(Reuters) - The head of Britain’s National Grid criticised the opposition Labour Party’s plans to renationalise energy networks, saying it would increase costs for consumers and could prompt legal challenges, as the firm’s profit fell slightly.
“The proposals that Labour have set are very complex and from our perspective would be a massive distraction for the industry and would certainly slow down the progress in terms of things like infrastructure investments,” Chief Executive John Pettigrew told Reuters on Thursday.
“It (the proposals) would ultimately increase the cost for customers ... we’ve set out quite clearly that actually we don’t think their proposals will be good for customers or good for the decarbonisation agenda.”
The company, which has been beefing up investments into its cross-border electric and gas lines, reported on Thursday a 2% dip in underlying operating profit of 3.43 billion pounds for the year ended March 31.
Labour’s nationalisation plan has prompted infrastructure owners to warn of damage to investment, high taxpayer costs and a slower transition to green energy.
The proposals have also rekindled lingering worries among investors about potential radical changes to public policy if Labour, Britain’s main opposition party, won a general election.
British Prime Minister Theresa May is facing intense scrutiny over her leadership, with many calling for her departure, as she struggles to sort out how Brexit would pan out after her EU exit deal has been defeated thrice.
Mounting concern over the nationalisation plan took the focus off National Grid’s largely in-line results.
Shares in National Grid and peer SSE fell for a second straight session on Thursday as worries that nationalisation could be below market valuation unnerved investors.
“National Grid has nearly a million shareholders who directly own shares in National Grid and that dividend is important for their income and quite often for their pensions. And similarly of course a large number of pension funds in the UK are also investors,” Pettigrew said.
“The UK’s duty, if they did do nationalisation, is to pay fair value. We would expect if they looked to something less than that, there would be significant legal challenges from our investors.”
He noted that not everyone in Labour believed nationalisation was the right approach, adding the company would continue to engage with the more than 100-year-old party.
Britain has a mixed record on the success of privatisation since major infrastructure and services were taken out of public ownership by then-Prime Minister Margaret Thatcher and her successors from the 1980s onwards.
Management of Britain’s train tracks and stations was privatised in the 1990s but operator Railtrack ran into financial difficulty, blamed for a series of safety failures that led to several fatal crashes, forcing the government to return provision to public ownership.
On Thursday, the government said it would renationalise the management of probation services in England and Wales five years after a heavily criticised programme of privatisation was deemed to have put members of the public at risk.
Britain’s energy infrastructure, such as gas pipes and electricity cables, is owned by companies including SSE, National Grid and Iberdrola’s Scottish Power.
National Grid, despite the dip in underlying operating profit, said it expected to spend nearly 5 billion pounds in the current year on capital investments, almost 500 million pounds more than in 2018/19.
National Grid, one of the world’s largest investor-owned energy companies, has said Labour would cause an “enormous distraction” with its plan, which it said would delay Britain’s move to green energy.
“What’s the problem that the Labour Party is trying to solve?” Pettigrew asked.
Reporting by Pushkala Aripaka and Muvija M in Bengaluru and Costas Pitas in London; Editing by Shounak Dasgupta, Tomasz Janowski and Dale Hudson