National Grid Plc · LSE:NG.
National Grid — Non-Deal Roadshow (June 2007)
49 slides from National Grid's roadshow presentation, June 2007
Slide 1: European Roadshow National Grid plc June / July 2007
European Roadshow National Grid plc June / July 2007
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 Securi
Slide 3: National Grid: a leading international electricity and gas company
National Grid… …a leading international electricity and gas company Overview Financial Headlines Owner/operator of gas/electricity Operating profit - £2.0bn iii ($3.9bn) networks in UK/US Good full year performance Large, complex networks management 9% growth in pre-tax profit iv skills £2.3bn capit
Slide 4: National Grid: a low risk business
National Grid… …a low risk business Regulated asset base, stable cash flows i Gas Distribution Transmission 32% 43% Electricity T&D Generation $4 trillion $4 trillion Non-regulated 4% Electricity Distribution & Generation 21% i Pro forma split using National Grid operating profit under IFRS (before
Slide 5: Delivering our strategy: More focused
Delivering our strategy More focused Our commitments Our delivery UK wireless infrastructure sold for £2.5bn Clear business model Focus on gas and electricity US wireless infrastructure sale agreed Focus on principal growth markets in the Completion expected in autumn 2007 UK and US Basslink sale we
Slide 6: Delivering our strategy: More integrated
Delivering our strategy More integrated Our commitments Our delivery Organisation design complete Global operating model Driving efficiencies Operating model implementation underway Global IS in place KeySpan acquisition and integration UK Shared Services in place Simple organisation structure US to
Slide 7: Delivering our strategy: More disciplined
Delivering our strategy More disciplined Our commitments Our delivery Maintain an efficient balance sheet Continued balance sheet optimisation Return surplus cash £1.8bn of proceeds from sale of UK wireless businesses to be returned via share buy-back Return $1.9bn US stranded asset cashflow £169m o
Slide 8: Acquisition of KeySpan
Acquisition of KeySpan Agreed acquisition for $7.3bn cash $42 per share $42 per share – represents a premium of 16% to undisturbed KeySpan share price(a) EV/EBITDA 8.8x(b) Earnings and cash flow enhancing(c) in the first full year following completion Growth expected from $200m synergy savings ident
Slide 9: Acquisition of KeySpan: well progressed
Acquisition of KeySpan …well progressed Clearances/approvals New York Public Service Commission (NYPSC) Federal Trade Commission (Hart-Scott-Rodino Settlement discussions mid-March to mid-May anti trust improvements Act) Committee on Foreign Investment in the US Parallel process (CFIUS) KeySpan stan
Slide 10: Investment update
Investment update (£bn) (£bn) Non-regulated ~£1.5bn 14 14 £1.8bn £1.8bn Electricity Distribution 12 12 Gas Distribution 10 Transmission 10 £4.2bn 8 8 6 6 KeySpan £9.8bn 4 £6.9bn Non-regulated 4 2 US regulated 2 UK regulated 0 0 2006-2012 2006-2012 10
Slide 11: Transmission: UK electricity transmission
Transmission: UK electricity transmission £4.1bn investment over 6 years to March 2012 Potential windfarm areas Significant increase driven by: Determined windfarm sites Asset replacement Potential gas fired plant Infrastructure for new generation & demand Potential upside from revenue drivers 39% b
Slide 12: Transmission: UK gas transmission
Transmission: UK gas transmission £1.5bn investment over 6 years to March 2012 Significant increase driven by: Vesteried, FLAGS 2007+ New sources of gas supply New network infrastructure Potential upside from revenue drivers Ormen Lange Dutch 44% baseline RAV growth Interconnector 4 Zeebrugge Actual
Slide 13: Gas distribution: UK gas distribution
Gas distribution: UK gas distribution £3.9bn investment over 6 years to March 2012* Significant increase driven by: Replacement of existing cast iron gas mains (repex programme) New network infrastructure Over 30% RAV growth* 8 GAS DISTRIBUTION Actual £bn 6 Projected baseline 4 01 April 2006 31 Marc
