The 50:50 joint venture will create an Energy Services Company (ESCO), representing the UK’s leaders in utility infrastructure and heat networks to provide affordable and low-carbon infrastructure to SGN’s existing land portfolio. This includes delivery of heat to developments planned by SGN’s property arm, SGN Place, and the local vicinities where there is a demand for low-carbon heat.

It is estimated that the heat network market requires approximately £30 billion of investment by 2050 to meet the UK Government’s net zero targets, and the decarbonisation of heat has been highlighted as a particular challenge where heat networks can offer a solution. The Climate Change Committee’s Sixth Carbon Budget suggests the UK should target 20% of UK heat demand through low-carbon heat networks by 2050.

Together, SGN and Vital have ambitious plans to establish solutions to this challenge across strategically located sites. These locations are a combination of redundant sites owned by SGN and others which will be developed over time through Vital’s existing market presence.

The objective is to supply new and existing residential, industrial and commercial facilities and development activity is already underway for two projects in Scotland and the South East, with another 20 in the pipeline.

SGN is looking to develop alternative heat solutions alongside its core gas distribution business and expand into the growing district heating market, recognising the future of heat is likely to include a mix of technological solutions and energy sources.

Vital Energi is seeking to expand into asset ownership opportunities to complement its core design, build and operations businesses.

The complementary skill sets of both organisations will offer a compelling proposition for developers, commercial and industrial users and public sector bodies seeking low-carbon heat solutions.

Marcus Hunt, SGN’s director of commercial services and investments, said: “Heat networks are likely to play an increasing role in the delivery of UK heat in the context of net zero. The creation of this joint venture with market-leading Vital Energi enables us to build a presence in this emerging market, delivering new heat infrastructure and supporting decarbonisation.”

With an established presence in the UK heat network market, this partnership is a major step for Vital Energi to expand its asset ownership solution.

Nick Gosling, chief strategy officer at Vital Energi, added: “We’re really excited to be extending our asset ownership portfolio and working alongside SGN on regeneration initiatives that will revolutionise the heat network market. Combining the resources, expertise and know-how of both organisations will allow us to play a major role in delivering the UK’s transition to low and zero-carbon heat.”