National Grid Plc · LSE:NG.
National Grid — FY2016/17 Earnings Presentation
68 slides from National Grid's earnings presentation, May 18, 2017
Slide 1: 2016/17 Full Year Results
nationalgrid 2016/17 Full Year Results 18 May 2017
Slide 2: Forward-looking statements
This presentation 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 1
Slide 3: John Pettigrew / Andrew Bonfield
John Pettigrew Andrew Bonfield John Pettigrew 3 2016/17 Full Year Results May 2017
Slide 4: 4 2016/17 Full Year Results May 2017
4 2016/17 Full Year Results May 2017
Slide 5: Safety plans across the Group to improve performance
Safety plans across the Group to improve performance Safety is embedded in our culture Lost time injury frequency rate of 0.09 5 2016/17 Full Year Results May 2017
Slide 6: FY 2016/17 financial performance
FY 2016/17 financial performance nationalgrid FY16 £4.1bn FY16 43.34p Total performance, including results from UK Gas Distribution Capital investment includes investment in JVs (excluding equity contributions to St Wiliam property JV) Adjusted results, excluding exceptional items and remeasurements
Slide 7: Strong reliability in the UK
Strong reliability in the UK US reliability performance reflects increased investment Storm response stands up to challenging weather 7 ~~ 2016/17 Full Year Results May 2017
Slide 8: UK Gas Distribution sale and returning £4 billion to shareholders
8 UK Gas Distribution sale and returning £4 billion to shareholders 2016/17 Full Year Results May 2017 US rate filings supporting improved performance and increased investment NIAGARA | MOHAWK | POWER. — -
Slide 9: Large, complex transaction
9 Large, complex transaction Premium valuation secured to realise value for shareholders Returning £4bn to shareholders Potential to secure further value in the future through 14% option Portfolio rebalanced towards higher growth 2016/17 Full Year Results May 2017
Slide 10: US rate filings supporting improved performance
US rate filings supporting nationalgrid improved performance = Three rate filings successfully completed = Increased levels of funded investment drive strong US growth = New rates for ~40% of rate base start to support improved performance - Achieved US RoE of 8.2% 10 2016/17 Full Year Results May 2
Slide 11: £460m in customer savings generated under RIIO
£460m in customer savings generated under RIlO through efficiency and innovation Strong operational performance drives outperformance above base return 300 basis points Mid-period review complete Further clarity on System Operator role 11 2016/17 Full Year Results May 2017
Slide 12: Financial performance
nationalgrid Financial performance ANDREW BONFIELD FINANCE DIRECTOR 12 2016/17 Full Year Results May 2017
Slide 13: Financial highlights
nationalgrid Financial highlights FY16 £4.3bn FY16 63.2p* FY16 £4.2bn FY16 12.3% FY16 4% FY16 £1.8bn Capital investment includes investment in joint ventures and associates (excluding equity contributions to St William property JV) *EPS restated for the impact of scrip issuances Operating profit and
Slide 14: UK Electricity Transmission
nationalgrid UK Electricity Transmission 10.2 + 190bps + 70bps + 80bps = ACHIEVED 13.6% Base return Totex incentive Other incentives Additional allowances RETURN FY16 13.9% OPERATING PROFIT £1.4bn 417% £1.0bn £12.5bn FY16 £1.2bn FY16 £1.1bn FY16 £11.8bn Adjusted results, excluding exceptional items
Slide 15: UK Gas Transmission
nationalgrid UK Gas Transmission 10.0% + (80)bps + 110bps + 5Obps = ACHIEVED 10.8% Base return Totex incentive Other incentives Additional allowances RETURN FY16 12.5% OPERATING PROFIT £511m 5% £214m £5.8bn FY16 £486m FY16 £186m FY16 £5.6bn Adjusted results, excluding exceptional items and remeasure
Slide 16: UK Gas Distribution
nationalgrid UK Gas Distribution 9.9% + 280bps + 120bps + 10bps = ACHIEVED 14.0% Base return Totex incentive Other incentives Additional allowances RETURN FY16 13.0% £898m 22% £558m £9.Obn FY16 £878m FY16 £549m FY16 £8.7bn Adjusted results, excluding exceptional items and remeasurements 16 2016/17 F
Slide 17: US Regulated
