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National Grid profits soar as undersea electricity cable to France boosts business

·2-min read
National Grid is working on a new tunnel that will run under London (National Grid)
National Grid is working on a new tunnel that will run under London (National Grid)

Energy network operator National Grid has seen its half-year profits soar as it benefits from a new undersea cable from France delivering renewable electricity.

National Grid saw pre-tax profits jump 86% to £1 billion in the six months to 30 September. The figure was flattered by the £7.8 billion acquisition of Western Power Distribution. The deal closed earlier this year, meaning numbers were included in financial reports for the first time. Stripping out this impact, comparable profits still rose by 24%.

Chief executive John Pettigrew said the performance was driven by a “strong contribution” from a new interconnector to France that came online during the period.

Interconnectors are undersea cables that link Britain’s electricity network with neighboring countries, allowing them to deliver renewably generated electricity. National Grid recently completed work on another £620 million interconnector with Norway.

Profits were also boosted by a revival in demand for electricity and the fading impact of Covid-19.

National Grid upgraded full-year forecasts after the strong first half, saying it now expects “full year underlying EPS significantly above the top end of our 5-7% range.” Operating profit is on track to be £100 million above forecasts thanks to high prices for electricity from interconnectors. National Grid today upped its interim dividend from 17p to 17.2p.

Shares rose 9.5p, 1%, to 984.4p.

National Grid is currently shifting its business to focus on renewable energy and green electricity infrastructure. It plans to spend £6.5 billion a year on building new infrastructure to support this and has invested £2.8 billion so far this year. Plans include a 33km tunnel 60 meters under London that will ensure the grid has enough capacity to deliver renewable electricity from sources like offshore wind as demand soars. The tunnel will run from Crayford to Wimbledon.

National Grid reckons it can fund the investments while keeping costs level. It has launched a three year cost efficiency programme that aims to save £400 million a year. Pettigrew said most cost saving would come from technology and digitising, saying it “isn’t about significant job losses.”

As an infrastructure operator, National Grid hasn’t been directly affected by soaring gas prices but it is involved in clean up when operators go bust. Pettigrew said he was “obviously concerned” about the level of consumer suppliers going bust.

Concerns have been growing that the UK could face a tough winter with sky high gas prices and concerns about supply. Pettigrew said there may be “a bit of tightness” in supply at times but this was normal.

“As we look at winter there’s plenty of gas available,” he said. “Of course for gas to flow there needs to be a price differential.”

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