National Grid, a leading energy company, has announced a significant capital raise of £7 billion to fortify its electricity networks in the UK and the US. The company aims to invest a total of £60 billion over the next five years to address the increasing strain on infrastructure due to the escalating transition towards renewable energy.
This strategic move comes as a response to the surge in demand for electricity expected from the widespread adoption of electric vehicles and heat pumps, as well as the integration of renewable energy sources like wind and solar power. National Grid's CEO, John Pettigrew, emphasised the unprecedented scale of this investment, stating it as the largest rights issue witnessed in Europe in the last 15 years, excluding the banking sector.
The decision to rebase its dividend from 53.1p per share this year to 45.3p next year, with subsequent increases aligned with inflation, has garnered mixed reactions from investors. While some are concerned about the impact on dividends, others view it as a positive step towards removing uncertainties surrounding the stock.
National Grid's investment plan demonstrates its commitment to facilitating the transition towards a cleaner and more sustainable energy future. The company aims to strengthen its infrastructure to accommodate the growing reliance on electricity and support the UK government's goal of decarbonising the electricity system by 2035.
In addition to the rights issue, National Grid plans to finance its investment through debt, the sale of its liquefied natural gas import terminal in Kent and its US onshore renewables business, National Grid Renewables. The majority of the investment, 52%, will be directed towards the UK, with the remaining portion allocated to the US.
The investment will primarily focus on the UK's electricity transmission and distribution systems, facilitating the widespread adoption of low-carbon technologies and ensuring a reliable and resilient energy infrastructure for the future.
