National Grid Plc · LSE:NG.
National Grid — Debt Investor Presentation (November 2022)
35 slides from National Grid's debt investor presentation, Nov 10, 2022
Slide 1: Debt Investor Update
Debt Investor Update Half Year Results 2022/23 Alexandra Lewis, Group Treasurer 10 November 2022
Slide 2: Cautionary statement
Cautionary statement These slides 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 E
Slide 3: Upgraded 5-year outlook
Upgraded 5-year outlook FY2022 - 2026 Capital investment Up to £40bn – c.£29bn green1, aligning to EU taxonomy One of the FTSE’s c.£9bn c.£12bn biggest investors UK Electricity Transmission New York Regulated in the delivery c.£6bn c.£9bn of net zero UK Electricity Distribution New England Regulated
Slide 4: Delivering for our customers and communities
Delivering for our customers and communities Our 3-year cost efficiency Cost programme delivery programme is on track £400m • £85m of savings in HY23, p.a. £225m to date HY23 £85m • As we look to deliver asset FY22 £140m growth of c.30% To date Target Acting now to support communities • Donating £65
Slide 5: Strategic progress
Strategic progress Repositioning our portfolio • Rhode Island sale complete • Completion of sale of 60% stake in UK Gas Transmission & Metering on track – Additional option for 40% stake • National Grid Electricity Distribution integration progressing well National Grid asset base Post-transactions1
Slide 6: Financial performance highlights
Financial performance highlights Strong delivery in H1 2023 Underlying operating profit Underlying EPS FY23 £2,117m 44% 32.4p 42% • Underlying EPS expected to be in the middle of new 6-8% HY22: £1,470m HY22: 22.8p CAGR range Capital investment Dividend growth in line with policy £3,883m 26% 17.84p 3
Slide 7: Safety and reliability
Safety and reliability Safety • Lost Time Injury Frequency rate: 0.12 • Safety critical area of focus with updated strategy implemented across the Group Reliability • Excellent performance despite US storms and volatility in UK electricity markets Winter Outlooks • ESO base scenario forecasts a capa
Slide 8: UK Electricity Distribution
UK Electricity Distribution UK Electricity Distribution Strong performance since acquisition • £584m capital investment – 10% increase in new customer connections RIIO-ED2 price control Four key areas of focus ahead of Final Determination 1. Streamlining the number of uncertainty mechanisms 2. Advoc
Slide 9: UK Electricity Transmission
UK Electricity Transmission UK Electricity Transmission Continued RIIO-T2 progress • £629m capital investment – Continuation of £1bn London Power Tunnels 2 project – East Coast reinforcement programme • Continued progress on Hinkley C Connection project – On track for completion by end of 2024 • ESO
Slide 10: UK Gas Transmission & Metering
UK Gas Transmission & Metering UK Gas Transmission & Metering Discontinued Operation • Announced sale of 60% stake to Macquarie-led consortium RIIO-T2 performance • Capital investment of £174m – £43m above prior year – Higher spend on asset health 10 Half Year Results 2022/23
Slide 11: Our Clean Energy Vision
US Our Clean Energy Vision Utilising our existing networks Our Clean to enable a fossil-free future by 2050 Energy Vision A fossil-free future for Targeted hybrid approach cleanly heating homes and businesses • Utilises existing gas networks • Provides continued security of supply • Enables customer
Slide 12: US Regulated – New York
US New York US Regulated – New York Underlying operational delivery New York • £1.2bn capital investment Regulatory Overview – Increased resilience and storm hardening spend KEDNY / KEDLI – Smart Path Connect Transmission project (2020-23) – 123 miles of gas pipeline replaced Allowed return on 8.8%
Slide 13: US Regulated – New England
US New England US Regulated – New England A successful regulatory period New England • Annual rate adjustments effective October Regulatory Overview • Approval for 5-year heat pump demonstration project Massachusetts Gas (2021-26) • Approval of $300m as part of our Grid Modernization Plan filing All
Slide 14: NG Ventures
NGV NG Ventures and Joint Ventures NG Ventures Capital investment: £478m • Sellindge converter station rebuild • Grain LNG Phase 4 construction • 73% of Viking Link interconnector cable now laid • US solar projects – over 670MW under construction Multi Purpose Interconnectors • Progressing case for
Slide 15: A strong, resilient business model
A strong, resilient business model Currency exposure • c.70% of our US assets hedged with USD debt • c.5¢ move in average USD:GBP impacts EPS by +/-1p on an annualised basis Inflation impact • Broadly neutral impact on near term earnings • Earnings improve when inflation moderates – Higher UK RAV, i
Slide 16: Interest, tax and earnings
Interest, tax and earnings Finance Underlying Underlying costs 1 effective tax rate 2 earnings 3 £732m 19.7% £1,182m 43% higher than HY22 Underlying tax charge: £273m HY22: £812m • Higher index-linked debt • 70bps higher than prior • Underlying EPS of interest costs year 32.4p, 42% up on prior year
Slide 17: Cash flow and net debt
Cash flow and net debt Net debt (£bn) Cash generated from operations1 1.1 (3.0) 0.7 £2.4bn 3.4 (2.4) 3.9 Financing, Dividends HY22: £2.0bn tax and NECO other 46.5 46.2 Disposal Net cash outflow 2 FX Cash generated Capital investment 42.8 £3.1bn from operations1 HY22: £1.6bn Net Debt 3 £46.5bn FY22:
Slide 18: Debt structure