nationalgrid US Regulated 8.4% +6.0% +7.7% + 11.3% = RETURN, = Oa2% New York Massachusetts Rhode Island FERC RETURN CY15 8.0% OPERATING PROFIT £1.7bn 425% $2.9bn $19.3bn FY16 £1.4bn FY16 $2.7bn FY16 $18.3bn Operating profit calculated at constant currency Adjusted results, excluding exceptional item
Slide 18: Metering, Grain LNG, IFA, Property
Metering Grain LNG IFA Property vs £53m £15m_ 2(5)m BritNed Millennium Other £404m« * Excludes investment in St. William JV Operating profit, share of joint venture profit after tax and investment calculated at constant currency Adjusted results, excluding exceptional items and remeasurements 18 201
Slide 19: Finance costs and earnings
FINANCE EARNINGS COSTS £1,175m £2,748m 6% higher than 2016 PY £2,386m = Effective interest rate Tax rate 130bps lower = 3,763m weighted of 3.9% than 2016 average shares = Higher average net Tax charge £55m = 73p/share debt and RP! higher than 2016 Finance costs are calculated at constant currency Ad
Slide 20: Cash flow and Net debt
Cash flow and Net debt nationalgrid £m Year ended 31 March 2017 Operating profit Depreciation & amortisation Pensions Working capital & other Net operating cash flow Net debt 4,667 1,698 (801) 50 5,614 (19,274) Adjusted results, excluding exceptional items and remeasurements 20 2016/17 Full Year Res
Slide 21: Closing net debt
nationalgrid Closing net debt + £5.3bn from weaker sterling, Movement in net debt (fbn) normal business activity, liability 35 management and transaction costs LM and Business transaction - £11.3bn from Gas Distribution 30 monte activity . . i} deconsolidation and gross proceeds . = Net proceeds of
Slide 22: Credit metrics
Year ended 31 March 2017 Operating profit Depreciation & amortisation Pensions Working capital & other Net operating cash flow Credit metrics reported using Moody's methodology Adjusted results, excluding exceptional items and remeasurements 22 2016/17 Full Year Results May 2017 4,667 1,698 (801) 50
Slide 23: Dividend and scrip
nationalgrid Dividend and scrip = Proposed dividend increase of 2.1% Dividend per share (p) in line with UK RPI 45 = Scrip option to continue 44.27p 43 = Continue to manage dilution 1 : _t i 37 2011/12 | 2012/13 2013/14 2014/15 2015/16 2016/17* —_—_—— FP I-linked dividend policy ————> * Excludes spe
Slide 24: Value Added supporting long-term returns
nationalgrid Value Added supporting long-term returns NET DIVIDEND PAID & GROWTH IN ASSET GROWTH SHARE BUYBACKS NET DEBT £1.7bn + £1.7bn - £(1.5)bn = £1.9bn 51 .6p per share Net asset growth and growth in net debt are calculated at constant currency 24 2016/17 Full Year Results Ma
Slide 25: FY17 Continuing operations
nationalgrid FY17 Continuing operations = Continuing operations excludes Gas Distribution earnings = FY17 Gas Distribution associate profit after tax proforma contribution of 5.0p = Lower weighted average number of shares proforma contribution of 4.7p 25 2016/17 Full Year Results May 2017 FY17 Profo
Slide 26: Technical guidance — Continuing operations
nationalgrid Technical guidance — Continuing operations UK Regulated: Other activities and Ventures = Lower base allowed revenue and increased = Overall contribution expected to increase MOD adjustments in ET = Expected to deliver outperformance of Net debt 200-300bps " Expected to increase as proce
Slide 27: Strong financial performance
Strong financial performance Increasing capital investment Financial position robust * Continuing operations proforma EPS excluding timing Adjusted results, excluding exceptional items and remeasurements 27 2016/17 Full Year Results May 2017 OPERATING PROFIT PROFORMA EPS* £3.8bn 59.2p CAPITAL INVEST
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Slide 29: Our Purpose, Vision and Values
Our Purpose Our We will exceed the expectations of our - os customers, shareholders, and Vision communities today and make possible the energy systems of tomorrow Our Values 29 2016/17 Full Year Results May 2017
Slide 30: Customer First
CUSTOMER FIRST Performance optimisation | Growth a Evolve for the future 30 2016/17 Full Year Results May 2017
Slide 31: Ongoing savings achieved for UK customers
