National Grid added another £2 billion to its investment budget yesterday as it prepared for its role in meeting the UK's changing energy needs.
The operator of gas and electricity transmission networks said £9 billion of the £12 billion investment set aside for the next five years would be in UK regulated infrastructure.
The company, which employs around 1,500 people at its headquarters at Warwick Business Park, had previously indicated that spending over the period would be in the region of £10 billion.
Priorities include schemes to connect to new UK gas import facilities as supplies in the North Sea dwindle, while work is planned to replace existing assets and support the development of renewable energy resources.
N ational Grid said it increased investment in the last year by 36 per cent to £2.1 billion, but added that the figure would rise again to £2.5 billion a year.
However, in a research note, analysts JP Morgan said it already anticipated around £10 billion of investment, w hile Morgan Stanley described the move as only a "tweaking" of the prior capital expenditure targets and as "no real surprise".
In the last year, National Grid spent £280 million on infrastructure replacement, particularly of overhead lines, while £124 million was used on an ongoing project at Mil-ford Haven to connect to new gas transmission capacity being built there.
Another £136 million was spent on the Isle of Grain LNG importation terminal.
M eanwhile, around £500 million will be required for upgrading the UK's electricity transmission network.
Chief executive Roger Urwin said: "This is a network that was built predominantly in the 1960s. We do need to step up the rate of replacement in order to maintain reliability.
"The gas distribution networks will also be upgraded, with the old metallic pipes replaced by modern plastic ones."
Mr Urwin claimed the new commitments would not prevent the company pursuing f uture acquisitions opportunities.
He said: "It has to be seen alongside the other thrusts for the group. We generate value through operational outperformance, through investment of the sort we're talking about and, in a highly disciplined w ay, through strategic opportunities."
The investment plans were announced as National Grid said pre-tax profits rose 11 per cent to £1.92 billion, helped by a 17 per cent reduction in costs from UK gas distribution and a good performance by operations in the United States.
Chairman Sir John Parker said: "National Grid has again delivered a strong operational and financial performance which has been accompanied by our continued focus on safety and reliability of delivery."
Sir John also indicated the investment programme would not get in the way of further acquisitions, should they arise.
The company recently announced a £4.2 billion deal to buy Keyspan, the fifth largest natural gas supplier in the US, in a move that bolstered its presence in the North American gas market.
It already distributes electricity in the north-east of the United States to around 3.3 million customers and gas in upstate New York to more than 500,000 customers. In 2004 it acquired around 3,500 mobile phone and broadcasting masts from Crown Castle International in a move that helped diversify its UK profits.
Mr Urwin said: "We see this as a new platform for growth, particularly Keyspan, where there are major opportunities to expand gas penetration in their territories on Long Island in Massachusetts which we'll be looking to exploit."
The group is paying a final dividend of 15.9p a share, making the total payout for the year 26.1p a share, up ten per cent.