National Grid Plc · LSE:NG.
National Grid — Debt Investor Presentation (May 2019)
32 slides from National Grid's debt investor presentation, May 16, 2019
Slide 1: Debt Investor Update
nationalgrid Debt Investor Update 16 May 2019 Full Year Results 2018/19 May 2019
Slide 2: Cautionary statement
. nationalgrid 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
Slide 3: Financial performance highlights
tionalgrid Financial performance highlights naronaign Underlying Underlying Return on operating profit EPS Equity £3,427m 44% 58.9p 15% 11.8% #50bps FY18: £3,560m FY18: 56.2p FY18: 12.3% Asset growth Dividend growth increased in line with policy 7.2% %130bps 47.34p 13.1% FY18: 5.9% FY18: 45.93p Unde
Slide 4: Safety, reliability and customer performance
Safety, reliability and customer performance * Continued strong safety performance — IFR of 0.1" * Strong reliability maintained across our networks * Good response to increased storm frequency * Improved customer satisfaction scores across the Group * Combined IFR is the number of injuries per 100,
Slide 5: Strong strategic progress in 2018/19
Strong strategic progress in 2018/19 * Delivered strong organic growth in 18/19 — £4.5bn of capital invested delivering asset growth of 7.2% * Sale of Cadent to complete with £2bn in proceeds expected in June * Good US regulatory progress, with all distribution companies under refreshed rates * Laun
Slide 6: US operational performance
US US operational performance * Achieved 8.8% RoE, 93% of allowed * Asset growth of 9.2% * US cost efficiency programme launched -— will deliver cost savings of $80m in 19/20 and $50m in 20/21 * Massachusetts Gas union agreement reached — higher costs of labour dispute due to additional spend during
Slide 7: Continued regulatory progress
US Continued regulatory progress ° First cycle of refreshing rate plans Rhode Island Meesacihuesis Gas successfully complete rate plan rate plan nationalgrid e Rhode Island and Massachusetts Gas Summary Summary filings completed in 18/19 * 3 year settlement from * New rates effective from September
Slide 8: UK Return on Equity of 12.4%, consistently delivering outperformance
UK Return on Equity of 12.4%, consistently delivering outperformance in the 200-300bps range Cost efficiency programme progressing — one-off costs of £136m in 18/19 — expect to deliver at least £50m opex savings in 19/20 and £100m from 20/21 RIIO-T1 reopeners funding agreed Electricity System Operat
Slide 9: Strong progress for NG Ventures
NGV tionalgrid Strong progress for NG Ventures nationalgri * 1GW, 140km Nemo Link to Belgium successfully commissioned in January © Operational O Under construction * Construction of IFA2 and NSL on track ¢ Final investment decision taken on Viking Link — all planning and land rights obtained * Gero
Slide 10: Interest, tax and earnings
Interest, tax and earnings Finance Underlying costs effective tax rate’ £993m 19.6% 1% lower than FY18 at £(476)m ° Lower RPI * Tax rate 420bps lower than 17/18, ° Effective interest rate due to tax reform of 4.3% . * Underlying tax charge £117m lower than 17/18 1. Excluding joint ventures and assoc
Slide 11: Cash flow and net debt
11 Cash flow and net debt Year ended 31 March £m 2019 Underlying operating profit 3,427 Depreciation & amortisation 1,588 Exceptional items (400) Working capital & other (151) Net operating cash flow 4,464 Net debt (26,529) RCF/Net debt FFO/Net debt 9.4, 12.6% Excluding exceptional items: 10.8% 14.7
Slide 12: Capital investment to increase to almost £5bn
tionalgrid Capital investment to increase to almost £5bn natonaigr US Regulated investment * Continued investment to update and modernise the networks * Supported by recent filings requests for Massachusetts Electric and KEDNY & KEDLI UK Regulated investment * Two thirds of spend relates to asset he
Slide 13: Efficiently funding growth
tionalgrid Efficiently funding growth nationalgrl * Gearing of 66% at March 2019 Assets (£bn) Gearing (%) 50 * Investment expected to increase to around £5bn ~7% asset growth —_ in 19/20 and 20/21 go CAGR 80 ¢ Financing growth through 30 pose sree 60 — new debt issued at attractive rates — benefit f
Slide 14: FY 19/20 technical guidance
tionalgrid FY 19/20 technical guidance Meola Ul Regulated performance * UK regulated operations expected to deliver outperformance of 200-300 bps — £50m benefit from cost efficiency programme in 19/20 * US RoE expected to improve to at least 95% of the allowed return — $30m benefit from US cost effi
Slide 15: Priorities & Outlook
nationalgrid Priorities & Outlook
Slide 16: US priorities & outlook: Delivering for our customers
16 Performance optimisation US priorities & outlook Delivering for our customers ¢ Three key focus areas: — improving customer experience — efficient and safe service delivery — fair and progressive regulatory settlements ° Invest in customer e-billing portal — ambition of universal paperless billin
