First Read National Grid Entering US AI co-location market

Research evidence excerpt

First Read National Grid Entering US AI co-location market

Forecast returns

Forecast price appreciation -5.0%

Forecast dividend yield 4.2%

Forecast stock return -0.9%

Market return assumption 9.2%

Forecast excess return -10.0%

Company Description

National Grid operates primarily in the transmission and distribution activities of electricity

and gas in the UK and the US. The company operates through four segments: UK Electricity

Transmission, UK Electricity Distribution (formerly Western Power Distribution), US Regulated

and NG Ventures & Others. NG Ventures operates outside of its core regulated business and

manages a diverse portfolio of flexible, low-carbon and renewable energy businesses,

including electricity interconnectors, LNG, battery storage, wind and solar power.

Valuation Method and Risk Statement

National Grid:

National Grid runs regulated energy delivery networks in both the US and the UK. The UK is

electricity transmission and distribution. The US is electricity and gas distribution, and

electricity transmission. A key risk is from the actions of regulators in either country, which can

impact prices, returns and valuations. National Grid is responsible for delivering essential

energy services, so is at risk from operational failings, which can have a financial or

reputational impact. Our PT is based on a SOTP approach including a separate EV-RAB

premium for the US and the UK based upon a DCF analysis.

The main drivers of the Utilities sector include: commodities, generation margins, demand

evolution, regulatory changes, M&A, regulation, government policy, credit conditions and

currency movements. Any adverse change in these would modify our view on these stocks.

Pennon: