National Grid Plc plans to raise £6.8 billion ($8.7 billion) of capital to help fund a massive investment program as the shift to net zero requires a sweeping overhaul of Britain’s power network.
As well as issuing new shares, the company intends to sell its Grain liquefied natural gas terminal and its US onshore-wind business, according to a statement Thursday. The firm will use the proceeds to expand and strengthen the grid so that it can connect new renewables projects and vehicle-charging networks, and shoulder an expected doubling of electricity demand in the push to decarbonize.
The company will issue new shares at 645 pence apiece, the statement shows. It’s Europe’s largest rights issue outside of the banking sector in 15 years, according to the firm.
National Grid sank as much as 9.5%, before trading at 1,029.5 pence as of 9:59 a.m. in London.
“When you have a rights issue, then there is a technical adjustment,” National Grid Chief Executive Officer John Pettigrew said in a call to reporters.
National Grid is a key player in the UK’s journey to net zero as grid infrastructure continues to hold back the pace of renewables expansion. It plans to spend £60 billion on networks in the UK and US over the next five years.
© Supplied by BloombergTo underpin the company’s credit rating, about £750 million of the net proceeds will be used to refinance a portion of outstanding hybrid bonds that have first call dates in the next 15 months. Senior debt will continue to be used to raise additional funds in capital markets.
Pettigrew said the huge investment means network charges will go up, but increased generation from renewables when the grid is strengthened means that “ultimately the overall bill to consumers will go down.”
The sale of the firm’s US onshore-wind business does not mean it’s fully exiting renewables as it’s still open to joint ventures in offshore and onshore wind.
National Grid reported annual earnings per share of 78 pence, above the 76-pence estimate of analysts surveyed by Bloomberg. The board recommended a dividend of 58.52 pence, which will be re-based given the increased number of shares following the rights issue. Payouts are set to grow in line with UK inflation.
National Grid breaks down its UK and US investment plans:
- UK Electricity Transmission business: £23 billion representing a more than 250% increase in capital spending compared with the previous five-year period.
- UK Electricity Distribution: £8 billion in infrastructure needed for low carbon technologies, such as electric vehicles and heat pumps.
- New York and New England: £17 billion and £11 billion, mostly into networks for renewable connections, transmission network upgrades to enable the energy transition.
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