National Grid is braced for a £400m hit to its profits in the current financial year as the full cost of the coronavirus pandemic rises, and customers fail to pay their bills.
The energy networks giant, which runs Britain’s energy system and operates gas networks in the US, said the pandemic threatens to wipe up to £1bn from the company’s cashflows this year.
It warned investors that its finances would take a hit due to lower levels of energy use during the pandemic lockdown and higher levels of “bad debt” from customers, particularly in the US.
National Grid runs gas distribution networks in New York state and expects a three-fold financial impact in its US business, which will face rising costs, higher bad debt charges and a delay to planned hike for gas distribution rates.
The FTSE 100 energy giant reported a pre-tax profit of £1.75bn for the last financial year, down 5% from the year before, after bad debts in the US rose to £117m last year.
National Grid expects the size of unpaid charges to grow as customers come under financial strain following the coronavirus lockdown, and said its revenues would take a hit due to lower demand for energy.
In the US, National Grid reported an 8% fall in gas consumption between mid-March and the end of April, and record low electricity demand in the UK. Overall, the UK’s power demand fell by 6% between mid-March and the end of May because a 5% increase in home energy use was more than offset by a 9% drop in demand from companies and factories.
John Pettigrew, National Grid’s chief executive, said the financial impact of Covid-19 would be “largely recoverable over future years” and that the company anticipates “no material economic impact on the group in the long-term”.
National Grid expects only a modest dent to its future capital spending, which last year reached a record £5.4bn last year, and will recommend that the dividend for the year climbs to 48.57p, up 2.6%.