Billions drain abroad from UK power grids

Tycoons cash in on energy bills – fuelling fears Corbyn will try to renationalise network

GIANT foreign firms which own the cables that supply electricity to British homes are making vast profits and siphoning hundreds of millions of pounds out of the country each year, an investigation by The Mail on Sunday can reveal.

Four firms that connect homes to the National Grid – including two owned by billionaires from the US and China – dished out dividends of more than £1 billion in the past two years alone.

They are paying themselves vast sums despite assurances that they are heavily regulated.

The findings of our probe will raise concern that the massive payouts are heaping extra costs on households – which pay for the running of the power network via their electricity bills – and could be seized upon by Jeremy Corbyn as the Labour party seeks to renationalise the power grid.

The 14 regional power networks in the UK are controlled by just six privately run companies. Two of these are part of larger energy groups, SSE and Scottish Power, but four are owned directly by overseas investors.

Northern Powergrid in the North East is owned by Berkshire Hathaway – run by the world’s third richest man Warren Buffett.

UK Power Networks, covering the East of England, is owned by Hong Kong-based multi-billionaire Li Ka-shing.

Western Power Distribution, which covers the Midlands and the South West, is owned by the US energy conglomerate PPL Corporation.

Electricity North West, which stretches from Manchester to Cumbria, is owned by Australian firm Colonial First State and US bank JP Morgan.

The latter is up for sale for £2 billion and bidders are understood to include Li Ka-shing.

Statutory accounts for the firms reveal that most make vast profit margins. In total, those four firms declared profits of £1.7 billion on revenues of £ 4.5 billion last year. The profit margin is more than 37 per cent. However, watchdog Ofgem and the Energy Networks Association, which represents the firms, said the companies are required to reinvest profits into their networks to improve services to customers.

The remaining two network operators are owned by energy providers ScottishPower and SSE, which are both currently subject to stringent caps on the prices they charge consumers.

Figures provided by the ENA suggest the ‘cost of investment activities’ across all six network operators was more than £2.5 billion in 2017. It claimed that these huge outlays left a ‘post-investment return’ of £319.7 million on revenues of £6.3 billion – a profit margin of just over 5 per cent.

But our investigation reveals that the four independent companies paid their foreign owners more than twice that in dividends in the corresponding period. The total dividends paid by the four firms to their owners from 2014 to 2018 were close to £2 billion.

Some networks also carry significant debts, including loans from their parent company, meaning the owners are able to make more money through interest payments.

Electricity bills for consumers include the cost of maintaining distribution networks. This accounts for about 15 per cent of the overall bill. The ENA said the networks are ‘ thoroughly scrutinised by the regulator’. It said the dividends paid were higher than its stated profit for the energy network industry because they ‘also include money received from unregulated parts of the businesses’.

But UK Power Networks, which has paid its owner more than £800 million in dividends since 2014, describes itself as a group that ‘owns, operates and manages three of the 14 electricity distribution networks in Great Britain’.

It says in its latest set of statutory accounts, filed at Companies House: ‘The group operates within a regulated environment with the major part of its revenue being set as part of a price control review by the industry regulator Ofgem.’ Mark Todd, co-founder of the comparison site Energyhelpline, said: ‘Thenetworks are seen as a good asset to own. It’s like a savings account that pays a very high rate of interest.

‘If the regulator sees that the return on investment is exceptional then they should take action because it’s not fair that foreign investment companies can buy up vast tracts of the British energy network where there is zero competition and then charge a price which is too high.’

Ofgem said: ‘Ofgem’s framework ensures that energy network companies deliver both good levels of performance and value for money for consumers.

‘From 2021, Ofgem has proposed a much lower cost of capital for network companies to raise the billions of pounds of investment needed, which will result in lower returns for investors and more savings for consumers.’