
Total £1,000.00 £159.98 £1,159.98

Updates

These updates tell the story of the investment over its life and include information reported to investors by the company or council behind the investment. The updates are provided for informational purposes only and do not constitute an inducement or invitation to invest. Information provided at the time of publishing may no longer be accurate.

Dear investor,

Under the terms of your investment in Northern Gas Networks (see Debenture Deed clause 15.2), every year in the month of May, we make an offer to Debenture holders to redeem up to 5.0% of the original total Debentures (i.e. up to £50,000) based on the market value for your Debentures at the time.

We included this in the terms of your investment to give our investors an option to exit the investment earlier in case their circumstances changed. Our offer to redeem your Debentures is entirely optional – if you wish to continue to hold your Debentures there is nothing you need to do.

The price we are offering to redeem your Debentures for is £0.79 for each £1 invested (the previous year offer was £0.74). So if you wanted to redeem £1,000 of your investment, you would receive back £790.
The price has been set such that the value is equal to the current market rate for similar bonds from BBB rated utilities companies, taking into account the rate on your investment (1.6%) and the maturity date of 30 June 2031. We have used the market rate of 5.24% to set this price. As the market rate for similar investments has increased since the issue of your Debentures, the market value for your Debentures has decreased as an investor could receive a higher return from investing elsewhere.

If you would like to accept our offer, please complete the form below by 14 June, indicating the amount you would like redeemed up to the maximum of your holding. Please note, if the amount that investors ask to be redeemed in total is greater than £50,000, the Debentures will be redeemed proportionately across the investors.

If you accept our offer of redemption we will complete the redemption on 28 June and Abundance will confirm to you once it has been completed. The redemption will be completed after the interest payment for the last 6-month period that is due on 28 June has been paid.

Please see the email you will have received from Abundance which contains a link to the form to submit your redemption request.

During the second half of 2023, we completed our East Coast Hydrogen Delivery Plan, which we then launched in November at the House of Commons.

East Coast Hydrogen is a partnership between National Gas, Cadent and ourselves to create a hydrogen network, linking planned hydrogen production and storage with industrial and large commercial users. Many industries and business in our area which rely on gas, are unable to electrify and hydrogen can offer a solution as they look to decarbonise. The East Coast Hydrogen Delivery Plan sets out how existing infrastructure would be repurposed and new infrastructure created to reach potential users across our network and other regions of the east coast. We believe delivering East Coast Hydrogen will provide vital support and growth to local industry, whilst securing jobs and investment in our region.

In December, the government made the decision not to pursue our proposal for ‘Redcar Hydrogen Community’, after excluding the alternative location of Whitby, near Ellesemere Port in the summer. The project would have seen the UK’s first hydrogen village created with around 2,000 homes and businesses in some areas of Redcar, Teesside converted from natural gas to 100% hydrogen or an electric alternative for around two years. The decision was made not to pursue the hydrogen village as planned green hydrogen production facilities, which were due to supply Redcar, were not going to be online in time and the Government decided the project was no longer deliverable.

The evidence from the hydrogen village would have helped inform the government’s decision about hydrogen for heating, expected around 2026. The government has committed to still exploring hydrogen for heating and will make the decision using evidence gathered from the H100 Fife hydrogen trial, being delivered by SGN, which will see around 300 homes use hydrogen, and from schemes which are taking place in Europe.

As part of its December hydrogen announcements, the government committed £400 million to 11 green hydrogen production facilities and to allowing blending hydrogen into the gas network in certain scenarios, subject to final safety assessments. We are extremely proud that, through the HyDeploy programme, we demonstrated that a blend of up to 20% hydrogen could be blended into the existing gas network. Blending up to 20% hydrogen by volume does not require any changes to be made to existing appliances or the gas network and from 2021 for 10 months, 668 homes and some small businesses in the community of Winlaton, near Gateshead used the blend successfully, providing evidence towards the recent Government decision.

