National Grid Plc · LSE:NG.
National Grid — Debt Investor Presentation (November 2018)
31 slides from National Grid's debt investor presentation, Nov 8, 2018
Slide 1: Half Year Results 2018/19 Debt Investor Update
Half Year Results 2018/19 Debt Investor Update 8 November 2018
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: Solid financial performance
Solid financial performance Dividend Underlying Underlying Capital growth in line operating profit earnings per share investment with policy down 6% up 6% up 7% up 3.8% £1,364m 19.7p £2,130m 16.08p £1,285m 18.5p 15.49p £1,994m HY18 HY19 HY18 HY19 HY18 HY19 HY18 HY19 Underlying results from continuin
Slide 4: Strong strategic progress
Strong strategic progress • Decision to exercise the options on our remaining 39% stake in Cadent • Completed full refresh of rates for US distribution companies • Started significant cost efficiency programme in the UK • Taken final investment decision on Viking interconnector to Denmark 4 Half Yea
Slide 5: Delivering strong US organic growth
Delivering strong US organic growth • $1.5bn capital invested in H1 • Mix of multiple small and large projects drive rate base growth • e.g. South Street substation, Providence RI, $80m project ‒ to build a new substation and secure reliability for downtown Providence ‒ increases reliability and sup
Slide 6: Massachusetts Gas union negotiation update
Massachusetts Gas union negotiation update • Ongoing negotiations with two unions ‒ 16 other unions accepted deals on similar terms • Contingency workforce plan implemented from end of June • Incremental costs of £97m incurred to 30 September • Negotiations ongoing to achieve fair settlement that mi
Slide 7: Good UK performance continues
Good UK performance continues • Strong operational performance • Consistent levels of investment • Delivery of forecast ET Network Output Measures for FY19 well ahead of schedule ‒ forecast to outperform over RIIO-T1 • Feeder 9 project progressing well ‒ 1.7km tunnelling complete ‒ on track for comp
Slide 8: UK regulatory update
UK regulatory update • RIIO-T1 reopeners ‒ allowances agreed for enhanced physical and cyber security spend ‒ funding disallowed for compressor works – reviewing our approach to meeting emissions standards ‒ asset health spend for Feeder 9 gas pipeline to continue project • Approval for Visual Impac
Slide 9: Progress on NG Ventures and Property
Progress on NG Ventures and Property North Sea Link IFA 2 Nemo Link Fulham, London 260km subsea Cable duct drilling Energisation & station Preliminary planning cable laid so far complete on UK end testing underway approval granted • 1.4GW, 720km link • 1GW, 240km link to • 1GW, 140km link to • 17 ac
Slide 10: UK cost efficiency programme
UK cost efficiency programme • Creating a leaner, more agile organisation • £127m exceptional charge recognised in H1 of FY19 • Will generate opex savings of ~£50m in FY20 and ~£100m per annum from FY21 onwards ‒ net cash positive from FY20 onwards • Continue to expect 200-300bps of out- performance
Slide 11: Update on US tax reform impact
Update on US tax reform impact • Tax reform is economically neutral for Overall impact on income statement utilities • Impact on operating profit of $210m ‒ lower cashflows in the near term FY19 • More than offset by the lower tax charge • Clarity on bill reductions for all operating • Small benefit
Slide 12: Interest, tax and earnings
Interest, tax and earnings FINANCE UNDERLYING UNDERLYING COSTS EFFECTIVE TAX RATE 1 EARNINGS £494m 19.3% £662m 9% lower than HY18 at £(153)m HY18 £656m • One-off benefits • Tax rate 360bps lower • 3,367m weighted offset higher net than HY18 average shares debt • Tax charge £36m • 19.7p/share • Effec
Slide 13: Cash flow and net debt
Cash flow and net debt £m Net debt (£bn) Period ended 30 September 2018 27.0 Operating profit 1,202 25.0 1.4 Depreciation & amortisation 791 1.2 FX Pensions (128) 23.0 Underlying Working capital & other 76 business 21.0 25.6 requirements Net operating cash flow 1,941 23.0 Net debt (25,631) 19.0 17.0
Slide 14: Efficiently funding growth
Efficiently funding growth • Current strong organic growth being funded Assets (£bn) Gearing (%) through 50 95 ‒ mix of debt at attractive rates ~7% CAGR ‒ internally generated cash flows 40 5% 80 CAGR ‒ scrip utilisation 30 65 ‒ Cadent proceeds in June 2019 50 • Forecast to maintain gearing at arou
Slide 15: Priorities & Outlook
Priorities & Outlook 15 Half Year Results 2018/19 November 2018 15
Slide 16: Regulatory frameworks that enable performance optimisation - UK
