Citigroup, Inc (NYSE: C) said that National Grid PLC, the owner of Britain’s natural-gas and power networks, may sell its U.S. operations in order to keep capital spending at current levels without having to issue new equities.
Citigroup, Inc (NYSE: C) said that National Grid’s U.S. operations have an estimated enterprise value of 12 billion pounds ($18 billion), said Citi analysts Peter Atherton and Stephen Hunt in a research note. Atherton and Hunt cut their rating on the stock to “hold” from “buy.”
“National Grid can expect much greater scrutiny of its U.S. business from shareholders, where performance has been increasingly disappointing,” they said. The “rationale for continued ownership has been significantly undermined by events and therefore a strategic review is likely.”
National Grid is committed to spending 4.4 billion GDP annually to modernize the U.K.’s transmission systems and connect power stations to new offshore wind farms. This is more than double what the company was spending on capital expenses in 2006. Atherton said that the level of spending may increase if Britain hopes to meet its goal of getting 15% of its energy from renewable sources by 2020.
The firm issued new shares in May to raise 3.2 billion GDP to fund its five year investment program.
