UK’s National Grid to invest 10 billion pounds in grid by 2026

Britain’s transmission system operator National Grid (LON:NG) said on Tuesday it broadly accepted a price control proposal from regulator Ofgem and will invest around 10 billion pounds ($13.87 billion) by 2026.

In December, Ofgem gave the go-ahead for 40 billion pounds ($53.4 billion) in spending on utility networks between 2021-26 to help prepare for more renewable power, including a higher-than-planned limit on grid operators’ returns.

National Grid said it was pleased to see the increase in allowances and accepted the overall package for its role as electricity system operator, while broadly accepting the package for electricity and transmission businesses.

The price controls take effect from April 2021.

“This package will allow the critical investment required to maintain the resilience and reliability of our networks,” National Grid said.

At nearly 2 billion pounds per annum on average, investment would be substantially higher than under the previous price control period (RIIO-T1), it said.

However, National Grid will submit a technical appeal to the Competition and Markets Authority (CMA) regarding Ofgem’s proposed cost of equity and downward adjustment to allowed returns in expectation of future outperformance, it said.

If accepted, the six-month appeal process would begin from April and final determinations could be expected in early October.

National Grid said it expected credit metrics to remain below the required threshold levels of a BBB+/Baa1 debt rating on an ongoing basis due to the increased investment programme.

However, it said it was confident of retaining broad access to debt markets even if agencies were to downgrade the ratings of the National Grid Group.

National Grid also said it had reviewed its dividend policy and aimed to deliver annual dividend per share growth in line with UK CPIH inflation from the full business year 2021/22.

($1 = 0.7209 pounds)