Ongoing savings achieved for UK customers Voluntary deferral of RIIO T1 allowances oO [ou] ip) Cc ne) = > xe) a = @ ja) no © Oo {o) non = e i) ep) op) o oO {S) =) no oO non = oD <€ = {ov pom D Proposing solutions to phase in US bill increases 31 2016/17 Full Year Results May 2017
Slide 32: Strong asset management
Strong asset management Technological innovations Strategic procurement initiatives Focus on environmental impact Best practice construction techniques * Modular kit - Wimbledon Sub-Station 32 2016/17 Full Year Results May 2017
Slide 33: Improving returns performance
nationalgrid Improving returns performance FERC MA Electric ; 0 Formula rates New rates Oct 2016 Achieved RoE as % of allowed returns Filings planned in 90% 2017/18 KEDNY/KEDLI 86% MA Gas $1 9.3bn New rates Jan 2017 82% Rhode Island Rate base q March 2017 Niagara Mohawk Filed April 2017 FY18 " ~70%
Slide 34: Investment in second-half of RIIO
Investment in second-half of RIIO comparable to first-half ET spend driven by non-load related investments GT investment expected to increase to support asset health Early preparation for RIIO T2 started 34 2016/17 Full Year Results May 2017 2,000 1,500 FY17 Gas Transmission @ Electricity Transmissi
Slide 35: Category 1 Category 2 Category 3
Category 1 Category 2 Category 3 Category 4 ▪ ▪ 35
Slide 36: New division to enhance value through investing in closely-linked businesses
New division to enhance value through investing in closely-linked businesses Interconnectors, Metering, Grain LNG Business development and strategy Currently a small asset base but with high cash returns Attractive IRRs with regulatory underpinning 36 2016/17 Full Year Results May 2017 Utility scale
Slide 37: Nemo Link, North Sea Link, IFA 2 and Sunrun
Nemo Link to Belgium on track for commissioning in 2019 North Sea Link to Norway on track for commissioning in late 2021 Final investment decision on IFA 2 Partnership formed with Sunrun 37 2016/17 Full Year Results May 2017
Slide 38: A strong portfolio for the future
nationalgrid A strong portfolio for the future = UK well positioned to deliver = US on track to improve returns = Attractive cash returns and further growth through NG Ventures = Portfolio shaped to deliver attractive long-term growth and yield = Underpinned by a robust balance sheet and strong fina
Slide 39: John Pettigrew, Andrew Bonfield
7s JOHN PETTIGREW ANDREW BONFIELD CHIEF EXECUTIVE FINANCE DIRECTOR 39 2016/17 Full Year Results May 2017
Slide 40: Appendices
Appendices 40 2016/17 Full Year Results May 2017
Slide 41: UK Electricity Transmission operating profit
Appendix 1 UK Electricity Transmission operating profit nationalgrid For the year ended 31 March (£m) 2017 2016 Revenue 4,439 3,977 Pass through costs (2,293) (2,030) Net revenue’ 2,146 1,947 Depreciation & amortisation (421) (390) Regulated controllable costs (286) (311) Pensions (43) (40) Other co
Slide 42: UK Gas Transmission operating profit
Appendix 2 UK Gas Transmission operating profit nationalgrid For the year ended 31 March (£m) 2017 2016 Revenue 1,080 1,047 Pass through costs (223) (221) Net revenue 857 826 Depreciation & amortisation (186) (178) Regulated controllable costs (137) (135) Pensions (19) (18) Other costs (4) (9) Total
Slide 43: UK Gas Distribution operating profit
Appendix 3 UK Gas Distribution operating profit nationalgrid For the year ended 31 March (£m) 2017 2016 Revenue 1,882 1,918 Pass through costs (350) (352) Net revenue 1,532 1,566 Depreciation & amortisation (214) (298) Regulated controllable costs (387) (374) Pensions (42) (39) Other costs / contrib
Slide 44: US Regulated operating profit
Appendix 4 US Regulated operating profit For the year ended 31 March (£m) 2017 2016 Revenue 8,931 8,653 Pass through costs (3,411) (3,642) Net revenue 5,520 5,011 Depreciation & amortisation (642) (618) Regulated controllable costs (1,830) (1,678) Pensions (104) (111) Bad debt (120) (152) Other cost
Slide 45: Metering, Grain LNG, French interconnector and Property operating profit
