National Grid has reported an 18 per cent drop in operating profits to £2.8 billion after writing off £137 million of costs incurred in developing the connections for the now shelved Wylfa Newydd and Moorside nuclear projects.

The company said the results for 2018/19 were also impacted by one-off expenses of £283 million and £204 million related to a labour dispute in the US and its cost-cutting efforts on both sides of the Atlantic.

The adjusted operating profit for the electricity transmission business in the UK slipped 2 per cent to £1 billion. However, its regulated financial performance increased by 8 per cent to £1.4 billion due to growth in its regulatory asset value (RAV) and an improved return on equity.

The latter rose by 0.6 percentage points year-on-year to 13.7 per cent. National Grid said this represents an outperformance of 3.5 percentage points when compared to its baseline allowance under RIIO. The RAV grew by 3.8 per cent to £13.5 billion after the company made £925 million of investments during the year.

There was a 38 per cent decline in the adjusted operating profits for the gas transmission business in the UK to £303 million and its regulated financial performance decreased by 11 per cent to £443 million.

This was mainly due to Ofgem’s decision in September 2018 to withdraw £123 million for replacement or upgrading of gas compressors and the cancellation as new gas pipeline in Avonmouth. National Grid said the return on equity fell 0.5 percentage points to 9.5 per cent, putting it 0.5 percentage points below the RIIO baseline.

The company invested £308 million in the gas transmission network in 2018/19, including in the replacement of the Feeder 9 gas pipeline under the Humber Estuary. The RAV rose by 3.3 per cent to £6.2 billion.

The sale of its remaining 39 per cent stake in Cadent is expected to be completed in June, bringing in £2 billion in cash.

National Grid chief executive John Pettigrew said: “During the year we launched new efficiency programmes to become a leaner, more agile organisation. In the US, we continued to make good regulatory progress and we reached agreement on new employment terms with unions in Massachusetts Gas. We delivered good returns in the UK and we made significant progress on our interconnector portfolio…”

“Looking ahead, we will continue to contribute to the important regulatory agenda in the UK and the US, to create value for shareholders, and play a central role in driving decarbonisation. Having delivered almost £640 million of savings for UK customers over the last six years, efficiency remains a key focus as does continued investment, which will increase to almost £5 billion each year for the next two years.”

The results came as Labour announced plans to renationalise Britain’s energy networks, with National Grid becoming part of a new National Energy Agency. According to the proposals, shareholders would be paid in government bonds but would not receive the market rate, with the price instead being decided by parliament and possibly including deductions for “asset stripping”, pension deficits and previous state subsidies.

Responding in a statement, National Grid said: “These proposals for state-ownership of the energy networks would only serve to delay the huge amount of progress and investment that is already helping to make this country a leader in the move to green energy.

“At a time when there is increased urgency to meet the challenges of climate change the last thing that is needed is the enormous distraction, cost and complexity contained in these plans.”