REG - National Grid PLC - National Grid PLC Half-Year Results 2023/24
09/11/2023 07:15
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RNS Number : 8650S National Grid PLC 09 November 2023
London | 9 November 2023:
National Grid, a leading energy
transmission and distribution company,
today announces its Half-Year results for the period ended 30 September 2023.
Record network investment: a new phase of capital delivery
John Pettigrew, Chief Executive, said:
"Today we've announced solid results, and reconfirmed our full-year guidance,
as we continue to enhance critical energy infrastructure across the
communities we serve.
This financial performance reflects our role at the heart of the energy
transition and a new phase of capital delivery that is firmly underway.
Capital investment in our regulated networks reached a record £3.5 billion in
this half year, as we step up our investment in 17 major onshore and offshore
transmission projects in the UK. In the US, we're now progressing a number of
major transmission projects to unlock renewable generation and upgrade
infrastructure across our jurisdictions. And we're delivering this critical
investment at the same time as ensuring affordability for our customers,
having now exceeded our £400 million efficiency savings target earlier
than planned.
In recognition of this strong progress, we are today updating our 2020/21 to
2025/26 five-year financial framework, which will modestly enhance our asset
and EPS growth within our existing ranges. And whilst we're pleased to see
momentum around policy reform on both sides of the Atlantic, we now look
forward to seeing announcements and consultations translated into decisions
and action in order to deliver the energy transition. We're ready to meet the
opportunities, and are set up to tackle the challenges ahead, to deliver a
clean, fair and affordable energy future for all."
Financial Summary
Six months ended 30 September: continuing operations(1)
Statutory results(2) Underlying(3)
Unaudited 2023 2022 % change 2023 2022 % change
Operating profit (£m) 1,985 2,239 (11%) 1,796 2,117 (15%)
Profit before tax (£m) 1,371 1,666 (18%) 1,144 1,455 (21%)
Earnings per share (p) 28.8 33.4 (14%) 23.8 32.4 (27%)
Dividend per share (p) 19.40 17.84 9%
Unaudited 2023 2022 % change
Capital investment(4) (£m) 3,868 3,883 0%
1. Excluding UK Gas Transmission which is held as a discontinued operation.
Amounts above are presented at actual currency.
2. For statutory EPS and profit before tax in 2022, comparative amounts have
been re-presented to reflect the classification of the Further Acquisition
Agreement (the FAA option) as held for sale and within discontinued
operations.
3. 'Underlying' represents statutory results from continuing operations, but
excluding exceptional items, remeasurements and timing. Further detail and
definitions for all alternative performance measures (including constant
currency) are provided on page 63.
4. Capital investment, an Alternative Performance Measure (APM), represents
statutory capital expenditure of £3,706 million (2022: £3,717 million) plus
contributions to joint ventures and associates and NG Partners additions.
Further detail and reconciliations are provided on page 63.
Highlights
(Solid financial delivery across the half year)
■ Solid underlying operating profit on a continuing basis of
£1.8 billion. Whilst this performance is in line with expectations,
non-recurring items reported in 2022/23 explain why underlying operating
profit is down 15% at actual exchange rates (14% at constant currency) versus
the prior period. These items in the prior half year included: St William
property land sales (£201 million); a two month contribution from the
Narragansett Electric Company (NECO) (£53 million); and insurance proceeds
received at our IFA1 interconnector following a fire in September 2021 (£70
million). Underlying EPS for continuing operations of 23.8p, down from 32.4p
in the prior period, in line with our expectation of underlying EPS to have a
greater weighting to the second half.
■ Statutory operating profit down 11% to £2.0 billion, driven
principally by gains on NECO and St William land sales in the prior period,
partly offset by favourable timing. Statutory EPS of 28.8p, down from 33.4p in
the prior period.
■ Interim dividend of 19.40p/ordinary share* in line with policy
(17.84p/ordinary share in the prior period).
* This represents 35% of the total dividend per share of 55.44p in respect of
the last financial year to 31 March 2023, in line with the Group's dividend
policy.
Highlights continued
(Record regulatory capital investment driving the energy transition)
■ Capital investment of £3.9 billion for continuing operations, £70
million higher than the prior period at constant currency (£15 million lower
at actual exchange rates). Of this total, capital investment in our regulated
networks 1 (#_ftn1) reached a record £3.5 billion, up 10% on the prior
period at constant currency (7% at actual exchange rates).
■ Group capital investment was principally driven by higher connections
spend and early investment relating to Accelerated Strategic Transmission
Investment (ASTI) in our UK Electricity Transmission business; increased spend
on our new transmission projects in New York, such as our Smart Path Connect
project; higher asset condition and Grid Modernization spend in New England;
partially offset by lower investment in National Grid Ventures (NGV) compared
to the prior period due to lower spend on the IFA1 Sellindge converter station
rebuild, Isle of Grain expansion and Viking interconnector as these projects
near completion.
(Good, early progress on ASTI projects)
■ Welcomed Ofgem's decision to place 17 ASTI projects into our UK
Electricity Transmission operating licence.
■ Signed JVs with SP Transmission plc (ScottishPower) for Eastern Green
Link 1 in August, and with Scottish Hydro Electric Transmission plc (SSE) for
Eastern Green Link 2 in June; selected suppliers for converter stations and
cables at the Eastern Green Links 1 and 2 offshore projects, received planning
consents on the English side of the links.
■ Launched the procurement process for the enterprise model to deliver
the majority of our onshore projects.
(Continued capital re-allocation from National Gas Transmission)
■ Agreed to sell a further 20% equity interest in National Gas
Transmission to the consortium led by Macquarie Asset Management and British
Columbia Investment Management Corporation, on equivalent financial terms to
the 60% stake sold to the consortium in January 2023.
■ Agreed a new option with the same consortium, exercisable between 1
May 2024 and 31 July 2024, allowing it to acquire the remaining interest.
(Strong regulatory progress underpinning future growth)
■ Welcomed the Energy Act 2023 receiving Royal Assent and passing into
UK legislation.
■ Published our 'Delivering for 2035' policy paper, outlining five
priority areas where action is required by the UK government and Ofgem to
ensure networks can play their part in decarbonising the power sector by 2035.
■ Welcomed the Electricity Networks Commissioner's (ENC) report and its
recommendations for a strategic spatial energy plan reducing timelines on
transmission infrastructure delivery.
■ Began the first year of new price controls under RIIO-ED2, running for
five years until 31 March 2028.
■ Planning to move forward in settlement negotiations with the New York
Public Service Commission (PSC) for new rates at KEDNY-KEDLI, hoping to reach
a Joint Proposal in the first quarter of calendar year 2024.
■ Filed our Electric Sector Modernization Plan (ESMP) in Massachusetts,
proposing $2 billion of investment over the next five years in our electric
distribution network to help meet state clean energy goals (not part of any
rate order we currently have in Massachusetts).
■ Community Offshore Wind JV successful in New York's offshore wind
solicitation with a provisional offtake award of 1.3 GW.
■ Received approval for our Propel NY Energy transmission project on Long
Island, a partnership between New York Transco and the New York Power
Authority, which will bring offshore wind into the state.
■ Our Twin States Clean Energy Link, a 1.2 GW transmission project,
selected by US Department of Energy (DOE) to move to the next stage of
negotiation under the DOE's Transmission Facilitation Program.
(Support for our communities and customers)
■ Working to return £200 million of interconnector revenues to UK
consumers that we announced in May 2022, and the further £100 million that we
announced in May 2023.
■ As part of our two-year winter support fund we announced last year,
£19 million will be available to support our most vulnerable customers this
coming winter.
■ Received two Edison Electric Institute Awards in June for outstanding
storm response for the two most severe winter storms in New England last year
(on 23 December 2022, and 13 March 2023).
( )
Highlights continued
(Further progress on our Group efficiency programme and synergies)
■ Achieved a further £53 million of Group efficiency savings during the
half year 2 (#_ftn2) . This is in addition to the £373 million reported at
the end of 2022/23 and takes cumulative efficiency savings under the programme
to £426 million, exceeding our £400 million target that we committed to
deliver by the end of 2023/24.
■ Delivered £18 million to date of our £100 million UK Electricity
Distribution synergy target.
(Updating our responsible business commitments)
■ Published our third Responsible Business Report, setting out the progress
we have made against our commitments over the last year, including a 70%
reduction in Scope 1 and 2 emissions versus a 1990/91 baseline, representing a
7.5% reduction versus the prior year.
■ Updated our Responsible Business Charter to reflect our new portfolio,
focused on three key pillars: environment; customers & communities; and
our people.
■ Published new Science Based Targets initiative (SBTi) aligned near-term
targets, including a new aim to reduce Scope 1 and 2 emissions by 60% by 2030
from a 2018/19 baseline, whilst remaining committed to reducing Scope 3
emissions by 37.5% by 2034 (achieving these targets is subject to a number of
external dependencies, including policies in our jurisdictions which deliver
the energy transition).
Financial Outlook and Guidance
■ Guidance is based on our continuing businesses as defined by IFRS. It
excludes the minority stake in National Gas Transmission which is classified
as held for sale within discontinued operations, but includes the ESO which is
held for sale within continuing operations.
■ We have today updated our Five-Year Financial Framework for the period
2020/21 to 2025/26:
■ total cumulative capital investment of around £42 billion, modestly
enhancing our asset and EPS growth;
■ asset growth CAGR* of 8-10% backed by our strong balance sheet;
■ driving underlying EPS CAGR of 6-8% from the 2020/21 EPS baseline of
54.2 pence per share(†);
■ credit metrics consistent with current Group rating; and
■ regulatory gearing to remain in the low 70% range.
■ Accelerated Strategic Transmission Investment (ASTI): as part of the
total cumulative capital investment of around £42 billion over the 2020/21 to
2025/26 period, we expect to deliver around £3 billion of capital investment
across our 17 ASTI projects. As we progress work on these projects, our
current best estimate for total outturn investment (in £bn) is in the
mid-to-high teens range.
■ Excluding the ESO accounting benefit as highlighted in our Forward
Guidance on page 15, for 2023/24 we continue to expect underlying EPS to be
modestly below 2022/23 levels following the UK government change to the
capital allowances legislation from 1 April 2023. We expect this change to
have a 6-7p per share impact on EPS, albeit no economic impact over the long
term. Without this change, underlying EPS was forecast to grow within our 6-8%
CAGR range between 2022/23 and 2023/24, assuming an exchange rate of
£1:$1.20.
* Compound Annual Growth Rate
† Full-year underlying EPS (2020/21) as reported on 20 May 2021.
Financial Key Performance Indicators
As at and for the six months ended 30 September 2023 2022 change %
(£ million)
Statutory operating profit (continuing) at actual currency:
UK Electricity Transmission 838 493 70%
UK Electricity Distribution 472 522 (10%)
UK Electricity System Operator 443 146 203%
New England (including NECO) (47) 720 (107%)
New York 8 (26) (131%)
National Grid Ventures 310 308 1%
Other (39) 76 (151%)
Total statutory operating profit (continuing) 1,985 2,239 (11%)
Underlying operating profit (continuing) at constant currency(1):
UK Electricity Transmission 656 564 16%
UK Electricity Distribution 563 579 (3%)
UK Electricity System Operator 34 52 (35%)
New England (including NECO) 218 304 (28%)
New York 119 195 (39%)
National Grid Ventures 219 258 (15%)
Other (13) 145 (109%)
Total underlying operating profit (continuing) 1,796 2,097 (14%)
Capital investment (continuing) at constant currency:(2,3)
UK Electricity Transmission 800 629 27%
UK Electricity Distribution 608 584 4%
UK Electricity System Operator 75 42 79%
New England (including NECO) 789 771 2%
New York 1,257 1,195 5%
National Grid Ventures 326 531 (39%)
Other 13 46 (72%)
Total capital investment (continuing) 3,868 3,798 2%
1. 'Underlying' represents statutory results from continuing operations, but
excluding exceptional items, remeasurements and timing. Further detail and
definitions for all alternative performance measures are provided on page 63.
2. Comparative amounts have been re-presented to reflect NGV as a separate
operating segment and the reclassification of our US LNG operations from
New England to NGV following an internal reorganisation in the period.
3. Capital investment, an Alternative Performance Measure (APM), represents
statutory capital expenditure of £3,706 million (2022: £3,717 million) plus
contributions to joint ventures and associates and NG Partners additions.
Further detail and reconciliations are provided on page 63.
Contacts
Investor Relations
Nick Ashworth +44 (0) 7814 355 590
Angela Broad +44 (0) 7825 351 918
James Flanagan +44 (0) 7970 778 952
Alexandra Bateman +44 (0) 7970 479 571
Media
Molly Neal +44 (0) 7583 102 727
Lyndsey Evans +44 (0) 7714 672 052
Brunswick
Dan Roberts +44 (0) 7980 959 590
Results presentation webcast
An audio webcast and live Q&A with management will be held at 09:15 (BST)
today. Please use this link to join via a laptop, smartphone or tablet:
https://www.nationalgrid.com/investors/events/results-centre
A replay of the webcast will be available soon after the event at the same
link.
UK (and International) +44 (0) 330 551 0200
UK (Toll Free) 0808 109 0700
US (Local) +1 786 697 3501
Password Quote "National Grid Half Year" when prompted by the operator
Use of Alternative Performance Measures (APMs)
Throughout this release we use a number of alternative (or non-IFRS) and
regulatory performance measures to provide users with a clearer picture of the
regulated performance of the business. This is in line with how management
monitor and manage the business day-to-day. Further detail and definitions for
all alternative performance measures are provided on pages 63 to 67.
Inside information
This announcement contains inside information for the purposes of Article 7 of
the UK Market Abuse Regulation. The person responsible for arranging the
release of this announcement on behalf of National Grid is Justine Campbell,
Group General Counsel & Company Secretary.
STRATEGIC OVERVIEW
A period of good regulatory progress and continued growth
National Grid has reported a solid financial performance for the first six
months of the year, underpinned by continued operational progress across the
Group and record half-year investment in our regulated network businesses.
Safety performance
In August 2023, one of our UK Electricity Distribution employees tragically
lost his life at a site in Ludlow, Shropshire, after falling from height
whilst performing overhead line work. This tragic loss of life was felt
acutely across the Group, and we have worked closely with the individual's
family, friends and colleagues to support them. As a Group, we are firmly
committed to our staff and contractors returning home safely at the end of
each day. With the incident investigation in progress, we are taking actions
in Electricity Distribution and across the Group to prevent reoccurrence,
enhance safety leadership engagement, and proactively learn from both actual
and potentially severe incidents.
During the half year, we recorded a Group Lost Time Injury Frequency Rate
(LTIFR) of 0.09, compared to 0.11 at year end and against our Group target of
0.1.
Half-year operating financial performance
Our statutory operating profit is presented on page 4 which includes the
impact of exceptional items, remeasurements and timing, and a reconciliation
to our APMs is presented on page 65.
We achieved solid underlying operating profit on a continuing basis of
£1.8 billion. Whilst this performance is in line with expectations,
non-recurring items reported in 2022/23 explain why underlying operating
profit is down 15% at actual exchange rates (14% at constant currency) versus
the prior period. These items in the prior half year included: St William
property land sales (£201 million); a two month contribution from the
Narragansett Electric Company (NECO) (£53 million); and insurance proceeds
received at our IFA1 interconnector following a fire in September 2021 (£70
million).
Underlying operating profit - continuing operations(1) At actual At constant currency
Six months ended 30 September exchange rates
(£ million) 2023 2022 % change 2022 % change
UK Electricity Transmission 656 564 16% 564 16%
UK Electricity Distribution 563 579 (3%) 579 (3%)
UK Electricity System Operator 34 52 (35%) 52 (35%)
New England 218 316 (31%) 304 (28%)
New York 119 202 (41%) 195 (39%)
National Grid Ventures 219 259 (15%) 258 (15%)
Other (13) 145 (109%) 145 (109%)
Total underlying operating profit 1,796 2,117 (15%) 2,097 (14%)
1. Excluding UK Gas Transmission which is held as a discontinued operation.
'Underlying results' and a number of other terms and performance measures are
not defined within accounting standards and may be applied differently by
other organisations. For clarity, we have provided definitions of these terms
and, where relevant, reconciliations on pages 63 to 67.
For the half year, Group capital investment for continuing operations reached
£3,868 million, £70 million higher than the prior period at constant
currency (£15 million lower at actual exchange rates). Of this total, capital
investment in our regulated networks reached a record £3,529 million, up 10%
on the prior period at constant currency (7% at actual exchange rates).
Group capital investment was principally driven by higher connections spend
and early investment relating to ASTI in our UK Electricity Transmission
business; increased spend on our new transmission projects in New York, such
as our Smart Path Connect project; higher asset condition and Grid
Modernization spend in New England; partially offset by lower investment in
NGV compared to the prior period due to lower spend on the IFA1 Sellindge
converter station rebuild, Isle of Grain expansion and Viking interconnector
as these projects near completion.
Positioning National Grid for the future - our strategic pivot
The strategic pivot that we announced in 2021 will enable the Group to play a
key role at the heart of the energy transition, drive long-term shareholder
value and deliver affordability for our customers. It included the acquisition
of UK Electricity Distribution (June 2021), the sale of NECO (May 2022), and
the sale of a majority stake in UK Gas Transmission (January 2023, when the
company began to operate under a new name, National Gas Transmission).
On 19 July, we announced the sale of a further 20% in National Gas
Transmission to a consortium led by Macquarie Asset Management. The equity
sale is on equivalent financial terms to the original 60% transaction
(acquired by the same consortium) that was completed in January 2023.
Completion of the sale of this further 20% is subject to the same National
Security and Investment (NSI) clearance process as the initial 60% tranche
and, subject to such clearance, will complete in the same way. This will take
the consortium's equity stake in National Gas Transmission to 80%.
As part of the same announcement, National Grid confirmed that it had entered
into a new option agreement with the Consortium for the potential sale of the
final 20% shareholding in National Gas Transmission. The Consortium has the
option, exercisable between 1 May 2024 and 31 July 2024, to acquire the
remaining interest. If the option is partially exercised by the Consortium,
National Grid will have the right to put the remainder of its equity interest
in National Gas Transmission to the Consortium, which can be exercised by
National Grid between 1 December 2024 and 31 December 2024. If one or both of
these options are exercised, the consideration for the remaining interest is
expected to be paid in cash to National Grid on equivalent financial terms to
the original 60% transaction, subject to certain adjustments.
National Grid's asset base will move to around 75% electricity (up from 60% in
2021) once the 20% equity sale in National Gas Transmission (that we announced
in July) completes.
Supporting our customers and communities
Over the half year, we have made good progress on making sure our economic and
social role has the greatest impact on the communities we serve. We have
continued to see a tough economic backdrop for our customers and communities
as inflation, and rising energy prices, have contributed to the cost-of-living
crisis. As a responsible business, our focus remains on delivering the energy
transition in the UK and the US to help move towards a clean energy future
that is affordable for customers.
As part of this, we announced last year our winter funding packages to help
our most vulnerable customers and communities in the UK and US. Of the $17
million we committed to help customers in New York and Massachusetts, around
$9 million has already been distributed in the past year through our network
partners to assist over 35,000 households with high energy costs. The
remaining funds will be distributed across the forthcoming winter months in
2023/24.
In the UK, we have £11 million remaining of the original £50 million support
fund that we established last year, and we plan to distribute it this coming
winter across a number of areas. This will include expanding our UK
Electricity Distribution Community Matters Fund that offers grants
to customers struggling with fuel poverty; continuing our support for home
visit, customer advice and fuel vouchers through the National Energy
Foundation and Fuel Bank Foundation; and supporting Citizens Advice by funding
an additional 15 full-time caseworkers, delivering support to an additional
2,400 people with specialist advice.
We also continue to work with Ofgem on the early return of £200 million of
interconnector revenues to UK consumers that we announced in May 2022. We also
plan to return a further £100 million of revenues to customers, as we
announced in May 2023, subject to Ofgem's consent.
UK regulatory progress and Winter Outlook
We have seen good regulatory progress in the UK across a number of policy and
regulatory areas. From recommendations made to accelerate transmission
investment, through to the Energy Act 2023 receiving Royal Assent, the
progress we have seen this year will support the UK's drive for
decarbonisation, greater energy affordability and increased energy security,
goals for which National Grid is wholly aligned and supportive in delivering.
Energy Act 2023 and Future Systems and Network Regulation (FSNR)
At the end of October, we welcomed the Energy Act receiving Royal Assent and
passing into legislation. The Act is a crucial next step in delivering a
secure and affordable clean energy network and establishes important policy
and governance foundations to deliver on the UK's net zero ambitions. The Act
enables the separation of the Electricity System Operator (ESO) from National
Grid and the formation of an Independent System Operator and Planner (ISOP).
The ISOP, formerly referred to as the Future System Operator, will have a
critical role in delivering strategic, whole system energy planning and
oversight as we continue to invest in and transform the UK's energy
infrastructure. We expect the ISOP to be established as a public entity in
2024 with responsibilities across both the electricity and gas systems.
We also welcomed the introduction of a net zero duty for Ofgem within the Act,
which widens the regulator's remit to consider net zero targets as part of
its decision making. The inclusion of marine grids in the
legislation's definition of offshore wind associated infrastructure is also
welcome and will assist in simplifying the consenting process.