Slide 17: US priorities & outlook: Evolving regulatory frameworks
17 Performance optimisation US priorities & outlook Evolving regulatory frameworks * Regulatory strategy to move to forward-looking incentive-based multi-year agreements — greater benefits for customers — higher returns for shareholders Full Year Results 2018/19 May 2019 nationalgrid Massachusetts K
Slide 18: UK priorities & outlook: Embedding cost efficiencies
Performance optimisation UK priorities & outlook Embedding cost efficiencies [A j * Three key focus areas: \ f+ Vv nationalgrid — embed customer cost efficiency programme — deliver capital investment efficiently — continue regulatory development * Go-live with new IT systems * Complete Feeder 9 tunn
Slide 19: UK priorities & outlook: Achieving a fair regulatory outcome
19 Performance optimisation UK priorities & outlook Achieving a fair regulatory outcome * Ofgem’s RIIO-2 proposals a step in the right direction, however: — current proposals won’t bring change consumers need — require a fair risk/return balance for both consumers and investors * Next step — submit
Slide 20: NGV priorities & outlook: Interconnectors driving strong growth
Performance optimisation NGV priorities & outlook Interconnectors driving strong growth nationalgrid * Interconnectors provide cost-effective source of energy to meet UK demand — 7.8GW importing ~90% low carbon energy by 2025 * Continue to successfully deliver interconnector projects * Geronimo acqu
Slide 21: Evolve for the future
Evolve for the future . 5 nationalgrid Our contribution At the forefront of the energy transition * Environmental and sustainability goals integral part of our business priorities * Significant progress on decarbonisation targets — already achieved 68% reduction in emissions and reviewing 2050 targe
Slide 22: Growth
Growth Investment of nearly £5n in both 19/20 and 20/21 Vast majority of investment covered by regulatory arrangements Targeting asset growth of ~£10bn 5-7% per annum of investment over assuming 3% inflation the next two years 7.2% | £37.4bn FY18 FY19 FY19 FY21 At constant currency 22 Full Year Resu
Slide 23: Debt Funding
nationalgrid Debt Funding
Slide 24: National Grid issued c. £2.9bn of new long term debt in 2018/19
National Grid issued c. £2.9bn of new long term debt in 2018/19: We issued c. $3.2bn (~£2.4bn) from our US companies, the majority at OpCo level National Grid Electricity Transmission (NGET) issued its first bonds since 2013, raising c. £0.5bn in total In 2019/20 we expect the majority of debt issua
Slide 25: Summary
Summary * Delivered strong organic growth and strategic progress — underpinning our total return proposition — delivering significant customer benefits * Contributing to the evolution of regulatory frameworks in US and UK * Strong balance sheet supporting long term growth and dividends 25 Full Year
Slide 26: nationalgrid
nationalgrid 26 Full Year Results 2018/19 May 2019
Slide 27: Appendix
nationalgrid Appendix 27 ~—~Full Year Results 2018/19 May 2019
Slide 28: UK Electricity Transmission
UK a i, nationalgrid UK Electricity Transmission 2 | seals Underlying operating profit (2m) * RoE benefits from 10.2% ay) reopener filings ERIS reituin Ee ocroliable * 3.8% RAV growth oe costs deneeat * Operating profit excludes = Speseten exceptional charges: 1" 50bps revenue — £137m nuclear charge
Slide 29: UK Return on equity and Gas Transmission
UK Return on equity 10.0% Base return (1 10)bps Totex incentive 1 20bps Other incentives (60)bps Additional allowances Achieved return 9.5% FY18: 10.0% UK Gas Transmission Underlying operating profit (fm) 505 (145) a 1) Net Controllable Depreciation revenue costs & other FY18 Capital Regulated inves
Slide 30: US Regulated
US US Regulated Return on equity 8.6% New York 7.6% Massachusetts 7.7% Rhode Island 11.5% FERC Achieved return 8. 6.6% Underlying operating profit (fm) = (40) 1,773 teue | Depreciation [GE2) Controllable Minor storms, costs bad debt & other FY18 FY19 Capital Assets outside investment Rate base rate
Slide 31: NG Ventures
3 NGV NG Ventures Year ended 31 March 31 March Operating profit (fm) 2019 2018 Metering 153 155 Grain LNG 74 76 Interconnectors 64 65 Other (28) (64) 263 232 Post tax share of JVs (£m) Interconnectors* 29 35 Millennium 18 14 Other 6 5 53 54 Total NGV 316 286 * Includes Britned and Nemo Operating pro
Slide 32: Other activities
Other ae nationalgrid Other activities Year ended 31 March 31 March Operating profit (fm) 2019 2018 * Operating profit increases Property 181 84 - Fulham transaction completed at the Corporate centre end of the year & other (44) (89) — legal settlements of £95m, partially 137 (5) offset by one-off p
National Grid — Debt Investor Presentation (May 2019) on 6ix