The UK National Grid Group has announced a 25% profit rise.
The National Grid yesterday announced a higher than expected dividend, following a 25% higher profit before tax for the first half of 2000. It is optimistic about its opportunities in the US, having agreed to buy Niagara Mohawk in September. This follows its purchases of New England Electric System and Eastern Utilities Associates in March and April respectively.
The utility now expects the US market to generate 60% of operating profit (up from 35%), as the company hopes for a more relaxed regulatory regime. It aims to become one of the US’ top ten utilities. In addition, the UK market, despite tough regulatory bodies, will provide a stable base with a guaranteed income.
The telecoms market also offers growth opportunities for the company. Although it has reduced its stake in long-distance and Internet infrastructure provider Energis to 34.6% to raise cash for acquisitions, it is still looking for growth elsewhere, aiming to leverage its infrastructure expertise. For example, in Brazil it has set up Intelig, a joint venture with Sprint and France Telecom. Despite teething problems – the operation is currently over-used by low-margin domestic consumers – Intelig should become highly successful as it focuses on the fast-growing business market.
The opportunities in the US and greater diversity of earnings should put the National Grid in a strong position to deliver sustained steady profit growth, while its new ventures in telecoms will allow it to build on its expertise in this sector. Further improvements in operating profits are on the horizon.
