National Grid unveils £3bn rights issue

UTILITIES giant National Grid yesterday shocked the market by revealing plans to tap investors for £3.2bn to keep up with investment demands in a rapidly-changing energy landscape.

The firm will issue 2 new shares per 5 existing shares, at a price of 335p – a 43.7 per cent discount to Wednesday’s closing price. Shares in National Grid slipped 7 per cent as investors digested the news, closing at 576.5p.

The firm needs the cash to replace ageing assets and undertake major infrastructure reinforcement works in the UK, to cope in particular with the leaps in energy generation from renewable and alternative sources.

“There have been significant developments in the UK energy landscape focused on maintaining security of supply and reducing carbon emissions,” the firm said.

“Environmental targets, legislation, age-related power station retirements and the decline of the UK’s North Sea gas reserves are expected to result in a significant change in the generation mix.”

Mick Gilligan, head of equities at Killik & Co, kept his “buy” rating on the stock, saying National Grid can now bring forward growth plans and maintain its single A credit rating.

The group unveiled the cash call alongside its full-year results, reporting a 12 per cent jump in pre-tax profit to £1.97bn for the year to March.

RACKING up the adviser fees on the National Grid rights issue will be three of the City’s largest banks.

Morgan Stanley is the lead financial adviser, joint sponsor, joins global co-ordinator and joint bookrunner on the deal, with the team led by Christopher Thiele, the bank’s EMEA head of power and utilities investment banking. Thiele, whose team recently won a gong at the Bloomberg/New Energy Finance awards for the top lead manager for clean and renewable energy, is joined by Alastair Cochran, a managing director in Morgan Stanley’s corporate broking team.

Bank of America Merrill Lynch is acting as a financial adviser, joint global co-ordinator and joint bookrunner for National Grid. The team there is headed up by Richard Taylor, the head of UK investment banking, who joined the bank in 2000 from HSBC. He has been involved in numerous high-profile deals, including the $36bn sale of O2 to Telefonica. Mark Astaire, BoA Merrill Lynch’s co-head of corporate broking, is also working on the National Grid rights issue.

Finally, Deutsche Bank is acting as joint sponsor, global co-ordinator and bookrunner. The bank’s corporate broking chairman James Agnew, fresh from working on Kraft’s £11.7bn acquisition of Cadbury, is on the team.