Buffett faces profit cap on UK’S electricity network

INVESTORS in Britain’s electricity network, including billionaires Li Kashing and Warren Buffett, face having returns slashed after the regulator moved to limit profit margins.

Electricity network owners, such as Mr Ka-shing’s UK Power Networks and Mr Buffett’s Northern Powergrid, are set to see their returns slashed as regulators try to limit soaring energy bills.

Companies that distribute electricity around the UK will have their rates of return cut from 6.8pc to 4.75pc under price controls for the next five years.

Regulators say it will enable £20.9bn of investment while keeping the levy on bills to pay for local networks at around £90-£100.

Jonathan Brearley, Ofgem’s chief executive, said: “We are determined to get the best possible deal for consumers. The proposals will mean that substantial additional investment can be made to deliver net zero without placing any further pressure on bills.”

Energy bills are at record highs of £1,971 on average per household due to high wholesale gas prices.

The regulator believes they could hit £2,800 in October, meaning they will have more than doubled in a year.

Britain’s distribution network operators are owned by six different groups, including UK Power Networks, which is majority owned by Hong Kong-based Mr Ka-shing’s CK Infrastructure Holdings and his foundation.

UK Power Networks paid dividends of £237m in each of the last two years.

Northern Powergrid, one of Britain’s other distribution network operators, is owned by US investment billionaire Warren Buffett’s Berkshire Hathaway Energy. Western Power Distribution has just been bought by National Grid.

All distributors are under pressure to boost networks to cope with a surge in demand from electric cars and heat pumps. Analysts at RBC said the 4.75pc rate of return was below the 5pc-6pc companies had requested.

Basil Scarsella, chief executive of UK Power Networks, welcomed Ofgem’s plans, which he said “challenges us to ensure that our network is able to accommodate the transition to a net zero economy at the lowest overall cost to customers”.