REG - National Grid PLC - National Grid plc Half-Year Results 2024/25
07/11/2024 07:00
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RNS Number : 2689L National Grid PLC 07 November 2024
London | 7 November 2024:
National Grid, a leading energy
transmission and distribution company,
today announces its Half-Year results for the period ended 30 September 2024.
Delivering investment at pace, in an exciting new era of growth
John Pettigrew, Chief Executive, said:
"Over the last six months, the exciting momentum within National Grid has
continued as we deliver an unprecedented step up in capital investment. We
successfully completed the £7 billion Rights Issue, underpinning our ability
to deliver our five-year, £60 billion investment plan at pace. Delivery is
well underway with investment increasing to a record £4.6 billion in the
first half of this year. In the UK, work on our 17 major onshore and offshore
transmission projects is moving forward, in consultation with our communities
and stakeholders, and we are well progressed in securing the supply chain for
all these projects. In the US, we've made good progress on our $4 billion
Upstate Upgrade in New York, and delivered further gas mains replacement and
network reinforcement across our communities.
We've been encouraged by policy and regulatory progress on both sides of the
Atlantic. In the UK, we sold the Electricity System Operator to government,
and Ofgem's publication of the sector specific methodology decision marked the
next step in the RIIO-T3 regulatory process. In the US, we have new rates for
our downstate New York gas business, and for our Massachusetts Electric
business, giving us greater visibility on investment plans.
National Grid is delivering a new and exciting phase of growth with an
attractive investor proposition underpinned by high quality asset growth,
strong earnings growth and an inflation protected dividend. We remain focused
on playing our role in the energy transition and the responsible delivery of
the new infrastructure required to enable the digital, electrified economies
of the future."
Financial Summary
Six months ended 30 September: continuing operations only (not including UK
Gas Transmission)
Statutory results Underlying(1,2)
Unaudited 2024 2023 % change 2024 2023 % change
Operating profit (£m) 1,309 1,985 (34%) 2,046 1,796 14%
Profit before tax (£m) 684 1,371 (50%) 1,436 1,144 26%
Earnings per share(3) (p) 12.6 26.7 (53%) 28.1 25.9 8%
Dividend per share (p) 15.84 19.40 (18%)
Dividend per share (rebased) (p) 15.84 14.98 6%
Capital investment(4) (£m) 4,603 3,946 17%
1. 'Underlying' represents statutory results from continuing operations, but
excluding exceptional items, remeasurements, major storm costs (when greater
than $100 million), timing and the impact on underlying results of deferred
tax in our UK regulated businesses (NGET and NGED). Further detail and
definitions for all alternative performance measures (including constant
currency) are provided from page 59.
2. Comparatives restated for the change in our underlying earnings
definition to remove the deferred tax in our UK regulated businesses (NGET and
NGED).
3. Comparatives restated for the impact of the bonus element of the Rights
Issue (see note 9).
4. Our definition of capital investment was amended in 2023/24 to align with
our statutory measure (see note 2(c) to the financial statements). Comparative
amounts have been restated.
Highlights
Good financial performance across the half year
■ Underlying operating profit on a continuing basis of £2.0 billion,
an increase of 14% at actual exchange rates (15% at constant currency) versus
the prior period. This was principally driven by: increased rates in our New
York businesses; higher revenues in UK Electricity Transmission; a lower
charge to the environmental provision in New York; and a higher contribution
from the UK Electricity System Operator (ESO); partially offset by lower
profits in National Grid Ventures (NGV).
■ Underlying EPS from continuing operations of 28.1p, up from 25.9p in
the prior period, driven primarily by the above factors and lower net finance
costs, partially offset by the increased share count following the Rights
Issue in June 2024.
■ Statutory operating profit down 34% to £1.3 billion, driven
principally by adverse timing movements primarily in ESO. Statutory EPS of
12.6p, down from 26.7p in the prior period.
■ Interim dividend of 15.84p/ordinary share. This represents 35% of the
total rebased dividend per share of 45.26p in respect of the last financial
year to 31 March 2024, in line with the Group's dividend policy (see page 63
for calculation).
Highlights continued
(Record capital investment driving the energy transition)
■ Capital investment of £4.6 billion for continuing operations,
£657 million higher than the prior period (£726 million higher at constant
currency). This was principally driven by higher connection spend in UK
Electricity Transmission, and increased spend on early Accelerated Strategic
Transmission Investment (ASTI) projects; higher spend in New York through our
Smart Path Connect and Climate Leadership and Community Protection Act (CLCPA)
electric transmission projects, as well as additional gas network spend in our
Leak Prone Pipe (LPP) replacement programme; partially offset by lower spend
at Viking Link following commissioning in the prior year; and the ESO being
classified as held for sale.
Evolving our strategy to focus on our pureplay energy networks
■ Successfully completed the £7 billion equity raise with proceeds
received in June.
■ Moved forward with the initial phase of our significantly higher
capital investment plan which, over the next five years, will be almost double
the investment compared to the last five years.
■ National Grid Renewables and Grain LNG classified as held for sale
following announced intention to sell both businesses.
■ Sold the ESO to the UK government for an enterprise value of £630
million 1 (#_ftn1) (transaction completed 1 October).
■ Completed the sale of the final 20% equity interest in National Gas
Transmission to a consortium of long-term infrastructure investors led by
Macquarie Asset Management.
■ £58 million of cumulative synergy benefits now delivered across the
Group as a result of the UK Electricity Distribution acquisition - on track to
reach our £100 million target by the end of 2025/26.
Progressing the new phase of capital delivery
■ Good progress on our early ASTI investments, commencing construction on
five of our 17 projects: Yorkshire Green; North London reinforcement; Eastern
Green Links 1 (EGL1) and 2 (EGL2) joint ventures; and Bramford to Twinstead.
■ Held public consultations over the summer covering eight other ASTI
projects, including 58 in-person consultations with over 7,600 people
attending, and with 750 people through online webinars.
■ Working with seven strategic partners to agree the initial allocation
of work under the Great Grid Partnership, our £9 billion supply chain
framework to deliver nine ASTI projects.
■ On track to award all High Voltage Direct Current (HVDC) and converter
station contracts for the remaining offshore ASTI projects in the first part
of 2025.
■ Further progress on our 'Upstate Upgrade' in New York, with our Smart
Path Connect project - the rebuild and upgrade of 110 circuit miles of
transmission lines in upstate New York - reaching the halfway point of
construction, slightly ahead of schedule.
■ Good progress on construction of our CLCPA Phase 1 projects. Issued a
procurement and construction Request for Proposal (RFP) for our CLCPA Phase 2
projects.
Delivering customer connections across our networks
■ On course to connect a further 4.5 GW of new projects to our UK
Electricity Transmission network in 2024/25, versus 3.4 GW in 2023/24.
■ Connected 269 MW of new projects across our UK Electricity Distribution
network (including 196 MW solar, 67 MW energy storage).
Highlights continued
Good regulatory and policy progress
■ Ofgem published the RIIO-T3 Sector Specific Methodology Decision (SSMD)
which continues to recognise 'investability' as a priority when considering
new price control regulation for RIIO-T3.
■ Responded to the UK government's consultation on the National Planning
Policy Framework (NPPF) calling for the explicit recognition of electricity
network infrastructure and its role in delivering the government's
energy objectives.
■ Welcomed Ofgem's open letter on connections reform, directing the ESO
and industry to consider stronger alignment between future connection
arrangements and government strategic energy plans.
■ New three-year rate agreement approved by the New York Public Service
Commission (PSC) for our downstate gas distribution business, KEDNY-KEDLI.
■ New five-year rate order issued by the Massachusetts Department of Public
Utilities (DPU) for our Massachusetts Electric (MECO) business.
■ Filed for new rates for Niagara Mohawk (NIMO), our upstate New York
electric and gas distribution business.
■ Our Electric Sector Modernization Plan (ESMP) was approved by the DPU
as a strategic roadmap, outlining the incremental investment required in our
electric network over the next five years to help deliver Massachusetts' clean
energy goals.
■ Ofgem consultation launched on Offshore Hybrid Asset (OHA) regulatory
framework to support first-of-a-kind OHAs.
Delivering on our responsible business commitments
■ Published our second Climate Transition Plan (CTP), outlining our
greenhouse gas emissions reduction targets and our roadmap to achieve net zero
by 2050.
■ Employees volunteered over 40,000 hours across communities during the
half year. Now achieved 44% of our 10-year Group commitment of volunteering
500,000 hours.
■ Board diversity remained at 45.5%; Group Executive diversity at 53.9%.
Since year end, gender and ethnically diverse colleagues have risen from circa
7,100 to 7,400 and 5,300 to 5,600 respectively 2 (#_ftn2) .
Financial Outlook and Guidance
■ Guidance is based on our continuing businesses, as defined by IFRS and
includes the contribution of the ESO up until disposal. It excludes the
minority stake in National Gas Transmission, which was classified as a
discontinued operation until disposal.
■ Financial outlook over the five-year period from 2024/25 to 2028/29:
■ total cumulative capital investment of around £60 billion;
■ Group asset growth CAGR(i) of around 10% backed by strong balance
sheet;
■ driving underlying EPS CAGR(ii) of 6-8% from a 2024/25 EPS baseline;
■ credit metrics consistent with current Group rating; and
■ regulatory gearing to fall to the low-60% range by March 2025, then
expected to trend towards the high-60% range by the end of RIIO-T3.
■ For 2024/25 underlying EPS we continue to expect strong operational
performance reflecting year-on-year operating profit growth of around 10%, as
well as reduced financing costs due to lower average net debt. We anticipate
the additional share count from the Rights Issue to largely offset this
improved performance. We then expect an underlying EPS CAGR of 6-8% from a
2024/25 baseline, through to 2028/29. Please refer to the detail in the
Five-Year Financial Framework and 2024/25 Forward Guidance on pages 15 to 17.
i. Group asset compound annual growth rate from a FY24 baseline. Forward
years based on assumed USD FX rate of 1.25; and long run UK CPIH and US CPI.
Assumes sale of ESO, Grain LNG, and National Grid Renewables before 2029.
Assumes 20% stake in National Gas Transmission treated as a discontinued
operation and therefore does not contribute to Group asset growth.
ii. Underlying EPS compound annual growth rate from FY25 baseline.
Forward years based on assumed USD FX rate of 1.25; long run UK CPIH, US CPI
and interest rate assumptions and scrip uptake of 25%. Assumed sale of ESO in
2024/25; and sale of Grain LNG and National Grid Renewables before 2029.
Assumed 20% stake in National Gas Transmission treated as a discontinued
operation and therefore did not contribute to underlying EPS.
Financial Key Performance Indicators
As at and for the six months ended 30 September 2024 2023 change %
(£ million)
Statutory operating profit (continuing) at actual currency:
UK Electricity Transmission 642 838 (23%)
UK Electricity Distribution 759 472 61%
UK Electricity System Operator (213) 443 (148%)
New England 87 (47) 285%
New York (50) 8 (725%)
National Grid Ventures 145 310 (53%)
Other (61) (39) (56%)
Total statutory operating profit (continuing) 1,309 1,985 (34%)
Underlying operating profit (continuing) at constant currency(1):
UK Electricity Transmission 724 656 10%
UK Electricity Distribution 573 563 2%
UK Electricity System Operator 115 34 238%
New England 237 211 12%
New York 288 115 150%
National Grid Ventures 147 219 (33%)
Other (38) (13) (192%)
Total underlying operating profit (continuing) 2,046 1,785 15%
Capital investment (continuing) at constant currency:(2)
UK Electricity Transmission 1,290 899 43%
UK Electricity Distribution 647 608 6%
UK Electricity System Operator - 75 (100%)
New England 814 764 7%
New York 1,569 1,217 29%
National Grid Ventures 279 312 (11%)
Other 4 2 100%
Total capital investment (continuing) 4,603 3,877 19%
1. 'Underlying' represents statutory results from continuing operations, but
excluding exceptional items, remeasurements, major storm costs (when greater
than $100 million), timing and the impact on underlying results of deferred
tax in our UK regulated businesses (NGET and NGED). Further detail and
definitions for all alternative performance measures (including constant
currency) are provided from page 59.
2. Prior year comparatives have been restated to reflect the change in our
'capital investment' definition (previously an alternative performance
measure, or APM), which now aligns with our statutory segmental disclosure of
capital investment in note 2(c) to the financial statements and as such, is no
longer considered to be an APM. Capital investments exclude additions for
assets or businesses from the point they are classified as held for sale.
Contacts
Investor Relations
Angela Broad +44 (0) 7825 351 918
Tom Edwards +44 (0) 7976 962 791
James Flanagan +44 (0) 7970 778 952
Media
Danielle Dominey-Kent +44 (0) 7977 054 575
Brunswick
Dan Roberts +44 (0) 7980 959 590
Peter Hesse +44 (0) 7834 502 412
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
(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 59 to 64.
STRATEGIC OVERVIEW
Strong reliability performance during a period of high growth
National Grid has reported strong reliability across our UK and US networks
for the half year.
Despite severe weather events across a number of our jurisdictions, our teams
were thoroughly prepared and restored outages rapidly and well within
regulatory requirements. This includes our New York region where the average
time to restore 95% of customers was 12 hours, and in Massachusetts where the
average time was 16 hours.
In the UK, the National Energy System Operator (NESO) recently published its
Winter Outlook report for the UK. The NESO is forecasting an electricity
capacity margin of 8.8%, slightly higher than last year's, and broadly in line
with recent winters. In New York, the PSC published its Electric and Gas
Utility Winter readiness report in October that sees adequate supplies of gas
and electricity to meet the demands of residential and commercial customers
across the state this winter.
Overall, we remain confident in delivering our usual high standard of
reliability across our networks in the months ahead and remain vigilant as we
move through winter in both the UK and the US.
Safety performance
During the half year, we recorded a Group Lost Time Injury Frequency Rate
(LTIFR) of 0.10*, compared to 0.08 at year end and against our Group target of
0.10. We continue to make strong progress under our Stand Up for Safety
campaign, launched in August 2022, and our three-year Group Safety Strategy.
The campaign is underpinned by our company-wide principles of Safe to Say,
Safe Choices, Safe to Stop and Safe to Learn. As we expand our investment
programme with additional contractors, we have introduced Group-wide
contractor management guidelines to improve oversight and drive consistency,
and created supply chain task forces to integrate safety into our planning.
* Employee and contractor lost time injury frequency rate per 100,000 hours
worked.
Half-year operating financial performance
Our statutory operating profit is presented on page 18 which includes the
impact of exceptional items, remeasurements, timing and the impact of deferred
tax in our UK regulated businesses (NGET and NGED) and a reconciliation to our
APMs is presented on page 61.
We achieved underlying operating profit on a continuing basis of
£2.0 billion, an increase of 14% at actual exchange rates (15% at constant
currency) versus the prior period. This was principally driven by: increased
rates in our New York businesses; higher revenues in UK Electricity
Transmission; a lower charge to the environmental provision in New York; and a
higher contribution from the ESO; partially offset by lower profits in NGV.
Underlying operating profit - continuing operations(1) At actual At constant currency
Six months ended 30 September exchange rates
(£ million) 2024 2023 % change 2023 % change
UK Electricity Transmission 724 656 10% 656 10%
UK Electricity Distribution 573 563 2% 563 2%
UK Electricity System Operator 115 34 238% 34 238%
New England 237 218 9% 211 12%
New York 288 119 142% 115 150%
National Grid Ventures 147 219 (33%) 219 (33%)
Other (38) (13) (192%) (13) (192%)
Total underlying operating profit 2,046 1,796 14% 1,785 15%
1. '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 59 to 64.
For the half year, Group capital investment for continuing operations reached
£4,603 million, £657 million higher than the prior period at
constant currency (£726 million higher at actual exchange rates). This was
principally driven by higher connection spend in UK Electricity Transmission,
and increased spend on early ASTI projects; higher spend in New York through
our Smart Path Connect and CLCPA electric projects, as well as additional gas
network spend in our LPP replacement programme; partially offset by lower
spend at Viking Link following commissioning in the prior year; and the ESO
being classified as held for sale.
Delivering a step change in infrastructure investment
As the energy transition accelerates at pace, National Grid is well positioned
to deliver the significant increase in investment that we announced in May
2024.
