National Grid hit by £900m charges

National Grid, the owner of Britain's electricity transmission network, was counting the cost of its ill-fated foray into overseas telecoms markets yesterday after announcing exceptional charges totalling nearly £900m.

The heavy write-downs plunged the group into a £462m loss for the year to 31 March. But they also enabled Grid to clear the decks ahead of its £15bn merger later this year with Lattice, the owner of the gas transmission network. Lattice has also written off £250m on its telecoms venture, the fibre optic network 186k.

The biggest of the Grid write-downs was a £383m charge to cover its withdrawal from the Latin American and Polish telecoms markets. This was closely followed by a £372m charge relating to Energis where Grid has written down the value of its remaining 32.5 per cent stake to zero.

Other exceptional items included £73m of integration and restructuring costs in Grid's UK and US electricity businesses and a one-off charge of £92.5m to reflect the devaluation of the Argentine peso.

Despite the heavy charges, Grid said its investment in telecoms had benefited shareholders to the tune of £1bn after netting off the investment made and Grid's share of losses.

Roger Urwin, Grid's chief executive, defended the investment in Energis, pointing out that it had made £2.2bn by selling down its shareholding before the telecoms market collapsed. But he conceded that the group had "overstretched beyond the UK with the benefit of hindsight".

The biggest single hit was in Latin America where the Grid has taken a £272m charge. The bulk of this relates to its 50 per cent investment in Intelig, a long-distance Brazilian telecoms network, where Grid's share of losses alone are £170m. Grid and its two partners in Intelig, the US phone group Sprint and France Telecom, are in talks to sell the business with a number of interested parties.

The other big overseas write-down was in Energis Polska, Grid's attempt to set up a long-distance network in Poland, where a £110m charge has been taken.

After the £5.8bn takeover of the US electricity transmission and distribution business Niagara Mohawk earlier this year the Grid's debts have risen to £8.2bn while borrowings as a percentage of shareholders' funds now stand at 240 per cent.

However, Mr Urwin said Grid would be on the lookout for another big US acquisition once the Lattice merger was complete and said it could afford to fund another deal the size of Niagara Mohawk.