TIDMNG.
RNS Number : 8650S
National Grid PLC
09 November 2023
London | 9 November
2023:
National Grid, a leading
energy
transmission and distribution
company,
today announces its Half-Year
results for the period
ended 30 September 2023.
==============================
Record network investment: a new phase of capital delivery
John Pettigrew, Chief Executive, said:
"Today we've announced solid results, and reconfirmed our
full-year guidance, as we continue to enhance critical energy
infrastructure across the communities we serve.
This financial performance reflects our role at the heart of the
energy transition and a new phase of capital delivery that is
firmly underway. Capital investment in our regulated networks
reached a record GBP3.5 billion in this half year, as we step up
our investment in 17 major onshore and offshore transmission
projects in the UK. In the US, we're now progressing a number of
major transmission projects to unlock renewable generation and
upgrade infrastructure across our jurisdictions. And we're
delivering this critical investment at the same time as ensuring
affordability for our customers, having now exceeded our GBP400
million efficiency savings target earlier than planned.
In recognition of this strong progress, we are today updating
our 2020/21 to 2025/26 five-year financial framework, which will
modestly enhance our asset and EPS growth within our existing
ranges. And whilst we're pleased to see momentum around policy
reform on both sides of the Atlantic, we now look forward to seeing
announcements and consultations translated into decisions and
action in order to deliver the energy transition. We're ready to
meet the opportunities, and are set up to tackle the challenges
ahead, to deliver a clean, fair and affordable energy future for
all."
Financial Summary
Six months ended 30 September: continuing operations(1)
===================================================================================================
Statutory results(2) Underlying(3)
------------------------- =================================== ==================================
Unaudited 2023 2022 % change 2023 2022 % change
========================== =========== ============ ======== =========== =========== ========
Operating profit (GBPm) 1,985 2,239 (11%) 1,796 2,117 (15%)
========================== =========== ============ ======== =========== =========== ========
Profit before tax (GBPm) 1,371 1,666 (18%) 1,144 1,455 (21%)
========================== =========== ============ ======== =========== =========== ========
Earnings per share (p) 28.8 33.4 (14%) 23.8 32.4 (27%)
========================== =========== ============ ======== =========== =========== ========
Dividend per share (p) 19.40 17.84 9%
========================== =========== ============ ======== =========== =========== ========
Unaudited 2023 2022 % change
========================= =========== ============ ======== =========== =========== ========
Capital investment (4)
(GBPm) 3,868 3,883 0%
========================== =========== ============ ======== =========== =========== ========
1. Excluding UK Gas Transmission which is held as a discontinued
operation. Amounts above are presented at actual currency.
2. For statutory EPS and profit before tax in 2022, comparative
amounts have been re-presented to reflect the classification of the
Further Acquisition Agreement (the FAA option) as held for sale and
within discontinued operations.
3. 'Underlying' represents statutory results from continuing
operations, but excluding exceptional items, remeasurements and
timing. Further detail and definitions for all alternative
performance measures (including constant currency) are provided on
page 63.
4. Capital investment, an Alternative Performance Measure (APM),
represents statutory capital expenditure of GBP3,706 million (2022:
GBP3,717 million) plus contributions to joint ventures and
associates and NG Partners additions. Further detail and
reconciliations are provided on page 63.
Highlights
(Solid financial delivery across the half year)
-- Solid underlying operating profit on a continuing basis of
GBP1.8 billion. Whilst this performance is in line with
expectations, non-recurring items reported in 2022/23 explain why
underlying operating profit is down 15% at actual exchange rates
(14% at constant currency) versus the prior period. These items in
the prior half year included: St William property land sales
(GBP201 million); a two month contribution from the Narragansett
Electric Company (NECO) (GBP53 million); and insurance proceeds
received at our IFA1 interconnector following a fire in September
2021 (GBP70 million). Underlying EPS for continuing operations of
23.8p, down from 32.4p in the prior period, in line with our
expectation of underlying EPS to have a greater weighting to the
second half.
-- Statutory operating profit down 11% to GBP2.0 billion, driven
principally by gains on NECO and St William land sales in the prior
period, partly offset by favourable timing. Statutory EPS of 28.8p,
down from 33.4p in the prior period.
-- Interim dividend of 19.40p/ordinary share* in line with
policy (17.84p/ordinary share in the prior period).
* This represents 35% of the total dividend per share of 55.44p
in respect of the last financial year to 31 March 2023, in line
with the Group's dividend policy.
Highlights continued
(Record regulatory capital investment driving the energy
transition)
-- Capital investment of GBP3.9 billion for continuing
operations, GBP70 million higher than the prior period at constant
currency (GBP15 million lower at actual exchange rates). Of this
total, capital investment in our regulated networks [1] reached a
record GBP3.5 billion, up 10% on the prior period at constant
currency (7% at actual exchange rates).
-- Group capital investment was principally driven by higher
connections spend and early investment relating to Accelerated
Strategic Transmission Investment (ASTI) in our UK Electricity
Transmission business; increased spend on our new transmission
projects in New York, such as our Smart Path Connect project;
higher asset condition and Grid Modernization spend in New England;
partially offset by lower investment in National Grid Ventures
(NGV) compared to the prior period due to lower spend on the IFA1
Sellindge converter station rebuild, Isle of Grain expansion and
Viking interconnector as these projects near completion.
(Good, early progress on ASTI projects)
-- Welcomed Ofgem's decision to place 17 ASTI projects into our
UK Electricity Transmission operating licence.
-- Signed JVs with SP Transmission plc (ScottishPower) for
Eastern Green Link 1 in August, and with Scottish Hydro Electric
Transmission plc (SSE) for Eastern Green Link 2 in June; selected
suppliers for converter stations and cables at the Eastern Green
Links 1 and 2 offshore projects, received planning consents on the
English side of the links.
-- Launched the procurement process for the enterprise model to
deliver the majority of our onshore projects.
(Continued capital re-allocation from National Gas
Transmission)
-- Agreed to sell a further 20% equity interest in National Gas
Transmission to the consortium led by Macquarie Asset Management
and British Columbia Investment Management Corporation, on
equivalent financial terms to the 60% stake sold to the consortium
in January 2023.
-- Agreed a new option with the same consortium, exercisable
between 1 May 2024 and 31 July 2024, allowing it to acquire the
remaining interest.
(Strong regulatory progress underpinning future growth)
-- Welcomed the Energy Act 2023 receiving Royal Assent and passing into UK legislation.
-- Published our 'Delivering for 2035' policy paper, outlining
five priority areas where action is required by the UK government
and Ofgem to ensure networks can play their part in decarbonising
the power sector by 2035.
-- Welcomed the Electricity Networks Commissioner's (ENC) report
and its recommendations for a strategic spatial energy plan
reducing timelines on transmission infrastructure delivery.
-- Began the first year of new price controls under RIIO-ED2,
running for five years until 31 March 2028.
-- Planning to move forward in settlement negotiations with the
New York Public Service Commission (PSC) for new rates at
KEDNY-KEDLI, hoping to reach a Joint Proposal in the first quarter
of calendar year 2024.
-- Filed our Electric Sector Modernization Plan (ESMP) in
Massachusetts, proposing $2 billion of investment over the next
five years in our electric distribution network to help meet state
clean energy goals (not part of any rate order we currently have in
Massachusetts).
-- Community Offshore Wind JV successful in New York's offshore
wind solicitation with a provisional offtake award of 1.3 GW.
-- Received approval for our Propel NY Energy transmission
project on Long Island, a partnership between New York Transco and
the New York Power Authority, which will bring offshore wind into
the state.
-- Our Twin States Clean Energy Link, a 1.2 GW transmission
project, selected by US Department of Energy (DOE) to move to the
next stage of negotiation under the DOE's Transmission Facilitation
Program.
(Support for our communities and customers)
-- Working to return GBP200 million of interconnector revenues
to UK consumers that we announced in May 2022, and the further
GBP100 million that we announced in May 2023.
-- As part of our two-year winter support fund we announced last
year, GBP19 million will be available to support our most
vulnerable customers this coming winter.
-- Received two Edison Electric Institute Awards in June for
outstanding storm response for the two most severe winter storms in
New England last year (on 23 December 2022, and 13 March 2023).
Highlights continued
(Further progress on our Group efficiency programme and
synergies)
-- Achieved a further GBP53 million of Group efficiency savings
during the half year [2] . This is in addition to the GBP373
million reported at the end of 2022/23 and takes cumulative
efficiency savings under the programme to GBP426 million, exceeding
our GBP400 million target that we committed to deliver by the end
of 2023/24.
-- Delivered GBP18 million to date of our GBP100 million UK
Electricity Distribution synergy target.
(Updating our responsible business commitments)
-- Published our third Responsible Business Report, setting out
the progress we have made against our commitments over the last
year, including a 70% reduction in Scope 1 and 2 emissions versus a
1990/91 baseline, representing a 7.5% reduction versus the prior
year.
-- Updated our Responsible Business Charter to reflect our new
portfolio, focused on three key pillars: environment; customers
& communities; and our people.
-- Published new Science Based Targets initiative (SBTi) aligned
near-term targets, including a new aim to reduce Scope 1 and 2
emissions by 60% by 2030 from a 2018/19 baseline, whilst remaining
committed to reducing Scope 3 emissions by 37.5% by 2034 (achieving
these targets is subject to a number of external dependencies,
including policies in our jurisdictions which deliver the energy
transition).
Financial Outlook and Guidance
-- Guidance is based on our continuing businesses as defined by
IFRS. It excludes the minority stake in National Gas Transmission
which is classified as held for sale within discontinued
operations, but includes the ESO which is held for sale within
continuing operations.
-- We have today updated our Five-Year Financial Framework for the period 2020/21 to 2025/26:
-- total cumulative capital investment of around GBP42 billion,
modestly enhancing our asset and EPS growth;
-- asset growth CAGR* of 8-10% backed by our strong balance sheet;
-- driving underlying EPS CAGR of 6-8% from the 2020/21 EPS baseline of 54.2 pence per share ;
-- credit metrics consistent with current Group rating; and
-- regulatory gearing to remain in the low 70% range.
-- Accelerated Strategic Transmission Investment (ASTI): as part
of the total cumulative capital investment of around GBP42 billion
over the 2020/21 to 2025/26 period, we expect to deliver around
GBP3 billion of capital investment across our 17 ASTI projects. As
we progress work on these projects, our current best estimate for
total outturn investment (in GBPbn) is in the mid-to-high teens
range.
-- Excluding the ESO accounting benefit as highlighted in our
Forward Guidance on page 15, for 2023/24 we continue to expect
underlying EPS to be modestly below 2022/23 levels following the UK
government change to the capital allowances legislation from 1
April 2023. We expect this change to have a 6-7p per share impact
on EPS, albeit no economic impact over the long term. Without this
change, underlying EPS was forecast to grow within our 6-8% CAGR
range between 2022/23 and 2023/24, assuming an exchange rate of
GBP1:$1.20.
* Compound Annual Growth Rate
Full-year underlying EPS (2020/21) as reported on 20 May
2021.
