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National Grid Turns to Shareholders for £7 Billion Energy Transition Investment

  • The UK’s National Grid is seeking to bring in £7 billion over the next five years to invest in its £60 billion green energy infrastructure plan.
  • The company plans to sell assets and offer discounted shares to fund the project.
  • Despite the ambitious plan, some investors are concerned about the cost and the company's recent financial performance.
Energy

One of the biggest fundraisers in the UK this year just hit the market, with National Grid’s pitch to bring £7 billion in over the next five years to help fund its £60 billion energy transition investment plan.

The new £60 billion plan is ambitious, with just over half of the investment being spent in the UK, and the rest going to National Grid’s US operations.

The plan allows investors to buy seven new shares at a discount of roughly a third, for every 24 shares they already own.

“Incentives like this allow existing shareholders to fund and benefit from National Grid’s potential growth,” explained Aarin Chiekrie, equity analyst at Hargreaves Lansdown.

The UK has a target to decarbonise its power sector by 2035, and the company has already set up plans to boost the grid network beyond 2030 to accommodate the expected growth in electricity demand.

Neil Shah, executive director of content and strategy at Edison Group, was very positive on the move, noting that the fundraiser showed “National Grid’s focus on the decarbonisation of energy system, while also working to deliver more jobs across both sides of the Atlantic”.

“As pressure mounts to push for more renewable and sustainable solutions, it is natural that National Grid is pushing for additional investments,” he added.

However, after the company also reported its underwhelming results this morning, it fell by over 10 percent on the stock exchange, wiping out £4.3 billion from its market capitalisation.

“It’s not a good look when a company reports a slump in profits and then goes cap in hand to shareholders, asking them to stump up £7 billion,” said Russ Mould, investment director at AJ Bell.

“Some investors might view this as a bit cheeky, but others will be salivating at the chance to buy shares in a generous dividend payer at a big discount to the market price.”

Nevertheless, the company will need this cash to push ahead with its plan, and has also announced a move to sell off Grain LNG, its UK LNG asset, and National Grid Renewables, its US onshore renewables business.

Edison’s Shah added: “Looking ahead, it seems National Grid is poised for additional growth as the effects of this long-term investment plan come into fruition.”

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