NG.Focus
Investor Relations | June 2020
One of the world's largest publicly listed utilities focused on transmission and distribution of electricity and gas. We play a vital role in connecting millions of people to the energy they use safely, reliably and efficiently.
Investment proposition
We aim to be a low risk business, focused on generating shareholder value through both dividends and asset growth by investing in essential assets under primarily regulated market conditions, to service long-term sustainable consumer-led demands
New York Stock Exchange NGG
Financial performance in 19/20
Business highlights in 19/20
• Underlying operating profit up 1% to £3.5bn
• Business continuity plans successfully implemented in response to COVID-19
• COVID-19 impact on earnings, primarily driven by a £117m increased provision for US bad debts
• Underlying EPS down 1% to 58.2p reflecting improved regulated performance, offset by non-recurrence of prior year one-off benefits
• Continued progress on 2050 net zero emissions target; achieved 70% reduction on 1990 baseline; new interim target to achieve 80% by 2030
• Record capital investment of £5.4bn leading to strong asset growth of 9%
• Group RoE of 11.7% (2019: 11.8%)
• Published long-term gas options for New York
• Achieved 99% of allowed RoE in the US (9.3%)
• Business plans submitted for RIIO-2
• Recommended final dividend to bring full year dividend to 48.57p, up 2.6%, in line with policy
• Cost efficiency programmes delivered around £100m savings
• FY21 outlook: assumed COVID-19 underlying operating profit impact of approximately £400m
• First renewable project commissioned through Geronimo since acquisition in July
1. Underlying results excluding exceptional items, remeasurements, timing and major storm costs
Strong and efficient balance sheet
Gearing and debt profile as at 31 March 2020
• Appropriate level of debt funding for strong credit ratings, with gearing at 63%
RPI linked 25%
• Target retained cash flow (RCF) to net debt above 9%
Debt 63%
Floating£28.6bn rate 10%
Fixed Rate 65%
• Single A credit rating for UK operating companies and majority of US operating companies; NG plc rated BBB+
• Scrip dividend option provides flexibility for growth
*Net debt includes 100% of hybrid debt, borrowings, associated derivatives and cash and current financial investments
London Stock Exchange
NG.
Good regulatory progress in 2019/20
US returns
* At actual currency
Capital investment $4.2bn
FY19: $3.5bn
Rate base $25.6bn
FY19: $22.9bn
Assets outside rate base $2.7bn
FY19: $2.5bn
Underlying operating profit £1.6bn
FY19: £1.6bn*
FY20 US Regulated capital investment
FERCMassachusetts
Rhode Island
New York
Regulation
• All distribution rates have been refreshed within the last 3 years
• ~50/50 debt:equity regulatory capital structure
• Nominal returns provide a faster cash return
2019/20 RoE/Rate base ($m)
Rhode Island
Electric 11.9%
Rhode Island
FERC Mass
Gas 8.8%
NiMo Gas 8.7%NiMo Electric
KEDNY
7.7%
$0$25.6bn
Strong performance in the US in FY20
• Rate base growth of 12%
• Consistent achieved return on equity; 99% of allowed
• Delivered over $30m of savings this year and remain on course to deliver $50m in 20/21
Rate case outlook
CY2020
KEDNY filing 1
KEDLI filing 1
2021
2022
2023
MA gas filing
MECO filing
NiMo rate filingRhode Island gas filing Rhode Island electric filing
1 Currently in settlement discussions with the regulator with new rates expected to be backdated to 1 April 2020
National Grid Ventures & Other
Capital investment £885m
FY19: £623m
Operating profit £242m
FY19: £400m
NG Ventures & Other
Total contribution £330m
FY19: £440m
Post-tax share £88m
FY19: £40m
Joint Ventures
• NGV includes long term assets with a low risk profile and stable cash flows
• Own and operate 4GW of electricity interconnection between UK and Europe, with a further 3.8GW under construction
• Geronimo acquisition to provide US renewable generation opportunities
• St. William joint venture with Berkley Group to unlock land value
Continued solid performance in the UK in 2019/20
UK RoE Combined 12.4%
FY19: 12.4%
Electricity Transmission
Other key financial metrics
Capital investment £1.0bn
FY19: £0.9bn
Regulated asset value £14.1bn
FY19: £13.5bn
Underlying operating profit £1.2bn
FY19: £1.1bn
Regulation
• Single regulatory body - Ofgem
• 8-year RIIO price control through to 2021
• Incentives to promote innovative and efficient capital investments benefitting customers and shareholders
• Cost allowances and revenues linked to RPI
• Remunerated in part through RPI asset indexation
Gas Transmission
Other key financial metrics
