"I am boring," shrugs Steve Holliday, the chief executive of National Grid. "Let's stick to talking about the company." To the uninitiated, National Grid might also seem boring. Thanks to its nationalised past, the company is synonymous with Britain's electricity network, and it has perhaps the most risk-averse approaches to investment of any of its peers. But since it was privatised in 1995, National Grid has reinvented itself several times over, and behind the commitment to absolute investment certainty is a keen perception of the opportunities ahead. "It is such an exciting time in this industry," Mr Holliday says. "There is a revolution happening and we sit at the heart of it."
He is talking about climate change, of course. But first, the history. Post-privatisation, National Grid was quick to expand. In the UK, it went into gas, merging with Lattice Group – the infrastructure business of the former British Gas – to run four of the eight regional gas distribution networks. Since Mr Holliday took the top job three years ago, the sprawling group sold out of its South American businesses and doubled the size of its US division with the $7.3bn (£4.4bn) purchase of Keyspan, leaving its £15.6bn revenues almost exactly split between Britain and the US.
The company has one of the safest business models imaginable. A massive 95 per cent of its revenues already come from regulated businesses, so its income is "decoupled" from the volumes its infrastructure carries. And the regulated business is about to get even bigger, as regulatory changes in the US follow the UK's de-coupled example. "Over the next 15 months, our exposure to volume goes from very small to none," Mr Holliday says. "Even for a utility – which is by definition seen as a lower risk business – we are exceptionally low risk."
Given such discipline, it is a great relief that Moody's finally concluded its review of the company this week and raised its outlook back to "stable". In early 2008 after the Keyspan takeover, the ratings agency downgraded its outlook to "negative" amid concerns about the group's £23bn debt pile, which is one of the largest in the FTSE 100. Mr Holliday is almost indignant. "This is the right level of gearing for this business," he says. The group has successfully issued £1.3bn in long-term debt since January, leaving only another £600m needed this year.
But even stable does not mean boring. For many in the once-grubby electricity industry, climate change is an opportunity for reinvention as a dynamic facilitator of society's greener future. And decoupling means National Grid can look at much more interesting business opportunities – such as energy efficiency services. "We want to invest hugely in energy efficiency but we won't do that if it's eating into our bottom line," Mr Holliday says. "There is potential for a huge energy efficiency business in the US. Last year we invested more than $200m, and that is likely to double or triple in the next three to four years."
Not that new opportunities mean taking greater risks with investors' money. An existing example of the group's diversification into unregulated sectors is the Isle of Grain liquefied natural gas (LNG) terminal. It is an enormous programme, with two phases completed since 2005 and the third to be ready by next year. But each stage only went ahead once the capacity was sold far into the future. "We still lock in cashflow for 20 years before making the investment," Mr Holliday says. "We only invest when we get an allowed return."
In the UK, the main item on National Grid's agenda is to refresh the electricity infrastructure itself. The grid's architecture – designed around a central spine connected to a relatively small number of very large sources of power – is simply not appropriate for the 21st-century energy mix, with lots of smallish wind farms, both off and onshore, as well as the new nuclear power stations. According to the Energy Networks Strategy Group, Britain's power grid needs £4.7bn of unavoidable investment, 75 per cent of which will come from National Grid. But rather than simply boosting the existing network, the group has a more radical scheme to build new links running down each coast under the sea. The plan for the west coast – from Scotland to just south of Liverpool – is the most advanced. It is no more costly than the more conservative upgrade plan. And although there are some challenges – such as shifting the current to DC when it goes offshore, and AC when it comes back on again – none of the technical novelties is a showstopper. "I just don't think anyone ever thought of doing this before," Mr Holliday says. The plan for the eastern half of the plan has yet to be proven. But the western undersea grid is a "no-brainer", Mr Holliday insists, even for a company as risk-averse as National Grid. Ofgem seems to agree. The regulator has made a rare exception to the rules and given National Grid the go-ahead to start work on the project before the business case is fully worked out.
The company was allowed to collect an extra £10m through this year's transmission charge so that it can get on with the design work, and there are 120 engineers busy on the designs. "This is a pivotal moment for the industry because we are not just thinking about the usual five-year, regulatory time horizon," Mr Holliday says. "This needs to be in place by 2016, so we need to get on with it now and, while we are working out how it can be paid for, we have some revenues to maintain the programme." But there will be no further investment until there is a payback. "It is clear under every scenario that no one would regret this investment," Mr Holliday adds. "But we have not quite finalised how we will earn revenues, and until then we won't invest."
Despite an absolute priority on immediate investment returns, National Grid has ambitious growth plans. The company's UK division, which is still the biggest tranche of its investments, has capital spending running at more than £3bn a year, but that is nothing compared with the prospects for the future. "There are investment opportunities linked to nuclear and renewables, there is the offshore grid, pipes for carbon capture and storage and then the US investment also has to get going," Mr Holliday says. Whatever else it is, National Grid is certainly not boring.
On the right lines: Holliday's CV
* Steve Holliday has a BSc in mining engineering from Nottingham University.
* He has been the chief executive of National Grid since January 2007. According to Forbes, his salary this year is £929,000, with a £1.27m bonus.
* From 2002 to 2007, Mr Holliday was National Grid's group director for UK gas distribution and business services.
* From 2001 to 2002, he was its group director for UK and Europe.
* Before he joined National Grid, Mr Holliday was the executive director of British Borneo Oil and Gas.
* Prior to Borneo Oil and Gas, he spent 19 years with the US energy giant Exxon. During that time, he held senior positions in the company's international gas business, as well as managing its major operational areas including refining and shipping.
* Mr Holliday is also a non-executive director of Marks and Spencer.
* His interests include the England rugby team and the arts.