REG - National Grid PLC - National Grid Half Year Results - 30 Sept 2016 <Origin Href="QuoteRef">NG.L</Origin> - Part 4
10/11/2016 07:07
- Part 4: For the preceding part double click ID:nRSJ8055Oc
loans 4,833 1,200
Repayment of loans (2,757) (582)
Net movements in short-term borrowings and derivatives 264 (366)
Interest paid (490) (391)
Exceptional finance cash flows on the redemption of debt (930) -
Dividends paid to shareholders (923) (805)
Net cash flow used in financing activities (4) (1,180)
Net increase/(decrease) in cash and cash equivalents 24 (8)
Exchange movements 14 (2)
Net cash and cash equivalents at start of period 124 116
Net cash and cash equivalents at end of period1 10 162 106
1. Net of bank overdrafts of £nil (2015: £9m).
Notes
1. Basis of preparation and new accounting standards, interpretations and amendments
The half year financial information covers the six month period ended 30 September 2016 and has been prepared under IAS 34
'Interim Financial Reporting' as issued by the International Accounting Standards Board (IASB) and as adopted by the
European Union (EU); and the Disclosure and Transparency Rules of the Financial Conduct Authority. The half year financial
information is unaudited but has been reviewed by the auditors and their report is attached to this document.
The half year financial information 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 2016, which were prepared in
accordance with International Financial Reporting Standards (IFRS) as issued by the IASB and as adopted by the EU, and have
been filed with the Registrar of Companies. The auditors' report on these statutory accounts was unqualified and did not
contain a statement under Section 498 of the Companies Act 2006.
The half year financial information has been prepared in accordance with the accounting policies expected to be applicable
for the year ending 31 March 2017 and is consistent with those applied in the preparation of the accounts for the year
ended 31 March 2016.
There are no new standards, interpretations and amendments, issued by the IASB and by the IFRS Interpretations Committee
(IFRIC), that have had a material impact on the Group's results.
In preparing this half year financial information, the areas of judgement made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated
financial statements for the year ended 31 March 2016.
Having made enquiries and reassessed the principal risks, the Directors consider that the Company and its subsidiary
undertakings have adequate resources to continue in business, and that it is therefore appropriate to adopt the going
concern basis in preparing the half year financial information.
2. Segmental analysis
We present revenue and the results of the business analysed by operating segment, based on the information the Board of
Directors uses internally for the purposes of evaluating the performance of operating segments and determining resource
allocation between operating segments. The Board is National Grid's chief operating decision-making body (as defined by
IFRS 8 'Operating Segments') and assesses the performance of operations principally on the basis of operating profit before
exceptional items and remeasurements (see note 3).
The following table describes the main activities for each operating segment:
UK Electricity Transmission High voltage electricity transmission networks in Great Britain.
UK Gas Transmission The gas transmission network in Great Britain and UK liquefied natural gas (LNG) storage activities.
UK Gas Distribution Four of the eight regional networks of Great Britain's gas distribution system.
US Regulated Gas distribution networks, electricity distribution networks and high voltage electricity transmission networks in New York and New England and electricity generation facilities in New York.
Other activities primarily relate to non-regulated businesses and other commercial operations not included within the above
segments, including: UK gas metering activities; the Great Britain-France Interconnector; UK property management; a UK LNG
import terminal (National Grid Grain LNG Limited); US LNG operations; US unregulated transmission pipelines; together with
corporate activities.
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.
The US Regulated segment typically experiences seasonal fluctuations in revenue and operating profit due to higher delivery
volumes during the second half of the financial year. These seasonal fluctuations have a consequential impact on the
working capital balances in the consolidated statement of financial position at 30 September 2016 when compared to 31 March
2016.