Financial Key Performance Indicators
As at and for the six months ended
30 September
(GBP million) 2023 2022 change %
=============================================== ====== ====== =====================
Statutory operating profit (continuing)
at actual currency:
UK Electricity Transmission 838 493 70%
UK Electricity Distribution 472 522 (10%)
UK Electricity System Operator 443 146 203%
New England (including NECO) (47) 720 (107%)
New York 8 (26) (131%)
National Grid Ventures 310 308 1%
Other (39) 76 (151%)
=============================================== ====== ====== =====================
Total statutory operating profit (continuing) 1,985 2,239 (11%)
=============================================== ====== ====== =====================
Underlying operating profit (continuing)
at constant currency(1) :
UK Electricity Transmission 656 564 16%
UK Electricity Distribution 563 579 (3%)
UK Electricity System Operator 34 52 (35%)
New England (including NECO) 218 304 (28%)
New York 119 195 (39%)
National Grid Ventures 219 258 (15%)
Other (13) 145 (109%)
=============================================== ====== ====== =====================
Total underlying operating profit (continuing) 1,796 2,097 (14%)
=============================================== ====== ====== =====================
Capital investment (continuing) at
constant currency:(2,3)
UK Electricity Transmission 800 629 27%
UK Electricity Distribution 608 584 4%
UK Electricity System Operator 75 42 79%
New England (including NECO) 789 771 2%
New York 1,257 1,195 5%
National Grid Ventures 326 531 (39%)
Other 13 46 (72%)
=============================================== ====== ====== =====================
Total capital investment (continuing) 3,868 3,798 2%
=============================================== ====== ====== =====================
1. 'Underlying' represents statutory results from continuing
operations, but excluding exceptional items, remeasurements and
timing. Further detail and definitions for all alternative
performance measures are provided on page 63.
2. Comparative amounts have been re-presented to reflect NGV as
a separate operating segment and the reclassification of our US LNG
operations from New England to NGV following an internal
reorganisation in the period.
3. Capital investment, an Alternative Performance Measure (APM),
represents statutory capital expenditure of GBP3,706 million (2022:
GBP3,717 million) plus contributions to joint ventures and
associates and NG Partners additions. Further detail and
reconciliations are provided on page 63.
Contacts
Investor Relations
===========================================================================
Nick Ashworth +44 (0) 7814 355 590
============================= ============================================
Angela Broad +44 (0) 7825 351 918
============================= ============================================
James Flanagan +44 (0) 7970 778 952
============================= ============================================
Alexandra Bateman +44 (0) 7970 479 571
============================= ============================================
Media
===========================================================================
Molly Neal +44 (0) 7583 102 727
============================= ============================================
Lyndsey Evans +44 (0) 7714 672 052
============================= ============================================
Brunswick
===========================================================================
Dan Roberts +44 (0) 7980 959 590
============================= ============================================
Results presentation webcast
===========================================================================
An audio webcast and live Q&A with management will be held at 09:15
(BST) today. Please use this link to join via a laptop, smartphone
or tablet: https://www.nationalgrid.com/investors/events/results-centre
A replay of the webcast will be available soon after the event at
the same link.
===========================================================================
UK (and International) +44 (0) 330 551 0200
============================= ============================================
UK (Toll Free) 0808 109 0700
============================= ============================================
US (Local) +1 786 697 3501
============================= ============================================
Password Quote "National Grid Half Year" when
prompted by the operator
============================= ============================================
Use of Alternative Performance Measures (APMs)
Throughout this release we use a number of alternative (or non-IFRS)
and regulatory performance measures to provide users with a clearer
picture of the regulated performance of the business. This is in
line with how management monitor and manage the business day-to-day.
Further detail and definitions for all alternative performance measures
are provided on pages 63 to 67.
Inside information
This announcement contains inside information for the purposes
of Article 7 of the UK Market Abuse Regulation. The person
responsible for arranging the release of this announcement on
behalf of National Grid is Justine Campbell, Group General Counsel
& Company Secretary.
STRATEGIC OVERVIEW
A period of good regulatory progress and continued growth
National Grid has reported a solid financial performance for the
first six months of the year, underpinned by continued operational
progress across the Group and record half-year investment in our
regulated network businesses.
Safety performance
In August 2023, one of our UK Electricity Distribution employees
tragically lost his life at a site in Ludlow, Shropshire, after
falling from height whilst performing overhead line work. This
tragic loss of life was felt acutely across the Group, and we have
worked closely with the individual's family, friends and colleagues
to support them. As a Group, we are firmly committed to our staff
and contractors returning home safely at the end of each day. With
the incident investigation in progress, we are taking actions in
Electricity Distribution and across the Group to prevent
reoccurrence, enhance safety leadership engagement, and proactively
learn from both actual and potentially severe incidents.
During the half year, we recorded a Group Lost Time Injury
Frequency Rate (LTIFR) of 0.09, compared to 0.11 at year end and
against our Group target of 0.1.
Half-year operating financial performance
Our statutory operating profit is presented on page 4 which
includes the impact of exceptional items, remeasurements and
timing, and a reconciliation to our APMs is presented on page
65.
We achieved solid underlying operating profit on a continuing
basis of GBP1.8 billion. Whilst this performance is in line with
expectations, non-recurring items reported in 2022/23 explain why
underlying operating profit is down 15% at actual exchange rates
(14% at constant currency) versus the prior period. These items in
the prior half year included: St William property land sales
(GBP201 million); a two month contribution from the Narragansett
Electric Company (NECO) (GBP53 million); and insurance proceeds
received at our IFA1 interconnector following a fire in September
2021 (GBP70 million).
Underlying operating profit -
continuing operations(1) At actual At constant
Six months ended 30 September exchange rates currency
======================== ================
(GBP million) 2023 2022 % change 2022 % change
=================================== ====== ====== ======== ====== ========
UK Electricity Transmission 656 564 16% 564 16%
UK Electricity Distribution 563 579 (3%) 579 (3%)
UK Electricity System Operator 34 52 (35%) 52 (35%)
New England 218 316 (31%) 304 (28%)
New York 119 202 (41%) 195 (39%)
National Grid Ventures 219 259 (15%) 258 (15%)
Other (13) 145 (109%) 145 (109%)
=================================== ====== ====== ======== ====== ========
Total underlying operating profit 1,796 2,117 (15%) 2,097 (14%)
=================================== ====== ====== ======== ====== ========
1. Excluding UK Gas Transmission which is held as a discontinued
operation. 'Underlying results' and a number of other terms and
performance measures are not defined within accounting standards
and may be applied differently by other organisations. For clarity,
we have provided definitions of these terms and, where relevant,
reconciliations on pages 63 to 67.
For the half year, Group capital investment for continuing
operations reached GBP3,868 million, GBP70 million higher than the
prior period at constant currency (GBP15 million lower at actual
exchange rates). Of this total, capital investment in our regulated
networks reached a record GBP3,529 million, up 10% on the prior
period at constant currency (7% at actual exchange rates).
Group capital investment was principally driven by higher
connections spend and early investment relating to ASTI in our UK
Electricity Transmission business; increased spend on our new
transmission projects in New York, such as our Smart Path Connect
project; higher asset condition and Grid Modernization spend in New
England; partially offset by lower investment in NGV compared to
the prior period due to lower spend on the IFA1 Sellindge converter
station rebuild, Isle of Grain expansion and Viking interconnector
as these projects near completion.
Positioning National Grid for the future - our strategic
pivot
The strategic pivot that we announced in 2021 will enable the
Group to play a key role at the heart of the energy transition,
drive long-term shareholder value and deliver affordability for our
customers. It included the acquisition of UK Electricity
Distribution (June 2021), the sale of NECO (May 2022), and the sale
of a majority stake in UK Gas Transmission (January 2023, when the
company began to operate under a new name, National Gas
Transmission).
On 19 July, we announced the sale of a further 20% in National
Gas Transmission to a consortium led by Macquarie Asset Management.
The equity sale is on equivalent financial terms to the original
60% transaction (acquired by the same consortium) that was
completed in January 2023. Completion of the sale of this further
20% is subject to the same National Security and Investment (NSI)
clearance process as the initial 60% tranche and, subject to such
clearance, will complete in the same way. This will take the
consortium's equity stake in National Gas Transmission to 80%.
As part of the same announcement, National Grid confirmed that
it had entered into a new option agreement with the Consortium for
the potential sale of the final 20% shareholding in National Gas
Transmission. The Consortium has the option, exercisable between 1
May 2024 and 31 July 2024, to acquire the remaining interest. If
the option is partially exercised by the Consortium, National Grid
will have the right to put the remainder of its equity interest in
National Gas Transmission to the Consortium, which can be exercised
by National Grid between 1 December 2024 and 31 December 2024. If
one or both of these options are exercised, the consideration for
the remaining interest is expected to be paid in cash to National
Grid on equivalent financial terms to the original 60% transaction,
subject to certain adjustments.
National Grid's asset base will move to around 75% electricity
(up from 60% in 2021) once the 20% equity sale in National Gas
Transmission (that we announced in July) completes.
Supporting our customers and communities
Over the half year, we have made good progress on making sure
our economic and social role has the greatest impact on the
communities we serve. We have continued to see a tough economic
backdrop for our customers and communities as inflation, and rising
energy prices, have contributed to the cost-of-living crisis. As a
responsible business, our focus remains on delivering the energy
transition in the UK and the US to help move towards a clean energy
future that is affordable for customers.
As part of this, we announced last year our winter funding
packages to help our most vulnerable customers and communities in
the UK and US. Of the $17 million we committed to help customers in
New York and Massachusetts, around $9 million has already been
distributed in the past year through our network partners to assist
over 35,000 households with high energy costs. The remaining funds
will be distributed across the forthcoming winter months in
2023/24.
In the UK, we have GBP11 million remaining of the original GBP50
million support fund that we established last year, and we plan to
distribute it this coming winter across a number of areas. This
will include expanding our UK Electricity Distribution Community
Matters Fund that offers grants to customers struggling with fuel
poverty; continuing our support for home visit, customer advice and
fuel vouchers through the National Energy Foundation and Fuel Bank
Foundation; and supporting Citizens Advice by funding an additional
15 full-time caseworkers, delivering support to an additional 2,400
people with specialist advice.
We also continue to work with Ofgem on the early return of
GBP200 million of interconnector revenues to UK consumers that we
announced in May 2022. We also plan to return a further GBP100
million of revenues to customers, as we announced in May 2023,
subject to Ofgem's consent.
UK regulatory progress and Winter Outlook
We have seen good regulatory progress in the UK across a number
of policy and regulatory areas. From recommendations made to
accelerate transmission investment, through to the Energy Act 2023
receiving Royal Assent, the progress we have seen this year will
support the UK's drive for decarbonisation, greater energy
affordability and increased energy security, goals for which
National Grid is wholly aligned and supportive in delivering.
Energy Act 2023 and Future Systems and Network Regulation
(FSNR)
At the end of October, we welcomed the Energy Act receiving
Royal Assent and passing into legislation. The Act is a crucial
next step in delivering a secure and affordable clean energy
network and establishes important policy and governance foundations
to deliver on the UK's net zero ambitions. The Act enables the
separation of the Electricity System Operator (ESO) from National
Grid and the formation of an Independent System Operator and
Planner (ISOP). The ISOP, formerly referred to as the Future System
Operator, will have a critical role in delivering strategic, whole
system energy planning and oversight as we continue to invest in
and transform the UK's energy infrastructure. We expect the ISOP to
be established as a public entity in 2024 with responsibilities
across both the electricity and gas systems.
We also welcomed the introduction of a net zero duty for Ofgem
within the Act, which widens the regulator's remit to consider net
zero targets as part of its decision making. The inclusion of
marine grids in the legislation's definition of offshore wind
associated infrastructure is also welcome and will assist in
simplifying the consenting process.
Also in October, we welcomed Ofgem's publication of the FSNR
Framework Decision. This sets out the overarching framework for the
network price controls for electricity and gas transmission, and
gas distribution, which will run from April 2026, known as
'RIIO-3'. For electricity transmission, the main points from the
FSNR Decision included:
-- the continuation of five-year price controls, including the
setting of returns and assessment of financeability (to ensure that
necessary capital is attracted to support expansion needed in the
grid);
-- evolution of a RIIO-style framework, with the introduction of
a major projects regime for significant network investments
identified in the Centralised Strategic Network Plan (see
below);
-- the need for streamlining of the regulatory framework,
recognising the requirement for companies to propose investments
that are anticipatory; and
-- a focus on the need to accelerate digitalisation.
The detail of the frameworks will now be developed through the
sector specific methodology phase which will be managed through a
combination of working groups and a consultation to be published in
December 2023. The final methodology decision will be made in
Spring 2024. The Decision also confirmed that the overarching
RIIO-3 framework will provide a foundation for the Electricity
Distribution price control which will start in April 2028. The
precise framework and process for Electricity Distribution will be
consulted on separately in late 2024.
