NG.focus - National Grid: Investors
NG.focus Balanced portfolio provides asset growth and dividend security Investor Relations | May 2015 Portfolio evolution Current portfolio of businesses: One of the world’s largest public owned utilities focused on transmission and distribution activities in electricity and gas in both the United Kingdom and the United States. We play a vital role in connecting millions of people to the energy they use, safely, reliably and efficiently. ¾ delivers appropriate balance of yield and growth Other ¾ maintains strong balance sheet with minimal scrip financing ¾ supports growing dividend ET US Asset growth Strategy discussions focus on evaluating the future portfolio, ensuring we have the right assets to deliver this sustainable, dividend-led investment proposition National Grid’s role in the UK GT 3% GD 12% 0% Electricity generators Gas producers and importers National Grid Electricity Transmission National Grid Gas Transmission Regional electricity distribution networks 11% Nominal returns (60/40 capital structure) National Grid’s role in the US Gas distribution networks Electricity generators NG Electricity Transmission National Grid Gas Distribution Gas producers and importers Other electricity transmission National Grid Electricity Distribution Gas transmission National Grid Gas Distribution Energy suppliers Commercial and domestic customers Commercial and domestic customers On track to deliver sustainable future performance Investment case underpinned by the responsible way we do business Focus on areas of material impact: Regulated assets £37.0bn (Total Group assets £40.6bn) Our priorities US ¾ Efficiency and process excellence UK 69% US ¾ Updated cost allowances ¾ Safety including suppliers ¾ Network reliability Electricity ¾ Customer satisfaction ¾ Employee engagement ¾ Greenhouse gas emissions 31% 31 March 2015 UK ¾ Deliver outperformance within RIIO framework ¾ Workforce diversity Additional measures from 2016: ¾ Community engagement ¾ Education, skills and capabilities 31% Group ¾ Priority remains delivery of attractive total returns for shareholders Reviewed non-material areas: ¾ Water usage Important notice This document contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include information with respect to National Grid’s financial condition, its results of operations and businesses, strategy, plans and objectives. Words such as ‘aims’, ‘anticipates’, ‘expects’, ‘should’, ‘intends’, ‘plans’, ‘believes’, ‘outlook’, ‘seeks’, ‘estimates’, ‘targets’, ‘may’, ‘will’, ‘continue’, ‘project’ and similar expressions, as well as statements in the future tense, identify forward-looking statements. Furthermore, this document, which is provided for information only, does not constitute summary financial statements and does not contain sufficient information to allow for as full an understanding of the results and state of affairs of National Grid, including the principal risks and uncertainties facing National Grid, as would be provided by the full Annual Report and Accounts, including in particular the Strategic Report section and the ‘Risk factors’ section of National Grid's most recent Annual Report and Accounts. Copies of the most recent Annual Report and Accounts are available online at www.nationalgrid.com or from Capita Registrars. Except as may be required by law or regulation, National Grid undertakes no obligation to update any of its forward-looking statements, which speak only as of the date of this document. The content of any website references herein do not form part of this document. Gas 15% Gas 23% Transmission (and other US FERC assets) 4% Gas 14% Electricity 13% Distribution Investment proposition We aim to be a low risk business focused on generating shareholder value through both dividends and asset/equity growth by investing in essential assets under predominately regulated market conditions to service long-term sustainable consumer-led demands Attractions of being a regulated network utility ¾ Dividend consistency underpinned by regulatory protection ¾ Protection from generation and supply exposures and margins ¾ Macro-economic protection through bad debt trackers, credit protection, inflation linked revenues and price control ‘re-openers’ ¾ Increasing use of revenue decoupling Strengths of National Grid ¾ Balance of activities between the UK and US, Electricity and Gas, Transmission and Distribution ¾ Stable regulatory environments, 95%+ regulated revenues ¾ Local expertise and global scale ¾ 5%+ growth profile with strong transmission exposure ¾ Central role in UK energy market Further information Andy Mead Senior Investor Relations Officer T +44 (0)20 7004 3166 M +44 (0)7752 890787 andy.mead@nationalgrid.com George Laskaris US Investor Relations Director T +1 929 324 4170 M +1 917 375 0989 george.laskaris@nationalgrid.com