National Grid PLC (NG.) - Rights Issue: 10 June 2024

[IanTHughes]

https://www.nationalgrid.com/document/152016/download

7 for 24 fully underwritten Rights Issue to raise c.£7.0 billion
New 5-year investment framework for FY25-29
Deliver £60bn investment in energy infrastructure

HIGHLIGHTS
• National Grid announces capital investment of around £60 billion over the next 5 years (FY25 to FY29), nearly double the previous 5-year period, to deliver a significant step-change in critical energy infrastructure in the UK and US in support of the energy transition and economic growth objectives
• As part of a comprehensive financing plan to deliver the investment, National Grid is announcing a 7 for 24 fully underwritten Rights Issue to raise net proceeds of approximately £6.8 Billion
• National Grid’s comprehensive financing plan comprises:
o A c.£7.0 billion Rights Issue which provides shareholders with the pre-emptive opportunity to fund and benefit from our higher growth strategy;
▪ the Issue Price of 645 pence per New Share represents a 34.7% discount to the theoretical ex-rights price based on the closing middle-market price on 22 May 2024 (being the last business day before the announcement of the terms of the Rights Issue) of 1,127.5 pence per Share, adjusted for the recommended final dividend for FY24 of 39.12 pence per Share
o streamlining of the portfolio to focus on pureplay networks across regulated and competitive, onshore and offshore networks, with the intention to sell Grain LNG and National Grid Renewables; and
o senior debt and future hybrid issuance to maintain balance sheet strength and investment flexibility
• The Board unanimously believes this comprehensive financing plan will allow the Group to funda significant increase in capital investment, maintain its strong investment grade credit rating, deliver for customers, and continue to achieve attractive shareholders returns
• Alongside this, National Grid is announcing a new 5-year financial framework from FY25 to FY29, which will see it deliver:
o Group asset growth of c.10% CAGR;
o 6-8% underlying EPS CAGR from an FY25 baseline; and
o continuing our progressive dividend policy, maintaining the total level of dividend following the Rights Issue. Aim to continue to grow the DPS in line with UK CPIH, from a rebased FY24 DPS level
• Overall, this makes National Grid one of the FTSE’s biggest investors in the delivery of the energy transition, and positions the Company to become a pre-eminent pureplay networks
business

INDICATIVE SUMMARY TIMETABLE OF PRINCIPAL EVENTS

               Event                                            |   Date   
Announcement of Rights Issue                                    | 23-May-24
Publication of the Prospectus                                   | 23-May-24
Record date for entitlement under the Rights Issue at 6:00 p.m. | 20-May-24
Despatch of Provisional Allotment Letters                       | 23-May-24
Admission and commencement of dealings in New Shares, nil paid  | 24-May-24
Existing Shares marked “ex-rights” by the London Stock Exchange | 24-May-24
Acceptance, payment in full and registration by 11:00 a.m.      | 10-Jun-24
Announcement of results of the Rights Issue                     | 12-Jun-24
Commencement of dealings in New Shares at 8.00 a.m.             | 12-Jun-24

Enjoy!


Ian

[blobby]

Seems like a very expensive way to do this. It would be better to cancel the dividend for a few years and let those who need an income sell shares periodically to raise cash.

[Arborbridge]

Seems like a very expensive way to do this. It would be better to cancel the dividend for a few years and let those who need an income sell shares periodically to raise cash.

Whichever way is better in the long run, cancelling the dividend is hardly going to be good for the share price.
Rights issues are a normal way of raising capital, so I don't see a mood to try something different.

[MrFoolish]

I'm not a HYPer myself, but out of interest, is NG still a share for HYP portfolios?

[tjh290633]

I'm not a HYPer myself, but out of interest, is NG still a share for HYP portfolios?

You need to look at it's history to decide that. Having a rights issue is not a disqualifying action. It is common for shares that do to adjust their dividend after the action. Currently the yield is above average.

It depends on your own view. Buy, hold or sell.

TJH

[PeterGreenhill]

I've opted to go for the cashless take up. Sell some rights to fund purchase of some new shares. No new money required. Still diluted, of course, but to a lesser extent than if I'd done nothing. Full take up of new shares would have required a serious slab of cash as I already have 6012 shares. I reinvest dividends so dilution will diminish over time.