At our Full Year results, we made several important announcements, launching a
new phase of growth for the Company. These included:
■ a new five-year financial framework with around £60 billion of capital
investment across the Group between now and 2029;
■ a £7 billion Rights Issue, forming a key part of our comprehensive
funding plan to deliver this investment and growth;
■ a refreshed strategy, to become the pre-eminent pureplay networks
business across our jurisdictions; and
■ our intention to sell our National Grid Renewables and Grain LNG
businesses as we deliver this refreshed strategy.
During the last six months we have made good progress in delivering each of
these. In June, we successfully completed the £7 billion equity raise, one of
the largest ever rights issues by a UK listed company. National Grid
Renewables and Grain LNG are now held for sale following our announced
intention to sell both businesses; and we continue to move forward with the
significant uplift in our capital investment plan which, over the next five
years, will be almost double the investment delivered over the last five
years. This is being driven primarily by the large increase in UK investment
through our ASTI projects, as well as continued investment in our US energy
networks, including our Upstate Upgrade in New York. Through these actions, we
are positioning the Company to help deliver the energy transition in our
jurisdictions, and to deliver for both our customers and shareholders.
Group portfolio changes in the Half Year
In September, we were pleased to reach agreement with the UK government on the
terms of the sale of the ESO for an enterprise value of £630 million 3
(#_ftn3) . The transaction, which completed on 1 October, was an important
milestone for the creation of an independent National Energy System Operator
(NESO). The NESO will take on responsibility for strategic planning for Great
Britain's energy infrastructure as well as advising the government and Ofgem
on the most efficient way to achieve Great Britain's net zero goals.
It represents the conclusion of several years' collaboration between National
Grid, the government and Ofgem, with the decision to establish a 'future
system operator' as an independent public corporation brought into law through
the Energy Act 2023. Moving forward, we will partner with NESO colleagues in a
new way as they formally take on responsibility for ensuring Great Britain's
energy system is secure and affordable. There will be some services that we
will continue to deliver to the NESO under transitional service agreements.
In the same month, we were pleased to complete the sale of the final 20%
equity interest in National Gas Transmission to a consortium of long-term
infrastructure investors led by Macquarie Asset Management. This followed the
consortium exercising its option for the remaining 20% in July. The
consideration for this equity stake was on equivalent financial terms to the
original 60% transaction (acquired by the same consortium) that was completed
in January 2023, and the 20% sale completed in March 2024. We now expect
National Grid's asset base to move to around 80% electric by 2028/29, up from
60% in 2021.
Delivering the next phase of capital investment
During the half year, we delivered another record level of capital investment
for a six-month period at £4,603 million, on track to deliver around £10
billion for the full year in line with guidance and our five-year financial
framework. This has been driven principally by the significant increase in
network investment we are seeing across both our UK and US jurisdictions.
UK - progress on ASTI project delivery
During the half year, we continued to make good progress on our early ASTI
investments with construction commencing on five of our 17 projects. The five
projects are:
■ Yorkshire Green - the upgrade and reinforcement of 40 kilometres of
transmission lines in Yorkshire, including the installation of 33 new pylons
and two new substations. Site access and establishment works began in June and
continue to progress well.
■ North London reinforcement - replacing an existing 275 kV overhead line
with a 400 kV line from Pelham substation, Hertfordshire, to Waltham Cross
substation in Epping Forest, and then to Tottenham substation in Haringey.
Site establishment works began in the summer and continue to progress well,
including ground investigation works for the overhead lines.
■ Eastern Green Link 1 (EGL1) - our joint construction project with
ScottishPower Energy Networks to deliver a 2 GW HVDC cable between Torness,
Scotland, and County Durham, England, to help unlock Scotland's renewable
energy reserves. Site establishment works began in September 2024.
■ Eastern Green Link 2 (EGL2) - our joint construction project with
Scottish and Southern Energy Networks (SSEN) to construct a 2 GW HVDC cable
between Peterhead, Scotland, and Drax, England. In September, we held
simultaneous 'groundbreaking' ceremonies with SSEN at either end of the £4.3
billion project. This included the start of construction at the new Wren Hall
converter station at Drax, North Yorkshire.
■ Bramford to Twinstead - our project to reinforce part of the East Coast
transmission network through 18 kilometres of new overhead line and around 11
kilometres of underground cable. We began construction of the Twinstead Green
Grid Supply Point in September 2023. In September this year, the project
received a Development Consent Order from the Secretary of State for Energy
Security and Net Zero. We are now mobilising this work across the wider
project, having awarded Main Works Contracts to Balfour Beatty in the summer.
We are also in the final stages of procuring the supply chain for our Tilbury
to Grain infrastructure upgrade. This project involves replacing the existing
1960s Thames Cable Tunnel beneath the Thames from Tilbury to Gravesend. The
existing tunnel, which houses 400 kV transmission cables, is nearing the end
of its useful life and our proposals include the construction of a new tunnel
and cabling. Mains Works Contracts are due to be awarded later this year with
construction to start in early 2025.
UK - ASTI project consultations
During the half year, we continued to make good progress on our other ASTI
projects with public consultations held over the summer period covering eight
other ASTI projects. In total, we held 58 in-person consultations across these
projects with over 7,600 people attending those events, and we reached a
further 750 people through online webinars. As part of our wider engagement
to support these events, we sent over 250,000 targeted newsletters to the
communities potentially impacted by our proposals.
This included the statutory consultation for the two Norwich to Tilbury
projects where we are proposing to build 180 kilometres of new transmission
line to reinforce the high voltage power network in East Anglia and enable the
connection of new offshore wind generation. From 23 April through 15 July, we
ran our first stage consultation for Eastern Green Link 3 (EGL3) and Eastern
Green Link 4 (EGL4). Both projects are new offshore high voltage links between
Scotland and England which, when commissioned, will together transmit enough
electricity to supply up to four million homes. We anticipate submitting an
application for development consent to the Planning Inspectorate in 2026.
Other consultations currently underway include:
■ Brinsworth to High Marnham overhead line upgrade - to build three new
substations to support the upgrade of the existing Brinsworth to Chesterfield,
and Chesterfield to High Marnham overhead lines from Yorkshire to
Nottinghamshire.
■ Chesterfield to Willington new 400 kV line - to build a new 60-kilometre,
400 kV line between a new substation in Chesterfield and an existing
substation at Willington, South Derbyshire. The new substation at Chesterfield
to be consented as part of the Brinsworth to High Marnham upgrade project.
■ Sea Link offshore cable link - to reinforce the transmission network
between Suffolk and Kent via a new, primarily offshore, cable link. Following
our statutory consultation at the end of 2023, we undertook targeted local
consultation over the summer. We anticipate submitting an application for a
development consent order in early 2025.
■ North Humber to High Marnham new 400 kV line - to build a new 400 kV
transmission line between a new substation in Hull, East Riding of Yorkshire,
and a new substation at High Marnham in Nottinghamshire. The upgrade is
required to increase the capability of the transmission network between the
north of England and the Midlands, as well as to facilitate the connection of
proposed new offshore wind planned in the area. Following our Stage 1
consultation in 2023, we ran a 'localised' consultation between 9 July and 6
August 2024 to seek views about a potential alternative corridor between South
Wheatley and High Marnham.
UK - ASTI supply chain
Across our ASTI projects, mobilisation under the Great Grid Partnership is
progressing well. This is part of a £9 billion supply chain framework to
secure the network design and construction work to deliver nine ASTI projects
and support projects beyond 2030. As part of this, we are working with seven
strategic partners to agree on the initial allocation of work by the end of
December 2024.
Our procurement programme for HVDC and converter stations is also entering its
final stages, with contracts for the remaining offshore ASTI projects due to
be awarded in the first part of 2025. Altogether, we are confident that by the
first part of next year we will have secured the 'tier 1' supply contractors
for all 17 confirmed ASTI projects that were awarded to us in our operational
licences in 2023.
United States (New York) - Upstate Upgrade
In March 2024, we announced plans to invest more than $4 billion in
transmission network infrastructure in New York. The 'Upstate Upgrade', the
largest investment in New York's electricity transmission network for over a
century, is a collection of more than 70 transmission enhancement projects
through to 2030. In addition to delivering a modernised, stronger, and cleaner
energy network in upstate New York, these projects will also generate over
1,700 new jobs.
Progress on these projects has continued during the half year, with a further
$218 million capital investment. Our Smart Path Connect project - the rebuild
and upgrade of 110 circuit miles of 230 kV to 345 kV transmission lines in
northern New York - reached the halfway point of construction, slightly ahead
of schedule. The project remains on track for energisation in December 2025.
On our $800 million CLCPA Phase 1 investment programme, construction has
progressed well on the first stage of our substation upgrade. This also
includes projects such as Inghams to Rotterdam circuit rebuilds (111 miles) to
support 330 MW of incremental headroom capacity for renewable generation.
Our Upstate Upgrade also includes CLCPA Phase 2 investments, part of the $2.1
billion Phase 2 funding which covers 400 circuit miles of 115 kV line
rebuilds, five new substations and nine line rating upgrade projects which
support increasing our system capacity to connect additional renewable
generation. This includes our Black River to Porter circuit rebuild projects
which will upgrade approximately 172 circuit miles of our 115 kV system in
Jefferson, Lewis, and Oneida counties, and our Colton to Nicholville circuit
rebuild, which will upgrade approximately 18 miles of our 115 kV system in St.
Lawrence County.
Through this investment, total network capacity in upstate New York will be
increased supporting the interconnection of new renewable generation. During
the half-year, the Procurement and Construction RFP covering Phase 2
investments was issued to the market. This follows the awarding of engineering
contracts for transmission projects in October 2023. We continue to grow
strategic relationships with major contractors as part of our Supply Chain
Transformation programme launched in 2023, which seeks to deliver two major
outcomes with suppliers to aid becoming a 'Client of Choice'. Firstly, to
partner more closely with the supply chain to ensure our strategies and goals
are aligned; and secondly, to use our scale as a group to secure wider,
longer-term contracts with our suppliers.
UK regulatory and policy progress
We welcomed a number of developments in UK policy and regulation during the
half year. Our engagement with the new UK government has been positive,
reflecting the strength of our existing relationships as the administration
begins to make progress against the energy priorities they set out, including
the establishment of the NESO. In addition, we have also seen and welcomed
Ofgem's SSMD document that continues to recognise 'investability' as a
priority when considering the formation of new price control regulation for
RIIO-T3.
Planning and permitting reform
In July, we were pleased to see the King's Speech (which sets out the
government's legislative agenda) include expected legislation to reform the
planning system. This will help accelerate the delivery of critical
infrastructure, which National Grid has been advocating for in recent years.
In the same month, the Ministry of Housing, Communities and Local Government
(MHCLG) issued a consultation to seek views on proposed reforms to the
National Planning Policy Framework (NPPF). As part of the consultation,
proposed amendments were made to give significant weight to benefits
associated with renewable and low carbon energy generation when assessing
planning proposals.
We responded to the consultation with a number of key points, including the
need to:
■ recognise electricity network infrastructure and its role in
delivering the government's energy objectives;
■ ensure existing network assets are protected in any new grey belt
developments; and
■ recognise the importance of network upgrades and connections to
facilitate the modern, digital economy, including data centres.
The consultation closed on 24 September and we now await the government's
response.
RIIO-T3 and Sector Specific Methodology Decision
In July, Ofgem published its SSMD for our UK Electricity Transmission business
relating to the RIIO-T3 regulatory period (effective from April 2026 through
to March 2031). This follows the regulator's Sector Specific Methodology
Consultation (SSMC) in December 2023 which recognised the need to deliver
clear signals as well as certainty for investors that projects are viable,
investable and deliverable. As part of this consultation, we highlighted the
need for regulation to allow projects to move at pace, and that the financial
framework must reflect the scale of the investment we need to deliver over the
RIIO-T3 period.
Overall, we welcomed Ofgem's recognition in the SSMD that an appropriate
financial framework is required to retain and attract capital that the sector
requires as we embark on a significant step up in investment. The regulator
set out an initial cost of equity range of 4.57-6.35% which it will use as it
considers cross checks, forward-looking risks, and the need to ensure the
price control is 'investable'. Within the SSMD, Ofgem also concluded its
inflation consultation, with the introduction of a nominal return on fixed
rate debt, which will allow better matching of allowances to actual debt costs
and faster recovery of cash.
Submission of Company business plans in December 2024 is the next step of a
regulatory process that will run through to the final determination at the end
of 2025. We will include the outcomes of SSMD in our UK Electricity
Transmission business plan for RIIO-T3, and we will continue to engage
constructively with Ofgem, as well as wider stakeholders, to agree the right
policy and regulatory frameworks to deliver a net zero energy system.
Connections reform - progress across our networks
At the end of September, the transmission connection pipeline for Great
Britain stood at 552 GW, with 417 GW of this capacity contracted to connect to
our transmission network in England & Wales. We are pleased that we now
have consensus with Government, Ofgem and the NESO on the need to reduce and
reorder the connections pipeline to ensure that priority is placed on
connecting the right technologies in the right places at the right time, to
help reach the UK's net zero goals. To this end, the NESO and Ofgem continue
to work through the reform process to put in place a long-term solution.
In June 2023, the ESO recommended the implementation of the Target Model
Option Four (TMO4) designed to reform the connections process. TMO4 is based
upon a 'first ready, first connected' approach to connections, rather than the
current 'first to contract, first to connect' system. Under TMO4, new projects
would enter the connections process at a 'first gate' and would be required to
satisfy criteria to arrive at a 'second gate'. The second gate would allow the
project to obtain a queue position and a connection date.
In September, we welcomed Ofgem's open letter on connections reform which
directed the ESO and industry to consider stronger alignment between future
connection arrangements and government strategic energy plans. This is
consistent with a recommendation made by our UK Electricity Transmission
business in our response to the ESO's TMO4 consultation, and we support the
recommendation that 'strategic need' should be incorporated into the reformed
connection arrangements criteria. The NESO will use Clean Power 2030 (see
below) as a basis and plan to implement code changes to manage the connections
queue based on technology needs. During the half year, the ESO continued to
progress TMO4 with the process set to 'go live' in the second quarter of
calendar year 2025 (we anticipate an Ofgem decision on the proposals in the
first quarter).
Across our UK Electricity Distribution network, we have led the way through
the industry's Technical Limits initiative where we signed 13 offers for over
283 MW of distribution network connections, with an average acceleration in
connection date of around nine years (we were the first Distribution Network
Operator (DNO) to connect a project under this initiative). We also removed
190 projects during the half year, amounting to 3.7 GW of capacity from the
contracted connections queue. We are now focused on reallocating this capacity
through better queue management to more ready projects.
During the half year, UK Electricity Distribution chaired the TMO4 impacts
group for the Electricity Networks Association (ENA), taking a lead role in
representing DNOs. In collaboration with other group members we are developing
some further improvements to the revised connections queue management process.
In addition, UK Electricity Distribution also created an internal team
dedicated to the acceleration of connections and are updating internal
policies to enable adoption of a 'first ready, first needed, first connected'
approach.
Clean Power by 2030
In August, the government commissioned the ESO to provide "practical advice on
achieving clean power by 2030 for Great Britain". This places a requirement on
the NESO to provide a range of pathways that enables the government's clean
power 2030 goal, including different energy generation and demand mixes. Based
on these scenarios, the NESO presented a view of a number of network
reinforcements required to deliver Clean Power 2030 alongside wider analysis
such as opportunities, risks and actions needed to enable delivery of the
pathways. As part of this, the NESO has been working with DNOs to understand
how demand flexibility can be used as an effective lever to help balance a
clean energy system.
From a connections perspective, the NESO, Ofgem and government are aligned
that the CP2030 scenario will feed into the 'system need' criteria under the
NESO's new TMO4 gated process, a key enabler to rationalising the connection
pipeline (see above).
Strategic planning for energy infrastructure
In October, the UK, Scottish and Welsh governments jointly commissioned the
NESO to produce a Strategic Spatial Energy Plan (SSEP) for Great Britain. This
will take a longer-term view of a spatial strategy for energy infrastructure,
serving as a 'blueprint' from which future plans will flow, such as the
Centralised Strategic Network Plan (CSNP). The stated goal of the SSEP is "to
help accelerate and optimise the transition to clean, affordable and secure
energy across Great Britain", and while it is ultimately anticipated to cover
the whole energy system, its first iteration will focus on infrastructure for
electricity generation and storage, including relevant hydrogen assets. NESO
will publish its consultation on methodology for the SSEP later this year, and
deliver the plan in 2026.
