National Grid Share Discussion Threads

[uknighted] 09/12/2016 21:34

If you hold the shares in an ISA you don't need to worry about the tax implications. Bed and ISA if you have any allowance left.

[atlantic57] 09/12/2016 21:28

My instinct is it will be treated as a dividend not capital gains tax treatment.

[losos] 09/12/2016 21:22

UtyINV - "but my guess Special divi around 81p."

Thanks for your posts above which have made it all clear to me. Do you have any thoughts on how this 'special' divi will be treated regarding tax.

Is it a 'return of capital' or is it treated as as 'income' ???

[bountyhunter] 09/12/2016 15:59

...with a steady rise over the last 4 days I think we could finally be on the way back up over the next few weeks, imho, fwiw!

[ringer12] 09/12/2016 13:34

Thanks UtyINV.

I have held NG for about three years and was under the impression then that it was difficult to make a profit there due to the regulations so hopefully things are looking up.

[utyinv] 09/12/2016 13:27

ringer12,

From the last final results (May 2016), of the total operating profits of £4.1billion, the regulated US business returned £1.2billion. However, some rate returns were not submitted on time (which would have enhanced that figure)and are going through that process now.

Top of my head I think the US regulated and unregulated contributes about 1/3 of the profits but there is supposedly potential over the pond, hence a re-focus.

How that will figure with the new President who knows, but I always remember Att Gen McCarthy (dem) for Mass. going on record by saying foriegn companies like BP and NG should help pay for the US recession! Ironic since it was the yanks that started the crisis and recession in the first place. Hopefully, a Republican may be kinder to business, only time will tell though.

[ringer12] 09/12/2016 10:46

RE: NG's US operations. DO they actually make any profit?

[septimus quaid] 09/12/2016 06:28

The way the share price has performed recently would make you think this detail has been leaked out before RNS.

[utyinv] 08/12/2016 18:28

db125,

Yes but NG will use a share buyback to reduce the effect of a reduced size company.

Hopefully too, the earnings per share from the remaining business may reap a better return from more lucrative parts of the business.

An interesting comment made by many Analysts is that with the sale, it focuses NG's attention to the US which has increased by percentage terms i.e. the UK business gets smaller and the US (by percentage terms) gets bigger than before.

Although National Grid in the US negotiate rate rebates at State level(getting money back spent on the system by increasing customer bills), it would be interesting to know if Dean Seavers and JP have had a chat with Trump or his 'Office'???

[db125] 08/12/2016 17:54

UtyINV
Thanks for the clarification.
"the combination of a special dividend (together with a share consolidation)."
I recall a similar arrangement by the then Scottish Power when I got a special dividend and the issue of a replacement share certificate. The nett effect was a dividend in exchange for a reduced shareholding.

[utyinv] 08/12/2016 17:20

Db125

I agree there are some areas that need explaining and which basically have been left out because they think it not relevant to Investors, like the £0.5 billion in costs to various institutions to facilitate the sale and other costs not mentioned but which have to be covered due to existing liabilities. However, the way I see it, of the £4 billion which will be returned to shareholders, £3billion (75%) via special divi and £1billion (25%) share buyback, should generate 81p/share.

There are approx 3.7 billion shares in circ so the £3billion should generate approx 81p/share. Fine tuning may alter this figure (share buy back) but my guess Special divi around 81p.

Bear in mind also this does not effect the 15.17p interim divi paid in Jan. Special divi may be paid in May with regular final divi in Aug. Note IMO only!

[db125] 08/12/2016 16:36

Can anyone help decipher some numbers from:-
"to return £4 billion of net proceeds to shareholders through the combination of a special dividend (together with a share consolidation)and share buy-backs. At least 75% of the net proceeds are expected to be returned via a special dividend in Q2 of calendar year 2017. Net proceeds are calculated after retaining £0.7 billion of the
additional debt financing, in order to maintain the equity value of our 39% interest in NGGD, and after deduction of costs of around £0.5 billion."

[utyinv] 08/12/2016 14:25

Prewar,

Not so, not all costs are allowable in the regulated base. There have been changes to how pensions costs are allowed by OFGEM.

Some significant changes took place in 2013!

