National Grid systems to be a legally separate division... but will remain a subsidiary

Oliver Gill
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Authorities are no longer sitting on the fence when it comes to the future of the National Grid (Source: Getty)

National Grid investors will breathe a sigh of relief as it has avoided being split up by the government.

The business, energy, and industrial strategy department and regulator Ofgem today revealed plans for the the electricity system operator to be separated into its own distinct legal entity from 2019.

But authorities stopped short of spinning the operating entity completely off from National Grid, meaning profits from the operator will continue to be consolidated into the wider group.

Read more: Government set to wave through takeover of National Grid gas network

Fears had persisted prior to today that the government would mandate full separation of the part of National Grid that operates the electricity networks – a distinct division from the part that owns the UK's electricity infrastructure.

Last year, MPs on the energy select committee called for a fully independent systems operator after warning National Grid's potential conflicts of interest were growing.

Investor concern

"[The decision] should remove any remaining investor concern relating to this matter as of half-year results back in November," said Maurice Choy, an analyst at RBC.

The boss of National Grid welcome the decision. "The Government and Ofgem have recognised our vast experience and expertise in balancing the electricity system and ensuring the market runs efficiently, said John Pettigrew.

"We share the same priorities towards keeping customer bills down, increasing certainty, enabling greener energy, and security of supply."

Read more: National Grid plans special divi after £14bn sale of its gas network

Shares in the FTSE 100 firm rose around two per cent following the news. Choy explained this was because the operating element of National Grid was a comparatively small division, contributing between one and two per cent to the group's financial performance.

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