National Grid's record £70bn investment plan and US AI power bet drive growth outlook
Record £70bn five-year investment plan National Grid will invest at least £70bn over five years, its largest ever, to connect up to 35GW of new generation and 19GW of new demand from data centres and electrification. This builds the asset base and supports 8-10% yearly earnings growth and rising dividends, pushing the shares up.
This is the core new plan that directly drives future earnings and dividends, the main reasons investors hold the stock.
$1.75bn US AI power investment National Grid is investing $1.75bn for a 35% stake in Joulent, funding a 2.67GW gas-fired plant in Texas that will power a Microsoft data centre under a 20-year contract. This expands its US footprint and taps into the AI-driven electricity demand boom, a new growth driver.
This is a new, concrete investment that opens a new growth market and is incremental to the £70bn plan.
UK grid upgrade costs up to £240bn The government now says Britain's grid needs up to £240bn of upgrades for net zero, far above earlier estimates. National Grid will deliver about £35bn of the £77bn planned by 2031, with more needed after. This means decades of regulated investment and earnings growth, though costs fall on consumer bills and face political criticism.
This sets the long-term scale of National Grid's regulated investment opportunity, a key driver of its value.
Valuation debate after US investment After the Joulent deal, analysts say National Grid looks fairly valued on dividends (intrinsic value about £12.79, only 2.7% above the price) but cheaper than peers on earnings (19.1 times vs 22.7 times). The debate is whether heavy investment can grow cash flow without squeezing dividends.
This gives a fair counterweight: the stock may not be cheap, and the investment phase carries risk to dividends.