National Grid £3.2bn cash call dismays City

NATIONAL Grid's shares plunged 7 per cent yesterday after the power provider dismayed the market with a £3.2 billion cash call to help fund the replacement of its ageing network and infrastructure.

City analysts accused the company of doing a U-turn on the need for a rights issue, and the shares closing down 43.5p at 576.5p – making it the Footsie's biggest faller.

Angelos Anastasiou, utilities expert at broker Ambrian, said: "Many investors will feel misled by the management, who have consistently and vehemently denied the need for a rights issue.

"Management will point to the increased capex plans, but we believe that this will cut little ice with investors."

National Grid said the rights issue was to help fund a surge in investment to 22bn from 14bn over the next five years and to ensure it kept its credit rating as spending increased.

The additional capital expenditure will cover the company's whole transmission network, including power lines and pylons.

The cash call came as the group reported a 12 per cent rise in underlying pre-tax profits to 1.97bn in the year to end-March.

National Grid owns and maintains electricity and natural-gas networks in the UK and the US, but said three-quarters of the money would go to the UK.

Chief executive Steve Holliday said he was confident about the need for "a step-up" in UK investment.