Ofgem RIIO-ED3 Framework Consultation
On 6 November, Ofgem released its RIIO-ED3 Framework Consultation which asks
65 wide-ranging questions to help shape the next price control. All NESO
published pathways show increased electrification of demand and decentralised
renewable generation during ED3 and beyond. Ofgem stated in the framework
consultation that ensuring electricity distribution networks have the
necessary capacity is a key priority for the ED3 framework. We expect to
submit a response early in the new year.
US regulatory and policy progress
We have continued to see good regulatory and policy progress across our US
jurisdictions during the half year.
New York rate agreements and filings
On 10 April 2024, we filed a Joint Proposal with the New York Public Service
Commission (PSC) for a three-year rate settlement at our downstate gas
distribution businesses, KEDNY and KEDLI. The Joint Proposal was approved by
the Commission on 15 August. The rate agreement included funding for capital
investment of $924 million for KEDNY and $646 million for KEDLI in the first
rate year (an increase of around 30% on 2022/23), and a Return on Equity (RoE)
of 9.35% which compares to 8.8% under the prior rate settlement. It will fund
programmes necessary to modernise the gas network and continue a safe and
reliable service for our customers. In addition, it maintains a focus on
customer affordability through bill assistance programmes, and includes
initiatives to reduce methane emissions, promote non-gas alternatives, and
expand energy efficiency in support of the State's environmental goals.
On 28 May, we filed for new rates for our Niagara Mohawk (NIMO) electric and
gas distribution business in upstate New York. We requested a four-year rate
plan with a 10.0% RoE; $1.7 billion capital investment for electric, and $338
million for gas, in the first rate year; and a revenue increase of $525
million for electric and $148 million for gas, also in the first rate year. In
addition, the filing includes targeted programmes to better serve residential,
commercial and industrial customers, and enhanced energy affordability
programmes and services to enable clean energy and energy efficiency benefits
for disadvantaged communities.
On 26 September, the PSC and twelve other parties submitted responses to our
NIMO rate filing. The PSC proposed a lower increase to our revenue and capital
expenditure requirements, but also supported key elements of our filing
including a RoE of 9.5% versus our current allowed RoE of 9.0%. In addition,
the PSC supported increased funding for major and minor storms and is also
supportive of proposed investments and programmes to run the core business.
The filing continues to progress and we anticipate an outcome of the rate
filing in spring/summer 2025.
New York regulatory proceedings
In August 2024, the New York PSC initiated a proceeding to proactively
identify and develop future grid infrastructure needs to address energy loads
driven initially by transportation and building electrification. The PSC
directed New York's utility providers to submit a portfolio of urgent electric
infrastructure upgrades to address the demand from electric vehicles and
electrification of buildings. Each utility project proposal, including
National Grid's, are due to be submitted to the PSC in November 2024. The PSC
also required the New York utilities to jointly develop a long-term proactive
planning and cost recovery framework to meet continued demands from
electrification, including from industrial load and demand attributable to
economic development. The proactive planning framework is due to be submitted
to the PSC in December 2024.
Massachusetts rate orders and filings
On 30 September, the Massachusetts Department of Public Utilities (DPU) issued
a 5-year rate case order for our Massachusetts Electric business (MECO). This
follows the filing for new rates that we made in November 2023. The order was
only the second issued by the current DPU Commission following the change in
the Massachusetts administration.
One of the key features of this innovative rate order is a new capital
recovery mechanism that adjusts annually to recover MECO's increases in core
investment costs, up to a recovery cap equivalent to 3% of MECO's total annual
revenue. The tracker will reduce the time taken to recover capital spend
enabling us to earn closer to the allowed RoE moving forward. Other features
included: a RoE of 9.35%; a Performance Based Rate Mechanism to provide
inflation protection against core operations and maintenance (O&M)
expense; improved recovery of storm costs with an incremental $60 million
per year; and an earnings sharing mechanism triggered when actual RoE exceeds
100 basis points above the allowed RoE, with incremental earnings shared
75/25 between customers and the company. Additionally, the order includes
approval of the first-of-its-kind tiered low-income discount rate which is
designed to address energy burdens and promote rate equity. New rates became
effective on 1 October 2024.
Massachusetts Electric Sector Modernization Plan outcome
On 29 August, we welcomed the DPU's order approving our Electric Sector
Modernization Plan (ESMP). The proposed plan, filed with the DPU in January
2023, 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). It proposes up to
$2 billion investment over the next five years across the following areas:
network infrastructure, including upgraded power lines, transformers,
substations; technology and platforms, including new planning tools for
smarter decision making; new data and monitoring systems; and customer
programmes, including help for customers seeking to reduce their carbon
footprint and drive smart energy use.
The ESMP cost recovery mechanism will be determined in a future proceeding
that will conclude by 30 June 2025, as will the final level of investment and
projects. As a result, the ESMP start date is scheduled for 1 July 2025 for a
duration of five years, concluding 30 June 2030. All electric utilities in
Massachusetts will have an ESMP across this period and each is expected to
provide the DPU with forecasts by September 2029 for the next ESMP which is
expected to run from 2030 through 2035.
FERC regulatory proceedings
Whilst not directly applicable to the Group, in October the Federal Energy
Regulatory Commission (FERC) issued a decision to change FERC's RoE
methodology for the Midcontinent Independent System Operator (MISO) region
which lowered RoEs. Given pending cases filed at FERC over the last decade
challenging New England RoE methodology, the Group will continue to monitor
these regulatory proceedings.
Progress at National Grid Ventures (NGV)
Community Offshore Wind (COSW)
COSW, our joint venture with RWE, continues to respond to offshore wind
solicitations from the authorities in New York and New Jersey to secure
offtake contracts for the 3 GW+ seabed lease in the New York Bight.
In July 2024, COSW submitted an offtake bid for up to 1.3 GW in response to
the New Jersey Board of Public Utilities (BPU) solicitation. This was followed
in October with offtake bids of up to 2.7 GW to the New York State Energy
Research and Development Authority (NYSERDA). We await selection decisions,
expected by the end of calendar year 2024.
US NGV transmission projects
During the half year, our New York Transco joint venture submitted its 'Energy
Link NY' proposals to the New York Independent System Operator (NYISO) for the
city's Public Policy Transmission Need (NY PPTN). The project would consist of
multiple HVDC transmission links to connect over 5 GW of offshore wind to the
New York City grid network. NYISO is currently evaluating proposals from four
bidders and plans to make an award in the second half of calendar year 2025.
UK Offshore Hybrid Assets (OHAs)
We have continued to lead the way on future interconnector development and
continue to work with Ofgem to establish the regulatory regime for Offshore
Hybrid Assets (OHAs). OHAs are the next phase of interconnection, not only
linking two countries but also connecting with offshore wind generation. Our
projects, LionLink (a joint venture with TenneT), and Nautilus (a joint
venture with Elia) are two UK pilots that would fall into this asset class,
paving the way for a more efficient and interconnected North Sea grid. We
expect Ofgem to confirm the LionLink and Nautilus OHA regulatory framework
parameters by the end of this calendar year. This will enable us to progress
to a Final Investment Decision (FID) during 2027/28.
Delivering our synergy target - Electricity Distribution
Following the acquisition of UK Electricity Distribution, we have continued to
make good progress on achieving £100 million of group synergies before the
end of 2025/26. During the half year, we delivered further synergies to take
the cumulative total to £58 million, over half of our target. This has been
achieved through: (a) leveraging our increased buying power and supplier base
across the Group including bulk purchase of assets and contract optimisation;
(b) shared sites and operational delivery, where we are reviewing how we can
work collaboratively across 48 joint UK Electricity Transmission and UK
Electricity Distribution sites, with pilots at Rugeley and Willington
underway; and c) cost savings through IT and insurance initiatives.
Our responsible business commitments
National Grid has a critical role in enabling net zero and ensuring that the
benefits of the energy transition are shared with everyone. 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.
During the half year, we published our second Climate Transition Plan (CTP)
which outlines our greenhouse gas (GHG) emissions reduction targets and our
roadmap to achieve net zero by 2050. This refreshed CTP provides a credible
pathway to meet our science-based climate targets, encompassing both direct
actions and dependencies on policies, regulations and the decarbonisation of
our supply chains. It is important to note that emissions reductions will not
follow a linear trajectory, resulting in potential year-on-year fluctuations.
Combustion of oil and gas at our National Grid Generation facilities on Long
Island is a key source of our Scope 1 emissions. These assets experienced a
notable increase in generation this year, attributable to contractual
obligations with the Long Island Power Authority (LIPA), as National Grid
fulfilled a temporary surge in demand. This was due to an unplanned
maintenance outage at a third-party power plant which was brought back into
service in August. Generation running conditions are expected to remain as
normal for the remainder of the year, provided there are no other unforeseen
circumstances. We therefore expect 2024/25 scope 1 GHG emissions to be higher
than 2023/24.
SF(6) emissions from our electric equipment is another focus area of Scope 1
emissions, the majority of which (~80%) is in our UK Electricity Transmission
network. During the half year, UK Electricity Transmission made good progress
repairing leaks. Additionally, Ofgem's Strategic Innovation Fund (SIF)
recently awarded UK Electricity Transmission £8.5 million for a project to
develop a long-term strategy to reduce SF(6) dependency in consultation with
industry partners.
To help reduce our Scope 3 GHG emissions, we have continued to engage with key
strategic suppliers that form a large part of our emissions linked to the
goods and services we procure. We closely collaborate to ensure transparency
and understanding of our new Science-Based Targets. Given our involvement in
global supply chains, achieving emissions reductions in our construction
projects relies on close collaboration with suppliers.
Across the Group, our colleagues have volunteered 40,707 hours in our
communities during the half year (15,508 in the UK and 25,199 in the US).
Cumulatively, National Grid colleagues have now volunteered 220,187 hours
since the publication of the Responsible Business Charter in 2020, achieving
44% of our ten-year Group commitment of 500,000 hours.
Since the end of 2023/24, the overall Board diversity has remained at 45.5%.
Individually, the Board aspires to comprise at least one Director from a
minority ethnic background and at least 40% women. Presently, two Directors
are from an ethnic minority background but, as a result of recent changes in
Board composition, female representation currently stands at 36.4%. Given the
Board's desire to stagger the induction of new Directors, gender balance is
expected to be restored in due course. There is no change in the overall
diversity of our Group Executive since 2023/24 which stands at 53.9%. Since
year end, gender and ethnically diverse colleagues have risen from circa 7,100
to 7,400 and 5,300 to 5,600 respectively 4 (#_ftn4) .
We are pleased that our efforts to create an inclusive environment are being
recognised by third parties. National Grid has been rated one of the top 50
employers in the UK for social mobility. The Social Mobility Index (SMI) is
the leading authority on employer-led social mobility and was created to
provide annual benchmarking and assessments for UK employers. Last year, we
made good progress, moving from ranking 71 to 49; this year, we have made
significant improvements in the right direction and improved our position by a
further 7 places with a new ranking of 42.
In 2024 National Grid took part in the Workforce Disclosure Initiative for the
seventh consecutive year. We were awarded a disclosure score of 85% compared
to the sector average of 62%.
FIVE-YEAR FINANCIAL FRAMEWORK
Our five-year financial framework is based on our continuing businesses, as
defined by IFRS, Grain LNG and National Grid Renewables until these businesses
are disposed. It excludes the minority stake in National Gas Transmission,
which was sold in September 2024, and includes contributions from the ESO
until it was sold 1 October 2024. The five-year financial framework assumes
an exchange rate of £1:$1.25.
Capital investment and Group asset growth
We expect to invest around £60 billion across our energy networks and
adjacent businesses, in the UK and US, over the five-year period to 2028/29,
with Group assets trending towards £100 billion by March 2029. Of the
£60 billion investment over the five years to March 2029, around £51
billion is considered to be aligned with the principles of the EU Taxonomy
legislation as at the date of reporting.
In the UK, we expect around £23 billion of investment in UK Electricity
Transmission for asset health and anticipatory system reinforcement to
facilitate offshore generation and other new onshore system connections. This
also includes the investment across our 17 ASTI projects, as we invest in the
critical infrastructure required to enable the energy transition and a
decarbonised electricity network in the 2030s. We expect our UK Electricity
Distribution network to invest around £8 billion over the five years to
2028/29 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 £17 billion in New
York, and £11 billion in New England, over the five years to 2028/29. From
over half of our investment in the prior five-year plan going to safety
related projects in our gas networks, we now expect to invest nearly 60% in
this plan into our electricity networks, as we see a step up in investment for
renewable connections, transmission network upgrades, and digital capabilities
to enable the energy transition.
NGV has committed capex of around £1 billion over the five years to 2028/29,
including the necessary maintenance investment across the six operational
interconnectors.
With the large step up in investment, we expect to see higher Group asset
growth of around 10% CAGR through to 2028/29.
Group gearing
We remain committed to a strong, overall investment grade credit rating. We
expect to maintain credit metrics above our thresholds for our current Group
credit ratings through to at least the end of the RIIO-T3 price control
period, with current thresholds of 10% for S&P's FFO/adjusted net debt,
and 7% for Moody's RCF/adjusted net debt. Having completed the Rights Issue,
we expect regulatory gearing to be in the low 60% range by March 2025, and
then expected to trend towards the high 60% range by the end of RIIO-T3.
Group earnings growth and dividend growth
We expect our CAGR in underlying EPS to be in the 6-8% range from a 2024/25
baseline*. This includes our long-run average scrip uptake assumption of 25%
per annum, which will support our sustainable, progressive dividend policy
into the future.
We will maintain a progressive level of total dividend growing from the
2023/24 dividend. This equates to a rebased DPS of 45.26p/share for 2023/24
which we aim to grow in line with UK CPIH in keeping with the current dividend
policy (for details of our dividend policy please refer to page 22).
* For more detail on underlying EPS guidance, see the 2024/25 Forward
Guidance section.
2024/25 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 was
classified as held for sale within discontinued operations before it was sold
on 26 September 2024. The guidance includes businesses classified as held for
sale within continuing operations; namely the ESO before it was sold on 1
October 2024 as well as Grain LNG and National Grid Renewables which were
classified as held for sale on 30 September 2024.
The forward guidance contained in this statement should be reviewed, 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,
deferrable major storm costs (when greater than $100 million), timing and the
impact on underlying results of deferred tax in our UK regulated businesses
(UK Electricity Transmission and UK Electricity Distribution). The 2024/25
forward guidance assumes an exchange rate of £1:$1.30.
UK Electricity Transmission
Underlying net revenue is expected to increase by over £150 million compared
to 2023/24 primarily driven by higher allowances as a result of growing RAV,
including returns on increasing ASTI investment, and indexation. Depreciation
is expected to be up to £50 million higher in the year due to the increasing
asset base.
We expect to deliver around 100 bps of outperformance in the fourth 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
Underlying net revenue is expected to increase by around £100 million
compared to 2023/24, driven by allowances on a higher RAV following continued
investment and indexation. Depreciation is expected to offset around a third
of this increase, reflecting the increasing asset base.
In line with our target, we expect to deliver around 100-125 basis points of
outperformance in the second year of RIIO-ED2 in operational Return on Equity.
UK Electricity System Operator (ESO)
Underlying operating profit is £115 million, reflecting the contribution up
until sale on 1 October 2024.
New England
Underlying net revenue is expected to be over $270 million higher, driven by
rate increases. This is expected to be offset by around $80 million higher
depreciation as a result of the increasing asset base and $70 million other
costs, driven by continued investment and business growth.
Return on Equity for New England is expected to be slightly lower than
2023/24, which had a one-off benefit relating to the regulatory recovery of a
historical property tax matter. Excluding the one-off benefits, New England
Return on Equity is expected to modestly improve from 2023/24.
New York
Underlying net revenue is expected to be nearly $570 million higher, including
increases from new rate settlements, primarily KEDNY/KEDLI. Depreciation is
expected to be around $100 million higher, reflecting the increasing asset
base, and other costs are expected to be around $30 million lower, driven by
non-recurrence of environmental reserve increases which occurred in 2023/24
mostly offset by cost increases driven by the KEDNY/KEDLI rate case.
Return on Equity for New York is expected to be marginally improved from
2023/24 because of the KEDNY/KEDLI rate settlement.
NGV and Other activities
In NGV, we expect operating profit to be around £100 million lower than
2023/24 driven by expected lower interconnector revenues.
We also expect other activities' underlying operating loss to be greater
year-on-year by around £50 million driven by expected lower returns from our
captive insurance provider where we benefited from unusually low claims in
2023/24.