We look forward to keeping you informed with future updates about our progress and send our best wishes to you for 2024.

An investment return from Northern Gas Networks was paid today.

An investment return from Northern Gas Networks was paid today.

At the start of the year, following an invitation from the Government, we submitted three locations to host possible hydrogen town pilots in our region from 2030.

Due to planned hydrogen production and their proximity to industrial clusters, we selected Teesside plus Hull and East Riding. Our third location was Leeds which, as one of the biggest cities in the north, offers the opportunity to decarbonise a large population and would pave a route for converting further urban areas of West Yorkshire.

Hydrogen town pilot locations need to demonstrate hydrogen use at scale, ahead of a potential wider roll out across the country. Each of our towns would connect a minimum of 10,000 homes in 2030 and be able to be expanded to 200,000 properties by the mid-2030s.

The Government will make a decision about whether to pursue hydrogen for heating around 2026, meaning hydrogen towns will only proceed in the event of a positive decision. However due to the scale of planning required, it is necessary to start work to scope hydrogen towns imminently. We are awaiting the Government’s shortlisting to find out which locations we can progress to the next stage and receive funding to develop our plans over the coming year.

In March, we submitted the detailed design of ‘Redcar Hydrogen Community’, our proposal to host the UK’s first hydrogen village trial on our gas network and we expect to hear in the autumn whether we have been successful.

The proposal would see around 2,000 properties in some areas of Redcar, Teesside converted from natural gas to 100% hydrogen from 2025 for around two years. The evidence from the hydrogen village will help inform the decision about hydrogen for heating, expected around 2026.

During 10 months of community and stakeholder engagement, we completed over 750 engineering surveys at properties in the area. We held customer drop-ins, consultation events and established a panel of 20 residents and landlords to help formulate our plans and ensure we developed a proposal which would bring significant benefits to Redcar and the people who live there. Our proposal had strong support from Redcar MP Jacob Young and the local community. Our consultation survey was completed by 699 residents and landlords and showed that 76% of respondents felt positive or very positive about our proposal, 19% were indifferent or undecided and only 5% were negative or very negative. Overall, 89% of respondents indicated they’d use hydrogen for heating in the event the project proceeds, 6% electric and 5% were undecided.

Our local customer service team continues to be based in Redcar at our Hydrogen Hub on the High Street which gives a focal point for the community to learn about our proposal and raise questions whilst we await a decision.

People and Planet Strategy update

Following the launch of our People and Planet Strategy, which established our sustainability journey to meet Net Zero in 2050, we have continued our journey to embed our strategic commitments with our colleagues and supply chain. Oversight of our performance against our strategy is now provided by a new board level Environmental, Social & Governance Committee, which met for the first time in February and will now meet three times a year.

We have continued to tackle our greenhouse gas emissions and achieved a 10% reduction in annual gas leakage for 2022-23. We have connected a new further biomethane plant to our network, resulting in a 6% increase in biomethane injection into our network, enough to heat 61,000 typical UK homes.

To enable our vehicle decarbonisation programme, we have started installation of electrical vehicle chargers at our premises. We have also commenced the design process for installing rooftop solar PV at our premises to generate our own renewable electricity. In the meantime, we continue to purchase 100% certified renewable electricity.

We continue to focus on minimising waste, reducing our annual waste by 5% and halving landfill waste to 1.3%. We have worked with our supply chain to establish a secure recycling contract for our personal protective equipment and are working to achieve 0% to landfill agreements for all of our recyclable/recoverable office and depot waste.

Following the launch of our supplier Code of Conduct to embed sustainability within our supply chain, we now have 50 of our largest suppliers signed up to our Code.

To support our strategic commitments to eradicate inequality and reflect the diversity of our communities, we have delivered Inclusion and Belonging training to all line managers with support from Business in the Community. This training will now be delivered to all employees over remainder of 2023.

We look forward to providing you with a further update at the end of the year.

