National Grid plans sale of majority stake in UK Gas Distribution business

Electricity and gas company National Grid plc revealed on Tuesday that following a review of the company’s portfolio, its board plans to rebalance the company’s portfolio with the sale of a majority stake in its UK Gas Distribution business.

This divestment is expected to deliver a higher asset growth profile and realise the value that National Grid has created in the networks. The board anticipates that National Grid’s total regulated and other assets will grow at around 5% annually over the next few years. It also expects the divestment of a majority stake in the UK Gas Distribution business to increase this growth rate towards the upper end of its range.

On completion of the sale, which is expected to close in early 2017, the company’s board plans to return substantially all of the net proceeds to shareholders, while maintaining a strong balance sheet. This will reportedly enable National Grid to continue to fund its investment programme and maintain the policy of increasing dividend per share by at least RPI for the foreseeable future.

National Grid reported strong half year financial results for the six months ended 30 September 2015 on Tuesday, declaring a 15% rise in half-year pre-tax profit to GBP1.348bn and a 22% rise in adjusted earnings per share of GBP0.284. Operating profit amounted to GBP1.849bn.

Chief executive, Steve Holliday, commented: “Our business has delivered a strong performance in the first half of the year while maintaining high standards of safety and reliability for our customers and increasing our level of investment. Headline profits have benefited from an excellent performance from our interconnectors and property activities, which are strongly weighted towards the first half.”

The company also provided it outlook for the remainder of 2015/16 and said it is on track to deliver another year of good overall returns and dividend growth. It expects to make a full year investment of around GBP3.7bn, driving asset growth of between 4% and 5%

Commenting on this outlook, Holliday added: “Our UK Regulated businesses and other activities remain on track to deliver good performance this year. In the US, we have made significant progress, managing our cost base through a time of increased activity and we expect to maintain profits in line with last year. In the second half of 2015/16 we will begin a process to rebalance our portfolio through the potential sale of a majority stake in our UK Gas Distribution business. Following a sale, National Grid’s portfolio of businesses will have a higher asset growth profile and will remain well positioned to deliver strong returns and a sustainable, growing dividend. The UK Gas Distribution business has been an important part of National Grid and the sale of a majority stake will realise some of the value we have created for our shareholders.”