(a) Revenue
Six months ended 30 September 2016 2015
£m £m
Operating segments
UK Electricity Transmission 2,129 1,963
UK Gas Transmission 422 435
UK Gas Distribution 929 952
US Regulated 3,431 3,133
Other activities 385 478
Sales between segments (93) (107)
7,203 6,854
Geographical areas
UK 3,751 3,695
US 3,452 3,159
7,203 6,854
2. Segmental analysis continued
(b) Operating profit
Before exceptional items and remeasurements After exceptional items and remeasurements
Six months ended 30 September 2016 2015 2016 2015
£m £m £m £m
Operating segments
UK Electricity Transmission 697 610 697 610
UK Gas Transmission 159 159 159 159
UK Gas Distribution 403 428 313 428
US Regulated 435 351 464 364
Other activities 157 288 157 288
1,851 1,836 1,790 1,849
Geographical areas
UK 1,428 1,441 1,338 1,441
US 423 395 452 408
1,851 1,836 1,790 1,849
Reconciliation to profit before tax:
Operating profit 1,851 1,836 1,790 1,849
Finance income 39 6 39 6
Finance costs (562) (499) (1,375) (535)
Share of post-tax results of joint ventures and associates 31 28 31 28
Profit before tax 1,359 1,371 485 1,348
(c) Capital expenditure
Net book value1 Capital expenditure2 Depreciation and amortisation3
30 September 2016 31 March 2016 30 September 2016 30 September 2015 30 September 2016 30 September 2015
£m £m £m £m £m £m
Operating segments
UK Electricity Transmission 12,295 11,907 586 514 (213) (199)
UK Gas Transmission 4,168 4,140 116 91 (88) (90)
UK Gas Distribution 8,488 8,378 268 286 (157) (147)
US Regulated 20,072 17,490 1,039 901 (295) (259)
Other activities 2,420 2,336 100 97 (112) (101)
47,443 44,251 2,109 1,889 (865) (796)
Geographical areas
UK 26,407 25,914 1,036 944 (532) (511)
US 21,036 18,337 1,073 945 (333) (285)
47,443 44,251 2,109 1,889 (865) (796)
By asset type
Property, plant and equipment 46,511 43,364 2,027 1,775 (782) (729)
Non-current intangible assets 932 887 82 114 (83) (67)
47,443 44,251 2,109 1,889 (865) (796)
1. Represents position at 30 September 2016 and 31 March 2016 respectively.
2. Represents additions to plant, property and equipment, and non-current intangibles, in the six months ended 30
September 2016 and 30 September 2015 respectively.
3. Represents the amounts recorded in the six months ended 30 September 2016 and 30 September 2015 respectively.
3. Exceptional items and remeasurements
Exceptional items and remeasurements are items of income and expenditure that, in the judgment of management, should be
disclosed separately on the basis that they are important to an understanding of our financial performance and
significantly distort the comparability of financial performance between periods. Remeasurements comprise gains or losses
recorded in the income statement (which can vary significantly from one period to the next) arising from changes in the
fair value of commodity contracts and of derivative financial instruments to the extent that hedge accounting is not
achieved or is not effective. These fair values increase or decrease because of changes in commodity and financial indices
and prices over which we have no control.
Six months ended 30 September 2016 2015
£m £m
Included within operating profit:
Exceptional items - transaction costs1 (90) -
Remeasurements - commodity contracts2 29 13
(61) 13
Included within finance costs:
Exceptional items:
Debt redemption costs3 (718) -
Remeasurements:
Net losses on derivative financial instruments2 (95) (36)
(813) (36)
Total included within profit before tax (874) (23)
Included within tax:Deferred tax credit arising on the reduction in the UK corporation tax rate4 151 -
Tax on exceptional items 148 -
Tax on remeasurements 17 3
316 3
Total exceptional items and remeasurements after tax (558) (20)
Analysis of exceptional items and remeasurements after tax:
Exceptional items after tax (509) -
Remeasurements after tax (49) (20)
Total (558) (20)
1. In November 2015, the Group announced that it was considering disposing of a majority stake in its UK Gas Distribution
business. In the six months ended 30 September 2016, costs of £90m (2015: £nil) were recognised in respect of this
potential transaction. These predominantly related to sale preparation costs including the direct costs of performing
vendor due diligence and otherwise supporting the process, financial advisers' fees and other transaction-related
expenses.
2. Remeasurements
i. Commodity contracts represent mark-to-market movements on certain physical and financial commodity contract
obligations in the US. These contracts primarily relate to the forward purchase of energy for supply to customers, or to
the economic hedging thereof, that are required to be measured at fair value and that do not qualify for hedge accounting.