Dear investor,

Under the terms of your investment in Northern Gas Networks (see Offer Document and clause 15.2 of the Debenture Deed), every year in the month of May (starting from 2023), we will make an offer to Debenture holders to redeem up to 5.0% of the total Debentures (£50,000 in total) based on the market value for your Debentures at the time.

We included this in the terms of your investment to give our investors an option to exit the investment earlier in case their circumstances changed. Our offer to redeem your Debentures is entirely optional – if you wish to continue to hold your Debentures there is nothing you need to do.

The price we are offering to redeem your Debentures for is £0.74 for each £1 invested. So if you wanted to redeem £1,000 of your investment, you would receive back £740.

The price has been set such that the value is equal to the current market rate for similar bonds from BBB rated utilities companies, taking into account the rate on your investment (1.6%) and the maturity date of 30 June 2031. We have used the market rate of 5.7% to set this price. As the market rate for similar investments has increased since the issue of your Debentures, the market value for your Debentures has decreased as an investor could receive a higher return from investing elsewhere.

If you would like to accept our offer, please complete the form below by 5 June, indicating the amount you would like redeemed up to the maximum of your holding. Please note, if the amount that investors ask to be redeemed in total is greater than £50,000, the Debentures will be redeemed proportionately across the investors.

If you accept our offer of redemption we will complete the redemption by 23 June and Abundance will confirm to you once it has been completed.

Please see the email you will have received from Abundance which contains a link to the form to submit your redemption request.

During the second half of 2022 we’ve been focussing on the detailed design of ‘Redcar Hydrogen Community’, our proposal to host the UK’s first hydrogen village trial on our gas network.

The proposal would see around 2,000 properties in some areas of Redcar, Teesside converted from natural gas to 100% hydrogen in 2025 for around two years. The detailed design involves working with potential green hydrogen producers, sourcing storage facilities and understanding the logistics of supplying hydrogen and maintaining the same level of resilience as we enjoy with today’s natural gas network. We’ve signed a Memorandum of Understanding with BP to use their HyGreen facilities on Teesside for the majority of our hydrogen production.

Community and stakeholder engagement has been on-going over the last six months. Every property in the Redcar Hydrogen Community has been offered a free engineering survey by a British Gas Engineer, including free servicing of gas appliances, a gas safety certificate and free minor repairs. Residents have been invited to complete a consultation questionnaire, had the opportunity to attend drop-ins and consultation events and our Citizen’s Panel was formed to help develop our plans. In November we opened our Hydrogen Hub on Redcar High Street, giving everyone in the area the opportunity to meet and discuss the proposal with us.

Our completed bid will be submitted to the Department of Business, Energy and Industrial Strategy (BEIS) in March 2023 with a decision about whether Redcar, or an alternative location in the north-west, is successful expected in the summer.

Our Hydrogen Home has now welcomed over 2,000 visitors and continues to be fully booked, attracting a wide range of visitors from industry, academia and the general public. The homes, located near Gateshead, are fitted with 100% hydrogen gas appliances including cookers, hobs, fires and boilers to give customers an insight into a hydrogen-fuelled home of the future. You can book your own visit by emailing hydrogenhome@northerngas.co.uk.

Following the successful completion of the HyDeploy project, which saw up to 20% hydrogen added to the natural gas network for the community of Winlaton, near Gateshead, our report of findings was launched at the House of Lords in November. As current gas appliances will work with a blend of up to 23% hydrogen, the 668 homes in Winlaton continued to use the blended gas as they’d use natural gas, without noticing any differences. The results demonstrated that existing gas networks, consisting of a mix of older and newer mains, can successfully transport a blend and also showed customers are receptive and positive about the use of blended gas.

Following successful completion of the testing phase, the H21 project team, led by Northern Gas Networks is compiling reports of results to be published early in 2023. These results will mark the completion of over five years of research to build vital safety evidence about a 100% hydrogen conversion. Our reports will help inform a decision about the future of the gas network, which the Government has committed to making around 2026.