Also in October, we welcomed Ofgem's publication of the FSNR Framework
Decision. This sets out the overarching framework for the network price
controls for electricity and gas transmission, and gas distribution, which
will run from April 2026, known as 'RIIO-3'. For electricity transmission, the
main points from the FSNR Decision included:
■ the continuation of five-year price controls, including the setting of
returns and assessment of financeability (to ensure that necessary capital is
attracted to support expansion needed in the grid);
■ evolution of a RIIO-style framework, with the introduction of a major
projects regime for significant network investments identified in the
Centralised Strategic Network Plan (see below);
■ the need for streamlining of the regulatory framework, recognising the
requirement for companies to propose investments that are anticipatory; and
■ a focus on the need to accelerate digitalisation.
The detail of the frameworks will now be developed through the sector specific
methodology phase which will be managed through a combination of working
groups and a consultation to be published in December 2023. The final
methodology decision will be made in Spring 2024. The Decision also confirmed
that the overarching RIIO-3 framework will provide a foundation for the
Electricity Distribution price control which will start in April 2028. The
precise framework and process for Electricity Distribution will be consulted
on separately in late 2024.
Further progress on ASTI
On 25 August, Ofgem published transmission licence modifications which
formally place the ASTI projects into Transmission Operators' licences. This
includes the 17 ASTI projects that Ofgem awarded to National Grid in December
2022 to upgrade the East coast transmission network in support of the UK
government's 50 GW 2030 offshore wind target. We are pleased with progress,
and we have continued to engage with Ofgem on the profile and timing of the
required ASTI investment. We expect the majority of this investment to be
deployed towards the end of this decade.
The 17 ASTI projects will be delivered by our Strategic Infrastructure (SI)
business unit which ensures efficient and effective delivery. As each project
completes, it will be transferred to UK Electricity Transmission which will
then be responsible for the ongoing operation and maintenance of the
infrastructure when in service 3 (#_ftn3) .
We have made good progress on our ASTI projects over the half year, including:
signing JVs with ScottishPower for Eastern Green Link 1 in August, and with
SSE for Eastern Green Link 2 in June; selecting the preferred suppliers for
converter stations and cables at Eastern Green Links 1 and 2; completing the
'examination' stage of our Development Consent Order (DCO) application for the
Yorkshire Green project; and launching the procurement process for the 'Great
Grid Upgrade Partnership', the contractual model that will be used to deliver
the majority of our onshore projects. The model has been designed on industry
best practice with contracts expected to be awarded early in the new year.
Transforming the network - reforming the pace of the energy transition
In May, National Grid published 'Delivering for 2035: Upgrading the grid for a
secure, clean and affordable energy future'. The paper outlines five priority
areas where action is required by the UK government and Ofgem to ensure
electricity networks can fully play their part in decarbonising the power
sector by 2035. These priority areas are:
■ reforming the planning system, centred around a strategic spatial
energy plan;
■ ensuring the regulatory and governance framework is set up for
delivery;
■ transforming how clean energy connects to the grid and accelerating net
zero projects;
■ putting communities and consumers at the forefront of the transition;
and
■ developing supply chain capacity and a skills pipeline across the
country.
The recommendations we made in the publication are critical to reforming the
scale and pace of the energy transition needed over the next decade,
particularly in transmission, to enable the decarbonisation of the UK power
sector by 2035. Whilst significant progress has been made towards transforming
the UK's power system in recent years, full decarbonisation will require more
urgent action from industry, the UK government and Ofgem. We are pleased to
see a number of positive developments in this half year that support our call
for urgent reform.
In August, we welcomed the publication of the Electricity Networks
Commissioner's (ENC's) report and its recommendations aimed at significantly
reducing timelines for delivering onshore and offshore transmission network
infrastructure. Many of the recommendations align with our priority areas. In
particular, we support the ENC's recommendation for a strategic spatial
approach to planning energy infrastructure and the robust need case this would
provide. The UK government has committed to publishing an Action Plan in
response to the ENC report by the end of 2023, setting out future actions for
government, Ofgem and industry.
Key proposals by the ENC also link with Ofgem's consultation published in June
on proposed arrangements for the Centralised Strategic Network Plan (CSNP).
The CSNP will be a new transmission network planning approach that will be
delivered by the ISOP. The Ofgem consultation covers the first stage of the
CSNP regulatory framework setting out how it expects the ISOP to model future
supply and demand (currently the Future Energy Scenarios, or FES) that will
inform future network investment need. National Grid fully supports the
creation of a CSNP and agrees with the direction of the proposals in the
Ofgem consultation. As with the ENC recommendations, the aims of the CSNP
align with our five priority areas in our 'Delivering for 2035' paper.
Connections reform across our transmission and distribution networks
National Grid has launched a new reform initiative to accelerate grid
connections across our transmission and distribution networks.
During the half year, the ESO has continued to work with stakeholders,
including UK Electricity Transmission, to improve and reform the connections
process to the transmission network. We have been working on two major
aspects, the shorter term Five Point Plan, and a longer full connection reform
process. The transmission connection queue now stands at over 400 GW for Great
Britain which represents a significant oversubscription of what is required to
meet the scenarios in the ESO Future Energy Scenario publication.
The Five Point Plan has been worked through with all transmission owners and
customers. Progress is being made with around 5 GW of connection contracts
being rescinded through the Transmission Entry Capacity (TEC) Amnesty, and our
change of the treatment of batteries has accelerated over 10 GW of connections
by at least four years. Work is being undertaken by the transmission owners to
assess the full impact of the implementation of the Five Point Plan. One of
the key changes will be the introduction of Queue Management clauses into
connection agreements so that if connecting customers miss key milestones in
their development then the ESO will have the right to terminate the
connection. It is expected that Ofgem will decide on the code modification
required to enable this in November this year.
For longer-term reform, the ESO published a consultation in the summer, and we
are responding with a recommended solution at the end of November. We are
working with Ofgem to understand a way forward that can expedite the
implementation and delivery of the benefits of the proposed connection reform.
We have also taken further action on connections reform across our UK
Electricity Distribution network. In September, we announced plans to release
10 GW of grid capacity for the connection of renewable generation assets to
our network. This follows engagement since the beginning of the year with the
ESO, Ofgem and the UK government to find solutions to speed up the connection
of low carbon technologies. Through a new agreement with the ESO, projects
that require additional transmission network reinforcement will be offered the
chance to connect under an interim, non-firm connection arrangement. In return
for an earlier connection, the interim arrangements would mean some projects
could be curtailed when there is too much generation on the system, such as on
some of the windiest and sunniest summer days.
In the long term, these interim arrangements will be replaced with firm
connections as network capacity increases. In addition, from September we
have started to replace the current 'first come, first served' connection
model with a 'first ready, first connected' approach on our UK Electricity
Distribution network. This updated approach, which will apply on a non-firm
basis to a subset of supply points, will accelerate the connection of 'shovel
ready' projects to allow more low carbon projects to connect faster. As a
result, these changes will allow customers to accelerate their connection
dates and provide a more agile approach to managing connection requests.
We also continue to work with members of the Energy Networks Association (ENA)
on reforming the connection process to distribution networks. This includes
promoting mature projects that are closer to delivery above those that may be
'blocking' the queue; and changing how transmission and distribution networks
coordinate connections, improving their interactivity.
Ofgem inflation consultation
On 1 August, Ofgem published a 'call for input' on the impact of high
inflation on network price controls. This was expected as it was raised by
Ofgem as part of the Electricity Distribution Draft Determinations in summer
2022. There are five policy considerations that Ofgem have asked stakeholders
to comment on, namely: no action; reporting and transparency; future price
control design; true up; and voluntary submissions. The document recognises
the importance of stable regulation and the risk of changing how regulation
works.
We have worked with the ENA to put forward our views and, given the timeline,
we believe this is best discussed as part of the RIIO-3 price controls. Ofgem
is expected to publish an informal consultation in late 2023 which will
provide more detail around whether it intends to launch a standalone
consultation or whether it will wait for the next price control period.
UK Winter Outlook
In September, the ESO published the electricity Winter Outlook for the
upcoming winter in Great Britain.
Despite the ongoing conflicts in Ukraine and the Middle East, the broad
European energy market has improved since last year. The market has bolstered
European gas storage and supplies, and the French nuclear fleet capacity is
back to pre-pandemic levels. The ESO has built on the experience of the
2022/23 winter and continued to build resilience and minimise the potential
impact of risks and uncertainties in the energy markets. As such, the System
Operator's Base Case scenario is that there will be adequate margins (4.4
GW/7.4%) through the forthcoming winter to ensure Great Britain remains within
the reliability standard 4 (#_ftn4) .
Alongside the Base Case, the ESO has stress tested the impact of credible
Great Britain and EU energy market events on the system against available
operational tools. As a result, it plans to reintroduce the Demand Flexibility
Service for this winter to incentivise customers to reduce consumption during
periods when margins are tightest. This measure, alongside the robust set of
tools already deployed by the ESO, will contribute to maintaining adequate
margins and mitigate impacts to customers.
US regulatory progress
We have seen good momentum on regulatory progress across our US jurisdictions
during the half year.
New York rate filings
On 1 September, New York Public Service Commission (PSC) Staff responded to
our rate filing that we made for our downstate gas business, KEDNY-KEDLI, in
April. The response proposed a Return on Equity (ROE) of 9.1% (compared to our
request for 9.8%), revenue increases of $389 million for KEDNY and $220
million for KEDLI (compared to our request of $466 million and $277 million
respectively) and a 7.5% reduction on our request for capital expenditure in
2024/25. In addition, PSC Staff also recommended increasing Leak Prone Pipe
(LPP) replacement targets for both KEDNY and KEDLI (for example, 55 miles of
pipe replacement at KEDNY in calendar year 2024 against our request for around
40 miles; and 125 miles of pipe replacement at KEDLI in calendar year 2024
against our request for around 110 miles). PSC Staff supported future
Renewable Natural Gas (RNG) connections to the gas network, recognising that
projects are at an early stage; the regulator also expressed support for
advancing and funding an opportunity to use an existing green hydrogen
facility for blending in a closed system on Long Island. National Grid
responded to the PSC Staff position on 22 September, and we plan to move
forward in settlement negotiations, hoping to reach a Joint Proposal with
stakeholders in the first quarter of calendar year 2024.
We also remain on track to file for new rates at our Niagara Mohawk (NIMO)
electric and gas business (upstate New York) in summer 2024.
New York transmission investment
In July, we received Federal Energy Regulatory Commission (FERC) approval for
cost recovery on our Smart Path Connect transmission rebuild and refurbishment
project in upstate New York. The order included a 10.3% ROE with a 50:50
debt:equity ratio, with cost recovery effective from 1 April 2023. The
project, to develop 110 miles of transmission lines in partnership with the
New York Power Authority (NYPA), will unlock more than 1,000 MW of existing
renewable resources, deliver significant production cost savings and emissions
reductions, and will decrease transmission congestion. The project is on track
to be completed by 2025.
Massachusetts - Electric Sector Modernization Plan submitted
On 1 September, we filed our Electric Sector Modernization Plan (ESMP) in
Massachusetts. The plan outlines the investment required in our electric
distribution network over the next five years and beyond to help the State
meet its clean energy goals under the 2050 Clean Energy and Climate Plan
(CECP). Under the plan, we have proposed to invest up to $2 billion over the
next five years across the following areas:
■ Network infrastructure: upgraded power lines, transformers,
substations, to make the network more resilient, connect clean energy and plan
in advance for growth in electric demand;
■ Technology and platforms: new planning tools for smarter decision
making, including new data and monitoring systems to ensure system stability,
and new IT infrastructure; and
■ Customer programmes: help customers reduce carbon footprint, drive
smart energy use.
Customers and all other interested parties will be able to provide their
feedback through public and technical workshops that National Grid will
conduct jointly with other electric distribution companies. We will use
feedback to inform the formal filing of a Future Grid Plan to the Department
for Public Utilities (DPU) in January 2024, after which the DPU will consider
the Plan and direct the company on how to proceed. The proposed investment
under the ESMP is not currently part of any rate order for our service
territory.
We remain on track to file for new rates for our Massachusetts Electric
business in mid-November 2023, and we will propose a mechanism for recovery of
the ESMP investment as part of that filing.
Twin States Clean Energy Link
In October, the Twin States Clean Energy Link was selected by the US
Department of Energy (DOE) as one of three projects in the US to enter
capacity contract negotiations through the DOE's Transmission Facilitation
Program. Twin States is a bidirectional transmission project being proposed by
National Grid and Citizens Energy Corporation. If built, the line will deliver
1,200 MW of hydro-sourced generation from Canada to New England when it is
needed and will allow for excess power from offshore wind in New England to be
delivered to Canada. Moving forward, we will continue working with local,
state and federal stakeholders to progress the project which has the potential
to create significant savings for customers in New England.
Community Offshore Wind (COSW)
On 24 October, the New York State Energy Research and Development Authority
(NYSERDA) announced three successful projects that will receive Offshore
Renewable Energy Certificates (ORECs) as part of New York's third large-scale
offshore wind solicitation. COSW, our JV with RWE, was selected as one of the
successful projects with a provisional offtake award of 1.3 GW. The project
would be located within COSW's 3.2 GW seabed lease in the New York Bight.
In August 2023, COSW also submitted an offtake bid for up to 1.3 GW in
response to the New Jersey Board of Public Utilities (BPU) solicitation. We
await selection decisions in the first or second quarter of calendar
year 2024.
Further progress on Group efficiency savings
As part of our Group efficiency savings programme, we achieved a further £53
million of savings in the first half of the year 5 (#_ftn5) . This is in
addition to the £373 million reported at the end of 2022/23 and takes our
cumulative efficiency savings under the programme to £426 million. This
exceeds our £400 million savings target that we announced in November 2021
and that we committed to deliver by the end of 2023/24.
Of the £53 million savings achieved this financial year, almost £40 million
has been in New York and New England. This has principally been through
property rationalisation and implementing a more strategic approach to
National Grid's sourcing and contract management strategies, enabling the
business to reduce its external spend. It has also been driven by the use of
digital solutions such as OnMyWay (which digitises National Grid's paper-based
work for electric line crews, enabling more efficient job coordination),
FutureNow (which digitises our electric network investment planning), and
Vegetation Management Optimization (which optimises our vegetation management
strategy and execution for value, cost and reliability). The continued roll
out of new customer initiatives, including the use of lower cost service
providers supporting our front office teams, and increased use of e-billing
and self-service options for customers has enabled further cost reduction.
In our field operations, we have identified ways to reduce the workloads of
our maintenance teams whilst maintaining the safe and reliable operation of
the network. For example, we have maximised resource capacity through combined
training for teams, more efficient coordination with external partners to
reduce completion time, and optimising crew sizes where it is safe to do so.
In addition, we have improved productivity through combining projects where
appropriate and making them more efficient to deliver.
Throughout the rest of our business, we have driven efficiencies following the
2020/21 Business Unit reorganisation, enabled by new digital capabilities,
contract renegotiations and procurement strategies. We will continue to drive
further efficiencies, and we would expect a similar level of savings in the
second half of this year compared to the first half.
Updating our responsible business commitments to reflect our repositioned
portfolio
National Grid believes that all businesses need to stand for more than just
profits. We have a critical role in enabling net zero and ensuring that the
benefits of the energy transition are shared with everyone, with nobody left
behind. This responsibility is integral to our core strategy and underpins our
Responsible Business Fundamentals - ensuring safe and reliable operations,
living our values, whilst influencing, and expecting the same of our partners
and supply chain.
Progress against our Responsible Business commitments
Our 2022/23 Responsible Business Report, released in June, sets out the
progress we have made against our commitments in 2022/23. These included:
■ a 70% reduction in Scope 1 and 2 emissions versus a 1990/91 baseline,
representing a 7.5% reduction versus the prior year;
■ maintaining our CDP Climate Change 'A list rating' for the seventh
consecutive year;
■ achieving 60,096 employee volunteering hours. This means that, since
2020, we have achieved a cumulative 100,000 employee volunteering hours versus
our target of 500,000 to be reached by 2030; and
■ integrating our responsible business commitments within our performance
management frameworks.
Underpinning this progress against our commitments is the record level of
investment we have made across our networks in the past year, making us one of
the FTSE's biggest investors in the delivery of net zero.
Updating our Responsible Business Charter
Since we launched our first Responsible Business Charter three years ago the
external environment has continued to change, and our business has evolved
significantly with the repositioning of our portfolio. To reflect these
changes, we updated the Charter in September following engagement with
stakeholders and with a focus on three core pillars: our environment; our
customers and community; and our people. Each of these pillars is underpinned
by our Responsible Business Fundamentals, with the previous pillars of economy
and governance now embedded within these new focus areas.
New SBTi aligned targets
On environment, our new aim is to reduce scope 1 and 2 emissions by 60% by
2030, from a 2018/19 baseline 6 (#_ftn6) , whilst remaining committed to
reducing scope 3 emissions by 37.5% by 2034. These near-term emission targets
across the Group align National Grid to a 1.5 degrees pathway and have been
verified by the SBTi. We have also updated our emission reduction ambitions
for our supply chain, adding clarity on how we will target our suppliers to
reduce Scope 3 emissions across the company. Achieving these targets is
subject to a number of external dependencies, including policies in our
jurisdictions which deliver the energy transition. We are engaging actively
with policy makers to enable these.
On our customers and communities, we aim to support an affordable, and fair,
energy transition, where nobody is left behind. We will continue to mobilise
hardship funds and energy efficiency measures, and improve our reporting, on
the benefits that these initiatives provide. We will also continue to provide
meaningful skills development for 45,000 people by 2030 with a focus on
communities facing socio-economic disadvantage, and report on the progress of
our Grid for Good employability programmes. We will deliver 500,000 hours of
volunteering by the same date.
On our third pillar, people, we are investing to build the skills needed to
deliver the clean energy future. Building a diverse, equitable and inclusive
organisation that reflects the communities we serve, is key to our success.
Whilst we have made good progress here, we will move forward with goals that
include: achieving 35% gender diversity and 20% ethnic diversity in our
management population by 2025, representing a 1.5% and 3% increase,
respectively, compared to today; aiming for 50% female representation and 40%
ethnic diversity in our new talent population by 2025; aiming to lead the
industry on wellbeing, with metrics above the prior year level; and we remain
committed to making sure pay is equitable for all our colleagues.
Board changes
On 17 May, we announced that Thérèse Esperdy will step down from the Board
as a Non-Executive Director on 31 December 2023 after serving more than nine
years.
On 21 September, we announced that Ian Livingston will succeed Thérèse
Esperdy as the Senior Independent Director on 31 December 2023.
FIVE-YEAR FINANCIAL FRAMEWORK
Our five-year financial framework (1 April 2021 to 31 March 2026) includes UK
Electricity Distribution from acquisition, the sale of NECO in May 2022, and
the sale of a 60% stake in our UK Gas Transmission business in January 2023.
Capital investment and Group asset growth
Following our update, we now expect to invest around £42 billion across our
energy networks and adjacent businesses, in the UK and US, over the five-year
period to 2025/26. Of this, around £32 billion is considered to be aligned
with the principles of the EU Taxonomy legislation as at the date of
reporting. We expect this increased investment to be modestly enhancing to
asset and EPS growth.
In the UK, we expect around £11 billion of investment in Electricity
Transmission, of which around £3 billion is driven by ASTI projects (which
forms part of our best current view on total outturn investment for all 17
ASTI projects of mid-to-high teens (in £bn)). We expect our Electricity
Distribution network to invest around £6 billion over the five years to
2025/26 in asset replacement, reinforcement and new connections, facilitating
the infrastructure for electric vehicles, heat pumps and directly connected
generation.
In our US regulated businesses, we expect to invest around £12 billion in New
York and £9 billion in New England, over the five years to 2025/26. Over half
of this will be safety related projects in our gas networks with the remainder
in our electric networks such as for storm hardening, other net zero
investments, and further electric transmission investment.
We expect NGV to invest £3-4 billion over the five years to 2025/26 in
completing the interconnector programme, the Isle of Grain Liquefied Natural
Gas (LNG) capacity expansion project, and US renewable generation.
As we have worked through the transactions, coupled with the sum of these
investments, and the broad economic protection our businesses have against
rising macroeconomic variables such as inflation, Group asset growth is
expected to be 8-10% CAGR through to 2025/26.
Group gearing
We expect regulatory gearing to remain in the low 70% range for the remainder
of the five-year framework. We remain committed to a strong, overall
investment grade credit rating. Combined with the benefit of our hybrid debt,
we expect gearing levels, and the other standard metrics we monitor, to sit
within our current BBB+/Baa1 corporate rating band.
Group underlying earnings growth and dividend growth
From 2020/21 through to 2025/26, we expect our CAGR in underlying earnings per
share to be in our 6-8% range from the baseline 54.2 pence per share 7
(#_ftn7) (this includes our long run average scrip uptake assumption of 25%
per annum). This will underpin our sustainable, progressive dividend policy
into the future.
Excluding the ESO accounting benefit as highlighted in our Forward Guidance on
page 15, for 2023/24 we continue to expect underlying EPS to be modestly below
2022/23 8 (#_ftn8) levels following the UK government change to the capital
allowances legislation from 1 April 2023. We expect this change to have a 6-7p
per share impact on EPS, albeit no economic impact over the long term. Without
this change, underlying EPS was forecast to grow within our 6-8% CAGR range
between 2022/23 and 2023/24, assuming an exchange rate of £1:$1.20.
2023/24 FORWARD GUIDANCE
This forward guidance is based on our continuing businesses as defined by
IFRS. It excludes the minority stake in National Gas Transmission which is
classified as held for sale within discontinued operations, but includes the
ESO which is held for sale within continuing operations.
The outlook and forward guidance contained in this statement should be viewed,
together with the forward-looking statements set out in this release, in the
context of the cautionary statement. The forward guidance in this section is
presented on an underlying basis and excludes remeasurements and exceptional
items.
