National Grid Share Discussion Threads

[esmerelda] 24/8/2016 22:35

I saw this on the PPG thread but it is relevant to post here. (I haven't looked for the source site/document but it reads legit to me). My concern when I read this and the posts above is that if/when the lights do go out it WILL be seen as National Grid's fault regardless of whether that is true or not. (Do you see anyone else the Government or Ofgen will blame?) Is this is becoming a higher risk share to hold?

One of the flagship schemes for keeping Britain’s lights on this winter has been cancelled at the last moment due to a lack of demand, illustrating the difficulties policymakers are having in balancing the UK’s electricity supplies. National Grid had promised to pay organisations that were willing to turn off or turn down equipment this winter if there was a spike in demand or a drop in supply. The scheme proved vital last year when several power plants unexpectedly shut down — heavy electricity users such as businesses, hospitals and factories took 40MW of demand off the system in response.

But this year National Grid has cancelled the scheme, known as the “demand-side balancing reserve”, after too few users said they were willing to put themselves on standby. The move could cost the grid millions of pounds, which it expected to receive from the energy regulator to implement the policy.

The grid’s decision, which was announced in a letter to the few organisations who did apply, shows how difficult the company is finding it to keep supply and demand balanced with large old power stations rapidly reaching the end of their lives. National Grid has said it expects the margin between supply and demand at peak hours during this winter to be the lowest ever.

The letter said: “Despite National Grid amending the DSBR service via a consultation in September 2015 to encourage participation over the peak, it is clear this has not been successful.

“Following tender close on 9th June and subsequent validation of data, it has been determined that minimal volume would be available across this period.” One reason for the move is that many organisations already avoid using power at peak times and so would find it hard to reduce their usage any further. But some critics say National Grid has not given enough incentive for users to sign up, while at the same time overpaying highly polluting coal-power stations to remain on the system as back-up.

Last year, the company agreed to pay old coal-power stations to remain in reserve in case of another unexpected outage at a rate of up to £88,000 per MW of capacity. If they are called into action they are guaranteed to be paid up to £14,000 per MW-hour of use.

UK PM should seize chance to overhaul energy policy. Biggest indictment of present policy is its failure to deliver the capacity that Britain needs. Those costs will eventually be paid by electricity customers across the country, and compare with a wholesale price of about £40 per MW/h. Plant operators say they need the higher payments because they are so seldom called into action.

One industry executive said: “They paid so much to the companies running coal-power stations that there is not enough available for those who are willing to reduce their demand. Not only is this bad for consumers, who will pay for all of this, but it is also bad for the environment.”

Last week, Ofgem, the energy regulator, said it would pay the grid £4.5m to implement reserve schemes such as the DSBR — there is now a chance some of that money will be cancelled. Ofgem said: “We are consulting on this and will set out our final decision after the consultation closes in October.” National Grid said it remains committed to paying companies to reduce their demand, although through different mechanisms.

[utyinv] 24/8/2016 16:55

Yanks at it again!

Amazing that Yelland of the FED is presenting a speech on Friday evening when London markets have closed for the bank holiday week-end.

Just like on many occasions the Dow opens red, waits for the FTSE to close before turning blue (buying shares on the cheap)

Always remember the US DEM Attorney General for Mass going on record saying that foreign companies like BP and NG should help pay for the recession, a recession that the US created from greed.

Is it a wonder why so many round the world have a low opinion of US money men?

[m100] 24/8/2016 11:25

It's still bottom line negative. As stated previously "National Grid has to pay 30 per cent of every pound overspent" The £95.3m recoverable is across the two contracts.

£113m spent overall by NG on two contracts

£54 million to Fiddlers Ferry that is fully allowable

£113m-£54m = £59m to Drax not fully allowable (?????)

30% of this £59m 'overspend' = £17.7m

Total cost to NG (£113m) - Total recoverable through balancing charges (95.3m) = £17.7m (Net loss to NG)

The tender process clearly identifies North East and North West England as the areas where black start capacity was required. Against a background of imminent and ongoing thermal plant closures and limited plant able to truly black start then maybe OFGEM should determine the level of provision and procure that capability 'cheaper' than NG can.

