ii view: National Grid will spend big under new chief exec

First-half results to 30 September

• Adjusted operating profit up 13% to £2.29 billion
• Interim dividend up 3% to 16.35p per share
• Net debt up 1% since late March to £41.85 billion

Chief executive John Pettigrew said:

"Our financial performance reflects another period of strong operational delivery in line with our five-year financial frame. We continue to deliver for our customers, investing a record £5 billion this half, and we are on track to invest over £11 billion this year. 

“This investment in our networks is critical to ensure continued resilience, enable economic growth, deliver cleaner energy, and meet growing power demand.”

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ii round-up:

National Grid (LSE:NG.) today detailed first half profits to late September that broadly matched City expectations, with the UK and US focused company soon to be headed by former Shell executive Zoë Yujnovich. 

Adjusted operating profits rose 13% from a year ago to £2.29 billion. A 3% improvement in the interim dividend to 16.35p per share is payable to eligible shareholders on 13 January. John Pettigrew, chief executive for almost 10 years, is retiring, with the new head taking the helm from 17 November. 

Shares in the UK’s largest utility company by stock market value gained 0.5% in UK trading having come into these latest results up by just over a fifth so far in 2025. That’s similar to both the FTSE 100 index and the UK’s biggest renewable energy generator SSE (LSE:SSE) year-to-date.  

National Grid operates in the UK and across the Eastern coastal states of the USA. Group plans include total cumulative investment of around £60 billion up to its 2028/2029 financial year. 

Investments during 2025 have included the upgrade of more than 100 miles of transmission lines in upstate New York as well as the replacement of 208 miles of leak-prone gas pipes in the US. 

Future investments include around £23 billion in UK electricity transmission networks to help facilitate offshore generation and other new onshore system connections. 

Builders of renewable generation regularly have to wait before being connected to the grid. Plans include readiness to connect 19 GigaWatts of additional demand to support the UK government’s drive to develop AI Growth Zones and datacentres. 

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the results, flagging an estimated fair value price of 1250p per share. 

ii view:

National Grid operates primarily in the transmission and distribution of electricity and gas in the UK and the US. Its divisions include UK electricity transmission, UK electricity distribution, as well as divisions for New York and New England in the US. Geographically, the UK makes most of its profits at just over 70%, with the US the balance.   

For investors, an investigation by regulator Ofgem into a fire at a National Grid plant which put Heathrow airport out of action, is ongoing with a fine possible. Negotiations with UK and US regulators create periodic uncertainty. Adjustments to taxes and capital allowances following the UK Budget could have an impact, while environmental considerations include potential new pylons across green fields and near homes.  

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To the upside, and given a degree of predictability for energy usage, National Grid can offer five-year financial plans which few other companies can. Major investment in the group’s core transmission business is being made to help connect new renewable generation such as offshore windfarms. Geographical diversity includes exposure to the US, while a previous year £7 billion fundraising has strengthened the group’s balance sheet. 

On balance, and despite continuing risks, this broadly defensive utility operator on a forecast dividend yield of around 4%, is likely to keep income investors supportive. 

Positives: 

• Attractive dividend payment (not guaranteed)
• Geographical diversity

Negatives:

• Subject to regulatory decisions
• Subject to currency movements

The average rating of stock market analysts:

Buy