Performance optimisation Regulatory frameworks that enable performance optimisation - UK • Regulatory frameworks major area of focus • RIIO-2 Framework decision in July ‒ key RIIO principles reaffirmed ‒ will work towards a fair return, reflecting level of risk borne by transmission • Sector specifi
Slide 17: Regulatory frameworks that enable performance optimisation - UK
Performance optimisation Regulatory frameworks that enable performance optimisation - UK • SPV consultation on onshore competition underway • Will work with Ofgem to develop a framework that delivers value for both customers and shareholders • Complex model that doesn’t present a clear customer bene
Slide 18: Regulatory frameworks that enable performance optimisation - US
Performance optimisation Regulatory frameworks that enable performance optimisation - US • Trend of higher investment to continue across all jurisdictions • Rate filing for new rates for Massachusetts Electric in November ‒ will propose five year, forward-looking incentive based framework • Changing
Slide 19: Interconnectors provide attractive long term cash flows
Growth Interconnectors provide attractive long term cash flows • Final investment decision taken on Viking interconnector ‒ £850m investment ‒ 760km, 1.4GW JV with the Danish transmission owner ‒ go live in 2023 • All four new interconnectors provide ‒ combined investment of £2.1bn ‒ expected annual
Slide 20: Efficient delivery of growth
Growth Efficient delivery of growth • Wide range of future growth drivers ‒ asset health for safety and reliability in our core networks ‒ new opportunities to meet changing customer needs • Significant capex visibility to 2021 • Driving asset growth of at least 7% for the next two years • Portfolio
Slide 21: Evolving for the future
Evolve for the future Evolve for the future Evolving for the future • Small but growing portfolio of US renewables ‒ almost 30MW solar and storage in operation and more under construction • Wind and solar opportunities that match our capabilities and risk/reward profile • Offshore wind agreements wi
Slide 22: Debt Funding
Debt Funding 22 Half Year Results 2018/19 November 2018 22
Slide 23: Debt Funding
Debt Funding • Since 31-March, our US companies have issued over $1.3bn of new long-term debt, including: ‒ NGNA: €500m 0.75% 5yr due 2023 ‒ Narragansett Electric: $350m 3.919% 10yr due 2028 • Over the remainder of FY 2018/19, we expect to issue new debt for the US, predominantly for our OpCos and p
Slide 24: Summary
Summary • Delivered solid financial performance and strong strategic progress • Influencing the evolution of regulatory frameworks in UK and US • Significant activity to be a more agile organisation • Disciplined delivery on growth opportunities in the medium term ‒ to create long term value for cus
Slide 25: Q&A
Q&A 25 Half Year Results 2018/19 November 2018 25
Slide 26: Appendices
Appendices 26 Half Year Results 2018/19 November 2018 26
Slide 27: UK Electricity Transmission
UK Electricity Transmission Totex Other Additional OUTLOOK incentive incentives allowances RoE FY18 180bps 40bps 70bps 13.1% UNDERLYING CAPITAL • Capital investment lower due to OPERATING PROFIT INVESTMENT completion of non-load investments ‒ FY20 will include cable £556m +3% £462m undergrounding in
Slide 28: UK Gas Transmission
UK Gas Transmission Totex Other Additional OUTLOOK incentive incentives allowances RoE FY18 (80)bps 120bps (40)bps 10.0% UNDERLYING CAPITAL • H1 operating profit decrease due to OPERATING PROFIT INVESTMENT expected return of Avonmouth revenues received in prior years £91m -37% £153m • Totex incentiv
Slide 29: US Regulated
US Regulated OUTLOOK Targeting ROE in line with prior year RoE • Underlying operating profit reflects UNDERLYING CAPITAL OPERATING PROFIT INVESTMENT ‒ benefit of new rate case outcomes ‒ £56m higher storm costs and £431m -17% $1.5bn impact of US tax reform HY18 £522m HY18 $1.4bn • US profitability m
Slide 30: NG Ventures
NG Ventures OPERATING £78m £37m £34m £(18)m £131m PROFIT Metering Grain LNG IFA Other HY18 £83m £37m £34m £(22)m HY18 £132m POST TAX £13m £8m £10m £31m SHARE of JVs BritNed Millennium Other HY18 £18m £6m £nil HY18 £24m TOTAL £212m • Interconnector projects driving INVESTMENT higher investment in NGV
Slide 31: Other activities
Other activities OPERATING £38m £38m £76m PROFIT Property Corporate centre and other HY18 £53m £(27)m HY18 £26m POST TAX £(6)m £(6)m SHARE of JVs St. William HY18 £(4)m HY18 £(4)m TOTAL £126m • Fulham transaction expected in H2, INVESTMENT 1 subject to finalisation of site works HY18 £53m and planni
National Grid — Debt Investor Presentation (November 2018) on 6ix