UK Electricity Transmission
Net revenue (excluding timing) is expected to increase by around £260 million
compared to 2022/23 primarily driven by the non-repeat of the prior year
Western Link settlement, and higher revenues driven by indexation. This
includes the impact on underlying revenues of the new UK capital allowances
legislation. Costs are expected to offset around a third of the revenue
increase, including higher depreciation due to the increasing asset base.
We expect to deliver around 100 bps of outperformance in the third year of
RIIO-T2 in operational Return on Equity. This is in line with our target to
deliver 100 basis points of operational outperformance on average through the
five-year period of the RIIO-T2 price control.
UK Electricity Distribution
Net revenue (excluding timing) is expected to be modestly lower compared to
2022/23, as we enter the first year of the RIIO-ED2 price control. This
includes the impact on underlying revenues of the new UK capital allowances
legislation. Controllable costs are expected to be modestly higher compared to
the prior year due to increased workload associated with the new price
control, inflationary impacts, and the non-repeat of some one-off items,
whilst depreciation is expected to be slightly higher, driven by increasing
rate base.
In line with our target, we expect to deliver around 100-125 basis points of
outperformance in the first year of RIIO-ED2 in operational Return on Equity.
UK Electricity System Operator (ESO)
Underlying operating profit (excluding timing) is expected to be around £30
million higher than 2022/23, driven by around £50 million lower depreciation
following being classified as held for sale at the end of October 2023.
Under the RIIO-2 price control, totex in ESO is no longer subject to the totex
incentive mechanism and is instead regulated under a pass-through mechanism,
with cost increases or efficiencies trued-up the following year.
New England
The completion of the sale of NECO in May 2022 will reduce underlying
operating profit (excluding timing) in 2023/24 by around $65 million. For the
remaining business we expect net revenue (excluding timing) to be around $160
million higher from expected rate increases, with just over half of this being
offset by cost increases due to depreciation, rate funded increases, and
inflation.
Return on Equity for New England is expected to slightly improve in respect of
underlying performance compared to 2022/23. Alongside this, there is expected
to be an additional one-off benefit of around 40 basis points in 2023/24
partially relating to the regulatory recovery of a historical property tax
matter.
New York
Net Revenue (excluding timing) is expected to be around $270 million higher,
including increases from proposed rate settlements. Just under one third of
this increase will be offset by depreciation as a result of higher investment.
Lower controllable costs, as a result of efficiencies and non-recurrence of
one-off items are broadly offset by higher rate funded costs.
Return on Equity for New York is expected to be broadly in line with 2022/23.
NGV and Other activities
In NGV, we expect operating profit to be around 5% lower than 2022/23 driven
by the reduction in interconnector auction revenues as energy markets return
to more usual levels following the high prices experienced last year.
We also expect other activities' underlying operating profit to be lower
year-on-year by just over £100 million. This is driven by reduced sales in
our Commercial Property business, partly offset by the impact of our
significant community spend in 2022/23.
Joint Ventures and Associates
Our share of the profit after tax of joint ventures and associates is expected
to be just under £100 million lower than 2022/23 as a result of lower auction
revenues in our joint venture interconnectors.
Interest and Tax
Net finance costs in 2023/24 are expected to be around £20 million lower than
2022/23. This follows the repayment of the acquisition bridge loan and lower
inflationary rate increases, partially offset by increasing rates on new
issuances. Other interest is expected to remain broadly flat.
For the full year 2023/24, the underlying effective tax rate, excluding the
share of post-tax profits from joint ventures and associates, is expected to
be around 26%.
Investment, Growth and Net Debt
Overall Group capital investment for continuing operations in 2023/24 is
expected to be above £8 billion.
Asset Growth is expected to be within the 8-10% CAGR range, reflecting an
increase in capex along with indexation impacting our UK regulated businesses.
Depreciation is expected to increase, reflecting the impact of continued high
levels of capital investment.
Operating cash flow generated from continuing operations (excluding
acquisitions, disposals and transaction costs) is expected to increase by
around 30% compared to 2022/23 principally driven by ESO over-recoveries and
higher operating profits. This increase is expected to be mostly offset by
higher cash interest, higher cash capital investment and higher cash dividends
than 2022/23.
Net debt is expected to increase by around £3.5 billion (from £41.0 billion
as at 31 March 2023) at a GBP:USD rate of 1.20, driven by our continued levels
of significant investment in critical clean energy infrastructure, with
regulatory gearing broadly flat year over year. This includes proceeds from
the sale of a further 20% stake in National Gas Transmission to the consortium
led by Macquarie Asset Management that we announced in July.
Weighted average number of shares (WAV) is expected to be approximately 3,690
million in 2023/24.
FINANCIAL REVIEW - HY 2023/24
In managing the business, we focus on various non-IFRS measures which provide
meaningful comparisons of performance between years, monitor the strength of
the Group's balance sheet as well as profitability, and reflect the Group's
regulatory economic arrangements. Such alternative and regulatory performance
measures are supplementary to, and should not be regarded as a substitute for,
IFRS measures which we refer to as statutory results. We explain the basis of
these measures and reconcile these to statutory results in 'Alternative
performance measures/non-IFRS reconciliations' on pages 63 to 67. Also, we
distinguish between adjusted results, which exclude exceptional items and
remeasurements, and underlying results, which further take account of: (i)
volumetric and other revenue timing differences arising from our regulatory
contracts, and (ii) major storm costs which are recoverable in future periods,
where these are in excess of $100 million in the year, neither of which give
rise to economic gains or losses.
Financial summary for continuing operations - performance for the six months
ended 30 September
(£ million) 2023 2022 change %
Accounting profit:
Gross revenue 8,489 9,444 (10%)
Other operating income 12 544 (98%)
Operating costs (6,516) (7,749) (16%)
Statutory operating profit 1,985 2,239 (11%)
Net finance costs(1) (685) (624) 10%
Share of joint ventures and associates (after tax) 71 51 39%
Tax (307) (447) (31%)
Non-controlling interest (1) - n/a
Statutory IFRS earnings(1) (see financial statements note 8) 1,063 1,219 (13%)
Less: exceptional items and remeasurements (after tax) (101) (302) (67%)
Less: timing (after tax) (87) 265 (133%)
Underlying earnings(2) 875 1,182 (26%)
EPS - statutory IFRS (pence)(1) (see financial statements note 8) 28.8 33.4 (14%)
EPS - underlying (pence)(2) 23.8 32.4 (27%)
Interim dividend per share (pence) 19.40 17.84 9%
Capital investment:
Capital expenditure (including NECO additions within held for sale) 3,706 3,717 0%
Add: investments in JVs and associates 151 129 17%
Add: investments in financial assets (National Grid Partners) 11 37 (70%)
Capital investment(1) 3,868 3,883 0%
1. Comparative amounts have been re-presented to reflect the classification
of the FAA option as held for sale and within discontinued operations.
2. Non-GAAP alternative performance measures (APMs). For further details and
reconciliation to GAAP measures, see 'Alternative performance
measures/non-IFRS reconciliations' on pages 63 - 67.
Statutory IFRS earnings were £1,063 million in the first six months of the
year, £156 million, or 13% lower than the six months to September 2022. The
prior period included £197 million of net exceptional gains, comprising £511
million on the disposal of NECO and £33 million property damage insurance
income, partly offset by £61 million of cost efficiency programme
expenditure and £65 million of transaction, separation and integration costs.
The current period includes £43 million of net exceptional gains relating to
£92 million further property damage net insurance proceeds offset by
£39 million of cost efficiency programme costs and £11 million of
transaction, separation and integration costs. In the current period, tax on
exceptional items was £1 million credit (2022: £221 million charge).
Statutory results were less favourably impacted this half by derivative
remeasurements with post-tax net gains of £58 million (2022: £105 million
net gains). Timing net over-recoveries were £106 million in the first six
months compared to £361 million net under-recoveries (£349 million at
constant currency) in the prior period.
Underlying operating profit of £1,796 million was down 15% and underlying EPS
of 23.8p was down 27% against the prior period. The biggest driver of the
decrease being £221 million lower property income than during the prior
period which benefitted from sales of a number of sites following our exit
from the St William joint venture in 2021/22. An improved performance in UK
Electricity Transmission and in NG Partners, was more than offset by lower
results in our other businesses, partly related to the sale of NECO (in New
England) in May 2022 and business interruption insurance proceeds in NGV in
the prior period. Underlying net revenues of £5,546 million were down
£51 million (1%) compared to the prior period, with higher UK regulated
business revenues and increases in New England and New York rates being offset
by lower property sales, lower interconnector revenues, the sale of NECO and
the impact of exchange rates. Regulated controllable costs were lower on a
constant currency basis, with higher workload and inflationary increases being
more than offset by efficiency savings. Pension and other post-employment
benefit costs were higher, driven by no repeat of a £40 million buy-out gain
in Niagara Mohawk (New York) in the prior period. Depreciation was higher from
our ongoing investment programme. Other costs were higher, principally related
to higher storm response costs, environmental provisions, US property taxes,
bad debt provisions and also higher costs to deliver outputs as agreed with
our regulators which are offset by higher revenues. These factors along with
the impact of a higher UK corporation tax rate, which increased to 25%
(2022/23: 19%), resulted in underlying earnings of £875 million for the
first six months of 2023/24, down £307 million or 26%.
Reconciliation of different measures of profitability and earnings
The table below reconciles our statutory profit measures for continuing
operations, at actual exchange rates, to adjusted and underlying versions.
Reconciliation of profit and earnings from continuing operations
Operating profit Profit after tax Earnings per share (pence)
(£ million) 2023 2022 2023 2022¹ 2023 2022¹
Statutory results 1,985 2,239 1,064 1,219 28.8 33.4
Exceptional items and remeasurements (83) (483) (101) (302) (2.7) (8.3)
Adjusted results 1,902 1,756 963 917 26.1 25.1
Timing (106) 361 (87) 265 (2.3) 7.3
Major storm costs - - - - - -
Underlying results 1,796 2,117 876 1,182 23.8 32.4
1. Comparative amounts for statutory results and exceptional items and
remeasurements from continuing operations have been re-presented to reflect
the classification of the FAA option as held for sale and within discontinued
operations.
Segmental income statement
The following tables set out the income statement on adjusted and underlying
bases.
Segmental analysis for continuing operations
Adjusted Underlying
£ million 2023 2022 change % 2023 2022 change %
UK Electricity Transmission 839 499 68% 656 564 16%
UK Electricity Distribution 476 531 (10%) 563 579 (3%)
UK Electricity System Operator 443 147 201% 34 52 (35%)
New England (32) 193 (117%) 218 316 (31%)
New York (30) (18) 67% 119 202 (41%)
National Grid Ventures 219 259 (15%) 219 259 (15%)
Other (13) 145 (109%) (13) 145 (109%)
Total operating profit 1,902 1,756 8% 1,796 2,117 (15%)
Net finance costs (711) (732) (3%) (711) (732) (3%)
Share of post-tax results of joint ventures and associates 59 70 (16%) 59 70 (16%)
Profit before tax 1,250 1,094 14% 1,144 1,455 (21%)
Tax (287) (177) 62% (268) (273) (2%)
Profit after tax 963 917 5% 876 1,182 (26%)
EPS (pence) 26.1 25.1 4% 23.8 32.4 (27%)
UK Electricity Transmission statutory operating of £838 million was up from
£493 million in the prior period and included exceptional charges of
£1 million as part of our cost efficiency programme (2022: £6 million).
Adjusted operating profit of £839 million increased by £340 million
compared to the prior period and included £248 million favourable swings
driven by the collection of prior period balances and an in-year over-recovery
due to changes to UK capital allowances legislation. Underlying operating
profit was £656 million compared to £564 million in the prior period. This
increase was driven by inflationary uplifts partly offset by the net impact to
allowed revenues from taxes (higher UK corporation tax rate, more than offset
by a change to first-year UK capital allowances). Separately, prior period
revenues were adversely impacted by £69 million related to the return of
Western Link liquidated damages to customers.
UK Electricity Distribution statutory operating profit of £472 million was
down from £522 million in the prior period and included exceptional charges
of £4 million for transaction and integration costs (2022: £9 million).
Adjusted operating profit decreased by £55 million to £476 million (2022:
£531 million) and included £39 million adverse timing swings mainly
related to under-recovery of inflation true-ups, recovery of pass-through
costs and the return of prior period balances. Underlying operating profit
decreased by £16 million to £563 million (2022: £579 million).
Underlying net revenues increased as a result of inflation and higher
allowances for the increase in the UK corporation tax rate, but were offset by
a decrease due to the impact of first-year UK capital allowances and also
adversely impacted by reduced incentives opportunities in the new RIIO-ED2
framework. The prior year also included a gain on disposal of a smart
metering business.
UK Electricity System Operator statutory operating profit of £443 million
was up from £146 million in the prior period and included exceptional
charges of £1 million in the prior period as part of our cost efficiency
programme. Adjusted operating profit was £443 million compared to
£147 million in the prior period. There has been a material impact on both
statutory and adjusted operating profit from an over-collection of allowed
revenues during the first six months of the year. This has arisen from the
BSUoS fixed price tariff substantially exceeding the actual costs incurred
during the period. This tariff is set ahead of the current financial year,
with the objective of NG ESO to recover the estimated system balancing costs
forecast to arise in the current period. The £409 million in-year
over-collection will be returned by means of an adjustment to tariffs in
2024/25. Underlying operating profit was £34 million compared to
£52 million in the prior period, principally as a result of lower incentives
and accelerated depreciation of intangible assets.
New England statutory operating loss of £47 million was down from a
statutory operating profit of £720 million in the prior period and included
an exceptional charge of £6 million (2022: £33 million) as part of our cost
efficiency programme, an exceptional charge of £3 million (2022: £511
million gain) related to the disposal of NECO (Rhode Island business sold in
2022/23) and commodity derivative remeasurement losses of £6 million (2022:
£49 million gains). New England incurred an adjusted operating loss of
£32 million, £225 million adverse to the prior period (£217 million
adverse on a constant currency basis). This was principally driven by a
£131 million adverse timing swing related to under-recoveries of net
metering credits and energy efficiency programme costs. In-year timing
under-recoveries were £250 million (2022: £123 million under-recoveries,
or £119 million under-recoveries at constant currency). Underlying operating
profit was £218 million (2022: £316 million, or £304 million at constant
currency), primarily as a result of the disposal of NECO which contributed
£53 million to underlying operating profit for the two months owned in the
prior period (£69 million contribution to adjusted operating profit).
Underlying operating profit benefitted from increases in revenues from higher
rates (through the performance based regulation), increased returns in
wholesale networks and capital trackers and bad debt recoveries, but these
were more than offset by an adverse impact from higher storm costs, increased
depreciation, increased bad debt provisions and higher costs from both
workload and inflation.
New York statutory operating profit of £8 million was up from a statutory
operating loss of £26 million in the prior period and included exceptional
charges of £9 million (2022: £24 million) as part of our cost efficiency
programme and commodity derivative remeasurement gains of £47 million (2022:
£16 million gains). Adjusted operating loss of £30 million in the first six
months was £12 million adverse to the prior period. This included a
favourable £71 million timing swing primarily from higher wholesale
transmission auction sales, partly offset by collection of downstate New York
surcharges. In-year timing under-recoveries were £149 million (2022:
£220 million under-recoveries, or £212 million under-recoveries at
constant currency). Underlying operating profit was £119 million,
£83 million lower than the prior period (£76 million lower at constant
currency). Underlying net revenues were £46 million higher principally from
increases in rates and an increase in energy efficiency programme funding
partly offset by exchange rate movements. Controllable costs were lower with
inflationary impacts more than offset by efficiency savings. Pension expense
was higher as a result of a £40 million gain from a Niagara Mohawk pension
buy-out in the prior period. Bad debts increased by £17 million, with a
benefit in the prior period related to the Bill Relief Program. Other costs
were higher related to property taxes, environmental reserves and also energy
efficiency programme costs (funded in revenue).
National Grid Ventures' statutory operating profit of £310 million was up
from £308 million in the prior period and included exceptional IFA1 fire
property damage net insurance proceeds of £92 million (2022: £50 million)
and exceptional charges of £1 million (2022: £1 million) as part of our
cost efficiency programme. Adjusted operating profit of £219 million was
£40 million lower than the prior period, driven by IFA1 interconnector
profits which were lower (principally related to insurance recoveries in the
prior period) and fewer projects completed in NG Renewables this year, partly
offset by higher North Sea Link interconnector revenues and a gain on disposal
of a smart metering business.
'Other' activities' statutory operating loss of £39 million was down from a
statutory operating profit of £76 million in the prior period and included
exceptional charges of £23 million (2022: £4 million credit) as part of our
cost efficiency programme, exceptional charges of £3 million (2022: £56
million) related to transaction and separation costs for disposal of a 60%
share of our UK Gas Transmission and Metering business in 2022/23 and an
exceptional charge of £17 million in our captive insurance business in the
prior period. The adjusted operating loss of £13 million (2022:
£145 million profit) was substantially lower than the prior period, which
was the result of the non-repeat of the higher level of profits in the prior
year in our Commercial Property business (£201 million related to site sales
in the prior year, following our exit from the St William joint venture in
2021/22), partly offset by higher captive insurance profits and favourable
fair value movements in NG Partners.
Financing costs and tax
Net finance costs
Statutory net finance costs of £685 million were up from £624 million in
the prior period and included derivative remeasurement gains of £26 million
(2022: £108 million). Adjusted net finance costs for continuing operations
of £711 million (2022: £732 million) were £21 million, or 3% lower than
the prior period (£10 million, or 1% lower at constant currency). This was
driven by lower inflation on RPI/CPI-linked debt, lower bridge financing costs
(in relation to the acquisition of National Grid Electricity Distribution)
and higher capitalised interest, partly offset by new financing requirements
to fund our ongoing capital investment programme and the impact of higher
interest rates.
Joint ventures and associates
The Group's share of net profits from joint ventures and associates on a
statutory basis was £71 million (2022: £51 million) and included
derivative fair value remeasurement gains of £12 million (2022:
£19 million losses). On an adjusted basis, share of net profits from joint
ventures and associates was £59 million (2022: £70 million) with the
decrease mainly driven by the sale of our interest in the Millennium gas
pipeline during 2022/23.
Tax
The statutory tax charge for continuing operations was £307 million (2022:
£447 million) including the impact of tax on exceptional items and
remeasurements of £20 million charge (2022: £270 million charge). The
adjusted tax charge for continuing operations was £287 million (2022:
£177 million), resulting in an effective tax rate for continuing operations
(excluding profits from joint ventures and associates) of 24.1% (2022: 17.3%)
and an underlying effective tax rate for continuing operations (excluding
profits from joint ventures and associates) of 24.7% (2022: 19.7%). The
underlying effective tax rate is higher than in the prior period primarily due
to the increase in UK corporation tax rate to 25% from 1 April 2023 and the
profit mix including the higher level of Property disposals incurring a lower
tax charge in the prior period.
Net debt
Net debt is a measure derived from IFRS (comprising cash and cash equivalents,
current financial investments, borrowings and bank overdrafts and financing
derivatives) and is defined and reconciled to these balances in note 11 to the
financial statements.
During the first six months of the year, net debt increased to £43.9 billion,
£2.9 billion higher than at 31 March 2023. This was driven by cash generated
from operations (continuing operations) of £3.1 billion and dividends
received on financial investments of £0.1 billion, offset by £3.6 billion of
cash outflows for capital investment (net of disposals) and movements in
financial investment outside net debt, £0.2 billion of tax paid, £0.7
billion of interest outflows, £1.3 billion paid in dividends, £0.1 billion
accretions on index-linked debt and exchange movements on opening net debt
of £0.2 billion.
During the period we raised around £3.0 billion of new long-term senior debt
to refinance maturing debt and to fund a portion of our significant capital
programme. As at 30 September 2023, we have £8.0 billion of committed
facilities available for general corporate purposes.
There are no significant updates relating to credit agency actions. National
Grid's balance sheet remains robust, and we remain committed to a strong,
overall investment grade credit rating.
Interim dividend
The Board has approved an interim dividend of 19.40p per ordinary share
($1.1899 per American Depositary Share). This represents 35% of the total
dividend per share of 55.44p in respect of the last financial year
to 31 March 2023 and is in line with the Group's dividend policy. The
interim dividend is expected to be paid on 11 January 2024 to shareholders on
the register as at 24 November 2023.
Since 2021/22, the Board's aim has been to grow the annual dividend per share
in line with UK CPIH, thus maintaining the dividend per share in real terms.
The Board will review this policy regularly, taking into account a range of
factors including expected business performance and regulatory developments.
The scrip dividend alternative will again be offered in respect of the 2023/24
interim dividend. As previously announced, we do not expect to buy back the
scrip shares issued during 2023/24.
GROWTH
A balanced portfolio to deliver asset and dividend growth
National Grid seeks to create value for shareholders through developing a
balanced portfolio of businesses that offer an attractive combination of asset
growth and cash returns.
£3.9 billion of capital investment for continuing operations across the Group
We continued to make significant investment in energy infrastructure in the
first six months of the year. Capital investment across the Group was £3,868
million, a decrease of £15 million or 0.4% at actual exchange rates (an
increase of 2% at constant currency) compared to the first half of 2022/23. Of
this total, investment in our regulated businesses reached a record £3,529
million, up 10% on the prior period at constant currency (7% at actual
exchange rates).