Appendix 5 Metering, Grain LNG, French interconnector and Property operating profit * At actual currency * Adjusted results, excluding exceptional items and remeasurements * Metering including Smart Metering For the year ended 31 March (£m) 2017 2016 Revenue 290 301 Depreciation & amortisation (72)
Slide 46: Exchange rates
Appendix 6 Exchange rates For the year ended 31 March (£m) 2017 2016 Closing $/ £ rate 1.25 1.44 Average $/ £ rate for the period 1.28 1.47 For the year ended 31 March (£m) 2017 Impact on operating profit’ 187 Impact on interest’ (99) Impact on tax, JVs and minority interests! (39) Net impact on ear
Slide 47: Pensions & other post-retirement benefit obligations
Appendix 7 Pensions & other post-retirement benefit obligations (IAS 19 data) nationalgrid UK us At 31 March 2017 (£m) ESPs NGUK PS Pensions OPEBs' Total Market value of assets 2,916 12,573 6,322 2,564 24,375 Present value of liabilities (3,423) (12,222) (7,050) (3,613) (26,308) Net (liability) / as
Slide 48: Timing impacts
Appendix 8 nationalgrid Timing impacts UK Gas US Total UK Gas £m Transmission Transmission Regulated (Continuing) Distribution Total 2016/17 Opening balance (171) 38 156 23 46 69 2016/17 Opening balance restatement adjustment 4 12 (23) (7) (1) (8) 2016/17 over/under) recovery 137 62 199 398 (22) 376
Slide 49: UK regulated asset values and returns
Appendix 9 UK Transmission and UK Gas Distribution Regulated asset values (‘RAV’) and returns nationalgrid UK Electricity UK Gas UK Gas Transmission Transmission Distribution Regulator Ofgem Ofgem Ofgem RAV £12,464m £5,755m £8,979M Base allowed real return (assumed CoD 2.38%) 4.23% 4.04% 3.89% (‘van
Slide 50: New York jurisdiction rate base and returns
Appendix 10 nationalgrid New York jurisdiction Regulated asset base (‘Rate base’) and returns Rate bases are reported by regulatory entity as at 31 March 2017 Upstate Upstate Returns are those for the fiscal year ended Long Island Downstate New York New York 31 March 2017 (KEDLI) New York (KEDNY) (N
Slide 51: Massachusetts and Rhode Island rate base and returns
Appendix 11 nationalgrid Massachusetts and Rhode Island jurisdiction Regulated asset base (‘Rate base’) and returns Rate bases are reported by regulatory entity as at 31 March 2017 Narragansett Returns are those for the fiscal year ended Massachusetts Massachusetts Distribution 31 March 2017 Electri
Slide 52: FERC jurisdiction rate base and returns
Appendix 12 nationalgrid FERC jurisdiction Regulated asset base (‘Rate base’) and returns Rate bases are reported by regulatory entity Narr: n as at 31 March 2017 larragansett New England Electric Canadian Long Island Re those for the fiscal ded pawns are tose or the fiscal year ende Power (Transmis
Slide 53: Value Added
Appendix 13 Value Added For the year ended 31 March (£m) 2017 = (constant currency) change UK RAV" 27,198 26,132 1,066 US rate base 15,398 14,571 827 Other regulated assets 1,068 1,442" (374) Regulated Financial Position 43,664 42,145 1,519 Other invested capital 2,231 2,001 230 Total group regulate
Slide 54: Group Return on Equity
Appendix 14 nationalgrid Group Return on Equity For the year ended 31 March (£m) 2017 2016 2015 Regulated financial performance 3,906 3,663 3,741 IFRS operating profit for non-regulated companies 204 374 199 Share of post tax results of joint ventures 63 59 46 Non-controlling interest 1 (3) 8 Treasu
Slide 55: Weighted average number of shares
Appendix 15 Weighted average number of shares For the year ended 31 March 2017 2016 Number of shares (millions): Prior period as reported (weighted average) - 3,755 Current period opening shares 3,745 - Scrip dividend shares 19 19 Other share movements (weighted from issuance/repurchase) (1) - Weigh
Slide 56: Interest cover
Appendix 16 nationalgrid Interest cover For the year ended 31 March (£m) 2017' 2017, 2016 2015 Interest expense (P&L) 1,082 1,082 1,035 1,069 Hybrid interest reclassified as dividend (51) (51) (49) (65) Capitalised interest 109 109 112 86 Pensions interest adjustment (60) (60) (60) (48) Interest on
Slide 57: RCF:Debt
