National Grid boosted by US operation

 

National Grid expects annual profits to be significantly higher this year thanks to favourable weather conditions boosting energy use and growth at the company's US operations.

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Profit forecast: National Grid expects a particularly strong year

Britain's biggest utility is taking the axe to costs in its business on the other side of the Atlantic, shedding 1,200 jobs - or 7% of its workforce - as part of a $200m savings plan. It will also hike the annual dividend pay-out by 8%.

Investors welcomed the news, pushing up National Grid shares 1.2% to 552.5p and valuing the FTSE 100 company at around £19bn.

Chief executive Steve Holliday did not rule out an eventual sale or spin-off of the US operation, a move previously flagged by City analysts as a way to boost the share price.

National Grid was disappointed last month when it failed to reach an accord with regulators in New York over the prices it can charge in part of its US operation.

Liberum Capital analyst Dominic Nash said the job cuts were a 'step in the right direction'.

Under its revamp plans the company has created a new management structure, making Tom King boss of the US business and Nick Winser head of the UK arm.

Mark Fairburn, who was director of gas distribution, will leave in March. He will walk off with a severance package worth around £10m, including 12 months' salary, a £3.7m pension and share options worth £5.6m at yesterday's closing price.

Holliday said: 'We are positioned for a particularly strong year, driven by profit growth at our US business.'

Closer to home, National Grid is starting the two-year process to renegotiate pricing controls for the UK transmission and gas distribution businesses.

National Grid is ploughing £3.6bn into the UK network of wires this year. Liberum's Nash says the industry together needs to spend at least 10 times that before 2020 to upgrade the infrastructure.

 
Powering up
Britain's biggest utility, market value £19bn
Cutting 1,200 US jobs to save $200m a year
One-off cost of restructuring is $100m
Investing £3.6bn in UK network this year