Capital investment £0.2bn
FY19: £0.3bn
Regulated asset value £6.3bn
FY19: £6.2bn
Adjusted operating profit £0.4bn
FY19: £0.3bn
Good performance in the UK in FY20
• Achieved outperformance of 230bps through innovation and efficiency
• Focus on customer savings; over £700m generated to date under RIIO
• Continued investment in maintaining the network
• Delivered over £70m of savings this year and remain on course to deliver £100m in 20/21
Timeline on RIIO-T2
Final determination
Draft business plans submitted
Stakeholder group report to Ofgem
ESG performance and priorities
Environment
Enabling a fair and affordable transition to a clean energy economy
Net Zero
scope 1 and 2 GHG emissions by 2050 (1990 baseline)
70% reduction achieved in FY20
Economy
Growing portfolio of high quality assets
Assets by segment as at 31 March 2020
NG Ventures & Other 9%
US Regulated 46%UK Electricity Transmission 31%
UK Gas Transmission 14%
• Power and heat networks at the heart of the energy system
• Targeting annual asset growth of 5-7%*
*Assuming long run UK RPI Inflation of 3%
FY21 forecast capital investment by segment
Other
UK TransmissionNG Ventures
US Regulated
• US regulated driven by mandated gas pipe replacement programmes; electric network resiliency, storm hardening and grid modernization; and decarbonisation of energy
• UK regulated driven by asset health and network resilience
• NG Ventures driven by interconnector programme
Key measures to deliver shareholder value
1. Underlying results excluding exceptional items, remeasurements, timing and major storm costs
Value added (at constant currency)
Captures total return per share created on an operational basis
Net asset growth +
Cash dividend
-
Growth in adjusted net debt =
Value added
Note: value added excludes Cadent sales proceeds
Group return on equity (RoE)
12.3% 12.3% 11.7% 11.8% 11.7% | ||||||||||
15/16 | 16/17 | 17/18 | 18/19 | 19/20 |
2019/20
£3.7bn +
Dividend policy to grow DPS at least in line with UK RPI
£0.9bn
£2.0bn
58.9p/share
£2.6bn =
-
*Excludes 84.375p special interim dividend related to sale of UK Gas Distribution (NGGD)
Important notice
This document contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include information with respect to National Grid's financial condition, its results of operations and businesses, strategy, plans and objectives. Words such as 'aims', 'anticipates', 'expects', 'should', 'intends', 'plans', 'believes', 'outlook', 'seeks', 'estimates', 'targets', 'may', 'will', 'continue', 'project' and similar expressions, as well as statements in the future tense, identify forward-looking statements. Furthermore, this document, which is provided for information only, does not constitute summary financial statements and does not contain sufficient information to allow for as full an understanding of the results and state of affairs of National Grid, including the principal risks and uncertainties facing National Grid, as would be provided by the full Annual Report and Accounts, including in particular the Strategic Report section and the 'Risk factors' section on pages 212 to 215 of National Grid's most recent Annual Report and Accounts for the year ended 31 March 2019 as updated by National Grid's unaudited half-year financial information for the six months ended 30 September 2019, published on 14 November 2019. Copies of the most recent Annual Report and Accounts are available online atwww.nationalgrid.comor from Equiniti Limited. Except as may be required by law or regulation, National Grid undertakes no obligation to update any of its forward-looking statements, which speak only as of the date of this document. The content of any website references herein do not form part of this document.
Further information
Nick Ashworth
Director of Investor Relations (Interim)
T +44 (0) 20 7004 3166
M +44 (0) 7814 355590nicholas.ashworth@nationalgrid.com
Jon Clay
Investor Relations Officer T +44 (0) 20 7004 3460 M +44 (0) 7899 928247jonathan.clay@nationalgrid.com
National Grid plc 1-3 Strand
London WC2N 5EH United Kingdom
James Flanagan
Investor Relations Manager (US)
T +44 (0) 20 7004 3129
M +44 (0) 7970 778952james.flanagan2@nationalgrid.com
Caroline Dawson
Investor Relations Manager
T +44 (0) 20 7004 3172 M +44 (0) 7789 273241caroline.dawson@nationalgrid.com
Peter Kennedy
Investor Relations Manager
T +44 (0) 20 7004 3169 M +44 (0) 7966 200094peter.kennedy@nationalgrid.com
@Grid_Media
investors.nationalgrid.com
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National Grid plc published this content on 18 June 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 June 2020 06:06:03 UTC