nergy network operator National Grid has seen its half-year profits soar as it delivers renewable electricity from France with a new undersea cable.
National Grid saw profit before tax jump 86% to £1 billion in the six months to 30 September. The figure was buoyed by the £7.8 billion acquisition of Western Electricity Distribution. The deal closed earlier this year, meaning the numbers were included in financial reports for the first time. Setting this impact aside, comparable profit still increased 24%.
Chief executive John Pettigrew said the performance was inspired by a “strong contribution” from a new interconnector in France that came online during this period.
Interconnectors are undersea cables that link Britain’s electricity network to neighboring countries, allowing them to distribute freshly generated electricity. National Grid has recently completed work on another £620 million interconnector with Norway.
Improvements in power demand and the fading effects of Covid-19 also boosted profits.
National Grid upgraded full-year forecasts after a strong first half, saying it now expects “full-year underlying EPS to be well above the top end of our 5-7% range.” Thanks to higher prices for electricity from interconnectors, operating profit is on track to exceed forecast by £100 million. National Grid today increased its interim dividend from 17p to 17.2p.
Shares rose 9.5p, up 1% to 984.4p.
National Grid is currently shifting its business to focus on renewable energy and green power infrastructure. It plans to spend £6.5 billion a year on building new infrastructure to support it and has invested £2.8 billion so far this year. Plans include a 33 km tunnel 60 meters under London that will ensure the grid has enough capacity to deliver renewable electricity from sources such as offshore wind when demand increases. This tunnel will run from Crayford to Wimbledon.
National Grid believes it can fund investments while maintaining cost levels. It has launched a three-year cost efficiency program that aims to save £400 million per year. Pettigrew said most of the cost savings would come from technology and digitization, adding that “it’s not just about significant job losses.”
As an infrastructure operator, National Grid has not been directly affected by increases in gas prices, but is involved in cleaning up when operators go bad. Pettigrew said he was “clearly concerned” about declining levels of consumer suppliers.
Concerns are growing that Britain could face a cold winter, with concerns about gas prices and supplies skyrocketing. Pettigrew said there could sometimes be “a little tightness” in supplies but that was normal.
“As we look to winter, there’s a lot of gas available,” he said. “Of course, there has to be a difference in prices for the gas to flow.”