Joint Ventures and Associates
Our share of the profit after tax of joint ventures and associates is expected
to be around £30 million lower than 2023/24 as a result of lower revenues in
our joint venture interconnectors, and reflecting the classification of the
Emerald Joint Venture as held for sale from the second half.
Interest and Tax (continuing operations)
Net finance costs in 2024/25 are expected to be over £100 million lower than
2023/24 as a result of expected favourable movements on inflation linked debt
costs. Reduced costs also reflect the receipt of proceeds from the Rights
Issue.
For the full year 2024/25, the underlying effective tax rate, excluding the
share of post-tax profits from joint ventures and associates, is expected to
be around 15%. This is calculated following the new definition of underlying
earnings which excludes the impact of deferred tax on underlying results of
our UK regulated businesses (UK Electricity Transmission and UK Electricity
Distribution).
Investment, Growth and Net Debt
Overall Group capital investment for continuing operations in 2024/25 is
expected to be around £10 billion.
Group asset growth is expected to be around 10% reflecting an increase in
investment, predominantly increasing ASTI investment, offsetting lower UK RAV
indexation.
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 decrease by over
10% compared to 2023/24 principally driven by the impact of ESO's significant
2023/24 timing over-recovery reversing in 2024/25, offset by increased
underlying performance.
Net debt is expected to decrease by around £1.5 billion (from £43.6 billion
as at 31 March 2024) at a GBP:USD rate of 1.30, driven by the receipt of
proceeds from the Rights Issue largely financing our continued levels of
significant investment in critical clean energy infrastructure, with
regulatory gearing reducing to the low 60% range. The forecast reflects the
sale proceeds from the ESO disposal and the remaining 20% stake in National
Gas Transmission.
Weighted average number of shares (WAV) is expected to be approximately 4,700
million in 2024/25. This includes 929 million shares directly related to the
Rights Issue, representing the full effect of the bonus element alongside a
pro-rating of the fully subscribed shares. In accordance with IFRS, the number
of fully paid shares are calculated as the number of shares, at the
theoretical ex-rights price, that would generate the proceeds of the Rights
Issue. The bonus shares are then the remaining new shares that are expected to
be issued.
FINANCIAL REVIEW - HY 2024/25
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 59 to 64. 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 aggregate) in the year; and
(iii) the impact of deferred tax on underlying results in our UK regulated
businesses (NGET and NGED); none of which give rise to economic gains or
losses.
Financial summary for continuing operations - performance for the six months
ended 30 September
(£ million) 2024 2023 change %
Accounting profit:
Gross revenue 7,961 8,489 (6%)
Other operating income - 12 (100%)
Operating costs (6,652) (6,516) (2%)
Statutory operating profit 1,309 1,985 (34%)
Net finance costs (682) (685) -%
Share of joint ventures and associates (after tax) 57 71 (20%)
Tax (112) (307) 64%
Non-controlling interest (1) (1) -%
Statutory IFRS earnings (see financial statements note 8) 571 1,063 (46%)
Exceptional items and remeasurements (after tax) (101) (101) -%
Timing (after tax) 617 (87) 809%
Deferred tax on underlying profits in NGET and NGED 184 158 16%
Underlying earnings(1) 1,271 1,033 23%
EPS - statutory IFRS (pence) (see financial statements note 8) 12.6 26.7 (53%)
EPS - underlying(1) (pence) 28.1 25.9 8%
Interim dividend per share (pence) 15.84 19.40 (18%)
Dividend per share (rebased)(1,2) (pence) 15.84 14.98 6%
Capital investment:
Capital investment(3) 4,603 3,946 17%
1. Non-GAAP alternative performance measures (APMs). For further details and
reconciliation to GAAP measures, see 'Alternative performance
measures/non-IFRS reconciliations' on pages 59 to 64. Our definition of
underlying results was amended in to exclude the impact of deferred tax on our
underlying results in our UK regulated businesses (NGET and NGED).
Comparative amounts have been restated accordingly.
2. Dividend per share (rebased) calculated by dividing the total dividend
paid by to the total number of shares in issue following the Rights Issue.
3. Our definition of capital investment was amended in 2023/24 to align with
our statutory measure (see note 2). Comparative amounts have been restated.
Statutory IFRS earnings were £571 million in the first six months of the
year, £492 million, or 46% lower than the six months to September 2023. The
main reason for this decrease is a £942 million period-on-period adverse
swing in timing (pre-tax), with net under-recoveries of £836 million in the
first six months compared to £106 million net over-recoveries in the prior
period. In our UK Electricity System Operator (ESO) business we over-collected
by £409 million in the prior period, whereas this year we returned £479
million of prior period over-collections, resulting in a £888 million adverse
period-on-period swing. Tax on timing for the current year was £219 million
net credit (2023: £19 million net charge). The current period statutory
results include £108 million (pre-tax) net exceptional gains, comprising: a
£151 million credit representing the element of the ESO over-recovery that
would be settled through the sale process, £42 million of charges for our
major transformation programme and a £1 million movement on our US
environmental provisions. The prior period included £42 million of
(pre‑tax) net exceptional gains, comprising: a £92 million net insurance
credit in National Grid Ventures, £39 million of cost efficiency programme
expenditure and £11 million of transaction, separation and integration costs.
In the current period, tax on exceptional items was £11 million credit
(2023: £1 million charge). Statutory results were adversely impacted by
derivative remeasurements in this half year, with post-tax net losses of
£18 million (2023: £58 million post-tax net gains). The expected future
exceptional costs associated with our multi-year major transformation
programme are anticipated to be in the region of £250 million over the period
to 2028.
Underlying operating profit of £2,046 million was up 14% and underlying EPS
of 28.1p was up 8% against the prior period. This was driven by improved
performance in New York and UK Electricity Transmission and in our Commercial
Property business, partly offset by lower underlying profits in National Grid
Ventures and NG Partners. Underlying net revenues of £5,750 million were
£204 million higher compared to the prior period, driven by higher UK
regulated business revenues and increases in New England and New York rates.
Regulated controllable costs were higher on a constant currency basis, with
higher workload and inflationary increases being partly offset by efficiency
savings. Pension and other post-employment benefit costs were higher than the
prior period. Depreciation was higher from our ongoing investment programme,
partly offset by the cessation of depreciation in UK Electricity System
Operator following classification as 'held for sale'. Other costs were lower,
principally related to environmental charges booked in NY in the prior year,
partly offset by higher storm response costs, US property taxes and also
higher costs to deliver outputs as agreed with our regulators which are
offset by higher revenues. These factors resulted in underlying earnings of
£1,271 million for the first six months of 2024/25, up £238 million or
23%.
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) 2024 2023 2024 2023¹ 2024 2023¹
Statutory results 1,309 1,985 572 1,064 12.6 26.7
Exceptional items and remeasurements (99) (83) (101) (101) (2.2) (2.5)
Adjusted results 1,210 1,902 471 963 10.4 24.2
Timing 836 (106) 617 (87) 13.6 (2.3)
Deferred tax on underlying results in NGET and NGED - - 184 158 4.1 4.0
Underlying results 2,046 1,796 1,272 1,034 28.1 25.9
1. Comparative amounts for underlying results have been re-presented to
reflect the change in definition to now exclude the impact of deferred tax on
our underlying results in our UK regulated businesses (NGET and NGED).
Segmental income statement
The following tables set out the income statement on adjusted and underlying
bases.
Segmental analysis for continuing operations
Adjusted Underlying
£ million 2024 2023 change % 2024 2023 change %
UK Electricity Transmission 642 839 (23%) 724 656 10%
UK Electricity Distribution 764 476 61% 573 563 2%
UK Electricity System Operator (364) 443 (182%) 115 34 238%
New England 89 (32) 378% 237 218 9%
New York (30) (30) -% 288 119 142%
National Grid Ventures 147 219 (33%) 147 219 (33%)
Other (38) (13) (192%) (38) (13) (192%)
Total operating profit 1,210 1,902 (36%) 2,046 1,796 14%
Net finance costs (670) (711) (6%) (670) (711) (6%)
Share of post-tax results of joint ventures and associates 60 59 2% 60 59 2%
Profit before tax 600 1,250 (52%) 1,436 1,144 26%
Tax (129) (287) (55%) (164) (110) 49%
Profit after tax 471 963 (51%) 1,272 1,034 23%
EPS (pence) 10.4 24.2 (57%) 28.1 25.9 8%
UK Electricity Transmission statutory operating profit of £642 million was
down from £838 million in the prior period. The prior period included
£1 million of exceptional charges related to our cost efficiency programme.
Adjusted operating profit included £265 million unfavourable timing swings
(related to UK capital allowances legislation changes and lower incentives and
volume under-recoveries). Underlying operating profit was £724 million
compared to £656 million in the prior period. This increase was driven by
£84 million higher underlying net revenues and a net £3 million reduction
in controllable costs, partially offset by higher depreciation resulting from
the higher asset base.
UK Electricity Distribution statutory operating profit of £759 million was
up from £472 million in the prior period and included exceptional charges of
£5 million for major transformation programme costs (2023: £4 million of
transaction and integration costs). Adjusted operating profit increased by
£288 million to £764 million (2023: £476 million) and included
£278 million favourable timing swings mainly related to higher inflation
recovery and higher volumes, partly offset by recovery of pass-through costs.
Underlying operating profit increased by £10 million to £573 million
(2023: £563 million). Underlying net revenues increased by £57 million,
but were partially offset by higher controllable costs driven by increased
workload and higher depreciation due to the higher asset base.
UK Electricity System Operator made a statutory operating loss of
£213 million down from a statutory operating profit of £443 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 prior
year which are being returned to customers in the current period. This was due
to the BSUoS fixed price tariff resulting in collected revenues significantly
exceeding the balancing costs incurred during the prior period. This tariff is
set ahead of the current financial year, with the objective of the ESO
recovering the estimated system balancing costs forecast to arise in the
current period. Current year statutory results include an exceptional credit
of £151 million representing the element of the over-recovery that would be
settled through the sale process. Adjusted operating loss was £364 million
compared to £443 million adjusted operating profit in the prior period.
Underlying operating profit was £115 million compared to £34 million in
the prior period, principally as a result of the cessation of depreciation
following classification as 'held for sale' since November 2023. National Grid
ESO was sold to the UK government on 1 October 2024 for an agreed enterprise
value of £630 million.
New England statutory operating profit of £87 million was up from a
statutory operating loss of £47 million in the prior period. This included
an exceptional charge of £6 million for major transformation programme costs
(2023: £6 million as part of our cost efficiency programme and £3 million
related to the disposal of NECO), along with commodity derivative
remeasurement gains of £4 million (2023: £6 million losses). New England's
adjusted operating profit of £89 million, was £121 million favourable to
the prior period. This was principally driven by a £95 million favourable
period-on-period timing swing, mainly related to lower commodity cost
under-recoveries and the impact of energy efficiency programme cost
under-recoveries in the prior period. In-year timing under-recoveries were
£148 million (2023: £250 million under-recoveries, or £243 million
under-recoveries at constant currency). Underlying operating profit was
£237 million (2023: £218 million, or £211 million at constant currency),
due to increases in underlying net revenues of £29 million (£60 million at
constant currency) from higher rates (performance based regulation), increased
returns in wholesale networks and higher revenues from capital trackers.
Controllable costs were higher mainly as a result of inflation and increased
workload, partly offset by efficiency savings. Depreciation increased from the
higher asset base due to ongoing investment. Other costs were lower, mainly
related to lower storm costs incurred compared to the prior period.
New York statutory operating loss of £50 million was down from a statutory
operating profit of £8 million in the prior period and included an
exceptional charge of £8 million for major transformation programme costs
(2023: £9 million as part of our cost efficiency programme), net £1 million
movement on environmental provisions (treated as exceptional in 2023/24), and
commodity derivative remeasurement losses of £11 million (2023: £47 million
gains). Adjusted operating loss of £30 million in the first six months was
in line with the prior period, but included a £169 million adverse
period-on-period timing swing, primarily from an under-collection of revenues
from new rates in KEDNY and KEDLI and the return of prior year balances,
partly offset by an over-collection of revenues to recover energy efficiency
programme costs. In-year timing under-recoveries were £318 million (2023:
£149 million, or £145 million at constant currency). Underlying operating
profit was £288 million, £169 million higher than the prior period
(£173 million higher at constant currency). Underlying net revenues were
£82 million higher (£137 million higher at constant currency) principally
due to increases from the approved KEDNY and KEDLI rate case. Controllable
costs were largely flat compared to the prior period with inflationary and
workload increases being offset by efficiency savings. Environmental
provisions incurred in the prior period were not repeated in the current
period (£128 million lower at constant currency). Other costs include £50
million higher storm costs compared to the prior period.
National Grid Ventures' statutory operating profit of £145 million was down
from £310 million in the prior period mainly due to £92 million exceptional
insurance proceeds related to IFA1 fire property damages. The prior period
included £1 million of exceptional charges as part of our cost efficiency
programme. In the current period, there were £2 million of losses related to
derivative remeasurements on capacity contracts in NSL (2023: £nil). Adjusted
operating profit of £147 million was £72 million lower than the prior
period, driven by no repeat of prior year benefits in NSL (revenue cap
adjustment 'catch-up'), in Grain LNG from sale of EU carbon trading credit,
and the sale of our smart metering business; along with lower performance in
Ventures' US businesses, partly offset by higher IFA1 revenues and
commencement of the Viking Link interconnector which began operating in
December 2023. On 30 September 2024, both our Grain LNG (UK) and our National
Grid Renewables (US) businesses met the IFRS 5 criteria to be classified as
held for sale.
'Other' activities' statutory operating loss of £61 million was down from a
statutory operating profit of £39 million in the prior period. The current
period includes exceptional charges of £26 million for major transformation
programme costs (2023: £23 million charge as part of our cost efficiency
programme). The adjusted operating loss of £38 million (2023: £13 million
loss) was adverse to the prior period, due to fair value losses in
NG Partners, along with lower captive insurance profits, partly offset by
increased profits from higher site sales in our Commercial Property business.
Financing costs and tax
Net finance costs
Statutory net finance costs of £682 million were down from £685 million in
the prior period and included derivative remeasurement gains of £12 million
(2023: £26 million). Adjusted net finance costs for continuing operations of
£670 million (2023: £711 million) were £41 million, or 6% lower than the
prior period (£28 million, or 4% lower at constant currency). This was
driven by interest benefits from the £7 billion Rights Issue proceeds
received in June 2024 and lower inflation on RPI/CPI-linked debt, partly
offset by refinancing costs and a higher discount unwind on provisions.
Joint ventures and associates
The Group's share of net profits from joint ventures and associates on a
statutory basis was £57 million (2023: £71 million) and included
derivative fair value remeasurement losses of £3 million (2023:
£12 million gains). On an adjusted basis, the share of net profits from
joint ventures and associates was broadly flat at £60 million (2023:
£59 million).
Tax
The statutory tax charge for continuing operations was £112 million (2023:
£307 million) including the impact of tax on exceptional items and
remeasurements of £17 million credit (2023: £20 million charge). The
adjusted tax charge for continuing operations was £129 million (2023:
£287 million), resulting in an effective tax rate for continuing operations
(excluding profits from joint ventures and associates) of 23.9% (2023: 24.1%).
The underlying effective tax rate for continuing operations (excluding profits
from joint ventures and associates) was 11.9% (2023: 10.1%).
Our underlying tax (a non-GAAP measure) takes our adjusted tax charge and
further excludes the tax impacts on timing and major storm costs and deferred
tax in our UK regulated businesses (NGET and NGED). The underlying effective
tax rate of 11.9% is higher than the prior period (10.1%), primarily due to
the geographic profit mix of the Group and prior year adjustments, partly
offset by a higher level of investment in NGET plc resulting in increased
levels of capital allowances resulting in a larger deferred tax adjustment in
NGET plc.
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 12 to the
financial statements.
During the first six months of the year, net debt decreased to £38.5 billion,
£5.1 billion lower than at 31 March 2024. This was significantly lower as a
result of the receipt of £6.8 billion of proceeds (net of transaction costs)
from the Rights Issue in June 2024. Movements in exchange rates benefited
reported opening net debt by £1.3 billion, along with £0.7 billion of
proceeds from the sale of our 20% interest in National Gas Transmission. In
addition, cash generated from continuing operations of £2.7 billion and
dividends received on financial investments of £0.1 billion were offset by
£4.3 billion of cash outflows for capital investment (net of disposals) and
movements in financial investment outside net debt, £0.1 billion of tax
paid, £0.8 billion of interest outflows, £0.8 billion paid in dividends,
£0.1 billion of accretions on index-linked debt and other non-cash movements.
