January 23, 2018 / 9:50 AM / 7 months ago

UK's National Grid disappointed with Hinkley Point grid upgrade terms

Jan 23 (Reuters) - British gas and power network operator National Grid said on Tuesday it was disappointed with proposed ranges for cost of debt and equity from regulator Ofgem for upgrading the grid link to the planned Hinkley Point nuclear plant.

Ofgem, which valued the project at 800 million pounds ($1.1 billion), said National Grid should build the infrastructure but the regulator would set revenue for construction and operations, based on assumption that work was put out to competitive tender.

Ofgem said its proposals were based on past experience of securing savings for consumers, who pay for such infrastructure in their bills, when it put ownership of transmission lines for offshore wind farms to tender.

Ofgem said it was considering setting a weighted average cost of capital for National Grid to operate the Hinkley Point infrastructure for 25 years at between 0.60 and 1.75 percent. It said savings to consumers could exceed 100 million pounds.

National Grid said Ofgem’s proposed ranges for cost of debt and cost of equity did not reflect the cost of financing the project or the risk of construction.

It said Ofgem overestimated the potential savings to consumers from its approach.

Shares in the firm were down 1.9 percent in early trading, making it one of the top losers in FTSE 100 index.

National Grid said it would work on details of the project with Ofgem in the coming weeks, but would also consider other options if it could not reach agreement. It did not specify what those options were.

Ofgem said a final decision on whether to take what it called the “competition proxy” approach in spring 2018.

$1 = 0.7166 pounds Reporting by Arathy S Nair in Bengaluru; Editing by Edmund Blair

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