Could the National Grid share price crash on government break-up plans?

first_img See all posts by Rupert Hargreaves Click here to get access to our presentation, and learn how to get the name of this ‘double agent’! I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Simply click below to discover how you can take advantage of this. Image source: Getty Images Don’t miss our special stock presentation.It contains details of a UK-listed company our Motley Fool UK analysts are extremely enthusiastic about.They think it’s offering an incredible opportunity to grow your wealth over the long term – at its current price – regardless of what happens in the wider market.That’s why they’re referring to it as the FTSE’s ‘double agent’.Because they believe it’s working both with the market… And against it.To find out why we think you should add it to your portfolio today… The National Grid (LSE: NG) share price is one of the most defensive investments on the market. Indeed, I’ve written about the business on multiple occasions explaining why I’d like to add the stock to my portfolio as a defensive income champion. However, it’s starting to look as if these qualities are now under threat. Recent government proposals suggest the company could be broken up. As such, I’ve begun to turn cautious on this stock as a long term investment. 5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…National Grid share price crashNational Grid narrowly escaped a forced breakup in 2017. The market regulator, Ofgem, stopped short of separating the business and instead required management to spin-off the group’s operator division into a legally separate entity.This entity, National Grid ESO, is the electricity system operator for Great Britain. The business moves electricity around the system to keep homes and businesses supplied with the energy they need. National Grid ESO is only a part of the group’s sprawling empire. The transmission side of the business owns the high-voltage transmission network in England and Wales and the national gas transmission system in Great Britain. There’s also the private equity-style National Grid Ventures, which invests in promising energy upstarts. And finally, there’s the US business, which owns and operates critical utility infrastructure primarily on the east coast of America. Policymakers accelerated their review into the ESO business following last year’s power cuts across the south of England. The government’s green energy agenda is also cited as being one of the reasons behind the break-up being considered. As yet, no decision has been made. Nevertheless, this is a red flag for investors. Splitting up the ESO division would remove National Grid’s monopoly over the market. I reckon this would hurt profitability in the long term. Compensation for investorsAll reports suggest that compensation will be provided for shareholders in the event of a forced break up. So, this isn’t going to be a deliberate power grab. In my opinion, that removes any immediate threat to the National Grid share price. Still, over the long run, I think a forced break up could limit its ability to grow. Shareholders may see lower dividend and earnings growth as a result. That said, even if it’s forced to give up the ESO business, National Grid will remain the dominant utility business in the UK. This suggests to me that, post break-up, the company will remain a defensive income investment. However, dividends and future growth may be lower than historical figures. As such, I don’t think the National Grid share price will crash on government break-up plans, although I’m not as optimistic about the group’s future potential as I once was. I think other utility firms may now provide better growth profiles. Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.center_img Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Enter Your Email Address There’s a ‘double agent’ hiding in the FTSE… we recommend you buy it! Could the National Grid share price crash on government break-up plans? Rupert Hargreaves | Thursday, 3rd December, 2020 | More on: NG Our 6 ‘Best Buys Now’ Shareslast_img read more