LONDON, Nov 21 (Reuters) - UK-based energy distributor National Grid said on Thursday the business was performing in line with expectations under a new price control regime and it would continue a policy of dividends that match or exceed British consumer inflation.
Its profit before tax fell 7 percent to 979 million pounds for the six months to Sept. 30, the first period the company has operated under the new formula for controlling its UK prices until April 2021, but it maintained the interim dividend payout at 14.49 pence a share.
British energy regulator Ofgem introduced price controls in April to set returns on National Grid’s regulated UK power and gas assets over eight years, versus an earlier five-year period.
“The new eight-year price controls, covering our principal UK regulated activities, and the recent rate case settlements in the U.S., provide us with the long-term framework and clarity to continue to invest for the future,” Chief Executive Steve Holliday said.
The extended price control period gives National Grid the certainty it needs to invest 25 billion pounds through April 2021, Holliday said.
National Grid, which also has operations in the northeast of the United States, reiterated a target to keep its dividend at least in line with the British Retail Price Index each year for the foreseeable future.
That figure was 2.6 percent in October, down from 3.3 percent in March.
The company said its 3.5 billion pound, 2013-2014 capital expenditure programme - down from initial estimates of 3.6-3.9 billion pounds - was expected to drive regulated asset growth by around 6 percent.
The results were broadly in line with expectations, despite an unexpected 1 percent drop in operating profit to 1.57 billion pounds blamed partly on higher U.S. transmission system costs, Liberum Capital analyst Mulu Sun said.
“Overall, National Grid may benefit from being seen as a safe-haven where investors can park money as the utilities sector in the UK is under political pressure to reduce utility bills,” Sun said.
Potential political intervention in Britain’s energy markets in response to public anger at rising electricity and gas prices puts utility profits at risk, as it may limit their ability to pass costs through to customers.
The firm’s shares traded 0.13 percent lower at 7.67 pounds.