Group capital investment (continuing operations)
Six months ended 30 September At actual exchange rates At constant currency
(£ million)
2023 2022(1) % change 2022(1) % change
UK Electricity Transmission 800 629 27% 629 27%
UK Electricity Distribution 608 584 4% 584 4%
UK Electricity System Operator (ESO) 75 42 79% 42 79%
New England 789 801 (1%) 771 2%
New York 1,257 1,242 1% 1,195 5%
National Grid Ventures 326 539 (40%) 531 (39%)
Other 13 46 (72%) 46 (72%)
Total Group capital investment (continuing operations) 3,868 3,883 0% 3,798 2%
1. Comparative amounts have been re-presented to reflect NGV as a separate
operating segment and the reclassification of our US LNG operations from
New England to NGV following an internal reorganisation in the period.
UK Electricity Transmission invested £800 million for the first six months
of the year, an increase of £171 million on the prior period, primarily
driven by the progression of Strategic Infrastructure (SI) projects, as well
as higher spend on refurbishment projects and customer connections (for
further information on SI projects, please refer to page 23 of the Business
Review). UK Electricity Distribution invested £608 million, an increase of
£24 million on the prior period, principally driven by higher spend in
connections, asset replacement and non-operational capex (including IT and
vehicles).
Investment in New York was £1,257 million, an increase of £15 million over
the period at actual exchange rates (an increase of £62 million at constant
currency). This was primarily driven by higher spend on our new transmission
projects to assist large scale renewable connections, such as our Smart Path
Connect project; higher electric network control system spend; and higher
mandated work on our gas distribution networks. For New England, investment
reached £789 million, a decrease of £12 million at actual exchange rates
(an increase of £18 million at constant currency). This was principally
driven by capital expenditure which occurred in NECO last year, more than
offset by increased electric distribution expenditure through higher customer
connection requests and Grid Modernization. In addition, electric transmission
spend was higher compared to the prior period driven by asset condition work
across our New England Power (NEP) assets.
Investment in NGV during the period was £326 million, a decrease of £213
million at actual exchange rates (£205 million at constant currency) on the
prior period. The decrease was primarily through lower spend on the Sellindge
(IFA1) converter station rebuild, Grain LNG expansion work, and Viking Link as
these projects near completion.
BUSINESS REVIEW
UK ELECTRICITY TRANSMISSION
Operations and capital expenditure
UK Electricity Transmission has continued to deliver good levels of
performance and our capital investment programme has progressed as expected.
Capital expenditure reached £800 million, up £171 million on the prior
period. This increase was primarily driven by the progression of Strategic
Infrastructure (SI) projects (see below for further information), and an
increase in spend versus the prior period on asset health work and customer
connections.
Progress continues on our London Power Tunnels 2 (LPT2) project where we
reached the completion of tunnelling in October in line with our timetable.
The £1 billion project is for the construction of 32.5 kilometres of
underground cable tunnels connecting Wimbledon to New Cross, New Cross to
Hurst, and Hurst to Crayford by 2027. In August, we reached 1,000,000 hours
worked without a Lost Time Injury (LTI) on the project.
We continue to make good progress on our £1 billion Hinkley-Seabank project
where we are building a new high voltage electricity connection between
Bridgewater and Seabank. We have completed the installation of all 116
T-pylons as part of the project (the first new pylon design in nearly a
century), and the 57-kilometre connection is on track for completion by
December 2025.
We have also continued progress on our Visual Impact Provision (VIP) projects,
where we are removing overhead transmission lines in Areas of Outstanding
Natural Beauty (AONB) and replacing them with underground cables to reduce our
visual impact on the natural environment. During the half year, we energised
new lines in Dorset and the Peak District, with our Dorset project being
shortlisted as one of four final schemes in the upcoming National APM Awards
for the Engineering, Construction and Infrastructure Project of the Year
award.
Strategic Infrastructure (SI) projects
Strategic Infrastructure is a part of National Grid Electricity Transmission
(NGET) and is responsible for delivering the 17 ASTI projects to connect more
clean, low-carbon power to the transmission network in England and Wales. SI
ensures the efficient and effective delivery of ASTI projects, which are
transferred to UK Electricity Transmission once they are complete and ready to
be accepted onto the wider network. UK Electricity Transmission will then be
responsible for the ongoing operation and maintenance of the infrastructure
when in service 9 (#_ftn9) .
We have made good progress on our ASTI projects, including: signing JVs with
Scottish Power for Eastern Green Link 1 in August, and with SSE for Eastern
Green Link 2 in June; selecting the preferred suppliers for converter stations
and cables at Eastern Green Links 1 and 2; completing the 'examination' stage
of our Development Consent Order (DCO) application for the Yorkshire Green
project; and launching the procurement process for the 'Great Grid Upgrade
Partnership', the contractual model that will be used to deliver the majority
of our onshore projects.
The Great Grid Upgrade Partnership is the opportunity for supply chain
partners to help deliver the 'Great Grid Upgrade', the largest overhaul of the
grid in generations. SI is seeking supply chain partners to deliver £4.5
billion of onshore network construction under an 'enterprise' partnership
approach. This approach aims to deliver integrated planning and working
between projects, enabling the supply chain to combine capacity, capability,
knowledge and experience to accelerate delivery and generate cost
efficiencies. This, in turn, will deliver value for money for consumers whilst
working with local communities to leave a positive legacy. The model has been
designed on industry best practice, with contracts expected to be awarded
early in the new year.
Customer Connections
Over the last five years, UK Electricity Transmission has connected 10 GW of
new clean energy and interconnectors to the electricity transmission network.
In the first half of 2023/24 the business connected 2,970 MW of generation
and 314 MVA of demand capacity, including the world's largest offshore wind
farm Dogger Bank and first Transmission connected solar farm. Of the 2,970 MW
of generation, 1,400 MW is the connection of the Viking Link interconnector;
1,200 MW the first part of the Dogger Bank connection; 70 MW for solar; and
the remaining 300 MW a mix of technologies including battery storage.
Regulatory progress
In our third year of RIIO-T2, we continue to make good progress in delivering
the agreed regulatory outputs despite challenging global supply chain
conditions. During the half year, we continued to outperform on network
reliability targets, achieving 99.9999% during the period.
We have seen good regulatory progress in the UK across a number of areas this
year, including: Royal Assent for the Energy Act 2023; Ofgem's publication of
the FSNR decision document; publication of the ENC's report and
recommendations on reducing timelines for delivering onshore and offshore
transmission network infrastructure; publication of proposed arrangements for
the CSNP and future transmission network planning. For further information and
background on each of these developments, please refer to pages 8 - 10 in the
Strategic Overview section.
UK ELECTRICITY DISTRIBUTION
Operations and capital expenditure
UK Electricity Distribution continues to perform well in the first year of
RIIO-ED2. During the period, capital expenditure reached £608 million, £24
million higher than the prior period principally driven by higher spend in
connections, asset replacement and non-operational capex (including IT and
vehicles).
Our larger capital investment projects remain on track, including the £65
million Hinkley Point connection to link the new nuclear power station and UK
Electricity Transmission's 400 kV circuit between Bridgwater and Seabank (UK
Electricity Distribution is providing 'safe space' around these assets). The
vast majority of works are now complete, and UK Electricity Transmission has
taken on the responsibility for works at Seabank. The project is expected to
complete in 2024.
Over the last three years, we have been targeting specific 'green' investment
at parts of our network where we anticipate there will be a high density of
Low Carbon Technologies to support the country's path to net zero. Investment
in 17 projects will directly benefit Motorway Service Areas (MSA) and
equivalent trunk roads in England and Wales by delivering over 100 MW of
capacity, enough to support around 700 150 kW Rapid EV Chargers. The seven
projects still to complete in this portfolio include a £7 million investment
at Tibshelf Services in Derbyshire to allow for network reinforcement and
expansion of EV chargers expected to complete before the end of calendar year
2023.
Customer connections
During the period we connected 51 renewable customers to the network, reaching
a total of 323 MW. At domestic level, we also connected 750 energy storage
technologies; 7,700 EV chargers; 3,500 heat pumps; and 15,400 solar PV
installations across the period.
UK Electricity Distribution has taken further action on connections reform. In
September, we announced plans to release 10 GW of grid capacity for the
connection of renewable generation assets to our network. For further
background on the work we have been involved in to reform the connections
process, please refer to pages 9 - 10 of the Strategic Overview section.
Regulatory Progress
On 1 April, UK Electricity Distribution began the first year of new price
controls under RIIO-ED2, running for five years until 31 March 2028. As we
announced at our UK Electricity Distribution Investor Event in July, we are
targeting outperformance of 100 to 125 bps across the price control period.
This will largely be achieved through incentives delivery and totex
efficiency, underpinned by synergies from the acquisition. To date, we have
delivered £18 million of our £100 million synergy target that we announced
in July 2023.
In August, the ENA named UK Electricity Distribution as the largest
flexibility provider of all UK DNOs, having procured 846 MW of flexibility
volume. This capacity mainly relates to Demand, EV and solar contracts across
a range of flexibility products, including managing peak load demand on the
network and pre-emptively reducing network load when necessary, and supporting
the network in the event of specific faults such as during maintenance work.
UK ELECTRICITY SYSTEM OPERATOR (ESO)
The ESO has performed well during the first half of the year. Capital
expenditure reached £75 million in the first half, £33 million higher than
prior period, driven primarily by higher IT spend.
Progress on network connection reform
During the half year, we have continued to work with stakeholders to improve
and reform the connections process to the transmission network. We have been
working on two major aspects, the shorter term Five Point Plan, and a longer
full connection reform process. The transmission connection queue now stands
at over 400 GW for Great Britain, which represents a significant over
subscription of what is required to connect to meet the scenarios in the ESO
Future Energy Scenario publication. For further background on the work we
have been involved in to reform the connections process, please refer to pages
9 - 10 of the Strategic Overview section.
Winter outlook
In September, the ESO published the electricity Winter Outlook for the
upcoming winter in Great Britain. Despite the ongoing conflicts in Ukraine and
the Middle East, the broad European energy market has improved since last
year. The market has bolstered European gas storage and supplies, and the
French nuclear fleet capacity is back to pre-pandemic levels. The ESO has
built on the experience of the 2022/23 winter and continued to build
resilience and minimise the potential impact of risks and uncertainties in the
energy markets. As such, the System Operator's Base Case scenario is that
there will be adequate margins (4.4 GW/7.4%) through the forthcoming winter to
ensure Great Britain remains within the reliability standard.
For more information on the Winter Outlook, please refer to page 10 of the
Strategic Overview section.
Progress on ESO separation
The Energy Act 2023, which received Royal Assent in October, includes
legislation to enable the separation of the ESO from National Grid and the
formation of an ISOP. The ISOP will have a critical role in delivering
strategic, whole system energy planning and oversight as we continue to invest
in and transform the UK's energy infrastructure, and we expect the ISOP to be
established as a Public Corporation in 2024 with responsibilities across both
the electricity and gas systems.
NEW ENGLAND
Operations and capital expenditure
We achieved good operational performance across New England during the half
year.
Capital expenditure remains on track with £789 million deployed during the
half year, (1%) lower at actual exchange rates (2% higher at constant
currency) than the prior period. This was principally driven by capital
expenditure which occurred in NECO last year, more than offset by increased
electric distribution expenditure through higher customer connection requests
and Grid Modernization. In addition, electric transmission spend was higher
compared to the prior period driven by asset condition work across our New
England Power (NEP) assets.
Our LPP replacement programme also continues on track with 61 miles of gas
pipeline replaced between April 2023 and September 2023.
Storm activity
National Grid was pleased to receive two Edison Electric Institute Awards in
June for outstanding storm response for the two most severe winter storms in
New England last year (on 23 December 2022, and 13 March 2023).
During the first half of this year, our Emergency Response Organization was
activated on six occasions in response to storms, including Hurricane Lee, a
large system that impacted parts of New England and Canada. As a comparison,
during the same period in 2022/23 the Emergency Response Organization was
activated on four occasions. Emergency Response performance was strong with
outages restored for five events in less than 24 hours, and reconnections
following the 8 September storm (which affected over 125,000 customers) were
completed in less than 72 hours.
Regulatory progress
On 1 September, we filed our Electric Sector Modernization Plan (ESMP) in
Massachusetts. The plan outlines the investment required in our electric
distribution network over the next five years and beyond to help the state
meet its clean energy goals under the 2050 Clean Energy and Climate Plan
(CECP). Under the plan, we have proposed to invest up to $2 billion over the
next five years. For further background on the ESMP filing, please refer to
page 11 of the Strategic Overview section.
The proposed investment under the ESMP is not currently part of any rate order
for our service territory. We remain on track to file for new rates for our
Massachusetts Electric business in mid-November 2023, and we will propose a
mechanism for recovery of the ESMP investment as part of that filing.
In October, the Twin States Clean Energy Link was selected by the US
Department of Energy (DOE) as one of three projects in the US to enter
capacity contract negotiations through the DOE's Transmission Facilitation
Program. Twin States is a bidirectional transmission project being proposed by
National Grid and Citizens Energy Corporation. If built, the line will
deliver 1,200 MW of hydro-sourced generation from Canada to New England when
it is needed. For further background on the project, please refer to page 11
of the Strategic Overview section.
Finally, in October, we were awarded $50 million through the Federal
Infrastructure Investment and Jobs Act for our 'Future Grid' proposal which
will deploy digital technologies in our New York and Massachusetts electric
distribution networks to improve system reliability and resilience.
Customers and communities
During the half year we have continued to build upon our customer and
community outreach programme across our Massachusetts service territory. In
June, we launched our four Clean Energy Academy summer pilots, building on the
successful launch of our spring pilots in March 2023. This Strategic Workforce
Development Initiative is designed to educate and inspire interest in STEM,
energy and utility industries. The academies have provided participants from
historically marginalised and underrepresented groups with career experience,
development and employment opportunities. Our Clean Energy Career Academy
offered over 70 college engineering students the opportunity to learn more
about clean energy, be mentored, visit our facilities and network with
National Grid engineers and executives. In addition, our Clean Energy STEM and
Tech Academies offered 270 middle and high school students aged 14 to 18
career exploration pathways in the energy industry. Our Energy Infrastructure
Academy, for work-ready-adults, has already resulted in 22 individuals
securing a job with National Grid and its vendor partners.
In September we held our 'Week of Service' across Massachusetts, which
involved 250 National Grid employees volunteering in support of community
organisations across the state. Events included promoting environmental
protection through beach clean-ups in Dorchester; supporting veterans and
their families in Worcester; preparing meals for home-bound people in Jamaica
Plain; and packing critical winter clothing items for children throughout
Massachusetts who need them most in wintertime. The Week of Service was part
of National Grid's 'Grid for Good' programme, a company-wide initiative that
supports communities we serve through volunteering, charitable contributions
to organisations focused on workforce development and STEM education, and
environmental sustainability. This year, the Company has a goal to engage
colleagues in more than 14,500 hours of service across Massachusetts.
The Massachusetts Advanced Meter Infrastructure (AMI) programme successfully
kicked off in September 2023 with stakeholder engagement across business
teams. Our improved self-service and digital channels continue to improve
customer experience and have reduced the number of calls by over 2 million.
Customers using digital channels to report and monitor electric outage
communications reached a new storm high of 97%.
NEW YORK
Operations and capital expenditure
Our New York business delivered good operational performance during the half
year.
Capital expenditure reached £1,257 million during the half year, an increase
of £15 million at actual exchange rates (£62 million at constant currency)
compared to the prior period. This was primarily driven by higher spend on our
new transmission projects to assist large scale renewable connections, such as
our Smart Path Connect project; higher electric network control system spend;
higher mandated work on our gas distribution networks; partly offset by
higher 'right of use' lease additions in the prior period. Excluding these
lease additions in the prior year, capital expenditure increased by £153
million at actual exchange rates (£193 million at constant currency).
Of our large-scale electric transmission projects:
■ Smart Path Connect remains on track for energisation in December 2025.
The $550 million project includes the rebuild and upgrade of approximately 55
miles of our Adirondack-Porter 230 kV transmission circuits to 345 kV in
Northern New York.
■ Construction has begun on the first stage of our substation upgrade as
part of the $800 million CLCPA Phase 1 funding for transmission upgrades. This
also includes projects such as Inghams-Rotterdam and Churchtown-Pleasant
Valley circuit rebuilds (129 miles) to support 330 MW of incremental headroom
capacity for renewable generation.
■ Engineering contracts were awarded in October for transmission projects
as part of the $2.1 billion CLCPA Phase 2 funding for transmission networks
and modernising the electric network.
Our LPP replacement programme continued on track with 148 miles of pipeline
replaced between the start of April and the end of September. During the half
year, we also officially began operations at our Newtown Creek renewable gas
recovery system that recovers biogas from the Newtown Creek Wastewater
Treatment Plant in Brooklyn.
Storm activity
During the half year, New York State has prepared 32 times for storms and
severe weather, including five major storm events. To date, the storm season
has delivered an equal to slightly increased amount of activity compared to
previous years. However, New York has not seen a storm with significant
intensity in the current financial year. Where our service territories have
been affected by storm activity, we have restored electricity to 95% of
disconnected customers within 9 to 12 hours.
Regulatory progress
On 1 September, PSC Staff responded to our rate filing that we made for our
downstate gas business, KEDNY-KEDLI, in April. National Grid responded to the
PSC Staff position on 22 September, and we plan to move forward in settlement
negotiations, aiming to reach a Joint Proposal with stakeholders in the first
quarter of calendar year 2024. For further information on our KEDNY-KEDLI
filing, and the PSC Staff response, please refer to page 11 of the Strategic
Overview section.
We remain on track to file for new rates at our Niagara Mohawk (NIMO) electric
and gas business (upstate New York) in summer 2024.
Finally, in October 2023 we were awarded $50 million through the Federal
Infrastructure Investment and Jobs Act for our 'Future Grid' proposal which
will deploy digital technologies in our New York and Massachusetts electric
distribution networks to improve system reliability and resilience.
Customers and communities
Our ongoing commitment to customers and communities has continued during the
half year. To celebrate the third year of our Project C initiative, we
expanded the Company's annual day of service to a week of service. This
included more than 2,000 company employee volunteers engaging in 200 events
taking place in communities across New York. This year's theme, 'Live
together. Grow together.', highlights the importance of creating meaningful
change in the communities we serve. As part of the week of service our
employees also pledged to complete Acts of Kindness, including collecting and
donating books, food and clothing to a local charity, and donating blood to a
blood bank. Across the whole Project C initiative, New York employees also
contributed over 15,000 hours of volunteering in local communities during the
half year.
NATIONAL GRID VENTURES (NGV)
Capital investment, including joint ventures, reached £326 million in the
half year, a decrease of £213 million at actual exchange rates
(£205 million at constant currency) on the prior period. The decrease was
primarily through lower spend on the Sellindge (IFA1) converter station
rebuild, Grain LNG expansion work and Viking Link as these projects near
completion.
Interconnectors
North Sea Link (NSL) delivered strong reliability and operated at over 99%
availability during the first half of the year. IFA1 operated at 80%
availability during the half year following outages relating to the newly
commissioned bipole which was reinstated following the Sellindge converter
station rebuild.
In July, the final length of cable was laid on the Viking Link and was
successfully tested in August, marking the end of the cable installation
process. We remain on track to commission the world's longest interconnector,
stretching 760 kilometres, by the end of calendar year 2023.
On our other interconnectors, IFA2 (France) operated at 97% availability
during the half year; Nemo Link (Belgium) at 97% availability; and BritNed
(Netherlands) at 96%. BritNed has historically been one of the best performing
interconnectors in the world in terms of safety with over 4,500 days without a
Lost Time Injury (LTI).
Offshore Hybrid Asset (OHA) projects
In 2022, Ofgem opened an OHA pilot seeking to work with selected developer(s)
on establishing an investible OHA regime. OHAs are the next phase of
interconnection, not only linking two countries but also connecting with
offshore wind generation. The two projects in the Ofgem OHA pilot are Lion
Link and Nautilus, both NGV projects, which provides us an opportunity to
shape the OHA regime and prepare it for further investment.
Ofgem further consulted on the regulatory regime for OHAs in June and NGV
responded to the consultation. Ofgem has also been assessing Lion Link and
Nautilus, and the regulator also expects to consult in December 2023 on their
Initial Project Assessment (IPA). A final decision on regulatory parameters
and IPA is expected in March 2024.
Grain LNG
Grain LNG continues to perform well and in line with expectations. This half
year we launched the 'Cap29' auction process for expiring capacity at Grain
from 2029. The auction is expected to complete in December.
The expansion programme to deliver additional LNG storage on site (Capacity
25) continues, with the delivery of major structural elements of the project
expected by the end of calendar year 2023. When complete, the expansion will
increase total site storage to 1,200,000 cubic metres and total regasification
capacity to 800 GWh/day, equivalent to one-third of UK gas demand. The
project remains on track to be ready for commercial operations in summer 2025.
Providence LNG
In May, we commissioned an LNG facility at Fields Point (Providence), Rhode
Island, at a previously existing LNG storage site. The facility has existing
natural gas supply infrastructure that can be used for liquefaction, requiring
no new gas pipelines. It serves three commercial customers for storage and
vaporisation services: Boston Gas and Rhode Island Energy on long-term
contracts, and Con Edison on a rolling short-term contract. For liquefaction
services, the asset has two customers: Boston Gas and Rhode Island Energy.
Long Island (LI) Generation
In the half year, Long Island Generation produced 2,694 GWh of energy and
remains above target in terms of its availability. Emissions for the first
half of 2023/24 are 8% lower than the first half of 2022/23 and remain on
track to deliver the 2023/24 target.
