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National Grid's £3.2bn cash call takes City by surprise

Despite assurances to the contrary, Britain's largest utility group has gone to the market for cash.

National Grid yesterday shocked its shareholders and City investors by calling for raising £3.2bn in a rights issue.

After repeated assurances for more than a year that it would not tap the equity markets for extra cash, Britain's largest utility group invited criticism and anger with the announcement of the rights issue.

The indebted group saw its share price fall by more than 7 per cent in response to the news, which overshadowed the strong results it revealed for the full year. Pre-tax profits rose 12 per cent to £1.97bn for the year ended 31 March.

National Grid said it would offer two new shares at 335p each, for every five shares owned, to finance its £22bn capital expenditure programme over the next five years. The figure is a 44 per cent discount over Wednesday's closing price of 620p per share.

However, the group increased its dividend by 8 per cent to 38.49p a share, and said it planned to maintain this growth until 2012.