National Grid Plc · LSE:NG.
National Grid — Debt Investor Presentation (November 2011)
29 slides from National Grid's debt investor presentation, Nov 24, 2011
Slide 1: National Grid plc Debt Investor Presentation
National Grid plc Debt Investor Presentation London | Thursday 24 November 2011
Slide 2: Cautionary statement
Cautionary statement This presentation 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 Securit
Slide 3: Strategy
Strategy We will operate and grow our business to deliver consistently superior financial returns by: Delivering excellent levels of safety, reliability, security, customer service and environmental performance Using consistent and cost effective ways of working, putting into practice shared process
Slide 4: Highlights
Highlights Removed over 1,150 Massachusetts US restructuring roles RI & NH New York FERC and cost savings On track for $200m cost on track saving 1 Capital Focus on regulated investment businesses continuing at Procurement and healthy levels efficiency savings Disposed of two non- Strengthening regu
Slide 5: Safety performance
Safety performance Injury frequency rate remains robust at 0.18 Process safety improved Still aiming to achieve world leading safety performance Reinforce our focus on safety going forward 5
Slide 6: Operational performance
Operational performance Improving trend of customer satisfaction Response to Hurricane Irene and storms Unseasonal autumn snowstorm 6
Slide 7: Regulatory update
Regulatory update Positive feedback on plans submitted in July RIIO-GD1 plans to be UK submitted in November Roll over final proposals due in November Deferral filing for $236m with NYPSC in July US Preparing for filings in Niagara Mohawk and Narragansett next year 7
Slide 8: Key priorities update
Key priorities update Deliver the new Completed the transition to the new operating model operating model On track towards the $200m saving run rate by March 2012 Deliver the Forecast to deliver £3.2 - 3.3bn investment in 2011/12 core investment Investing in our people and processes programme Delive
Slide 9: Good financial performance
Good financial performance Excluding timing and Hurricane Irene costs 19% Profit before tax 1 £953m 2% £1,077m 19% Operating profit 1 £1,420m 4% £1,544m 7% Earnings £697m 6% EPS 2 19.6p 2% Dividend per share 13.93p 8% 1 Constant currency figures calculated by applying the average 2011 rate ($1.64 to
Slide 10: UK Transmission
UK Transmission 42% of Group Operating Profit Operating profit Timing effects of £54m 7% Higher revenues driven by RPI Higher controllable costs driven by inflation, investments made Operating profit in teams and processes excluding timing 2% Depreciation increased in line with growth in asset base
Slide 11: UK Gas Distribution
UK Gas Distribution 27% of Group Operating Profit Operating profit Timing effects of £18m 1% Higher revenues driven by RPI Controllable costs flat in real terms despite investment in new Operating profit systems excluding timing 4% Depreciation increase led by software amortisation Visual representa
Slide 12: US Regulated
US Regulated 22% of Group Operating Profit Operating profit Timing effects of £15m 13% £69m net charge for Hurricane Irene Operating profit Controllable costs down in both real and nominal terms excluding timing and Irene 10% Depreciation decreased reflecting movements in asset lives Visual represen
Slide 13: Other activities
Other activities 9% of Group Operating Profit Operating profit Grain LNG profits up after phase III completion Lower operating costs in our Property business 30% Metering profits up due to growth in meter portfolio and higher revenue from contract prices Visual representation only – not to scale Bus
Slide 14: Capital investment
Capital investment Six months to 30 Sep £m 2011 2010 UK Transmission 603 627 UK Gas Distribution 325 329 US Regulated 462 521 Other activities 89 132 Joint ventures - 72 Total 1,479 1,681 2011/12 forecast capex £3.2 - 3.3bn 14
Slide 15: Interest, tax and earnings
Interest, tax and earnings Finance costs 1 Tax Earnings 15% 9% 6% at £(468)m at £(254)m at £697m (effective tax rate 26.7%) Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations 1 Constant currency figures calculated by applying the
Slide 16: Funding headlines