Slide 14: US transmission and distribution
US transmission and distribution Electricity transmission Northeast US transmission assets £1bn of investment projected over 6 years to March 2012 Maine Vermont Electricity distribution New £1.4bn of investment over 6 years to March 2012, driven by: Hampshire Reliability enhancement (asset condition
Slide 15: UK regulatory timetable
UK regulatory timetable 1 April 2006 1 April 2007 1 April 2008 UK electricity and gas Prior electricity Previous electricity transmission transmission price transmission price control control Current transmission price control (ends March 2012) Previous gas transmission price control period Consulta
Slide 16: Transmission: Overview of the Transmission Owner price control
Transmission: Overview of the Transmission Owner price control Full funding of on-going contributions Pensions Recovery of the majority of current pension deficit (based on current actuarial valuations) 4.4% post-tax real allowed return Rate of return Consistent with current allowed return Baseline
Slide 17: Gas distribution: Five-year UK price control, key areas of debate
Gas distribution: Five-year UK price control, the key areas of debate Ofgem likely to update TPCR4 outcome for changes in market conditions Rate of return Possibility of a risk differential (Transmission versus Distribution) Comparative regulation likely to be more influential Opex Areas of major co
Slide 18: US regulatory timetable
US regulatory timetable 1 April 2005 1 April 2007 1 April 2009 1 April 2011 New York Current rate plan (ends December 2011) Future rate plan CTC reset filings New rate filing Service quality plan (ends December 2011) Massachusetts Current rate plan Current rate plan Current rate plan earned savings
Slide 19: Summary corporate structure: external net debt
Summary corporate structure: Including external net debt as at 31 March 2007 National Grid plc & NGG Finance plc ($8.1bn) equiv. to (£4.1bn)1 National Grid USA National Grid Holdings One ($2.1bn) equiv. to (£1.1bn)1 in US group Lattice Group National Grid Holdings Niagara Mohawk £1.5bn (cash) New En
Slide 20: Summary corporate structure: external gross debt
Summary corporate structure: Including external gross debt as at 31 March 2007 National Grid plc & NGG Finance plc ($10.1bn) equiv. to (£5.1bn)1 National Grid USA National Grid Holdings One ($2.5bn) equiv. to (£1.3bn)1 in US group Lattice Group National Grid Holdings Niagara Mohawk New England Power
Slide 21: Summary group debt statistics
Summary group debt statistics As at 31 March 2007 £11.8bn net debt as at 31st March Breakdown of net debt Currency of net debt (split of the currency 2007. 50% fixed that debt has been swapped into) 20% floating 36% USD 30% index linked 62% GBP 5.95% effective underlying interest rate for the twelve
Slide 22: Group borrowing facilities and liquidity
Group borrowing facilities and liquidity As at 31 March 2007 National Grid plc National Grid Gas plc $1.5bn 364-day undrawn syndicated loan facility with 12- £840m undrawn committed bank lines – 5 year duration, month term out dated 14 November 2006; no MAC event of minimal covenants default or rati
Slide 23: Credit ratings
Credit ratings Long term senior unsecured debt and short term debt credit ratings Moody’s S&P5 Fitch National Grid plc Baa11/P21 A-/A1 A-6/F26 National Grid Electricity Transmission plc A22/P12 A/A1 A3/F23 National Grid Holdings One plc Not rated A-/A1 Not rated National Grid Gas plc A22/P12 A/A1 A+
Slide 24: Expected ratings movements on completion of KeySpan acquisition
Expected ratings movements for active debt issuers on completion of KeySpan acquisition Long-term senior unsecured bond ratings Agency NG plc NGET NGGas S&P A- → BBB+ A → A- A → A- Moody’s Stay at Baa1 A2 → A3 A2 → A3 Fitch A- → BBB+ Stay at A A+ → A Note: Based on public comments made by the rating
