Broker snap: Nomura remains a buyer of National Grid

16th Jul 2012 10:51

Nomura has maintained its 'buy' rating and 730p target price for gas and electricity group National Grid despite Ofgem's proposals for the power and gas transmission (RIIO-T1) and gas distribution (RIIO-GD1) regulatory reviews for 2013-2021.National Grid said on Monday that the initial plans, which envisage up to £22bn of investment between 2013 and 2021, "differ substantially" from its own business plan. Nomura says that the allowed returns are behind its forecasts and what the market was expecting. There has also been some push-back from the regulator on National Grid's transmission capital expenditure plan."Running a sensitivity based on the allowed returns versus our expectation suggests it could be a 2-3% negative on the NG share price," the broker said."However, it is important to note that these are headlines from the initial proposals and it is natural to expect for there to be differences between the negotiating positions of the regulator and NG at this stage - we could see positive movement from the regulator at the final review."Nomura says that it is awaiting the full details of the initial review on July 27th and the final proposals in December. "While the initial review is behind our expectations, we still see the attractions of the NG transmission growth story and remain buyers."Shares were trading 2.44% lower at 676.06p by 10:51.BC