Under the existing rate plans in the US, commodity costs are recoverable from customers although the timing of recovery may
differ from the pattern of costs incurred.
ii. Net losses on derivative financial instruments comprise losses arising on derivative financial instruments
reported in the income statement. These exclude gains and losses for which hedge accounting has been effective, which have
been recognised directly in other comprehensive income or which are offset by adjustments to the carrying value of debt.
3. In preparation for the sale of the UK Gas Distribution business, the Group completed a public bond tender in September
2016 to restructure its financing portfolio. The Group re-purchased external fixed rate and RPI linked debt with a carrying
value of £1.9bn (notional value of £1.8bn) at a fair market value of £2.8bn. The cash loss arising of £0.9bn is offset by
an unrealised gain of £0.2bn resulting from the release of historic fair value hedge adjustments designated against the
repurchased fixed rate debt. Consistent with the presentation of sale preparation costs, these costs have been treated as
exceptional.
4. A reduction in the UK corporation tax rate to 17% from 1 April 2020 was enacted during the year, resulting in a
deferred tax credit (note 5). This credit is presented as exceptional, reflecting its nature.
4. Finance income and costs
Six months ended 30 September 2016 2015
£m £m
Interest income on financial instruments1 39 6
Finance income 39 6
Net interest on pensions and other post-retirement benefit obligations (47) (54)
Interest expense on financial instruments (525) (440)
Unwinding of discount on provisions (37) (35)
Other interest (7) (23)
Less: interest capitalised 54 53
Finance costs before exceptional items and remeasurements (562) (499)
Exceptional items:
Debt redemption costs (718) -
Remeasurements:
Net losses on derivative financial instruments (95) (36)
Exceptional items and remeasurements included within finance costs (813) (36)
Finance costs (1,375) (535)
Net finance costs (1,336) (529)
1. Included within interest income on financial instruments is £28m (2015: £nil) in respect of realised gains on
available-for-sale investments.
5. Tax
The tax charge for the period, excluding tax on exceptional items and remeasurements, is £295m (2015: £302m). The effective
tax rate of 21.7% (2015: 22.0%) for the period is based on the best estimate of the weighted average annual income tax rate
by jurisdiction expected for the full year. The current period rate reflects the seasonality of earnings in the US. For the
full year we expect the Group effective tax rate to be around 24%, excluding tax on exceptional items and remeasurements.
The effective tax rate for the year ended 31 March 2016 was 24.0%.
The Finance (No.2) Act 2015 enacted reductions in the UK corporation tax rate from 20% to 19% with effect from 1 April 2017
and 18% with effect from 1 April 2020. A further reduction to 17% with effect from 1 April 2020 was enacted in the Finance
Act 2016. Deferred taxes at the reporting date have been measured using these enacted tax rates and reflected in these
financial statements.
6. Earnings per share
Adjusted earnings per share, excluding exceptional items and remeasurements, are provided to reflect the business
performance subtotals used by the Group. For further details of exceptional items and remeasurements, see note 3.
(a) Basic earnings per share
Six months ended 30 September 2016 2016 2015 20151
Earnings Earnings Earnings Earnings
per share per share
£m Pence £m Pence
Adjusted earnings 1,062 28.2 1,067 28.2
Exceptional items after tax (509) (13.5) - -
Remeasurements after tax (49) (1.3) (20) (0.5)
Earnings 504 13.4 1,047 27.7
Millions Millions
Weighted average number of shares - basic1 3,763 3,779
1. Comparative amounts have been restated to reflect the impact of additional shares issued as scrip dividends.
(b) Diluted earnings per share
Six months ended 30 September 2016 2016 2015 20151 Earnings
Earnings Earnings Earnings per share
per share
£m Pence £m pence
Adjusted diluted earnings 1,062 28.1 1,067 28.1
Exceptional items after tax (509) (13.5) - -
Remeasurements after tax (49) (1.3) (20) (0.5)
Diluted earnings 504 13.3 1,047 27.6
Millions Millions
Weighted average number of shares - diluted1 3,780 3,796
1. Comparative amounts have been restated to reflect the impact of additional shares issued as scrip dividends.
7. Dividends
Six months ended 30 September 2016 2016 2016 2015 2015 2015
pence per share Cash dividend paid £m Scrip dividend£m pence per share Cash dividend paid £m Scrip dividend£m
Ordinary dividends
Final - year ended 31 March 2016 28.34 923 151 - - -
Final - year ended 31 March 2015 - - - 28.16 805 248
The Directors are proposing an interim dividend of 15.17p per share to be paid in respect of the year ending 31 March 2017.
