Edison Initiates ADR Coverage on National Grid

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Jan 16, 2015, 10:09 ET

LONDON, January 16, 2015 /PRNewswire/ --

Edison Investment Research, a leading international investment research firm, announces the initiation of full coverage of National Grid.

In this report Edison highlights that National Grid's regulated assets offer investors a predictable earnings profile, a growing asset base and an attractive yield. Operational outperformance has led to impressive achieved returns above the Ofgem base allowance, which we expect to continue until the end of 2021. The results of the capacity and contract for difference auctions could provide visibility on the size of load-related capex in the UK, giving further upside to an already appealing growth profile.

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For the US-regulated assets, achieved ROE has improved significantly over the last five years, from 7% to 9% over 2009-13. For CY14 however, the company expects achieved ROE to fall within 8.5-8.9%. This decline is primarily due to the impact of bonus depreciation adding around $350m to rate base growth (leading to a 20bp reduction to returns) and the additional costs associated with the cold weather of 2013/14, resulting in gas main leakages. Excluding these impacts, the underlying US business is performing in line with management expectations. This pressure on the operational ROE in the US should be short-lived, with National Grid looking to make a number of regulatory filings over the next two to three years.

Edison's valuation methodologies provide a range of 769-1,020p/share or $62-82/ADR.

To download this report, please click here.

All reports published by Edison are available to download free of charge from its website http://www.edisongroup.com.

About Edison: Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals works with leading companies, fund managers and investment banks worldwide to support its capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority (http://www.fsa.gov.uk/register/firmBasicDetails.do?sid=181584).

Edison is not an adviser or broker-dealer and does not provide investment advice. Edison's reports are not solicitations to buy or sell any securities.

For more information please contact:

Jenny Ping, Edison Investment Research, +44 (0)20 3077 5700

Roger Johnston, Edison Investment Research, +44 (0)20 3077 5722

[email protected]

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SOURCE Edison Investment Research