National Grid: Interim Results, Making Stately Progress
Edison | Nov 14, 2016 06:05AM ET
National Grid (LON:NG) reported interim (H117) results on Thursday showing performance in line with guidance and maintaining its outlook. As expected, the UK Gas Distribution disposal is on track to complete early next year. Operationally, management continues to focus its energy on filing rate cases in the US with good progress achieved in Massachusetts Electric and KEDNY/KEDLI. In the UK, the company continues to negotiate with the regulator in the future of its role as system operator. RAV growth, capex and interim numbers were all in line with guidance. We reaffirm our fair value range of $55-69/ADR.
NG’s interim results were predictably steady given its high proportion of regulated revenues. Operationally, management demonstrated solid progress with each of its key priorities: the US rate filing programme, the UK Gas Distribution disposal and various UK regulatory dialogues. Investment plans are on track, with £2.15bn of capex invested over the half year, a 6% year-on-year increase. The interim dividend of 15.17p per share/$0.9427 per ADR is in line with the company’s policy of growth at least in line with RPI.
Management maintained its long-term objective of RAV growth between 5% and 7%, a target it will be more confident of meeting after the UK Gas Distribution disposal. For the current financial year, capital investment is expected to increase, the UK business is expected to be flat year-on-year and the ROE in the US business is expected to be around 8% benefitting from rate increases in Massachusetts and New York. On the whole, therefore, NG is performing well and is on course to meet its objectives.
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