National Grid, which maintains the backbone of Britain’s electricity network, should be taken under government control to ensure the rapid transition to net zero, campaigners said, after a report revealed that the business paid investors almost £9bn in dividends and share buyback schemes over the last five years.
The stock-market-listed firm, which counts the fund managers BlackRock, Vanguard and the Abu Dhabi Investment Authority among its top five shareholders, has a 19% operating margin on its electricity business, allowing the board to fund an average £1bn a year in dividends.
A report by the left-of-centre thinktank Common Wealth found that a special dividend following the sale of its gas distribution business gave a significant boost to shareholders in 2017 when the funds might have been used for further investment.
The business increased the amount paid to shareholders to £4.5bn following a £3.2bn special dividend.
Part of National Grid is on course to be nationalised next year to allow the government more control over its strategy, but the Green party said the entire organisation needed to be nationalised to ensure that all the resources available were used to reduce carbon emissions.
Unite, Britain’s largest union, said National Grid was a “state-sponsored cash machine” and that ministers should take control of the company and the 14 privately owned distribution network operators (DNOs), each responsible for a different area of the country.
Renewables businesses have complained that the DNOs and National Grid resist extending the network to bring low-carbon generation on stream to protect their profit margins.
Molly Scott Cato, the Green party’s finance and economy spokesperson, said: “To achieve our climate targets, it is vital that we shift to powering our lives through electricity, and the National Grid plays a vital role in this endeavour.”
She said that by the end of last year, almost 700 renewable energy projects were on hold, waiting for the National Grid to find them capacity. “When it comes to ensuring a rapid transition to renewables, ownership really matters. We need National Grid to be able to focus solely on ensuring we have a sustainable future, not being distracted by keeping shareholders sweet.”
Unite’s general secretary, Sharon Graham, said National Grid and the 14 DNOs moved slowly to protect shareholder interests. “Electricity and gas networks such as National Grid are effectively state-licensed cash machines.”
She said the union’s research showed that the transmission and distribution monopolies made a combined £6.3bn in 2021, up from £5.6bn in 2019. “Unite’s analysis found that at least 30% of the increase in the energy price cap over the last year was made up of profit for companies across the energy supply chain, with networks like National Grid among the biggest winners.”
The Hong Kong billionaire Li Ka-shing’s CK Group was awarded £2bn in dividends over the last 5 years from its holdings in the DNO’s UK Power Networks, Northern Gas Networks, Wales and West Utilities.
National Grid, which has half its business in the US, said it was planning to spend almost £30bn upgrading the UK’s transmission systems over the next four years, making it the largest single investment in low-carbon technologies in Britain.
A company spokesperson said: “National Grid is a global business with assets split 50/50 between the UK and US. We are proud to be one of the largest FTSE investors in the transition to net zero, committing £29bn of green capex between 2022 and 2026 to fund the infrastructure that will deliver a clean, fair and affordable energy future.”
Supporters of the electricity supply system remaining in private hands argue that the £30bn would need to be raised by the government if the business was taken into public hands.
However, the government can raise funds more cheaply than private companies, and would not need to pay a dividend. The regulator will also allow most of this cost of new infrastructure investments to be passed on to customers, allowing shareholders to preserve their annual dividends.