[IanTHughes]

I've opted to go for the cashless take up. Sell some rights to fund purchase of some new shares. No new money required. Still diluted, of course, but to a lesser extent than if I'd done nothing. Full take up of new shares would have required a serious slab of cash as I already have 6012 shares. I reinvest dividends so dilution will diminish over time.

What is it about "dilution" that some people consider so important when deciding to whether to Exercise the rights or not?

"Dilution" of what exactly?

Enjoy!


Ian

[NeilW]

I'll follow the standard approach and let the rights lapse.

When NG. is raising capital and UK Wind is shedding capital (buying back shares) it suggests we've got ahead of ourselves on generation and behind on transmission. The generation is where the cash is getting thrown off at present.

[G3lc]

I’ve taken up my rights as I thing they will use the money to dig a deeper moat.

[johnstevens77]

I’ve taken up my rights as I thing they will use the money to dig a deeper moat.

Me too.

john

[eyeball08]

Been away from this site awhile.
Held NG in an ISA for many years now.
What happens if I do absolutely nothing?
eyeball

[tjh290633]

Been away from this site awhile.
Held NG in an ISA for many years now.
What happens if I do absolutely nothing?
eyeball

The underwriters will convert all the rights not taken up into fully paid shares by paying the 645p. They will then sell them in the market, deduct the 645p per share and their expenses, then distribute the remainder among the holders of the untaken rights pro rata to their holdings. You should get the proceeds in a week or so.

TJH

[kempiejon]

Been away from this site awhile.
Held NG in an ISA for many years now.
What happens if I do absolutely nothing?
eyeball

That is often my MO for corporate actions, rights issues takeovers etc. There is always a default position that it doesn't massively affect the disinterested HYPer but will change cash balances and often the income from the original purchase. This time do nothing and your rights, that will have a cash value, will be sold and that amount added to your balance. (ah TJH has just explained this) You ISA will end up with an extra sprinkle of cash from the rights something like £2.50 per share.

[eyeball08]

Thanks TJH and kempiejon. Back to sleep now….

[IanTHughes]

Been away from this site awhile.
Held NG in an ISA for many years now.
What happens if I do absolutely nothing?
eyeball

That is often my MO for corporate actions, rights issues takeovers etc. There is always a default position that it doesn't massively affect the disinterested HYPer but will change cash balances and often the income from the original purchase. This time do nothing and your rights, that will have a cash value, will be sold and that amount added to your balance. (ah TJH has just explained this) You ISA will end up with an extra sprinkle of cash from the rights something like £2.50 per share.

Just to clarify. The amount received will be for each Right given up, not for each Share held.

Currently the Rights are priced by the market at about 220.00p, but the actual value will only be determined once the new shares have been sold in the market by the underwriters, on or shortly after 10 June. Anything over the Exercise Price - 645.00p - less charges, will be paid to the original holder of the Right.

Enjoy!


Ian.

[Newroad]

Hi All.

IBKR have grabbed my money for the NG rights issue, which is fine (and as planned).

When I look at how those are expressed in my account (as ticker NGPF) it shows

Average Price: 645p
Cost Basis: 497p
Market Value: 693.03p
Last Trade 877.6p (Ask 910p, Bid 861.2p)

The Average Price is fine and as expected (and I'm not actually worried about anything) just curious to understand the derivation of the 2nd and 3rd in particular?

Regards, Newroad

[tjh290633]

Hi All.

IBKR have grabbed my money for the NG rights issue, which is fine (and as planned).

When I look at how those are expressed in my account (as ticker NGPF) it shows

Average Price: 645p
Cost Basis: 497p
Market Value: 693.03p
Last Trade 877.6p (Ask 910p, Bid 861.2p)

The Average Price is fine and as expected (and I'm not actually worried about anything) just curious to understand the derivation of the 2nd and 3rd in particular?

Regards, Newroad

Mine are in my ISA with Lloyds and they show the cost as being the amount that NG. fell by when it went XD plus the 645p now subscribed, but the value is still that of NGPN, presumably as the fully paid version is not quoted until next Tuesday. So currently it shows as a negative value. That 497p is a mystery to me. Likewise their derivation of market value. My personal view is that the 645p cash is now added to the value of the nil-paid rights, which ought to be similar to the current price for the XD NG. shares, with which they will rank pari passu (I think). It needs more thinking time.

TJH