Scottish & Southern Energy’s hopes of becoming the UK’s largest electricity network appear to be fading as the sovereign wealth fund of Abu Dhabi prepares to bid for assets put up for sale by EDF. Perth-based SSE was thought to be the leading contender to buy EDF’s three English electricity distribution networks, which are expected to fetch more than £4billion.

But yesterday reports emerged that Abu Dhabi Investment Authority (ADIA), the world’s largest sovereign wealth fund, had hired advisers about a bid for the assets valued at around £5bn.

According to the reports, the ADIA is investigating a joint bid with Canadian Pension Plan, a pension fund, and has hired investment bankers at Goldman Sachs and Lexicon Partners to advise on the bid.

Emerging as an early leading candidate for the sale, SSE has already appeared to play down the chances of it snapping up the assets.

Following Ofgem’s review on what utilities are allowed to charge customers of distribution networks between 2010 and 2015, SSE warned that the level of returns allowed by the energy regulator may put it off investment in the sector.

Earlier this month, SSE begrudgingly said it would accept Ofgem’s findings, but a spokeswoman told The Scotsman that the review was likely to reduce what it would be prepared to pay for EDF’s distribution networks.

The Scottish utility has already said that if it did bid it would probably do so as part of a joint venture with Borealis, a Canadian pension fund.

The networks put up for sale by EDF cover London, the South East and the East of England, distributing electricity to almost eight million homes.

SSE already owns two electricity distribution networks, one in Scotland and one in England. Buying the EDF assets would have made it the largest player in the sector, and some industry sources have warned that it could prompt competition concerns.

EDF, the majority owner of nuclear company British Energy, is thought to have put the assets up for sale in a bid to cut its debt pile, and help fund an expensive investment programme, which includes building new nuclear power plants in the UK.

Other utilities thought to be in contention to bid for the assets include National Grid and Hong Kong’s Cheung Kong Infrastructure Holdings.

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