NG.focus
Balanced portfolio provides asset growth and dividend security
Investor Relations | May 2015
Portfolio evolution
Current portfolio of businesses:
One of the world’s largest public owned utilities focused on
transmission and distribution activities in electricity and gas
in both the United Kingdom and the United States.
We play a vital role in connecting millions of people to the
energy they use, safely, reliably and efficiently.
¾ delivers appropriate balance
of yield and growth
Other
¾ maintains strong balance
sheet with minimal scrip
financing
¾ supports growing dividend
ET
US
Asset
growth
Strategy discussions focus on
evaluating the future portfolio,
ensuring we have the right
assets to deliver this
sustainable, dividend-led
investment proposition
National Grid’s role in the UK
GT
3%
GD
12%
0%
Electricity generators
Gas producers and importers
National Grid
Electricity Transmission
National Grid
Gas Transmission
Regional electricity
distribution networks
11%
Nominal returns (60/40 capital structure)
National Grid’s role in the US
Gas distribution
networks
Electricity generators
NG Electricity
Transmission
National Grid
Gas Distribution
Gas producers and importers
Other electricity
transmission
National Grid
Electricity Distribution
Gas transmission
National Grid
Gas Distribution
Energy suppliers
Commercial and domestic customers
Commercial and domestic customers
On track to deliver sustainable future performance
Investment case underpinned by
the responsible way we do business
Focus on areas of material impact:
Regulated assets £37.0bn (Total Group assets £40.6bn)
Our priorities
US
¾ Efficiency and process excellence
UK
69% US
¾ Updated cost allowances
¾ Safety including suppliers
¾ Network reliability
Electricity
¾ Customer satisfaction
¾ Employee engagement
¾ Greenhouse gas emissions
31%
31 March 2015
UK
¾ Deliver outperformance within
RIIO framework
¾ Workforce diversity
Additional measures from 2016:
¾ Community engagement
¾ Education, skills and capabilities
31%
Group
¾ Priority remains delivery of attractive
total returns for shareholders
Reviewed non-material areas:
¾ Water usage
Important notice
This document 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 Exchange Act of 1934, as amended. These statements include information with respect to National Grid’s financial condition, its results of operations and businesses, strategy, plans and objectives. Words such as ‘aims’, ‘anticipates’, ‘expects’,
‘should’, ‘intends’, ‘plans’, ‘believes’, ‘outlook’, ‘seeks’, ‘estimates’, ‘targets’, ‘may’, ‘will’, ‘continue’, ‘project’ and similar expressions, as well as statements in the future tense, identify forward-looking statements. Furthermore, this document, which is provided
for information only, does not constitute summary financial statements and does not contain sufficient information to allow for as full an understanding of the results and state of affairs of National Grid, including the principal risks and uncertainties facing National
Grid, as would be provided by the full Annual Report and Accounts, including in particular the Strategic Report section and the ‘Risk factors’ section of National Grid's most recent Annual Report and Accounts. Copies of the most recent Annual Report and
Accounts are available online at www.nationalgrid.com or from Capita Registrars. Except as may be required by law or regulation, National Grid undertakes no obligation to update any of its forward-looking statements, which speak only as of the date of this
document. The content of any website references herein do not form part of this document.
Gas
15%
Gas
23%
Transmission (and other US FERC assets)
4%
Gas
14%
Electricity
13%
Distribution
Investment proposition
We aim to be a low risk business focused on generating shareholder value through both
dividends and asset/equity growth by investing in essential assets under predominately
regulated market conditions to service long-term sustainable consumer-led demands
Attractions of being a regulated network utility
¾ Dividend consistency underpinned by regulatory protection
¾ Protection from generation and supply exposures and
margins
¾ Macro-economic protection through bad debt trackers,
credit protection, inflation linked revenues and price control
‘re-openers’
¾ Increasing use of revenue decoupling
Strengths of National Grid
¾ Balance of activities between the UK and US, Electricity and
Gas, Transmission and Distribution
¾ Stable regulatory environments, 95%+ regulated revenues
¾ Local expertise and global scale
¾ 5%+ growth profile with strong transmission exposure
¾ Central role in UK energy market
Further information
Andy Mead
Senior Investor Relations Officer
T +44 (0)20 7004 3166
M +44 (0)7752 890787
[email protected]
George Laskaris
US Investor Relations Director
T +1 929 324 4170
M +1 917 375 0989
[email protected]
Victoria Davies
Investor Relations Officer
T +44 (0)20 7004 3171
M +44 (0)7771 973447
[email protected]
Mike Ioanilli
Investor Relations Manager
T +44 (0)20 7004 3006
M +44 (0)7789 878784
[email protected]
Tom Hull
Investor Relations Manager
M +1 917 524 4099
[email protected]
Richard Foster
Investor Relations Manager
T +44 (0)207 004 3169
M +44 (0)7768 294017
[email protected]
John Dawson
Director of Investor Relations
T +44 (0)20 7004 3170
M +44 (0)7810 831944
[email protected]
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@nationalgridIR
National Grid plc
1–3 Strand
London WC2N 5EH
United Kingdom
www.nationalgrid.com
London Stock Exchange
NG.
