National Grid earnings fall in first half, as expected

National Grid reported a first-half underlying operating profit of £1.8bn on Thursday, in line with expectations, but down 15% at actual exchange rates and 14% at constant currency.

The FTSE 100 company put the decrease down to non-recurring items reported last year, including property land sales and insurance proceeds.

Statutory operating profit declined 11% to £2bn, primarily due to gains on previous land sales and contributions from the Narragansett Electric Company (NECO).

Statutory earnings per share stood at 28.8p, down from 33.4p in the prior period.

National Grid declared an interim dividend of 19.4p per ordinary share, per the company’s dividend policy.

The company said its regulatory capital investment reached a record £3.9bn, with a focus on regulated networks.

That investment marked a 10% increase at constant currency rates and 7% at actual exchange rates compared to the previous period.

The capital investment was primarily driven by higher connections spending and early investments related to the ‘Accelerated Strategic Transmission Investment’ (ASTI) programme in the UK electricity transmission business.

National Grid said it made significant progress on ASTI projects, including partnerships with SP Transmission and Scottish Hydro Electric Transmission for offshore projects.

It also initiated the procurement process for the enterprise model for onshore projects.

Continuing its capital re-allocation strategy, National Grid noted its agreement to sell an additional 20% equity interest in National Gas Transmission to a consortium led by Macquarie Asset Management and British Columbia Investment Management.

National Grid also emphasised strong regulatory progress, including the enactment of the Energy Act 2023, the publication of the ‘Delivering for 2035’ policy paper, and the initiation of new price controls under RIIO-ED2.

The firm said it also achieved £53m in group efficiency savings during the half-year, in addition to the £373m reported previously.

Looking ahead, National Grid projected a total cumulative capital investment of around £42bn from 2020-2021 to 2025-2026, with solid asset and earnings per share growth.

The company expected modestly lower underlying earnings per share for 2023-2024 due to changes in capital allowances legislation but anticipated long-term stability.

“Today, we’ve announced solid results and reconfirmed our full-year guidance as we continue to enhance critical energy infrastructure across the communities we serve,” said chief executive officer John Pettigrew.

“This financial performance reflects our role at the heart of the energy transition and a new phase of capital delivery that is firmly underway.

“Capital investment in our regulated networks reached a record £3.5bn in this half year, as we step up our investment in 17 major onshore and offshore transmission projects in the UK.”

Pettigrew noted that in the US, the firm was progressing with several major transmission projects to unlock renewable generation and upgrade infrastructure across its jurisdictions.

“We’re delivering this critical investment at the same time as ensuring affordability for our customers, having now exceeded our £400m efficiency savings target earlier than planned.

“In recognition of this strong progress, we are today updating our 2020-2021 to 2025-2026 five-year financial framework, which will modestly enhance our asset and earnings per share growth within our existing ranges.

“Whilst we’re pleased to see momentum around policy reform on both sides of the Atlantic, we now look forward to seeing announcements and consultations translated into decisions and action in order to deliver the energy transition.”

Reporting by Josh White for Sharecast.com.