[septimus quaid] 24/8/2016 04:02

Is the announcement not good news overall?

"As a result of Ofgem’s decision, National Grid will bear up to £17.7m in costs itself, which is 30 per cent of the costs of the Drax contract, and will recover at least £95.3m via balancing charges on suppliers and generators."

[m100] 23/8/2016 10:28

"Under the costs targets if National Grid spends less than the target it receives 30 per cent of every pound saved. If costs are above the target National Grid has to pay 30 per cent of every pound overspent. As a result of Ofgem’s decision, National Grid will bear up to £17.7m in costs itself"

OFGEM conveniently overlooking that black start capability is not technically available from a every piece of thermal or hydro plant, and is impossible to procure from solar or wind plant, so it's a closed and reducing market, accelerated by more recent coal plant closures, and thus the cost of procuring that capability will always increase. Why NG agreed to incentivisation of this activity is, IMHO, crazy.

[mirandaj] 23/8/2016 08:55

Interesting:

[m100] 19/8/2016 11:03

"National Grid has slashed its forecasts for the number of big new power plants expected to be built in coming years, while admitting its estimates for the growth of solar farms and other small-scale generators were almost 50 times too low.

Just four years ago the company expected up to 33 gigawatts (GW) of new power plant capacity to be connected to its high voltage electricity transmission networks in England and Wales by 2021.

But this forecast has now been cut to 14GW, the company said yesterday, due to delays to new nuclear reactors such as Hinkley Point, a hiatus in investment in new gas-fired power stations and delays to some offshore wind farms."




Ofgem proposes reductions in National Grid’s spending allowances for its energy transmission price controls




Consultation on the mid-period review of RIIO-T1

[pvb] 09/8/2016 22:20

Scrip dividend shares issued:

[m100] 08/8/2016 12:55

OFGEM - Extending competition in electricity transmission: tender models and market offering



Consultation runs through to the end of September.

[utyinv] 08/8/2016 09:33

This is unusual, the share price should rise up to dividend payment day on the anticipation that much of the dividend held in ISA's etc will be re-invested to purchase extra shares.

I will be interested to know how our new CEO reacts to negative actions on the shares (Shorting etc) and will he be engaged with Investors as Steve Holliday was?

[mj19] 05/8/2016 17:21

Does this have trading update anytime soon?

[utyinv] 05/8/2016 13:14

IMO these are oversold! If the Dist network being sold has gone out to tender then it wouldn't surprise me if forces are at hand to reduce the overall value of NG in the hope an undervalued offer price may be accepted for the Distn networks. However, at the AGM the Chairman had said if the expected price isn't achieved they just won't sell, simple!

£billions is being pumped into improve / expand asset value and Grid's allowable earning are based on Asset value as well as the fact that customers pay for the capital spend on assets, albeit on a spread over 40 years. The upshot is this Company is a cash generating machine for investors and IMO very cheap!

[tonio] 04/8/2016 10:20

Oh darn Uty, I was so hopeful for a moment - my hopes are dashed!

[utyinv] 04/8/2016 10:01

Tonio, lol, obviously you know I was referring to the previous post of the Dist sale posted by Skinny ( post 4036). If you look at my post again ( post 4037) I said price should be ..referring to the Dist sale.. But a share price of 10b would be nice now that you mention it :)

The share price before the referendum and after is only a re-balance correlating to the devaluation in the GBP by 15%. That's the main reason why the share price jumped so much after the vote. Don't forget 35% of revenues come in US dollars!

[tonio] 04/8/2016 09:50

UtyINV, where do I sell a share for £10b?
Also the pre-Brexit share price was about £9.80, it rose to £11 on June 30th, after the referendum I think.

MJ19,rising interest rates? Not today I think - and the idea that inflation can be moderated by increasing interest rates is so last year. With interest rates being decreased to near-zero and staying there have you noticed inflation accelerating upwards?
Just another economist's myth I'm afraid - sack them all!

Excuse me for being so argumentative.

