The utility announced yesterday it would acquire the UK electricity distributor from PPL for £7.8bn while selling its interest in US business NECO. The Grid also flagged the sale of its majority stake in UK Gas Transmission.
For the deal to work requires a similarly high multiple on the gas assets to the WPD price, said Credit Suisse.
Assuming it can get this, the Swiss broker expects ‘low but useful’ earnings accretion from the deal.
Strategically, NG will also be more focused on the electrification and net-zero in the UK and its grids will not be facilitating as much CO2 emission.
The broker also expects some more leeway on regulated UK returns, which are also likely to improve.
The WPD deal is due to complete in July. Draft business plans are due on 1st July with new on the gas sale progress in the final quarter of 2021.
The shares are down 40% relative to the FTSE100 across the past year, notes the broker despite sustaining the dividend base and the stock trades on a 6.2% dividend yield.
Credit Suisse kept its outperform rating and target price of 1020p with rising interest rates highlighted as the main risk to its equity valuation.
Shares rose 1.6% to 842.4p.