National Grid Plc · LSE:NG.
National Grid — H1 2013/14 Earnings Presentation
42 slides from National Grid's earnings presentation, Nov 21, 2013
Slide 1: Half year results 2013/14
2013/14 Half year London | Thursday 21 November 2013 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: Highlights
2013/14 Half year results Highlights Steve Holliday | Chief Executive
Slide 4: Agenda
Agenda Highlights Steve Holliday Business review Andrew Bonfield Outlook Steve Holliday 4
Slide 5: Solid start to 2013/14
Solid start to 2013/14 Solid first half performance: on track for good full year result Good progress managing against regulatory targets UK Thorough business reorganisation Benefits of supplier & partner negotiations Progress towards robust full year out-turn New rate plans in place US
Slide 6: Financial performance
Financial performance £ 1.6bn £ 979m £ 761m profit operating profit before tax earnings 20.4p 14.49p earnings dividend per share per share Interim scrip suspended reflecting high take up in August Note: Business performance, excluding exceptional items, remeasurements and stranded cost recoveries fo
Slide 7: Safety
Safety Significant improvement UK in UK Lost time injury rate improved to under 0.1 Performance not yet at UK levels US Investments in training and safety initiatives Lost time injury frequency rate refers to the number of lost time injuries per 100,000 hours worked in a 12 month period 7
Slide 8: Generating efficiency in the UK
Generating efficiency in the UK Transmission £40m Headcount reductions Scoping Totex efficiencies £30m Smart Design Alliance arrangements - - Competitive contracting Tendering £26m Efficiencies reduce consumer bills 8
Slide 9: Generating efficiency in the UK
Generating efficiency in the UK Transmission Gas Distribution Headcount reductions IT investments Totex efficiencies Contract renegotiation - Alliance arrangements Field force reorganisation - Competitive contracting Repex strategic partners Efficiencies reduce Efficiencies consumer
Slide 10: Capital investment
Capital investment £m Sept Sept 2013 2012 UK Elec.Transmission 703 681 UK Gas Transmission 92 130 UK Gas Distribution 248 324 US Regulated 571 575 Other Activities 74 114 Joint ventures - 1 Total 1,688 1,825 10
Slide 11: Summary
Summary Solid start to the year Foundations for good overall performance in the year 11
Slide 12: Business Review
2013/14 Half year results Business Review Andrew Bonfield | Finance Director
Slide 13: Performance measures
Performance measures Measuring performance requires additional information produced annually Added context to IFRS movements More detailed disclosure at full year - Regulatory returns - Regulatory revenue movements and “IOUs” - Regulated Asset Value 13
Slide 14: Solid business performance
Solid business performance UK Electricity Transmission Higher operating profit, led by increased regulatory allowances, link to RPI and French 39 £614m interconnector operating profit % of group operating profit Timing over-recovery of £10m UKGas UK Transmission Transmission Lower operating pr
Slide 15: Operating profit
Operating profit Operating profit Year on year timing of £32m excluding timing 3% lower Higher revenues led by RIIO revenue resets and Operating profit the French interconnector Increased controllable costs and depreciation 2% lower 91 32 25 (71) (10) 45 (34) (30) (73) £m 1,597 1,572 2012 timi
Slide 16: US systems
US systems Increased SAP workload continues Complex project, touching around 90 other systems Need to separate LIPA systems from start of 2014 Costs in the second half expected to be lower than the ~£90m incurred in first six months 16
Slide 17: Interest, tax and earnings
Interest, tax and earnings Finance costs £605m 9% higher* than 2012 Effective interest rate of 5.3% Higher cost of carry on gross debt associated with pre financing Business performance, excluding exceptional items, remeasurements and stranded cost recoveries * Constant currency figures calculat
Slide 18: Debt financing
Debt financing Operating companies, external debt Over last six months long term interest rates increased by 100bps Only back to 2011 levels – long way below pre-2008 financial crisis levels US ~£4-5bn UK ~£13-14bn ~80% fixed rate ~45% RPI linked Debt allowances typically reflect Debt al
Slide 19: UK debt financing
UK debt financing 5.00% iBoxx annual yield iBoxx trailing average 4.00% spread to NG yield 2.92% 3.00% 2.72% 2.00% iBoxx: real 1.00% rate of ~1.5% 0.00% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Scope to deliver continued outperformance 19
Slide 20: Interest, tax and earnings
Interest, tax and earnings Finance costs Effective tax rate Earnings per share £605m 23% 20.4p 9% higher* than 2012 at £(225)m Effective interest rate Tax rate 400bp lower than £761m earnings of 5.3% 2012 3,729m weighted avg. Higher cost of carry on Reflects lower proportion shares gross
Slide 21: Dividend
Dividend “We aim to grow the ordinary dividend at least in line with the rate of RPI inflation each year for the foreseeable future” 2013/14 interim dividend held at 14.49p Full effect of annual increase in the total dividend expected to be reflected in this year’s final dividend Future interi
Slide 22: Scrip dividend
