National Grid Plc · LSE:NG.
National Grid — H1 2011/12 Earnings Presentation
37 slides from National Grid's earnings presentation, Nov 17, 2011
Slide 1: Half Year Results 2011/12
2011/12 Half Year London | Thursday 17 November 2011 Results
Slide 2: Cautionary statement
Cautionary statement 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 Securit
Slide 3: Key Highlights
2011/12 Half Year Results Key Highlights Steve Holliday | Chief Executive
Slide 4: Nine years of progress
nationalgrid Nine years of progress fy National Grid Transco nationalg rid
Slide 5: Agenda
Agenda Highlights and operational performance Financial results Update on priorities and outlook 5
Slide 6: Good financial performance
Good financial performance Excluding timing and Hurricane Irene costs 19% Profit before tax 1 £953m 2% £1,077m 19% Operating profit 1 £1,420m 4% £1,544m 7% Earnings £697m 6% EPS 2 19.6p 2% Dividend per share 13.93p 8% 1 Constant currency figures calculated by applying the average 2011 rate ($1.64 to
Slide 7: Highlights
Highlights Removed over 1,150 Massachusetts US restructuring roles RI & NH New York FERC and cost savings On track for $200m cost on track saving 1 Capital Focus on regulated investment businesses continuing at Procurement and healthy levels efficiency savings Disposed of two non- Strengthening regu
Slide 8: Regulatory update
Regulatory update Positive feedback on plans submitted in July RIIO-GD1 plans to be UK submitted in November Roll over final proposals due in November Deferral filing for $236m with NYPSC in July US Preparing for filings in Niagara Mohawk and Narragansett next year 8
Slide 9: Reinforce our focus on safety going forward
Safety performance Injury frequency rate remains robust at 0.18 Process safety improved Still aiming to achieve world leading safety performance Reinforce our focus on safety going forward 9
Slide 10: Improving trend of customer satisfaction
Operational performance Improving trend of customer satisfaction Response to Hurricane Irene and storms Unseasonal autumn snowstorm 10
Slide 11: Summary
Summary Good underlying performance Steady progress towards strategic goals 11
Slide 12: Business Review
2011/12 Half Year Results Business Review Andrew Bonfield | Finance Director
Slide 13: UK Transmission
UK Transmission 42% of Group Operating Profit Operating profit Timing effects of £54m 7% Higher revenues driven by RPI Higher controllable costs driven by inflation, investments made Operating profit in teams and processes excluding timing 2% Depreciation increased in line with growth in asset base
Slide 14: UK Gas Distribution
UK Gas Distribution 27% of Group Operating Profit Operating profit Timing effects of £18m 1% Higher revenues driven by RPI Controllable costs flat in real terms despite investment in new Operating profit systems excluding timing 4% Depreciation increase led by software amortisation 37 7 0 10 18 4 £m
Slide 15: US Regulated
US Regulated 22% of Group Operating Profit Operating profit Timing effects of £15m 13% £69m net charge for Hurricane Irene Operating profit Controllable costs down in both real and nominal terms excluding timing and Irene 10% Depreciation decreased reflecting movements in asset lives 15 69 16 3 2 6
Slide 16: Other activities
Other activities 9% of Group Operating Profit Operating profit Grain LNG profits up after phase III completion Lower operating costs in our Property business 30% Metering profits up due to growth in meter portfolio and higher revenue from contract prices 10 3 6 17 £m 101 131 2010 operating profit at
Slide 17: Operating profit
Operating profit Operating profit Timing effects of £87m and Hurricane Irene impact of £69m 4% Excluding timing and Hurricane Irene, operating profit up £95m Increase in revenues driven by RPI Operating profit Controllable costs down in real terms excluding timing and Irene 7% Strong performance fro
Slide 18: Real reduction in regulated controllable costs
Real reduction in regulated controllable costs £m 943 928 31 623 617 Inflation US Regulated UK Gas Distribution UK Transmission 135 142 154 169 2010 2011 Regulated controllable operating costs excluding pensions, other post employment benefits and bad debts Constant currency figures calculated by ap
Slide 19: Interest, tax and earnings
Interest, tax and earnings Finance costs 1 Tax Earnings 15% 9% 6% at £(468)m at £(254)m at £697m (effective tax rate 26.7%) Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations 1 Constant currency figures calculated by applying the
Slide 20: Capital investment
Capital investment Six months to 30 Sep £m 2011 2010 UK Transmission 603 627 UK Gas Distribution 325 329 US Regulated 462 521 Other activities 89 132 Joint ventures - 72 Total 1,479 1,681 2011/12 forecast capex £3.2 - 3.3bn 20
Slide 21: Cash flows
