National Grid profits have dipped slightly due to the cancellation of a new gas transmission pipeline in Avonmouth.
Last year Ofgem decided to lower the company’s RIIO spending allowance by £168.8 million after concluding the project was no longer necessary as part of a mid-period review.
National Grid has blamed the loss of these revenues for a drop in its underlying operating profits for the six months to the end of September which fell 6 per cent year-on-year to £1,285 million. Underlying pre-tax profits declined by 4 per cent to £816 million.
Accordingly, the gas transmission business posted a 37 per cent reduction in underlying operating profits to £91 million. The figure for electricity transmission was up 3 per cent at £556 million.
Earnings from National Grid Ventures – the segment of the group devoted to non-regulated activities – swelled by 31 per cent to £207 million.
The company noted its recent decision to approve the investment of £850 million in its proposed 1.4GW Viking Link interconnector to Denmark.
National Grid said the Nemo Link, North Sea Link and IFA2 interconnectors currently under construction “remain on track”. The Nemo Link project is expected to be commissioned before the end of March next year.
The firm said it will invest more than £2.1 billion in the four interconnectors which it expects to contribute roughly £250 million to annual earnings once they are fully operational by the mid-2020s.
The half-year results were also affected by a drop in profits from National Grid’s US division as a result of tax reforms and storm-related costs.
They did not include earnings from Cadent following National Grid’s decision to proceed with the sale of its remaining 39 per cent stake in the gas distribution business for £2 billion. Subject to regulatory approval, the transaction is expected to be completed in June 2019.
John Pettigrew, chief executive of National Grid, said: “We have continued to make strong operational progress in the first six months whilst maintaining excellent levels of safety and reliability.
“Investment in our networks increased to £2.1 billion, including further progress on our three major interconnector projects. In the UK, we are implementing a cost efficiency and restructuring programme to ensure that we continue to drive outperformance for customers and shareholders.”
He added: “Strategically, we have made good progress with the decision to exercise options for the sale of our remaining 39 per cent share in Cadent and the final investment decision on the Viking interconnector.
“Looking forward, National Grid is well positioned for the ongoing energy transition and we are on track to achieve asset growth at the top end of our 5-7 per cent range in the medium term.”