Funding headlines We are committed to financing our business in a manner that maintains an efficient balance sheet Net Debt (Sept 2011) FFO interest cover and optimises our cost of capital. £20bn 3.8x External debt is raised by our operating Capacity to fund whilst Target range (trend) 3.0 companies
Slide 17: Debt in National Grid
Debt in National Grid RPI Gross and net debt as at 30 September 2011 (IFRS, Gross Net Linked £bn) Debt Debt debt National Grid plc, NGG Finance plc and other 4.5 3.4 National Grid Electricity Transmission plc 2.1 4.5 4.4 National Grid Gas plc 3.6 7.7 6.7 National Grid Grain LNG 0.3 0.3 Total UK debt
Slide 18: Group borrowing facilities and liquidity
Group borrowing facilities and liquidity National Grid plc National Grid USA Group $850m, 5-year syndicated facility agreement expiring $500m syndicated loan facility (1-year Standby Bond November 2015 with National Grid USA as a named Purchase Facility) for New England Power, borrower Massachusetts
Slide 19: Treasury policies
Treasury policies Indicative currency profile Foreign exchange Interest rate risk (ultimate liability NOT currency of issue)* risk management management (at 30-Sep-11) Principle foreign exchange risk is We seek to minimise total financing USD costs within preset fixed/floating ‘Natural hedge’: manag
Slide 20: Appendix
Appendix
Slide 21: Review of financial metrics
Review of financial metrics Regulators Equity Investors Regulated returns are an effective way of driving Operating return measures Shareholder value regulated entity performance Allowed Achieved Review of our key Metric UK vanilla vanilla TBC performance measures to returns returns support our inve
Slide 22: Return on capital employed 2010/11
Return on capital employed 2010/11 Regulators Equity Investors Allows comparability between UK & US 2010/11 Operating return measures Shareholder value Post tax measure based Allowed vanilla Achieved vanilla RoCE Overall on IFRS operating profit Group ROE Adjusted for different UK 5.01% 6.28% 8.5% r
Slide 23: Two year trend reflects progress to date
Two year trend reflects progress to date Return on Capital Employed UK movement reflects 2009/10 2010/11 low level of revenue RoCE RoCE inflation v 4.4% inflation in RAV Improved US UK 9.6% 8.5% reflects stronger 140bps difference performance and driven by US business RoCE RoCE increased which, whil
Slide 24: Enduring changes present a clearer view
Representation of US ROEs and rate base Reviewed in parallel with the development of our new RoCE metric Rate base to fully reflect Improved clarity of jurisdictional definitions reporting Consistent treatment when Better comparability calculating US ROEs for between relative and each regulatory ent
Slide 25: Current Group structure (summary)
Current Group structure (summary) National Grid plc Baa1 / BBB+ / BBB+ National Grid Holdings Inc NR / A- / NR National Grid Holdings One plc NR / BBB+ / NR National Grid USA Baa1 / BBB+ / NR KeySpan Corporation Niagara Mohawk Power Corporation Baa1 / A- / A- National Grid Gas plc National Grid Elec
Slide 26: Group credit ratings
Group credit ratings Senior Unsecured / Short-Term ratings Moody’s S&P Fitch National Grid plc Baa1/P2 BBB+/A2 BBB+/F2 National Grid Electricity Transmission plc A3/P2 A-/A2 A/F2 National Grid Holdings One plc Not rated BBB+/A2 Not rated National Grid Gas plc1 A3/P2 A-/A2 A/F2 National Grid Gas Hold
Slide 27: Interest cover calculation
Interest cover calculation For the year ended 31 March (£m) 2011 2010 2009 Interest expense (P&L) 2,415 2,160 2,465 Capitalised interest 129 99 133 Interest on pensions debt adjustment 30 92 78 Interest on decommissioning liabilities adjustment 5 6 7 Interest on lease rentals adjustment 30 29 27 Pen
Slide 28: Return on Capital Employed
Return on Capital Employed Year ended 31 March 2011 Year ended 31 March 2010 £m UK US UK US Statutory Operating Profit 1,964 1,704 1,934 1300 Exceptional items, remeasurements and stranded cost recoveries 110 (297) 100 (359) Business Performance Operating Profit 2,074 1,407 2,034 941 Depreciation an
Slide 29: Thank you
Thank you Group website: www.nationalgrid.com Detailed debt investor information: www.nationalgrid.com/corporate/Investor+Relations/DebtInvestors 29
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