National Grid's shares drop 10% after announcing renewable energy plan and dividend reduction.

From Morningstar: 2024-05-23 20:29:00

Shares in National Grid (NG) dipped almost 10% after the company announced a plan to raise £7 billion to support renewable energy in the UK and US. Investors are concerned about dividend payments, but National Grid assured it will decrease dividends temporarily to accommodate the plan.

National Grid plans to lower dividends from 53.1p per share to 45.3p next year, promising to increase them in line with inflation later. Morningstar maintains National Grid’s Fair Value Estimate at £10.40 despite the new strategic plan. The core business of UK electricity transmission accounts for 65% of planned investments.

Analyst Tancrede Fulop believes National Grid may lose bargaining power when Ofgem imposes a new regulatory regime for UK transmission networks in 2026. By committing to increased investments, National Grid seeks higher returns despite the uncertain regulatory environment. Management plans to focus on UK electricity transmission and sell non-core assets.



Read more at Morningstar: National Grid Shares Plunge on Renewables Plan and…