National Grid plans £12bn spend to boost gas import capacity

National Grid, the owner of Britain's gas and electricity transmission networks, unveiled plans yesterday to invest £12bn over the next five years.

Some £9bn of the money will be spent on its regulated UK businesses to meet the huge increase in demand for imported gas and to connect renewable power projects such as wind farms to the electricity transmission grid.

The increase marks a steep change in the company's spending programme and follows earlier criticism that power blackouts in London were the result of the company not investing enough to modernise its network. Last year the Grid spent £2.1bn - a one-third increase on 2004-05. Over the next five years that will rise to about £2.5bn a year.

Roger Urwin, the chief executive, said the big increase in investment meant energy bills were likely to rise but the impact would be limited because transmission costs accounted for less than 5 per cent of household gas and electricity charges.

Of the £9bn to be invested in the UK, £7bn will be spent on renewing and upgrading the nationwide electricity and gas transmission networks while £2bn will go on the local gas distribution systems.

The remaining £3bn will be spent largely in the US, where the Grid is the third-largest energy company after the $7.8bn (£4.1bn) takeover of two more east coast gas and electricity businesses this year.

Steve Holliday, who takes over as chief executive this year, said the Secretary of State for Trade and Industry Alistair Darling's initiative to speed up planning procedures for new gas storage depots would have an impact in the medium term. The Grid warned this week gas prices this winter were likely to rise because of falling North Sea production and doubts about the timing of new facilities to boost the UK's import capacity.

Pre-tax profits rose 11 per cent last year to £1.924bn on turnover of £9.2bn, up £1.8bn. Profits fell slightly in the UK transmission business because of increased depreciation charges. They also declined marginally in the US on a constant currency basis.

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