Grid in £290m South American write-off

National Grid's strategy of expanding into overseas telecoms markets suffered a huge setback yesterday after it was forced to take a £290m writedown to cover its possible withdrawal from Latin America.

The group has invested £400m in three telecoms ventures in Brazil, Argentina and Chile since 1999. But it is having to write down its entire investment and seek strategic investors or buyers for the businesses after failing to raise the finance to repay the original investment and complete the roll-out of the networks.

Roger Urwin, National Grid's new chief executive, said that it would consider an outright sale of its interests in Latin America if it could not find a strategic investor. He refused to say what the company would do if no buyers could be found.

The biggest of the three investments is in a Brazilian long-distance carrier called Intelig, which National Grid owns jointly with France Telecom and the US company Sprint. Intelig was launched with a great fanfare in January 2000. A public competition to find a name for the company attracted more than a million entries.

But it soon ran into financial difficulties when it was discovered that the low value of calls being made on the network meant that it was uneconomical to bill individual customers.

National Grid had hoped to raise vendor finance for Intelig from the two telecoms equipment makers Alcatel and Nortel, but the decline in the telecoms market has put paid to that. It has now appointed UBS Warburg to find new financial backers for Intelig in the next six months and a buyer for a second long-distance network in Argentina ­ Silica Networks ­ in which it has a 50 per cent stake.

The third telecoms venture, Manquehue, which operates a service in the Chilean capital Santiago, has been hit by a downturn in the local economy.

The £290m write-down plunged National Grid into a £103m loss for the first six months of the year. Its shares fell 6 per cent to 473p.

Despite the write-down, National Grid said Intelig's performance had improved markedly with its billing problems out of the way and operating losses reduced from £70m to £22m.

The Latin American setback took the shine out of an otherwise strong set of results with operating profits up by 6 per cent to £385m.

Grid said it was on course to complete the £5.6bn acquisition of the US electricity transmission and distribution company Niagara Mohawk early next year.

The purchase, which will be funded with the issue of about £1bn in National Grid shares to Niagara Mohawk shareholders, will increase the group's borrowings to £8bn.