Victoria Davies Investor Relations Officer T +44 (0)20 7004 3171 M +44 (0)7771 973447 victoria.davies@nationalgrid.com Mike Ioanilli Investor Relations Manager T +44 (0)20 7004 3006 M +44 (0)7789 878784 michael.ioanilli@nationalgrid.com Tom Hull Investor Relations Manager M +1 917 524 4099 tom.hull@nationalgrid.com Richard Foster Investor Relations Manager T +44 (0)207 004 3169 M +44 (0)7768 294017 richard.foster1@nationalgrid.com John Dawson Director of Investor Relations T +44 (0)20 7004 3170 M +44 (0)7810 831944 john.dawson@nationalgrid.com Download our Investor Relations app free from the App Store @nationalgridIR National Grid plc 1–3 Strand London WC2N 5EH United Kingdom www.nationalgrid.com London Stock Exchange NG. New York Stock Exchange (ADR) NGG Strong business unit performance underlies group performance UK returns Base return 2014/15 + Totex incentive Other incentives + + Additional allowances = Strong balance sheet enables growth and a secure dividend Operational return on equity Regulated asset value Operating profit 10.2% 70bps 210bps 100bps 14.0% £11.3bn £1.2bn ~30% RPI linked equity ¾ Appropriate level of debt funding for strong credit ratings UK Electricity Transmission March 2015 Appropriate mix of debt and equity financing ¾ ~60/40 debt to equity split, in-line with regulatory assumption ~40% ¾ Retained cash flow (RCF) to net debt above 9% ¾ Strong single A credit rating for UK operating companies. and majority of US operating companies; NG plc rated BBB+ Assets Debt £40.6bn £23.9bn ¾ Scrip dividend and share buyback provides flexibility for UK Gas Transmission 10.0% UK Gas Distribution (40)bps 9.9% 220bps 240bps 230bps 60bps £5.6bn 14.2% 10bps £8.5bn 12.9% £0.4bn ~10% floating rate growth while minimising share dilution ¾ Global treasury operations deliver financing benefits ~60% fixed rate ~60% debt £0.8bn Asset and dividend growth drive shareholder value Electricity Transmission Gas Transmission Regulation and performance ¾ RIIO price control provides regulatory clarity through 2021 Base returns Gas Distribution 2014/15 Dividend Total shareholder return (TSR) ¾ Single regulatory body ¾ Increased incentives to deliver innovative and efficient 14.2% 14.0% capital investments benefitting customers and shareholders ¾ Cost allowances and revenues linked to RPI 12.9% £0 + ¾ Efficiencies remunerated in part through additional growth £25.4bn Half year dividend 35% of prior full year dividend + 2014 FERC US Regulated Rate base FERC Rhode Island Massachusetts 10.4% 6.2% 8.2% $2.4bn $1.1bn $3.7bn $10.0bn Mass Gas KEDNY KEDLI Mass Elec 11.5% p 45 40 35 30 25 20 15 2014/15 Base case asset growth of ~5% ¾ £2bn UK investment p.a. ¾ $2bn US investment p.a. 2013/14 Group performance Upside of 6%+ ¾ Accelerated UK load related growth ¾ US gas growth/network modernisation ¾ Additional business development 2012/13 Post tax share Dividend per share 2011/12 Joint ventures UK & US asset growth 9.7% average allowed return $17.2bn Metering Other activities = 2010/11 $0 = dividend yield + growth in the per share value of shareholders’ equity 2009/10 4.6% total shareholder return ¾ Portfolio evolution 2008/09 6.5% + £1.2bn ¾ Hybrid debt 42.87p 2007/08 7.8% Full year dividend Policy to grow at least in line with RPI inflation 2006/07 8.5% $17.2bn ¾ Scrip dividend = 2005/06 9.0% 8.4% Rate base Operating profit Regulation and performance ¾ Jurisdictional operating model aligned with four regulatory bodies ¾ ~50/50 capital structure assumed by regulator ¾ Nominal returns provide faster recovery of investment ¾ Flexible filing timetables ¾ $2.8bn of other regulated assets and working capital ¾ Ability to file for capital rate case amendments Allowed returns NiMo Gas 8.3% NiMo Electric New York 11.5% Narragansett Gas 11.6% Narragansett Electric 9.5% Operational return on equity Capital allocation decisions enhance TSR through: ¾ Investment in additional growth opportunities ¾ Share repurchase 28.16p Final dividend = US returns Core regulated asset growth, dividend and A- credit ratings represent priorities for allocation of capital 14.71p £160m + + Property Grain LNG £28m BritNed Operating profit £3.9bn + £72m £31m French Interconnector £103m Millennium EPS + = Other £(164)m £9m Iroquois Return on equity 58.1p 11.8% Operating profit £199m £7m Total Group assets £40.6bn Key performance indicators focus management on efficient investment and profitability 2014/15 Value added Captures total return per share created on an operational basis Asset growth £1,125m + + Dividend cash cost net of scrip and share buybacks £1,606m − − Change in net debt and goodwill £1,046m excluding FX impact = Value added = £1,685m Return on equity (RoE) 10.8% 2010/11 11.3% 11.7% 11.4% 11.8% 2011/12* 2012/13* 2013/14 2014/15 44.7p/share * Excluding major storms
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