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National Grid looking stateside for returns

The energy infrastructure provider is updating its US rate agreements to boost returns
November 15, 2016

The sale of a majority stake in its UK gas distribution business may have stolen the headlines for National Grid (NG.) in recent months, but the most exciting growth opportunities for the group lie on the other side of the Atlantic. The energy infrastructure group is focused on updating its regulatory agreements with the US authorities, increasing the level of capital investment and returns the company is allowed to make. As a result, around 40 per cent of its US business is operating under new frameworks. During the first half of the year, capital investment stateside increased by £39m to £1.04bn.

IC TIP: Buy at 955.7p

One-off refinancing costs, together with declining income from its French interconnector, dragged at the group level: management present the latter as a return to normal levels of profitability. The UK electricity transmission division put in a better performance. Operating profits were up £33m to £610m, excluding the favourable impact of revenue recognition timing. This reflected higher inflation and regulated revenue allowances. However, marginally higher revenues were not able to offset depreciation charges for the UK gas distribution business. As a result, operating profit was down slightly at £427m, excluding timing.

Prior to these results, analysts at Edison forecast adjusted pre-tax profits of £3.2bn and EPS of 65.1p for the year ending March 2017, up from £3.1bn and 63.5p in FY2016.

 

NATIONAL GRID (NG.)

ORD PRICE:955.7pMARKET VALUE:£36bn
TOUCH:955.7-956p12-MONTH HIGH:1,148pLOW: 893p
DIVIDEND YIELD:4.6%PE RATIO:17
NET ASSET VALUE:334p*NET DEBT:232%

Half-year to 30 SepTurnover (£bn)Pre-tax profit (£bn)Earnings per share (p)Dividend per share (p)
20156.851.3527.715
20167.200.4913.415.17
% change+5-64-52+1

Ex-div: 24 Nov

Payment: 11 Jan

*Includes intangible assets of £6.8bn, or 181p a share