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The UK’s National Wealth Fund has announced a £600mn loan to Spanish energy giant Iberdrola to upgrade the British power grid, marking its largest commitment so far.
The state-backed fund is investing as part of a total £1.35bn financing package led by Bank of America alongside other commercial banks including Lloyds Bank, NatWest and Banco Sabadell.
The money will go towards two major subsea transmission cables between Scotland and England that Scottish Power, Iberdrola’s subsidiary in the UK, plans to build, as well as other onshore upgrades in Scotland.
The lines are needed to connect wind farms in remote parts of Scotland with areas of higher electricity demand. Currently, the farms are often asked to curb their output as it cannot be transported to where it is needed.
John Flint, NWF chief executive, said on Thursday that upgrading the power grid was “one of the most significant barriers to decarbonising our economy”, adding that “substantial” investment was needed. He did not disclose further details of the terms.
The UK government aims to decarbonise the nation’s electricity system by 2030, a significant step towards the wider goal of cutting emissions across the economy to net zero by 2050.
In its report last year that outlined pathways towards the 2030 target, the government’s National Energy System Operator said nearly 1,000km of new cables onshore and 4,500km offshore would be required, costing roughly £60bn by 2030.
The National Wealth Fund has a mandate to support growth and tackle climate change. It was formerly known as the UK Infrastructure Bank before being rebranded by the government last October.
In a letter to the NWF in March, UK chancellor Rachel Reeves described it as a “key lever” for the government’s “clean energy mission”.
She added it should “focus its interventions where there is an undersupply of private finance” and help to “crowd-in private capital”.
Investment in electricity grids is in high demand globally, although in many countries they are considered a stable investment as they are regulated monopolies.
In the UK, rising network costs are still putting pressure on electricity bills despite the regulator Ofgem’s efforts to control them.
Keith Anderson, chief executive of Scottish Power, said: “We’re securing our supply chain, employing people, contracting with other UK companies . . . We’re putting all of the building blocks in place.”
It comes after National Grid, the FTSE 100 company which owns the main transmission network in England and Wales, raised £7bn in a rights issue in May 2024 to pay for its own network investments.
Iberdrola is one of the world’s largest utilities with profits of about €2bn in the first quarter of 2025 and a market capitalisation of about €104bn on the Madrid stock exchange. It plans to invest up to £24bn by 2028 in the UK.
Reeves said energy infrastructure upgrades would help “bring down bills, put more money in working people’s pockets and enable businesses to expand”.
