National Grid plc

Overview

National Grid plc is one of the world's largest investor-owned energy infrastructure companies, operating electricity transmission and distribution networks in the United Kingdom and regulated electric and gas utilities across New York and Massachusetts. It is listed in London with American Depositary Receipts in New York. Formed in 1990 as part of the privatization of the UK electricity industry, it has expanded through acquisitions into a predominantly electricity-focused business spanning two countries.

Zoë Yujnovich became Chief Executive in November 2025, succeeding John Pettigrew, who led the company for roughly a decade. Pettigrew oversaw a dramatic reshaping of the portfolio: the £7.8 billion acquisition of Western Power Distribution, the UK's largest electricity distribution company, the divestiture of UK gas transmission, the transfer of the electricity system operator function to government ownership, and a £7 billion rights issue to fund the expanded capital program. Yujnovich, previously an Integrated Gas and Upstream director at Shell, takes over with that program well underway.

The four primary segments are UK Electricity Transmission, UK Electricity Distribution operating as Western Power Distribution, US Regulated operations in New York and New England, and National Grid Ventures, which owns electricity interconnectors linking the UK to continental Europe and Scandinavia. The connecting thread is regulated or contracted wires infrastructure: National Grid is not a power generator and takes no commodity price exposure in its core operations. The stock traded around 1,230 to 1,250 pence in early July 2026, a market capitalization of roughly £62 billion.

Business segments

Portfolio transformation

National Grid has spent five years deliberately reorienting away from gas and toward electricity. The logic is straightforward: net-zero transitions run through electricity networks rather than gas pipelines, and the investment needed to accommodate renewable generation, electric vehicles, and heat pumps concentrates on the wires side. Five moves did it.

First, the March 2021 acquisition of Western Power Distribution for £7.8 billion gave National Grid the UK's largest electricity distribution business, the largest such transaction in UK history. To partly fund it and satisfy regulators, it simultaneously agreed to sell Narragansett Electric to PPL for approximately $3.8 billion, closing in May 2022.

Second, it divested the majority of UK gas transmission and metering to a consortium led by Macquarie Asset Management in January 2023, with a further 20% stake sold in July 2023 for £681 million. That business now operates as National Gas plc, independently managed, and National Grid retains no operational role in UK gas transmission.

Third, in October 2024 it transferred its Electricity System Operator function to government ownership for £630 million. The entity, now the National Energy System Operator, handles real-time balancing of the GB electricity system and long-term energy planning. The transfer removed an operationally distinct and politically sensitive function and left National Grid a pure networks owner and operator.

Fourth, in June 2024 it completed a £7 billion rights issue, one of the largest in UK corporate history, offering 7 new shares for every 24 held at a 34.7% discount to the ex-rights price, to strengthen the balance sheet and equity-fund the expanded capital plan.

Fifth, during fiscal 2026 it completed two further disposals: National Grid Renewables, its US onshore renewables business, to Brookfield Asset Management and partners at a $1.735 billion enterprise value in May 2025, and the Grain LNG import terminal to a consortium of Centrica and Energy Capital Partners at a £1.5 billion enterprise value in November 2025, together generating £2.8 billion of net cash proceeds. The result is a significantly larger, electricity-concentrated pure networks business with a heavier capital program and a substantially larger debt load than five years ago.

Financial performance

National Grid reported FY2026 revenue of £17.7 billion from continuing operations, down 4% from FY2025's £18.4 billion. Underlying operating profit was £5.68 billion, up 9% at constant currency. Underlying earnings were £3.86 billion, up 12%, and underlying earnings per share was 78.0p, up 8% at constant currency from 73.3p. Capital investment reached a record £11.6 billion, up 18%. For FY2027 the company guides to underlying EPS growth of 13% to 15% from the 78.0p baseline, reflecting the step-up in allowed revenue as RIIO-T2 gives way to RIIO-T3, with group capital investment growing about 10% to nearly £13 billion.

The company reports both statutory and underlying figures. Statutory profit after tax was £3.24 billion in FY2026, statutory EPS 65.5p, up 9%, boosted by £376 million of pre-tax net exceptional gains on the Grain LNG and National Grid Renewables sales. Underlying figures exclude exceptional items, remeasurements, and timing effects to show regulated operating performance more cleanly, and underlying EPS is the basis for dividend setting and guidance.

Net debt at March 31, 2026 was £44.2 billion, up £2.8 billion year over year even after £2.8 billion of net divestment proceeds, with regulatory gearing steady at 61%. The company guides to net debt rising by just over £6 billion in FY2027 and gearing around 64%. It is rated investment grade. The full-year dividend was 48.49p per share, up 3.8%, in line with a policy of growing the dividend with UK CPIH inflation, a yield of roughly 3.9% at the mid-2026 share price. The dividend is funded through a combination of operating cash flows and debt, since the size of the capital program leaves limited free cash flow after investment.

Strategy & outlook

The capital plan of at least £70 billion covering 2026/27 through 2030/31, confirmed in the upgraded five-year framework announced on March 2, 2026 alongside the RIIO-T3 acceptance, is the defining commitment of this period, roughly a 70% step-up from the prior five years. It allocates roughly £31 billion to UK electricity transmission, £9 billion to UK electricity distribution, £17 billion to New York regulated operations, and £12 billion to New England, with £1 billion for National Grid Ventures. The company targets around 10% compound annual asset growth, with group assets trending toward £115 billion by March 2031, and 8% to 10% annual underlying EPS growth from the FY2026 baseline. Approximately three-quarters of the supply chain and delivery mechanisms to execute the plan were secured, with around two-thirds of the required investment covered by existing regulatory agreements.

The investment case rests on two structural tailwinds: the UK's legally binding net-zero targets require large-scale network expansion to accommodate offshore wind, interconnection, and demand electrification, and the US Northeast faces grid investment requirements from aging infrastructure, clean energy mandates, and rising demand from data centers and EVs. National Grid Ventures operates six interconnectors linking the UK to France, the Netherlands, Belgium, Norway, and Denmark, a smaller but high-return complement to the regulated core, and the LionLink hybrid interconnector to the Netherlands, which would also connect offshore wind, is targeted for completion around 2032. Whether the company can execute more than £70 billion of investment in five years while holding credit quality and dividend payments is the central question.

Key considerations

Ofgem's RIIO framework is the primary determinant of UK earnings, and the allowed returns in each price control directly constrain what National Grid can earn on UK assets. It accepted the RIIO-T3 package in March 2026, and the allowed equity return of 5.70% at 55% notional gearing leaves limited headroom. The next tests come quickly: the RIIO-ED3 reset for distribution is ahead, and the incentive and cost-recovery mechanics of T3 will determine whether the headline return can be outperformed as it was in T2, when the transmission business earned about 100 basis points above the base allowance. UK political and regulatory pressure on energy bills is a persistent headwind against higher network returns even as investment requirements grow.

The financing challenge is significant. Net debt of £44.2 billion is already large and guided to rise by more than £6 billion in FY2027 alone, with regulatory gearing moving from 61% toward the high-60% range by 2031. The June 2024 rights issue raised £7 billion, and the company assumes roughly 25% scrip dividend uptake as an ongoing equity contribution. If credit conditions tighten, funding the plan at acceptable cost becomes harder. The dividend, yielding around 4% at mid-2026 prices, is not covered by free cash flow after capital investment at current levels, so it is partly funded by debt and relies on regulatory returns eventually converting into cash. A dividend cut, the option of last resort for UK utilities, would be a material event for a shareholder base that holds the stock primarily for income.

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