During the period we raised around £1.8 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 2024, we have £7.9 billion of committed
facilities available for general corporate purposes.
There are no significant updates relating to credit rating 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 15.84p per ordinary share
($1.0196 per American Depositary Share). The interim dividend is expected to
be paid on 14 January 2025 to shareholders on the register as at 22 November
2024.
As part of the Rights Issue, the Board announced that the overall cash
dividend would be maintained, but the additional shares from the Rights Issue
would result in a reduction to calculated dividend per share. The total
dividend to shareholders (cash plus scrip) in respect of the financial year to
31 March 2024 was 58.52p per share (£1,455 million). The total dividend of
£1,455 million spread across the higher number of shares following the Rights
Issue equates to a 'rebased' dividend per share in respect of 2023/24 of
45.26p (see calculation on page 63). The Board will aim to grow this rebased
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 2024/25
interim dividend. As previously announced, we do not expect to buy back any of
the scrip shares issued during 2024/25.
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.
£4.6 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 £4,603
million, an increase of £657 million or 17% at actual exchange rates (19% at
constant currency) compared to the first half of 2023/24.
Group capital investment (continuing operations)
Six months ended 30 September At actual exchange rates At constant currency
(£ million)
2024 2023 % change 2023 % change
UK Electricity Transmission 1,290 899 43% 899 43%
UK Electricity Distribution 647 608 6% 608 6%
UK Electricity System Operator (ESO) - 75 (100%) 75 (100%)
New England 814 789 3% 764 7%
New York 1,569 1,257 25% 1,217 29%
National Grid Ventures 279 316 (12%) 312 (11%)
Other 4 2 100% 2 100%
Total Group capital investment (continuing operations) 4,603 3,946 17% 3,877 19%
UK Electricity Transmission invested £1,290 million for the first six months
of the year, an increase of £391 million on the prior period, primarily
driven by increased spend on customer connections, early ASTI project spend,
overhead lines, and Visual Impact Provisions (VIPs); partially offset by lower
spend on the Hinkley connection project. For further information on our ASTI
projects, please refer to page 8 of the Strategic Overview. UK Electricity
Distribution invested £647 million, an increase of £39 million on the
prior period, principally driven by planned asset health work and network
reinforcement.
Investment in New York was £1,569 million, an increase of £312 million
over the period at actual exchange rates (an increase of £352 million at
constant currency). This was primarily driven by: (a) continued investment in
our electric infrastructure with a ramp up of Smart Path Connect and CLCPA
investment; and (b) gas main replacements across our gas distribution
networks, including increased leak-prone pipe replacement. For New England,
investment reached £814 million, an increase of £25 million at actual
exchange rates (an increase of £50 million at constant currency). This was
principally driven by a higher volume of asset condition projects
in electricity distribution and transmission compared to the prior period,
along with increased miles of replaced leak-prone pipe.
Investment in National Grid Ventures during the period was £279 million, a
decrease of £37 million at actual exchange rates (£33 million at constant
currency) on the prior period. The decrease was primarily through reduced
expenditure on Viking Link following the commissioning of the asset, offset by
spend on Grain LNG for the Cap25 capacity expansion programme and NG
Renewables projects.
HALF-YEAR BUSINESS REVIEW
UK ELECTRICITY TRANSMISSION
■ Capital expenditure reached £1,290 million, up £391 million on the
prior period. This increase was primarily driven by increased spend on
customer connections, early ASTI projects, overhead lines and Visual Impact
Provisions (VIPs), partially offset by lower spend on the Hinkley connection
project.
■ Main capital investment projects remain on track, including:
■ London Power Tunnels 2 (LPT2) - the first of six circuits went live in
August (Hurst-Crayford); significant progress made on the first fully
SF(6)-free substation build at Bengeworth Road; cable installation in tunnels
progressing well with works underway across all six circuit sections; over 1.3
million hours worked without a Lost Time Injury.
■ Hinkley Point C connection - majority of construction works on course
to be completed by September 2025.
■ VIPs - Dorset and Peak District East VIPs now energised; Snowdonia and
Cotswolds VIPs progressing; over 1,000,000 hours now worked without a Lost
Time Injury.
■ On course to connect a further 4.5 GW of new projects to the
transmission network in 2024/25, versus the 3.4 GW delivered in 2023/24.
■ Targeting delivery of the Sofia Offshore Wind Farm (a further 1.2 GW)
by the end of the financial year.
■ Connected the 100 MW TagEnergy battery storage project in North
Yorkshire, the largest transmission connected Battery Energy Storage System
(BESS) in the UK.
■ Connected the Greenlink interconnector at Pembroke, Wales, a HVDC link
owned by Partners Group and operated by the Irish electricity grid operator,
EirGrid.
■ Continued to accelerate distributed connections, working with the ENA
and all DNOs on the Technical Limits initiative (see page 11 of the Strategic
Overview), aimed at releasing capacity for distribution networks to offer
potential accelerated connections to customers:
■ By summer 2024, this had enabled close to 30 GW of capacity to be
offered.
■ This equated to 250 projects being offered accelerations by DNOs with
an average acceleration of 7.7 years.
■ Delivered a 27% reduction in SF(6) emissions compared to the prior
period through active intervention to fix and repair leaks over the second
half of last year and this half year.
For further information on UK Electricity Transmission regulatory and
connection progress, please refer to the Strategic Overview section, pages 10
to 11.
UK ELECTRICITY DISTRIBUTION
■ Capital expenditure reached £647 million, £39 million higher than
the prior period principally driven by planned asset health work, new
connections and network reinforcement.
■ £58 million of cumulative synergy benefits have now been delivered
across the Group as a result of the UK Electricity Distribution acquisition.
■ Secured additional allowances through both the RIIO-ED1 'closeout'
process for specified street works costs, and through RIIO-ED2 uncertainty
mechanisms for additional investment in network resilience and security.
■ Connected 269 MW new projects, of which 263 MW was renewable plant
(196 MW solar, 67 MW energy storage).
■ Connected 46,000 Low Carbon Technologies (LCTs), including 17,000 EV
chargers (an increase of 40% compared to the prior half year), and 8,000 heat
pumps (95% more than the prior half year).
■ Published our first annual vulnerability report, highlighting how we
delivered record benefits of more than £23 million in fuel poverty savings
in 2023/24, supporting close to 24,000 customers.
■ Published our first Distribution System Operator (DSO) report and panel
assessment as part of the new DSO Incentive for RIIO-ED2. Ofgem announced
that UK Electricity Distribution (NGED) scored 8.24/10, the second highest
score of all UK Distribution Network Operators.
■ Through the DSO, awarded flexibility contracts for operation in
2025/26, including new trials for demand turn up/generation turn down markets.
■ Maintained a high level of customer satisfaction with a score of 9/10,
and achieved 8.7/10 for major connections satisfaction.
For further information on UK Electricity Distribution regulatory and
connection progress, please refer to the Strategic Overview section, pages 10
to 11.
NEW ENGLAND
■ Capital expenditure reached £814 million, £25 million higher
(£50 million higher at constant currency) than the prior period principally
driven by a higher volume of asset condition projects in Electricity
Distribution and Transmission compared to the prior period, along with
increased miles of replaced Leak Prone Pipe (LPP).
■ LPP replacement programme continued on track with 66 miles of pipeline
replaced between the start of April and the end of September.
■ Delivered a strong storm response during the half year, particularly
for two major events in April and July that had peak customer outages of
28,000 and 18,000 respectively. We have also benefited from greater
installation of FLISR (Fault Location, Isolation and System Restoration)
across the network with 31 successful operations restoring power to more than
40,000 customers in around one minute.
■ Completed construction on our transmission lines from Medway to Brayton
Point with 760 structures installed over 50 miles over the last five years.
■ Good regulatory progress through a new five-year rate order for MECO, and
DPU approval for our ESMP as a strategic roadmap. For more information,
please see pages 12 to 13 in the Strategic Overview section.
■ Exited all remaining Transition Service Agreements for Rhode Island on
30 September.
■ All US customers (New England and New York) now on a single billing
platform following the successful migration of 2.2 million accounts from older
legacy systems.
■ Awarded funding from the Department of Energy for our proposed Brayton
Point Transmission project. If built, the project will help the region
accommodate more offshore wind power.
■ Recognised by the Northeast Gas Association for an Excellence in Safety
Award, and by the American Gas Association for our Quality Assurance Best
Practice Program (this programme carries out audits and inspections on our gas
infrastructure work and is aligned with recommended practice for safe
management of gas pipelines).
NEW YORK
■ Capital expenditure reached £1,569 million during the half year, an
increase of £312 million at actual exchange rates (£352 million at
constant currency) compared to the prior period. This was primarily driven by:
(a) continued investment in our electric infrastructure with a focus on
reinforcing the network, increasing capacity, and fulfilling our commitment to
a clean and renewable energy future with a ramp up of Smart Path Connect and
CLCPA investment; and (b) gas main replacements across our gas distribution
networks, including our LPP and LNG tank replacement programmes.
■ Of our large-scale 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 (110 circuit miles) of our Adirondack-Porter 230 kV transmission
circuits to 345 kV in Northern New York;
■ construction is ongoing on the first stage of our substation upgrade as
part of the $800 million CLCPA Phase 1 funding for transmission upgrades; and
■ we received bids in October for the procurement and construction of
transmission projects as part of the $2.1 billion CLCPA Phase 2 funding for
transmission networks and modernising the electric network.
■ LPP replacement programme continued on track with 161 miles of
pipeline replaced between the start of April and the end of September.
■ Good regulatory progress through a new three-year rate agreement for
KEDNY-KEDLI, and the ongoing NIMO rate filing process. For more information,
please refer to page 12 in the Strategic Overview section.
■ During the period, around 935,000 customers across our service
territory experienced supply interruptions due to storms or severe weather
events. Despite the increased storm activity, our average time to restore
service to 95% of the affected customers for each event remained consistent at
around 12 hours, aligning with the performance of the previous year. Compared
to the previous year, a higher number of customers experienced interruptions
(935,000 vs 375,000) despite a similar number of events (34 vs 32). However,
our restoration times for 95% of affected customers remained similar,
averaging between 9-12 hours for both years. Additionally, our New York and
New England crews provided support to other utilities including AEP,
Appalachian Power, Duke Energy and Tampa Electric in their restoration efforts
following Hurricanes Helene and Milton.
NATIONAL GRID VENTURES (NGV)
■ Lower underlying operating profit than prior year primarily due to lower
interconnector revenues (following a one-off catch up in North Sea Link (NSL)
revenues in the prior year), lower National Grid Renewables (NG Renewables)
sales as we prepare for divestment, the sale of NG Smart and carbon credits in
Grain LNG in 2023/24.
■ Capital investment reached £279 million in the half year, a decrease
of £37 million at actual exchange rates (£33 million at constant currency)
on the prior period. The decrease was primarily through reduced expenditure on
Viking Link following the commissioning of the asset, offset by spend on Grain
LNG for the Cap25 programme and NG Renewables projects.
■ Good interconnector performance during the half year:
■ On 17 October, Viking Link achieved 60 days' continuous service at
full technical capacity, meaning the link met Ofgem's 60-day test, and the
revenue floor now comes into effect under the cap and floor regime. Viking
achieved 86% availability in the period which represents a strong performance
in its first year of operation. Restrictions imposed by the Denmark system
operator remain in place, limiting capacity to 1,000 MW to Great Britain and
1,100 MW to Denmark.
■ Across our other interconnectors, availability was 84% reflecting
extended planned maintenance on BritNed and IFA, as well as an unplanned
outage on IFA2 following a converter valve fault.
■ Grain LNG continues to perform well and the expansion programme to
deliver additional LNG storage on site (Capacity 25) remains on track to be
ready for commercial operations in summer 2025. 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.
■ Continued to progress our two Offshore Hybrid Asset (OHA) pilot
projects with our European partners: LionLink to the Netherlands with TenneT;
and Nautilus to Belgium with Elia. These will combine interconnection and
offshore wind, offering strong benefits to consumers through contributions to
security of supply, facilitating decarbonisation and reduced renewable
curtailment.
■ COSW submitted offtake bids of up to 2.7 GW to NYSERDA and 1.3 GW to
the New Jersey Board of Public Utilities (BPU). We await selection decisions
by the end of the calendar year.
■ On transmission, NGV's New York Transco joint venture submitted its
Energy Link NY proposals to the NYISO for the NYC PPTN solicitation, with the
project looking to connect over 5 GW of offshore wind to the New York City
grid. We also continue to progress development of our Propel NY Energy
electric project.
■ Reached a Final Investment Decision (FID) on 217 MW of renewable
developments including Apple River and Sycamore projects in our renewable
business.
OTHER ACTIVITIES
■ Underlying operating loss was £38 million during the half year,
£25 million adverse to the prior period. This was principally driven by a
revaluation in NG Partners of one of our main investments, partially offset by
the sale of 19 sites in our remaining property portfolio.
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 60.
Alternative Performance Measures derived from IFRS
The following are terms or metrics that are reconciled to IFRS measures and
are defined on pages 59 to 64:
Net revenue and underlying net revenue
Adjusted profit measures
Underlying results
Constant currency
Timing impacts
Net debt - defined in note 12 on page 53
Rebased dividend per share.
PROVISIONAL 2024/25 FINANCIAL TIMETABLE
Date Event
7 November 2024 2024/25 half-year results
21 November 2024 Ordinary shares and ADRs go ex-dividend for 2024/25 interim dividend
22 November 2024 Record date for 2024/25 interim dividend
28 November 2024 Scrip reference price announced for 2024/25 interim dividend
12 December 2024 (5pm London time) Scrip election date for 2024/25 interim dividend
14 January 2025 2024/25 interim dividend paid to qualifying shareholders
15 May 2025 2024/25 full-year results
29 May 2025 Ordinary shares and ADRs go ex-dividend for 2024/25 final dividend
30 May 2025 Record date for 2024/25 final dividend
5 June 2025 Scrip reference price announced for 2024/25 final dividend
19 June 2025 (5pm London time) Scrip election date for 2024/25 final dividend
9 July 2025 2025 AGM
17 July 2025 2024/25 final dividend paid to qualifying shareholders
6 November 2025 2025/26 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 and decisions by governmental bodies or
regulators, including those relating to current and upcoming price controls in
the UK and rate cases in the US, as well as the future of system operation in
the UK; 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, 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, or due to counterparties being unable to deliver
physical commodities; reliability of and access to IT systems, including due
to the failure of or unauthorised access to or deliberate breaches of National
Grid's 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 support its role in the
energy transition; 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 breaches 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 announced intended
sales of its US onshore renewables business and its UK Grain LNG terminal. 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 226 to 231 of National Grid's Annual Report and
Accounts for the year ended 31 March 2024, as updated by the principal risks
and uncertainties statement on page 56 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
2024 Notes Before Exceptional Total
exceptional items and remeasurements £m
items and remeasurements £m
£m
Continuing operations
Revenue 2(a),3 7,961 - 7,961
Provision for bad and doubtful debts (81) - (81)
Other operating costs 4 (6,670) 99 (6,571)
Operating profit 2(b),4 1,210 99 1,309
Finance income 4,5 231 3 234
Finance costs 4,5 (901) (15) (916)
Share of post-tax results of joint ventures and associates 2(b),4 60 (3) 57
Profit before tax 2(b),4 600 84 684
Tax 4,7 (129) 17 (112)
Profit after tax from continuing operations 4 471 101 572
Profit after tax from discontinued operations 6 4 72 76
Total profit for the period (continuing and discontinued) 475 173 648
Attributable to:
Equity shareholders of the parent 474 173 647
Non-controlling interests 1 - 1
Earnings per share (pence)
Basic earnings per share (continuing) 8 12.6
Diluted earnings per share (continuing) 8 12.6
Basic earnings per share (continuing and discontinued) 8 14.3
Diluted earnings per share (continuing and discontinued) 8 14.2
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)¹
Basic earnings per share (continuing) 8 26.7
Diluted earnings per share (continuing) 8 26.6
Basic earnings per share (continuing and discontinued) 8 28.3
Diluted earnings per share (continuing and discontinued) 8 28.2
1. Restated to reflect the impact of the bonus element of the Rights Issue
(see note 9).
