National Grid Plc · LSE:NG.
National Grid — Debt Investor Presentation (June 2009)
46 slides from National Grid's debt investor presentation, June 2009
Slide 1: European Roadshow June 2009
European Roadshow June 2009 J J nationalgrid The power of action:
Slide 2: Cautionary statement
Cautionary statement Unless otherwise stated, all financial data of National Grid contained in this presentation is as reported under IFRS.This presentation contains certain statements that are neither reported financial results nor other historical information. These statements are forward- looking
Slide 3: Financial headlines
Financial headlines Strong results Operating profit and EPS up Dividend cover improved* at 1.43 times Strong financial position Funding programme well advanced Well positioned for 2009/10 Investment driving growth RPI indexation benefits UK revenues Lower effective interest rates * On a pro forma ba
Slide 4: Delivering our plans
Delivering our plans Invested £3.2bn – in line with Plan Asset base growth – UK 3%, US 4% KeySpan savings run rate $129m Procurement savings ahead of plan – run rate exceeds £100m Good incentive performance 4
Slide 5: Capital investment
Capital investment 2008/09 capital investment £3.2bn £427m £355m £1,441m 2008/09 capital investment in line with £1,019m Business Plan: 98% supported by regulatory arrangements / long-term contracts Growing our asset base: Transmission Gas Distribution 3% growth in UK regulatory asset value (RAV) El
Slide 6: Funding 2009/10
Funding 2009/10 2009/10 funding ~75% complete ~£0.6bn to go Planned further long-term issuance ~£1.1bn activity: ~£0.6m long term debt required for 2009/10 Pre-funding for 2010/11 £1.9bn ~£1.4bn £1.5bn to £2bn further total long term issuance expected in 2009/10 £3bn per annum ongoing funding requir
Slide 7: Credit ratings and potential funding plans of main issuing entities
Credit ratings and potential funding plans of main issuing entities S&P Moody’s Fitch Possible 2009/10 Funding NG plc BBB+/A2 Baa1/P2 BBB+/F2 Likely maximum of one syndicated issue with any currency possible Possible that all requirement satisfied by small EMTNs / taps of existing issues Repurchases
Slide 8: National Grid structure with Group borrowing facilities
National Grid structure with Group borrowing facilities National Grid plc National Grid USA Group Short-term funding programmes: $2bn NGUSA commercial paper programme: Nil outstanding USCP $3bn: Nil outstanding €4bn NGUSA EMTN programme: €0.1bn ECP $1.5bn: c. $600m outstanding issued €15bn EMTN prog
Slide 9: Recent funding – loans and bonds
Recent funding – loans and bonds $/£=1.45 £m 1,400 NGUSA 1,200 NG NGET NGGas 1,000 800 600 400 200 0 Aug-08 Nov-08 Jan-08 Feb-08 Apr-08 Jun-08 Jul-08 Sep-08 Oct-08 Dec-08 Jan-09 Feb-09 Apr-09 May-08 May-09 Mar-08 Mar-09 Total funding for January 2008 to May 2009 was £5,996m 9
Slide 10: Liquidity support – committed bank lines and cash
Liquidity support – committed bank lines and cash Total Amount (£m)* Group Committed Facilities 4000 3500 KeySpan Corp 3000 2500 New England Power 2000 NG Gas 1500 NG Electrcity 1000 Transmission 500 National Grid plc 0 Nov-08 Jun-09 Jul-09 Nov-09 Jun-10 Jul-10 Nov-10 Jan-09 May-09 Aug-09 Jan-10 May
Slide 11: Net debt
Net debt Closing net debt £(22.7)bn £m Net debt at 1 April 2008 (17,641) £(4.0)bn Operating cash flow (a) 3,336 Interest & tax (1,683) Investment (3,231) Disposals 1,617 £(18.7)bn £(17.6)bn Dividends & share repurchase (1,465) Other (b) 345 Net change in net debt (1,081) FX movements (3,951) 2008 20
Slide 12: Debt in the Group
Debt in the Group Gross and net debt as at 31 March 2009 (IFRS, £bn) Gross Debt Net Debt National Grid plc, NGG Finance plc and other 9.1 8.2 National Grid Electricity Transmission plc 4.6 3.9 National Grid Gas plc* 7.3 6.3 National Grid Grain LNG 0.3 0.3 Total UK debt 21.3 18.7 Total US debt (at $1
Slide 13: Funding policies
Funding policies Counterparty risk Refinancing risk Controlled through credit limits, approvals and monitoring procedures Controlled through limits on the amount of financing obligations arising in any given year For multiple transactions with a single counterparty we usually use a master netting ag
Slide 14: Strong financial position – interest cover
Strong financial position Interest cover 3.1 times 4.00x Interest cover 3.75x Aim to manage within a 3.0 – 3.5x range 3.50x Consistent with single ‘A’ range credit rating commitment at UK OpCo level 3.25x 3.00x Credit rating metrics strengthen in 2009/10 2.75x 2009/10 revenues ‘locked in’ 2.50x Inte
Slide 15: Outlook for 2009/10 strong
… and finally, our focus for 2009/10 Outlook for 2009/10 strong Regulation Disciplined investment Deliver opex savings and drive efficiency 15
Slide 16: Appendix
Appendix wy, f nationalgrid The power of action:
Slide 17: We are a very low risk business…