Cash flows Six months to 30 Sep 2011 £m Operating profit 1,420 Net operating cash flow Depreciation & amortisation Pensions 619 (207) £1.8bn Working capital & other (30) Net debt £20.0bn Net operating cash flow 1,802 Closing net debt (19,986) Operating cash flows from continuing operations before ex
Slide 22: Guidance for 2011/12
Guidance for 2011/12 Financing costs down £100m To date US storms estimated at about £140m Full year capex at £3.2 - 3.3bn 22
Slide 23: Review of financial metrics
Review of financial metrics Regulators Equity Investors Regulated returns are an effective way of driving Operating return measures Shareholder value regulated entity performance Allowed Achieved Review of our key Metric UK vanilla vanilla TBC performance measures to returns returns support our inve
Slide 24: Return on capital employed 2010/11
Return on capital employed 2010/11 Regulators Equity Investors Allows comparability between UK & US 2010/11 Operating return measures Shareholder value Post tax measure based Allowed vanilla Achieved vanilla RoCE Overall on IFRS operating profit Group ROE Adjusted for different UK 5.01% 6.28% 8.5% r
Slide 25: Two year trend reflects progress to date
Two year trend reflects progress to date Return on Capital Employed UK movement reflects 2009/10 2010/11 low level of revenue RoCE RoCE inflation v 4.4% inflation in RAV Improved US UK 9.6% 8.5% reflects stronger 140bps difference performance and driven by US business RoCE RoCE increased which, whil
Slide 26: Enduring changes present a clearer view
Representation of US ROEs and rate base Reviewed in parallel with the development of our new RoCE metric Rate base to fully reflect Improved clarity of jurisdictional definitions reporting Consistent treatment when Better comparability calculating US ROEs for between relative and each regulatory ent
Slide 27: Summary
Summary Good first half performance Increased consistency and clarity in metrics Positive outlook for rest of year 27
Slide 28: Strategic Priorities
2011/12 Half Year Results Strategic Priorities Steve Holliday | Chief Executive
Slide 29: Key priorities update
Key priorities update Deliver the new Completed the transition to the new operating model operating model On track towards the $200m saving run rate by March 2012 Deliver the Forecast to deliver £3.2 - 3.3bn investment in 2011/12 core investment Investing in our people and processes programme Delive
Slide 30: Appendix
2011/12 Half Year Results Appendix
Slide 31: Pensions & other post-retirement benefit obligations
Pensions & other post-retirement benefit obligations: (IAS19 data) UK US At 30 September 2011 (£m) ESPS NGUK PS Pensions OPEBs NG total Market value of assets 1,582 13,453 3,637 1,028 19,700 Present value of liabilities (2,086) (13,528) (4,684) (2,889) (23,187) Net liability (504) (75) (1,047) (1,86
Slide 32: Timing impacts
Timing impacts £m UK Transmission UK Gas Distribution US Regulated Total March 2011 opening balance * (7) (20) 96 69 2011/12 H1 over/(under) recovery (23) (7) (25) (55) September 2011 closing balance (30) (27) 71 14 March 2010 opening balance (77) (24) (98) (199) 2010/11 H1 over/(under) recovery 31
Slide 33: Ready reckoner – weighted average number of shares
Ready reckoner – weighted average number of shares Period ended Period ended 30 September 2011 30 September 2010 Number of shares (millions): Prior period as reported (weighted average) - 3,238 January 2011 dividend scrip shares - 12 Current period opening shares 3,508 - 3,508 3,250 August 2011 divi
Slide 34: Representation of US ROEs and ratebase
Representation of US ROEs and ratebase Driven by desire for consistency - Currently each rate case has different methodology for calculating rate base and return Going forward all ROEs will be calculated using the same criteria ROE Old methodology New methodology = US GAAP operating US GAAP operatin
Slide 35: US Return on Equity and Rate Base Restated
US Return on Equity and Rate Base Restated Return on Equity Regulatory Rate Base (calendar year) (at 31 March) 2010 2009 2011 2010 % % $m $m New York KEDNY 11.9 11.0 2,162 2,154 KEDLI 10.0 10.7 1,931 1,897 NMPC Gas 7.6 5.1 832 928 NMPC Electric 6.1 4.5 3,722 3,807 Total New York 8.4 7.4 8,647 8,786
Slide 36: Return on Capital Employed
Return on Capital Employed Year ended 31 March 2011 Assumptions and calculation detail £m UK US RPI indexation: Reflecting the portion of return received in the UK via indexation of Statutory Operating Profit 1,964 1,704 the RAV and charged over time against profit through regulatory depreciation Ex
Slide 37: Return on Capital Employed
Return on Capital Employed Year ended 31 March 2011 Year ended 31 March 2010 £m UK US UK US Statutory Operating Profit 1,964 1,704 1,934 1300 Exceptional items, remeasurements and stranded cost recoveries 110 (297) 100 (359) Business Performance Operating Profit 2,074 1,407 2,034 941 Depreciation an