U.K. National Grid Boosts Profit 21%, Estimates Sandy Losses
National Grid Plc (NG/), the operator of energy networks in the U.K. and North America, increased fiscal first-half earnings 21 percent after expanding assets and limiting cost growth.
Pretax profit rose to 1.15 billion pounds ($1.82 billion) in the six months through September from 953 million pounds a year earlier, in line with the 1.1 billion-pound median estimate of four analysts surveyed by Bloomberg. Costs from Hurricane Sandy last month probably won’t exceed 100 million pounds, the company said today in a statement.
“This good first half-year performance reflects increased net regulated revenues driven by our growing asset base and tight control over operating cost growth,” Chief Executive Officer Steve Holliday said in the statement.
The company has increased investment in its U.S. power- transmission and gas-distribution businesses, while boosting spending on U.K. networks to accommodate more generation from low-carbon sources such as wind farms. The increase in regulated controllable costs was kept to 3 percent as a U.S. cost-cutting program helped to mitigate “inflationary pressures,” it said.
National Grid fell 0.3 percent to 692 pence in London trading as of 10:54 a.m. local time.
Hurricane Sandy, which hit the U.S. and Caribbean in October, cut power to about 1.1 million of National Grid’s Long Island customers. Costs of as much as 100 million pounds, which the company says were incurred outside its work with the local power authority, probably won’t affect results until the next half at the earliest, Deutsche Bank AG said in a note.
The utility forecast “another year of good operating and financial performance.” Its outlook hinges on the result of an audit by U.K. energy regulator Ofgem, which is reviewing prices charged by the company’s power and gas grids. New price controls will take effect in April and last eight years, compared with past review periods of four to five years.
Initial proposals put forward in July were criticized by National Grid, which said the prices wouldn’t be enough to spur essential investment in infrastructure. A final decision is due Dec. 17.
The London-based company submitted a “very comprehensive” and “fair” response to Ofgem’s original proposals, Holliday said today on a conference call, declining to comment on whether he expects a more favorable outcome next month.
Final U.K. price-control proposals remain the “key” issue for the company, Deutsche Bank said in the note. The bank said in January it expects Ofgem to be “tougher than the market is anticipating.”
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