National Grid plc · LSE:NG.
National Grid — National Grid Transco — BNP Paribas Utility Conference (March 2005)
25 slides from National Grid's conference presentation, Mar 11, 2005
Slide 1: National Grid Transco plc BNP Paribas Utility Conference
National Grid Transco plc BNP Paribas Utility Conference Malcolm Cooper, Group Treasurer March 11th 2005
Slide 2: Cautionary Statement
Cautionary Statement This material is being furnished to you solely for your information and may not be reproduced or redistributed to any other person. This document is for distribution in the United Kingdom only by or with the approval of an authorised person or to persons who are of a kind descri
Slide 3: Introduction
Introduction · National Grid Transco Overview · Structure of National Grid Transco businesses · Review of key businesses Shape of the Group · Transco 31/03/04 · National Grid Company (NGC) 40% Electricity 33% & gas · National Grid USA (NG USA) UK gas transmission distribution · Capital Structure · B
Slide 4: National Grid Transco - overview
National Grid Transco - overview · Strategic Focus: Asset based network provider · Driving world class performance · Managing regulation · 3 main businesses, all regulated, tend to provide stable financial environment · Transco: regional economic monopoly on gas transportation in Great Britain · NGC
Slide 5: Business risk profile
Business risk profile · Operating profits derived mainly from regulated utility businesses in GB & US · Low risk profile, stable, cash generative earnings · Non utility businesses focused in areas of property, metering, interconnectors and wireless infrastructure. · Stable regulated utility business
Slide 6: Results for 6 months ending 30 September 2004
Results for 6 months ending 30 September 2004 · Operating profits* up 2% · US cost reductions of £25m · Strong earnings · PBT up 6% · EPS up 10% · Net debt increased from £12.6bn at 31st March to £14.5bn at 30th September Net debt at 30th September 2003: £13.92 bn Restated to 30th September 2004 £/$
Slide 7: Summary corporate structure
Summary corporate structure Gross debt at 30 September 2004 €600m bonds due 2018 €500m bonds due 2020 National Grid Transco plc (£1.7bn) €500m bonds due 2008 (issued March 2005) €500m bonds due 2006 National Grid USA NGG Finance National Grid Holdings One (£1.9bn) in US group (guaranteed) (£1.3bn) €
Slide 8: UK regulated operations
UK regulated operations · Transco plc (“Transco”) & Transco Holdings plc (“TH”) · Transco owns and operates majority of gas transportation system in Great Britain - transmission and distribution · Also owns metering and LNG storage assets · Expected sale of distribution networks · National Grid Comp
Slide 9: UK regulatory environment - background
UK regulatory environment - background · High degree of economic regulation, under GEMA, (the Gas and Electricity Markets Authority) which directs Ofgem · Subject to 5 year regulatory reviews - to set prices and form of control. Revenues based on forecasts of efficient operating and capital costs pl
Slide 10: Regulatory 'ring-fence'/licence conditions
Regulatory ‘ring-fence’/licence conditions · Restriction on non-licensed businesses operated · Ensure availability of sufficient managerial and financial resources · Pursue all reasonable endeavours to maintain an investment grade credit rating · Restrictions on intra-group lending or guarantees by
Slide 11: Transco transmission and distribution business
Transco transmission and distribution business · RAV £12.8bn out of Transco total of Regional gas distribution networks and national transmission system £14.2bn (as at March 2004 ) · remainder relates to metering business Scotland St Fergus · National Transmission System (NTS) (main pipeline down ba
Slide 12: Agreed sale of distribution networks
Agreed sale of distribution networks · Agreed sale of up to 4 DNs Scotland · Combined RAV c.£4.9bn (Ofgem Mar 04) · Cash proceeds £5,787m North of England · Liabilities transferred £133m UK Distribution · Total enterprise value £5,920m Wales and the West · Premium to Ofgem 04 RAV 20.2% South of Engl
Slide 13: National Grid Company - high voltage electricity transmission
