STEVE HOLLIDAY, the chief executive of National Grid, pulled together his key executives 12 months ago to help him solve a problem. In Whitehall, there was lots of talk about new energy - building nuclear power stations was coming on to the agenda, while huge wind farms were being sanctioned in far-flung spots around the country’s coastline.

Holliday’s concern was that nobody seemed to be paying enough attention to how all this new power would be transported into the nation’s homes.

“The new nuclear power stations are likely to be 1.6GW [gigawatt] generators,” said Holliday. “Most of those we have today are 400MW [megawatt]. There is significant upgrade needed in the connections that tie those in [to the grid]. If you use a roads analogy, you’ve got a C road where you now need a motorway. The fact you’ve got a C road there is all very interesting, but building a motorway is a very different proposition. That’s before you start to look at the rest of the motorway network.”

Usually, National Grid plans its investments in new electricity and gas networks seven years in advance. In light of the seismic changes going on, Holliday is now planning 10, 20 and 30 years ahead.

National Grid is investing £16 billion over the next five years in Britain and America as it begins to lay these foundations, against a backdrop of mounting fears about security of supply, climate change and soaring energy costs.

The investment programme is key to Holliday’s plans for growth. In the 18 months since he took the helm, he has gained a reputation for selling assets at top prices. He sold the group’s network of mobile-phone masts to Macquarie for £2.5 billion, a move in which the group doubled its money in less than two years.

“To say it was a good price would be an understatement,” said Holliday. “I’d use a rather different adjective: it was extraordinary, a very high price. A lot of people said that deal called the top of the market.”

Holliday also sold an electricity network in Australia to an infrastructure fund, making a gain of about 35%. Then he auctioned the Ravenswood power station in New York for $2.9 billion (£1.5 billion). In the meantime, the £4.2 billion acquisition of the US energy group Keyspan, that had been agreed by the previous management, finally won regulatory approval.

Holliday reckons the disposals are over. The next phase is about growing the business, which is now split “almost exactly 50-50” between Britain and America.

Results due to be published this week should confirm the progress being made. Despite rising bad debts in its US business, analysts are forecasting a 20% increase in pretax profits to about £2.6 billion.

National Grid is Britain’s biggest issuer of corporate debt after the banks, with about £15 billion of outstanding loans. While rising debt costs remain a threat due to the impact of the credit crisis, Holliday does not seem excessively worried.

Last week he closed a €750m (£595m) bond, priced at 0.8% above Libor, the inter-bank lending rate. Analysts saw the deal as a sign that conditions could be improving for corporate-bond issuers.

“I had a banker in here last week who was trying to tell me that the crisis was over,” said Holliday. “He took out a graph to prove it. I said to him that, with all due respect, one line on a graph doesn’t predict the future. But there are some positive indications. We’ve raised the best part of £2 billion this year so far. We’re not sanguine but we are comfortable. Am I surprised about that? Well I shouldn’t be. If you can’t finance a business like National Grid then you have got problems.” If anything, Holliday wants to raise and invest more money, particularly in America. National Grid is now the second-largest power supplier in America, thanks to the Keystone deal. While Britain’s energy systems are old and tired, much of the company’s operations in the US are reliant on infrastructure built in the 1920s.

Holliday has spent much of his time lobbying US politicians and regulators for permission to increase charges to fund investment. “The quandary that people have is that energy costs are very high,” he said. “The investment that needs to be paid for feeds into bills. If you are really worried about bills, you put off the investment as long as possible. Now is the time you can’t put it off any longer. The way to square the circle is energy efficiency. Let’s reduce the energy we use, and get the energy delivered through reliable infrastructure.”

Holliday is somewhat evangelical about climate change and has made a pledge to cut National Grid’s carbon footprint by 80% between now and 2050.

National Grid was recently hit with a record £41.6m fine by Ofgem, the industry regulator, over allegations that it was hindering the roll-out of smart meters – technologically advanced electricity and gas meters that allow consumers to monitor their consumption. Holliday (who is appealing against the fine) believes these meters could play a key role in combating climate change. He also reckons they could help to keep his investment bills in check.

“One of the interesting things about this industry is that everything is sized for peak demand,” he said. “Peak is hard to calculate and happens, in theory, just once a year, at half-time in a football match or something like that.”

The idea is that the meters could be used to give rebates to customers who were willing to have part of their power supply knocked out for a few minutes a week at times of high demand.

Holliday said: “If I offered you a deal where you paid $100 a month, but if you’re willing to allow us to interrupt this circuit once a week between these times you get a rebate of $20, you might be willing to accept it.”

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