Consolidated statement of comprehensive income
for the six months ended 30 September
2024 2023
Notes £m £m
Profit after tax from continuing operations 572 1,064
Profit after tax from discontinued operations 76 65
Other comprehensive income from continuing operations
Items from continuing operations that will never be reclassified to profit or
loss:
Remeasurement gains/(losses) on pension assets and post-retirement benefit 13 51 (263)
obligations
Net losses in respect of cash flow hedging of capital expenditure (25) (2)
Tax on items that will never be reclassified to profit or loss (8) 64
Total items from continuing operations that will never be reclassified to 18 (201)
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 (799) 118
Net gains in respect of cash flow hedges 78 201
Net (losses)/gains in respect of cost of hedging (12) 40
Net gains/(losses) on investments in debt instruments measured at fair value 13 (16)
through other
comprehensive income
Tax on items that may be reclassified subsequently to profit or loss (17) (59)
Total items from continuing operations that may be reclassified subsequently (737) 284
to profit or loss
Other comprehensive (loss)/income for the period, net of tax, from continuing (719) 83
operations
Other comprehensive loss for the period, net of tax, from discontinued 6 (10) (9)
operations
Other comprehensive (loss)/income for the period, net of tax (729) 74
Total comprehensive (loss)/income for the period from continuing operations (147) 1,147
Total comprehensive income for the period from discontinued operations 6 66 56
Total comprehensive (loss)/income for the period (81) 1,203
Attributable to:
Equity shareholders of the parent
From continuing operations (147) 1,146
From discontinued operations 66 56
(81) 1,202
Non-controlling interests - 1
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 2024 493 1,298 32,066 (3,990) 29,867 25 29,892
Profit for the period - - 647 - 647 1 648
Other comprehensive income/(loss) for the period - - 38 (766) (728) (1) (729)
Total comprehensive income/(loss) for the period - - 685 (766) (81) - (81)
Rights Issue 9 135 - - 6,704 6,839 - 6,839
Transfer between reserves 9 - - 6,704 (6,704) - - -
Equity dividends 10 - - (811) - (811) - (811)
Scrip dividend-related share issue 9 (9) - - - - -
Issue of treasury shares - - 15 - 15 - 15
Transactions in own shares - - (5) - (5) - (5)
Share-based payments - - 16 - 16 - 16
Cash flow hedges transferred to the statement - - - 1 1 - 1
of financial position, net of tax
At 30 September 2024 637 1,289 38,670 (4,755) 35,841 25 35,866
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 10 - - (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
Consolidated statement of financial position
30 September 2024 31 March 2024
Notes £m £m
Non-current assets
Goodwill 9,367 9,729
Other intangible assets 2(c) 3,393 3,431
Property, plant and equipment 2(c) 69,195 68,907
Other non-current assets 850 848
Pension assets 13 2,478 2,407
Financial and other investments 795 880
Investments in joint ventures and associates 901 1,420
Derivative financial assets 11 413 324
Total non-current assets 87,392 87,946
Current assets
Inventories and current intangible assets 639 828
Trade and other receivables 2,661 3,415
Current tax assets 19 11
Financial and other investments 12 6,140 3,699
Derivative financial assets 11 145 44
Cash and cash equivalents 12 1,125 559
Assets held for sale 6 3,731 1,823
Total current assets 14,460 10,379
Total assets 101,852 98,325
Current liabilities
Borrowings 12 (2,703) (4,859)
Derivative financial liabilities 11 (419) (335)
Trade and other payables (3,969) (4,076)
Contract liabilities (91) (127)
Current tax liabilities (181) (220)
Provisions (314) (298)
Liabilities held for sale 6 (1,309) (1,474)
Total current liabilities (8,986) (11,389)
Non-current liabilities
Borrowings 12 (42,473) (42,213)
Derivative financial liabilities 11 (854) (909)
Other non-current liabilities (848) (880)
Contract liabilities (2,200) (2,119)
Deferred tax liabilities (7,357) (7,519)
Pensions and other post-retirement benefit obligations 13 (603) (593)
Provisions (2,665) (2,811)
Total non-current liabilities (57,000) (57,044)
Total liabilities (65,986) (68,433)
Net assets 35,866 29,892
Equity
Share capital 637 493
Share premium account 1,289 1,298
Retained earnings 38,670 32,066
Other equity reserves (4,755) (3,990)
Total shareholders' equity 35,841 29,867
Non-controlling interests 25 25
Total equity 35,866 29,892
Consolidated cash flow statement
for the six months ended 30 September
2024 2023
Notes £m £m
Cash flows from operating activities
Operating profit from continuing operations 2(b) 1,309 1,985
Adjustments for:
Exceptional items and remeasurements 4 (99) (83)
Other fair value movements 21 (19)
Depreciation, amortisation and impairment 2(b) 1,058 1,021
Share-based payments 16 19
Changes in working capital 429 119
Changes in provisions (30) 39
Changes in pensions and other post-retirement benefit obligations 24 27
Cash flows relating to exceptional items (38) (46)
Cash generated from operations - continuing operations 2,690 3,062
Tax paid (78) (201)
Net cash flow from operating activities - continuing operations 2,612 2,861
Net cash flow from operating activities - discontinued operations - -
Cash flows from investing activities
Purchases of intangible assets (243) (269)
Purchases of property, plant and equipment (3,985) (3,210)
Disposals of property, plant and equipment 10 18
Investments in joint ventures and associates (102) (151)
Dividends received from joint ventures, associates and other investments 71 121
Disposal of interest in the UK Gas Transmission business 6 686 -
Disposal of financial and other investments 33 65
Acquisition of financial investments (49) (32)
Contributions to National Grid Renewables and Emerald Energy Venture LLC - (5)
Net movements in short-term financial investments (2,995) 885
Interest received 162 69
Cash inflows on derivatives - 103
Cash outflows on derivatives (6) (4)
Net cash flow used in investing activities - continuing operations (6,418) (2,410)
Net cash flow from investing activities - discontinued operations 22 -
Cash flows from financing activities
Proceeds of Rights Issue 9 7,001 -
Transaction fees related to Rights Issue 9 (162) -
Proceeds from issue of treasury shares 15 20
Transactions in own shares (5) (1)
Proceeds received from loans 1,809 3,033
Repayments of loans (916) (839)
Payments of lease liabilities (75) (61)
Net movements in short-term borrowings (1,313) (444)
Cash inflows on derivatives 73 68
Cash outflows on derivatives (33) (60)
Interest paid (1,002) (779)
Dividends paid to shareholders 10 (811) (1,325)
Net cash flow from/(used in) financing activities - continuing operations 4,581 (388)
Net cash flow from financing activities - discontinued operations - -
Net increase in cash and cash equivalents 797 63
Reclassification to held for sale (166) -
Exchange movements (65) 1
Net cash and cash equivalents at start of period 559 163
Net cash and cash equivalents at end of period 1,125 227
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 2024 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 2024 and 2023, together with the audited
consolidated statement of financial position as at 31 March 2024. The half
year financial information has been prepared applying consistent accounting
policies to those applied by the Group for the year ended 31 March 2024 and
are expected to be applicable for the year ending 31 March 2025. 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 2024 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 2024, 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 2024 are aligned to those disclosed in the Annual
Report and Accounts for year ended 31 March 2024, with the following
amendments:
• in relation to the planned disposals of Grain LNG, our UK LNG business,
and National Grid Renewables Development LLC (NG Renewables), our US onshore
renewables business, judgement has been applied in concluding that the
criteria required for held for sale classification have been met (see note 6);
and
• the classification of our 20% equity investment in GasT TopCo Limited,
together with the Remaining Acquisition Agreement (RAA) over the remaining
interest, as held for sale is no longer considered to represent an area of
judgement following the disposal on 26 September 2024 (see note 6).
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 2024.
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 56) 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 (see note
6);
• adverse impacts of higher 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 2024, the Group had undrawn committed facilities available
for general corporate purposes amounting to £7.7 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.£1.8 billion of new long-term senior debt issued in the period from
1 April to 30 September 2024 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 2024 and have had a material impact on the
Group's results.
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, timing adjustments relating to revenue, certain
pass-through costs and deferred tax for our UK Electricity Transmission and UK
Electricity Distribution businesses. 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.
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 which is classified as held for sale (see
note 6).
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
(Grain LNG) and Providence, Rhode Island in the US, our electricity generation
business in the US, our electricity interconnectors in the UK and our
investment in NG Renewables, our renewables business in the US. Whilst NGV
operates outside our regulated core business, the electricity interconnectors
in the UK are subject to indirect regulation by Ofgem regarding the level of
returns they can earn. NG Renewables and Grain LNG were classified as held
for sale at 30 September 2024 (see note 6).
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 2024 when compared to
31 March 2024. 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 2024 2023
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 1,274 (92) 1,182 1,356 (19) 1,337
UK Electricity Distribution 1,166 (2) 1,164 850 (2) 848
UK Electricity System Operator 1,029 (17) 1,012 1,734 (17) 1,717
New England 1,545 - 1,545 1,441 - 1,441
New York 2,341 - 2,341 2,365 - 2,365
National Grid Ventures 650 (26) 624 666 (27) 639
Other 98 (5) 93 142 - 142
Total revenue from continuing operations 8,103 (142) 7,961 8,554 (65) 8,489
Geographical areas:
UK 3,755 4,309
US 4,206 4,180
Total revenue from continuing operations 7,961 8,489
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.
(b) Operating profit/(loss)
Before exceptional items and remeasurements Exceptional items and remeasurements After exceptional items and remeasurements
Six months ended 30 September 2024 2023 2024 2023 2024 2023
£m £m £m £m £m £m
Operating segments - continuing operations:
UK Electricity Transmission 642 839 - (1) 642 838
UK Electricity Distribution 764 476 (5) (4) 759 472
UK Electricity System Operator (364) 443 151 - (213) 443
New England 89 (32) (2) (15) 87 (47)
New York (30) (30) (20) 38 (50) 8
National Grid Ventures 147 219 (2) 91 145 310
Other (38) (13) (23) (26) (61) (39)
Total operating profit from continuing operations 1,210 1,902 99 83 1,309 1,985
Geographical areas:
UK 1,173 1,956 121 60 1,294 2,016
US 37 (54) (22) 23 15 (31)
Total operating profit from continuing operations 1,210 1,902 99 83 1,309 1,985
Before exceptional items and remeasurements Exceptional items and remeasurements After exceptional items and remeasurements
Six months ended 30 September 2024 2023 2024 2023 2024 2023
£m £m £m £m £m £m
Reconciliation to profit before tax:
Operating profit from continuing operations 1,210 1,902 99 83 1,309 1,985
Share of post-tax results of joint ventures and associates 60 59 (3) 12 57 71
Finance income 231 123 3 (8) 234 115
Finance costs (901) (834) (15) 34 (916) (800)
Total profit before tax from continuing operations 600 1,250 84 121 684 1,371
2. Segmental analysis continued
The following items are included in the total operating profit by segment:
Depreciation, amortisation and impairment 30 September 2024 30 September 2023
£m £m
Operating segments:
UK Electricity Transmission (267) (250)
UK Electricity Distribution (122) (105)
UK Electricity System Operator - (52)
New England (221) (204)
New York (351) (321)
National Grid Ventures (92) (84)
Other (5) (5)
Total (1,058) (1,021)
Asset type:
Property, plant and equipment (936) (868)
Non-current intangible assets (122) (153)
Total (1,058) (1,021)
(c) Capital investment
Capital investment represents additions to property, plant and equipment,
prepayments to suppliers to secure production capacity in relation to our
capital projects, non-current intangibles and additional equity investments in
joint ventures and associates. Segmental information used for internal
decision making was revised in the year ended 31 March 2024 to include capital
expenditure prepayments and additional equity investments in joint ventures
and associates. Capital investments exclude additions for assets or businesses
from the point they are classified as held for sale.
30 September 2024 30 September 2023¹
£m £m
Operating segments:
UK Electricity Transmission 1,290 899
UK Electricity Distribution 647 608
UK Electricity System Operator - 75
New England 814 789
New York 1,569 1,257
National Grid Ventures 279 316
Other 4 2
Total 4,603 3,946
Asset type:
Property, plant and equipment 4,200 3,413
Non-current intangible assets 196 257
Equity investments in joint ventures and associates 102 151
Capital expenditure prepayments 105 125
Total 4,603 3,946
1. Comparative amounts have been represented to reflect the change in
presentation for capital investments.
(d) Geographical analysis of non-current assets
Non-current assets by geography comprise goodwill, other intangible assets,
property, plant and equipment, investments in joint ventures and associates
and other non-current assets.
30 September 2024 31 March 2024
£m £m
Split by geographical area:
UK 40,738 40,065
US 42,968 44,270
Total 83,706 84,335
Reconciliation to total non-current assets:
Pension assets 2,478 2,407
Financial and other investments 795 880
Derivative financial assets 413 324
Non-current assets 87,392 87,946
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 2024 £m £m £m England York £m £m £m
£m £m
Revenue under IFRS 15
Transmission 1,116 - 46 46 126 430 - 1,764
Distribution - 1,113 - 1,468 2,181 - 1 4,763
System Operator - - 966 - - - - 966
Other(1) 16 49 - 4 8 43 - 120
Total IFRS 15 revenue 1,132 1,162 1,012 1,518 2,315 473 1 7,613
Other revenue
Generation - - - - - 191 - 191
Other(2) 50 2 - 27 26 (40) 92 157
Total other revenue 50 2 - 27 26 151 92 348
Total revenue from continuing operations 1,182 1,164 1,012 1,545 2,341 624 93 7,961
Geographic split of revenue for the six months ended 30 September 2024 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 1,132 1,162 1,012 - - 430 - 3,736
US - - - 1,518 2,315 43 1 3,877
Total IFRS 15 revenue 1,132 1,162 1,012 1,518 2,315 473 1 7,613
Other revenue
UK 50 2 - - - (38) 5 19
US - - - 27 26 189 87 329
Total other revenue 50 2 - 27 26 151 92 348
Total revenue from continuing operations 1,182 1,164 1,012 1,545 2,341 624 93 7,961
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 by NG Renewables which was
classified as held for sale in the period (see note 6).
2. Other revenue, recognised in accordance with accounting standards other
than IFRS 15, includes property sales by our UK commercial property business,
net fair value gains and losses in respect of investments in our National
Grid Partners business, rental income, income arising in connection with the
Transition Services Agreements in place following the sales of NECO and the UK
Gas Transmission businesses and the planned sale of the ESO, 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 2023 UK Electricity Transmission UK Electricity Distribution UK Electricity System Operator New England New York National Grid Ventures Other Total
£m £m £m £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 York National Grid Ventures Other Total
£m £m £m £m £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 by NG Renewables.
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.
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 and transformation 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. In assessing
items to exclude from adjusted profit, management uses an exceptional items
framework that has been discussed and approved by the Audit & Risk
Committee, as detailed in note 5 of the Annual Report and Accounts for the
year ended 31 March 2024.
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 gains and losses 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 2024 Exceptional items Remeasurements Total
£m £m £m
Included within operating profit from continuing operations
Provision for UK electricity balancing costs 151 - 151
Major transformation programme (42) - (42)
Changes in environmental provisions (1) - (1)
Net losses on commodity contract derivatives - (9) (9)
108 (9) 99
Included within net finance costs (note 5)
Net losses on derivative financial instruments - (15) (15)
Net gains on financial assets at fair value through profit and loss - 3 3
- (12) (12)
Included within share of post-tax results of joint ventures and associates
Net losses on financial instruments - (3) (3)
- (3) (3)
Total included within profit before tax from continuing operations 108 (24) 84
Tax on exceptional items and remeasurements 11 6 17
Total exceptional items and remeasurements after tax from 119 (18) 101
continuing operations
4. Exceptional items and remeasurements continued
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 costs(1) (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.
Provision for UK electricity balancing costs: During the year ended 31 March
2024, the ESO's operating profit increased due to a substantial over-recovery
of allowed revenues received under its regulatory framework. Under IFRS a
corresponding liability is not recognised for the return of over-recoveries as
this relates to future customers and services that have not yet been
delivered. Following legislation to enable the separation of the ESO and the
formation of the National Energy System Operator (NESO), the Group recognised
a liability of £498 million representing the element of the over-recovery
that would be settled through the sale process, as detailed in note 5 of the
Annual Report and Accounts for the year ended 31 March 2024. In the period,
the liability has been remeasured to reflect the final amount of
over-recovered revenues which will transfer through the disposal which
completed on 1 October 2024 (see note 6).
