Ofgem set to give National Grid go ahead on £44bn investment
NATIONAL Grid’s plans to invest as much as £44bn in the UK’s energy infrastructure are set to be approved by Ofgem, although it could have to fund the spending by selling off assets or cutting dividends.
The energy regulator is expected to give National Grid the green light this morning when it announces its initial decision on the company’s plans, the Sunday Telegraph reported yesterday.
National Grid plans to invest more than £21bn in links between new electricity plants in England and Wales over the next eight years, as well as spending £9bn on gas pipelines and £13.5bn on gas distribution networks.
Last week analysts said they believe Ofgem will not allow National Grid to significantly raise its prices, meaning that the investment will have to be paid for by selling assets, raising capital or decreasing its dividends.
The company has indicated its preferred fundraising measure would be selling off assets, with chief executive Steve Holliday keen to keep investors happy after criticism over the way he handled a surprise £3.2bn rights issue in 2010. Holliday was accused of misleading shareholders about the company’s cash reserves.
National Grid has said bills could increase by up to £20, but the energy regulator is expected to demand stricter terms under its new price control system, which aims to keep prices down. Ofgem will announce its initial proposals this morning and make a decision later this year.
National Grid and Ofgem did not comment on the plans yesterday.