National Grid Share Discussion Threads

[newbank] 04/2/2014 18:00

Vastly oversold IMHO.

Its about time Steve Holliday gives out some news that will burn all the Shorters!

With Nick Windser in the ENTSO-E Presidents seat surely we should see some benefit to National Grid.

[skinny] 30/1/2014 11:07

A perspective from "over there"!

[skinny] 30/1/2014 07:03

HIGHLIGHTS

Further progress in line with expectations towards a good full year result
· UK - good outcome expected both from efficiencies against regulatory "totex" cost allowances and from other incentivised performance
· US - separation of Long Island Power Authority (LIPA) management service activities completed on time on 31 December 2013 - over 2,000 employees transferred to new operator
· Strong network performance across all businesses in challenging winter conditions
· Capital investment of around £3.5bn expected to drive continued healthy growth in regulated asset value this year

Steve Holliday, Chief Executive, said:

"Our businesses made further progress through to the end of January toward achieving our priorities for the year. We are investing in our networks for the benefit of customers and maintaining a strong focus on efficiency and incentive performance.

Our networks performed well, demonstrating strong resilience during some difficult weather conditions in both the US and UK. I believe that this shows the benefits of our investment in process development and infrastructure and the continued dedication of our front line colleagues.

We reconfirm our positive outlook for 2013/14 - overall, we are well positioned to deliver another year of good operating performance and sustainable dividend growth."

BUSINESS UPDATE

To date National Grid has delivered good network performance for customers despite adverse winter weather conditions in both the UK and US.

In the UK recent investment in flood defences for critical sites over the past few years has helped to minimise any cost or reliability impact on National Grid's operations from recent bad weather.

In the US, there has been some extremely cold weather in recent weeks along with an ice storm in upstate New York and Massachusetts in December. The ice storm resulted in around 150,000 National Grid customers being temporarily without power due to damage to the local electricity distribution systems. National Grid's workforce responded well to these challenges, rapidly restoring power to customers. Disruption and costs related to extreme weather to date have been much lower than in the previous two years.

In December, the US business successfully separated its Long Island electricity transmission and distribution activities, where National Grid previously managed LIPA's assets under a management services contract. As a result over 2,000 National Grid employees transferred on 31 December 2013 to the new business operators, together with associated financial systems and other equipment.

Completing the financial systems aspects of the LIPA separation now allows a full focus on concluding the new US systems and financial processes projects. Work is now focused on implementing further system improvements and reducing ongoing costs including those associated with manual processes in the production of regulatory and statutory financial information. Expected costs remain in line with previous guidance and completion is still expected in 2014.

Business environment

Key elements of the UK electricity generation environment are largely consistent with those discussed in National Grid's half year results statement published in November 2013. Expected generation connections to, and disconnections from, the transmission grid over the next twelve months are largely unchanged, although further updates are possible before the year end. Consultation on new balancing services arrangements has made good progress, with Ofgem having approved two new mechanisms to be introduced ready, if required, for the winter of 2014/15. With continued tightening of plant margins expected into next winter and into 2015/16, these new services could provide additional tools to support the operation of the system.

In the US, environmental and economic advantages remain key drivers of growth in demand for new distribution infrastructure and connections. National Grid continues to make progress on developing new transmission and generation infrastructure that should deliver attractive medium to long term growth.

FINANCIAL UPDATE

There have been no material changes to the financial position of the Company. National Grid's balance sheet remains strong, underpinning the stable credit ratings and the continued ability to raise funding in debt markets at competitive rates.

OUTLOOK

Outlook is unchanged from that stated in National Grid's half year results statement published in November 2013. The Group is well positioned to deliver another year of good operating performance and sustainable dividend growth.

TECHNICAL GUIDANCE

National Grid is making no updates to the technical guidance published in the half year results statement of 21 November 2013.

[utyinv] 27/1/2014 22:43

Pierre,

That's right, the ultimate return will benefit shareholders so the Regulator said that some of the pain must be experienced by the shareholders. The rate of return though is slower than previous Cap Ex that had been recovered via customers. However if you look at Mkt Cap of approx £29 billion (3.6 billion shares in circ) and with the extra investment increasing the asset base including a depreciation of existing assets, I can see by 2020 the asset base being £55 billion devided by 3.6 billion shares in circ should make a share price of £15/ share.

I do not worry about Debt as the regulator has also advised Grid that a high Debt is recommended for a Company which has an almost monopoly. By taking that stance they are hoping some of the financial costs the customers will have to stump up may be delayed by Grid securing Debt at fantastic rates. However, there is a mechanism to guard against Grid being exposed to higher rates of interest and RIIO will be revisited to make any amendments 4 years into the 8 year term.