US Renewables
On 24 October, the New York State Energy Research and Development Authority
(NYSERDA) announced three successful projects that will receive Offshore
Renewable Energy Certificates (ORECs) as part of New York's third large-scale
offshore wind solicitation. COSW, our JV with RWE, was selected as one of the
successful projects with a provisional offtake award of 1.3 GW. For further
background on the NYSERDA announcement, please refer to page 12 in the
Strategic Overview section.
In August 2023, COSW also submitted an offtake bid for up to 1.3 GW in
response to the New Jersey Board of Public Utilities (BPU) solicitation and
we await selection decisions in the first or second quarter of calendar
year 2024.
In October, we announced the start of operations at our 274 MW Yellowbud solar
project in Ohio. The project, located in the Pennsylvania-Jersey-Maryland
(PJM) market, has a Power Purchase Agreement (PPA) for its offtake with
Amazon. This takes the total operating capacity of National Grid Renewables to
1,308 MW with a further 801 MW currently under construction.
NGV Transmission Projects
National Grid Ventures has had a successful first half of the year through New
York Transco, a partnership of New York's major utilities, including NGV.
In June 2023, New York Transco's Propel NY Energy transmission project was
selected by the New York Independent System Operator (NYISO) to deliver
increased transmission capacity between the mainland and Long Island. The
project is in partnership with the New York Power Authority. This follows the
bid New York Transco submitted in October 2021 as part of the NYISO's Long
Island Offshore Wind Export Public Policy Transmission Need solicitation.
Total investment for the project is $2.8 billion, of which NGV's share is
around $340 million.
Also in June 2023, our New York Energy Solution transmission line upgrade
project was fully energised. This project was selected by the NYISO to provide
transmission upgrades to New York's power system, while enhancing reliability
and facilitating upstate clean energy resources to downstate demand centres.
Total investment for the project is $670 million, of which NGV's share is
around $100 million.
OTHER ACTIVITIES
Capital investment in Other activities was £13 million during the half year,
£33 million lower than the prior period, principally driven by fewer
National Grid Partners (NGP) investments in the first half.
APPENDIX
Unless otherwise stated, all financial commentaries in this results statement
are given on an underlying basis at actual exchange rates for continuing
operations. Underlying represents statutory results excluding exceptional
items, remeasurements, timing and major storm costs. The underlying basis is
further defined on page 63.
Alternative Performance Measures derived from IFRS
The following are terms or metrics that are reconciled to IFRS measures and
are defined on pages 63 to 67:
Net revenue
Adjusted profit measures
Underlying results
Constant currency
Timing impacts
Capital investment; including Capital investment (regulated networks)
Net debt - defined in note 11 on page 55.
PROVISIONAL 2023/24 FINANCIAL TIMETABLE
Date Event
9 November 2023 2023/24 half-year results
22 November 2023 ADRs go ex-dividend for 2023/24 interim dividend
23 November 2023 Ordinary shares go ex-dividend for 2023/24 interim dividend
24 November 2023 Record date for 2023/24 interim dividend
30 November 2023 Scrip reference price announced for 2023/24 interim dividend
11 December 2023 (5pm London time) Scrip election date for 2023/24 interim dividend
11 January 2024 2023/24 interim dividend paid to qualifying shareholders
23 May 2024 2023/24 Preliminary Results
6 June 2024 Ordinary shares and ADRs go ex-dividend for 2023/24 final dividend
7 June 2024 Record date for 2023/24 final dividend
13 June 2024 Scrip reference price announced for 2023/24 final dividend
24 June 2024 (5pm London time) Scrip election date for 2023/24 final dividend
10 July 2024 2024 AGM
19 July 2024 2023/24 final dividend paid to qualifying shareholders
7 November 2024 2024/25 half-year results
CAUTIONARY STATEMENT
This announcement 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 (the Company) 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. This document also references climate-related
targets and climate-related risks which differ from conventional financial
risks in that they are complex, novel and tend to involve projection over
long-term scenarios which are subject to significant uncertainty and change.
These forward-looking statements are not guarantees of National Grid's future
performance and are subject to assumptions, risks and uncertainties that could
cause actual future results to differ materially from those expressed in or
implied by such forward-looking statements or targets. Many of these
assumptions, risks and uncertainties relate to factors that are beyond
National Grid's ability to control, predict or estimate precisely, such as
changes in laws or regulations, including announcements from and decisions by
governmental bodies or regulators, including those relating to the RIIO-T2 and
RIIO-ED2 price controls and proposals for the future of the electricity system
operator in the United Kingdom; the timing of construction and delivery by
third parties of new generation projects requiring connection; breaches of, or
changes in, environmental, climate change and health and safety laws or
regulations, including breaches or other incidents arising from the
potentially harmful nature of its activities; network failure or interruption
(including any that result in safety and/or environmental events), the
inability to carry out critical non network operations and damage to
infrastructure, due to adverse weather conditions including the impact of
major storms as well as the results of climate change, due to counterparties
being unable to deliver physical commodities, or due to the failure of or
unauthorised access to or deliberate breaches of National Grid's IT systems
and supporting technology; failure to adequately forecast and respond to
disruptions in energy supply; performance against regulatory targets and
standards and against National Grid's peers with the aim of delivering
stakeholder expectations regarding costs and efficiency savings, as well as
against targets and standards designed to deliver net zero; and customers and
counterparties (including financial institutions) failing to perform their
obligations to the Company. Other factors that could cause actual results to
differ materially from those described in this announcement include
fluctuations in exchange rates, interest rates and commodity price indices;
restrictions and conditions (including filing requirements) in National Grid's
borrowing and debt arrangements, funding costs and access to financing;
regulatory requirements for the Company to maintain financial resources in
certain parts of its business and restrictions on some subsidiaries'
transactions such as paying dividends, lending or levying charges; the delayed
timing of recoveries and payments in National Grid's regulated businesses, and
whether aspects of its activities are contestable; the funding requirements
and performance of National Grid's pension schemes and other post-retirement
benefit schemes; the failure to attract, develop and retain employees with the
necessary competencies, including leadership and business capabilities, and
any significant disputes arising with National Grid's employees or the breach
of laws or regulations by its employees; the failure to respond to market
developments, including competition for onshore transmission; the threats and
opportunities presented by emerging technology; the failure by the Company to
respond to, or meet its own commitments as a leader in relation to, climate
change development activities relating to energy transition, including the
integration of distributed energy resources; and the need to grow the
Company's business to deliver its strategy, as well as incorrect or unforeseen
assumptions or conclusions (including unanticipated costs and liabilities)
relating to business development activity, including the integration of its UK
Electricity Distribution business, the sale of its UK Gas Transmission
business, and the separation and transfer of the ESO to the public sector. For
further details regarding these and other assumptions, risks and uncertainties
that may impact National Grid, please read the Strategic Report section and
the 'Risk factors' on pages 225 to 228 of National Grid's most recent Annual
Report and Accounts, as updated by the principal risks and uncertainties
statement on page 60 of this announcement. In addition, new factors emerge
from time to time and National Grid cannot assess the potential impact of any
such factor on its activities or the extent to which any factor, or
combination of factors, may cause actual future results to differ materially
from those contained in any forward-looking statement. Except as may be
required by law or regulation, the Company undertakes no obligation to update
any of its forward-looking statements, which speak only as of the date of this
announcement.
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Consolidated income statement
for the six months ended 30 September
2023 Notes Before Exceptional Total
exceptional items and remeasurements £m
items and remeasurements £m
£m
Continuing operations
Revenue 2(a),3 8,489 - 8,489
Provision for bad and doubtful debts (91) - (91)
Other operating costs 4 (6,508) 83 (6,425)
Other operating income 12 - 12
Operating profit 2(b),4 1,902 83 1,985
Finance income 4,5 123 (8) 115
Finance costs 4,5 (834) 34 (800)
Share of post-tax results of joint ventures and associates 2(b),4 59 12 71
Profit before tax 2(b),4 1,250 121 1,371
Tax 4,7 (287) (20) (307)
Profit after tax from continuing operations 4 963 101 1,064
Profit after tax from discontinued operations 6 7 58 65
Total profit for the period (continuing and discontinued) 970 159 1,129
Attributable to:
Equity shareholders of the parent 969 159 1,128
Non-controlling interests 1 - 1
Earnings per share (pence)
Basic earnings per share (continuing) 8 28.8
Diluted earnings per share (continuing) 8 28.7
Basic earnings per share (continuing and discontinued) 8 30.6
Diluted earnings per share (continuing and discontinued) 8 30.5
2022(1) Notes Before Exceptional Total
exceptional items and remeasurements £m
items and remeasurements £m
£m
Continuing operations
Revenue 2(a),3 9,444 - 9,444
Provision for bad and doubtful debts (52) - (52)
Other operating costs 4 (7,636) (61) (7,697)
Other operating income 4 - 544 544
Operating profit 2(b),4 1,756 483 2,239
Finance income 4,5 69 (32) 37
Finance costs 4,5 (801) 140 (661)
Share of post-tax results of joint ventures and associates 2(b),4 70 (19) 51
Profit before tax 2(b),4 1,094 572 1,666
Tax 4,7 (177) (270) (447)
Profit after tax from continuing operations 4 917 302 1,219
Profit after tax from discontinued operations 6 121 (84) 37
Total profit for the period (continuing and discontinued) 1,038 218 1,256
Attributable to:
Equity shareholders of the parent 1,038 218 1,256
Non-controlling interests - - -
Earnings per share (pence)
Basic earnings per share (continuing) 8 33.4
Diluted earnings per share (continuing) 8 33.2
Basic earnings per share (continuing and discontinued) 8 34.4
Diluted earnings per share (continuing and discontinued) 8 34.2
1. Comparative amounts have been re-presented to reflect the classification
of the Further Acquisition Agreement (the FAA option) as held for sale and
within discontinued operations.
.
Consolidated statement of comprehensive income
for the six months ended 30 September
2023 2022¹
Notes £m £m
Profit after tax from continuing operations 1,064 1,219
Profit after tax from discontinued operations 65 37
Other comprehensive income from continuing operations
Items from continuing operations that will never be reclassified to profit or
loss:
Remeasurement losses on pension assets and post-retirement benefit obligations 12 (263) (631)
Net (losses)/gains in respect of cash flow hedging of capital expenditure (2) 14
Tax on items that will never be reclassified to profit or loss 64 159
Total items from continuing operations that will never be reclassified to (201) (458)
profit or loss
Items from continuing operations that may be reclassified subsequently to
profit or loss:
Retranslation of net assets offset by net investment hedge 118 2,360
Exchange differences reclassified to the consolidated income statement on - (145)
disposal
Net gains in respect of cash flow hedges 201 450
Net gains/(losses) in respect of cost of hedging 40 (64)
Net losses on investments in debt instruments measured at fair value through (16) (47)
other
comprehensive income
Share of other comprehensive income of associates, net of tax - 1
Tax on items that may be reclassified subsequently to profit or loss (59) (86)
Total items from continuing operations that may be reclassified subsequently 284 2,469
to profit or loss
Other comprehensive income for the period, net of tax, from continuing 83 2,011
operations
Other comprehensive loss for the period, net of tax, from discontinued 6 (9) (86)
operations
Other comprehensive income for the period, net of tax 74 1,925
Total comprehensive income for the period from continuing operations 1,147 3,230
Total comprehensive income/(loss) for the period from discontinued operations 6 56 (49)
Total comprehensive income for the period 1,203 3,181
Attributable to:
Equity shareholders of the parent
From continuing operations 1,146 3,227
From discontinued operations 56 (49)
1,202 3,178
Non-controlling interests 1 3
1. Comparative amounts have been re-presented to reflect the classification
of the FAA option within the UK Gas Transmission business disposal group.
Consolidated statement of changes in equity
for the six months ended 30 September
Share Share premium account Retained earnings Other equity reserves Total Non-controlling interests Total
capital share-holders' equity equity
Notes £m £m £m £m £m £m £m
At 1 April 2023 488 1,302 31,608 (3,860) 29,538 24 29,562
Profit for the period - - 1,128 - 1,128 1 1,129
Other comprehensive (loss)/income for the period - - (199) 273 74 - 74
Total comprehensive income for the period - - 929 273 1,202 1 1,203
Equity dividends 9 - - (1,325) - (1,325) - (1,325)
Scrip dividend-related share issue 1 (1) - - - - -
Issue of treasury shares - - 20 - 20 - 20
Transactions in own shares - - (1) - (1) - (1)
Share-based payments - - 19 - 19 - 19
Cash flow hedges transferred to the statement - - - 2 2 - 2
of financial position, net of tax
At 30 September 2023 489 1,301 31,250 (3,585) 29,455 25 29,480
At 1 April 2022 485 1,300 26,611 (4,563) 23,833 23 23,856
Profit for the period - - 1,256 - 1,256 - 1,256
Other comprehensive (loss)/income for the period - - (564) 2,486 1,922 3 1,925
Total comprehensive income for the period - - 692 2,486 3,178 3 3,181
Equity dividends 9 - - (1,119) - (1,119) - (1,119)
Scrip dividend-related share issue 1 (1) - - - - -
Issue of treasury shares - - 14 - 14 - 14
Transactions in own shares - 5 (3) - 2 - 2
Share-based payments - - 20 - 20 - 20
Cash flow hedges transferred to the statement - - - 3 3 - 3
of financial position, net of tax
At 30 September 2022 486 1,304 26,215 (2,074) 25,931 26 25,957
Consolidated statement of financial position
30 September 2023 31 March 2023
Notes £m £m
Non-current assets
Goodwill 9,905 9,847
Other intangible assets 2(c) 3,717 3,604
Property, plant and equipment 2(c) 67,396 64,433
Other non-current assets 570 567
Pension assets 12 2,352 2,645
Financial and other investments 871 859
Investments in joint ventures and associates 1,414 1,300
Derivative financial assets 10 325 276
Total non-current assets 86,550 83,531
Current assets
Inventories and current intangible assets 931 876
Trade and other receivables 3,340 3,883
Current tax assets 18 43
Financial and other investments 11 1,680 2,605
Derivative financial assets 10 60 153
Cash and cash equivalents 11 227 163
Assets held for sale 6 1,441 1,443
Total current assets 7,697 9,166
Total assets 94,247 92,697
Current liabilities
Borrowings 11 (2,691) (2,955)
Derivative financial liabilities 10 (321) (222)
Trade and other payables (4,465) (5,068)
Contract liabilities (159) (252)
Current tax liabilities (231) (236)
Provisions (361) (288)
Liabilities held for sale 6 (51) (109)
Total current liabilities (8,279) (9,130)
Non-current liabilities
Borrowings 11 (42,106) (40,030)
Derivative financial liabilities 10 (1,116) (1,071)
Other non-current liabilities (1,004) (921)
Contract liabilities (1,904) (1,754)
Deferred tax liabilities (7,318) (7,181)
Pensions and other post-retirement benefit obligations 12 (615) (694)
Provisions (2,425) (2,354)
Total non-current liabilities (56,488) (54,005)
Total liabilities (64,767) (63,135)
Net assets 29,480 29,562
Equity
Share capital 489 488
Share premium account 1,301 1,302
Retained earnings 31,250 31,608
Other equity reserves (3,585) (3,860)
Total shareholders' equity 29,455 29,538
Non-controlling interests 25 24
Total equity 29,480 29,562
Consolidated cash flow statement
for the six months ended 30 September
2023 2022
Notes £m £m
Cash flows from operating activities
Operating profit from continuing operations 2(b) 1,985 2,239
Adjustments for:
Exceptional items and remeasurements 4 (83) (483)
Other fair value movements (19) 31
Depreciation, amortisation and impairment 2(c) 1,021 932
Share-based payments 19 20
Changes in working capital 119 (306)
Changes in provisions 39 82
Changes in pensions and other post-retirement benefit obligations 27 (54)
Cash flows relating to exceptional items (46) (101)
Cash generated from operations - continuing operations 3,062 2,360
Tax paid (201) (88)
Net cash flow from operating activities - continuing operations 2,861 2,272
Net cash flow from operating activities - discontinued operations - 256
Cash flows from investing activities
Purchases of intangible assets (269) (224)
Purchases of property, plant and equipment (3,210) (3,258)
Disposals of property, plant and equipment 18 63
Investments in joint ventures and associates (151) (376)
Dividends received from joint ventures and associates 121 107
Disposal of interest in The Narragansett Electric Company¹ - 2,968
Disposal of financial and other investments 65 70
Acquisition of financial investments (32) (62)
Contributions to National Grid Renewables and Emerald Energy Venture LLC (5) (8)
Net movements in short-term financial investments 885 599
Interest received 69 20
Cash inflows on derivatives 103 -
Cash outflows on derivatives (4) (377)
Cash flows relating to exceptional items 4 - 33
Net cash flow used in investing activities - continuing operations (2,410) (445)
Net cash flow used in investing activities - discontinued operations - (181)
Cash flows from financing activities
Proceeds from issue of treasury shares 20 14
Transactions in own shares (1) 2
Proceeds received from loans 3,033 9,047
Repayments of loans (839) (9,049)
Payments of lease liabilities (61) (78)
Net movements in short-term borrowings (444) 380
Cash inflows on derivatives 68 201
Cash outflows on derivatives (60) (230)
Interest paid (779) (669)
Dividends paid to shareholders 9 (1,325) (1,119)
Net cash flow used in financing activities - continuing operations (388) (1,501)
Net cash flow used in financing activities - discontinued operations - (334)
Net increase in cash and cash equivalents 63 67
Reclassification to held for sale - (5)
Exchange movements 1 15
Net cash and cash equivalents at start of period 163 182
Net cash and cash equivalents at end of period 227 259
1. The balance for the period ended 30 September 2022 consists of cash
proceeds received, net of cash disposed.
Notes to the financial statements
1. Basis of preparation and new accounting standards, interpretations and
amendments
The half year financial information covers the six month period ended
30 September 2023 and has been prepared in accordance with IAS 34 'Interim
Financial Reporting' as issued by the International Accounting Standards Board
(IASB) and as adopted by the United Kingdom (UK); and the Disclosure and
Transparency Rules of the Financial Conduct Authority. This condensed set of
financial statements comprises the unaudited financial information for the
half years ended 30 September 2023 and 2022, together with the audited
consolidated statement of financial position as at 31 March 2023. The half
year financial information has been prepared applying consistent accounting
policies to those applied by the Group for the year ended 31 March 2023 and
are expected to be applicable for the year ending 31 March 2024. The notes to
the unaudited financial information are prepared on a continuing basis unless
otherwise stated.
The financial information for the six months ended 30 September 2023 does not
constitute statutory accounts as defined in Section 434 of the Companies Act
2006. It should be read in conjunction with the statutory accounts for the
year ended 31 March 2023, which were prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by the IASB and
as adopted by the UK, and have been filed with the Registrar of Companies. The
Deloitte LLP audit report on those statutory accounts was unqualified, did not
contain an emphasis of matter and did not contain a statement under Section
498 of the Companies Act 2006.
The key sources of estimation uncertainty and areas of judgement for the
period ended 30 September 2023 are aligned to those disclosed in the Annual
Report and Accounts for year ended 31 March 2023, with the following
amendments:
• whilst the entirety of the UK Electricity System Operator (ESO) is
expected to transfer out of the Group to become part of an independent system
operator public body, the Independent System Operator and Planner (ISOP), we
have concluded that the held for sale criteria were not met as at 30 September
2023 due to the ESO not being available for sale in its present condition
given the formation of the ISOP at the half year remained subject to
legislative approval. The Group has identified this as an additional area of
judgement in the period. The ESO was subsequently classified as held for sale
at the end of October 2023 (see note 17); and
• the value attributable to GasT TopCo Limited in determining the fair
value of the options over the Group's 40% interests (see note 6) is no longer
considered to represent a key source of estimation uncertainty.
Our consolidated income statement and segmental analysis (see note 2)
separately identify financial results before and after exceptional items and
remeasurements. The Directors believe that presentation of the results
in this way is relevant to an understanding of the Group's financial
performance. Presenting financial results before exceptional items and
remeasurements is consistent with the way that financial performance is
measured by management and reported to the Board and improves the
comparability of reported financial performance from year to year. Items which
are classified as exceptional items or remeasurements are defined in the
Annual Report and Accounts for the year ended 31 March 2023.
1. Basis of preparation and new accounting standards, interpretations and
amendments (continued)
Going concern
As part of the Directors' consideration of the appropriateness of adopting
the going concern basis of accounting in preparing the half year financial
information, the Directors have considered the Group's principal risks
(discussed on page 60) alongside potential downside business cash flow
scenarios impacting the Group's operations. The Directors specifically
considered both a base case and a reasonable worst-case scenario for business
cash flows. The assessment is prepared on the conservative assumption that the
Group has no access to the debt capital markets.
The main additional cash flow impacts identified in the reasonable worst-case
scenario are:
• the timing of the sale of assets classified as held for sale;
• adverse impacts of inflation and incremental spend on our capital
expenditure programme;
• adverse impact from timing across the Group (i.e. a net under-recovery
of allowed revenues or reductions in over-collections) and slower collections
of outstanding receivables;
• higher operating and financing costs than expected; including
non-delivery of planned efficiencies across the Group; and
• the potential impact of further significant storm costs in the US.
As part of their analysis, the Board also considered the following potential
levers at their discretion to improve the position identified by the analysis
if the debt capital markets are not accessible:
• the payment of dividends to shareholders;
• significant changes in the phasing of the Group's capital expenditure
programme, with elements of non-essential works and programmes delayed; and
• a number of further reductions in operating expenditure across the
Group.
As at 30 September 2023, the Group had undrawn committed facilities available
for general corporate purposes amounting to £8.0 billion. Based on these
available liquidity resources and having considered the reasonable worst-case
scenario, and the further levers at the Board's discretion, the Group has not
identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on its ability to
continue as a going concern for the foreseeable future, a period not less than
12 months from the date of this report.