Further progress on ASTI
On 25 August, Ofgem published transmission licence modifications
which formally place the ASTI projects into Transmission Operators'
licences. This includes the 17 ASTI projects that Ofgem awarded to
National Grid in December 2022 to upgrade the East coast
transmission network in support of the UK government's 50 GW 2030
offshore wind target. We are pleased with progress, and we have
continued to engage with Ofgem on the profile and timing of the
required ASTI investment. We expect the majority of this investment
to be deployed towards the end of this decade.
The 17 ASTI projects will be delivered by our Strategic
Infrastructure (SI) business unit which ensures efficient and
effective delivery. As each project completes, it will be
transferred to UK Electricity Transmission which will then be
responsible for the ongoing operation and maintenance of the
infrastructure when in service [3] .
We have made good progress on our ASTI projects over the half
year, including: signing JVs with ScottishPower for Eastern Green
Link 1 in August, and with SSE for Eastern Green Link 2 in June;
selecting the preferred suppliers for converter stations and cables
at Eastern Green Links 1 and 2; completing the 'examination' stage
of our Development Consent Order (DCO) application for the
Yorkshire Green project; and launching the procurement process for
the 'Great Grid Upgrade Partnership', the contractual model that
will be used to deliver the majority of our onshore projects. The
model has been designed on industry best practice with contracts
expected to be awarded early in the new year.
Transforming the network - reforming the pace of the energy
transition
In May, National Grid published 'Delivering for 2035: Upgrading
the grid for a secure, clean and affordable energy future'. The
paper outlines five priority areas where action is required by the
UK government and Ofgem to ensure electricity networks can fully
play their part in decarbonising the power sector by 2035. These
priority areas are:
-- reforming the planning system, centred around a strategic spatial energy plan;
-- ensuring the regulatory and governance framework is set up for delivery;
-- transforming how clean energy connects to the grid and accelerating net zero projects;
-- putting communities and consumers at the forefront of the transition; and
-- developing supply chain capacity and a skills pipeline across the country.
The recommendations we made in the publication are critical to
reforming the scale and pace of the energy transition needed over
the next decade, particularly in transmission, to enable the
decarbonisation of the UK power sector by 2035. Whilst significant
progress has been made towards transforming the UK's power system
in recent years, full decarbonisation will require more urgent
action from industry, the UK government and Ofgem. We are pleased
to see a number of positive developments in this half year that
support our call for urgent reform.
In August, we welcomed the publication of the Electricity
Networks Commissioner's (ENC's) report and its recommendations
aimed at significantly reducing timelines for delivering onshore
and offshore transmission network infrastructure. Many of the
recommendations align with our priority areas. In particular, we
support the ENC's recommendation for a strategic spatial approach
to planning energy infrastructure and the robust need case this
would provide. The UK government has committed to publishing an
Action Plan in response to the ENC report by the end of 2023,
setting out future actions for government, Ofgem and industry.
Key proposals by the ENC also link with Ofgem's consultation
published in June on proposed arrangements for the Centralised
Strategic Network Plan (CSNP). The CSNP will be a new transmission
network planning approach that will be delivered by the ISOP. The
Ofgem consultation covers the first stage of the CSNP regulatory
framework setting out how it expects the ISOP to model future
supply and demand (currently the Future Energy Scenarios, or FES)
that will inform future network investment need. National Grid
fully supports the creation of a CSNP and agrees with the direction
of the proposals in the Ofgem consultation. As with the ENC
recommendations, the aims of the CSNP align with our five priority
areas in our 'Delivering for 2035' paper.
Connections reform across our transmission and distribution
networks
National Grid has launched a new reform initiative to accelerate
grid connections across our transmission and distribution
networks.
During the half year, the ESO has continued to work with
stakeholders, including UK Electricity Transmission, to improve and
reform the connections process to the transmission network. We have
been working on two major aspects, the shorter term Five Point
Plan, and a longer full connection reform process. The transmission
connection queue now stands at over 400 GW for Great Britain which
represents a significant oversubscription of what is required to
meet the scenarios in the ESO Future Energy Scenario
publication.
The Five Point Plan has been worked through with all
transmission owners and customers. Progress is being made with
around 5 GW of connection contracts being rescinded through the
Transmission Entry Capacity (TEC) Amnesty, and our change of the
treatment of batteries has accelerated over 10 GW of connections by
at least four years. Work is being undertaken by the transmission
owners to assess the full impact of the implementation of the Five
Point Plan. One of the key changes will be the introduction of
Queue Management clauses into connection agreements so that if
connecting customers miss key milestones in their development then
the ESO will have the right to terminate the connection. It is
expected that Ofgem will decide on the code modification required
to enable this in November this year.
For longer-term reform, the ESO published a consultation in the
summer, and we are responding with a recommended solution at the
end of November. We are working with Ofgem to understand a way
forward that can expedite the implementation and delivery of the
benefits of the proposed connection reform.
We have also taken further action on connections reform across
our UK Electricity Distribution network. In September, we announced
plans to release 10 GW of grid capacity for the connection of
renewable generation assets to our network. This follows engagement
since the beginning of the year with the ESO, Ofgem and the UK
government to find solutions to speed up the connection of low
carbon technologies. Through a new agreement with the ESO, projects
that require additional transmission network reinforcement will be
offered the chance to connect under an interim, non-firm connection
arrangement. In return for an earlier connection, the interim
arrangements would mean some projects could be curtailed when there
is too much generation on the system, such as on some of the
windiest and sunniest summer days.
In the long term, these interim arrangements will be replaced
with firm connections as network capacity increases. In addition,
from September we have started to replace the current 'first come,
first served' connection model with a 'first ready, first
connected' approach on our UK Electricity Distribution network.
This updated approach, which will apply on a non-firm basis to a
subset of supply points, will accelerate the connection of 'shovel
ready' projects to allow more low carbon projects to connect
faster. As a result, these changes will allow customers to
accelerate their connection dates and provide a more agile approach
to managing connection requests.
We also continue to work with members of the Energy Networks
Association (ENA) on reforming the connection process to
distribution networks. This includes promoting mature projects that
are closer to delivery above those that may be 'blocking' the
queue; and changing how transmission and distribution networks
coordinate connections, improving their interactivity.
Ofgem inflation consultation
On 1 August, Ofgem published a 'call for input' on the impact of
high inflation on network price controls. This was expected as it
was raised by Ofgem as part of the Electricity Distribution Draft
Determinations in summer 2022. There are five policy considerations
that Ofgem have asked stakeholders to comment on, namely: no
action; reporting and transparency; future price control design;
true up; and voluntary submissions. The document recognises the
importance of stable regulation and the risk of changing how
regulation works.
We have worked with the ENA to put forward our views and, given
the timeline, we believe this is best discussed as part of the
RIIO-3 price controls. Ofgem is expected to publish an informal
consultation in late 2023 which will provide more detail around
whether it intends to launch a standalone consultation or whether
it will wait for the next price control period.
UK Winter Outlook
In September, the ESO published the electricity Winter Outlook
for the upcoming winter in Great Britain.
Despite the ongoing conflicts in Ukraine and the Middle East,
the broad European energy market has improved since last year. The
market has bolstered European gas storage and supplies, and the
French nuclear fleet capacity is back to pre-pandemic levels. The
ESO has built on the experience of the 2022/23 winter and continued
to build resilience and minimise the potential impact of risks and
uncertainties in the energy markets. As such, the System Operator's
Base Case scenario is that there will be adequate margins (4.4
GW/7.4%) through the forthcoming winter to ensure Great Britain
remains within the reliability standard [4] .
Alongside the Base Case, the ESO has stress tested the impact of
credible Great Britain and EU energy market events on the system
against available operational tools. As a result, it plans to
reintroduce the Demand Flexibility Service for this winter to
incentivise customers to reduce consumption during periods when
margins are tightest. This measure, alongside the robust set of
tools already deployed by the ESO, will contribute to maintaining
adequate margins and mitigate impacts to customers.
US regulatory progress
We have seen good momentum on regulatory progress across our US
jurisdictions during the half year.
New York rate filings
On 1 September, New York Public Service Commission (PSC) Staff
responded to our rate filing that we made for our downstate gas
business, KEDNY-KEDLI, in April. The response proposed a Return on
Equity (ROE) of 9.1% (compared to our request for 9.8%), revenue
increases of $389 million for KEDNY and $220 million for KEDLI
(compared to our request of $466 million and $277 million
respectively) and a 7.5% reduction on our request for capital
expenditure in 2024/25. In addition, PSC Staff also recommended
increasing Leak Prone Pipe (LPP) replacement targets for both KEDNY
and KEDLI (for example, 55 miles of pipe replacement at KEDNY in
calendar year 2024 against our request for around 40 miles; and 125
miles of pipe replacement at KEDLI in calendar year 2024 against
our request for around 110 miles). PSC Staff supported future
Renewable Natural Gas (RNG) connections to the gas network,
recognising that projects are at an early stage; the regulator also
expressed support for advancing and funding an opportunity to use
an existing green hydrogen facility for blending in a closed system
on Long Island. National Grid responded to the PSC Staff position
on 22 September, and we plan to move forward in settlement
negotiations, hoping to reach a Joint Proposal with stakeholders in
the first quarter of calendar year 2024.
We also remain on track to file for new rates at our Niagara
Mohawk (NIMO) electric and gas business (upstate New York) in
summer 2024.
New York transmission investment
In July, we received Federal Energy Regulatory Commission (FERC)
approval for cost recovery on our Smart Path Connect transmission
rebuild and refurbishment project in upstate New York. The order
included a 10.3% ROE with a 50:50 debt:equity ratio, with cost
recovery effective from 1 April 2023. The project, to develop 110
miles of transmission lines in partnership with the New York Power
Authority (NYPA), will unlock more than 1,000 MW of existing
renewable resources, deliver significant production cost savings
and emissions reductions, and will decrease transmission
congestion. The project is on track to be completed by 2025.
Massachusetts - Electric Sector Modernization Plan submitted
On 1 September, we filed our Electric Sector Modernization Plan
(ESMP) in Massachusetts. The plan outlines the investment required
in our electric distribution network over the next five years and
beyond to help the State meet its clean energy goals under the 2050
Clean Energy and Climate Plan (CECP). Under the plan, we have
proposed to invest up to $2 billion over the next five years across
the following areas:
-- Network infrastructure: upgraded power lines, transformers,
substations, to make the network more resilient, connect clean
energy and plan in advance for growth in electric demand;
-- Technology and platforms: new planning tools for smarter
decision making, including new data and monitoring systems to
ensure system stability, and new IT infrastructure; and
-- Customer programmes: help customers reduce carbon footprint, drive smart energy use.
Customers and all other interested parties will be able to
provide their feedback through public and technical workshops that
National Grid will conduct jointly with other electric distribution
companies. We will use feedback to inform the formal filing of a
Future Grid Plan to the Department for Public Utilities (DPU) in
January 2024, after which the DPU will consider the Plan and direct
the company on how to proceed. The proposed investment under the
ESMP is not currently part of any rate order for our service
territory.
We remain on track to file for new rates for our Massachusetts
Electric business in mid-November 2023, and we will propose a
mechanism for recovery of the ESMP investment as part of that
filing.
Twin States Clean Energy Link
In October, the Twin States Clean Energy Link was selected by
the US Department of Energy (DOE) as one of three projects in the
US to enter capacity contract negotiations through the DOE's
Transmission Facilitation Program. Twin States is a bidirectional
transmission project being proposed by National Grid and Citizens
Energy Corporation. If built, the line will deliver 1,200 MW of
hydro-sourced generation from Canada to New England when it is
needed and will allow for excess power from offshore wind in New
England to be delivered to Canada. Moving forward, we will continue
working with local, state and federal stakeholders to progress the
project which has the potential to create significant savings for
customers in New England.