Major transformation programme: Following the announcement of our new
strategic priorities in May 2024, the Group entered into a new four-year
transformation programme designed to implement our refreshed strategy to be a
pre-eminent pureplay networks business. In the period, the Group incurred
£42 million of costs in relation to the programme. The costs recognised
primarily relate to technology implementation costs, employee costs and
professional fees incurred in delivering the programme. Whilst the costs
incurred in the six-month period do not meet the quantitative threshold to be
classified as exceptional on a standalone basis, when taken in aggregate with
the costs expected to be incurred over the duration of the programme, we have
concluded that the costs should be classified as exceptional in line with our
exceptional items policy. Estimated costs expected to be incurred in future
years are disclosed in the Financial review on page 19. The total cash outflow
for the period was £33 million.
Changes in environmental provisions: In the US, we recognise environmental
provisions related to the remediation of the Gowanus Canal, Newtown Creek and
the former manufacturing gas plant facilities previously owned or operated by
the Group or its predecessor companies. The sites are subject to both state
and federal environmental remediation laws in the US. Potential liability for
the historical contamination may be imposed on responsible parties jointly and
severally, without regard to fault, even if the activities were lawful when
they occurred. The provisions and the Group's share of estimated costs are
re-evaluated at each reporting period. During the period, following
discussions with the New York State Department of Environmental Conservation
and the Environmental Protection Agency on the scope and design of remediation
activities related to certain of our responsible sites, we have re-evaluated
our estimates of total costs and recognised net movements of £1 million in
relation to our provisions. Under the terms of our rate plans, we are entitled
to recovery of environmental clean-up costs from rate payers in future
reporting periods. Such recoveries through overall allowed revenues are not
classified as exceptional in the future periods that they occur due to the
extended duration over which such costs are recovered and the immateriality of
the recoveries in any given year.
4. Exceptional items and remeasurements continued
Cost efficiency programme: During the prior period, the Group incurred a
further £39 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 primarily related to redundancy provisions, employee costs and
professional fees incurred in delivering the programme. The total cash outflow
in relation to these costs was £28 million. The cost efficiency programme
completed in the year ended 31 March 2024, with total costs of £207 million
recognised over the duration of the programme.
Transaction, separation and integration costs: During the prior period, the
Group incurred £11 million of transaction and separation costs 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 related to legal fees,
professional fees, and employee costs. The total cash outflow in relation to
these costs for the period was £9 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 prior period, the Group recognised net
insurance claims of £92 million which were recognised as exceptional in line
with our exceptional items policy and consistent with previous related claims.
The total cash inflow for the period was £nil.
5. Finance income and costs
2024 2023
Six months ended 30 September Notes £m £m
Finance income before exceptional items and remeasurements
Interest income from financing activities 143 52
Net interest on pensions and other post-retirement benefit obligations 50 51
Other interest income 38 20
231 123
Finance costs before exceptional items and remeasurements
Interest expense on financial instruments(1) (950) (903)
Unwinding of discount on provisions and other liabilities (64) (50)
Other interest (21) (8)
Less: interest capitalised(2) 134 127
(901) (834)
Net finance costs before exceptional items and remeasurements (670) (711)
Total exceptional items and remeasurements(3) 4 (12) 26
Net finance costs including exceptional items and remeasurements (682) (685)
from continuing operations
1. Finance costs include principal accretion on inflation-linked debt of
£87 million (2023: £149 million) and income related to principal accretion
on inflation-linked swaps of £4 million (2023: £18 million expense).
2. Interest on funding attributable to assets in the course of construction
in the current period was capitalised at a rate of 4.3% (2023: 4.7%). In the
UK, capitalised interest qualifies for a current year tax deduction with tax
relief claimed of £16 million (2023: £21 million). In the US, capitalised
interest is added to the cost of property, plant and equipment and qualifies
for tax depreciation allowances.
3. Includes a net foreign exchange gain on borrowing activities, offset by
foreign exchange gains and losses 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. Once assets and
businesses are classified as held for sale, depreciation and equity accounting
ceases and the assets and businesses are remeasured 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 2024 31 March 2024
Total assets Total liabilities held for sale Net assets/(liabilities) held for sale Total assets Total liabilities held for sale Net assets/(liabilities)
held for sale £m £m held for sale £m held for sale
£m £m £m
UK Electricity System Operator 1,549 (992) 557 1,134 (1,427) (293)
National Grid Renewables 1,146 (10) 1,136 - - -
Grain LNG 1,036 (307) 729 - - -
Investment in GasT TopCo Limited - - - 689 - 689
RAA - - - - (47) (47)
Net assets/(liabilities) held for sale 3,731 (1,309) 2,422 1,823 (1,474) 349
UK Electricity System Operator
In October 2023, legislation required to enable the separation of the ESO and
the formation of the NESO, which will undertake responsibilities across both
the electricity and gas systems, was passed through Parliament. The assets and
liabilities of the ESO were consequently presented as held for sale in the
consolidated financial statements in the year ended 31 March 2024. The
disposal subsequently completed on 1 October 2024 for consideration of £630
million, subject to certain completion adjustments. The gain on disposal will
be reported in the Annual Report and Accounts for the year ended 31 March
2025.
Based on the scale and pass-through nature of the ESO, it is not considered a
separate major line of business or geographic operation under IFRS 5 for
treatment as a discontinued operation, and its disposal is not part of a
single coordinated plan being undertaken by the Group. Accordingly, the
results of the ESO have not been separately disclosed on the face of the
income statement.
The following assets and liabilities of the ESO were classified as held for
sale at 30 September 2024.
£m
Intangible assets 485
Property, plant and equipment 121
Trade and other receivables 375
Pension asset 16
Cash and cash equivalents 51
Financing derivatives 501
Total assets 1,549
Borrowings (13)
Other liabilities (632)
Provision for UK electricity balancing costs (347)
Total liabilities (992)
Net assets 557
The ESO generated profit after tax of £103 million for the period ended
30 September 2024 (2023: £455 million profit).
6. Assets held for sale and discontinued operations continued
NG Renewables and Grain LNG
The Group has previously announced its intention to sell NG Renewables, its US
onshore renewables business, and Grain LNG, its UK LNG asset. As both sales
are considered to be highly probable and expected to complete within a year,
the associated assets and liabilities have been presented as held for sale in
the consolidated statement of financial position at 30 September 2024.
However, as NG Renewables and Grain LNG do not represent separate major lines
of business or geographical operations, they have not met the criteria for
classification as discontinued operations and therefore their results for the
period are not separately disclosed on the face of the income statement.
The following assets and liabilities were classified as held for sale at
30 September 2024.
National Grid Renewables Grain LNG
£m £m
Goodwill 80 -
Other intangible assets - 5
Property, plant and equipment 90 856
Investments in joint ventures and associates 704 -
Trade and other receivables 74 47
Cash and cash equivalents 39 106
Financial investments 23 -
Other assets 136 22
Total assets 1,146 1,036
Borrowings (2) (120)
Other liabilities (8) (187)
Total liabilities (10) (307)
Net assets 1,136 729
Upon disposal of NG Renewables, the Group will also release deferred income
related to profits on previous sales to the joint venture Emerald Energy
Venture LLC which are deferred in accordance with IAS 28. In line with our
exceptional items framework, the release of the deferred income will be
classified as exceptional given the crystallisation event for the release is
the sale of the Group's interest in NG Renewables. No impairment losses were
recognised on reclassification of the NG Renewables and Grain LNG assets and
liabilities classified to held for sale. The aggregate profit after tax
for NG Renewables and Grain LNG for the period ended 30 September 2024 was
£52 million (2023: £83 million).
The UK Gas Transmission business
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. Both the investment in
GasT TopCo Limited and the FAA option were immediately classified as held for
sale and the Group has not applied equity accounting in relation to its
investment in GasT TopCo Limited.
The FAA was partially exercised by the Consortium on 11 March 2024 and the
Group disposed of 20% of the 40% interest in GasT TopCo Limited, as detailed
in note 10 of the Annual Report and Accounts for the year ended 31 March 2024.
As part of the transaction, the Group also entered into a new agreement with
the Consortium, the RAA, to replace the FAA option for the potential sale of
all or part of the remaining 20% equity interest in GasT TopCo Limited (the
Remaining Interest).
On 26 July 2024, the Consortium exercised its option under the RAA and the
disposal of the Group's remaining interest in GasT TopCo Limited completed on
26 September 2024. The total sales proceeds were £686 million and the gain
on disposal, after transaction costs, was £25 million.
6. Assets held for sale and discontinued operations continued
The disposal of the Group's Remaining Interest in GasT TopCo Limited is the
final stage of the plan to dispose of the UK Transmission business first
announced in 2021. As a result, the gain on disposal 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.
The summary income statements for the periods ended 30 September 2024 and
2023 are as follows:
Before exceptional items Exceptional items and remeasurements Total
and remeasurements
2024 2023 2024 2023 2024 2023
£m £m £m £m £m £m
Operating profit - - - - - -
Finance income 5 9 - - 5 9
Finance costs(1) - - 47 61 47 61
Profit before tax 5 9 47 61 52 70
Tax (1) (2) - (3) (1) (5)
Profit after tax from discontinued operations 4 7 47 58 51 65
Gain on disposal - - 25 - 25 -
Total profit after tax from discontinued operations 4 7 72 58 76 65
1. Exceptional finance costs include the remeasurement of the FAA option,
the FAA forward and the RAA.
The summary statements of comprehensive income are as follows:
2024 2023
£m £m
Profit after tax from discontinued operations 76 65
Other comprehensive (loss)/income from discontinued operations
Items from discontinued operations that may be reclassified subsequently to
profit or loss:
Net losses on investments in debt instruments measured at fair value through (13) (12)
other
comprehensive income
Tax on items that may be reclassified subsequently to profit or loss 3 3
Total losses from discontinued operations that may be reclassified (10) (9)
subsequently to profit or loss
Other comprehensive loss for the period, net of tax, from discontinued (10) (9)
operations
Total comprehensive income for the period from discontinued operations 66 56
7. Tax from continuing operations
The tax charge from continuing operations for the six month period ended
30 September 2024 is £112 million (2023: £307 million), and before tax on
exceptional items and remeasurements, is £129 million (2023: £287 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 21.5% (2023: 22.9%),
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, is lower than the Group's full year effective tax rate, as shown
below, primarily as a result of seasonality of earnings in the US Group.
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 2024 before exceptional items
and remeasurements was 24.1% 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 Two) 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 became effective for National
Grid from 1 April 2024. The Group has applied the mandatory exception in the
UK to recognising and disclosing information about the deferred tax assets and
liabilities related to Pillar Two income taxes in accordance with the
amendments to IAS 12 published by the IASB on 23 May 2023. The Group does not
expect there to be a material impact on our current period or future tax
charges.
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 2024 2024 2023 2023¹
£m pence £m pence
Profit after tax before exceptional items and remeasurements - continuing 470 10.4 962 24.2
Exceptional items and remeasurements after tax - continuing 101 2.2 101 2.5
Profit after tax from continuing operations attributable to the parent 571 12.6 1,063 26.7
Profit after tax before exceptional items and remeasurements - discontinued 4 0.1 7 0.2
Exceptional items and remeasurements after tax - discontinued 72 1.6 58 1.4
Profit after tax from discontinued operations attributable to the parent 76 1.7 65 1.6
Total profit after tax before exceptional items and remeasurements 474 10.5 969 24.4
Total exceptional items and remeasurements after tax 173 3.8 159 3.9
Total profit after tax attributable to the parent 647 14.3 1,128 28.3
2024 2023¹
millions millions
Weighted average number of shares - basic 4,526 3,981
1. Comparative amounts have been restated to reflect the impact of the bonus
element of the Rights Issue (see note 9).
(b) Diluted earnings per share
Earnings EPS Earnings EPS
Six months ended 30 September 2024 2024 2023 2023¹
£m pence £m pence
Profit after tax before exceptional items and remeasurements - continuing 470 10.3 962 24.1
Exceptional items and remeasurements after tax - continuing 101 2.3 101 2.5
Profit after tax from continuing operations attributable to the parent 571 12.6 1,063 26.6
Profit after tax before exceptional items and remeasurements - discontinued 4 0.1 7 0.2
Exceptional items and remeasurements after tax - discontinued 72 1.5 58 1.4
Profit after tax from discontinued operations attributable to the parent 76 1.6 65 1.6
Total profit after tax before exceptional items and remeasurements 474 10.4 969 24.3
Total exceptional items and remeasurements after tax 173 3.8 159 3.9
Total profit after tax attributable to the parent 647 14.2 1,128 28.2
2024 2023¹
millions millions
Weighted average number of shares - diluted 4,547 3,999
1. Comparative amounts have been restated to reflect the impact of the bonus
element of the Rights Issue (see note 9).
9. Rights Issue
In June 2024, the Company completed a Rights Issue to support the future
capital investment plans of the Group. The Company raised £6,839 million (net
of expenses of £162 million) through the issue of 1,085 million new ordinary
shares at 645 pence each on the basis of 7 new ordinary shares for every 24
existing ordinary shares. The issue price represented a discount of 33% to the
closing ex-div share price on 23 May 2024, the announcement date of the Rights
Issue. The structure of the Rights Issue gave rise to a merger reserve,
representing the net proceeds of the Rights Issue less the nominal value of
the new shares issued. Following the receipt of the cash proceeds through the
structure, the excess of the net proceeds over the nominal value of the share
capital issued was considered realised and has been transferred from the
merger reserve to retained earnings.
The discount element inherent in the Rights Issue is treated as a bonus issue
of shares. Basic and diluted earnings per share figures have been restated for
the comparative period, by adjusting the weighted average number of shares for
a factor of 1.0811 to reflect the bonus element of the June 2024 Rights Issue,
in accordance with IAS 33 Earnings per Share (note 8). For comparability,
dividends per share are also restated after taking account of the bonus
element of the Rights Issue, in note 10.
Allotted, called up and fully paid shares of 12(204)⁄(473) pence each:
Allotted, called-up and fully paid
Shares Nominal value
million £m
At 1 April 2024 3,967 493
Issued in Rights Issue 1,085 135
Issued during the period in lieu of dividends(1) 74 9
At 30 September 2024(2) 5,126 637
1. The issue of shares under the scrip dividend programme is considered to
be a bonus issue under the terms of the Companies Act 2006, and the nominal
value of the shares is charged to the share premium account.
2. At 30 September 2024, the Company held 241 million (31 March 2024:
247 million) of its own shares.
10. Dividends
Pence Cash Scrip
per share dividend dividend
paid £m
£m
Ordinary dividends
Final dividend in respect of the year ended 31 March 2024 39.12 811 643
Interim dividend in respect of the year ended 31 March 2024 19.40 393 320
Final dividend in respect of the year ended 31 March 2023 37.60 1,325 56
For comparability purposes the table below presents dividends per share
adjusted for a factor of 1.0811 to reflect the bonus element of the Rights
Issue:
Pence Impact of Rights Issue Pence
per share per share
(actual) (adjusted)
Ordinary dividends
Final dividend in respect of the year ended 31 March 2024 39.12 (2.93) 36.19
Interim dividend in respect of the year ended 31 March 2024 19.40 (1.46) 17.94
Final dividend in respect of the year ended 31 March 2023 37.60 (2.82) 34.78
The Directors are proposing an interim dividend of 15.84 pence per share to be
paid in respect of the year ending 31 March 2025. This would absorb
approximately £774 million of shareholders' equity.
A final dividend for the year ended 31 March 2024 of 39.12 pence per share
was paid in August 2024. The cash dividend paid was £811 million with an
additional £643 million settled via a scrip issue.
11. 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 202 of the Annual Report and Accounts for the year ended 31 March 2024.
30 September 2024 31 March 2024
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 5,589 - 406 5,995 3,084 - 483 3,567
Investments held at fair value through other comprehensive income(1) - 389 - 389 - 397 - 397
Financing derivatives - 467 53 520 - 293 40 333
Commodity contract derivatives - 34 4 38 - 35 - 35
5,589 890 463 6,942 3,084 725 523 4,332
Liabilities
Financing derivatives - (1,044) (105) (1,149) - (1,022) (104) (1,126)
Commodity contract derivatives - (102) (22) (124) - (105) (13) (118)
- (1,146) (127) (1,273) - (1,127) (117) (1,244)
Total 5,589 (256) 336 5,669 3,084 (402) 406 3,088
1. Investments held include instruments which meet the criteria of IFRS 9 or
IAS 19.