We are a very low risk business… Risk factor Exposure Notes ~95% of our activities(a) are regulated Regulation Low Portfolio of ~20 regulatory agreements Predictable revenues and cash flows UK revenues RPI indexed, nominal US revenues (variety of protections against Inflation / deflation Low high in
Slide 18: Regulatory process… …many common elements to rate agreements
Regulatory process… …many common elements to rate agreements Common elements Return on asset base Opex allowance Pensions and tax allowance No commodity exposure Incentive mechanisms US specific UK specific Some residual volume drivers No volume exposure Protection from uncontrollable costs Indexati
Slide 19: Current US regulatory position
Current US regulatory position % of US rate Regulatory entity Base allowed return Achieved return base Previously agreed New England Power 11.14% 11.7% Narragansett (electricity transmission) 11.14% 11.6% 33% Canadian interconnector 13.0% 13.5% KEDNY 9.8% 11.9% KEDLI 9.8% 11.1% Settlement reached /
Slide 20: Our US regulatory agenda
Our US regulatory agenda What we are asking for Anticipated new rates effective Timely recovery of costs Jan 2010 Mass Electric Company Pension & benefit true ups Jan 2010 Narragansett (electric) Bad debt recovery Nov 2010 Boston gas Decoupling Nov 2010 Colonial gas Investment Nov 2010 Essex gas Com
Slide 21: Transmission – our activities
Transmission – our activities Transmission UK – electricity and gas Electricity We own the electricity transmission system in England and Wales. transmission Our assets comprise ~7,200km of overhead line; ~675km of owner underground cable; and 337 substations at 244 sites. Electricity We are the Gre
Slide 22: Transmission – results
Transmission – results Operating profit Transmission 10% up operating profit Rest of National Grid 45% at constant currency Operating profit mainly driven by £39m increases in regulated revenue UK regulated net revenues +£111m US regulated net revenues +£29m £1,301m £1,149m Other items net £(27)m Re
Slide 23: Transmission – asset bases and returns
Transmission – asset bases and returns Asset base and returns reported by regulatory entity as at 31 March 2009 and 31 December 2008 for UK and US entities respectively. Narragansett UK electricity UK gas New England Canadian electric (d) transmission (a) transmission (b) Power (c) Interconnector (e
Slide 24: UK electricity transmission load related investment
UK electricity transmission load related investment Future Scenario Further offshore wind leasing targeted to deliver 25GW by 2020 Political will for nuclear replanting EU directive for greater interconnection Target of 30 – 40% generation from renewable (i.e. wind) sources could require a plant mar
Slide 25: Gas Distribution – our activities
Gas Distribution – our activities Gas Distribution UK Gas Comprises four of the eight regional gas distribution networks in Distribution UK Great Britain Comprise approximately 132,000 kilometres of gas distribution UK Networks pipelines. We transport gas on behalf of approximately 33 active shipper
Slide 26: Gas Distribution – results
Gas Distribution – results Operating profit Gas Distribution 16% up operating profit Rest of National Grid 44% at constant currency Operating profit mainly driven by increases in regulated revenue UK regulated net revenues +£63m £120m US regulated net revenues +£140m Other items net £(26)m £1,284m R
Slide 27: Gas Distribution – asset bases and returns
Gas Distribution – asset bases and returns Asset base and returns reported by regulatory entity as at 31 March 2009 and 31 December 2008 for UK and US entities respectively. Down-state Up-state UK gas Long Island Massachusetts Narragansett New York New York (a) Energy North (d) distribution (KEDLI)
Slide 28: Electricity Distribution & Generation – our activities
Electricity Distribution & Generation – our activities Electricity Distribution & Generation operations Electricity We own and manage electricity distribution networks in New York, Massachusetts, Rhode Island and New Hampshire. distribution Our assets comprise ~116,000km of electricity circuits, ser
Slide 29: Electricity Distribution & Generation – results
Electricity Distribution & Generation – results Operating profit Electricity Distribution & 9% 39% down Generation operating profit Rest of National Grid at constant currency Operating profit significantly impacted by storms and one-offs £101m Storm recovery costs £(74)m One-off items £(45)m Other i
Slide 30: Electricity Distribution & Generation – asset bases and returns
Electricity Distribution & Generation – asset bases and returns Asset base and returns reported by regulatory entity as at 31 December 2008. Up-state Narragansett Massachusetts Granite State Nantucket Long Island New York (a) electric electric (b) Electric electric (c) Generation (d) (NiMo elec.) (D
Slide 31: Non-regulated businesses – results
Non-regulated businesses – results Operating profit Non-regulated & other 2% 50% down operating profit Rest of National Grid at constant currency Operating profit significantly impacted by planned suspension of property sales £(92)m Property £(92)m Suspension of sales in current property market £129