Community Offshore Wind (COSW)
On 24 October, the New York State Energy Research and
Development Authority (NYSERDA) announced three successful projects
that will receive Offshore Renewable Energy Certificates (ORECs) as
part of New York's third large-scale offshore wind solicitation.
COSW, our JV with RWE, was selected as one of the successful
projects with a provisional offtake award of 1.3 GW. The project
would be located within COSW's 3.2 GW seabed lease in the New York
Bight.
In August 2023, COSW also submitted an offtake bid for up to 1.3
GW in response to the New Jersey Board of Public Utilities (BPU)
solicitation. We await selection decisions in the first or second
quarter of calendar year 2024.
Further progress on Group efficiency savings
As part of our Group efficiency savings programme, we achieved a
further GBP53 million of savings in the first half of the year [5]
. This is in addition to the GBP373 million reported at the end of
2022/23 and takes our cumulative efficiency savings under the
programme to GBP426 million. This exceeds our GBP400 million
savings target that we announced in November 2021 and that we
committed to deliver by the end of 2023/24.
Of the GBP53 million savings achieved this financial year,
almost GBP40 million has been in New York and New England. This has
principally been through property rationalisation and implementing
a more strategic approach to National Grid's sourcing and contract
management strategies, enabling the business to reduce its external
spend. It has also been driven by the use of digital solutions such
as OnMyWay (which digitises National Grid's paper-based work for
electric line crews, enabling more efficient job coordination),
FutureNow (which digitises our electric network investment
planning), and Vegetation Management Optimization (which optimises
our vegetation management strategy and execution for value, cost
and reliability). The continued roll out of new customer
initiatives, including the use of lower cost service providers
supporting our front office teams, and increased use of e-billing
and self-service options for customers has enabled further cost
reduction.
In our field operations, we have identified ways to reduce the
workloads of our maintenance teams whilst maintaining the safe and
reliable operation of the network. For example, we have maximised
resource capacity through combined training for teams, more
efficient coordination with external partners to reduce completion
time, and optimising crew sizes where it is safe to do so. In
addition, we have improved productivity through combining projects
where appropriate and making them more efficient to deliver.
Throughout the rest of our business, we have driven efficiencies
following the 2020/21 Business Unit reorganisation, enabled by new
digital capabilities, contract renegotiations and procurement
strategies. We will continue to drive further efficiencies, and we
would expect a similar level of savings in the second half of this
year compared to the first half.
Updating our responsible business commitments to reflect our
repositioned portfolio
National Grid believes that all businesses need to stand for
more than just profits. We have a critical role in enabling net
zero and ensuring that the benefits of the energy transition are
shared with everyone, with nobody left behind. This responsibility
is integral to our core strategy and underpins our Responsible
Business Fundamentals - ensuring safe and reliable operations,
living our values, whilst influencing, and expecting the same of
our partners and supply chain.
Progress against our Responsible Business commitments
Our 2022/23 Responsible Business Report, released in June, sets
out the progress we have made against our commitments in 2022/23.
These included:
-- a 70% reduction in Scope 1 and 2 emissions versus a 1990/91
baseline, representing a 7.5% reduction versus the prior year;
-- maintaining our CDP Climate Change 'A list rating' for the seventh consecutive year;
-- achieving 60,096 employee volunteering hours. This means
that, since 2020, we have achieved a cumulative 100,000 employee
volunteering hours versus our target of 500,000 to be reached by
2030; and
-- integrating our responsible business commitments within our performance management frameworks.
Underpinning this progress against our commitments is the record
level of investment we have made across our networks in the past
year, making us one of the FTSE's biggest investors in the delivery
of net zero.
Updating our Responsible Business Charter
Since we launched our first Responsible Business Charter three
years ago the external environment has continued to change, and our
business has evolved significantly with the repositioning of our
portfolio. To reflect these changes, we updated the Charter in
September following engagement with stakeholders and with a focus
on three core pillars: our environment; our customers and
community; and our people. Each of these pillars is underpinned by
our Responsible Business Fundamentals, with the previous pillars of
economy and governance now embedded within these new focus
areas.
New SBTi aligned targets
On environment, our new aim is to reduce scope 1 and 2 emissions
by 60% by 2030, from a 2018/19 baseline [6] , whilst remaining
committed to reducing scope 3 emissions by 37.5% by 2034. These
near-term emission targets across the Group align National Grid to
a 1.5 degrees pathway and have been verified by the SBTi. We have
also updated our emission reduction ambitions for our supply chain,
adding clarity on how we will target our suppliers to reduce Scope
3 emissions across the company. Achieving these targets is subject
to a number of external dependencies, including policies in our
jurisdictions which deliver the energy transition. We are engaging
actively with policy makers to enable these.
On our customers and communities, we aim to support an
affordable, and fair, energy transition, where nobody is left
behind. We will continue to mobilise hardship funds and energy
efficiency measures, and improve our reporting, on the benefits
that these initiatives provide. We will also continue to provide
meaningful skills development for 45,000 people by 2030 with a
focus on communities facing socio-economic disadvantage, and report
on the progress of our Grid for Good employability programmes. We
will deliver 500,000 hours of volunteering by the same date.
On our third pillar, people, we are investing to build the
skills needed to deliver the clean energy future. Building a
diverse, equitable and inclusive organisation that reflects the
communities we serve, is key to our success. Whilst we have made
good progress here, we will move forward with goals that include:
achieving 35% gender diversity and 20% ethnic diversity in our
management population by 2025, representing a 1.5% and 3% increase,
respectively, compared to today; aiming for 50% female
representation and 40% ethnic diversity in our new talent
population by 2025; aiming to lead the industry on wellbeing, with
metrics above the prior year level; and we remain committed to
making sure pay is equitable for all our colleagues.
Board changes
On 17 May, we announced that Thérèse Esperdy will step down from
the Board as a Non-Executive Director on 31 December 2023 after
serving more than nine years.
On 21 September, we announced that Ian Livingston will succeed
Thérèse Esperdy as the Senior Independent Director on 31 December
2023.
FIVE-YEAR FINANCIAL FRAMEWORK
Our five-year financial framework (1 April 2021 to 31 March
2026) includes UK Electricity Distribution from acquisition, the
sale of NECO in May 2022, and the sale of a 60% stake in our UK Gas
Transmission business in January 2023.
Capital investment and Group asset growth
Following our update, we now expect to invest around GBP42
billion across our energy networks and adjacent businesses, in the
UK and US, over the five-year period to 2025/26. Of this, around
GBP32 billion is considered to be aligned with the principles of
the EU Taxonomy legislation as at the date of reporting. We expect
this increased investment to be modestly enhancing to asset and EPS
growth.
In the UK, we expect around GBP11 billion of investment in
Electricity Transmission, of which around GBP3 billion is driven by
ASTI projects (which forms part of our best current view on total
outturn investment for all 17 ASTI projects of mid-to-high teens
(in GBPbn)). We expect our Electricity Distribution network to
invest around GBP6 billion over the five years to 2025/26 in asset
replacement, reinforcement and new connections, facilitating the
infrastructure for electric vehicles, heat pumps and directly
connected generation.
In our US regulated businesses, we expect to invest around GBP12
billion in New York and GBP9 billion in New England, over the five
years to 2025/26. Over half of this will be safety related projects
in our gas networks with the remainder in our electric networks
such as for storm hardening, other net zero investments, and
further electric transmission investment.
We expect NGV to invest GBP3-4 billion over the five years to
2025/26 in completing the interconnector programme, the Isle of
Grain Liquefied Natural Gas (LNG) capacity expansion project, and
US renewable generation.
As we have worked through the transactions, coupled with the sum
of these investments, and the broad economic protection our
businesses have against rising macroeconomic variables such as
inflation, Group asset growth is expected to be 8-10% CAGR through
to 2025/26.
Group gearing
We expect regulatory gearing to remain in the low 70% range for
the remainder of the five-year framework. We remain committed to a
strong, overall investment grade credit rating. Combined with the
benefit of our hybrid debt, we expect gearing levels, and the other
standard metrics we monitor, to sit within our current BBB+/Baa1
corporate rating band.
Group underlying earnings growth and dividend growth
From 2020/21 through to 2025/26, we expect our CAGR in
underlying earnings per share to be in our 6-8% range from the
baseline 54.2 pence per share [7] (this includes our long run
average scrip uptake assumption of 25% per annum). This will
underpin our sustainable, progressive dividend policy into the
future.
Excluding the ESO accounting benefit as highlighted in our
Forward Guidance on page 15, for 2023/24 we continue to expect
underlying EPS to be modestly below 2022/23 [8] levels following
the UK government change to the capital allowances legislation from
1 April 2023. We expect this change to have a 6-7p per share impact
on EPS, albeit no economic impact over the long term. Without this
change, underlying EPS was forecast to grow within our 6-8% CAGR
range between 2022/23 and 2023/24, assuming an exchange rate of
GBP1:$1.20.
2023/24 FORWARD GUIDANCE
This forward guidance is based on our continuing businesses as
defined by IFRS. It excludes the minority stake in National Gas
Transmission which is classified as held for sale within
discontinued operations, but includes the ESO which is held for
sale within continuing operations.
The outlook and forward guidance contained in this statement
should be viewed, together with the forward-looking statements set
out in this release, in the context of the cautionary statement.
The forward guidance in this section is presented on an underlying
basis and excludes remeasurements and exceptional items.
UK Electricity Transmission
Net revenue (excluding timing) is expected to increase by around
GBP260 million compared to 2022/23 primarily driven by the
non-repeat of the prior year Western Link settlement, and higher
revenues driven by indexation. This includes the impact on
underlying revenues of the new UK capital allowances legislation.
Costs are expected to offset around a third of the revenue
increase, including higher depreciation due to the increasing asset
base.
We expect to deliver around 100 bps of outperformance in the
third year of RIIO-T2 in operational Return on Equity. This is in
line with our target to deliver 100 basis points of operational
outperformance on average through the five-year period of the
RIIO-T2 price control.
UK Electricity Distribution
Net revenue (excluding timing) is expected to be modestly lower
compared to 2022/23, as we enter the first year of the RIIO-ED2
price control. This includes the impact on underlying revenues of
the new UK capital allowances legislation. Controllable costs are
expected to be modestly higher compared to the prior year due to
increased workload associated with the new price control,
inflationary impacts, and the non-repeat of some one-off items,
whilst depreciation is expected to be slightly higher, driven by
increasing rate base.
In line with our target, we expect to deliver around 100-125
basis points of outperformance in the first year of RIIO-ED2 in
operational Return on Equity.
UK Electricity System Operator (ESO)
Underlying operating profit (excluding timing) is expected to be
around GBP30 million higher than 2022/23, driven by around GBP50
million lower depreciation following being classified as held for
sale at the end of October 2023.
Under the RIIO-2 price control, totex in ESO is no longer
subject to the totex incentive mechanism and is instead regulated
under a pass-through mechanism, with cost increases or efficiencies
trued-up the following year.
New England
The completion of the sale of NECO in May 2022 will reduce
underlying operating profit (excluding timing) in 2023/24 by around
$65 million. For the remaining business we expect net revenue
(excluding timing) to be around $160 million higher from expected
rate increases, with just over half of this being offset by cost
increases due to depreciation, rate funded increases, and
inflation.
Return on Equity for New England is expected to slightly improve
in respect of underlying performance compared to 2022/23. Alongside
this, there is expected to be an additional one-off benefit of
around 40 basis points in 2023/24 partially relating to the
regulatory recovery of a historical property tax matter.
New York
Net Revenue (excluding timing) is expected to be around $270
million higher, including increases from proposed rate settlements.
Just under one third of this increase will be offset by
depreciation as a result of higher investment. Lower controllable
costs, as a result of efficiencies and non-recurrence of one-off
items are broadly offset by higher rate funded costs.
