National Grid, the electricity and gas transmission company, reported a 4 per cent rise in operating profits for the first half of the year and confirmed that it would raise its interim dividend by 8 per cent, in line with its policy.

Operating profits rose from £1.039 billion to £1.079 billion in the six months to September 30, on the back of a 28 per cent increase in revenues from £1.54 billion to £1.97 billion. Shares in National Grid closed down 10p to 680p.

The UK company, which completed its acquisition of KeySpan, a US transmission business, for £4.2 billion in August last year, said that it was on track to continue increasing its UK assets by more than 6 per cent this year and its US assets by about 4 per cent.

Steve Holliday, the chief executive, said that the outlook was positive and the company well placed for organic growth. “We remain on track to deliver in line with our expectations for the full year,” he said.

Clive Roberts, an S&P analyst, downgraded Grid from “buy” to “hold”, but raised its target price by 21p to 668p.

National Grid said that it had completed its share buyback programme. It has returned almost £594 million to shareholders since April and has completed the return of £1.8 billion, the proceeds from the sale of its wireless business, which it sold in 2006.

Operating profits were driven by a strong result in its gas distribution business, which has almost doubled in size since it bought KeySpan. Here, a 65 per cent increase in operating profit in the first half owed mainly to the UK business, where National Grid has just begun a new five-year regulatory settlement, allowing it to make an above-inflation increase in charges for the year. The US gas business is heavily weighted to the second half of the year.

The company said that it expected to see higher second-half profits in its non-regulated businesses, which would offset timing issues in electricity distribution and generation, where costs climb in the second half.

It has invested £1.6 billion in the first half of the year and will have invested £3.2 billion by the end of the year.

A second tank and jetty is scheduled to come on line soon at the company's Isle of Grain Liquefied Natural Gas (LNG) business. Completion of a third phase is planned by 2010, which will take annual capacity for LNG to 15 million tonnes, about a fifth of the total UK gas demand.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax