National Grid in £3.2bn cash call

The energy company said it was tapping shareholders to help fund a hike in investment to 22 billion over the next five years and to ensure it maintained its credit rating as spend increases.

National Grid made the announcement as it reported a 12 per cent hike in underlying pre-tax profits to 1.97 billion in the year to March 31.

National Grid is upping its spend from more than 14 billion over the previous five years as it invests across its transmission network, including power lines and pylons.

The group owns and maintains electricity and natural-gas networks in the UK and the US, but said three quarters of the new five-year investment plan will be spent in the UK and around 60 per cent on transmission.

National Grid wants to continue focusing on replacing old assets, while also ensuring its networks are able to meet new regulatory and renewable energy targets.

Steve Holliday, chief executive of National Grid, said the firm was "confident about the requirement for a step-up in UK investment" as he launched the rights issue to raise 3.3 billion, or 3.2 billion net of fees.

"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 our UK operating companies in a more volatile economic environment," added the group.

National Grid's annual profits were up on strong results in its transmission and electricity businesses, although group revenues dropped 11 per cent.

Allowed increases in regulated income above inflation drove transmission earnings higher.

The group also said it expects to see continued growth across all its businesses in the current financial year.

But shares were hit heavily, down more than eight per cent as investors digested news of the multi-billion pound rights issue.