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National Grid profits surge on back of European energy crisis

<span>Photograph: Gareth Fuller/PA</span>
Photograph: Gareth Fuller/PA

Higher revenues from subsea cables and acquisition of Western Power Distribution boost half-year results


Europe’s energy crisis has sparked a profit surge for National Grid after its subsea power cables connecting the UK to the continent generated greater revenues on the back of record highs in the electricity market.

National Grid secured higher prices to transmit electricity through its cables running from the UK to Belgium and France, and also benefited from the early startup of the North Sea Link, the world’s longest subsea power cable, which links the UK to Norway’s hydropower.

The FTSE 100 energy company reported first-half profits had increased by 86% to £1.1bn on the same period a year earlier, when Covid-19 lockdowns led to a slowdown in energy markets. The increase was in part helped by record-high electricity prices in the UK in recent months.

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The half-year results were also buoyed up by National Grid’s acquisition of Western Power Distribution (WPD), the local power grid company running grids for the Midlands, south Wales and south-west England, for £14.2bn in March.

The group added that earnings a share for the full year would be “significantly above the top end” of its 5%-7% guidance at the beginning of the year.

John Pettigrew, the company’s chief executive, said National Grid’s focus would be on “delivering critical and green investment to enable the decarbonisation of power, transport and heat” to help create a “clean, fair and affordable energy transition” in the UK and US markets.

Laura Hoy, an equity analyst at Hargreaves Lansdown, said the WPD acquisition had “juiced overall returns” for National Grid, while the early completion of the UK-France network was “the cherry on top”.

“National Grid’s planted itself firmly at the centre of the electric revolution,” Hoy said. “It’s not often that a utility offers that kind of growth opportunity, so NG could turn out to be somewhat of a gem within the sector.”

National Grid runs the subsea cables and the high voltage transmission networks in England and Wales, as well as the regional WPD electricity network, and plans to sell a majority stake in its gas transmission grid, which covers Great Britain, to help pay for the acquisition.

Pettigrew said the sales talks were on track because there was a recognition among potential buyers that “gas will have a role to play” for many years ahead, and the opportunity to invest in solutions to decarbonising the UK’s gas system, for example by blending gas with hydrogen.

National Grid also plans to sell the Rhode Island network from its American business, which runs gas and electricity networks in the north-eastern US, by March 2022.

Hoy warned that without the proceeds from these sales National Grid’s debt from “could become a crippling burden”, and added that “a lot can go wrong in six months”.

The earnings surge from National Grid’s cables running to Belgium, France, the Netherlands and Norway more than offset the shutdown of one of the UK’s most important power cables running from England to France after a fire in September.

The blaze at the Sellindge converter station in Kent forced the shutdown as energy markets rocketed to all-time highs amid global energy supply difficulties.

National Grid said “extensive work” would be needed to bring the 2,000 megawatt (MW) power link back to full service. Around half the cable’s capacity remains shut, of which 500MW will return from October 2022 and the final 500MW in December 2022.