Over the last five years, the National Grid (LSE:NG.) share price has been on a slow but steady upward trajectory, climbing by around 25% since July 2020. However, with management now executing its exceptionally ambitious £60bn investment programme, this growth could be set to accelerate. It might even push the shares of the energy infrastructure business to double to £20.
Renewed growth potential
At a market-cap of £50bn, for the share price to double it would need to grow to £100bn. While ambitious, that’s not outside the realms of possibility, especially if the aforementioned investment programme proves successful.
While it’s already caused some equity dilution, the plan to modernise and upgrade the UK’s energy infrastructure could unlock considerable growth over the next five years. In fact, management’s projected an average 10% annual growth in assets paired with up to 8% earnings expansion over the same period.
Despite it still being early days of the strategic transformation, some significant improvements have already been delivered. Total pre-tax profits in its 2025 fiscal year (ending in March) jumped by 20%, while zooming in on its UK Electricity Distribution business, it saw a 64% surge in operating profits.
At the same time, rate increases in New York and Massachusetts have helped further elevate its international income, while the subsequent sale of its Renewables business has helped raise further funds for reinvestment and debt reduction.
Speaking of which, the firm’s net debt position has also improved, falling by around £2.2bn in the last 12 months to £41.4bn. That still leaves a fairly substantial amount of leverage for management to tackle. But as its new infrastructure investments steadily bolster cash flows through margin expansion, financial health should continue to improve.
All things considered, while it certainly won’t happen overnight, I wouldn’t be surprised to see the National Grid share price climb to £20 within the next decade. At the same time, it might never happen, of course.
Taking a step back
The outlook for National Grid shares certainly looks promising. But it’s crucial to recognise that nothing’s set in stone, and the stock could easily end up moving in the opposite direction. Management needs to continue executing its strategy and hitting key milestones, which is far easier said than done for turnaround plans on this scale.
But let’s say leadership executes everything perfectly with infrastructure upgrades coming in on time and under budget. There’s still the ongoing question market regarding the regulatory environment. Price caps and energy rates are highly regulated and can be shifted in an unfavourable direction for this enterprise, limiting the firm’s growth capabilities.
Combining these risks with the potential equity dilution of any future fundraising activities could mean that even over the next decade, National Grid shares fall short of expectations. Nevertheless, an interesting growth opportunity could still exist here. That’s why I think long-term investors may want to consider taking a closer look.
