National Grid Plc · LSE:NG.
National Grid — H1 2014/15 Earnings Presentation
50 slides from National Grid's earnings presentation, Nov 7, 2014
Slide 1: Half Year Results 2014/15
2014/15 Half Year London | Friday 7 November 2014 Results
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: Half Year Results Highlights
2014/15 Half Year Results Highlights Steve Holliday | Chief Executive
Slide 4: On track for another good year
On track for another good year Consistent delivery of growth & continued execution against our plans UK performing well US systems implementation completed US business growing Delivering the fundamentals 4
Slide 5: Safety, reliability & customer service
Safety, reliability & customer service UK employee safety remains world class; US making excellent progress Network reliability remains strong Delivering another year of substantial investment 5
Slide 6: Financial headlines
Financial headlines £ 1.6bn £ 1.1bn £ 883m profit operating profit before tax earnings 23.4p 14.71p earnings dividend per share per share Capital investment £1.6bn Note: Adjusted performance, excluding exceptional items and remeasurements for continuing operations 6 All numbers include impacts of ti
Slide 7: UK Priorities
UK Priorities Electricity Transmission Significant investment programme Gas Transmission Several important upgrades required Gas Distribution Challenge to improve customer service 7
Slide 8: Significant investment programme
London power tunnels Significant investment programme 8
Slide 9: Several important upgrades
Gas Transmission compressors Several important upgrades 9
Slide 10: Challenge to improve customer service
Gas Distribution customer service Challenge to improve customer service 10
Slide 11: US Priorities
US Priorities Complete installation of new financial systems Sustain asset growth and returns 11
Slide 12: US Priorities: new financial systems completed
US Priorities Complete installation of new financial systems Completed Sustain asset growth Upgrade successfully installed in July and returns New financial systems fully integrated 12
Slide 13: US Priorities: sustain asset growth and returns
US Priorities Operations performing well Strong growth in regulated assets Complete installation Headwinds of to expected returns new financial systems Unplanned gas mains repair costs End of bonus depreciation dilutes returns Sustain asset growth and returns 13
Slide 14: Unplanned gas mains repair costs
Unplanned gas mains repair costs 14
Slide 15: Property JV with Berkeley Group
Property JV with Berkeley Group Property deal up to 24 sites into JV First 10 sites identified Berkeley Group invest cash, we provide sites Realise greater value for our London portfolio 15
Slide 16: Responsible business
Responsible business ‘Responsible business of the year’ award from Business in the Community Recognised UK & US businesses: - focus on sustainability - work in the community - developing skills and talent 16
Slide 17: Half Year Results Business Review
2014/15 Half Year Results Business Review Andrew Bonfield | Finance Director
Slide 18: In line with expectations
In line with expectations Operating profit UK Electricity Full Year focus on… Transmission £687m - value added UK Gas - returns Transmission £110m - regulatory financial performance & UK Gas Distribution £434m position Half Year update… US Regulated £307m - key drivers - outlook on full year ret
Slide 19: UK Electricity Transmission
Electricity Transmission Incentives Totex Other Add’l Overall Totex UK Electricity Transmission £687m + = = + UK Transmission Legal settlements of £53m not included in 14/15 returns Totex improvements driven by capital efficiencies Other incentives to maintain into the full year Additional (
Slide 20: UK Gas Transmission
Gas Transmission Incentives Totex Other Add’l Overall Totex UK Gas Transmission £110m + + = + UK Transmission Lower totex spend - in line with allowances Permit income to boost traditional (other) incentives Additional (legacy) allowances to remain in line with 13/14 but will ramp down from 20
Slide 21: UK Gas Distribution
Gas Distribution Incentives Totex Other Add’l Overall Totex UK Gas Distribution £434m = + = = UK Transmission Another good year for mains replacement activities Customer service improvements should benefit other incentives Small amount of additional benefits set to continue Note: Adjusted perf
Slide 22: US bonus depreciation
US bonus depreciation Stimulus measure to encourage investment Lowered cash tax by accelerating tax deductions Creates deferred tax liability, offset against rate base growth No impact on revenues, potential upside when rate base growth trued up For calendar year, likely to add around $350
Slide 23: US Regulated
US Regulated US Regulated £307m 8.5 % - 8.9% projected 2014 returns UK Transmission Operations performing well Strong growth in regulated assets Returns expect to reflect - bonus depreciation impact - costs associated with winter weather of 2013/14 Fundamentals of US business remain attracti
Slide 24: Other operating activities
Other Metering Grain LNG IFA Property Other operating £87m £38m £51m £26m activities Operating activities continue to provide steady performance Positive outlook for the full year Joint venture with Berkeley Group should unlock value of London property portfolio over time Corporate costs ass
Slide 25: Interest, tax and earnings
Interest, tax and earnings Finance costs £492m 19% lower than 2013 Effective interest rate 4.5% Lower cost of carry from holding cash & refinancing debt at attractive rates Adjusted performance, excluding exceptional items and remeasurements 25
Slide 26: Debt financing