The start of 2023 will see us embark on the next ambitious programme of hydrogen conversion, when we submit our initial locations for ‘town pilots’ to BEIS in January. We have been invited to propose locations for hydrogen town pilots which would see conversion of over 10,000 properties to 100% hydrogen in each location by 2030. It is anticipated that multiple town pilots will be progressed and then hoped that the towns would expand to wider conversion by the mid-2030s.

We look forward to keeping you informed with future updates about our progress and send our best wishes to you for 2023.

An investment return from Northern Gas Networks was paid today.

The first half of 2022 has been an exciting time at Northern Gas Networks, as we received the go-ahead to progress our proposal to create the first hydrogen village to the ‘detailed design’ stage.

The creation of the hydrogen village was first mentioned in 2020 as part of the Prime Minister’s 10-point plan for a Green Industrial Revolution and again in the 2021 Heat and Buildings Strategy. Following the creation of a hydrogen community of around 300 properties using 100% hydrogen in the place of natural gas in 2023, the village will see around 2,000 properties converted to 100% hydrogen in 2025.

We submitted our bid to host the village trial and received the go-ahead from our regulator Ofgem in the spring. Our proposal involves switching the gas supply from natural gas to clean burning hydrogen for homes and businesses in parts of Redcar, Teesside including the town centre, Warrenby, Coatham and an area of Kirkleatham. As well as homes, the project area would see a hydrogen fuelled leisure centre, college, council offices plus cafes, shops and care homes.

We are now completing the detailed design of the project, which includes liaising with the local community and developing our plans to use locally produced, green hydrogen. Redcar was chosen for our proposal as there are already plans to produce hydrogen locally. A decision about whether the project will progress is due to be made in 2023 and, if it goes ahead, the gas appliances in the area will need be changed for hydrogen or electric alternatives. You can find out more by visiting redcarhydrogencommunity.co.uk.

Our Hydrogen Home has now been open for almost a year and continues to be fully booked, attracting a wide range of visitors from industry, academia and the general public. In recent months we have opened our doors for school trips. The homes, located near Gateshead, are fitted with 100% hydrogen gas appliances including cookers, hobs, fires and boilers to give customers an insight into a hydrogen-fuelled home of the future. You can book your own visit by emailing Send email.

At the end of June our HyDeploy project, which has seen up to 20% hydrogen added to the natural gas network for the community of Winlaton, near Gateshead, will come to an end. The 668 homes, local primary school, shop and church made history when they became the first community to receive hydrogen blended with natural gas on public network and they have successfully used the blend for 10 months. As current gas appliances are able to work with a blend of up to 23% hydrogen, the community continued to use the blended gas as they’d use natural gas without noticing any differences. The results of the project will be compiled and submitted to Government which has committed to make a decision about whether to blend hydrogen into the gas network.

The H21 project team, led by Northern Gas Networks, is continuing to build more vital safety evidence about a 100% hydrogen conversion. Earlier this year, in a world-first project, we converted a disused and disconnected existing gas network in the South Bank area of Middlesbrough for testing operational procedures under 100% hydrogen conditions. At this site we are also odourising hydrogen with the same smell as natural gas for the first time.

Later in the year, we’ll conclude the safety work in support of a hydrogen gas conversion and submit our reports to the Government. Our evidence will help inform a decision about the future of the gas network, which the Government has committed to making around 2026.

We look forward to keeping you informed with future updates about our progress and thank you for your support through your investment in our bond.

An investment return from Northern Gas Networks was paid today.

In the few months since you invested in our Green Transition Bond, we have continued to make progress towards our vision of a 100% hydrogen conversion for our gas network.

The public has become more aware of the need to change the way homes are heated and the options which may be available as we drive towards decarbonising heat and meeting Net Zero by 2050, largely due to the publication of the Government’s first Hydrogen Strategy in August and the Heat & Buildings Strategy in October, as well as Glasgow hosting the COP26 conference in November.

