UK watchdog Ofgem approved a baseline total expenditure of £10.3 billion for National Grid’s electricity transmission networks, up from £8.8 billion. The baseline totex allocation increased by 17.5% to £4.9 billion, falling short of the company’s £5.7 billion request. The allowed cost of equity rose marginally to 5.70%.

The shortfall in baseline totex defers asset value growth, with most investments expected to be funded later. Morningstar maintains a fair value estimate of GBX 1,100 per share for National Grid. The £10.3 billion expenditure is only 15% of the total £70 billion under RIIO-3, with the rest released progressively for major projects.

Read more at Morningstar: National Grid: Ofgem Final Determination for RIIO-3 an Improvement but Below Firm’s Request