National Grid Plc · LSE:NG.
National Grid — Debt Investor Presentation (May 2022)
35 slides from National Grid's debt investor presentation, May 2022
Slide 1: Debt Investor Update
Debt Investor Update Full Year Results 2021/22 Alexandra Lewis, Group Treasurer
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: The Energy Transition Company
The Energy Transition Company Green investment in the decarbonisation of energy systems Investing for the c.£24bn 1 clean energy future from FY2022 - 2026 £30-35bn c.£24bn capital investment FY2022-26 Green capex aligned to more than 70% EU Taxonomy1 of our 5 year framework 6-8% 2 group asset growth
Slide 4: Investing to decarbonise energy systems
Investing to decarbonise energy systems c.£24bn 2 Capital investment FY2022-26 £30-35bn from FY2022 - 2026 Ineligible gas & other investment £14bn £10bn c.£24bn NE Transmission 3 JVs - US renewables 4 Gas emissions Gas emissions in the UK in the US reduction investment reduction investment c.£13bn E
Slide 5: Our strategic vision
Our strategic vision Enabling the energy transition for all • COP26 Principal Partner • Our strategy further underpinned by – British Energy Security Strategy – US Infrastructure Investment and Jobs Act Delivering for customers efficiently • $1.3bn in energy efficiency measures in Massachusetts over
Slide 6: Repositioning of our portfolio
Repositioning of our portfolio National Grid asset base Greater visibility and certainty of long term growth Post-transactions1 • WPD acquired and integration progressing US • UK Gas Transmission and Metering Regulated UK Regulated Networks Networks – Sale of 60% expected to complete in Q3 FY23 c.40
Slide 7: Financial performance highlights
Financial performance highlights Strong delivery in 2022 Underlying operating profit Underlying EPS Return on Equity £3,992m 11% 65.3p 10% 11.4% 80bps FY21: £3,600m FY21: 59.1p FY21: 10.6% Cost efficiency Capital investment Asset growth programme delivery £6,739m 19% 8.7% 310 bps c.£140m FY21: £5,68
Slide 8: Safety and reliability
Safety and reliability Safety • Another good year of safety performance – Lost Time Injury Frequency rate: 0.13 • Slight increase in minor incidents Reliability • Over 99.9% availability across regulated networks • Excellent performance despite challenging storms in UK and US 8 National Grid plc Ful
Slide 9: Progress on operational priorities: New York
New York Progress on operational priorities Underlying operational delivery New York • Achieved RoE 8.8% Regulatory Overview – 99% of allowed return KEDNY/ KEDLI • $2.6bn investment (2020-23*) – Rate base growth of 7.6% Allowed return on 8.8% equity – 237 miles gas pipeline replaced, reducing methan
Slide 10: Progress on operational priorities: New England
New England Progress on operational priorities Underlying operational delivery New England • Achieved RoE 8.3% Regulatory Overview – 80 basis points above prior year Massachusetts Gas • $2.1bn investment (2021-26) – Rate base growth of 6.7% Allowed return on 9.7% equity – Replacing ageing infrastruc
Slide 11: Progress on operational priorities: UK Electricity Transmission
UK – Electricity Transmission Progress on operational priorities Successful start to RIIO-T2 Sustained investment growth in • Achieved RoE: 7.7% Electricity Transmission – 140bps outperformance £8bn investment breakdown • £1.2bn capital investment 2.5 – Commenced LPT2 tunnel boring 2.0 – Hinkley T-p
Slide 12: Progress on operational priorities: UK Electricity Distribution
UK – Electricity Distribution Progress on operational priorities Continuing to perform in RIIO-ED1 RIIO-ED2 proposed baseline totex • Achieved RoE: 13.6% – 400bps above allowed level Vehicles, Property & Engineering Other • £899m capital investment 1 Equipment Non Load Network Investment and IT & Re
Slide 13: Progress on operational priorities: NG Ventures and Joint Ventures
NG Ventures and Joint Ventures Progress on operational priorities Capital expenditure: £452m • Viking Link to complete in FY24 • Isle of Grain LNG Phase 4 construction Interconnector progress • IFA2 first full year of operation • North Sea Link commissioned early • 1GW restored to IFA, remaining 1GW
Slide 14: Progress on operational priorities: UK Gas Transmission & Metering
UK – Gas Transmission & Metering Progress on operational priorities Strong start to RIIO-T2 • Achieved RoE of 7.8% – 120bps outperformance • Capital investment of £261m – £57m above prior year 14 National Grid plc Full Year Results 2021/22 May 2022
Slide 15: Investment driving asset growth
Investment driving asset growth UK Electricity System Operator UK Electricity 1 Distribution £0.1bn Capital investment £0.9bn £6,739m 19% New York £2.0bn FY21: £5,680m UK Electricity Transmission Capital 2 £1.2bn Investment1 Asset growth £6.7bn 8.7% 310bps New England FY21: 5.6% £1.6bn NGV Ventures
Slide 16: Interest, tax and earnings
Interest, tax and earnings Finance Underlying Underlying costs effective tax rate 1 earnings 2 £1.1bn 24.3% £2,350m 4% higher than FY213 Underlying tax charge: £708m FY213 : £2,081m • Higher impact from • 260 bps higher than • 65.3p/share – 10% up interest on index linked prior year on prior year co
Slide 17: Cash flow and net debt
Cash flow and net debt Cash generated Net debt (£bn) from operations 1 £5.8bn Fair value (0.4) FY21: £4.0bn uplift on Dividend St William WPD debt4 (4.5) Financing, tax and Disposal Held for sale WPD Debt 5 Business reclassification Net cash outflow 2 Acquired and Cash Flows £1.6bn Discontinued Oper