Scrip dividend August take up over 45% Over next few years, scrip helps maintain an A- credit rating However, excess take up of little further value Suspending this interim scrip option Limits this year’s overall take up to around 30% 22
Slide 23: Cash flows and net debt
Cash flows and net debt Period ended 30 September 2013 £m Net operating cash flow Operating profit 1,572 Depreciation & amortisation 690 £2.0bn Pensions (174) Operating cash flow after capex Working capital & other (130) £85m Net debt £21.4bn Net operating cash flow 1,958 Net debt 21,374 Operating c
Slide 24: Guidance for 2013/14
Guidance for 2013/14 French interconnector performed well in first half, somewhat lower in second half SAP costs continue, albeit reduced level expected Full year tax rate expected of 26% - 27% Capital investment revised to around £3.5bn Net debt increasing by around £1bn, excluding FX 24
Slide 25: Strategy, growth and returns
2013/14 Half year results Strategy, growth and returns Steve Holliday | Chief Executive
Slide 26: Business developments
Business developments UK increased uncertainty around timing of new generation build US focusing on need for future investments 26
Slide 27: UK: Electricity Transmission
UK: Electricity Transmission Baseline MW connections Baseline capital expenditure allowance* 6000 1600 non-load load £m 09/10 prices MW 3000 800 0 0 2014 2019 2014 2019 *Allowed capital spend for the electricity transmission owner, excludes system operator capex 27
Slide 28: UK: Electricity Transmission
UK: Electricity Transmission Contracted generation connections Feb-2012 Aug-2013 80 60 Currently low levels of Low level sustains 40 new reflecting delayed generation projects construction Increase in 20 contracted generation to 2023 0 2013 2023 28
Slide 29: UK: Electricity Transmission capital priorities
UK: Electricity Transmission capital priorities Still investing in load related and strategic projects Extensive pre Investment in Completion of works constraint reduction major projects 29
Slide 30: UK: Electricity Transmission non-load investment
UK: Electricity Transmission non-load investment Continuing at a material level Baseline capital expenditure allowance* 1600 non-load load £m 09/10 prices Age of grid 800 Need to replace critical infrastructure ~£500m in 2012/13 – 0 similar levels in 2013/14 2014 2019 *Allowed capital spend fo
Slide 31: UK: gas investments
UK: gas investments Different agenda Major transmission investments always planned for end of RIIO period Gas distribution remains focused on repex and safety agenda 31
Slide 32: UK: need for flexibility
UK: need for flexibility Investment could accelerate Overall investment programme still feels about right Totex allowances flex for the outputs needed Customers only fund necessary outputs Continue to invest a significant amount in next 2-3 years 32
Slide 33: UK: medium term drivers of investment
UK: medium term drivers of investment Contracted generation connections Growth expectations remain 80 Feb-2012 Aug-2013 strong 60 Sustained investment at current levels in UK Electricity 40 Transmission drives average 8-10% asset growth 20 Overall UK growth ~6%pa 0 2013 2023 33
Slide 34: US: investment opportunities
US: investment opportunities Medium term ~$2.5bn pa Shale gas Changing generation mix Network resilience Business development Next year forecast ~$2bn pa Currently investing ~$1.8bn pa 34
Slide 35: US: investment opportunities
US: investment opportunities New York state Repowering generation in Long Island - Advanced discussions around $1.5bn investment in Barrett facility New York Transmission consortium energy superhighway 35
Slide 36: US: investment opportunities
US: investment opportunities Clean Line Projects making good progress Grain Belt Express Clean Line - State of Kansas approval - $2 billion project - Targeted construction in 2016 - Commissioning in 2018 36
Slide 37: 2013/14 priorities
2013/14 priorities Streamline organisation and UK deliver outputs to drive outperformance under RIIO Build on new rate cases and systems to enhance US customer service and drive efficiencies 37
Slide 38: Outlook
Outlook Solid start to the year Remain confident of delivering growth and returns 38
Slide 39: Appendix
2013/14 Half year results Appendix
Slide 40: Appendix 1: Pensions & other post-retirement benefit obligations
Appendix 1: Pensions & other post-retirement benefit obligations (IAS19 data) UK US At 30 September 2013 (£m) ESPS NGUK PS Pensions OPEBs NG total Market value of assets 1,871 15,225 4,145 1,520 22,761 Present value of liabilities (2,476) (15,671) (4,465) (2,529) (25,141) Net liability (605) (446) (
Slide 41: Appendix 2: Timing Impacts
Appendix 2: Timing Impacts £m UK Electricity UK Gas UK Gas US Total Transmission Transmission Distribution Regulated 2013/14 Opening balance * 5 19 (8) 111 127 2013/14 over/(under) recovery 10 (12) 8 (57) (51) 2013/14 Closing balance to return / (recover) 15 7 - 54 76 2012/13 Opening balance (24) 2
Slide 42: Appendix 3: Weighted average number of shares
Appendix 3: Weighted average number of shares Period ended 30 September 2013 2012 Number of shares (millions): Prior period as reported (weighted average) - 3,637 January 2013 scrip dividend shares - 27 Current period opening shares 3,665 - 3,665 3,664 August 2013 dividend scrip shares 60 60 Other s