This would absorb approximately £571 million of shareholders' equity. An interim dividend for the year ended 31 March 2016
of 15.00p per share was paid in January 2016. The cash dividend paid was £532 million with an additional £31 million
settled via scrip issues.
8. Fair value measurement
Carrying values and fair values of certain financial assets and liabilities
Certain of the Group's financial instruments are measured at fair value. The following table categorises these financial
assets and liabilities by the valuation methodology applied in determining their fair value using the fair value hierarchy
described on page 154 of the Annual Report and Accounts 2015/16.
30 September 2016 31 March 2016
Level 1£m Level 2£m Level 3£m Total£m Level 1£m Level 2£m Level 3£m Total£m
Assets
Available-for-sale investments 1,936 417 - 2,353 2,040 393 - 2,433
Derivative financial instruments - 2,075 27 2,102 - 1,945 18 1,963
Commodity contracts - 11 113 124 - 5 27 32
1,936 2,503 140 4,579 2,040 2,343 45 4,428
Liabilities
Derivative financial instruments - (2,252) (261) (2,513) - (1,855) (214) (2,069)
Commodity contracts - (71) (147) (218) - (81) (54) (135)
- (2,323) (408) (2,731) - (1,936) (268) (2,204)
Total 1,936 180 (268) 1,848 2,040 407 (223) 2,224
Financial assets and liabilities in the Group's consolidated statement of financial position are either held at fair value
or the carrying value if it approximates to fair value, with the exception of borrowings, which are held at amortised
cost.
The estimated fair value of total borrowings using market values at 30 September 2016 is £37,479 million (31 March 2016:
£31,463 million).
Our level 1 available-for-sale investments are valued using quoted prices from liquid markets.
Our level 2 available-for-sale investments 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. Our level 2 derivative financial
instruments include cross-currency, interest rate and foreign exchange derivatives. We value our level 2 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 swaps and foreign
exchange rates, therefore we classify our vanilla trades as level 2 under the IFRS 13 framework.
8. Fair value measurement continued
Our level 2 commodity contracts include over-the-counter (OTC) 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 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 derivative financial instruments include: Cross currency swaps with an embedded call option, equity call
options, cross currency swaps where the cross currency forward curve is illiquid and inflation linked swaps where the
inflation curve is illiquid. In valuing these instruments a third-party valuation is obtained to support each reported fair
value. In addition we also use internal developed models to value Limited Price Inflation (LPI) derivatives where the
inflation curve is illiquid. Inputs include breakeven rates and inflation option premiums which are increasingly illiquid,
towards the long-dated points of the curve.
Our level 3 commodity contracts primarily consist of our forward purchases of electricity and gas where pricing inputs are
unobservable, as well as other complex transactions. Complex transactions can introduce the need for internally developed
models based on reasonable assumptions. Industry standard valuation techniques such as the Black-Scholes pricing model and
Monte Carlo simulation are used for valuing such instruments. Level 3 is also applied in cases when optionality is present
or where an extrapolated forward curve is considered unobservable. All published forward curves are verified to market
data; if forward curves differ from market data by 5% or more they are considered unobservable.
As disclosed in note 3, gains/losses on our recurring financial instruments are recorded in remeasurements in the
consolidated income statement.
The impacts on a post-tax basis of reasonably possible changes in significant level 3 assumptions are as follows:
10% increase in commodity prices - - 2 2
10% decrease in commodity prices - - - (2)
Volume forecast uplift1 - - (1) (1)
Volume forecast reduction1 - - 4 2
+10% market area price change - - (17) (2)
-10% market area price change - - 13 -
+20 basis point increase in Limited Price Inflation (LPI) market curve2 (101) (77) - -
-20 basis point decrease in LPI market curve2 98 75 - -
-20 basis point decrease in LPI market curve2
98
75
-
-
1. Volumes were flexed using maximum and minimum historical averages, or by >10% where historical averages were not
available.