New York Stock Exchange (ADR)
NGG
Strong business unit performance underlies group performance
UK returns
Base
return
2014/15
+
Totex
incentive
Other
incentives
+
+
Additional
allowances
=
Strong balance sheet enables growth and a secure dividend
Operational
return on equity
Regulated
asset value
Operating
profit
10.2%
70bps
210bps
100bps
14.0%
£11.3bn
£1.2bn
~30%
RPI
linked
equity
¾ Appropriate level of debt funding for strong credit ratings
UK Electricity
Transmission
March 2015
Appropriate mix of debt and equity financing
¾ ~60/40 debt to equity split, in-line with regulatory assumption ~40%
¾ Retained cash flow (RCF) to net debt above 9%
¾ Strong single A credit rating for UK operating companies.
and majority of US operating companies; NG plc rated BBB+
Assets
Debt
£40.6bn
£23.9bn
¾ Scrip dividend and share buyback provides flexibility for
UK Gas
Transmission
10.0%
UK Gas
Distribution
(40)bps
9.9%
220bps
240bps
230bps
60bps
£5.6bn
14.2%
10bps
£8.5bn
12.9%
£0.4bn
~10%
floating
rate
growth while minimising share dilution
¾ Global treasury operations deliver financing benefits
~60%
fixed
rate
~60%
debt
£0.8bn
Asset and dividend growth drive shareholder value
Electricity Transmission
Gas Transmission
Regulation and performance
¾ RIIO price control provides regulatory clarity through 2021
Base
returns
Gas Distribution
2014/15
Dividend
Total shareholder return (TSR)
¾ Single regulatory body
¾ Increased incentives to deliver innovative and efficient
14.2%
14.0%
capital investments benefitting customers and
shareholders
¾ Cost allowances and revenues linked to RPI
12.9%
£0
+
¾ Efficiencies remunerated in part through additional growth
£25.4bn
Half year dividend
35% of prior full year dividend
+
2014
FERC
US Regulated
Rate base
FERC
Rhode Island
Massachusetts
10.4%
6.2%
8.2%
$2.4bn
$1.1bn
$3.7bn
$10.0bn
Mass
Gas
KEDNY
KEDLI
Mass
Elec
11.5%
p
45
40
35
30
25
20
15
2014/15
Base case asset growth of ~5%
¾ £2bn UK investment p.a.
¾ $2bn US investment p.a.
2013/14
Group
performance
Upside of 6%+
¾ Accelerated UK load related growth
¾ US gas growth/network modernisation
¾ Additional business development
2012/13
Post tax share
Dividend per share
2011/12
Joint ventures
UK & US asset growth
9.7% average allowed return
$17.2bn
Metering
Other
activities
=
2010/11
$0
=
dividend yield
+
growth in the
per share value of
shareholders’
equity
2009/10
4.6%
total
shareholder
return
¾ Portfolio evolution
2008/09
6.5%
+
£1.2bn
¾ Hybrid debt
42.87p
2007/08
7.8%
Full year dividend
Policy to grow at least in line with RPI inflation
2006/07
8.5%
$17.2bn
¾ Scrip dividend
=
2005/06
9.0%
8.4%
Rate base
Operating
profit
Regulation and performance
¾ Jurisdictional operating model aligned with four regulatory
bodies
¾ ~50/50 capital structure assumed by regulator
¾ Nominal returns provide faster recovery of investment
¾ Flexible filing timetables
¾ $2.8bn of other regulated assets and working capital
¾ Ability to file for capital rate case amendments
Allowed
returns
NiMo Gas 8.3%
NiMo Electric
New York
11.5%
Narragansett Gas 11.6%
Narragansett Electric 9.5%
Operational
return on equity
Capital allocation decisions enhance TSR through:
¾ Investment in additional growth opportunities
¾ Share repurchase
28.16p
Final dividend
=
US returns
Core regulated asset growth, dividend and A- credit ratings
represent priorities for allocation of capital
14.71p
£160m
+
+
Property
Grain LNG
£28m
BritNed
Operating profit
£3.9bn
+
£72m
£31m
French
Interconnector
£103m
Millennium
EPS
+
=
Other
£(164)m
£9m
Iroquois
Return on equity
58.1p
11.8%
Operating
profit
£199m
£7m
Total Group assets
£40.6bn
Key performance indicators focus management on efficient investment and profitability
2014/15
Value added
Captures total return per share created on an operational basis
Asset growth
£1,125m
+
+
Dividend
cash cost net of scrip and share buybacks
£1,606m
−
−
Change in net debt and goodwill
£1,046m
excluding FX impact
=
Value added
=
£1,685m
Return on equity (RoE)
10.8%
2010/11
11.3%
11.7%
11.4%
11.8%
2011/12*
2012/13*
2013/14
2014/15
44.7p/share
* Excluding major storms