Monday 18 February 2013

National Grid: An Interesting Prospect

A few weeks ago there was one of those silly outbreaks of the bleedin' obvious whenMr Quango's colleagues on the Public Accounts Committee 'discovered' that developers of the infrastructure needed to implement the UK's mad energy policy - in this case, power grids for offshore wind-farms - are being heavily subsidised, underwritten, and given guaranteed returns:
"We are talking about returns that are exceeding PFI - and we thought that that was a licence to print money"
said an apparently surprised Jackie Doyle-Price (Cons, Thurrock)

Yes indeed - and it's not just these offshore developments, it's the whole panoply of state-mandated energy infrastructure investments.  Can we all join in, please ?

Well, maybe.  Some of these types of development are not always easy to invest in for the private punter: but National Grid is the biggest single listed UK company involved in the whole mad business, and Ofgem lets it - nay, forces it (kicking and protesting, I expect) - to invest huge amounts on these infrastructure projects ... at RPI-linked returns.

Now:  as of last week the BoE is famously going to, ahem, *tolerate* higher RPI for a while ... and NG borrows at a tad under RPI ... and most of its other costs don't rise with RPI (labour is only 10% of its cost-base) ... did someone say 'licence to print" ?

No investment advice here, naturally; you're on your own - and one cannot but observe that NG's fortunes are riddled with regulatory risk.  He who lives by the subsidy, etc etc.  But it's kinda interesting for all that.

ND  

 

9 comments:

Blue Eyes said...

Can't we persuade some mad Spaniards to buy it then get the Competition Commission to split it up into much less profitable competing businesses?

Weekend Yachtsman said...

And they are already damn good dividend payers.

Fill yer boots.

Mark Wadsworth said...

"He who lives by the subsidy.."

Good one. That happened to the solar panel people recently and they were not happy at all.

Sackerson said...

It's like letting kids win at draughts, isn't it? "Ooops, you win, silly me!"

Budgie said...

ND, it depends how you define subsidy. If you define it simply as tax payers money given to causes with which you disagree then you are not making a point of principle or even a valid point.

The fact is there are subsidies all over the place for all manner of products and services from both government and private sources, and the majority of people are not even aware of them, or may even approve of them.

The idea that we can live in a land with no subsidies is a libertarian wet dream. A subsidy here being defined as a reduction to the true market cost paid by a non-beneficiary. Anyone involved in costing knows that is just not practical.

James Higham said...

Puts new meaning into the word risk.

Blue Eyes said...

What is this nonsense from Ofgem about competing for gas purchases "in the global market"? Don't we buy our coal and uranium and wind turbines from this difficult global market?

Anonymous said...

If HMG can run our state banks albeit they didn't want to, why not get them to run power generation centrally and staff it with competent engineers.

We could call it the CEGB.

Agence communication said...

i"m so excited to read that topic "" Well, maybe. Some of these types of development are not always easy to invest in for the private punter: but National Grid is the biggest single listed UK company involved in the whole mad business, and Ofgem lets it - nay, forces it (kicking and protesting, I expect) - to invest huge amounts on these infrastructure projects ... at RPI-linked returns.

Now: as of last week the BoE is famously going to, ahem, *tolerate* higher RPI for a while ... and NG borrows at a tad under RPI ... and most of its other costs don't rise with RPI (labour is only 10% of its cost-base) ... did someone say 'licence to print" ?""