As for millipede, he says he is going to do this and that and realistically very little of his talk will come to fruition even if he get in. If he does get in he may change some terms for some energy suppliers but he needs Grid (the good boys) to advise the government on energy security policy, so even if he does get in and does become an extreme maverick, Grid will be left alone, IMO.:)

[gj2] 27/1/2014 19:07

As a lurker but long time investor here (was in sharesave 1, matured in 1996), have been interested in the various discussions here over the last year or so. My two pence worth - or should I say two points - are :

1. Having listened to the webcast on the day the rights issue was announced, rather than OFGEM telling NG., it was NG.'s decision to tap shareholders in order to keep a single "A" credit rating. NG.' s calculation : either fund the increased CAPEX via further debt and hence risk losing the single "A" rating, with the resultant increase in borrowing costs (and the resulting spiral...), or get shareholders to inject some capital. The supergrid system required this investment - either NG. supplied it or NG. would lose its monopoly. Trying to judge the optimum debt/equity funding split against an uncertain future is key. And yes, I considered the dividend policy prior to the rights issue unduly aggressive. They pitched the amount raised (3.2BN GBP from memory) so that the single "A" rating would be maintained through the next 8 years against a range of assumptions on (increasing) CAPEX e.g. how many windfarms would connect at supergrid voltage, how many nuclear stations would start to connect.... etc. OFGEM often point out that although they set NG's income - it is up to NG. to decide how to allocate that income between staff, management, shareholders etc & how best to seek funding - via debt or shareholder's funds. Contrary to post 3031, the rights issue was to fund numerous new projects - why else would the CAPEX rate increase ?

2. Cost of debt - with the size of the debt, this is of great importance. However, this is broadly an allowable expense - if the cost of servicing debt rises, so should OFGEM's allowance for it. However I am unsure of the lag in cost/recovery equation here.

3. Well – I did say two points but here is my third : Milliband/Balls etc : dangerous. However, they seem entirely focussed on companies that consumers pay their bills to VS. how much profit those companies report (=popular in the constituency/on TV). Luckily NG. is a step away from consumers in the U.K. Electricity sector. However with the windfall tax on the sector still fresh in the memory , their axe could fall anywhere....

4. Well - lastly, OFGEM have no say on the returns from the USA.

Good Luck

GJ2

[redartbmud] 27/1/2014 16:15

Pierre

You are quite right, but when the Red Millipede and "Flat" Ed Balls take the reins in 2015 they will change the goal posts - because they can.

red

[pierre oreilly] 27/1/2014 11:22

utyinv - that's mainly my understanding too.

I'm not sure of the final bit though - are you saying ng won't now benefit from the capex made? (partly at the cost of customers, and partly by shareholders).

My understanding is the government (i.e. the regulator) regulate to give the company a certain % return on assets. Since the assets have/will increase, the return in absolute terms (the same in percentage terms) will increase. Since the public, via costs passed on via uplift to suppliers who could also then pass it on in bills, paid/are paying the majority of the infrastructure upgrades, ng will benefit (at no investment costs themselves for that tranch) for zero cost. That's why the regulator said ng shareholders had to stump up some cash, to help a little to redress the balance.

Unless soemthing has changed recently, ng will benefit, probably unfairly, by investments partially paid for by the public. Is that your understanding, or something different?

[redartbmud] 27/1/2014 08:44

Uty

Point taken but it does mean that the balance sheet has been,and is being loaded, with more and more debt. Debt attracts interest payments. At present the cost of debt is lower than the income generated, but it may not always be the case.


red

[utyinv] 27/1/2014 08:29

Darias,


The reason why NG approached shareholders for cash was a direct result of OFGEMS insistence. NG had to invest £30billion over 8 years improving and building new infrastructure to comply with the Governments energy policy inc renewables etc. now NG are allowed to claim back from customers any Cap Ex costs but the regulator said in 5 years time as NG's asset base is increased shareholders will see the share price increase and will benefit. They went on to say that 10% of money needed must come from shareholders as they must accept some pain in the short term only to gain in the long term. OFGEM like most regulators are run by Governments and have to listen to public comments. So they are quite happy to hit shareholders if the public demand it. When NG had a share buy back they thought they would be allowed to recoup all Cap Ex costs from customers as detailed in the white paper when privatised. Regulators and Governments lie and do not keep agreements.

[redartbmud] 26/1/2014 23:31

ian

Yes, Barclays pay a dividend, but it amounts to no more than petty cash.

red

[ianood] 26/1/2014 01:12

Darias take a look at Barclays. They have had a rights issue and continue to pay a dividend.