Slide 32: Business performance results and statutory results
Business performance results and statutory results For the year ended 31 March (£m) 2009 2008 Operating profit* 2,915 2,595 Exceptional operating items, remeasurements and stranded cost recoveries (292) 369 Net finance costs (including exceptional items and remeasurements) (1,234) (786) Share of pos
Slide 33: Revenue
Revenue For the year ended 31 March (£m) 2009 2008 Transmission - UK 3,487 2,956 Transmission - US 420 299 Gas distribution - UK 1,466 1,383 Gas distribution - US 4,786 2,845 Electricity distribution (excluding stranded cost recoveries) 4,537 3,126 Non-regulated businesses and other 719 642 Stranded
Slide 34: Transmission Depreciation & Amortisation
Transmission Depreciation & Amortisation For the year ended 31 March (£m) 2009 2008 Electricity Transmission Owner 208 225 Electricity System Operator 16 18 Other electricity - 1 Sub total – Electricity Transmission (UK) 224 244 Gas Transmission Owner 101 99 Gas System Operator 14 16 Sub total – Gas
Slide 35: Transmission Operating costs
Transmission Operating costs (excluding depreciation & amortisation) For the year ended 31 March (£m) 2009 2008 Electricity Transmission Owner 348 298 Electricity System Operator 1,255 901 Other electricity 41 31 Sub total – Electricity Transmission (UK) 1,644 1,230 Gas Transmission Owner 172 165 Ga
Slide 36: Transmission Operating profit
Transmission Operating profit For the year ended 31 March (£m) 2009 2008 Electricity Transmission Owner 723 623 Electricity System Operator 9 41 Other electricity 1 7 Sub total – Electricity Transmission (UK) 733 671 Gas Transmission Owner 204 205 Gas System Operator 117 100 Other gas - - Sub total
Slide 37: Gas Distribution
Gas Distribution For the year ended 31 March (£m) 2009 2008 Depreciation & amortisation (UK) (177) (181) Depreciation & amortisation (US) (172) (91) Total depreciation & amortisation (349) (272) Operating costs (UK) (619) (615) Operating costs (US) (4,002) (2,362) Total operating costs (excluding de
Slide 38: Electricity Distribution & Generation
Electricity Distribution & Generation For the year ended 31 March (£m) 2009 2008 Depreciation & amortisation (223) (146) Operating costs (excluding depreciation & amortisation) (4,054) (2,650) Total Electricity Distribution & Generation operating profit 265 330 At actual currency. 38 Business perfor
Slide 39: Metering, Grain LNG and Property
Metering, Grain LNG and Property For the year ended 31 March (£m) 2009 2008 Revenue 406 388 Other operating income - - Depreciation & amortisation (140) (141) Operating costs (excluding depreciation & amortisation) (133) (143) Sub total – Metering operating profit 133 104 Revenue 74 41 Other operati
Slide 40: Pensions & other post retirement benefit obligations: regulatory recovery principles
Pensions & other post retirement benefit obligations: regulatory recovery principles UK US Regulatory recovery principles ESPS NGUK PS Pensions OPEBs On-going pension costs recoverable 98% 90% 100% 100% Deficits recoverable 98% 63% 100% 100% (legacy non-regulated and some (true-up mechanisms / filin
Slide 41: US pensions & other post retirement benefit obligations: regulatory treatment by rate plan
US pensions & other post retirement benefit obligations: regulatory treatment by rate plan Each of our five US regulatory commissions regulate the level of costs related to pensions and other post-retirement employee benefits (OPEBs) that are charged to customers. Approach 1: Periodic reconciliation
Slide 42: Pensions & other post retirement benefit obligations: (IAS19 data)
Pensions & other post retirement benefit obligations: (IAS19 data) UK US At 31 March 2009 (£m) ESPS NGUK PS Pensions OPEBs NG total Market value of assets 1,145 11,040 2,612 722 15,519 Present value of liabilities (1,553) (10,786) (3,661) (2,330) (18,330) (Deficit) / surplus (408) 254 (1,049) (1,608
Slide 43: Interest cover – calculation
Interest cover – calculation For the year ended 31 March (£m) 2009 2008 2007 Interest expense (P&L) 2,465 2,045 1,736 Capitalised interest 133 119 70 Interest on pensions debt adjustment 78 0 41 Interest on decommissioning liabilities adjustment 7 4 4 Interest on lease rentals adjustment 27 21 28 Pe
Slide 44: Predictability of regulated cash flows is a key factor in our ratings
Predictability of regulated cash flows is a key factor in our ratings – Group credit ratings Senior Unsecured / Short-Term ratings Moody’s1 S&P Fitch National Grid plc Baa1/P2 BBB+/A2 BBB+/F2 National Grid Electricity Transmission plc A3/P2 A-/A2 A/F2 National Grid Holdings One plc Not rated BBB+/A2
Slide 45: 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 (Senior Corporate Banking Manager): D: +44 (0)20 7004 3369 [email protected] Davi
Slide 46: nationalgrid
nationalgrid
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