Return on Equity for New York is expected to be broadly in line
with 2022/23.
NGV and Other activities
In NGV, we expect operating profit to be around 5% lower than
2022/23 driven by the reduction in interconnector auction revenues
as energy markets return to more usual levels following the high
prices experienced last year.
We also expect other activities' underlying operating profit to
be lower year-on-year by just over GBP100 million. This is driven
by reduced sales in our Commercial Property business, partly offset
by the impact of our significant community spend in 2022/23.
Joint Ventures and Associates
Our share of the profit after tax of joint ventures and
associates is expected to be just under GBP100 million lower than
2022/23 as a result of lower auction revenues in our joint venture
interconnectors.
Interest and Tax
Net finance costs in 2023/24 are expected to be around GBP20
million lower than 2022/23. This follows the repayment of the
acquisition bridge loan and lower inflationary rate increases,
partially offset by increasing rates on new issuances. Other
interest is expected to remain broadly flat.
For the full year 2023/24, the underlying effective tax rate,
excluding the share of post-tax profits from joint ventures and
associates, is expected to be around 26%.
Investment, Growth and Net Debt
Overall Group capital investment for continuing operations in
2023/24 is expected to be above GBP8 billion.
Asset Growth is expected to be within the 8-10% CAGR range,
reflecting an increase in capex along with indexation impacting our
UK regulated businesses.
Depreciation is expected to increase, reflecting the impact of
continued high levels of capital investment.
Operating cash flow generated from continuing operations
(excluding acquisitions, disposals and transaction costs) is
expected to increase by around 30% compared to 2022/23 principally
driven by ESO over-recoveries and higher operating profits. This
increase is expected to be mostly offset by higher cash interest,
higher cash capital investment and higher cash dividends than
2022/23.
Net debt is expected to increase by around GBP3.5 billion (from
GBP41.0 billion as at 31 March 2023) at a GBP:USD rate of 1.20,
driven by our continued levels of significant investment in
critical clean energy infrastructure, with regulatory gearing
broadly flat year over year. This includes proceeds from the sale
of a further 20% stake in National Gas Transmission to the
consortium led by Macquarie Asset Management that we announced in
July.
Weighted average number of shares (WAV) is expected to be
approximately 3,690 million in 2023/24.
FINANCIAL REVIEW - HY 2023/24
In managing the business, we focus on various non-IFRS measures
which provide meaningful comparisons of performance between years,
monitor the strength of the Group's balance sheet as well as
profitability, and reflect the Group's regulatory economic
arrangements. Such alternative and regulatory performance measures
are supplementary to, and should not be regarded as a substitute
for, IFRS measures which we refer to as statutory results. We
explain the basis of these measures and reconcile these to
statutory results in 'Alternative performance measures/non-IFRS
reconciliations' on pages 63 to 67. Also, we distinguish between
adjusted results, which exclude exceptional items and
remeasurements, and underlying results, which further take account
of: (i) volumetric and other revenue timing differences arising
from our regulatory contracts, and (ii) major storm costs which are
recoverable in future periods, where these are in excess of $100
million in the year, neither of which give rise to economic gains
or losses.
Financial summary for continuing operations - performance for
the six months ended 30 September
(GBP million) 2023 2022 change %
===================================================== =================== =================== ========
Accounting profit:
----------------------------------------------------- ------------------- ------------------- --------
Gross revenue 8,489 9,444 (10%)
Other operating income 12 544 (98%)
Operating costs (6,516) (7,749) (16%)
----------------------------------------------------- ------------------- ------------------- --------
Statutory operating profit 1,985 2,239 (11%)
----------------------------------------------------- ------------------- ------------------- --------
Net finance costs(1) (685) (624) 10%
Share of joint ventures and associates (after
tax) 71 51 39%
Tax (307) (447) (31%)
Non-controlling interest (1) - n/a
----------------------------------------------------- ------------------- ------------------- --------
Statutory IFRS earnings(1) (see financial statements
note 8) 1,063 1,219 (13%)
Less: exceptional items and remeasurements
(after tax) (101) (302) (67%)
Less: timing (after tax) (87) 265 (133%)
----------------------------------------------------- ------------------- ------------------- --------
Underlying earnings(2) 875 1,182 (26%)
EPS - statutory IFRS (pence)(1) (see financial
statements note 8) 28.8 33.4 (14%)
----------------------------------------------------- ------------------- ------------------- --------
EPS - underlying (pence)(2) 23.8 32.4 (27%)
----------------------------------------------------- ------------------- ------------------- --------
Interim dividend per share (pence) 19.40 17.84 9%
----------------------------------------------------- ------------------- ------------------- --------
Capital investment:
Capital expenditure (including NECO additions
within held for sale) 3,706 3,717 0%
Add: investments in JVs and associates 151 129 17%
Add: investments in financial assets (National
Grid Partners) 11 37 (70%)
----------------------------------------------------- ------------------- ------------------- --------
Capital investment(1) 3,868 3,883 0%
----------------------------------------------------- ------------------- ------------------- --------
1. Comparative amounts have been re-presented to reflect the
classification of the FAA option as held for sale and within
discontinued operations.
2. Non-GAAP alternative performance measures (APMs). For further
details and reconciliation to GAAP measures, see 'Alternative
performance measures/non-IFRS reconciliations' on pages 63 -
67.
Statutory IFRS earnings were GBP1,063 million in the first six
months of the year, GBP156 million, or 13% lower than the six
months to September 2022. The prior period included GBP197 million
of net exceptional gains, comprising GBP511 million on the disposal
of NECO and GBP33 million property damage insurance income, partly
offset by GBP61 million of cost efficiency programme expenditure
and GBP65 million of transaction, separation and integration costs.
The current period includes GBP43 million of net exceptional gains
relating to GBP92 million further property damage net insurance
proceeds offset by GBP39 million of cost efficiency programme costs
and GBP11 million of transaction, separation and integration costs.
In the current period, tax on exceptional items was GBP1 million
credit (2022: GBP221 million charge). Statutory results were less
favourably impacted this half by derivative remeasurements with
post-tax net gains of GBP58 million (2022: GBP105 million net
gains). Timing net over-recoveries were GBP106 million in the first
six months compared to GBP361 million net under-recoveries (GBP349
million at constant currency) in the prior period.
Underlying operating profit of GBP1,796 million was down 15% and
underlying EPS of 23.8p was down 27% against the prior period. The
biggest driver of the decrease being GBP221 million lower property
income than during the prior period which benefitted from sales of
a number of sites following our exit from the St William joint
venture in 2021/22. An improved performance in UK Electricity
Transmission and in NG Partners, was more than offset by lower
results in our other businesses, partly related to the sale of NECO
(in New England) in May 2022 and business interruption insurance
proceeds in NGV in the prior period. Underlying net revenues of
GBP5,546 million were down GBP51 million (1%) compared to the prior
period, with higher UK regulated business revenues and increases in
New England and New York rates being offset by lower property
sales, lower interconnector revenues, the sale of NECO and the
impact of exchange rates. Regulated controllable costs were lower
on a constant currency basis, with higher workload and inflationary
increases being more than offset by efficiency savings. Pension and
other post-employment benefit costs were higher, driven by no
repeat of a GBP40 million buy-out gain in Niagara Mohawk (New York)
in the prior period. Depreciation was higher from our ongoing
investment programme. Other costs were higher, principally related
to higher storm response costs, environmental provisions, US
property taxes, bad debt provisions and also higher costs to
deliver outputs as agreed with our regulators which are offset by
higher revenues. These factors along with the impact of a higher UK
corporation tax rate, which increased to 25% (2022/23: 19%),
resulted in underlying earnings of GBP875 million for the first six
months of 2023/24, down GBP307 million or 26%.
Reconciliation of different measures of profitability and
earnings
The table below reconciles our statutory profit measures for
continuing operations, at actual exchange rates, to adjusted and
underlying versions.
Reconciliation of profit and earnings from continuing operations
========================================================================================================================================
Profit after Earnings per
Operating profit tax share (pence)
====================================== ====================================== ======================================
(GBP million) 2023 2022 2023 2022(1) 2023 2022(1)
================ ================== ================== ================== ================== ================== ==================
Statutory
results 1,985 2,239 1,064 1,219 28.8 33.4
Exceptional
items and
remeasurements (83) (483) (101) (302) (2.7) (8.3)
================ ================== ================== ================== ================== ================== ==================
Adjusted results 1,902 1,756 963 917 26.1 25.1
Timing (106) 361 (87) 265 (2.3) 7.3
Major storm
costs - - - - - -
=============== ================== ================== ================== ================== ================== ==================
Underlying
results 1,796 2,117 876 1,182 23.8 32.4
================ ================== ================== ================== ================== ================== ==================
1. Comparative amounts for statutory results and exceptional
items and remeasurements from continuing operations have been
re-presented to reflect the classification of the FAA option as
held for sale and within discontinued operations.
Segmental income statement
The following tables set out the income statement on adjusted
and underlying bases.
Segmental analysis for continuing operations
====================================================================================================================
Adjusted Underlying
======================== ============================================================
GBP million 2023 2022 change % 2023 2022 change %
============================ ====== ====== ======== ================== ================== ====================
UK Electricity Transmission 839 499 68% 656 564 16%
UK Electricity Distribution 476 531 (10%) 563 579 (3%)
UK Electricity System
Operator 443 147 201% 34 52 (35%)
New England (32) 193 (117%) 218 316 (31%)
New York (30) (18) 67% 119 202 (41%)
National Grid Ventures 219 259 (15%) 219 259 (15%)
Other (13) 145 (109%) (13) 145 (109%)
============================ ====== ====== ======== ================== ================== ====================
Total operating profit 1,902 1,756 8% 1,796 2,117 (15%)
Net finance costs (711) (732) (3%) (711) (732) (3%)
Share of post-tax results of
joint ventures and
associates 59 70 (16%) 59 70 (16%)
============================ ====== ====== ======== ================== ================== ====================
Profit before tax 1,250 1,094 14% 1,144 1,455 (21%)
Tax (287) (177) 62% (268) (273) (2%)
============================ ====== ====== ======== ================== ================== ====================
Profit after tax 963 917 5% 876 1,182 (26%)
============================ ====== ====== ======== ================== ================== ====================
EPS (pence) 26.1 25.1 4% 23.8 32.4 (27%)
============================ ====== ====== ======== ================== ================== ====================
UK Electricity Transmission statutory operating of GBP838
million was up from GBP493 million in the prior period and included
exceptional charges of GBP1 million as part of our cost efficiency
programme (2022: GBP6 million). Adjusted operating profit of GBP839
million increased by GBP340 million compared to the prior period
and included GBP248 million favourable swings driven by the
collection of prior period balances and an in-year over-recovery
due to changes to UK capital allowances legislation. Underlying
operating profit was GBP656 million compared to GBP564 million in
the prior period. This increase was driven by inflationary uplifts
partly offset by the net impact to allowed revenues from taxes
(higher UK corporation tax rate, more than offset by a change to
first-year UK capital allowances). Separately, prior period
revenues were adversely impacted by GBP69 million related to the
return of Western Link liquidated damages to customers.
UK Electricity Distribution statutory operating profit of GBP472
million was down from GBP522 million in the prior period and
included exceptional charges of GBP4 million for transaction and
integration costs (2022: GBP9 million). Adjusted operating profit
decreased by GBP55 million to GBP476 million (2022: GBP531 million)
and included GBP39 million adverse timing swings mainly related to
under-recovery of inflation true-ups, recovery of pass-through
costs and the return of prior period balances. Underlying operating
profit decreased by GBP16 million to GBP563 million (2022: GBP579
million). Underlying net revenues increased as a result of
inflation and higher allowances for the increase in the UK
corporation tax rate, but were offset by a decrease due to the
impact of first-year UK capital allowances and also adversely
impacted by reduced incentives opportunities in the new RIIO-ED2
framework. The prior year also included a gain on disposal of a
smart metering business.