[darias] 24/1/2014 20:41

I agree companies do raise funds from shareholders and also pay divis. However most do not do it at the same time. Consider findel any of the banks or many others. If they do pay divis and raise cash at the same time they do it to invest in new projects. NG. came to the shareholders for cash because they got their sums wrong and were buying back shares a year before the new issue. I don't mind the board playing their private game of monopoly but I prefer they did not do it with my money!

[pierre oreilly] 24/1/2014 18:32

Oh no, not again.

Darius, just about every half decent company both pays divis and raises cash from shareholders. That's the idea of the stock market basically. Investors invest and take a return from the company. You put cash in, and get divis out.

Could you care to tell me any company in the ftse 250 which hasn't raised cash from shareholders and paid a divi? I don't understand why you get hung up on these perfectly normal actions virtually all companies make.

Let's have a look at your portfolio, and see which ones of those haven't both raised cash and paid divis. I'd expect you're a microcap man, where all they do is regularly takes shareholders cash with little hope of ever getting any divi back!

[darias] 24/1/2014 16:27

So. They keep increasing the dividend until they come to shareholders for more cash. This company has form remember.

[dgo] 24/1/2014 13:31

speedsgh Thanks for that I remember speed reading it at the time but didn't
absorb it.

[speedsgh] 23/1/2014 17:34

Digital Look are forecasting 42.40p div for fin yr ending 31/3/14 (2013: 40.85p). Interim 14.49p, therefore final in Aug 14 should be 27.91p (2013: 26.36p).

[speedsgh] 23/1/2014 17:30

Half year report for 6 months ended 30 Sept 2013 -

"In March, the Board of National Grid agreed a new dividend policy to apply from 1 April 2013. The new policy aims to grow the ordinary dividend at least in line with the rate of RPI inflation each year for the foreseeable future. The first interim dividend under this new policy, for the year ending 31 March 2014, was set at 14.49p; thereafter it is intended that the interim dividend be 35% of the total dividend per share in respect of the previous financial year. As a result, it is expected that the final dividend paid next August in respect of the year ending 31 March 2014 will reflect the full monetary value of the percentage increase for the year as a whole."

[dgo] 23/1/2014 16:54

Just noticed this current div is the same as last January 14.49p
Any idea anyone ?

[neddo] 23/1/2014 12:56

had divi this morning, lubbly jubbly

[skinny] 23/1/2014 07:46

JP Morgan Cazenove Neutral 798.00 798.00 735.00 805.00 Reiterates

[tonio] 15/1/2014 18:05

This sounds like good news for NG and the UK electricity supply. It was on google financial news today from the Cumberland News and Star but I've not seen it in any national news source. Westinghouse is of course the company Gordon Brown sold off quietly at Christmas a few years ago.

hxxp://www.newsandstar.co.uk/news/1-000-permanent-jobs-if-new-nuclear-reactors-go-ahead-in-west-cumbria-1.1110292


The US nuclear company Westinghouse has unveiled firm plans to build three of its AP1000 reactors on land at Moorside, Sellafield, with the first due to come on stream in 2024.

The project is potentially worth £5bn and would be the biggest ever private-sector investment in west Cumbria.

Westinghouse expects 6,000 jobs to be created during the construction phase plus 1,000 permanent jobs once the reactors are finished and further employment every time one is refuelled. Westinghouse Springfields, a fuel manufacturing facility near Preston, would make the fuel.

When all three reactors are operational they would supply seven per cent of the UK's electricity - more than all the wind turbines in the country put together.

The announcement follows the decision of Westinghouse's parent company, Toshiba, to buy into the NuGen consortium that has an option to develop Moorside.

Toshiba is acquiring the 50 per cent stake of Spanish energy company Iberdrola and part of the stake owned by the French energy company GDF Suez, giving it a 60 per cent holding in NuGen.

NuGen had previously said it was carrying out site investigations to see if Moorside was suitable for reactor development and that it would decide next year whether to proceed.

Westinghouse says the final decision will come in 2018 but the answer is likely to be 'yes'.

Simon Marshall, the company's UK project director for new build, said: "The site investigations have not yet been completed but the work done has given us confidence to go ahead and buy a majority stake in NuGen."

Hurdles still to overcome include securing planning consent and a connection to the National Grid.

Construction of the reactors would start in 2020.

[tonio] 08/1/2014 17:02

well if you believe in charts that's fine. how about looking at unexpected realities such as US snow/ice storms the worst ever. This, you would think, is bound to be impacting on NG share price - charts cannot take account of such events.

[codek] 07/1/2014 16:18

LSE seems to think the same as yf23_1:

[yf23_1] 07/1/2014 12:59

If you look at the chart the price action is more akin to a flag (flatlining) making 780 a support instead of a resistance, reinforced by the quick bounce back from 750.