National Grid is expecting underlying operating profits to take a £400 million hit from the COVID-19 pandemic.
The majority of this will be because of the impact on the company’s operations in the US, with higher bad debt charges expected in that market. Cash flow could be effected by as much as a £1 billion by the end of the 2021 financial year, the company has said in its full year 2019/2020 results today.
Operating profit for the past year was impacted by the pandemic, despite the lockdown only coming into force in the UK right at the end of the period. It fell by 3% from £2,870 million to £2,780 million.
Its operations across both the UK and the US have had to adapt in recent months to lockdown conditions and low power demand. This has challenged the UK grid in particular, with fears raised of a blackout, like that experienced last August.
John Pettigrew, chief executive of National Grid, said the company had successfully implemented its business continuity plan in response to COVID-19, protecting staff and customer well-being.
“I am proud of our response and contribution to help our customers and communities through these challenging times.”
Despite the financial knock of COVID-19, the company’s investment programme remains unchanged with around £5 billion expected to be invested this year. The firm also hailed the success of its efficiency investments ahead of the looming RIIO-2 price period.
A cost efficiency programme implemented in 2018 helped National Grid achieve efficiency savings of £54 million in Electricity Transmission in the 2019/20 financial year.
National Grid has meanwhile outlined a £7.5 billion business plan for transmission during the RIIO-2 price period, set to come in from April 2021. It will look to connect over 15GW of capacity during the five year period the plan covers.
Despite the impact of the pandemic on the 2019/20 results – and the more significant impact predicted for the next financial year – he remains positive that it will prove recoverable.
“Looking ahead, whilst COVID-19 will impact our financial performance in FY21, we expect this to be largely recoverable over future years and therefore anticipate no material economic impact on the Group in the long-term," Pettigrew said. "We continue to target asset growth of 5-7% in the near term and with an efficient balance sheet that underpins asset and dividend growth, the Group is well positioned to create value for shareholders.
National Grid is targeting a final full year dividend of 48.57p, up 2.6%, in line with policy.