National Grid gas sale ‘on track’ as profits rise

National Grid has reported an increase in pre-tax profit of 15 per cent to £3 billion, up from £2.6 billion the previous year, as it announced the sale of its gas distribution business is “on track”.

In its 2015-16 full year financial results, Grid said its increase in profits, which was slightly ahead of analysts’ expectations, was driven by a strong operational performance across its UK and US businesses.

The company said its gas distribution business had made “good progress” on the activity needed to create a standalone business that can operate efficiently, while maintaining its primary role as a provider of “safe and reliable networks”.

“The necessary consultations are underway with internal and external stakeholders to enable a smooth separation process,” it said. The sale, announced last November, is expected to reach completion in early 2017.

Overall, the group posted a six per cent increase in operating profits, which came in at £4 billion, up from £3.7 billion the previous year.

Whitman Howard utilities analyst Angelos Anastasiou said: “The profit performance reflects an improvement in the overall group return on equity of 50 basis point  to 12.3 per cent, with much of this improved return coming from the strong first half performance in other activities.”

However, Grid said its UK regulated businesses had also delivered “solid operational performance”, driving further efficiency and innovation and, in the first three years of the RIIO price control period, customers’ share of savings is more than £330 million.

The transmission operator has been working with the Department of Energy and Climate Change (Decc) and Ofgem to consider how to evolve the current system operator model, to make it more independent, whilst remaining cost effective. The firm insisted that, in doing so, it is “vital” that there is no disruption to the “pivotal role” National Grid plays as system operator in balancing the network.

National Grid chief executive John Pettigrew took over from Steve Holliday in April. He said: “In 2015/16, alongside the strong performance, we also made good progress with important rate filings in the US, and the start of a process to sell a majority interest in the UK gas distribution business, which is expected to complete in early 2017.

“The needs of our customers remain at the centre of our business, demonstrated by the significant investment in critical infrastructure in the UK and the US, and over £330 million of savings generated for customers in the UK in the last three years.

“We are well positioned to deliver asset growth in 2016/17 and beyond. We will continue to enhance efficiency across the group to deliver an outstanding and affordable service to our customers. At the same time, National Grid will continue to adapt to the new trends in the energy sector, to ensure we keep delivering value for shareholders.”