UK Electricity System Operator statutory operating profit of
GBP443 million was up from GBP146 million in the prior period and
included exceptional charges of GBP1 million in the prior period as
part of our cost efficiency programme. Adjusted operating profit
was GBP443 million compared to GBP147 million in the prior period.
There has been a material impact on both statutory and adjusted
operating profit from an over-collection of allowed revenues during
the first six months of the year. This has arisen from the BSUoS
fixed price tariff substantially exceeding the actual costs
incurred during the period. This tariff is set ahead of the current
financial year, with the objective of NG ESO to recover the
estimated system balancing costs forecast to arise in the current
period. The GBP409 million in-year over-collection will be returned
by means of an adjustment to tariffs in 2024/25. Underlying
operating profit was GBP34 million compared to GBP52 million in the
prior period, principally as a result of lower incentives and
accelerated depreciation of intangible assets.
New England statutory operating loss of GBP47 million was down
from a statutory operating profit of GBP720 million in the prior
period and included an exceptional charge of GBP6 million (2022:
GBP33 million) as part of our cost efficiency programme, an
exceptional charge of GBP3 million (2022: GBP511 million gain)
related to the disposal of NECO (Rhode Island business sold in
2022/23) and commodity derivative remeasurement losses of GBP6
million (2022: GBP49 million gains). New England incurred an
adjusted operating loss of GBP32 million, GBP225 million adverse to
the prior period (GBP217 million adverse on a constant currency
basis). This was principally driven by a GBP131 million adverse
timing swing related to under-recoveries of net metering credits
and energy efficiency programme costs. In-year timing
under-recoveries were GBP250 million (2022: GBP123 million
under-recoveries, or GBP119 million under-recoveries at constant
currency). Underlying operating profit was GBP218 million (2022:
GBP316 million, or GBP304 million at constant currency), primarily
as a result of the disposal of NECO which contributed GBP53 million
to underlying operating profit for the two months owned in the
prior period (GBP69 million contribution to adjusted operating
profit). Underlying operating profit benefitted from increases in
revenues from higher rates (through the performance based
regulation), increased returns in wholesale networks and capital
trackers and bad debt recoveries, but these were more than offset
by an adverse impact from higher storm costs, increased
depreciation, increased bad debt provisions and higher costs from
both workload and inflation.
New York statutory operating profit of GBP8 million was up from
a statutory operating loss of GBP26 million in the prior period and
included exceptional charges of GBP9 million (2022: GBP24 million)
as part of our cost efficiency programme and commodity derivative
remeasurement gains of GBP47 million (2022: GBP16 million gains).
Adjusted operating loss of GBP30 million in the first six months
was GBP12 million adverse to the prior period. This included a
favourable GBP71 million timing swing primarily from higher
wholesale transmission auction sales, partly offset by collection
of downstate New York surcharges. In-year timing under-recoveries
were GBP149 million (2022: GBP220 million under-recoveries, or
GBP212 million under-recoveries at constant currency). Underlying
operating profit was GBP119 million, GBP83 million lower than the
prior period (GBP76 million lower at constant currency). Underlying
net revenues were GBP46 million higher principally from increases
in rates and an increase in energy efficiency programme funding
partly offset by exchange rate movements. Controllable costs were
lower with inflationary impacts more than offset by efficiency
savings. Pension expense was higher as a result of a GBP40 million
gain from a Niagara Mohawk pension buy-out in the prior period. Bad
debts increased by GBP17 million, with a benefit in the prior
period related to the Bill Relief Program. Other costs were higher
related to property taxes, environmental reserves and also energy
efficiency programme costs (funded in revenue).
National Grid Ventures' statutory operating profit of GBP310
million was up from GBP308 million in the prior period and included
exceptional IFA1 fire property damage net insurance proceeds of
GBP92 million (2022: GBP50 million) and exceptional charges of GBP1
million (2022: GBP1 million) as part of our cost efficiency
programme. Adjusted operating profit of GBP219 million was GBP40
million lower than the prior period, driven by IFA1 interconnector
profits which were lower (principally related to insurance
recoveries in the prior period) and fewer projects completed in NG
Renewables this year, partly offset by higher North Sea Link
interconnector revenues and a gain on disposal of a smart metering
business.
'Other' activities' statutory operating loss of GBP39 million
was down from a statutory operating profit of GBP76 million in the
prior period and included exceptional charges of GBP23 million
(2022: GBP4 million credit) as part of our cost efficiency
programme, exceptional charges of GBP3 million (2022: GBP56
million) related to transaction and separation costs for disposal
of a 60% share of our UK Gas Transmission and Metering business in
2022/23 and an exceptional charge of GBP17 million in our captive
insurance business in the prior period. The adjusted operating loss
of GBP13 million (2022: GBP145 million profit) was substantially
lower than the prior period, which was the result of the non-repeat
of the higher level of profits in the prior year in our Commercial
Property business (GBP201 million related to site sales in the
prior year, following our exit from the St William joint venture in
2021/22), partly offset by higher captive insurance profits and
favourable fair value movements in NG Partners.
Financing costs and tax
Net finance costs
Statutory net finance costs of GBP685 million were up from
GBP624 million in the prior period and included derivative
remeasurement gains of GBP26 million (2022: GBP108 million).
Adjusted net finance costs for continuing operations of GBP711
million (2022: GBP732 million) were GBP21 million, or 3% lower than
the prior period (GBP10 million, or 1% lower at constant currency).
This was driven by lower inflation on RPI/CPI-linked debt, lower
bridge financing costs (in relation to the acquisition of National
Grid Electricity Distribution) and higher capitalised interest,
partly offset by new financing requirements to fund our ongoing
capital investment programme and the impact of higher interest
rates.
Joint ventures and associates
The Group's share of net profits from joint ventures and
associates on a statutory basis was GBP71 million (2022: GBP51
million) and included derivative fair value remeasurement gains of
GBP12 million (2022: GBP19 million losses). On an adjusted basis,
share of net profits from joint ventures and associates was GBP59
million (2022: GBP70 million) with the decrease mainly driven by
the sale of our interest in the Millennium gas pipeline during
2022/23.
Tax
The statutory tax charge for continuing operations was GBP307
million (2022: GBP447 million) including the impact of tax on
exceptional items and remeasurements of GBP20 million charge (2022:
GBP270 million charge). The adjusted tax charge for continuing
operations was GBP287 million (2022: GBP177 million), resulting in
an effective tax rate for continuing operations (excluding profits
from joint ventures and associates) of 24.1% (2022: 17.3%) and an
underlying effective tax rate for continuing operations (excluding
profits from joint ventures and associates) of 24.7% (2022: 19.7%).
The underlying effective tax rate is higher than in the prior
period primarily due to the increase in UK corporation tax rate to
25% from 1 April 2023 and the profit mix including the higher level
of Property disposals incurring a lower tax charge in the prior
period.
Net debt
Net debt is a measure derived from IFRS (comprising cash and
cash equivalents, current financial investments, borrowings and
bank overdrafts and financing derivatives) and is defined and
reconciled to these balances in note 11 to the financial
statements.
During the first six months of the year, net debt increased to
GBP43.9 billion, GBP2.9 billion higher than at 31 March 2023. This
was driven by cash generated from operations (continuing
operations) of GBP3.1 billion and dividends received on financial
investments of GBP0.1 billion, offset by GBP3.6 billion of cash
outflows for capital investment (net of disposals) and movements in
financial investment outside net debt, GBP0.2 billion of tax paid,
GBP0.7 billion of interest outflows, GBP1.3 billion paid in
dividends, GBP0.1 billion accretions on index-linked debt and
exchange movements on opening net debt of GBP0.2 billion.
During the period we raised around GBP3.0 billion of new
long-term senior debt to refinance maturing debt and to fund a
portion of our significant capital programme. As at 30 September
2023, we have GBP8.0 billion of committed facilities available for
general corporate purposes.
There are no significant updates relating to credit agency
actions. National Grid's balance sheet remains robust, and we
remain committed to a strong, overall investment grade credit
rating.
Interim dividend
The Board has approved an interim dividend of 19.40p per
ordinary share ($1.1899 per American Depositary Share). This
represents 35% of the total dividend per share of 55.44p in respect
of the last financial year to 31 March 2023 and is in line with the
Group's dividend policy. The interim dividend is expected to be
paid on 11 January 2024 to shareholders on the register as at 24
November 2023.
Since 2021/22, the Board's aim has been to grow the annual
dividend per share in line with UK CPIH, thus maintaining the
dividend per share in real terms. The Board will review this policy
regularly, taking into account a range of factors including
expected business performance and regulatory developments.
The scrip dividend alternative will again be offered in respect
of the 2023/24 interim dividend. As previously announced, we do not
expect to buy back the scrip shares issued during 2023/24.
GROWTH
A balanced portfolio to deliver asset and dividend growth
National Grid seeks to create value for shareholders through
developing a balanced portfolio of businesses that offer an
attractive combination of asset growth and cash returns.
GBP3.9 billion of capital investment for continuing operations
across the Group
We continued to make significant investment in energy
infrastructure in the first six months of the year. Capital
investment across the Group was GBP3,868 million, a decrease of
GBP15 million or 0.4% at actual exchange rates (an increase of 2%
at constant currency) compared to the first half of 2022/23. Of
this total, investment in our regulated businesses reached a record
GBP3,529 million, up 10% on the prior period at constant currency
(7% at actual exchange rates).
Group capital investment (continuing
operations)
===================================== ================ ================ ======== ================ ========
At constant
At actual exchange rates currency
===================================== ============================================ ==========================
Six months ended 30 September 2022 2022
(GBP million) 2023 (1) % change (1) % change
====================================== ================ ================ ======== ================ ========
UK Electricity Transmission 800 629 27% 629 27%
UK Electricity Distribution 608 584 4% 584 4%
UK Electricity System Operator
(ESO) 75 42 79% 42 79%
New England 789 801 (1%) 771 2%
New York 1,257 1,242 1% 1,195 5%
National Grid Ventures 326 539 (40%) 531 (39%)
Other 13 46 (72%) 46 (72%)
====================================== ================ ================ ======== ================ ========
Total Group capital investment
(continuing operations) 3,868 3,883 0% 3,798 2%
====================================== ================ ================ ======== ================ ========
1. Comparative amounts have been re-presented to reflect NGV as
a separate operating segment and the reclassification of our US LNG
operations from New England to NGV following an internal
reorganisation in the period.
UK Electricity Transmission invested GBP800 million for the
first six months of the year, an increase of GBP171 million on the
prior period, primarily driven by the progression of Strategic
Infrastructure (SI) projects, as well as higher spend on
refurbishment projects and customer connections (for further
information on SI projects, please refer to page 23 of the Business
Review). UK Electricity Distribution invested GBP608 million, an
increase of GBP24 million on the prior period, principally driven
by higher spend in connections, asset replacement and
non-operational capex (including IT and vehicles).
Investment in New York was GBP1,257 million, an increase of
GBP15 million over the period at actual exchange rates (an increase
of GBP62 million at constant currency). This was primarily driven
by higher spend on our new transmission projects to assist large
scale renewable connections, such as our Smart Path Connect
project; higher electric network control system spend; and higher
mandated work on our gas distribution networks. For New England,
investment reached GBP789 million, a decrease of GBP12 million at
actual exchange rates (an increase of GBP18 million at constant
currency). This was principally driven by capital expenditure which
occurred in NECO last year, more than offset by increased electric
distribution expenditure through higher customer connection
requests and Grid Modernization. In addition, electric transmission
spend was higher compared to the prior period driven by asset
condition work across our New England Power (NEP) assets.
Investment in NGV during the period was GBP326 million, a
decrease of GBP213 million at actual exchange rates (GBP205 million
at constant currency) on the prior period. The decrease was
primarily through lower spend on the Sellindge (IFA1) converter
station rebuild, Grain LNG expansion work, and Viking Link as these
projects near completion.
