National Grid to Step Up Capital Investment in U.S.

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Researched by Industrial Info Resources (Sugar Land, Texas)--As political debate around the re-nationalization of energy grids mounts in the U.K., British power grid operator National Grid Plc (NYSE:NGG) (Warwick, England) is upping capital investments and growing its asset base in the U.S. Industrial Info is tracking more than $1.8 billion in active National Grid projects, including $370 million that are under construction in the U.S.

In its interim report, National Grid maintained its full-year outlook and said it expects capital investment to exceed 4 billion pounds (US$5.3 billion), after a first-half outlay of 2 billion pounds (US$2.6 billion), up 7% from a year earlier. About 55% of the first-half outlay was funneled into the U.S. market, where profits are on the rise.

"In the coming years, we expect significant investment opportunity in the U.S., driven by the need to replace aging infrastructure and to modernize the networks," Chief Executive John Pettigrew said in an earnings-related call.

National Grid owns and operates an 8,600-mile-long electricity transmission system spanning New Hampshire, Massachusetts, Rhode Island, Upstate New York and Vermont. Of the $370 million in U.S. investments, New York and Rhode Island have the lion's share, with 15 projects valued at just more than $280 million.

National Grid's $93 million Aquidneck Island Reliability Project in Portsmouth, Rhode Island, calls for the construction of two new substations - one each in Middletown, Rhode Island, and Newport, Rhode Island - a rebuild of an existing substation and the retirement of five substations. Planned upgrades also include the reconfiguration of two, high-voltage transmission lines from 69 kilovolts (kV) to 115 kV. For more information, see Industrial Info's project report.

National Grid's fiscal year begins on October 1 and ends on September 30 of the following year. For the first half of 2017-2018, capital spending in New York increased compared to the first half of 2016-2017 reflecting increased allowances, the company said. National Grid and subsidiary KeySpan Energy Corporation (Brooklyn, New York) have kicked off the Metropolitan Reliability Infrastructure project in Brooklyn, New York, and the Northwest Nassau Gas Transmission Reliability project to increase operational reliability on Long Island, New York. The two projects are expected to result in a total investment value of more than $500 million over six years.

The utility also plans to kick off construction of its $12 million 112-kV/13.2kV Sodeman Road Substation project in Middle Grove, New York. Industrial Info forecasts the project has a high probability (81%-99%) of being completed by February 2019. See Industrial Info's project report for more information.

In the U.S., National Grid's earnings jumped by nearly 20% to 526 million pounds (US$694 million), helped by the stronger dollar.

"That favorable sentiment is likely to continue after U.S. regulators approved our plans to spend $3 billion over the next three years upgrading our infrastructure to embrace a wave of low-carbon technologies such as renewable energy and electric vehicles," Pettigrew said.

Full-year performance in the U.S. business is expected to improve, driven by a full year of new rates for the utility's downstate New York natural gas and Massachusetts electricity businesses.

In the U.K., National Grid used its first-half results to make the case for its success as a private company after the Labour Party called for the company to be renationalized. Hit by a lower allowed base revenue and higher costs, the U.K. power-transmission network made a half-year profit of 847 million pounds (US$1.11 billion), compared with 965 million pounds (US$1.3 billion) in the same prior-year period. Revenues stood at 6.7 billion pounds (US$8.8 billion), up from 6.3 billion (US$8.3 billion) in the first six months of 2016. Over the last decade, National Grid said it has invested 14 billion pounds (US$18.5 billion) in power grid infrastructure.

"And the cost of transmitting electricity via the power grid has declined 30% below pre-privatization levels on a real basis," Pettigrew said. "One of the advantages of being a portfolio business is that we're not reliant on the regulatory stance of a single jurisdiction."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle TM, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com