Surprise £3.2bn rights issue by National Grid
The National Grid launched a surprise £3.2bn rights issue drive yesterday (May 20) aimed at overhauling the UK's power infrastructure.
The fully underwritten rights issue of 990,439,017 new ordinary shares at £3.35 each, is on the basis of two new ordinary shares for every five existing ordinary shares.
The move is designed to raise much needed capital for building a ‘smart grid’ to replace the country’s aging energy infrastructure.
In November 2006, National Grid set out its strategy to focus primarily on the transmission and distribution of electricity and gas in its chosen markets of the United Kingdom and the United States.
National Grid chief executive, Steve Holliday, said: “Environmental targets, legislation, age related power station retirements and the decline of the UK’s North Sea gas reserves are expected to result in a significant change in the generation mix between now and 2020.
“The board believes that raising £3.2bn through the rights issue will give it the scope and appropriate financial flexibility to deliver the group’s strategy.
“In particular, the board believes it will allow the group to fund a significant increase in capital investment and continue to deliver attractive returns to shareholders, whilst maintaining single A credit ratings for National Grid’s UK operating companies in a more volatile economic environment.
“The Board also believes that raising equity today will strengthen the Company’s long-term competitive position to take advantage of an appropriate share of UK growth opportunities.”
He added that the proceeds from the issue will be used to fund a portion of National Grid’s UK capital investment programme and for general corporate purposes.
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