National Grid Shares Plunge on Renewables Plan and Dividend Doubts

National Grid's share price has taken a hit following news that it plans to raise £7 billion to accelerate its transition to renewable energy sources

Christopher Johnson 24 May, 2024 | 12:29AM
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UK power industry main

Shares in National Grid (NG) recorded an almost double-digit hit this week after the company announced plans to raise around £7 billion in support of renewable energy sources in the UK and US. 

The announcement appears to have shocked investors, who immediately questioned the companies ability to pay dividends to its shareholders.

National Grid subsequently said it will decrease its dividend from 53.1p per to 45.3p per share as of next year to accommodate the plans, although it assured investors it will increase dividend payments again in line with inflation at a later date. 

Key Morningstar Metrics For National Grid:

• Morningstar Fair Value Estimate: £10.40
• Morningstar Rating: 
• Morningstar Economic Moat Rating: None 
• Morningstar Uncertainty Rating: Low 

Responding to the news, Morningstar analyst Tancrede Fulop maintains National Grid's Fair Value Estimate at £10.40 despite the new five-year strategic plan.

"National Grid intends to sell its liquid natural gas import terminal on the Isle of Grain [in Kent] and its renewables assets. In light of current market conditions, we believe that it could fetch a good price for those assets," he says.

"The core business of UK electricity transmission accounts for 65% of the planned increase in investments. Accordingly, its share of total investments increases from 27% in the previous plan to 38% in the new one. The increase is driven by system reinforcement and new lines to connect new offshore and onshore wind farms."

However, Fulop believes National Grid may lose some bargaining power when Ofgem, the gas and electricity regulator, imposes its five-year regulatory regime for UK transmission networks which starts in April 2026.

"National Grid calls for higher returns given high interest rates," he adds.

"By committing to a big step-up in investments ahead of the Ofgem final decision expected in early 2026. When asked about it during the conference call, management said it could not afford to maintain uncertainty about its future investments in the meantime."


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Christopher Johnson  is data journalist at Morningstar

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