National Grid Plc · LSE:NG.
National Grid — Debt Investor Presentation (May 2018)
25 slides from National Grid's debt investor presentation, May 17, 2018
Slide 1: 2017/18 Full Year Results Debt Investor Update
2017/18 Full Year Results Debt Investor Update 17 MayEnergy Bring 2018 to Life
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: Safety and reliability performance
Safety and reliability performance ▪ Safety culture underpins world-class safety performance ▪ Reliability remains strong across our networks − near 100% reliability despite unsettled winter in the UK − particularly challenging winter in the US − multiple major storms ▪ Around £140 million storm res
Slide 4: Strong financial performance
Strong financial performance Underlying Capital Asset growth Strong RoE Dividend operating profit investment increased achieved growth in line with policy up 6% up 14% £4,251m 45.93p £3,495m 6% 11.7% 12.3% 44.27p £3,289m 5% £3,717m FY17 FY18 FY17 FY18 FY17 FY18 FY17 FY18 FY17 FY18 Underlying results
Slide 5: Significant regulatory progress in the US
Significant regulatory progress in the US ▪ Around 80% of distribution rate base Mass Gas Filing RI Gas and Elec. Filing now under new rate plans Summary of request Summary of request ▪ NiMo 3-year rate filing completed with positive outcome ▪ $46m revenue increase ▪ $35m revenue increase − 9.0% RoE
Slide 6: Significant financial and operational progress in the US
Significant financial and operational progress in the US ▪ Achieved RoE of 95% of allowed Strong financials ▪ Delivered strong asset growth of over 7% Achieved RoE as % of allowed returns ▪ New Capital Delivery function introduced 95% − Metropolitan Reliability Infrastructure 86% − five year, $280m
Slide 7: Solid UK operational and financial performance
Solid UK operational and financial performance Portfolio evolution Operational performance ▪ Agreed option on final 25% ▪ £540m of savings under RIIO stake in Cadent T1 ▪ Expected proceeds of £1.2bn to ▪ Achieved 200bps be reinvested in the business outperformance through ▪ Options to complete betwe
Slide 8: Progress on NG Ventures and Property
Progress on NG Ventures and Property Nemo Link North Sea Link IFA 2 Battersea, London Initial cable laying Cable laying Construction work complete now underway commenced ▪ Convertor stations ▪ Construction started ▪ 1GW, 240km link to ▪ St William JV – complete by October on converter stations Franc
Slide 9: Interest, tax and earnings
Interest, tax and earnings FINANCE COSTS EFFECTIVE TAX RATE UNDERLYING EARNINGS £974m 23.7% 60.4p/share PY £955m at £589m PY 58.6p/share ▪ Effective interest rate ▪ Tax rate 50bps lower than ▪ £2,089m underlying higher at 4.6% the prior year earnings ▪ Higher RPI offset by ▪ Partial impact of US tax
Slide 10: Cash flow and net debt
Cash flow and net debt Year ended £m 31 March 2018 MOVEMENT IN NET DEBT (£bn) Operating profit 3,457 24.0 Depreciation & amortisation 1,530 Pensions (239) 21.5 Working capital & other (46) 19.0 Net operating cash flow 4,702 Return of capital Net debt (23,002) 16.5 Exchange Underlying impacts busines
Slide 11: Step change in rate of organic growth
Step change in rate of organic growth ▪ Sale of GD stake reshaping the portfolio towards GROUP CAPITAL INVESTMENT higher growth 5,000 ▪ Visibility of US growth through successful rate filings 14% Higher Investment 4,000 ▪ Increased investment in interconnector projects ▪ Driving sustained asset grow
Slide 12: Higher US growth rate
Higher US growth rate ▪ Approximately $10bn of capex to be US RATE BASE GROWTH ($bn) invested over the next three years 30 6% At least 7% − 90% already in rate plans rate base growth 25 Rate base − with attractive allowed RoEs growth 20 ▪ Rate base growth steps up from FY18 onwards 15 − and expected