Slide 25: Funding requirement for 2007/08
Funding requirement for 2007/08 Operating company funding needs driven by capital investment programme and intention to fund possible pensions deficits £2.75bn of operating company level funding raised/launched in 2006/07 As at May 2007, some NGGas funding requirement anticipated in the 2nd half of
Slide 26: Summary
Summary Asset based network provider focused on ownership and operation of large complex networks Other network related businesses Successful track record of managing and integrating network businesses in the US and the UK Well established presence in European debt capital markets; recently expanded
Slide 27: Treasury contacts
Treasury contacts Malcolm Cooper (Group Tax and Treasury Director): D: +44 (0) 20 7004 3340 [email protected] Andrew Kluth (Assistant Treasurer, Funding): D: +44 (0) 20 7004 3365 [email protected] Andy Mead (Manager, Corporate Banking): D: +44 (0) 20 7004 3369 [email protected] David B
Slide 28: Our businesses
Our businesses nationalgrid
Slide 29: Group financials
Group financials £' millions y/e 31 March 2007 y/e 31 March 2006 Capital Capital continuing operations - business segments Revenue Operating Profit* Expenditure Revenue Operating Profit* Expenditure Electricity Transmission Owner 533 454 Electricity System Operator 41 38 Gas Transmission Owner 212 1
Slide 30: Transmission: UK transmission
Transmission: UK transmission Owner and manager of the electricity transmission assets in England & Wales Operator of the transmission network in Great Britain under the British Electricity Trading and Transmission Arrangements (BETTA) Owner and operator of the gas transmission network in Great Brit
Slide 31: Transmission: US electricity transmission
Transmission: US electricity transmission Northeast US transmission assets 9,000 miles of overhead lines (>69kV) 85 miles of underground cables £1.0bn of investment projected over 6 years to March 2012 Maine Member of New England RTO Vermont FERC order (effective 1 November 2006) established allowed
Slide 32: Gas distribution: UK gas distribution
Gas distribution: UK gas distribution Owner, manager and operator of gas distribution assets in the Northwest, West Midlands, East of England and London Distribute gas to 11 million end users Single and consistent operating model Focus on driving efficiency and effectiveness Improvement of cross-fun
Slide 33: Gas distribution: US gas distribution
Gas distribution: US gas distribution 569,000 gas customers in New York Maine Vermont Acquisition of Rhode Island gas assets Completed August 2006 New Strong overlap with National Grid’s existing electricity Hampshire operations Agreed acquisition for $498m cash New York Massachusetts Assumption of
Slide 34: Electricity distribution: US electricity distribution
Electricity distribution: US electricity distribution £1.4bn investment over 6 years to March 2012 Significant distribution investment driven by: Reliability enhancement (asset condition) Maine Vermont Asset replacement Infrastructure for requirements of new customers (domestic & commercial) New Ham
Slide 35: Acquisition of KeySpan: Businesses
Acquisition of KeySpan: Businesses GAS DISTRIBUTION ELECTRICITY TRANSMISSION & DISTRIBUTION Largest gas distributor in Northeast with 2.6m customers Operator of the T&D system owned by LIPA 1.7m in New York and Long Island 0.9m in New England Serves 1.1m customers Operate under similar rate plans to
Slide 36: Non-regulated businesses
Non-regulated businesses National Grid Metering (regulated) BritNed 18.2m gas meters 1000MW, 260km (160mile) cable between Isle 400,000 industrial and commercial meters of Grain and Maasvlakte in the Netherlands Long term contracts for legacy domestic gas £200m of investment for National Grid meters
Slide 37: Non-regulated businesses: Grain LNG