Debt structure Net Debt 1 Floating Rate 19% • Post transactions floating rate debt £46.5bn Bridge financing to settle around 10% FY22: £42.8bn2 • Remain comfortable with our funding requirements Index linked Net Debt1 Fixed rate • Raise c.£5-6bn per annum 10% 71% £46.5bn – £4bn of bond financing com
Slide 19: Financing National Grid’s Operations
Financing National Grid’s Operations Debt issuance Issuance programmes • External debt is raised by our operating National Grid North America National Grid plc (NG plc) companies, intermediate holding companies and (NGNA) by the group parent company, National Grid plc Programme ECP USCP EMTN ECP USC
Slide 20: Green Financing Approach
Green Financing Approach Green Bonds issued to date: c.£2.3bn across NG plc, NGET and NIMO 1 • Green Financing Framework – updated July 2021. The framework is aligned with the ICMA Green Bond Principles (2021) and Green Loan Principles (2021). Projects are also July 2021 Framework Second Party Opini
Slide 21: UK priorities
UK priorities Enabling the clean energy of tomorrow • One of the UK’s biggest investors in delivering net zero Regulatory focus • Agree RIIO-ED2 settlement • Agree the onshore transmission framework – To enable Government offshore wind target of 50GW – Potential investment of £14bn for 19 major proj
Slide 22: UK priorities
UK priorities What we need from Ofgem and Government 1. Clarity and commitment on the 19 projects identified 2. Anticipatory investment framework to mitigate connection queues and costs 3. Planning process reform to reduce delivery timelines 4. Clear long term economic benefits for communities where
Slide 23: US priorities
US priorities State relationships and policy • Focused on strengthening relations in New York and Massachusetts Continued regulatory focus • Massachusetts regulatory decisions anticipated by end of 2022 – $400m of Advanced Metering Infrastructure funding – $275m Phase 3 EV proposal • New KEDNY and K
Slide 24: US priorities
US priorities Progressing our Clean Energy Vision Our Clean • Advocate for a hybrid solution Energy Vision • New York and Massachusetts to set policy A fossil-free future for recommendations for role of gas cleanly heating homes and businesses Federal policy • Infrastructure Investment and Jobs act
Slide 25: Strengthening our Responsible Business commitments
Strengthening our Responsible Business commitments The heart of a clean, fair and affordable energy future Our Responsible Business Charter • Annual progress reported via Responsible Business Report • Next iteration of the Charter to be released in early 2023 25 Half Year Results 2022/23
Slide 26: Summary
Summary Strong and resilient business model • Upgraded 5-year financial framework – Record capital investment for H1 – Up to £40bn of investment through to FY26 • FY23 underlying EPS guidance – Middle of new 6-8% range One of the FTSE’s biggest investors in the delivery of net zero 26 Half Year Resu
Slide 27: Q&A
Q&A In the event we do not have time for all questions, we will respond by email as soon as possible debtinvestors@nationalgrid.com
Slide 28: Appendices
Appendices
Slide 29: UK Electricity Distribution
UK Electricity Distribution UK Electricity Distribution Underlying Operating Profit (£m) Underlying Capital 9 17 Operating Profit investment Depreciation Other 579 Net revenue £579m £584m HY22: £257m HY22: £315m 2.5 months 257 earnings1 • Additional 2.5 months • Additional 2.5 months of contribution
Slide 30: UK Electricity Transmission
UK Electricity Transmission UK Electricity Transmission Underlying Operating Profit (£m) 12 Underlying Capital (13) 564 Operating Profit investment 8 552 Net revenue Other £564m £629m Controllable Depreciation Costs HY22: £552m HY22: £587m • Higher revenue • Resilience spend and indexation new conne
Slide 31: US Regulated – New York
US New York US Regulated – New York Underlying Operating Profit (£m) 3 (49) Underlying Capital 169 Costs2, Operating Profit investment (32) Pensions & Depreciation Property Taxes Environmental (51) £202m £1,242m Costs HY22: £162m HY22: £978m Other 202 162 Net revenue1 • Higher revenues • £150m attri
Slide 32: US Regulated – New England
US New England US Regulated – New England Underlying Operating Profit (£m) Underlying Capital 88 (2) (15) 17 Operating Profit investment (56) Costs1, 284 Pensions & Depreciation Bad debts Other 316 £316m £862m Rhode Net HY22: £284m HY22: £804m Island revenue • New rate settlements • £147m increased
Slide 33: NG Ventures
NGV NG Ventures and Joint Ventures NG Ventures 6 months ended 30 Sept 30 Sept Operating Profit (£m) 2022 2021 Operating Profit: Grain LNG 77 58 Interconnectors 166 65 • Increased profit at Isle of Grain LNG US Ventures 25 30 • Full contribution from North Sea Link interconnector Business Development
Slide 34: Other activities
Other Other activities 6 months ended 30 Sept 30 Sept Operating Profit (£m) 2022 2021 Operating Profit: Property 227 17 NG Partners (17) 33 • Property sales as part of St William JV transaction Corporate & other (65) (35) • Slightly offset by NG Partners fair value movements 145 15 Post tax share of
Slide 35: Discontinued operations: UK Gas Transmission & Metering
UK Gas Transmission & Metering Discontinued operations 1 UK Gas Transmission & Metering Underlying Operating Profit (£m) (23) Underlying Capital Operating Profit investment (22) (3) Other 381 £381m £174m 332 Net HY22: £332m HY22: £131m Controllable Depreciation revenue Costs • Cessation of • Increas
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