In addition to the above, the ability to raise new and extend existing
financing was separately included in the analysis, and the Directors noted the
c.£3.0 billion of new long-term senior debt issued in the period from
1 April to 30 September 2023 as evidence of the Group's ability to continue
to have access to the debt capital markets if needed.
Based on the above, the Directors have concluded the Group is well placed to
manage its financing and other business risks satisfactorily, and have a
reasonable expectation that the Group will have adequate resources
to continue in operation for at least 12 months from the signing date of
these consolidated interim financial statements. They therefore consider it
appropriate to adopt the going concern basis of accounting in preparing
the half year financial information.
New IFRS accounting standards, interpretations and amendments adopted in the
period
There are no new standards, interpretations or amendments, issued by the IASB
or by the IFRS Interpretations Committee (IFRIC), that are applicable for the
period commencing on 1 April 2023 and have had a material impact on the
Group's results.
New IFRS accounting standards, interpretations and amendments not yet adopted
There are no new accounting standards and amendments to existing standards
that have been issued, but are not yet effective or have not yet been endorsed
by the UK that were not disclosed in our Annual Report and Accounts. The Group
has not early adopted any standard, amendment or interpretation that has been
issued but is not yet effective.
2. Segmental analysis
Revenue and the results of the business are analysed by operating segment,
based on the information the Board use internally for the purposes of
evaluating the performance of each operating segment and determining resource
allocation between them. The Board is National Grid's chief operating decision
maker (as defined by IFRS 8 'Operating Segments') and assesses the
profitability of a profit measure that excludes certain income and expenses.
We call that measure 'adjusted profit'. Adjusted profit excludes exceptional
items and remeasurements (as defined in note 4) and is used by management to
monitor financial performance as it is considered that it aids the
comparability of our reported financial performance from year to year. As a
matter of course, the Board also considers profitability by segment, excluding
the effect of major storms and timing adjustments relating to revenue and
certain pass-through costs. However, the measure of profit disclosed in this
note is operating profit before exceptional items and remeasurements, as this
is the measure that is most consistent with the IFRS results reported within
these financial statements.
In the year ended 31 March 2023, the National Grid Ventures (NGV) operating
segment met the quantitative thresholds set out in IFRS 8 to be identified as
the Group's sixth separate reportable segment. Accordingly, the Group's
operating segments were modified and the data relating to previous periods has
been restated to reflect this change. The results of our six principal
businesses are reported to the Board and are accordingly treated
as reportable operating segments. All other operating segments are either
reported to the Board on an aggregated basis or do not meet the quantitative
threshold in order to be considered a separate operating segment. The
following table describes the main activities for each reportable operating
segment:
UK Electricity Transmission The high-voltage electricity transmission networks in England and Wales. This
includes our Accelerated Strategic Transmission Investment projects to connect
more clean, low-carbon power to the transmission network in England and
Wales.
UK Electricity Distribution The electricity distribution networks of NGED in the East Midlands, West
Midlands and South West of England and South Wales.
UK Electricity System Operator The Great Britain system operator. The ESO has not met the criteria to be
classified as held for sale as at 30 September 2023.
New England Gas distribution networks, electricity distribution networks and high-voltage
electricity transmission networks in New England.
New York Gas distribution networks, electricity distribution networks and high-voltage
electricity transmission networks in New York.
National Grid Ventures Comprises all commercial operations in LNG at the Isle of Grain in the UK and
Providence, Rhode Island in the US, our electricity generation business in the
US, our electricity interconnectors in the UK and our investment in National
Grid Renewables Development LLC, our renewables business in the US. NGV
operates outside our regulated core business. Our US LNG operations were
reclassified from the New England segment following an internal reorganisation
in the period.
The New England and New York segments typically experience seasonal
fluctuations in revenue and operating profit due to higher delivery volumes
during the second half of the financial year, for example as a result of
colder weather over the winter months driving increased heating demand. These
seasonal fluctuations have a consequential impact on the working capital
balances (primarily trade debtors and accrued income) in the consolidated
statement of financial position at 30 September 2023 when compared to
31 March 2023. The majority of UK revenues are derived from the supply of
network capacity rather than the supply of commodities and therefore are not
subject to the same seasonal fluctuations as in New York and New England.
Other activities that do not form part of any of the segments in the above
table primarily relate to our UK property business together with insurance and
corporate activities in the UK and US and the Group's investments in
technology and innovation companies through National Grid Partners.
2. Segmental analysis (continued)
(a) Revenue
Six months ended 30 September 2023 2022²
Total sales Sales between segments(1) Sales to third parties Total sales Sales between segments(1) Sales to third
parties
£m £m £m £m £m £m
Operating segments - continuing operations:
UK Electricity Transmission 1,356 (19) 1,337 969 (14) 955
UK Electricity Distribution 850 (2) 848 1,005 (8) 997
UK Electricity System Operator 1,734 (17) 1,717 2,060 (15) 2,045
New England 1,441 - 1,441 1,760 - 1,760
New York 2,365 - 2,365 2,758 - 2,758
National Grid Ventures 666 (27) 639 685 (9) 676
Other 142 - 142 253 - 253
Total revenue from continuing operations 8,554 (65) 8,489 9,490 (46) 9,444
Geographical areas:
UK 4,309 4,589
US 4,180 4,855
Total revenue from continuing operations 8,489 9,444
1. Sales between operating segments are priced having regard to the
regulatory and legal requirements to which the businesses are subject. The
analysis of revenue by geographical area is on the basis of destination.
There are no material sales between the UK and US geographical areas.
2. Comparative amounts have been re-presented to reflect NGV as a separate
operating segment.
(b) Operating profit/(loss)
Before exceptional items and remeasurements Exceptional items and remeasurements After exceptional items and remeasurements
Six months ended 30 September 2023 2022¹ 2023 2022¹ 2023 2022¹
£m £m £m £m £m £m
Operating segments - continuing operations:
UK Electricity Transmission 839 499 (1) (6) 838 493
UK Electricity Distribution 476 531 (4) (9) 472 522
UK Electricity System Operator 443 147 - (1) 443 146
New England (32) 193 (15) 527 (47) 720
New York (30) (18) 38 (8) 8 (26)
National Grid Ventures 219 259 91 49 310 308
Other (13) 145 (26) (69) (39) 76
Total operating profit from continuing operations 1,902 1,756 83 483 1,985 2,239
Geographical areas:
UK 1,956 1,550 60 (32) 2,016 1,518
US (54) 206 23 515 (31) 721
Total operating profit from continuing operations 1,902 1,756 83 483 1,985 2,239
1. Comparative amounts have been re-presented to reflect NGV as a separate
operating segment.
Before exceptional items and remeasurements Exceptional items and remeasurements After exceptional items and remeasurements
Six months ended 30 September 2023 2022¹ 2023 2022¹ 2023 2022¹
£m £m £m £m £m £m
Reconciliation to profit before tax:
Operating profit from continuing operations 1,902 1,756 83 483 1,985 2,239
Share of post-tax results of joint ventures and associates 59 70 12 (19) 71 51
Finance income 123 69 (8) (32) 115 37
Finance costs (834) (801) 34 140 (800) (661)
Total profit before tax from continuing operations 1,250 1,094 121 572 1,371 1,666
1. Comparative amounts have been re-presented to reflect the classification
of the FAA option as held for sale and within discontinued operations.
2. Segmental analysis (continued)
(c) Capital expenditure
Capital expenditure represents additions to property, plant and equipment and
other intangible assets but excludes additional investments in and loans to
joint ventures and associates.
Net book value of property, plant and equipment and other intangible assets Capital expenditure Depreciation, amortisation
and impairment
30 September 2023 31 March 2023¹ 30 September 2023 30 September 2022¹ 30 September 2023 30 September 2022¹
£m £m £m £m £m £m
Operating segments:
UK Electricity Transmission 16,030 15,483 800 629 (250) (235)
UK Electricity Distribution 13,940 13,462 608 584 (105) (104)
UK Electricity System Operator 434 411 75 42 (52) (40)
New England 13,781 13,033 789 801 (204) (184)
New York 22,937 21,730 1,257 1,242 (321) (292)
National Grid Ventures 3,956 3,880 175 410 (84) (73)
Other 35 38 2 9 (5) (4)
Total 71,113 68,037 3,706 3,717 (1,021) (932)
Geographical areas:
UK 33,475 32,343 1,649 1,594 (464) (432)
US 37,638 35,694 2,057 2,123 (557) (500)
Total 71,113 68,037 3,706 3,717 (1,021) (932)
By asset type:
Property, plant and equipment 67,396 64,433 3,449 3,490 (868) (829)
Other intangible assets 3,717 3,604 257 227 (153) (103)
Total 71,113 68,037 3,706 3,717 (1,021) (932)
1. Comparative amounts have been re-presented to reflect NGV as a separate
operating segment and the reclassification of our US LNG operations from New
England to NGV following an internal reorganisation in the period.
3. Revenue
Under IFRS 15 'Revenue from Contracts with Customers', revenue is recorded as
or when the Group satisfies a performance obligation by transferring a
promised good or service to a customer. A good or service is transferred when
the customer obtains control of that good or service.
The transfer of control of our distribution or transmission services coincides
with the use of our network, as electricity and gas pass through our network
and reach our customers. The Group principally satisfies its performance
obligations over time and the amount of revenue recorded corresponds to the
amounts billed and accrued for volumes of gas and electricity
delivered/transferred to/from our customers.
Revenue for the six months UK Electricity Transmission UK Electricity Distribution UK Electricity System Operator New New National Grid Ventures Other Total
ended 30 September 2023 £m £m £m England York £m £m £m
£m £m
Revenue under IFRS 15
Transmission 1,299 - 5 43 283 426 - 2,056
Distribution - 810 - 1,329 2,047 - - 4,186
System Operator - - 1,712 - - - - 1,712
Other(1) 9 36 - 4 7 75 - 131
Total IFRS 15 revenue 1,308 846 1,717 1,376 2,337 501 - 8,085
Other revenue
Generation - - - - - 181 - 181
Other(2) 29 2 - 65 28 (43) 142 223
Total other revenue 29 2 - 65 28 138 142 404
Total revenue from continuing operations 1,337 848 1,717 1,441 2,365 639 142 8,489
Geographic split of revenue for the six months ended 30 September 2023 UK Electricity Transmission UK Electricity Distribution UK Electricity System Operator New England New National Grid Ventures Other Total
£m £m £m £m York £m £m £m
£m
Revenue under IFRS 15
UK 1,308 846 1,717 - - 430 - 4,301
US - - - 1,376 2,337 71 - 3,784
Total IFRS 15 revenue 1,308 846 1,717 1,376 2,337 501 - 8,085
Other revenue
UK 29 2 - - - (50) 27 8
US - - - 65 28 188 115 396
Total other revenue 29 2 - 65 28 138 142 404
Total revenue from continuing operations 1,337 848 1,717 1,441 2,365 639 142 8,489
1. The UK Electricity Transmission and UK Electricity Distribution other
IFRS 15 revenue principally relates to engineering recharges, which are the
recovery of costs incurred for construction work requested by customers, such
as the re-routing of existing network assets. Within NGV, the other IFRS 15
revenue principally relates to revenue generated from our NG Renewables
business.
2. Other revenue, recognised in accordance with accounting standards other
than IFRS 15, includes property sales by our UK commercial property business,
rental income, income arising in connection with the Transition Services
Agreements in place following the sales of The Narragansett Electric Company
(NECO) and the UK Gas Transmission business, and an adjustment to NGV revenue
in respect of the interconnector cap and floor and Use of Revenue regimes
constructed by Ofgem.
3. Revenue (continued)
Revenue for the six months ended 30 September 2022 UK Electricity Transmission UK Electricity Distribution UK Electricity System Operator New England New York National Grid Ventures¹ Other¹ Total
£m £m £m £m £m £m £m £m
Revenue under IFRS 15
Transmission 931 - 77 53 117 306 - 1,484
Distribution - 940 - 1,675 2,617 - - 5,232
System Operator - - 1,968 - - - - 1,968
Other(2) 16 43 - 4 6 69 - 138
Total IFRS 15 revenue 947 983 2,045 1,732 2,740 375 - 8,822
Other revenue
Generation - - - - - 224 - 224
Other(3) 8 14 - 28 18 77 253 398
Total other revenue 8 14 - 28 18 301 253 622
Total revenue from continuing operations 955 997 2,045 1,760 2,758 676 253 9,444
Geographic split of revenue for the six months ended 30 September 2022 UK Electricity Transmission UK Electricity Distribution UK Electricity System Operator New England New York National Grid Ventures¹ Other¹ Total
£m £m £m £m £m £m £m £m
Revenue under IFRS 15
UK 947 983 2,045 - - 310 - 4,285
US - - - 1,732 2,740 65 - 4,537
Total IFRS 15 revenue 947 983 2,045 1,732 2,740 375 - 8,822
Other revenue
UK 8 14 - - - 83 199 304
US - - - 28 18 218 54 318
Total other revenue 8 14 - 28 18 301 253 622
Total revenue from continuing operations 955 997 2,045 1,760 2,758 676 253 9,444
1. Comparative amounts have been re-presented to reflect NGV as a separate
operating segment.
2. The UK Electricity Transmission and UK Electricity Distribution other
IFRS 15 revenue principally relates to engineering recharges, which are the
recovery of costs incurred for construction work requested by customers, such
as the re-routing of existing network assets. Within NGV, the other IFRS 15
revenue principally relates to revenue generated from our NG Renewables
business.
3. Other revenue, recognised in accordance with accounting standards other
than IFRS 15, includes property sales by our UK commercial property business,
rental income and income arising in connection with the Transition Services
Agreement with PPL Rhode Island Holdings, LLC following the sale of NECO.
In the period ended 30 September 2022 the Group also recognised other income
relating to an insurance claim.
4. Exceptional items and remeasurements
To monitor our financial performance, we use an adjusted consolidated profit
measure that excludes certain income and expenses. We exclude items from
adjusted profit because, if included, these items could distort understanding
of our performance in the period and the comparability between periods. With
respect to restructuring costs, these represent additional expenses incurred
that are not related to normal business and day‑to-day activities. These
can take place over multiple reporting periods given the scale of the Group,
the nature and complexity of the transformation initiatives and due to the
impact of strategic transactions.
Remeasurements comprise unrealised gains or losses recorded in the
consolidated income statement arising from changes in the fair value of
certain financial assets and liabilities categorised as held at fair value
through profit and loss (FVTPL). Once the fair value movements are realised
(for example, when the derivative matures), the previously recognised fair
value movements are then reversed through remeasurements and recognised within
earnings before exceptional items and remeasurements. These assets and
liabilities include commodity contracts and derivative financial instruments
to the extent that hedge accounting is either not achieved or is not
effective. We have also classified the unrealised gains or losses reported in
profit and loss on certain additional assets treated as FVTPL within
remeasurements. These relate to financial assets (which fail the 'solely
payments of principal and interest test' under IFRS 9), the money market fund
investments used by Group Treasury for cash management purposes and the net
foreign exchange gains and losses on borrowing activities. These are offset by
foreign exchange losses and gains on financing derivatives measured at fair
value. In all cases, these fair values increase or decrease because of changes
in foreign exchange, commodity or other financial indices over which we have
no control.
Six months ended 30 September 2023 Exceptional items Remeasurements Total
£m £m £m
Included within operating profit from continuing operations
Cost efficiency programme (39) - (39)
Transaction, separation and integration costs¹ (11) - (11)
IFA1 fire insurance proceeds 92 - 92
Net gains on commodity contract derivatives - 41 41
42 41 83
Included within net finance costs (note 5)
Net gains on derivative financial instruments - 34 34
Net losses on financial assets at fair value through profit and loss - (8) (8)
- 26 26
Included within share of post-tax results of joint ventures and associates
Net gains on financial instruments - 12 12
- 12 12
Total included within profit before tax from continuing operations 42 79 121
Tax on exceptional items and remeasurements 1 (21) (20)
Total exceptional items and remeasurements after tax from 43 58 101
continuing operations
1. Transaction, separation and integration costs represent the aggregate of
distinct activities undertaken by the Group in the periods presented.
4. Exceptional items and remeasurements (continued)
Six months ended 30 September 2022¹ Exceptional items Remeasurements Total
£m £m £m
Included within operating profit from continuing operations
Net gain on disposal of NECO 511 - 511
Cost efficiency programme (61) - (61)
Transaction, separation and integration costs(2) (65) - (65)
IFA1 fire insurance proceeds 33 - 33
Net gains on commodity contract derivatives - 65 65
418 65 483
Included within net finance costs (note 5)
Net gains on derivative financial instruments - 140 140
Net losses on financial assets at fair value through profit and loss - (32) (32)
- 108 108
Included within share of post-tax results of joint ventures and associates
Net losses on financial instruments - (19) (19)
- (19) (19)
Total included within profit before tax from continuing operations 418 154 572
Tax on exceptional items and remeasurements (221) (49) (270)
Total exceptional items and remeasurements after tax from 197 105 302
continuing operations
1. Comparative amounts have been re-presented to reflect the classification
of the FAA option as held for sale and within discontinued operations.
2. Transaction, separation and integration costs represent the aggregate of
distinct activities undertaken by the Group in the periods presented.
Cost efficiency programme: During the period, the Group incurred a further
£39 million (2022: £61 million) of costs in relation to the major cost
efficiency programme announced in November 2021, that targeted at least
£400 million savings per annum across the Group by the end of three years.
The costs recognised in the period primarily relate to redundancy provisions,
employee costs and professional fees incurred in delivering the programme.
Whilst the costs incurred during the period do not meet the quantitative
threshold to be classified as exceptional on a standalone basis, when taken
in aggregate with the £142 million of costs incurred since the announcement
of the programme, the costs qualify for exceptional treatment in line with our
exceptional items policy. Estimated costs expected to be incurred over the
remainder of the programme to 31 March 2024 remain consistent with those
disclosed in the Annual Report and Accounts for year the ended 31 March 2023.
The total cash outflow for the period in relation to these costs was
£28 million (2022: £38 million).
Transaction, separation and integration costs: During the period,
£11 million (2022: £65 million) of transaction and separation costs were
incurred in relation to the disposals of NECO and the UK Gas Transmission
business (see note 6) and the integration of NGED. The costs incurred
primarily relate to legal fees, professional fees, and employee costs. The
costs have been classified as exceptional, consistent with similar costs for
the year ended 31 March 2023 and past precedent. The total cash outflow for
the period in relation to these costs was £9 million (2022: £59 million).
IFA1 interconnector insurance recovery: In September 2021, a fire at the IFA1
converter station in Sellindge, Kent caused significant damage to
infrastructure on-site. In the period, the Group recognised net insurance
claims of £92 million (2022: £33 million) which were recognised as
exceptional in line with our exceptional items policy and consistent with
related claims in the prior year. The total cash inflow in the period in
relation to the property damage insurance proceeds was £nil (2022:
£33 million).
Net gain on disposal of NECO: During the prior period, the Group recognised a
gain of £511 million on the disposal of 100% of the share capital of NECO
to PPL Rhode Island Holdings, LLC for cash consideration of £3.1 billion
($3.9 billion). The receipt of cash was recognised within net cash used in
investing activities within the consolidated cash flow statement.
5. Finance income and costs
2023 2022¹
Six months ended 30 September Notes £m £m
Finance income before exceptional items and remeasurements
Interest income from financing activities 52 14
Net interest on pensions and other post-retirement benefit obligations 51 41
Other interest income 20 14
123 69
Finance costs before exceptional items and remeasurements
Interest expense on financial instruments(2) (903) (878)
Unwinding of discount on provisions (50) (42)
Other interest (8) 8
Less: interest capitalised(3) 127 111
(834) (801)
Net finance costs before exceptional items and remeasurements (711) (732)
Total exceptional items and remeasurements(4) 4 26 108
Net finance costs including exceptional items and remeasurements (685) (624)
from continuing operations
1. Comparative amounts have been re-presented to reflect the classification
of the FAA option as held for sale and within discontinued operations.
2. Finance costs include principal accretion on inflation-linked debt of
£149 million (2022: £240 million) and income related to principal
accretion on inflation-linked swaps of £18 million (2022: £5 million
expense).
3. Interest on funding attributable to assets in the course of construction
in the current period was capitalised at a rate of 4.7% (2022: 4.3%). In the
UK, capitalised interest qualifies for a current year tax deduction with tax
relief claimed of £21 million (2022: £13 million). In the US, capitalised
interest is added to the cost of property, plant and equipment and qualifies
for tax depreciation allowances.
4. Includes a net foreign exchange gain on borrowing activities, offset by
foreign exchange losses and gains on financing derivatives measured at fair
value.
6. Assets held for sale and discontinued operations
Assets and businesses are classified as held for sale when their carrying
amounts are recovered through sale rather than through continuing use. They
only meet the held for sale condition when the assets are ready for immediate
sale in their present condition, management is committed to the sale and it is
highly probable that the sale will complete within one year. Depreciation
ceases on assets and businesses when they are classified as held for sale and
the assets and businesses are impaired if their carrying value exceeds their
fair value less expected costs to sell.
The results and cash flows of assets or businesses classified as held for sale
or sold during the year, that meet the criteria of being a major separate line
of business or geographical area of operation, are shown separately from our
continuing operations, and presented within discontinued operations in the
income statement and cash flow statement.