BUSINESS REVIEW
UK ELECTRICITY TRANSMISSION
Operations and capital expenditure
UK Electricity Transmission has continued to deliver good levels
of performance and our capital investment programme has progressed
as expected.
Capital expenditure reached GBP800 million, up GBP171 million on
the prior period. This increase was primarily driven by the
progression of Strategic Infrastructure (SI) projects (see below
for further information), and an increase in spend versus the prior
period on asset health work and customer connections.
Progress continues on our London Power Tunnels 2 (LPT2) project
where we reached the completion of tunnelling in October in line
with our timetable. The GBP1 billion project is for the
construction of 32.5 kilometres of underground cable tunnels
connecting Wimbledon to New Cross, New Cross to Hurst, and Hurst to
Crayford by 2027. In August, we reached 1,000,000 hours worked
without a Lost Time Injury (LTI) on the project.
We continue to make good progress on our GBP1 billion
Hinkley-Seabank project where we are building a new high voltage
electricity connection between Bridgewater and Seabank. We have
completed the installation of all 116 T-pylons as part of the
project (the first new pylon design in nearly a century), and the
57-kilometre connection is on track for completion by December
2025.
We have also continued progress on our Visual Impact Provision
(VIP) projects, where we are removing overhead transmission lines
in Areas of Outstanding Natural Beauty (AONB) and replacing them
with underground cables to reduce our visual impact on the natural
environment. During the half year, we energised new lines in Dorset
and the Peak District, with our Dorset project being shortlisted as
one of four final schemes in the upcoming National APM Awards for
the Engineering, Construction and Infrastructure Project of the
Year award.
Strategic Infrastructure (SI) projects
Strategic Infrastructure is a part of National Grid Electricity
Transmission (NGET) and is responsible for delivering the 17 ASTI
projects to connect more clean, low-carbon power to the
transmission network in England and Wales. SI ensures the efficient
and effective delivery of ASTI projects, which are transferred to
UK Electricity Transmission once they are complete and ready to be
accepted onto the wider network. UK Electricity Transmission will
then be responsible for the ongoing operation and maintenance of
the infrastructure when in service [9] .
We have made good progress on our ASTI projects, including:
signing JVs with Scottish Power for Eastern Green Link 1 in August,
and with SSE for Eastern Green Link 2 in June; selecting the
preferred suppliers for converter stations and cables at Eastern
Green Links 1 and 2; completing the 'examination' stage of our
Development Consent Order (DCO) application for the Yorkshire Green
project; and launching the procurement process for the 'Great Grid
Upgrade Partnership', the contractual model that will be used to
deliver the majority of our onshore projects.
The Great Grid Upgrade Partnership is the opportunity for supply
chain partners to help deliver the 'Great Grid Upgrade', the
largest overhaul of the grid in generations. SI is seeking supply
chain partners to deliver GBP4.5 billion of onshore network
construction under an 'enterprise' partnership approach. This
approach aims to deliver integrated planning and working between
projects, enabling the supply chain to combine capacity,
capability, knowledge and experience to accelerate delivery and
generate cost efficiencies. This, in turn, will deliver value for
money for consumers whilst working with local communities to leave
a positive legacy. The model has been designed on industry best
practice, with contracts expected to be awarded early in the new
year.
Customer Connections
Over the last five years, UK Electricity Transmission has
connected 10 GW of new clean energy and interconnectors to the
electricity transmission network. In the first half of 2023/24 the
business connected 2,970 MW of generation and 314 MVA of demand
capacity, including the world's largest offshore wind farm Dogger
Bank and first Transmission connected solar farm. Of the 2,970 MW
of generation, 1,400 MW is the connection of the Viking Link
interconnector; 1,200 MW the first part of the Dogger Bank
connection; 70 MW for solar; and the remaining 300 MW a mix of
technologies including battery storage.
Regulatory progress
In our third year of RIIO-T2, we continue to make good progress
in delivering the agreed regulatory outputs despite challenging
global supply chain conditions. During the half year, we continued
to outperform on network reliability targets, achieving 99.9999%
during the period.
We have seen good regulatory progress in the UK across a number
of areas this year, including: Royal Assent for the Energy Act
2023; Ofgem's publication of the FSNR decision document;
publication of the ENC's report and recommendations on reducing
timelines for delivering onshore and offshore transmission network
infrastructure; publication of proposed arrangements for the CSNP
and future transmission network planning. For further information
and background on each of these developments, please refer to pages
8 - 10 in the Strategic Overview section.
UK ELECTRICITY DISTRIBUTION
Operations and capital expenditure
UK Electricity Distribution continues to perform well in the
first year of RIIO-ED2. During the period, capital expenditure
reached GBP608 million, GBP24 million higher than the prior period
principally driven by higher spend in connections, asset
replacement and non-operational capex (including IT and
vehicles).
Our larger capital investment projects remain on track,
including the GBP65 million Hinkley Point connection to link the
new nuclear power station and UK Electricity Transmission's 400 kV
circuit between Bridgwater and Seabank (UK Electricity Distribution
is providing 'safe space' around these assets). The vast majority
of works are now complete, and UK Electricity Transmission has
taken on the responsibility for works at Seabank. The project is
expected to complete in 2024.
Over the last three years, we have been targeting specific
'green' investment at parts of our network where we anticipate
there will be a high density of Low Carbon Technologies to support
the country's path to net zero. Investment in 17 projects will
directly benefit Motorway Service Areas (MSA) and equivalent trunk
roads in England and Wales by delivering over 100 MW of capacity,
enough to support around 700 150 kW Rapid EV Chargers. The seven
projects still to complete in this portfolio include a GBP7 million
investment at Tibshelf Services in Derbyshire to allow for network
reinforcement and expansion of EV chargers expected to complete
before the end of calendar year 2023.
Customer connections
During the period we connected 51 renewable customers to the
network, reaching a total of 323 MW. At domestic level, we also
connected 750 energy storage technologies; 7,700 EV chargers; 3,500
heat pumps; and 15,400 solar PV installations across the
period.
UK Electricity Distribution has taken further action on
connections reform. In September, we announced plans to release 10
GW of grid capacity for the connection of renewable generation
assets to our network. For further background on the work we have
been involved in to reform the connections process, please refer to
pages 9 - 10 of the Strategic Overview section.
Regulatory Progress
On 1 April, UK Electricity Distribution began the first year of
new price controls under RIIO-ED2, running for five years until 31
March 2028. As we announced at our UK Electricity Distribution
Investor Event in July, we are targeting outperformance of 100 to
125 bps across the price control period. This will largely be
achieved through incentives delivery and totex efficiency,
underpinned by synergies from the acquisition. To date, we have
delivered GBP18 million of our GBP100 million synergy target that
we announced in July 2023.
In August, the ENA named UK Electricity Distribution as the
largest flexibility provider of all UK DNOs, having procured 846 MW
of flexibility volume. This capacity mainly relates to Demand, EV
and solar contracts across a range of flexibility products,
including managing peak load demand on the network and
pre-emptively reducing network load when necessary, and supporting
the network in the event of specific faults such as during
maintenance work.
UK ELECTRICITY SYSTEM OPERATOR (ESO)
The ESO has performed well during the first half of the year.
Capital expenditure reached GBP75 million in the first half, GBP33
million higher than prior period, driven primarily by higher IT
spend.
Progress on network connection reform
During the half year, we have continued to work with
stakeholders to improve and reform the connections process to the
transmission network. We have been working on two major aspects,
the shorter term Five Point Plan, and a longer full connection
reform process. The transmission connection queue now stands at
over 400 GW for Great Britain, which represents a significant over
subscription of what is required to connect to meet the scenarios
in the ESO Future Energy Scenario publication. For further
background on the work we have been involved in to reform the
connections process, please refer to pages 9 - 10 of the Strategic
Overview section.
Winter outlook
In September, the ESO published the electricity Winter Outlook
for the upcoming winter in Great Britain. Despite the ongoing
conflicts in Ukraine and the Middle East, the broad European energy
market has improved since last year. The market has bolstered
European gas storage and supplies, and the French nuclear fleet
capacity is back to pre-pandemic levels. The ESO has built on the
experience of the 2022/23 winter and continued to build resilience
and minimise the potential impact of risks and uncertainties in the
energy markets. As such, the System Operator's Base Case scenario
is that there will be adequate margins (4.4 GW/7.4%) through the
forthcoming winter to ensure Great Britain remains within the
reliability standard.
For more information on the Winter Outlook, please refer to page
10 of the Strategic Overview section.
Progress on ESO separation
The Energy Act 2023, which received Royal Assent in October,
includes legislation to enable the separation of the ESO from
National Grid and the formation of an ISOP. The ISOP will have a
critical role in delivering strategic, whole system energy planning
and oversight as we continue to invest in and transform the UK's
energy infrastructure, and we expect the ISOP to be established as
a Public Corporation in 2024 with responsibilities across both the
electricity and gas systems.
NEW ENGLAND
Operations and capital expenditure
We achieved good operational performance across New England
during the half year.
Capital expenditure remains on track with GBP789 million
deployed during the half year, (1%) lower at actual exchange rates
(2% higher at constant currency) than the prior period. This was
principally driven by capital expenditure which occurred in NECO
last year, more than offset by increased electric distribution
expenditure through higher customer connection requests and Grid
Modernization. In addition, electric transmission spend was higher
compared to the prior period driven by asset condition work across
our New England Power (NEP) assets.
Our LPP replacement programme also continues on track with 61
miles of gas pipeline replaced between April 2023 and September
2023.
Storm activity
National Grid was pleased to receive two Edison Electric
Institute Awards in June for outstanding storm response for the two
most severe winter storms in New England last year (on 23 December
2022, and 13 March 2023).
During the first half of this year, our Emergency Response
Organization was activated on six occasions in response to storms,
including Hurricane Lee, a large system that impacted parts of New
England and Canada. As a comparison, during the same period in
2022/23 the Emergency Response Organization was activated on four
occasions. Emergency Response performance was strong with outages
restored for five events in less than 24 hours, and reconnections
following the 8 September storm (which affected over 125,000
customers) were completed in less than 72 hours.
Regulatory progress
On 1 September, we filed our Electric Sector Modernization Plan
(ESMP) in Massachusetts. The plan outlines the investment required
in our electric distribution network over the next five years and
beyond to help the state meet its clean energy goals under the 2050
Clean Energy and Climate Plan (CECP). Under the plan, we have
proposed to invest up to $2 billion over the next five years. For
further background on the ESMP filing, please refer to page 11 of
the Strategic Overview section.
The proposed investment under the ESMP is not currently part of
any rate order for our service territory. We remain on track to
file for new rates for our Massachusetts Electric business in
mid-November 2023, and we will propose a mechanism for recovery of
the ESMP investment as part of that filing.
In October, the Twin States Clean Energy Link was selected by
the US Department of Energy (DOE) as one of three projects in the
US to enter capacity contract negotiations through the DOE's
Transmission Facilitation Program. Twin States is a bidirectional
transmission project being proposed by National Grid and Citizens
Energy Corporation. If built, the line will deliver 1,200 MW of
hydro-sourced generation from Canada to New England when it is
needed. For further background on the project, please refer to page
11 of the Strategic Overview section.
Finally, in October, we were awarded $50 million through the
Federal Infrastructure Investment and Jobs Act for our 'Future
Grid' proposal which will deploy digital technologies in our New
York and Massachusetts electric distribution networks to improve
system reliability and resilience.
Customers and communities
During the half year we have continued to build upon our
customer and community outreach programme across our Massachusetts
service territory. In June, we launched our four Clean Energy
Academy summer pilots, building on the successful launch of our
spring pilots in March 2023. This Strategic Workforce Development
Initiative is designed to educate and inspire interest in STEM,
energy and utility industries. The academies have provided
participants from historically marginalised and underrepresented
groups with career experience, development and employment
opportunities. Our Clean Energy Career Academy offered over 70
college engineering students the opportunity to learn more about
clean energy, be mentored, visit our facilities and network with
National Grid engineers and executives. In addition, our Clean
Energy STEM and Tech Academies offered 270 middle and high school
students aged 14 to 18 career exploration pathways in the energy
industry. Our Energy Infrastructure Academy, for work-ready-adults,
has already resulted in 22 individuals securing a job with National
Grid and its vendor partners.