Slide 13: 4-5% UK asset growth over RIIO-T1
4-5% UK asset growth over RIIO-T1 ▪ Approximately £1.3bn of annual UK RAV GROWTH (£bn) investment 30 − over the remaining 3 years of RIIO-T1 4-5% Annual RAV growth ▪ Targeting returns outperformance 20 − of 200-300bps throughout RIIO-T1 10 0 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Assume 3% RPI
Slide 14: Significant interconnectors capex in NGV
Significant interconnectors capex in NGV NGV INTERCONNECTOR CAPEX 600 ▪ Total interconnector investment of approximately £1.3bn, excluding Viking ▪ NEMO to be operational in FY19, IFA2 400 FY21 and NSL in FY22 ▪ Generates additional EBITDA, excluding Viking: Viking 200 IFA2 − £100m in FY22 NSL − ove
Slide 15: Implications of US tax reform
Implications of US tax reform ▪ US tax costs pass through and economically neutral Prospective revenue reduction to be for utilities reflected by end of FY19 ▪ Balance sheet implications due to current net operating loss position: KEDNY & KEDLI Niagara − $180m of revenue adjustments expected for NiM
Slide 16: Strong and efficient capital structure
Strong and efficient capital structure ▪ Asset growth at least 7% in the near-term FY19-21 FORECAST ASSETS CAPEX BY SEGMENT ▪ Efficient capital structure underpins financing: 20% − internally generated capital ASSET GROWTH − capital generated from future efficiencies US and recovery of regulatory as
Slide 17: Priorities & Outlook
Priorities & Outlook 17 2017/18 Full Year Results May 2018 17
Slide 18: UK regulatory priorities
Performance optimisation UK regulatory priorities ▪ RIIO-2 Framework Consultation − early days – RIIO 2 commences in 2021 − final package needs to: − provide appropriate risk/reward balance − drive innovation and efficiency through incentivisation − ensure financeability of networks ▪ Hinkley Seaban
Slide 19: US regulatory and operational priorities
Performance optimisation US regulatory and operational priorities ▪ Strengthened organisation structure for jurisdictions FY19 FORECAST CAPITAL − increased gas, electric and transmission INVESTMENT BY JURISDICTION support New York ▪ ~$10bn forecast capex for the next three years ▪ Growth driven by m
Slide 20: Industry decarbonising at pace
Evolve for the future Industry decarbonising at pace ▪ Both UK and US continue rapid decarbonisation US RENEWABLES FORECAST GROWTH ▪ 2017 Greenest year ever for the UK SOLAR WIND ▪ Many US states remain committed to aggressive CO2 188GW reduction targets 153GW ▪ Solar, Wind and Storage economics bec
Slide 21: Renewable generation creating new opportunities
Evolve for the future Renewable generation creating new opportunities ▪ Pipeline of UK solar/storage connections at transmission level ▪ Scale of growth in utility scale renewables offering opportunities − Block Island offshore wind − Nantucket storage ▪ Generates further opportunities for increment
Slide 22: Debt Funding
Debt Funding 22 2017/18 Full Year Results May 2018 22
Slide 23: Debt Funding
Debt Funding ▪ Our US companies issued over $2.5bn of new long-term debt in 2017/18, the majority at OpCo level ▪ We expect to issue new US OpCo and HoldCo debt in 2018/19 ▪ £5.4bn of general liquidity facilities ▪ Capital generated through the scrip dividend in 2018/19 and 2019/20 ▪ Strong credit r
Slide 24: Summary
Summary ▪ Delivered strong financial and operational performance − 95% of allowed US returns − 200bps returns outperformance in the UK ▪ Well positioned to capitalise on significant medium term growth ▪ Focused on efficient delivery − to create long term value for customers and shareholders − whilst
Slide 25: Q & A
Q&A 25 2017/18 Full Year Results May 2018 25
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