The estimated fair value of total borrowings, excluding lease liabilities,
using market values at 30 September 2024 is £41,604 million (31 March 2024:
£42,617 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.
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).
11. Fair value measurement continued
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. Out of
38 equity investments, 11 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 25
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.
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 2024 2023 2024 2023 2024 2023
£m £m £m £m £m £m
10% increase in commodity prices - - 2 15 - -
10% decrease in commodity prices - - (2) (15) - -
+10% market area price change - - 11 12 - -
-10% market area price change - - (10) (11) - -
+20 basis point increase in Limited Price Index (40) (38) - - - -
(LPI) market curve
-20 basis point decrease in LPI market curve 38 38 - - - -
+20 basis point increase between Retail Price Index (RPI) and Consumer Price 36 36 - - - -
Index (CPI)
-20 basis point decrease between RPI and CPI market curves (33) (33) - - - -
+100 basis points change in discount rate - - - - (6) (8)
-100 basis points change in discount rate - - - - 7 9
+10% change in venture capital price - - - - 26 30
-10% change in venture capital price - - - - (26) (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.
11. Fair value measurement continued
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
2024 2023 2024 2023 2024 2023 2024 2023
£m £m £m £m £m £m £m £m
At 1 April (64) (100) (13) (36) 483 433 406 297
Net gains/(losses) through the consolidated income statement for the 12 25 (19) (4) (54) 26 (61) 47
period(2,3)
Purchases - - - (10) 19 11 19 1
Settlements - - 4 7 (42) 3 (38) 10
Reclassification/transfers out of level 3⁴ - - 10 - - - 10 -
At 30 September (52) (75) (18) (43) 406 473 336 355
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. Net gains and loss are recognised within
finance income and costs in the income statement.
2. Gains of £12 million (2023: gains of £25 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 £19 million (2023: losses of £4 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. £10 million of US Commodity contract derivatives were reclassified out
of Level 3 to Level 2 in the period due to improved observability of the fair
value of these instruments.
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.
12. Net debt
Net debt is comprised as follows:
30 September 2024 31 March 2024
£m £m
Cash and cash equivalents 1,125 559
Current financial investments 6,140 3,699
Borrowings and bank overdrafts (45,176) (47,072)
Financing derivatives(1) (629) (793)
Net debt (net of related derivative financial instruments) (38,540) (43,607)
1. Includes £58 million liability (31 March 2024: £36 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 gives alignment with the presentation
of the hedged item. 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 2024 31 March 2024
Assets Liabilities Total Assets Liabilities Total
£m £m £m £m £m £m
Financing derivatives 520 (1,149) (629) 333 (1,126) (793)
Commodity contract derivatives 38 (124) (86) 35 (118) (83)
Total derivative financial instruments 558 (1,273) (715) 368 (1,244) (876)
13. Pensions and other post-retirement benefit obligations
30 September 2024 31 March 2024
£m £m
Present value of funded obligations (17,058) (17,601)
Fair value of plan assets 19,247 19,733
2,189 2,132
Present value of unfunded obligations (253) (266)
Other post-employment liabilities (61) (52)
Net defined benefit asset 1,875 1,814
Presented in consolidated statement of financial position:
Assets 2,478 2,407
Liabilities (603) (593)
1,875 1,814
Key actuarial assumptions 30 September 2024 31 March 2024
Discount rate - UK past service 5.02% 4.87%
Discount rate - US 4.90% 5.15%
Rate of increase in RPI - UK past service 2.95% 3.05%
The movement in the net pensions and other post-retirement benefit (OPEB)
obligations position in the period can be analysed as follows:
30 September 2024 30 September 2023
£m £m
Opening net defined benefit asset 1,814 1,951
Cost recognised in the income statement (29) (34)
Employer contributions 81 80
Remeasurement and foreign exchange effects recognised in the statement of 18 (257)
other comprehensive income
Other movements (9) (3)
Closing net defined benefit asset 1,875 1,737
The pension and OPEB surpluses in both the UK and the US of £1,359 million
and £1,119 million respectively (31 March 2024: £1,317 million and
£1,090 million) continue to be recognised as assets under IFRIC 14 as
explained on page 180 of the Annual Report and Accounts for the year ended
31 March 2024.
In June 2023, the UK High Court issued a ruling, which was subsequently upheld
by the Court of Appeal in July 2024, in the case of Virgin Media Limited
versus NTL Pension Trustees II Limited and others relating to the validity of
certain historical pension changes. The Group has performed its review of past
significant changes made to its UK defined benefit pension arrangements and it
has concluded that there is no financial impact from the ruling of the case.
14. Commitments and contingencies
At 30 September 2024, there were commitments for future energy purchase
agreements of £13,403 million (31 March 2024: £14,175 million) and future
capital expenditure contracted but not provided for in relation to the
acquisition of property, plant and equipment of £3,697 million (31 March
2024: £3,250 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 2024.
Legal and regulatory proceedings
Through the ordinary course of our operations, we are party to various
litigation, claims, regulatory proceedings 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.
15. 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 2024 2023 Year ended 31 March 2024
Closing rate applied at period end 1.34 1.22 1.26
Average rate applied for the period 1.30 1.25 1.26
16. Related party transactions
Related party transactions in the six months ended 30 September 2024 were
substantially the same in nature to those disclosed in note 31 of the Annual
Report and Accounts for the year ended 31 March 2024. There were no other
related party transactions in the period that have materially affected the
financial position or performance of the Group.
17. Post balance sheet events
On 1 October 2024, the Group completed the disposal of the ESO (see note 6).
The gain on disposal, which is subject to certain completion adjustments, will
be reflected in the Annual Report and Accounts for the year ended 31 March
2025.
On 31 October 2024, the Trustees of the National Grid Electricity Group of the
Electricity Supply Pension Scheme entered into a buy-in transaction of £1.7
billion covering the pensioner and dependant members of the plan. This buy-in
is a bulk annuity policy held by the Trustees and provides the income needed
to pay the pensions to the members covered by the policy. It was funded by
existing scheme assets (mainly gilts) and also included the novation of the
longevity swap policy to the insurer. IAS 19 requires that the asset value
placed on buy-in policies such as this one to be consistent with the
corresponding value of liabilities (rather than the price paid). Accordingly,
this will result in a reduction in the pension asset for the year ended 31
March 2025, with the recognition of actuarial losses within the consolidated
statement of other comprehensive income.
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 2024 (Group
Principal Risks on pages 24-30 and inherent risks on pages 226-231) were
reviewed to ensure that the disclosures remained appropriate and adequate.
Below is a summary of our key risks as at 30 September 2024:
People risks
■ Risk that we do not have, across our workforce and within our
leadership, the capability or capacity necessary to deliver on existing or
future commitments because of ineffective planning for future people needs,
insufficient development of people and failure to attract and retain people in
a competitive market for skills and talent, leading to failure to deliver on
our business goals, strategic priorities and vision to be at the heart of a
clean, fair and affordable energy future.
Financial risks
■ Risk that we are unable to fund our business efficiently as a result of a
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, including our proposed capital investment
programme.
Strategic risks
■ 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 identify and/or deliver upon the actions necessary to meet
our climate change targets and enable the wider energy transition because of
poor monitoring and response to external developments associated with
mitigating climate change, leading to legal risks or reputational impacts of
not meeting our climate change targets and in the longer-term reaching net
zero by 2050.
■ Risk in not positioning ourselves appropriately to political and societal
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, integrity and/or
availability of systems.
■ Failure to predict and respond adequately to significant energy
disruption events to our assets resulting from asset failure (including third
party interactions e.g. control systems protection etc.), climate change,
storms, attacks or other emergency events leading to significant customer
harm, lasting reputational damage with customers, regulators and politicians,
material financial losses, loss of franchise or significant damage to investor
confidence.
■ Failure to predict and respond adequately to disruptions in upstream
energy supply because of energy falling short of capacity needs leading to
challenges in balancing supply and customer demand, with adverse impacts on
customers and/or the public, reputational damage and regulatory impacts.
■ Risk of a catastrophic asset failure or bulk power system failure
because of failure of a critical asset or system, substandard operational
performance or inadequate maintenance, third-party damage and undetected
system anomalies leading to a significant public or employee safety and/or
environmental event.
■ Failure to deliver on our major capital project programme within the
required timeframes because of misalignment or lack of clarity with regulatory
expectations, unclear 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, schedule over-runs, compromised quality, 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).
By order of the Board
……………………..
……………………..
John
Pettigrew
Andy Agg
6 November
2024 6
November 2024
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 2024 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 2024 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
6 November 2024
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. For each of these we present a
reconciliation to the most directly comparable IFRS measure. We present
'constant currency' comparative period performance and capital investment by
applying the current period average exchange rate to the relevant US dollar
amounts in the comparative periods presented, to remove the year-on-year
impact of foreign exchange translation.
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 reflect 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).
2024
Six months ended 30 September Gross revenue Pass- Net revenue Timing Underlying net revenue
£m through £m £m £m
costs
£m
UK Electricity Transmission 1,274 (203) 1,071 82 1,153
UK Electricity Distribution 1,166 (95) 1,071 (191) 880
UK Electricity System Operator 1,029 (1,217) (188) 479 291
New England 1,545 (663) 882 148 1,030
New York 2,341 (869) 1,472 318 1,790
National Grid Ventures 650 - 650 - 650
Other 98 - 98 - 98
Sales between segments (142) - (142) - (142)
Total from continuing operations 7,961 (3,047) 4,914 836 5,750
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
Alternative performance measures/non-IFRS reconciliations (continued)
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 18 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 63 of the Annual Report and Accounts for the year ended
31 March 2024, 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. Underlying
results also exclude deferred tax in our UK regulated business (NGET and
NGED). Our UK regulated revenue contain an allowance for current tax, but not
for deferred tax, so excluding the IFRS deferred tax charge aligns our
underlying results APM more closely with our regulatory performance measures.
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 2024, which was $1.30 to £1.00. The weighted average rate for
the six months ended 30 September 2023, was $1.25 to £1.00. Assets and
liabilities as at 30 September 2024 have been retranslated at the closing
rate at 30 September 2024 of $1.34 to £1.00. The closing rate for the
balance sheet date 31 March 2024 was $1.26 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 2024 Statutory Exceptionals and remeasurements Adjusted Timing Major storm costs Deferred tax on underlying profits in NGET and NGED Underlying
£m £m £m £m £m £m £m
UK Electricity Transmission 642 - 642 82 - - 724
UK Electricity Distribution 759 5 764 (191) - - 573
UK Electricity System Operator (213) (151) (364) 479 - - 115
New England 87 2 89 148 - - 237
New York (50) 20 (30) 318 - - 288
National Grid Ventures 145 2 147 - - - 147
Other (61) 23 (38) - - - (38)
Total operating profit 1,309 (99) 1,210 836 - - 2,046
Net finance costs (682) 12 (670) - - - (670)
Share of post-tax results of JVs and associates 57 3 60 - - - 60
Profit before tax 684 (84) 600 836 - - 1,436
Tax (112) (17) (129) (219) - 184 (164)
Profit after tax 572 (101) 471 617 - 184 1,272
Six months ended 30 September 2023 Statutory Exceptionals and remeasurements Adjusted Timing Major storm costs Deferred tax on underlying profits in NGET and NGED Underlying(1)
£m £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 - 158 (110)
Profit after tax 1,064 (101) 963 (87) - 158 1,034
1. Prior year comparatives have been restated to reflect the change in our
underlying earnings definition to remove the deferred tax in UK regulated
businesses (NGET and NGED).
Alternative performance measures/non-IFRS reconciliations (continued)
Reconciliation of Adjusted and Underlying Profits - at constant currency
At constant currency
Six months ended 30 September 2023 Adjusted Constant currency adjustment Adjusted Timing Major storm costs Underlying(1)
at actual exchange rate
£m £m £m £m £m £m
UK Electricity Transmission 839 - 839 (183) - 656
UK Electricity Distribution 476 - 476 87 - 563
UK Electricity System Operator 443 - 443 (409) - 34
New England (32) - (32) 243 - 211
New York (30) - (30) 145 - 115
National Grid Ventures 219 - 219 - - 219
Other (13) - (13) - - (13)
Total operating profit 1,902 - 1,902 (117) - 1,785
Net finance costs (711) 13 (698) - - (698)
Share of post-tax results of JVs and associates 59 (1) 58 - - 58
Profit before tax 1,250 12 1,262 (117) - 1,145
1. Prior year comparatives have been restated to reflect the change in our
underlying earnings definition to remove the deferred tax in UK regulated
businesses (NGET and NGED).
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 2024 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 572 (1) 571 4,526 12.6
Adjusted (also referred to as Headline) 471 (1) 470 4,526 10.4
Underlying 1,272 (1) 1,271 4,526 28.1
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(2) per share
pence
Statutory 1,064 (1) 1,063 3,981 26.7
Adjusted (also referred to as Headline) 963 (1) 962 3,981 24.2
Underlying¹ 1,034 (1) 1,033 3,981 25.9
1. Prior year comparatives have been restated to reflect the change in our
underlying earnings definition to remove the deferred tax in UK regulated
businesses (NGET and NGED).
2. Comparatives have been restated to reflect the impact of the bonus
element of the Rights Issue (see note 9).
Alternative performance measures/non-IFRS reconciliations (continued)
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 2024 opening balance(2) 154 (288) 941 (441) 647 1,013
Over/(under)-recovery (82) 191 (479) (148) (318) (836)
30 September 2024 closing balance 72 (97) 462 (589) 329 177
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 2023 opening balance(2) (217) (119) 78 (381) 676 37
Over/(under)-recovery 183 (87) 409 (243) (145) 117
30 September 2023 closing balance (34) (206) 487 (624) 531 154
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 2024.
2. Opening balances have been restated to reflect the finalisation of
calculated over/(under)-recoveries in the UK and the US and also adjusted for
the regulatory time value of money impact on opening balances, where
appropriate, in the UK.
Rebased dividend per share
The table below reconciles the actual dividend per share paid with a 'rebased
dividend per share' calculated using a hypothetical assumption that all of
the additional shares from the Rights Issue existed for previous reporting
periods.
Total Number of shares Actual dividend per share Rights Issue additional shares Total number of shares (rebased) Rebased
dividend millions pence millions millions dividend
£m per share
pence
Final dividend in respect of the year ended 31 March 2024 1,454 3,717 39.12 1,085 4,802 30.28
Interim dividend in respect of the year ended 31 March 2024 713 3,676 19.40 1,085 4,761 14.98
Total dividend for the year ended 31 March 2024 2,167 n/a 58.52 1,085 n/a 45.26
Alternative performance measures/non-IFRS reconciliations (continued)
Capital investment - at constant currency
We have updated our definition of capital investment this year. 'Capital
investment' or 'investment' both refer to additions to property, plant and
equipment and intangible assets, including capital prepayments plus equity
contributions to joint ventures and associates during the period. This
measure of capital investment is aligned with how we present our segmental
information (see note 2(c) to the financial statements for further details).
References to 'capital investment' in our regulated networks include the
following segments: UK Electricity Transmission, UK Electricity Distribution,
UK Electricity System Operator (prior to classification as held for sale), New
England and New York, but exclude National Grid Ventures and 'Other'. Capital
investment measures are presented at actual exchange rates, but are also shown
on a constant currency basis to show the year-on-year comparisons excluding
any impact of foreign currency translation movements.
At actual exchange rates At constant currency
Six months ended 30 September 2024 2023 % change 2024 2023 % change
£m £m £m £m
UK Electricity Transmission 1,290 899 43 1,290 899 43
UK Electricity Distribution 647 608 6 647 608 6
UK Electricity System Operator - 75 (100) - 75 (100)
New England 814 789 3 814 764 7
New York 1,569 1,257 25 1,569 1,217 29
Capital investment (regulated networks) 4,320 3,628 19 4,320 3,563 21
National Grid Ventures 279 316 (12) 279 312 (11)
Other 4 2 100 4 2 100
Group capital investment - total 4,603 3,946 17 4,603 3,877 19
1 (#_ftnref1) Subject to customary closing adjustments, including timing
differences.
2 (#_ftnref2) All figures exclude ESO employees. As at 31 March 2024,
Group gender and ethnically diverse headcount inclusive of ESO was circa 7,700
and 5,800, respectively.
3 (#_ftnref3) Subject to customary closing adjustments, including timing
differences.
4 (#_ftnref4) All figures exclude ESO employees. As at 31 March 2024,
Group gender and ethnically diverse headcount inclusive of ESO was circa 7,700
and 5,800, respectively.
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