RDEIF - National Grid: Rights Issue Highlights Lack Of Compounding
2024-06-07 17:38:42 ET
Summary
- A couple of years after the step down of baseline compensation for the transmission network, the distribution concession is now also seeing lower baseline comp.
- Transmission is growing because RAB gets indexed to inflation, but a lot of the growth was non-recurring and otherwise has to be financed by large basically obligatory CAPEX.
- The compensation at fair values by Ofgem means that there's no outstanding compounding engine here. It's why they needed to do a rights issue equity raise.
- The absolute forward P/E at around 14x barely competes with risk free rates, which might be fair, but it's not compelling.
- At least it's a better profile and valuation than Redeia.