National Grid shares: What to expect from its 20/21 full year results

• Closing net debt estimated at £30.9bn
• Pre-tax profit of £2.3bn forecast
• £7.8bn deal for Western Power Distribution to complete by Q1 2022
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What do analysts anticipate for National Grid’s 2020/21 full year results?

National Grid will be publishing its 2020/21 full year results on 20 May. In anticipation of this, National Grid published its analyst consensus on 17 May. The consensus, based on projected earnings made by various research analysts who cover National Grid, anticipates a £2.3bn pre-tax profit for 2020/21 and a net profit of £1.835bn.

Almost half of its underlying income during the Covid-19 pandemic is thought to have been derived from the US regulated market, totalling an estimated £1.522bn. That’s followed by £1.092bn from the UK electricity transmission marketplace and £430m from the UK gas transmission marketplace.

Has National Grid’s looming acquisition of Western Power Distribution strengthened its hand?

Its gas assets generate over 13% of National Grid’s estimated overall income. It’s no surprise to see that the firm plans to sell its key gas assets following its impending £7.8bn acquisition of the UK’s biggest electricity distributor, Western Power Distribution (WPD).

National Grid confirmed that its purchase of the US-owned WPD is part of its intention to focus exclusively on electricity. Its majority stake in National Grid Gas PLC, the owner of the UK’s gas transmission system, looks set to be sold in the coming months.

The deal to acquire WPD alone will see National Grid assets shift from 60% to 70% electricity-focused. This is something the company has needed to adopt given the UK’s shift to greener, more sustainable power sources.

John Pettigrew, CEO, National Grid, described the deal for WPD as a ‘one-off opportunity to acquire a significant scale position in UK electricity distribution’.

How have National Grid shares reacted to its Ofgem Penalty Notice?

On 12 May, Ofgem revealed its final decision on its Penalty Notice issued to National Grid for inaccurate and unbiased electricity demand forecasts covering the period April-July and October 2017.

Ofgem confirmed National Grid will be fined £1.5m having been found in breach of Standard Condition C16 of its transmission license. Although Ofgem revealed it did not believe National Grid had deliberately contravened its obligations, it was criticised for its lack of compliance controls.

Given that Ofgem’s findings suggested the breach was unintentional, the Penalty Notice has not had a negative impact on National Grid shares. Since 12 May, the National Grid share price has risen from £9.19 to highs of £9.36 on 14 May, before contracting to £9.21 during this morning’s trading session – still 0.2% up since Ofgem’s final decision.

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