Hydrogen Home

Our Hydrogen Home was officially opened in the summer by the then Energy Minister Anne-Marie Trevelyan. To date, we have hosted 127 different visits and 714 visitors from a range of stakeholders including the media, our regulator, MPs, local government, education representatives, the local community and industry representatives. The homes, located near Gateshead, are fitted with 100% hydrogen gas appliances including cookers, hobs, fires and boilers to give customers a glimpse of a hydrogen-fuelled home of the future. Media coverage has helped us showcase the possibility of a hydrogen-fuelled future for our network to a wider audience with broadcast media coverage from BBC Newsnight, ITV Tyne Tees News, BBC Look North, BBC Radio Newcastle, BBC North East Politics show, ITV Tonight, Channel 4 and Channel 5 news and Radio 4s ‘You and Yours’ programme. Print media coverage has included The Times, Which magazine and even the New York Times! You can book your own visit by emailing hydrogenhome@northerngas.co.uk.

Hydrogen cooker

In August the HyDeploy project which adds up to 20% hydrogen into the natural gas network started to supply the community of Winlaton, near Gateshead with blended gas. The 668 homes, local primary school, shop and church made history as they became the first community to receive hydrogen blended with natural gas on public network. As current gas appliances are able to work with a blend of up to 23% hydrogen, the community is continuing to use the blended gas as they’d use natural gas and don’t notice any difference.

Over the past 12 months, the H21 project team, led by Northern Gas Networks, has continued to build more vital safety evidence about a 100% hydrogen conversion. The Health and Safety Executive’s Science Division (HSE-SD) has been vetting our procedures to see if they would be impacted by a 100% hydrogen network. At Spadeadam in Cumbria, a one kilometre, polyethylene MicroGrid has been built to mirror a typical UK gas distribution network. Since June, we’ve been using the MicroGrid to carry out those procedures the HSE-SD identified as being affected, including purging, venting and ignition sensitivity. In a testing programme which will run until around April 2022, we are also using the MicroGrid to test operational and maintenance procedures including identifying and repairing leaks, planned procedures and emergency response to understand how gas distribution companies would manage and operate the network under 100% hydrogen conditions.

In the summer, we secured planning permission from Redcar and Cleveland Council to carry out 100% hydrogen trials on a disused gas network in the South Bank area of Middlesbrough which is disconnected from the existing network. Site preparations are almost complete and early in 2022 we’ll start several months of rigorous testing of our operations and maintenance activities on an existing gas network for the first time. The South Bank project will see another first, as hydrogen is odourised to smell the same as natural gas for the first time. During 2022, following over five years of exhaustive research, we’ll conclude the safety work in support of a hydrogen gas conversion and submit our reports to the Government. Our evidence will help inform a decision about the future of the gas network, which the Government has committed to making around 2026.

We look forward to keeping you informed with future updates about our progress and send you our best wishes for the coming year.

An investment return from Northern Gas Networks was paid today.

The Northern Gas Networks investment can now be put up for sale on the marketplace.

This first payment covers interest earned in the initial interest period from the date an investor's investment was confirmed (after the 14 day refund period) to 30 June 2021. Future interest payments from this investment will be every 6 months. The company has provided short update below.

An update from Northern Gas Networks

Thank you again for your investment in our first Green Transition Bond. We’re very excited about our new investor community and the journey we’re on together to convert the UK’s gas network to net zero.

On 15th July, we reached another milestone with the launch of the UK’s first Hydrogen Home. Located at our innovation centre in Gasteshead, the Hydrogen Home is showcasing hydrogen boilers, cookers and fires. You can tune into our coverage on Twitter and Linkedin. And if you’d like to see it for yourself, we’d love nothing better than to show you around the Home for an investors tour. If you’d like to join us, please email hydrogenhome@northerngas.co.uk.

This investment closed today.

Please read the full update here

Northern Gas Networks has raised 50% of its £1,000,000 target in the first 2 weeks after launching.

Northern Gas Networks opened for investment today.