The following assets and liabilities were classified as held for sale:
30 September 2023 31 March 2023
Total assets Total liabilities held for sale Net assets held for sale Total assets Total liabilities held for sale Net assets held for sale
held for sale £m £m held for sale £m £m
£m £m
Investment in GasT TopCo Limited 1,441 - 1,441 1,443 - 1,443
FAA option - - - - (109) (109)
FAA forward - (7) (7) - - -
RAA option - (44) (44) - - -
Net assets held for sale 1,441 (51) 1,390 1,443 (109) 1,334
On 31 January 2023, the Group disposed of 100% of the UK Gas Transmission
business for cash consideration of £4.0 billion and a 40% interest in a newly
incorporated UK limited company, GasT TopCo Limited. The other 60% was
purchased by Macquarie Infrastructure and Real Assets (MIRA) and British
Columbia Investment Management Corporation (BCI) (together, the 'Consortium').
The Group also entered into a Further Acquisition Agreement (the FAA option)
with the Consortium over its remaining 40% interest. The Group's interest in
GasT TopCo Limited was immediately classified as held for sale with effect
from 31 January 2023 together with the FAA option, as detailed in note 10 of
the Annual Report and Accounts for the year ended 31 March 2023. The Group has
not applied equity accounting in relation to its investment in GasT TopCo
Limited.
On 19 July 2023, following the partial exercise of the FAA option by the
Consortium, the Group agreed to sell a further 20% out of the remaining 40%
interests in GasT TopCo Limited (the FAA forward). Completion is expected in
the second half of calendar year 2023, subject to regulatory approval. As part
of the transaction, the Group entered into a new option agreement with the
Consortium, the Remaining Acquisition Agreement (the RAA option), to replace
the FAA option for the potential sale of all or part of the remaining 20%
equity interest in GasT TopCo Limited. The RAA option is exercisable, at the
Consortium's option, between 1 May 2024 and 31 July 2024. If the RAA option is
partially exercised by the Consortium, the Group will have the right to put
the remainder of its interests in GasT TopCo Limited to the Consortium, which
can be exercised by the Group between 1 December 2024 and 31 December 2024.
The FAA forward to complete the sale of 20% of GasT TopCo Limited is a Level 3
derivative and some of the assumptions which are used to determine the fair
value are specific to the contract and not readily observable in active
markets. The most significant unobservable input is the valuation of GasT
TopCo Limited's unlisted equity.
The RAA option is also a Level 3 derivative. Significant unobservable inputs
include the valuation and volatility of GasT TopCo Limited's unlisted equity.
These inputs are used as part of a Black-Scholes option pricing model to
provide the reported fair values.
The disposal of the Group's interests in GasT TopCo Limited is considered to
be the final stage of the plan to dispose of the UK Transmission business
first announced in 2021. As a result, the results of the business prior to the
recognition of the associate and any remeasurements pertaining to the
financial derivatives noted above are shown separately from the continuing
business for all periods presented on the face of the income statement as a
discontinued operation. This is also reflected in the statement of
comprehensive income, as well as earnings per share (EPS) being shown split
between continuing and discontinued operations.
6. Assets held for sale and discontinued operations (continued)
The summary income statements for the periods ended 30 September 2023 and
2022 are as follows:
Before exceptional items Exceptional items and remeasurements Total
and remeasurements
2023 2022¹ 2023 2022¹ 2023 2022¹
£m £m £m £m £m £m
Discontinued operations
Revenue - 805 - - - 805
Other operating costs - (465) - 6 - (459)
Operating profit - 340 - 6 - 346
Finance income 9 9 - - 9 9
Finance costs² - (173) 61 (88) 61 (261)
Profit/(loss) before tax 9 176 61 (82) 70 94
Tax (2) (55) (3) (2) (5) (57)
Profit/(loss) after tax from discontinued operations 7 121 58 (84) 65 37
1. Comparative amounts have been re-presented to reflect the classification
of the FAA option as held for sale and within discontinued operations.
2. Exceptional finance costs include the remeasurement of the FAA option,
the FAA forward and the RAA option.
The summary statements of comprehensive income are as follows:
2023 2022¹
£m £m
Profit after tax from discontinued operations 65 37
Other comprehensive (loss)/income from discontinued operations
Items from discontinued operations that will never be reclassified to profit
or loss:
Remeasurement losses on pension assets and post-retirement benefit obligations - (126)
Tax on items that will never be reclassified to profit or loss - 31
Total losses from discontinued operations that will never be reclassified to - (95)
profit or loss
Items from discontinued operations that may be reclassified subsequently to
profit or loss:
Net gains in respect of cash flow hedges - 8
Net gains in respect of cost of hedging - 4
Net losses on investments in debt instruments measured at fair value through (12) -
other
comprehensive income
Tax on items that may be reclassified subsequently to profit or loss 3 (3)
Total (losses)/gains from discontinued operations that may be reclassified (9) 9
subsequently to profit or loss
Other comprehensive loss for the period, net of tax, from discontinued (9) (86)
operations
Total comprehensive income/(loss) for the period from discontinued operations 56 (49)
1. Comparative amounts have been re-presented to reflect the classification
of the FAA option as held for sale and within discontinued operations.
7. Tax from continuing operations
The tax charge from continuing operations for the six month period ended
30 September 2023 is £307 million (2022: £447 million), and before tax on
exceptional items and remeasurements, is £287 million (2022: £177 million).
It is based on management's estimate of the weighted average effective tax
rate by jurisdiction expected for the full year. The effective tax rate
excluding tax on exceptional items and remeasurements is 22.9% (2022: 16.2%),
which includes the impact of our share of post-tax results of joint ventures
and associates. The half year effective tax rate before exceptional items and
remeasurements, including our share of post-tax results of joint ventures and
associates, primarily reflects seasonality of earnings in the US Group and
increase in the UK statutory tax rate from 19% to 25% from 1 April 2023.
For the full year, we expect the Group's effective tax rate excluding tax on
exceptional items and remeasurements to be around 25% which includes the
impact of our share of post-tax results of joint ventures and associates. The
effective tax rate for the year ended 31 March 2023 before exceptional items
and remeasurements was 21.4% including the impact of our share of post-tax
results of joint ventures and associates.
The legislation implementing the Organisation for Economic Co-operation and
Development's (OECD) proposals for a global minimum corporation tax rate
('Pillar 2') was enacted into UK law on 11 July 2023. The legislation includes
an income inclusion rule and a domestic minimum tax, which together are
designed to ensure a minimum effective tax rate of 15% in each country in
which the Group operates. Similar legislation is being enacted by other
governments around the world. The legislation is effective for National Grid
from 1 April 2024 and therefore the rules do not impact the Group's
consolidated financial statements for year ended 31 March 2024. We have
applied the mandatory exception in the UK to recognising and disclosing
information about the deferred tax assets and liabilities related to Pillar 2
income taxes in accordance with the amendments to IAS 12 published by the IASB
on 23 May 2023. The Group's work is ongoing to assess the potential impact in
the financial statements for year ended 31 March 2025.
8. Earnings per share
Earnings per share (EPS), excluding exceptional items and remeasurements are
provided to reflect the adjusted profit subtotals used by the Group, as set
out in note 1. The earnings per share calculations are based on profit after
tax attributable to equity shareholders of the parent company which excludes
non-controlling interests.
(a) Basic earnings per share
Earnings EPS Earnings EPS
Six months ended 30 September 2023 2023 2022¹ 2022¹
£m pence £m pence
Profit after tax before exceptional items and remeasurements - continuing 962 26.1 917 25.1
Exceptional items and remeasurements after tax - continuing 101 2.7 302 8.3
Profit after tax from continuing operations attributable to the parent 1,063 28.8 1,219 33.4
Profit after tax before exceptional items and remeasurements - discontinued 7 0.2 121 3.3
Exceptional items and remeasurements after tax - discontinued 58 1.6 (84) (2.3)
Profit after tax from discontinued operations attributable to the parent 65 1.8 37 1
Total profit after tax before exceptional items and remeasurements 969 26.3 1,038 28.4
Total exceptional items and remeasurements after tax 159 4.3 218 6.0
Total profit after tax attributable to the parent 1,128 30.6 1,256 34.4
2023 2022
millions millions
Weighted average number of shares - basic 3,682 3,651
1. Comparative amounts have been re-presented to reflect the classification
of the FAA option as held for sale and within discontinued operations.
(b) Diluted earnings per share
Earnings EPS Earnings EPS
Six months ended 30 September 2023 2023 2022¹ 2022¹
£m pence £m pence
Profit after tax before exceptional items and remeasurements - continuing 962 26.0 917 25.0
Exceptional items and remeasurements after tax - continuing 101 2.7 302 8.2
Profit after tax from continuing operations attributable to the parent 1,063 28.7 1,219 33.2
Profit after tax before exceptional items and remeasurements - discontinued 7 0.2 121 3.3
Exceptional items and remeasurements after tax - discontinued 58 1.6 (84) (2.3)
Profit after tax from discontinued operations attributable to the parent 65 1.8 37 1
Total profit after tax before exceptional items and remeasurements 969 26.2 1,038 28.3
Total exceptional items and remeasurements after tax 159 4.3 218 5.9
Total profit after tax attributable to the parent 1,128 30.5 1,256 34.2
2023 2022
millions millions
Weighted average number of shares - diluted 3,700 3,668
1. Comparative amounts have been re-presented to reflect the classification
of the FAA option as held for sale and within discontinued operations.
9. Dividends
Pence Cash Scrip
per share dividend dividend
paid £m
£m
Ordinary dividends
Final dividend in respect of the year ended 31 March 2023 37.60 1,325 56
Interim dividend in respect of the year ended 31 March 2023 17.84 488 163
Final dividend in respect of the year ended 31 March 2022 33.76 1,119 114
The Directors are proposing an interim dividend of 19.40 pence per share to be
paid in respect of the year ending 31 March 2024. This would absorb
approximately £716 million of shareholders' equity.
A final dividend for the year ended 31 March 2023 of 37.60 pence per share
was paid in August 2023. The cash dividend paid was £1,325 million with an
additional £56 million settled via a scrip issue.
10. Fair value measurement
Assets and liabilities measured at fair value
Included in the statement of financial position are certain financial assets
and liabilities which are measured at fair value. The following table
categorises these assets and liabilities by the valuation methodology applied
in determining their fair value using the fair value hierarchy described on
page 197 of the Annual Report and Accounts for the year ended 31 March 2023.
30 September 2023 31 March 2023
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
£m £m £m £m £m £m £m £m
Assets
Investments held at fair value through profit and loss 1,007 - 483 1,490 1,764 - 452 2,216
Investments held at fair value through other comprehensive income(1) - 388 - 388 - 407 - 407
Financing derivatives - 309 20 329 - 341 22 363
Commodity contract derivatives - 54 2 56 - 62 4 66
1,007 751 505 2,263 1,764 810 478 3,052
Liabilities
Financing derivatives - (1,219) (95) (1,314) - (997) (122) (1,119)
Commodity contract derivatives - (78) (45) (123) - (134) (40) (174)
Contingent consideration(2) - - (10) (10) - - (19) (19)
- (1,297) (150) (1,447) - (1,131) (181) (1,312)
Total 1,007 (546) 355 816 1,764 (321) 297 1,740
1. Investments held include instruments which meet the criteria of IFRS 9 or
IAS 19.
2. Contingent consideration relates to the acquisition of National Grid
Renewables Development LLC.
The estimated fair value of total borrowings, excluding lease liabilities,
using market values at 30 September 2023 is £38,354 million (31 March 2023:
£38,219 million).
Our level 1 financial investments and liabilities held at fair value are
valued using quoted prices from liquid markets and primarily comprise
investments in short-term money market funds.
Our level 2 financial investments held at fair value primarily include bonds
with a tenor greater than one year and are valued using quoted prices for
similar instruments in active markets, or quoted prices for identical or
similar instruments in inactive markets. Alternatively, they are valued using
models where all significant inputs are based directly or indirectly on
observable market data.
10. Fair value measurement (continued)
Our level 2 financing derivatives include cross-currency, interest rate and
foreign exchange derivatives. We value these derivatives by discounting all
future cash flows by externally sourced market yield curves at the reporting
date, taking into account the credit quality of both parties. These
derivatives can be priced using liquidly traded interest rate curves and
foreign exchange rates, and therefore we classify our vanilla trades as level
2 under the IFRS 13 framework.
Our level 2 commodity derivatives include over-the-counter gas swaps and power
swaps as well as forward physical gas deals. We value our contracts based on
market data obtained from the New York Mercantile Exchange (NYMEX) and the
Intercontinental Exchange (ICE) where forward monthly prices are available. We
discount based on externally sourced market yield curves at the reporting
date, taking into account the credit quality of both parties and liquidity in
the market. Our commodity contracts can be priced using liquidly traded swaps.
Therefore we classify our vanilla trades as level 2 under the IFRS 13
framework.
Our level 3 financing derivatives include inflation-linked swaps, where the
market is illiquid. In valuing these instruments we use in-house valuation
models and obtain external valuations to support each reported fair value.
Our level 3 commodity contract derivatives primarily consist of our forward
purchases of electricity and gas that we value using proprietary models.
Derivatives are classified as Level 3 where significant inputs into the
valuation technique are neither directly nor indirectly observable (including
our own data, which are adjusted, if necessary, to reflect the assumptions
market participants would use in the circumstances).
Our level 3 investments include equity instruments accounted for at fair value
through profit and loss. These equity holdings are part of our corporate
venture capital portfolio held by National Grid Partners and comprise
a series of relatively small, early-stage non-controlling minority interest
unquoted investments where prices or valuation inputs are unobservable.
Fifteen equity investments (out of thirty-three) are fair valued based on the
latest transaction price (a price within the last 12 months), either being the
price we paid for the investments, marked to a latest round of funding and
adjusted for our preferential rights or based on an internal model. In
addition, we have eighteen investments without a transaction in the last 12
months that underwent an internal valuation process using the Black-Scholes
Murton Option Pricing Model (OPM Backsolve). Between 12 and 18 months a blend
between OPM Backsolve and other techniques are utilised such as proxy group
revenue multiples, discounted cash flow, comparable company analysis and
probability weighted expected return approach in order to triangulate a
valuation. After 18 months the valuation is based on these alternative methods
as the last fundraising price is no longer a reliable basis for valuation.
Our level 3 investments also include our investment in Sunrun Neptune 2016
LLC, which is accounted for at fair value through profit and loss. The
investment is fair valued by discounting expected cash flows using a weighted
average cost of capital specific to Sunrun Neptune 2016 LLC.
10. Fair value measurement (continued)
The impacts on a post-tax basis of reasonably possible changes in significant
assumptions used in valuing assets and liabilities classified within level 3
of the fair value hierarchy are as follows:
Financing derivatives Commodity contract derivatives Other
Six months ended 30 September 2023 2022 2023 2022 2023 2022
£m £m £m £m £m £m
10% increase in commodity prices - - 15 35 - -
10% decrease in commodity prices - - (15) (36) - -
+10% market area price change - - 12 7 - -
-10% market area price change - - (11) (7) - -
+20 basis point increase in Limited Price Index (38) (51) - - - -
(LPI) market curve
-20 basis point decrease in LPI market curve 38 51 - - - -
+20 basis point increase between Retail Price Index (RPI) and Consumer Price 36 17 - - - -
Index (CPI)
-20 basis point decrease between RPI and CPI market curves (33) (16) - - - -
+50 basis points change in discount rate - - - - (8) (9)
-50 basis points change in discount rate - - - - 9 10
+10% change in venture capital price - - - - 30 -
-10% change in venture capital price - - - - (30) -
The impacts disclosed above were considered on a contract by contract basis
with the most significant unobservable inputs identified. A reasonably
possible change in assumptions for other level 3 assets and liabilities would
not result in a material change in fair values.
The changes in fair value of our level 3 financial assets and liabilities in
the six months to 30 September are presented below:
Financing derivatives Commodity contract derivatives Other(1) Total
2023 2022 2023 2022 2023 2022 2023 2022
£m £m £m £m £m £m £m £m
At 1 April (100) (187) (36) 44 433 376 297 233
Net gains/(losses) through the consolidated income statement for the 25 76 (4) 44 26 30 47 150
period(2,3)
Purchases - (133) (10) (56) 11 37 1 (152)
Settlements - - 7 (4) 3 (4) 10 (8)
At 30 September(4) (75) (244) (43) 28 473 439 355 223
1. Other comprises our investments in Sunrun Neptune 2016 LLC and the
investments made by National Grid Partners, which are accounted for at fair
value through profit and loss and the contingent consideration arising from
the acquisition of National Grid Renewables Development LLC. Net gains and
loss are recognised within finance income and costs in the income statement.
2. Gains of £25 million (2022: gains of £93 million) are attributable to
derivative financial instruments held at the end of the reporting period and
have been recognised in finance costs in the income statement.
3. Losses of £15 million (2022: losses of £23 million) are attributable to
the commodity contract derivative financial instruments held at the end
of the reporting period and have been recognised in other operating costs
in the consolidated income statement.
4. There were no reclassifications in or out of level 3 (2022: none).
The Group also has a number of financial instruments which are not measured at
fair value in the balance sheet. The carrying value of current financial
assets at amortised cost approximates their fair values, primarily due to
short-dated maturities.
11. Net debt
Net debt is comprised as follows:
30 September 2023 31 March 2023
£m £m
Cash and cash equivalents 227 163
Current financial investments 1,680 2,605
Borrowings and bank overdrafts (44,797) (42,985)
Financing derivatives(1) (985) (756)
Net debt (net of related derivative financial instruments) (43,875) (40,973)
1. Includes £4 million liability (31 March 2023: £4 million liability) in
relation to the hedging of capital expenditure. The cash flows related to
these derivatives are included within investing activities in the
consolidated cash flow statement which is in the same manner as the
transactions which are the subject of the hedges. The financing derivatives
balance included in net debt exclude the commodity derivatives.
The following table splits out the total derivative balances on the face of
the consolidated statement of financial position by category:
30 September 2023 31 March 2023
Assets Liabilities Total Assets Liabilities Total
£m £m £m £m £m £m
Financing derivatives 329 (1,314) (985) 363 (1,119) (756)
Commodity contract derivatives 56 (123) (67) 66 (174) (108)
Total derivative financial instruments 385 (1,437) (1,052) 429 (1,293) (864)
12. Pensions and other post-retirement benefit obligations
30 September 2023 31 March 2023
£m £m
Present value of funded obligations (17,502) (18,934)
Fair value of plan assets 19,570 21,246
2,068 2,312
Present value of unfunded obligations (264) (292)
Other post-employment liabilities (67) (69)
Net defined benefit asset 1,737 1,951
Presented in consolidated statement of financial position:
Assets 2,352 2,645
Liabilities (615) (694)
1,737 1,951
Key actuarial assumptions 30 September 2023 31 March 2023
Discount rate - UK past service 5.55% 4.80%
Discount rate - US 5.70% 4.85%
Rate of increase in RPI - UK past service 3.19% 3.17%
The net pensions and other post-retirement benefit (OPEB) obligations
position, as recorded under IAS 19, at 30 September 2023 was an asset of
£1,737 million (31 March 2023: £1,951 million asset). The movement
of £214 million primarily reflects asset performance being less than the
discount rate at the start of the period, partially offset by increases in
discount rates resulting in a decrease in liabilities.
Net actuarial losses of £263 million have been reflected within the
consolidated statement of comprehensive income. There was a loss of
£1,754 million (UK £1,155 million; US £599 million) relating to asset
performance which reflects returns on assets, both in the UK and US, being
less than the discount rate at the beginning of the year. Changes in
actuarial assumptions led to a gain on liabilities of £1,491 million (UK
£793 million; US £698 million). This primarily reflected movements in
discount rates which resulted from large increases in corporate bond yields.
The pension and OPEB surpluses in both the UK and the US of £1,377 million
and £975 million respectively (31 March 2023: £1,672 million and
£973 million) continue to be recognised as assets under IFRIC 14 as
explained on page 175 of the Annual Report and Accounts for the year ended
31 March 2023.
13. Commitments and contingencies
At 30 September 2023, there were commitments for future energy purchase
agreements of £13,824 million (31 March 2023: £19,194 million) and future
capital expenditure contracted but not provided for in relation to the
acquisition of property, plant and equipment of £3,218 million (31 March
2023: £2,936 million).
We also have contingencies in the form of certain guarantees and letters of
credit. These are described in further detail in note 30 to the Annual Report
and Accounts for the year ended 31 March 2023.
Litigation and claims
Through the ordinary course of our operations, we are party to various
litigation, claims and investigations. We do not expect the ultimate
resolution of any proceedings to have a material adverse effect on our results
of operations, cash flows or financial position.
14. Exchange rates
The consolidated results are affected by the exchange rates used to translate
the results of our US operations and US dollar transactions. The US dollar to
pound sterling exchange rates used were:
30 September 2023 2022 Year ended 31 March 2023
Closing rate applied at period end 1.22 1.12 1.23
Average rate applied for the period 1.25 1.21 1.22
15. Related party transactions
Related party transactions in the six months ended 30 September 2023 were
substantially the same in nature to those disclosed in note 31 of the Annual
Report and Accounts for the year ended 31 March 2023. There were no other
related party transactions in the period that have materially affected the
financial position or performance of the Group.
16. Additional disclosures in respect of guaranteed securities
Niagara Mohawk Power Corporation, a wholly owned subsidiary of the Group, has
issued preferred shares that are listed on a US national securities exchange
and are guaranteed by National Grid plc. This guarantor commits to honour any
liabilities should the company issuing the debt have any financial
difficulties. In order to provide debt holders with information on the
financial stability of the company providing the guarantee, we are required to
disclose individual financial information for this company. We have chosen to
include this information in the half year financial information.