National Grid Company - revenues earned from high voltage electricity transmission · Monopoly transmission business covers · Strong regulatory ring-fence imposed by England and Wales Ofgem · No distribution · Single management unit with Transco transmission · Transmission Owner (TO) · Ownership, mai
Slide 14: National Grid USA
National Grid USA · Long term incentive–based rate plans · 20–year incentive based regulatory deals negotiated in Massachusetts and Rhode Island (until 2019 ) · 10–year incentive based rate settlement in New York (until 2011) · No commodity risk MAINE · 3.3 million electric and 500,000 gas customers
Slide 15: US regulatory environment SEC restrictions
US regulatory environment SEC restrictions · 30% consolidated capitalisation ratio required for: · NGT (38.3% at 30 September 2004) · NG USA and US operating utility affiliates · NGT to maintain a long term investment grade credit rating · Aggregate investment (equity, loans, guarantees) by the enti
Slide 16: US electricity transmission
US electricity transmission Northeast transmission assets · Member of New England RTO · Filing made Autumn 2003 - benefits through FERC approach GridAmerica - operations in the Midwest NIPSCO · Operational since October 1, 2003 AMEREN ➤ ATSI/FE · Managing member of the first multi- system ITC · Focu
Slide 17: Non-regulated businesses
Non-regulated businesses · Wireless infrastructure · Interconnectors – Combination of Gridcom UK & Crown – Existing links from England to France and Castle acquisition makes NGT principal Scotland independent mobile towers owner and – Basslink interconnector from Tasmania to operator in the UK mainl
Slide 18: Employee pension schemes
Employee pension schemes · Lattice Group scheme · Actuarial review as at March 2003 resulted in a post-tax funding deficit of £615m · Annual assessment at March 2004 shows a funding deficit of £400m -£500m net of tax · Defined benefit section now closed; defined contribution section now available fo
Slide 19: National Grid Transco group capital structure
National Grid Transco group capital structure · Net debt at 30/9/2004: £14.5bn · Transco Holdings/Transco: £7.1bn* – September 2004 gearing (debt/RAV) ~49% – Ofgem assume 62.5% gearing (debt/RAV) for Transco · National Grid Company: £3.1bn – September 2004 gearing (debt/RAV) ~60% – Ofgem assume 60-7
Slide 20: UK company borrowing facilities
UK company borrowing facilities · Transco plc · £1.5 billion undrawn committed bank lines - minimal covenants · €7 billion EMTN programme, €3 bn unissued at 30/09/04 · Short-term funding programmes: USCP $2.5 billion - $1.7bn at 30/09/04; ECP $1.25 billion - £684m outstanding at 30/09/04 · National
Slide 21: Dividend policy
Dividend policy · At the same time as the sale of networks was announced, NGT Board announced that conditional on the sales process it intends to increase dividend for 2004/05 by 20% · National Grid Transco aims to increase dividends by 7% nominal per annum out to March 2008 · £2bn return of capital
Slide 22: Debt repurchase
Debt repurchase · DN disposal will leave cash of c. £3.8bn after return of capital of £2bn Debt Maturity profile £m · Expect to repay around £2.3bn of debt in Transco/TH 800 · Anticipate ~£1.7bn of CP outstanding in 700 Transco when the proceeds are received 600 · Balance c. £600m 500 US £m 400 NGT/
Slide 23: Rating agency announcements
Rating agency announcements · Meetings with all 3 agencies took place in November 2004 · Fitch · affirmed ratings of Transco (A) and Transco Holdings (A -) (both stable) at time of announcement of network sales and again in November 2004. · Moody’s · affirmed ratings of NGT (Baa1) (stable), NGC (A2)
Slide 24: Summary
Summary · Transco plc and National Grid Company plc have economic monopolies with a high level of regulation · Disciplined M&A and portfolio management approach · Low risk profile, stable, cash generative earnings · Expected significant cash inflow from network sales - limited further issuance expec
Slide 25: Treasury contacts
Treasury contacts · Malcolm Cooper (Group Treasurer) D: +44 (0) 20 7004 3340 [email protected] · Andrew Kluth (Assistant Treasurer, Capital Markets) D: +44 (0) 20 7004 3365 [email protected] · Andy Mead (Manager, Corporate Banking) +44 (0) 20 7004 3369 [email protected] · Davi
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