Slide 18: Inflation and supply chain
Inflation and supply chain • Impact on UK regulated revenues broadly offset by RPI linked debt in FY22 • Controllable costs held flat • Similar inflation impacts expected for FY23 • Improved earnings momentum in medium term as inflation moderates • No material impact to our supply chain to date 18 N
Slide 19: 5-year outlook and guidance
5-year outlook and guidance FY22-26 Capital investment £30-35bn – c.£24bn green1, aligning to EU taxonomy c.£8bn c.£5bn UK Electricity Transmission Western Power Distribution c.£17bn c.£2-3bn US Regulated Businesses NG Ventures Group asset growth 6-8% CAGR 2 Settles slightly above 70% Gearing Credit
Slide 20: The heart of a clean, fair and affordable energy future
Delivering our vision: • We are a leader in pioneering smart, low carbon energy networks • Developing resilient and efficient transmission grids is at our core • Completing our pivot to electricity will bring us certainty of growth The heart of a clean, fair and affordable energy future 20 National
Slide 21: Growth opportunities further underpinned
Growth opportunities further underpinned • New policies and increased clean energy targets – British Energy Security Strategy (BESS) announced – UK Energy Bill announced in Queen’s Speech – US Infrastructure Investment and Jobs Act signed into law • Coupled with pivot to electricity provide greater
Slide 22: UK Focus
UK Focus • Continue to deliver world class network reliability • 60% sale of UK Gas Transmission & Metering expected in 3rd quarter of FY23 • WPD integration and RIIO-ED2 process • Progress plans to support BESS ambitions – East Coast transmission projects • Support development of Holistic Network D
Slide 23: US Focus
US Focus • Infrastructure Investment and Jobs Act focused – Grid modernization and resilience – Electric transportation infrastructure – Northeast Hydrogen Hub • Massachusetts regulatory decisions – Electric grid modernization – Advanced metering infrastructure – Phase 3 Electric vehicle proposal –
Slide 24: Clean Energy Vision
Clean Energy Vision Utilising our existing networks to enable clean gas by 2050 4 key pillars 01 Increase energy efficiency 02 Eliminate fossil fuels by from our gas networks by 2050 03 Maximise customer benefits of pairing electric and clean gas solutions Investor Event 04 Support targeted electrif
Slide 25: Debt Funding
Debt Funding FY22 debt funding • FY22 debt funding totalled £4.2bn across the group. Benchmark bonds issued in EUR, USD and CAD. Boston Gas, Other loans NG Electricity AUD GBP £304m Transmission, CAD • NG plc issued a €850m 8yr green bond in August £731m KeySpan Gas East 2021 (KEDLI), £304m – Procee
Slide 26: Summary
Summary • Our pivot to electricity is nearly complete • Focus on Massachusetts and RIIO-ED2 rate settlements • Working with regulators and politicians to define 2050 clean energy roadmaps • £24 billion1 of green investment to decarbonise energy systems in our five year framework THE ENERGY TRANSITIO
Slide 27: Q&A
Q&A debtinvestors@nationalgrid.com
Slide 28: Appendices
Appendices 28 National Grid plc Full Year Results 2021/22 May 2022
Slide 29: UK Electricity Distribution
UK UK Electricity Distribution Underlying operating profit vs FY21 proforma (£m) Return on equity Outperformance • Greater spend on network reinforcement and connections 300bps • Improved customer Customer incentives Controllable (14) experience incentives Costs (13) Other Depreciation 100bps Net re
Slide 30: UK Electricity Transmission
UK UK Electricity Transmission Underlying operating profit (£m) Return on equity Outperformance • Higher base revenues in the first year of RIIO-T2 Controllable 140bps COVID Costs Other • Partially offset by lower returns Totex incentive (47) Depreciation (37) (10) Net revenue Achieved return on equ
Slide 31: US Regulated – New York
US US Regulated – New York Underlying operating profit (£m) Return on equity • Increase in environmental Environmental reserves Controllable Costs 99% COVID Costs (86) • Higher depreciation of our allowed Depreciation • Partially offset by rate case (130) increases and bad debt baseline return Net (
Slide 32: US Regulated – New England
US US Regulated – New England Underlying operating profit vs FY21 proforma1 (£m) Return on equity 43 (45) • Higher rates under new rate settlement COVID Depreciation 85% (24) Controllable Costs (18)(23) Other2 • Resumed collection activities for outstanding receivables of our allowed Environmental b
Slide 33: NG Ventures
NGV NG Ventures Year ended 31 March 31 March Operating profit (£m) 2022 2021 Operating profit and post tax share of JVs: Genco 33 37 Grain LNG 113 104 • First time contribution from NSL and full year from IFA2 Interconnectors 135 60 • £200m from interconnector business to be repaid to consumers 2 NG
Slide 34: Other activities
Other Other activities Year ended 31 March 31 March Operating profit (£m) 2022 2021 Increase in operating profit: Property 40 22 NG Partners 66 1 • Fair value gains in National Grid Partners Corporate & other (85) (91) • Release of historical unclaimed dividends 21 (68) Post tax share of JVs (£m) St
Slide 35: Discontinued operations
Discontinued operations 1 UK Gas Transmission & Metering • Achieved RoE: 7.8% Operating profit (£m) Capital investment (3) Controllable (26) £261m Costs Other £57m higher than prior year Depreciation Net revenue FY21 FY22 Operating profit £139m higher than prior year • Higher base revenues • Cessati
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