Debt financing $900m NiMo bond raising - 10 years at 3.5% - 20 years at 4.3% £1.5bn bank loan facility arranged with European Investment Bank 26
Slide 27: Interest, tax and earnings
Interest, tax and earnings Finance costs Effective tax rate Earnings per share £492m 22.7% 23.4p 19% lower than 2013 at £(258)m Effective interest rate 4.5% Tax rate 30bp lower than £883m earnings Lower cost of carry from 2013 3,771m weighted avg. holding cash & refinancing Reflects lowe
Slide 28: Cash flows and net debt
Cash flows and net debt Period ended 30 September 2014 £m Net operating cash flow Operating profit 1,611 Depreciation & amortisation 721 £2.6bn Provisions, incl. pensions (197) Operating cash flow after capex Working capital & other 432 £85m Net debt £21.7bn Net operating cash flow 2,567 Net debt 21
Slide 29: Capital investment
Capital investment £m H1 2014 H1 2013 UK Transmission 514 701 UK Gas Transmission 85 92 UK Gas Distribution 226 248 US Regulated 649 571 Other Activities 105 76 Total 1,579 1,688 c.5% group growth rate expected 29
Slide 30: Technical guidance
Technical guidance 2014/15 2015/16 US 18a timing refund Two-year lag in UK $120-$140m regulation Impacts of US weather - return revenues Interest costs lower - share savings Full year tax rate of 25% - collect incentives No impact on returns 30
Slide 31: Summary
Summary Solid first half Good progress to year end objectives Continue to grow group whilst supporting dividend 31
Slide 32: Half Year Results Priorities & outlook
2014/15 Half Year Results Priorities & outlook Steve Holliday | Chief Executive
Slide 33: Electricity Market Reform
Electricity Market Reform Managed capacity market qualification process - 63GW capacity qualified - target of 51GW First capacity auctions in December 2014 First contract for difference awards in early 2015 33
Slide 34: Winter outlook
Winter outlook Loss of load expectation (LOLE) Worsening reliability Supplemental & Demand-side Balancing Reserve EMR Capacity Market in place Improving reliability Source: Ofgem June Electricity Capacity Assessment Report
Slide 35: UK Priorities
UK Priorities Electricity Transmission Significant investment programme Gas Transmission Several important upgrades required Gas Distribution Challenge to improve customer service 35
Slide 36: US Priorities
US Priorities Drive performance and efficiency Smaller targeted applications for cost allowances Complete installation of - Massachusetts & KEDLI new financial systems Major filings in New York and Massachusetts Sustain asset growth and returns 36
Slide 37: Tom King
Tom King Tom King to step down in March 2015 Seven years of important change Leaves behind an organisation with strong jurisdictional & regulatory focus 37
Slide 38: Dean Seavers
Dean Seavers Dean Seavers will join in December 2014 as US CEO Brings wealth of experience in performance management 38
Slide 39: Peggy Smyth
Peggy Smyth Peggy Smyth joined in October as US CFO Brings strong utility experience after time at Consolidated Edison 39
Slide 40: US Priorities
US Priorities Drive performance and efficiency Smaller targeted applications for cost allowances Complete installation of - Massachusetts & KEDLI new financial systems Major filings in New York and Massachusetts Sustain asset growth and returns 40
Slide 41: Growth pipeline: UK
Growth pipeline UK £16bn - £20bn over 2013 - 2021 £2bn - £3bn pa 41
Slide 42: Growth pipeline: US
Growth pipeline US £16bn - £20bn $2bn - $2.5bn+ pa Network over modernisation 2013 - 2021 Gas mains replacement Customer £2bn - connections £3bn pa 42
Slide 43: Growth pipeline: Interconnectors
Growth pipeline UK US £16bn - £20bn $2bn - $2.5bn+ pa over 2013 - 2021 Nemo Link £2bn - £3bn pa £500m, 1GW Belgian interconnector + NSN Link Interconnectors £2bn, 1.4GW Norwegian interconnector 43
Slide 44: Growth pipeline: New York Transco and FERC 1000
Growth pipeline UK US £16bn - £20bn $2bn - $2.5bn+ pa New Yorkover State 2013 Transco - 2021 JV JV between four + transmission operators £2bn - £3bn pa New York Transco Reinforce north-south + transfer of power + Expect overall $2bn Interconnectors FERC1000 & Other investment FERC 1000 Wid
Slide 45: Growth pipeline: combination of growth and yield
Growth pipeline UK US £16bn - £20bn $2bn - $2.5bn+ pa over 2013 - 2021 + £2bn - £3bn pa New York Transco + + Interconnectors FERC1000 & Other = Attractive Combination of Growth & Yield 45
Slide 46: In summary
In summary Safety, reliability and operational execution Well positioned & confident in our future 46
Slide 47: Half Year Results Appendices
2014/15 Half Year Results Appendices
Slide 48: Appendix 1: Pensions & other post-retirement benefit obligations
Appendix 1: Pensions & other post-retirement benefit obligations (IAS19 data) UK US At 30 September 2014 (£m) ESPS NGUK PS Pensions OPEBs NG total Market value of assets 2,102 16,029 4,506 1,696 24,333 Present value of liabilities (2,612) (16,194) (5,056) (2,847) (26,709) Net liability (510) (165) (
Slide 49: Appendix 2: Timing Impacts
Appendix 2: Timing Impacts £m UK Electricity UK Gas UK Gas US Total Transmission Transmission Distribution Regulated 2014/15 Opening balance (67) (11) 21 113 56 2014/15 over/(under) recovery (6) 10 3 (35) (28) 2014/15 Closing balance to return / (recover) (73) (1) 24 78 28 2013/14 Opening balance (7
Slide 50: Appendix 3: Weighted average number of shares
Appendix 3: Weighted average number of shares Period ended 30 September 2014 2013 Number of shares (millions): Prior period as reported (weighted average) - 3,729 Current period opening shares 3,730 - August 2014 dividend scrip shares 35 35 Other share issuances (weighted from issuance) 6 - Weighted