National Grid plc

National Grid plc is a regulated electricity and gas network operator with system-critical assets across the United Kingdom and the northeastern United States, operating under regulatory frameworks that provide high visibility of revenues but structurally cap economic returns (Ofgem, 2020). The group is entering an unusually capital-intensive phase as decarbonisation and electrification policies drive large-scale investment in transmission and distribution infrastructure, materially expanding the regulated asset base but also increasing reliance on external financing and long-dated regulatory capital recovery (National Grid, 2024). Historical performance indicates that this asset base expansion has not translated into proportionate improvements in economic returns, with ROCE remaining broadly flat despite sharply rising capital intensity, reflecting the long recovery profiles and tightening return allowances embedded in modern regulatory regimes (Oxera, 2020). Valuation analysis using a Regulated Asset Base Discounted Cash Flow framework yields an intrinsic equity value of £10.15 per share, driven predominantly by terminal value and highly sensitive to the assumed cost of capital, while a Dividend Discount Model implies a value of £9.60 per share based on consensus dividend expectations. Both outcomes sit broadly in line with the prevailing market price, indicating that expected asset growth, regulatory support, and income visibility are largely reflected in current valuation levels. The dominance of terminal value across both approaches highlights the long-duration nature of National Grid’s cash flows and reinforces that equity value is shaped primarily by discount rate assumptions, regulatory credibility, and execution discipline during the current capex-heavy phase rather than near-term earnings delivery (Ofgem, 2020). While National Grid benefits from system importance, policy-backed investment visibility, and defensive characteristics, these strengths are increasingly offset by capped returns, rising capital intensity, and dilution risk associated with funding requirements (Reuters, 2024a). On balance, the equity offers stability and income support but limited valuation asymmetry at current levels, supporting a Hold recommendation, with expected shareholder returns driven primarily by income and regulatory stability rather than material capital appreciation.