10th Nov 2015 07:36
LONDON (Alliance News) - National Grid PLC Tuesday confirmed media speculation that it is looking to sell its UK gas distribution business in order to rebalance its portfolio, with the proceeds being returned to shareholders.
"The UK Gas Distribution business is a very attractive, mature business delivering good cash flows and return on equity. The board believes there is now an opportunity to rebalance National Grid's portfolio to deliver a higher asset growth profile and realise the value it has created in the networks," said the company.
"Following completion of a sale, the board expects to return substantially all of the net proceeds to shareholders, while maintaining the strong balance sheet that allows the group to continue to fund its investment programme and maintain the policy of increasing dividend per share by at least RPI for the foreseeable future," it added.
The process is likely to be completed in early 2017, National Grid said, and media reports earlier this week from Bloomberg said the assets could be worth as much as GBP10.00 billion. Bloomberg, citing people "familiar with the situation", also suggested the idea that the business may be carved into parts, or that National Grid may sell a minority stake.
National Grid's comments came as it reported a rise in pretax profit for the six months ended September 30 to GBP1.34 billion from GBP1.17 billion a year earlier. Revenue rose to GBP6.85 billion from GBP6.36 billion.
Operating profit followed suit and increased to GBP1.83 billion from the GBP1.61 billion reported a year earlier.
The solid results prompted the utility to raise its interim dividend in line with its policy to 15.0 pence per share from the 14.71p a year earlier.
Net debt at the end of September rose to GBP24.60 billion from GBP23.70 billion at the end of March 2015.
Looking forward, National Grid said it expects capital expenditure for the full year to total around GBP3.70 billion, driving asset growth of between 4% to 5% for the full year. In the first half, National Grid spent GBP1.91 billion in capital expenditure, which was up 17% on a constant currency basis from last year, primarily reflecting increased investment in the US and in UK Gas Distribution.
However, the company also said its cashflow before capital expenditure and shareholder returns for the full year is expected to "reduce slightly", reflecting lower working capital inflows and increased US pension contributions.
By Joshua Warner; [email protected]; @JoshAlliance
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