National Grid reports mixed year, announces £7bn rights issue

23rd May 2024 08:25

(Sharecast News) - National Grid shares were sliding on the release of its full-year results on Thursday morning, as it announced an equity raise of £7bn through a rights issue to support its future investments.

The FTSE 100 company reported underlying operating profit of £4.8bn for the year ended 31 March, marking a 4% increase at actual exchange rates, driven by revenue growth in UK electricity transmission and higher rates in New York and New England.

However, statutory operating profit for continuing operations fell by 8% to £4.5bn due to non-cash exceptional charges.

Underlying earnings per share (EPS) rose 5%, whereas statutory earnings per share declined 19% to 60p.

National Grid recommended a final dividend of 39.12p, bringing the full-year dividend to 58.52p, an increase of 5.55% in line with its policy.

The company also unveiled a refreshed strategy to position itself as a leading pure-play networks business, with a planned capital investment of £60bn over the next five years - nearly double the amount of the last five years.

It said the investment was expected to drive a 10% compound annual growth rate (CAGR) in group assets, aiming to reach £100bn by 2029.

A significant portion, around £51bn, would be aligned with the EU Taxonomy for decarbonising energy networks, with nearly 80% directed towards electricity networks.

To streamline its operations, National Grid said it intended to sell its UK LNG business, Grain LNG, and its US onshore renewables business, National Grid Renewables.

The investment programme would be supported by a balanced financing plan, including the £7bn rights issue, providing funding clarity through at least the end of the RIIO-T3 price control period.

Looking ahead, National Grid said it expected total cumulative capital investment of around £60bn, with group asset growth at a 10% CAGR, and an underlying earnings per share CAGR of 6% to 8% from a 2025 baseline.

Regulatory gearing was projected to decrease to the low 60% range by March 2025, before returning to the high 60% range by the end of RIIO-T3.

For the upcoming year, the company anticipated underlying earnings per share to be broadly in line with the adjusted 2024 level, considering the impact of the rights issue.

"Today is a defining moment for National Grid as we announce a significant increase in investment that cements our position as a leader in the energy transition on both sides of the Atlantic," said chief executive officer John Pettigrew.

"This is an unprecedented time for our industry that is creating significant opportunities for National Grid today, over the next five years and for decades to come.

"Our new five-year investment plan will deliver long-term value and returns for our shareholders, support over 60,000 more jobs, and accelerate the decarbonisation of the energy system for the digital, electrified economies of the future.

"Alongside our new five-year financial framework, we are also today further evolving our strategy to focus on networks and will therefore be streamlining our business as we announce our intention to sell Grain LNG, our UK LNG asset, and National Grid Renewables, our US onshore renewables business."

At 0820 BST, shares in National Grid were down 8.43% at 1,032.5p.

Reporting by Josh White for Sharecast.com.