Speedsgh,

there are tax implications for shares outside tax efficient platforms, i.e., no tax payable if your investments are held in say ISA's etc

[speedsgh] 08/12/2016 14:10

Surely the term 'dividend' merely signifies the mechanism by which the capital is being returned to the shareholder. The mechanism used obviously has tax implications for the shareholder. Capital returned via a dividend (special or otherwise) will be taxed as income; capital returned via Tender Offer would be taxed as a capital gain. In this case dividend is the proposed method for returning part of the value from the announced deal; in that sense they cannot really call it anything else. Aimho

[utyinv] 08/12/2016 13:35

ringer12,

special divi because it's in addition to the normal divi payouts :)

However, in relation to the rest of your comments it depends on the Company, the track record and philosophy adopted by the Company. In NG's case IMO it is giving you part of your own money back and using some to buy back shares to hopefully maintain the current value in the remaining shares. As a share buy back increases earnings per share and that SHOULD correlate to a higher share price than would be. However, let's not forget the main reason for NG selling off the business; it is highly regulated and extremely costly (a drag on earnings). Just remember the pension liabilities are gigantic due to the number of staff and pensioners in a number schemes (in addition to money purchase schemes there are big liabilities to fund an increasingly expensive final salary pension fund), hence one of the reasons why the unions were against the deal. Again, IMO only.

[ringer12] 08/12/2016 13:07

Why do they keep referring to these returns of value as "special dividends"

I have now had several of these with different companies. A far as my experience goes the company is simply giving you back your own money. Your shareholding will be reduced so that your remaining share value plus the so called dividend leave you no better off in the meantime.

However I have found from experience that the Sp will tend to tick up afterwards and of course with fewer shares in circulation the EPS should be accordingly higher.

Just my opinion.

[utyinv] 08/12/2016 09:39

So, as mentioned in earlier posts, NG said they were selling a majority stake in the Gas Distn business (expected to be about 51%). The reason why they were selling was that they weren't happy about the future earnings / returns of the business as it forecast that the business didn't have much growth / uplift in a heavily regulated business. Now they have decided to sell 61% confirming their opinion and strategy for selling. So as a result may get a bit more than 70p / share unless they decide to use some of the proceeds for a share buy back.

Either way, I expect NG to hold the remaining 39% ensuring there is some continuity of excellent service to customers whilst at the same time trying to maximise the value of the Gas Distn Company ready for the remaining holding to be sold to finance some further aquisitions that will give a better return. National Grid like to make a premium on every pound spent (they are not a Charity).

So NG have come good on keeping to their timescale. :)

[salpara111] 08/12/2016 08:58

not much of a bump but still relaxed with my buy at 902.

[a0148009] 08/12/2016 08:06

Half a billion costs paid to the bankers and lawyers on the deal that will help to keep their bonuses topped up.
AO

[septimus quaid] 06/12/2016 19:17

Eh?, down 0.05%

[utyinv] 06/12/2016 17:55

share price falling in the US this evening.

[prewar] 06/12/2016 11:28

Unlikely to have SO split out per FT article from November.

[utyinv] 06/12/2016 00:07

prewar,

If you spend £5billion a year on assets (capex not opex )and National Grid's revenue is based on asset value there is a correlation between market cap worth and the asset value. A business wouldn't spend a penny unless the corresponding value is reflected in the company value.

In simple terms, take your house if you build an extension for £x you would target that the property would be worth £x+premium if you were to sell it. Otherwise you cannot profess to have a track record of achieving a premium on every pound spent, something that Grid always expected in its performance.

I remember 2010 well when the markets were in melt down but Grid did not lose 25% in just a few weeks as it has now. My charts show a max deviation of 17% for NG in 2010. The min was in June not May after the shares went ex-divi on 2nd June. The shares went ex-divi for a 24.84 pence final dividend to be paid in Aug.On 20th May there was a script issue to raise £3.2billion. However, after adjustments the fall as mentioned was not nearly as bad as the one being experienced now.

The last biggest drop was over 9-10th Oct 2008 with a deviation (peak to low) of 19%. This was in the aftermath of the Lehman Bros crash and the birth of the financial crash.

Anyway, its obvious I expect a better performance from NG than some.

Let's hope for some good news soon and as I said earlier, whether you like or dislike Trump, hopefully if Trump's policy of infrastructure build takes off then NG should be a beneficiary :)

[prewar] 05/12/2016 22:20

Uty

"Unlike other Companies NG has spent £5billion per year on Capex asset reinforcement / new connections.

National Grid have a PEx benchmark of making a premium return on every GBP or Dollar spent (a philosophy we always adopted). So based on the fact that each year the asset value should increase the value of the Company by £5 billion + / year (even taking account of asset depreciation) £14/£15 is a reasonable expection."

How can spending £5bn p.a turn into an extra £5bn valuation? The premium they look to achieve isn't 100%!

By unprecedented I think you'll find a few sharp drops within your 35 yr investment career, look at May 2010 for a start.