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Winter Blackouts and Power Shortages

The chief executive of National Grid said this winter’s energy capacity would be more stretched than last year but that he was confident of getting through without blackouts.

Steve Holliday, who is leaving the pipes and pylons operator at the end of March, also announced plans to sell a majority stake in the company’s gas distribution business, which is worth about £10bn.

National Grid said last month it is more likely to draw on extra sources of power this winter to keep the country’s electricity running with the chance of blackouts at its highest for a decade.

Announcing National Grid’s first-half results, Holliday said: “We know this winter is tighter than last winter. We have got the tools we need to make sure we can balance supply and demand.”

National Grid has faced criticism for allowing spare capacity to fall to 1.2%, down from a peak of 16.8% in 2011-2012 and the lowest since 2005-2006. The fall follows closures and reduction in output at a number of power stations.

The first auction to encourage new capacity to fill the shortfall took place last December. The government expected a number of new gas-fired power stations to be built but most of the new capacity was provided by existing power stations with only 5% from a newly built one.

Holliday told Bloomberg TV the government may want to offer further incentives to build power stations after next month’s second auction. “We need to see how this auction goes,” he said.

National Grid’s pre-tax profit for the six months to the end of September rose 21% to £1.37bn. It increased the interim dividend by 0.29p to 15p.

Halliday said the sale of the gas distribution business would leave National Grid with higher growth businesses to fund its dividend and investment.

“Today is literally the start of the process and we expect that process to take right the way through 2016 and to close in 2017,” he said.

The shares rose 2.3% to 917p and are virtually unchanged since the start of this year.

Holliday declined to say how much he expected to get for the stake but The Sunday Times has reported that the sale could be worth as much as £10bn (£).

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