Appendix 17 nationalgrid RCF:Debt For the year ended 31 March (£m) 2017' 2017 2016 2015 Adjusted funds from operations (FFO) 4,862 4,723 4,403 4,180 Hybrid interest reclassified as dividend (51) (61) (49) (65) Dividends paid to shareholders (1,463) (1,463) (1,337) (1,271) RCF (headline) 3,348 3,209
Slide 58: UK Electricity Transmission net revenue
Appendix 18 nationalgrid UK Electricity Transmission net revenue For the year ended 31 March (£m) 2017 Revenue 4,439 Net timing adjustment (137) —> Pass through costs Em Revenue collected on behalf of others (1,029) Incentives (excluding totex), true ups (non-controllable BSIS costs (1,120) costs, p
Slide 59: UK Electricity Transmission operating profit
Appendix 19 UK Electricity Transmission operating profit For the year ended 31 March (£m) Net Revenue adjusted for timing Transmission Owner (ETO) excluding incentives ETO incentives 16 System Operator (ESO) excluding incentives 156 ESO incentives 28 Other (including legal settlements) 35 — co. 2,00
Slide 60: UK Gas Transmission net revenue
Appendix 20 nationalgrid UK Gas Transmission net revenue For the year ended 31 March (£m) 2017 Revenue 1,080 Net timing adjustment (62) —> Pass through costs £m Revenue collected on behalf of others (14) Incentives (excluding totex), true ups (non-controllable Gas Transmission Owner (GTO) pass throu
Slide 61: UK Gas Transmission operating profit
Appendix 21 nationalgrid UK Gas Transmission operating profit For the year ended 31 March (£m) 2017 Net Revenue adjusted for timing Transmission Owner (GTO) excluding incentives 589 ———————— £m GTO incentives 6 Ofgem annual iteration TO revenue 591 System Operator (GSO) excluding incentives and reve
Slide 62: UK Gas Distribution net revenue and operating profit
Appendix 22 nationalgrid UK Gas Distribution net revenue and operating profit For the year ended 31 March (£m) 2017 Revenue 1,882 Net timing adjustment 22 —__> Pass through costs (350) £m Net revenue adjusted for timing 1,554 Incentives (excluding totex), true ups (non-controllable costs, pensions e
Slide 63: Continuing, discontinued and total Group profits and earnings
Appendix 23 nationalgrid Continuing, discontinued and total Group profits and earnings 2017 2016 Continuing Discontinued Continuing Discontinued For the year ended 31 March (&m) operations —_—_ operations Total operations operations Total Revenue 15,035 1,887 16,922 13,212 1,903 15,115 Operating cos
Slide 64: Reconciliation of adjusted operating profit to adjusted EPS
Appendix 24 Reconciliation of adjusted operating profit to adjusted EPS (including and excluding timing) Including timing Excluding timing For the year ended 31 March (£m) 2017 2016' 2017 2016' Continuing operations Adjusted operating profit 3,773 3,214 3,375 3,215 Adjusted net finance costs (1,029)
Slide 65: Reconciliation of adjusted operating profit to adjusted EPS (continued)
Appendix 24 continued Reconciliation of adjusted operating profit to adjusted EPS (including and excluding timing) Including timing Excluding timing For the year ended 31 March (em) 2017 2016' 2017 2016! Discontinued operations Adjusted operating profit 894 882 916 856 Adjusted net finance costs (14
Slide 66: Reconciliation of adjusted operating profit to adjusted EPS (continued)
Appendix 24 continued Reconciliation of adjusted operating profit to adjusted EPS (including and excluding timing) Including timing Excluding timing For the year ended 31 March (em) 2017 2016' 2017 2016! Continuing and discontinued operations Adjusted operating profit 4,667 4,096 4,291 4,071 Adjuste
Slide 67: Reconciliation of adjusted EPS to statutory EPS
Appendix 25 Reconciliation of adjusted EPS to statutory EPS (including and excluding timing) Including timing nationalgrid Excluding timing For the year ended 31 March (pence) 2017 2016" 2017 2016' Adjusted EPS from continuing operations 56.9 48.0 49.5 47.6 Exceptional items after tax from continuin
Slide 68: Capital investment
Appendix 26 Capital investment For the year ended 31 March (£m) 2017 2016 % change Capital expenditure 3,735 3,327 12% Additions within discontinued operations 588 566 4% Equity and funding contributions to joint ventures and associates’ 127 53 140% Group capital investment 4,450 3,946 13% 1 Exclude