2. A reasonably possible change in assumption of other level 3 derivative financial instruments is unlikely to result
in a material change in fair values.
3. Tax rates applied above: Derivative financial instruments 20% (2015: 20%), commodity contracts 40% (2015: 40%).
Movements in the six months to 30 September for financial instruments measured using level 3 valuation methods are
presented below:
At 1 April (196) (166) (27) (42)
Net (losses)/gains for the period1, 2 (38) 2 (24) (13)
Purchases - - (4) 11
Settlements - (11) 21 30
At 30 September (234) (175) (34) (14)
At 30 September
(234)
(175)
(34)
(14)
1. Losses of £38m (2015: gains of £6m) are attributable to derivative financial instruments held at the end of the
reporting period.
2. Losses of £20m (2015: losses of £1m) are attributable to commodity contract financial instruments held at the end
of the reporting period.
3. There were no reclassifications or transfers out of level 3 (2015: none).
9. Reconciliation of net cash flow to movement in net debt
Six months ended 30 September 2016 2015
£m £m
Increase/(decrease) in cash and cash equivalents 24 (8)
Increase/(decrease) in financial investments 137 (546)
Increase in borrowings and related derivatives (2,340) (252)
Net interest paid on the components of net debt1 1,408 384
Change in net debt resulting from cash flows (771) (422)
Changes in fair value and exchange movements (1,847) 235
Net interest charge on the components of net debt1 (1,204) (434)
Other non-cash movements (75) (56)
Movement in net debt (net of related derivative financial instruments) in the period (3,897) (677)
Net debt (net of related derivative financial instruments) at start of period (25,325) (23,915)
Net debt (net of related derivative financial instruments) at end of period (29,222) (24,592)
1. An exceptional charge of £718m (2015: £nil) is included in net interest charge on the components of net debt and an
exceptional cash outflow of £930m (2015: £nil) is included in net interest paid on the components of net debt.
10. Net debt
30 September 2016 31 March 2016
£m £m
Cash and cash equivalents 162 127
Bank overdrafts - (3)
Net cash and cash equivalents 162 124
Financial investments 3,255 2,998
Borrowings (excluding bank overdrafts) (32,228) (28,341)
Net debt related derivative financial assets 2,102 1,963
Net debt related derivative financial liabilities (2,513) (2,069)
Net debt (net of related derivative financial instruments) (29,222) (25,325)
11. Pensions and other post-retirement benefit obligations
30 September 2016 31 March 2016
£m £m
Present value of funded obligations (34,092) (28,648)
Fair value of plan assets 30,956 26,434
(3,136) (2,214)
Present value of unfunded obligations (353) (304)
Other post-employment liabilities (73) (67)
Net liability (3,562) (2,585)
Represented by:
Liabilities (3,733) (2,995)
Assets 171 410
(3,562) (2,585)
Key actuarial assumptions
Discount rate (UK) 2.2% 3.3%
Discount rate (US) 3.9% 4.3%
Rate of increase in RPI (UK) 3.0% 2.9%
The net pensions and other post-retirement benefit obligations position, as recorded under IAS19, at 30 September 2016 was
a deficit of £3,562m compared to £2,585m at 31 March 2016. The increase in the deficit of £977m primarily reflects the
significant fall in discount rates in both the UK and US, resulting in an increase in liabilities of £4,487m which is
partially offset by returns on assets being greater than assumed by £3,437m. The net impact of £1,050m has been reflected
within the consolidated statement of comprehensive income.
12. Commitments and contingencies
At 30 September 2016 there were commitments for future capital expenditure contracted but not provided for of
£2,667 million (31 March 2016: £2,616 million).
We also have other commitments relating primarily to commodity purchase contracts, operating leases and contingencies in
the form of certain guarantees and letters of credit. These commitments and contingencies are described in further detail
on page 144 of the Annual Report and Accounts 2015/16.
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 of these proceedings to have a material adverse effect on our results of operations,
cash flows or financial position.
