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National Grid bet on US energy pays off despite winter storms

National Grid’s bet on the US market has paid off for its dividend hungry investors despite fears over the winter storms which battered the energy network operator late last year.
The FTSE 100 group’s shareholders took fright after a series of hurricanes wiped ?140m from their profits, but they are now in line for higher than expected dividends after National Grid’s full year earnings outpaced predictions.
A little over a month since the profit warning, the US business emerged as the “star of the group”, according to analysts at UBS.
In return patient investors will receive a 3.75pc dividend hike compared to the year before, and the promise of 7pc growth for the company in the near term.
The underlying earnings growth was mostly driven by the US which more than offset the weakness in National Grid’s UK electricity transmission business which has been squeezed by falling regulated revenues and higher costs.
National Grid’s operating profits bounded 9pc higher to ?3.5bn for last year. Although its adjusted pre-tax profits slipped by 5.6pc to ?2.65bn, the group still narrowly beat analysts’ estimate of ?2.64bn.
National Grid
The US provided the bulk of National Grid’s profits, falling slightly to ?1.7bn but still higher than analyst estimates of ?1.66bn.
National Grid boss John Pettigrew said he expects growth at the top end of the 5-7pc range for the medium term, and at least 7pc in the near term.
The group will rely on “continued capital discipline and improved efficiency" across the group, as well as the strong potential in the US market, he added.
National Grid’s look to the West has emerged as political pressure ratchets higher in the UK.
Mr Pettigrew said the group is “very conscious of the issue of affordability in the UK” while raking in higher profits.
“We were very pleased to report that National Grid has saved consumers ?540m and returned cash when we believed extra work on the grid wasn’t required. When you put all of that together consumers pay less than 10p a day for the energy grid,” he said.
National Grid bet on US energy pays off despite winter storms

The National Grid control centre

Credit:
Andrew Crowley
National Grid also plans to boost investment in the UK, as well as in the US where he has described the regulator as being “very supportive” and “very ambitious” around tackling carbon emissions.
In the UK, Mr Pettigrew said it is “incredibly important” that there is a regulatory environment that is predictable and stable.
“In recent years we’ve seen a little less predictability and stability,” he said.
“As we look to the future, we’re in dialogue with Ofgem over what the framework should look like. And we are very clear that we need to get the balance right between affordability and making sure the UK is an attractive place to invest,” he said.
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