National Grid unlocks brownfield value

Called St William Homes, the venture will utilise Berkeley Group's development expertise to construct around 14,000 properties on brownfield industrial sites owned by National Grid in London and the South East. Each firm will hold a 50 per cent stake in St Williams, which will have £700m in funding though an even split of shareholder equity and bank debt. National Grid's land assets have a current book value of £500m, but management believes the project has the potential to unlock further value.

Aside from the Berkeley Group tie-up, National Grid announced that its core UK transmission business delivered a 22 per cent increase in operating profits, to £687m. UK transmission is also set to benefit from a £53m one-off legal gain during the second half. Across the Atlantic, US operating profits were broadly static, because the group was forced to undertake prolonged repairs on infrastructure following last winter’s polar vortex. This effectively cancelled out revenue increases in upstate New York and the benefits of recent transmission investments.

National Grid can easily afford capital expenditure commitments into the first half of 2015-16. During the period, the group raised $1.2bn (£745m) through low-cost bond issues, and also arranged a £1.5bn RPI-linked loan facility with the European Investment Bank. Over the next few years, the group expects to raise around £2bn of new long-term debt every year to finance growth and replace maturing debt. Net finance costs fell 15 per cent on a constant-currency basis, but a reinvigorated greenback presents a problem as a significant proportion of group debt is denominated in US dollars.