Shares in National Grid (LON:NG) have fallen deep into the red in today’s session, as industry watchdog Ofgem published sector specific consultation documents for UK transmission businesses. The move is part of the ongoing RIIO (Revenues = Incentives + Innovation + Outputs) 2 regulatory process which relates to gas distribution and gas and electricity transmission price controls.
As of 14:36 GMT, National Grid’s share price had given up 6.88 percent to 777.85p, underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.68 percent lower at 6,727.13 points. The group’s shares have lost more than 10 percent of their value over the past year, largely in line with the Footsie.
Ofgem sector consultation
National Grid responded to Ofgem’s move to publish sector specific consultation documents for the group’s transmission businesses as part of the RIIO 2 process, saying in a statement that it was “disappointed with the proposed financial package, in particular the cost of equity range as we do not believe it appropriately reflects the level of risk borne by transmission networks”.
The FTSE 100 group said that it will provide a detailed response to the consultation early next year. The consultation is expected to conclude in the second quarter of 2019 with the RIIO 2 price control commencing in April 2021.
Analysts weigh in
“The consensus analyst forecast is for National Grid to pay 48.9p per share in dividends for the financial year to March 2020, implying a 6.1% yield. One could expect dividends beyond 2021 to potentially be less generous should Ofgem’s proposals be finalised without any amendments,” Russ Mould, the investment director at AJ Bell, commented, as quoted by Proactive Investors, adding that it showed that “even the most defensive companies are still at risk from regulatory changes”.