Non-regulated businesses Grain LNG The UK’s first modern LNG import terminal Able to deliver ~20% of UK gas demand by Winter 2010/11 Phase 1 operational since July 2005 Annual capacity of 3.3m tonnes of LNG (4.4bcm of gas, ~4% of UK gas demand) Phase 2 expected to be operational in 2008 Additional a
Slide 38: US stranded cost recovery
US electricity and gas distribution: Stranded cost recovery Costs associated with our former generation investment and related contractual commitments that were not recovered through the sale of those investments ~$1.7bn (post-tax) US stranded asset cash remaining to be returned to shareholders, via
Slide 39: Appendix
Appendix nationalgrid
Slide 40: UK electricity and gas transmission - facts
UK electricity and gas transmission - facts OWNER OPERATOR ELECTRICITY Operator of the electricity and gas transmission networks in Great Britain Owner and manager of electricity transmission assets in England and Wales Operate under incentive schemes which are subject to Ofgem targets, sharing fact
Slide 41: UK regulatory environment - background
UK regulatory environment - background High degree of economic regulation under GEMA (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 plus return
Slide 42: UK regulatory ring-fence/licence conditions
UK regulatory ‘ring-fence’/licence conditions Regulatory ‘ring-fences’ surrounding National Grid Gas/National Grid Gas Holdings and National Grid Electricity Transmission Conditions include: Restriction on non-licensed businesses operated Requirement to ensure availability of sufficient managerial a
Slide 43: Electricity distribution: Incentive based regulation
Electricity distribution: Incentive based regulation MASSACHUSETTS RHODE ISLAND NEW YORK Rates indexed to regional peers Basic return on equity of 10.5% 10.6% post tax target return on through to 2009 equity Merger savings established $20m increase in March 2006 After equal sharing of merger ~1.2% R
Slide 44: Acquisition of KeySpan: Incentive based regulation
Acquisition of KeySpan: Incentive based regulation (rate plans as at 31 March 2007) New York Long Island New England Customers 1.2m 0.5m 0.9m Earnings sharing 13.25% 11.1% 14.2% a level Debt / equity ~50 / 50 ~50 / 50 ~50 / 50 Sharing ratepayers / 60 / 40 60 / 40 25 / 75 shareholders Weather Yes Yes
Slide 45: Electricity distribution: New England delivery rates
Electricity distribution: New England delivery rates Transition/stranded costs cents per kWh Transmission 8.9 DSM*/renewables/other 8.2 Distribution 7.8 7.5 7.4 6.5 5.9 5.7 5.7 5.7 5.6 5.7 4.9 5.2 5.0 4.2 4.0 4.1 4.2 3.8 FG&E NSTAR - NSTAR - NSTAR- WMECo PSNH Unitil Rhode New MA Cambridge Com Elec B
Slide 46: Electricity utilities in the Northeast US
Electricity utilities in the Northeast US Central Vermont Public Serv. CH Energy Group Inc. Consolidated Edison Inc. Constellation Energy Inc Emera Inc. Energy East Corp. Exelon Corp. Maine Vermont FirstEnergy Corp. New Hampshire Maine & Maritimes Corp National Grid plc New York Northeast Utilities
Slide 47: Gas utilities in the Northeast US
Gas utilities in the Northeast US AGL Resources C&T Enterprises CH Energy Group Inc. Chesapeake Utilities Corp. Consolidated Edison Inc. Constellation Energy Inc Maine Corning Natural Gas Corp. Dominion Resources Inc. Enbridge Inc. Energy East Corp. Vermont New Hampshire Exelon Corp. New York Gaz M‚
Slide 48: Business results and statutory results
Business results and statutory results* For the 12 months ended 31 March (£m) 2007 2006 Operating profit ** 2,454 2,457 Exceptional operating items and remeasurements (59) (83) Net finance costs (646) (659) (including exceptional items and remeasurements) Share of post tax results of joint ventures
Slide 49: Pensions – IAS19 data
Pensions – IAS19 data ESPS (mainly £m NGET) NGUK PS US NG total At 31 March 2007 Market value of assets 1,336 12,865 1,798 15,999 Present value of liabilities (1,824) (12,828) (2,592) (17,244) Deficit (488) 37 (794) (1,245) Deferred tax 146 (11) 318 453 Deficit net of deferred tax (342) 26 (476) (79