[mj19] 03/8/2016 23:45

Also offering international exposure is National Grid(LSE: NG), with the utility company having operations in North America. Clearly it remains UK-focused but due to its lack of reliance on the prospects for the UK economy, its performance looks set to be stable and resilient in future.One cloud on the horizon for National Grid is rising interest rates. Inflation could spike due to a weak pound, which makes imports more expensive. And due to National Grid's debt pile being high, its profitability could be squeezed by high debt servicing costs. Countering this, though, is National Grid's vast defensive appeal so that if inflation and interest rates rise, it could still be viewed as a worthy buy among more risk-averse investors.

[utyinv] 03/8/2016 16:30

Price should be more than £10b. With the pre-brexit price of £11b I would hope that with a 15% reduction in the value of the £ the real value taking into consideration the fx situation will be £12.65b

[utyinv] 03/8/2016 11:28

I am surprised that due to the low pound and reduced value of debt (debt is usually a defence from unwanted take-overs bids), that predators haven't been looking at Grid.

Take AZN due to the low pound they are being rumoured with potential bid takeover, especially as a large % of its earning come in US Dollars.

35% of Grid earnings come from US Dollars

[utyinv] 03/8/2016 11:23

Divis being paid next week and many investors re-invest so should see the share price rise. this IMO is oversold especially when you consider the forecast asset base of NG which will bring in some nice returns in the future.

As for debt, debt is fine for a Utility and has been endorsed by the regulator as appropriate i.e. the regulator believes for a Utility with guaranteed returns to have a higher debt means that customers would not have to stump up as much money up front to help pay for infrastructure build and it is appropriate to borrow at low interest rates. However this does not mean that once built then customers are let off paying for the asset use.

[darias] 02/8/2016 20:58

M100 Thank you for your post I might just order that book but it will have to make very powerful arguments for me to accept nuclear with its legacy for future generations which has not been solved for 35-40 years power.I compare nuclear to the problems of asbestos where we bury it in holes for future generations to find. There is no such place as "away".

[m100] 02/8/2016 12:01

Whatever Germany wants to do is really their decision alone, that Energiewende and acclerated closure of their nuclear capability has done nothing but drive up domestic consumer energy prices to the very top of those within the EU (and indeed across the entire industrialised world), increased the levy domestic consumers have to pay to maintain stable prices for large industrial users, has led to negative energy pricing at times of peak solar output, has lead to issues on grid systems in adjacent countries, and has increased CO2 emissions is all a matter of record. Sat on high it might smell of roses but at ground level it really stinks of horse manure.

France, with a very high nuclear penetration, today meeting around 80% of their national demand, is, as right now, emitting around 40g CO2/kWh. Germany meanwhile... well I leave you to find that figure. I'll warn you It's not pretty reading. In fact I recommend sitting somewhere with nearby medical assistance as the shock hits. But that is to be fully expected when their nuclear capability is now below that of the UK but with a winter peak demand some 70% higher than that of the UK.

Many in the UK could indeed have solar panels on their roofs, and assuming space heating is not by electricity the annual output of those panels may often exceed their annual electricity usage. But for such a system to actually meet the usage during the month of January would require a system oversized by a factor of about four, and that is merely to meet the totalised electricity demand across a 24 hour period, not when it is actually required. Factor in the costs of storage to move that supply capability to the time of demand be it winter evening, or winter breakfast and it's another £1k per annum in storage costs alone, where the current total costs of electricity supply from our existing generation for the exact same load profile is under £700 delivered to the consumer.

Your quote "Whilst most of Germany's energy comes from fossil fuels. 25% of its energy in 2012 came from renewables"

That is electricity supply not total energy, when you look at the whole picture of space heating, transport and industrial fuelling etc then the 20% renewables figure is pathetic.

So Darius, with respect, please take a while to read Sir David MacKay's book, then you might begin to recognise the harsh realities and limitations of renewables.

To get this slightly back on subject the 2016 version of Future Energy Scenarios was recently published by NG.

[darias] 02/8/2016 06:16

Whilst most of Germany's energy comes from fossil fuels. 25% of its energy in 2012 came from renewables a level that the Uk did not reach until 2015. (It does include wood pellets as renewables)

[pierre oreilly] 01/8/2016 17:01

Darias, this board has always been one of the better boards on advfn and hasn't suffered from the usual guff of most other boards. I think I'll leave others to answer you and hope you'll try to keep this board at a reasonable quality level.