13. 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 2016 2015 Year ended 31 March 2016
Closing rate applied at period end 1.30 1.51 1.44
Average rate applied for the period 1.39 1.54 1.47
14. Related party transactions
Related party transactions in the six months ended 30 September 2016 were substantially the same in nature to those
disclosed on page 145 of the Annual Report and Accounts 2015/16. There were no related party transactions in the period
that have materially affected the financial position or performance of the Group.
15. Principal risks and uncertainties
When preparing the half year results the risks as reported in the 2015/16 Annual Report and Accounts (principal risks on
pages 27-28 and inherent risks on pages 183-186) were reviewed to ensure they remained appropriate and adequate. While no
significant new risks were identified, the Board concluded that the previously reported principal risk in respect of the
impact of inflation and deflation on our operations should be removed. Below is a summary of our key risks as at 30
September 2016:
· Failure to identify and execute the right opportunities to deliver our growth strategy;
· Failure to secure satisfactory regulatory outcomes/failure to influence future energy policy;
· Failure to secure skills and leadership capacity (including effective succession planning) required to deliver our
vision and strategy;
· Failure to deliver appropriate information systems and data integrity;
· We experience a catastrophic/major cyber security breach;
· We experience catastrophic asset failure; and
· Failure to effectively respond to the threats and opportunities presented by emerging technology, particularly the
challenge of adapting our networks to meet the challenges of increasing distributed energy resources.
The risks and uncertainties associated with the United Kingdom exiting the EU have been considered by the Board. The Board
continues to monitor the potential impact of the referendum result on the future performance and position of the Group but
does not currently believe there will be a material adverse impact on the Group's results or financial position in the
current financial year.
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 report in accordance with the Disclosure and Transparency Rules (DTR) of the United
Kingdom's Financial Conduct Authority.
The Directors confirm that the financial information has been prepared in accordance with IAS 34 as issued by the
International Accounting Standards Board and as adopted by the European Union, and that the half year report herein
includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8.
The Directors of National Grid plc are as listed in the National Grid plc Annual Report for the year ended 31 March 2016
with the exception of the following changes to the Board:
· Steve Holliday who stepped down as an Executive Director on 22 July 2016.
· Nicola Shaw who was appointed to the Board on 1 July 2016 as Executive Director, UK.
By order of the Board
…………………….. ……………………..
John Pettigrew Andrew Bonfield
9 November 2016 9 November 2016
Chief Executive Finance Director
Independent review report to National Grid plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed National Grid plc's condensed consolidated interim financial statements (the "interim financial
statements") in the half year financial information of National Grid plc for the six month period ended 30 September 2016.
Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are
not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
What we have reviewed
The interim financial statements comprise:
· the consolidated interim statement of financial position as at 30 September 2016;
· the consolidated interim income statement and consolidated statement of comprehensive income for the period then ended;
· the consolidated interim cash flow statement for the period then ended;
· the consolidated interim statement of changes in equity for the period then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the half year financial information have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure
and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the
preparation of the full annual financial statements of the group is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The half year financial information, including the interim financial statements, 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 and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial statements in the half year financial information
based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose
of complying with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no
other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in
writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board
for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scopethan an audit conducted in accordance with International Standards on Auditing (UK
and Ireland) and,consequently, does notenable 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.
We have read the other information contained in the half year financial information and considered whether it contains any
apparent misstatements or material inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
9 November 2016, London
The maintenance and integrity of the National Grid plc website is the responsibility of the directors; the work carried out
by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for
any changes that may have occurred to the financial statements since they were initially presented on the website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
1 Unless otherwise stated, all financial commentaries in this release are given on an adjusted basis at actual exchange
rates.
'Adjusted results', and a number of other terms and performance measures used in this document are not defined within
accounting
standards and may be applied differently by other organisations. For clarity, we have provided definitions of these terms,
descriptions of restatements and, where relevant, proforma calculations on pages 22 to 23. Prior year EPS has been adjusted
to reflect the additional shares issued as scrip dividends, refer to note 6 on page 36.
2 In November 2015, Ofgem ran the financial models that calculate substantial elements of the revenue allowances for
National Grid's UK regulated businesses. The outcome of these model runs (known as the 'MOD adjustments') were in line with
National Grid's expectations.
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AnnouncementREG - National Grid PLC - Director/PDMR Shareholding
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