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UK’s National Grid Expects Windfall Profits From High Power Prices

The UK’s National Grid expects significantly higher earnings for its 2021/2022 fiscal year ending in March 2022, due to the higher auction prices for electricity amid soaring natural gas and power prices in the UK and the rest of Europe.

In its 2021/22 half-year results statement for the six months to September, National Grid said it was updating higher its full-year outlook, considering “the strong start to the year.”

The utility expects to deliver full-year underlying earnings per share (EPS) significantly above the top end of its 5-7 percent range. This would be largely due to the early commissioning of the North Sea Link (NSL) interconnector with Norway, “coupled with higher auction prices across our interconnector portfolio.” This is expected to deliver around US$135 million (£100 million) higher operating profit, National Grid said.

The surging UK power prices raise demand for National Grid’s interconnectors to import cheaper electricity from Norway, France, or Benelux.

“If prices are higher in the UK, the arbitrage will be higher and therefore the revenues on the interconnectors will be higher. It’s what traders are willing to pay for that access to the UK market,” National Grid’s CEO John Pettigrew said, commenting on the performance, as carried by The Times.

Power prices in the UK and the rest of Europe are still above historical values, although they are now off the records seen in October, when record natural gas prices and low wind speeds drove wholesale electricity prices to all-time highs in many markets.

On Wednesday, Europe experienced another day of very high electricity prices, Javier Blas, Chief Energy Correspondent at Bloomberg News, noted.

Spain is one example of those high power prices as it saw on Wednesday the sixth-highest day-ahead price of above US$255 (225 euro) per megawatt hour (MWh).

“Although prices are not as high as in mid-October, the downward trend of the last few weeks is over,” Blas tweeted.  

By Charles Kennedy for Oilprice.com

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  • George Doolittle on November 21 2021 said:
    "if they can even get the electricity at the moment."

    Hard to call that bullish news for National Grid as I fail to see any build out of peaking power units in all of not just Western Europe but obviously Russia and Turkey as well. That doesn't meet the proper definition of a "windfall profit" to me anyways which is defined as exploding *TOP LINE* growth leading to non-normative earnings increases in a rising price environment that results in a crisis.

    Long virtual power plant electrical construction and product deployment strong buy would be an understatement.

    Should be fantastical news for $ibm International Business Machines but so far hasn't been in the least oddly enough.

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