The following summarised financial information is given in respect of Niagara
Mohawk Power Corporation as a result of National Grid plc's guarantee, dated
29 October 2007, of Niagara Mohawk Power Corporation's 3.6% and 3.9% issued
preferred shares, which amount to $23 million. National Grid plc's guarantee
of Niagara Mohawk Power Corporation's preferred shares is full and
unconditional. There are no restrictions on the payment of dividends by
Niagara Mohawk Power Corporation or limitations on National Grid plc's
guarantee of the preferred shares, and there are no factors that may affect
payments to holders of the guaranteed securities.
The following summarised financial information for National Grid plc and
Niagara Mohawk Power Corporation is presented on a combined basis and
is intended to provide investors with meaningful and comparable financial
information, and is provided pursuant to the early adoption of Rule 13-01 of
Regulation S-X in lieu of the separate financial statements of Niagara Mohawk
Power Corporation.
Summarised financial information is presented, on a combined basis, as at
30 September 2023. The combined amounts are presented under IFRS measurement
principles. Intercompany transactions between National Grid plc and Niagara
Mohawk Power Corporation have been eliminated. Investments in other non-issuer
and non-guarantor subsidiaries are included at cost, subject to impairment.
National Grid plc and Niagara Mohawk Power Corporation combined
£m
Combined statement of financial position
Non-current loans to other subsidiaries 126
Non-current assets 12,033
Current loans to other subsidiaries 15,557
Current assets 1,526
Current loans from other subsidiaries (6,893)
Current liabilities (1,263)
Non-current loans from other subsidiaries (2,080)
Non-current liabilities (13,703)
Net assets¹ 5,303
Equity 5,303
Combined income statement - continuing operations
Revenue 1,594
Operating costs (1,330)
Operating profit 264
Other income from other subsidiaries -
Other income and costs, including taxation (51)
Profit after tax 213
1. Excluded from net assets above are investments in other consolidated
subsidiaries with a carrying value of £14,480 million.
17. Post balance sheet events
At the end of October 2023, legislation required to enable the separation of
the ESO and formation of the ISOP was passed through Parliament. The ISOP
is expected to be established as a Public Corporation in 2024, with
responsibilities across both the electricity and gas systems. As a result,
the Group took the judgement to classify the associated assets and liabilities
of the ESO as held for sale in the consolidated statement of financial
position at the end of October 2023 and the ESO will be measured at the lower
of its carrying amount or fair value less costs to sell, which will take into
consideration the current over-collection of allowed revenues as disclosed on
page 19.
Principal risks and uncertainties
When preparing the half year financial information the risks as reported in
the Annual Report and Accounts for the year ended 31 March 2023 (principal
risks on pages 20-24 and inherent risks on pages 225-228) were reviewed to
ensure that the disclosures remained appropriate and adequate. Below is a
summary of our key risks as at 30 September 2023:
People risks
■ Failure to build capability and leadership capacity required to
deliver our vision and strategy because of ineffective succession planning
and recruitment into leadership roles.
Financial risks
■ Failure to fund our business efficiently as a result of lack of access
to a wide pool of investors, market volatility, unsatisfactory regulatory
outcomes or unsatisfactory financial or operational performance of the
business, leading to a lack of access to capital, impacting our ability to
achieve our strategic objectives.
Strategic risks
■ Failure to identify and/or deliver upon actions necessary to meet our
climate change targets and enable the wider energy transition because of poor
management of threats and opportunities associated with migrating climate
change, leading to a reputational impact of not enabling us to meet our net
zero commitments.
■ Failure to influence future energy policies and secure satisfactory
regulatory agreements because of lack of insight or unsuccessful
negotiations, leading to poor regulatory outcomes, energy policies that
negatively impact our operations, impacts on market prices, reduced financial
performance, fines/penalties, increased costs to remain compliant and/or
reputational damage.
■ Failure to position ourselves appropriately to societal and political
expectations because of a failure to proactively monitor the landscape or, to
anticipate and respond to changes leading to reputational damage, political
intervention, threats to the Group's licences to operate, and our ability to
achieve our objectives.
Operational risks
■ Failure to adequately anticipate and manage disruptive forces on our
systems because of a cyber-attack, poor recovery of critical systems or
malicious external or internal parties, resulting in an inability to operate
the network, damage to assets, loss of confidentiality and integrity and/or
availability of systems.
■ Catastrophic asset failure or bulk system failure because failure of a
critical asset or system, substandard operational performance or inadequate
maintenance, over-pressurisation, leak-prone pipe, third-party damage and
undetected system anomalies, leading to a significant public and employee
safety and/or environmental event.
■ Failure to predict and respond to a significant disruption of energy
supply because of climate change, asset failure, storms, attacks, market
failure or other emergency events leading to significant customer harm,
lasting reputational damage with customers, regulators, and politicians,
material financial losses, loss of franchise, and damage to investor
confidence.
■ Failure to effectively predict or respond to fluctuations in energy
supply and inability to balance supply and customer demand, or appropriately
respond to energy supply constraints, due to external, system or human factors
leading to adverse impacts on customers and/or the public.
■ Failure to deliver on our major capital project programme within the
required timeframes because of: a lack of a clearly defined regulatory and
financial frameworks to incentivise investment; complex planning requirements;
external impacts on supply chain; or a failure to demonstrate clear long-term
economic benefits to communities, leading to increased costs, compromised
quality and reputational damage and detrimentally impacting our ability to
deliver our clean energy transition strategy.
Statement of Directors' Responsibilities
The half year financial information is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
half year financial information in accordance with the Disclosure Guidance and
Transparency Rules (DTR) of the United Kingdom's Financial Conduct Authority.
The Directors confirm that to the best of their knowledge:
a) the condensed consolidated interim financial statements have been
prepared in accordance with IAS 34 'Interim Financial Reporting' as issued by
the International Accounting Standards Board and as adopted by the United
Kingdom;
b) the half year management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events during the
first six months and description of principal risks and uncertainties for the
remaining six months of the year); and
c) the half year management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
The Directors of National Grid plc are listed in the Annual Report and
Accounts for the year ended 31 March 2023, with the exception of the changes
in the period which are listed on page 13.
By order of the Board
……………………..
……………………..
John
Pettigrew
Andy Agg
8 November
2023
8 November 2023
Chief Executive
Chief Financial Officer
Independent Review Report to National Grid plc
Conclusion
We have been engaged by the Company (National Grid plc) to review the
condensed consolidated set of financial statements in the half-yearly
financial report for the six months ended 30 September 2023 which comprises
the consolidated income statement, the consolidated statement of comprehensive
income, the consolidated statement of changes in equity, the consolidated cash
flow statement and related notes 1 to 17 (collectively referred to as the
'interim financial information').
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2023 is not prepared,
in all material respects, in accordance with United Kingdom adopted
International Accounting Standard 34 and the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom (ISRE (UK) 2410). A review of interim
financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become
aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with United Kingdom adopted international accounting
standards. The condensed set of financial statements included in
this half-yearly financial report has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34, 'Interim Financial
Reporting'.
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the Directors have
inappropriately adopted the going concern basis of accounting or that the
Directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410; however future events or conditions may cause the entity to
cease to continue as a going concern.
Responsibilities of the Directors
The Directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the Directors are responsible
for assessing the Group's ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to liquidate the
Company or to cease operations, or have no realistic alternative but to do
so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for
expressing to the Company a conclusion on the condensed consolidated set of
financial statements in the half-yearly financial report. Our Conclusion,
including our Conclusion Relating to Going Concern, are based on procedures
that are less extensive than audit procedures, as described in the Basis for
Conclusion paragraph of this report.
Use of our report
This report is made solely to the Company in accordance with ISRE (UK) 2410.
Our work has been undertaken so that we might state to the Company those
matters we are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company, for our review work,
for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
8 November 2023
Alternative performance measures/non-IFRS reconciliations
Within the Half Year Results Statement, a number of financial measures are
presented. Some of these measures have been categorised as alternative
performance measures (APMs), as per the European Securities and Markets
Authority (ESMA) guidelines and the Securities and Exchange Commission (SEC)
conditions for use of non-IFRS Financial Measures.
An APM is a financial measure of historical or future financial performance,
financial position, or cash flows, other than a financial measure defined
under IFRS. The Group uses a range of these measures to provide a better
understanding of its underlying performance. APMs are reconciled to the most
directly comparable IFRS financial measure where practicable.
The Group has defined the following financial measures as APMs derived from
IFRS within the Half Year Results Statement: net revenue, the various adjusted
operating profit, earnings and earnings per share metrics detailed in the
'adjusted profit measures' section below and capital investment (including
capital investment (regulated networks)). For each of these we present a
reconciliation to the most directly comparable IFRS measure.
Net revenue and underlying net revenue
'Net revenue' is revenue less pass-through costs, such as system balancing
costs, and gas and electricity commodity costs in the US. Pass-through costs
are fully recoverable from our customers and are recovered through separate
charges that are designed to recover those costs with no profit. Any over- or
under-recovery of these costs is returned to, or recovered from, our
customers. Underlying net revenue further adjusts this to remove the impact of
'timing', i.e. the in-year difference between allowed and collected revenues,
including revenue incentives, as governed by our rate plans in the US or
regulatory price controls in the UK (but excluding totex-related allowances
and adjustments).
2023
Six months ended 30 September Gross revenue Pass- Net revenue Timing Underlying net revenue
£m through £m £m £m
costs
£m
UK Electricity Transmission 1,356 (104) 1,252 (183) 1,069
UK Electricity Distribution 850 (114) 736 87 823
UK Electricity System Operator 1,734 (1,123) 611 (409) 202
New England 1,441 (690) 751 250 1,001
New York 2,365 (806) 1,559 149 1,708
National Grid Ventures 666 - 666 - 666
Other 142 - 142 - 142
Sales between segments (65) - (65) - (65)
Total from continuing operations 8,489 (2,837) 5,652 (106) 5,546
2022
Six months ended 30 September Gross revenue Pass- Net revenue Timing Underlying net revenue
£m through £m £m £m
costs
£m
UK Electricity Transmission 969 (90) 879 65 944
UK Electricity Distribution 1,005 (199) 806 48 854
UK Electricity System Operator 2,060 (1,783) 277 (95) 182
New England 1,760 (820) 940 123 1,063
New York 2,758 (1,316) 1,442 220 1,662
National Grid Ventures 685 - 685 - 685
Other 253 - 253 - 253
Sales between segments (46) - (46) - (46)
Total from continuing operations 9,444 (4,208) 5,236 361 5,597
Adjusted profit measures:
In considering the financial performance of our business and segments, we use
various adjusted profit measures in order to aid comparability of results
year-on-year. The various measures are presented on page 17 and reconciled
below.
Adjusted results: These exclude the impact of exceptional items and
remeasurements that are treated as discrete transactions under IFRS and can
accordingly be classified as such. Further details of these items are included
in note 4.
Underlying results: Further adapts our adjusted results to take account of
volumetric and other revenue timing differences arising due to the in-year
difference between allowed and collected revenues, including revenue
incentives, as governed by our rate plans in the US or regulatory price
controls in the UK (but excluding totex-related allowances and adjustments).
As defined on page 56 of the Annual Report and Accounts for the year ended
31 March 2023, major storm costs are costs (net of certain deductibles) that
are recoverable under our US rate plans but expensed as incurred under IFRS.
Where the total incurred costs (after deductibles) exceed $100 million in any
given year we also exclude the net amount from underlying earnings. Group
underlying EPS is one of the incentive targets set annually and part of the
LTPP target for remunerating certain Executive Directors.
Constant currency: 'Constant Currency Basis' refers to the reporting of the
actual results against the results for the same period last year which, in
respect of any US dollar currency-denominated activity, have been translated
using the weighted average US dollar exchange rate for the six months ended
30 September 2023, which was $1.25 to £1.00. The weighted average rate for
the six months ended 30 September 2022, was $1.21 to £1.00. Assets and
liabilities as at 30 September 2023 have been retranslated at the closing
rate at 30 September 2023 of $1.22 to £1.00. The closing rate for the
balance sheet date 31 March 2023 was $1.23 to £1.00.
Alternative performance measures/non-IFRS reconciliations (continued)
Reconciliation of Statutory, Adjusted and Underlying Profits and Earnings - at
actual exchange rates - continuing operations
Six months ended 30 September 2023 Statutory Exceptionals and remeasurements Adjusted Timing Major storm costs Underlying
£m £m £m £m £m £m
UK Electricity Transmission 838 1 839 (183) - 656
UK Electricity Distribution 472 4 476 87 - 563
UK Electricity System Operator 443 - 443 (409) - 34
New England (47) 15 (32) 250 - 218
New York 8 (38) (30) 149 - 119
National Grid Ventures 310 (91) 219 - - 219
Other* (39) 26 (13) - - (13)
Total operating profit 1,985 (83) 1,902 (106) - 1,796
Net finance costs (685) (26) (711) - - (711)
Share of post-tax results of JVs and associates 71 (12) 59 - - 59
Profit before tax 1,371 (121) 1,250 (106) - 1,144
Tax (307) 20 (287) 19 - (268)
Profit after tax 1,064 (101) 963 (87) - 876
*Includes Property. 6 - 6 - - 6
Six months ended 30 September 2022 Statutory(1) Exceptionals and remeasurements(1) Adjusted Timing Major storm costs Underlying
£m £m £m £m £m £m
UK Electricity Transmission 493 6 499 65 - 564
UK Electricity Distribution 522 9 531 48 - 579
UK Electricity System Operator 146 1 147 (95) - 52
New England 720 (527) 193 123 - 316
New York (26) 8 (18) 220 - 202
National Grid Ventures 308 (49) 259 - - 259
Other* 76 69 145 - - 145
Total operating profit 2,239 (483) 1,756 361 - 2,117
Net finance costs (624) (108) (732) - - (732)
Share of post-tax results of JVs and associates 51 19 70 - - 70
Profit before tax 1,666 (572) 1,094 361 - 1,455
Tax (447) 270 (177) (96) - (273)
Profit after tax 1,219 (302) 917 265 - 1,182
*Includes Property. 227 - 227 - - 227
1. Comparative amounts have been re-presented to reflect the classification
of the FAA option as held for sale and within discontinued operations.
Reconciliation of Adjusted and Underlying Profits - at constant currency
At constant currency
Six months ended 30 September 2022 Adjusted Constant currency adjustment Adjusted Timing Major storm costs Underlying
at actual exchange rate
£m £m £m £m £m £m
UK Electricity Transmission 499 - 499 65 - 564
UK Electricity Distribution 531 - 531 48 - 579
UK Electricity System Operator 147 - 147 (95) - 52
New England 193 (8) 185 119 - 304
New York (18) 1 (17) 212 - 195
National Grid Ventures 259 (1) 258 - - 258
Other* 145 - 145 - - 145
Total operating profit 1,756 (8) 1,748 349 - 2,097
Net finance costs (732) 11 (721) - - (721)
Share of post-tax results of JVs and associates 70 (1) 69 - - 69
Profit before tax 1,094 2 1,096 349 - 1,445
*Includes Property. 227 - 227 - - 227
Alternative performance measures/non-IFRS reconciliations (continued)
Earnings per share calculations from continuing operations - At actual
exchange rates
The table below reconciles the profit after tax from continuing operations per
the previous tables back to the earnings per share from continuing operations
for each of the adjusted profit measures. Earnings per share is only
presented for those adjusted profit measures that are at actual exchange
rates, and not for those at constant currency.
Six months ended 30 September 2023 Profit after tax Non-controlling interest Profit after tax attributable to the parent Weighted average number of shares Earnings
£m £m £m Millions per share
pence
Statutory 1,064 (1) 1,063 3,682 28.8
Adjusted (also referred to as Headline) 963 (1) 962 3,682 26.1
Underlying 876 (1) 875 3,682 23.8
Six months ended 30 September 2022 Profit after tax Non-controlling interest Profit after tax attributable to the parent Weighted average number of shares Earnings
£m £m £m Millions per share
pence
Statutory(1) 1,219 - 1,219 3,651 33.4
Adjusted (also referred to as Headline) 917 - 917 3,651 25.1
Underlying 1,182 - 1,182 3,651 32.4
1. Comparative amounts have been re-presented to reflect the classification
of the FAA option as held for sale and within discontinued operations.
Timing impacts from continuing operations
Under the Group's regulatory frameworks, the majority of the revenues that
National Grid is allowed to collect each year are governed by a regulatory
price control or rate plan. If National Grid collects more than this allowed
level of revenue, the balance must be returned to customers in subsequent
years, and if it collects less than this level of revenue, it may recover the
balance from customers in subsequent years. These variances between allowed
and collected revenues give rise to 'over and under-recoveries'. A number of
costs in the UK and the US are pass-through costs (including commodity and
energy efficiency costs in the US), and are fully recoverable from customers.
Timing differences between costs of this type being incurred and their
recovery through revenues are also included in over and under-recoveries. In
the UK, timing differences include an estimation of the difference between
revenues earned under revenue incentive mechanisms and associated revenues
collected. UK timing balances and movements exclude adjustments associated
with changes to controllable cost (totex) allowances or adjustments under the
totex incentive mechanism. Opening balances of over and under-recoveries have
been restated where appropriate to correspond with regulatory filings and
calculations.
UK Electricity Transmission UK Electricity Distribution UK Electricity System Operator New New Total
£m £m £m England(1) York(1) £m
£m £m
1 April 2023 opening balance(2) (217) (119) 78 (394) 699 47
Over/(under)-recovery 183 (87) 409 (250) (149) 106
30 September 2023 closing balance (34) (206) 487 (644) 550 153
to (recover)/return
UK Electricity Transmission UK Electricity Distribution UK Electricity System Operator New New Total
£m £m £m England(1) York(1) £m
£m £m
1 April 2022 opening balance (85) 25 (127) (332) 636 117
Over/(under)-recovery (65) (48) 95 (119) (212) (349)
Disposal in the year(3) - - - (17) - (17)
30 September 2022 closing balance (150) (23) (32) (468) 424 (249)
to (recover)/return
1. New England and New York in-year over/(under)-recovery and all New
England and New York balances have been translated using the average exchange
rate for the half year ended 30 September 2023.
2. Opening balances have been restated to reflect the finalisation of
calculated over/(under)-recoveries in the UK and the US.
3. Disposal of NECO (Rhode Island) in May 2022.
Alternative performance measures/non-IFRS reconciliations (continued)
Capital investment
Capital investment is not a statutory measure as it is not a defined term
under IFRS. 'Capital investment' or 'investment' refers to additions to plant,
property and equipment and intangible assets, and contributions to joint
ventures and associates. We also include the Group's investments by National
Grid Partners during the period (which are classified for IFRS purposes as
non-current financial assets on the Group consolidated statement of financial
position). References to 'capital investment' or 'capital expenditure' in our
regulated networks include the following segments: UK Electricity
Transmission, UK Electricity Distribution, UK Electricity System Operator, New
England and New York, but exclude National Grid Ventures and 'Other'.
At actual exchange rates At constant currency
Six months ended 30 September 2023 2022(1) % change 2023 2022(1) % change
£m £m £m £m
UK Electricity Transmission 800 629 27% 800 629 27%
UK Electricity Distribution 608 584 4% 608 584 4%
UK Electricity System Operator 75 42 79% 75 42 79%
New England(2) 789 801 (1%) 789 771 2%
New York 1,257 1,242 1% 1,257 1,195 5%
National Grid Ventures 175 410 (57%) 175 407 (57%)
Other 2 9 (78%) 2 9 (78%)
Group capital expenditure (continuing) 3,706 3,717 0% 3,706 3,637 2%
Memo: Capital expenditure (regulated networks) 3,529 3,298 7% 3,529 3,221 10%
Six months ended 30 September - at actual exchange rates 2023 2022(1) % change
£m £m
Capital expenditure 3,706 3,717 0%
Equity investments in joint ventures and associates 151 129 17%
Increase in financial assets (National Grid Partners) 11 37 (70%)
Group capital investment (continuing) 3,868 3,883 0%
Memo: Capital investment (regulated networks) 3,529 3,298 7%
Six months ended 30 September - at constant currency 2023 2022(1) % change
£m £m
Capital expenditure 3,706 3,637 2%
Equity investments in joint ventures and associates 151 124 22%
Increase in financial assets (National Grid Partners) 11 37 (70%)
Group capital investment (continuing) 3,868 3,798 2%
Memo: Capital investment (regulated networks) 3,529 3,221 10%
1. Comparative amounts have been re-presented to reflect NGV as a separate
operating segment and the reclassification of our US LNG operations from
New England to NGV following an internal reorganisation in the period.
2. New England comparative amounts include NECO.
1 (#_ftnref1) UK Electricity Transmission, UK Electricity Distribution,
UK Electricity System Operator, New England and New York.
2 (#_ftnref2) Excluding UK Electricity Distribution, UK Gas Transmission
and Metering and the UK Electricity System Operator.
3 (#_ftnref3) ASTI capital expenditure is reported as part of the UK
Electricity Transmission segment.
4 (#_ftnref4) The reliability standard is set at less than three hours
Loss of Load Expectation (LOLE).
5 (#_ftnref5) Excluding UK Electricity Distribution, UK Gas Transmission
and Metering and the UK Electricity System Operator.
6 (#_ftnref6) Our previous SBT was to reduce Scope 1 and 2 emissions by
50% by 2030 from a 2015/16 baseline.
7 (#_ftnref7) Full-year underlying EPS (2020/21) as reported on 20 May
2021.
8 (#_ftnref8) With our 40% stake in National Gas Transmission accounted
for as held for sale, it is not included in our underlying EPS guidance for
2023/24.
9 (#_ftnref9) ASTI capital expenditure is reported as part of the UK
Electricity Transmission segment.
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