National Grid, the UK energy transmission utility, has raised its capital spending target for fiscal 2027 and lifted its earnings growth outlook, a move that Bank of America says suggests supply chain worries may be overdone. The company now plans to spend £13.5 billion by fiscal 2027, up from a previous £13 billion, and expects underlying earnings per share to grow 15%-16% from a fiscal 2026 starting point, compared with an earlier 13%-15% forecast.
The upgrade comes as National Grid reported stronger-than-expected first-half delivery, according to Bank of America. The bank highlighted that the company’s ability to complete projects on time is key to unlocking the value of its investment plan. For a regulated utility, the payoff from capital spending isn’t immediate—it comes when new infrastructure is finished and added to the regulated asset base, the pool of assets on which the company is allowed to earn a return.
How National Grid makes money
National Grid operates and maintains the electricity and gas networks that transport energy across the UK and the northeastern US. Its revenue is largely determined by regulators, who set the amount the company can earn based on its regulated asset base. Under the UK’s RIIO price-control framework, the company is moving from the RIIO-T2 period to RIIO-T3, which is expected to allow higher “allowed revenue” as the asset base grows.
That regulatory mechanism is why the raised spending target matters. More capital spending means more infrastructure, which, once completed, can justify higher revenue allowances. The upgraded earnings guidance reflects that dynamic: a larger asset base can support stronger earnings growth over several years, turning years of construction into a steadier income stream.
Bank of America’s main takeaway is that the market may be pricing too much near-term execution risk. If projects keep getting finished and connected on time, the company could deliver earnings growth that exceeds current expectations. The bank’s view is that supply chain concerns, which have weighed on the sector, may be overblown given National Grid’s recent performance.
What it means for investors
For investors, the key is to understand that £13.5 billion of capex isn’t the prize by itself. The real value comes when those assets are completed and start earning regulated returns. That’s why delivery risk is a major valuation driver. If supply chain hiccups or permitting delays push projects back, they don’t just shift costs—they can delay when assets begin generating revenue, which can affect how confidently investors price National Grid’s earnings path into 2027 and beyond.
The company’s raised guidance suggests management is confident in its ability to execute. But utilities are sensitive to interest rates and regulatory decisions, and any change in the RIIO-T3 settlement could alter the outlook. Investors will likely watch for further updates on project timelines and regulatory approvals.
National Grid’s move comes amid a broader backdrop of European stocks sliding as investors weigh spending plans across sectors. While that slide was driven by AI-related concerns, the utility sector often attracts attention when growth expectations are uncertain, given its defensive characteristics.
For everyday investors, the takeaway is that National Grid’s upgraded outlook is a positive signal, but it’s not a guarantee. The company’s earnings growth depends on completing projects on time and on regulators allowing the higher revenue. If those factors hold, the stock could benefit from a re-rating. If not, the risk is that the market’s current caution proves justified.
Bank of America’s note is just one analyst’s view, but it highlights a common theme: for regulated utilities, the path to earnings growth is paved with completed assets, not just announced spending. Investors should keep an eye on project milestones and regulatory updates in the coming quarters.