In September we held our 'Week of Service' across Massachusetts,
which involved 250 National Grid employees volunteering in support
of community organisations across the state. Events included
promoting environmental protection through beach clean-ups in
Dorchester; supporting veterans and their families in Worcester;
preparing meals for home-bound people in Jamaica Plain; and packing
critical winter clothing items for children throughout
Massachusetts who need them most in wintertime. The Week of Service
was part of National Grid's 'Grid for Good' programme, a
company-wide initiative that supports communities we serve through
volunteering, charitable contributions to organisations focused on
workforce development and STEM education, and environmental
sustainability. This year, the Company has a goal to engage
colleagues in more than 14,500 hours of service across
Massachusetts.
The Massachusetts Advanced Meter Infrastructure (AMI) programme
successfully kicked off in September 2023 with stakeholder
engagement across business teams. Our improved self-service and
digital channels continue to improve customer experience and have
reduced the number of calls by over 2 million. Customers using
digital channels to report and monitor electric outage
communications reached a new storm high of 97%.
NEW YORK
Operations and capital expenditure
Our New York business delivered good operational performance
during the half year.
Capital expenditure reached GBP1,257 million during the half
year, an increase of GBP15 million at actual exchange rates (GBP62
million at constant currency) compared to the prior period. This
was primarily driven by higher spend on our new transmission
projects to assist large scale renewable connections, such as our
Smart Path Connect project; higher electric network control system
spend; higher mandated work on our gas distribution networks;
partly offset by higher 'right of use' lease additions in the prior
period. Excluding these lease additions in the prior year, capital
expenditure increased by GBP153 million at actual exchange rates
(GBP193 million at constant currency).
Of our large-scale electric transmission projects:
-- Smart Path Connect remains on track for energisation in
December 2025. The $550 million project includes the rebuild and
upgrade of approximately 55 miles of our Adirondack-Porter 230 kV
transmission circuits to 345 kV in Northern New York.
-- Construction has begun on the first stage of our substation
upgrade as part of the $800 million CLCPA Phase 1 funding for
transmission upgrades. This also includes projects such as
Inghams-Rotterdam and Churchtown-Pleasant Valley circuit rebuilds
(129 miles) to support 330 MW of incremental headroom capacity for
renewable generation.
-- Engineering contracts were awarded in October for
transmission projects as part of the $2.1 billion CLCPA Phase 2
funding for transmission networks and modernising the electric
network.
Our LPP replacement programme continued on track with 148 miles
of pipeline replaced between the start of April and the end of
September. During the half year, we also officially began
operations at our Newtown Creek renewable gas recovery system that
recovers biogas from the Newtown Creek Wastewater Treatment Plant
in Brooklyn.
Storm activity
During the half year, New York State has prepared 32 times for
storms and severe weather, including five major storm events. To
date, the storm season has delivered an equal to slightly increased
amount of activity compared to previous years. However, New York
has not seen a storm with significant intensity in the current
financial year. Where our service territories have been affected by
storm activity, we have restored electricity to 95% of disconnected
customers within 9 to 12 hours.
Regulatory progress
On 1 September, PSC Staff responded to our rate filing that we
made for our downstate gas business, KEDNY-KEDLI, in April.
National Grid responded to the PSC Staff position on 22 September,
and we plan to move forward in settlement negotiations, aiming to
reach a Joint Proposal with stakeholders in the first quarter of
calendar year 2024. For further information on our KEDNY-KEDLI
filing, and the PSC Staff response, please refer to page 11 of the
Strategic Overview section.
We remain on track to file for new rates at our Niagara Mohawk
(NIMO) electric and gas business (upstate New York) in summer
2024.
Finally, in October 2023 we were awarded $50 million through the
Federal Infrastructure Investment and Jobs Act for our 'Future
Grid' proposal which will deploy digital technologies in our New
York and Massachusetts electric distribution networks to improve
system reliability and resilience.
Customers and communities
Our ongoing commitment to customers and communities has
continued during the half year. To celebrate the third year of our
Project C initiative, we expanded the Company's annual day of
service to a week of service. This included more than 2,000 company
employee volunteers engaging in 200 events taking place in
communities across New York. This year's theme, 'Live together.
Grow together.', highlights the importance of creating meaningful
change in the communities we serve. As part of the week of service
our employees also pledged to complete Acts of Kindness, including
collecting and donating books, food and clothing to a local
charity, and donating blood to a blood bank. Across the whole
Project C initiative, New York employees also contributed over
15,000 hours of volunteering in local communities during the half
year.
NATIONAL GRID VENTURES (NGV)
Capital investment, including joint ventures, reached GBP326
million in the half year, a decrease of GBP213 million at actual
exchange rates (GBP205 million at constant currency) on the prior
period. The decrease was primarily through lower spend on the
Sellindge (IFA1) converter station rebuild, Grain LNG expansion
work and Viking Link as these projects near completion.
Interconnectors
North Sea Link (NSL) delivered strong reliability and operated
at over 99% availability during the first half of the year. IFA1
operated at 80% availability during the half year following outages
relating to the newly commissioned bipole which was reinstated
following the Sellindge converter station rebuild.
In July, the final length of cable was laid on the Viking Link
and was successfully tested in August, marking the end of the cable
installation process. We remain on track to commission the world's
longest interconnector, stretching 760 kilometres, by the end of
calendar year 2023.
On our other interconnectors, IFA2 (France) operated at 97%
availability during the half year; Nemo Link (Belgium) at 97%
availability; and BritNed (Netherlands) at 96%. BritNed has
historically been one of the best performing interconnectors in the
world in terms of safety with over 4,500 days without a Lost Time
Injury (LTI).
Offshore Hybrid Asset (OHA) projects
In 2022, Ofgem opened an OHA pilot seeking to work with selected
developer(s) on establishing an investible OHA regime. OHAs are the
next phase of interconnection, not only linking two countries but
also connecting with offshore wind generation. The two projects in
the Ofgem OHA pilot are Lion Link and Nautilus, both NGV projects,
which provides us an opportunity to shape the OHA regime and
prepare it for further investment.
Ofgem further consulted on the regulatory regime for OHAs in
June and NGV responded to the consultation. Ofgem has also been
assessing Lion Link and Nautilus, and the regulator also expects to
consult in December 2023 on their Initial Project Assessment (IPA).
A final decision on regulatory parameters and IPA is expected in
March 2024.
Grain LNG
Grain LNG continues to perform well and in line with
expectations. This half year we launched the 'Cap29' auction
process for expiring capacity at Grain from 2029. The auction is
expected to complete in December.
The expansion programme to deliver additional LNG storage on
site (Capacity 25) continues, with the delivery of major structural
elements of the project expected by the end of calendar year 2023.
When complete, the expansion will increase total site storage to
1,200,000 cubic metres and total regasification capacity to 800
GWh/day, equivalent to one-third of UK gas demand. The project
remains on track to be ready for commercial operations in summer
2025.
Providence LNG
In May, we commissioned an LNG facility at Fields Point
(Providence), Rhode Island, at a previously existing LNG storage
site. The facility has existing natural gas supply infrastructure
that can be used for liquefaction, requiring no new gas pipelines.
It serves three commercial customers for storage and vaporisation
services: Boston Gas and Rhode Island Energy on long-term
contracts, and Con Edison on a rolling short-term contract. For
liquefaction services, the asset has two customers: Boston Gas and
Rhode Island Energy.
Long Island (LI) Generation
In the half year, Long Island Generation produced 2,694 GWh of
energy and remains above target in terms of its availability.
Emissions for the first half of 2023/24 are 8% lower than the first
half of 2022/23 and remain on track to deliver the 2023/24
target.
US Renewables
On 24 October, the New York State Energy Research and
Development Authority (NYSERDA) announced three successful projects
that will receive Offshore Renewable Energy Certificates (ORECs) as
part of New York's third large-scale offshore wind solicitation.
COSW, our JV with RWE, was selected as one of the successful
projects with a provisional offtake award of 1.3 GW. For further
background on the NYSERDA announcement, please refer to page 12 in
the Strategic Overview section.
In August 2023, COSW also submitted an offtake bid for up to 1.3
GW in response to the New Jersey Board of Public Utilities (BPU)
solicitation and we await selection decisions in the first or
second quarter of calendar year 2024.
In October, we announced the start of operations at our 274 MW
Yellowbud solar project in Ohio. The project, located in the
Pennsylvania-Jersey-Maryland (PJM) market, has a Power Purchase
Agreement (PPA) for its offtake with Amazon. This takes the total
operating capacity of National Grid Renewables to 1,308 MW with a
further 801 MW currently under construction.
NGV Transmission Projects
National Grid Ventures has had a successful first half of the
year through New York Transco, a partnership of New York's major
utilities, including NGV.
In June 2023, New York Transco's Propel NY Energy transmission
project was selected by the New York Independent System Operator
(NYISO) to deliver increased transmission capacity between the
mainland and Long Island. The project is in partnership with the
New York Power Authority. This follows the bid New York Transco
submitted in October 2021 as part of the NYISO's Long Island
Offshore Wind Export Public Policy Transmission Need solicitation.
Total investment for the project is $2.8 billion, of which NGV's
share is around $340 million.
Also in June 2023, our New York Energy Solution transmission
line upgrade project was fully energised. This project was selected
by the NYISO to provide transmission upgrades to New York's power
system, while enhancing reliability and facilitating upstate clean
energy resources to downstate demand centres. Total investment for
the project is $670 million, of which NGV's share is around $100
million.
OTHER ACTIVITIES
Capital investment in Other activities was GBP13 million during
the half year, GBP33 million lower than the prior period,
principally driven by fewer National Grid Partners (NGP)
investments in the first half.
APPIX
Unless otherwise stated, all financial commentaries in this
results statement are given on an underlying basis at actual
exchange rates for continuing operations. Underlying represents
statutory results excluding exceptional items, remeasurements,
timing and major storm costs. The underlying basis is further
defined on page 63.
Alternative Performance Measures derived from IFRS
The following are terms or metrics that are reconciled to IFRS
measures and are defined on pages 63 to 67:
Net revenue
Adjusted profit measures
Underlying results
Constant currency
Timing impacts
Capital investment; including Capital investment (regulated
networks)
Net debt - defined in note 11 on page 55.
PROVISIONAL 2023/24 FINANCIAL TIMETABLE
Date Event
============================== ==============================================
9 November 2023 2023/24 half-year results
============================== ==============================================
ADRs go ex-dividend for 2023/24 interim
22 November 2023 dividend
============================== ==============================================
Ordinary shares go ex-dividend for 2023/24
23 November 2023 interim dividend
============================== ==============================================
24 November 2023 Record date for 2023/24 interim dividend
============================== ==============================================
Scrip reference price announced for 2023/24
30 November 2023 interim dividend
============================== ==============================================
11 December 2023 (5pm London Scrip election date for 2023/24 interim
time) dividend
============================== ==============================================
2023/24 interim dividend paid to qualifying
11 January 2024 shareholders
============================== ==============================================
23 May 2024 2023/24 Preliminary Results
============================== ==============================================
Ordinary shares and ADRs go ex-dividend
6 June 2024 for 2023/24 final dividend
============================== ==============================================
7 June 2024 Record date for 2023/24 final dividend
============================== ==============================================
Scrip reference price announced for 2023/24
13 June 2024 final dividend
============================== ==============================================
24 June 2024 (5pm London time) Scrip election date for 2023/24 final dividend
============================== ==============================================
10 July 2024 2024 AGM
============================== ==============================================
2023/24 final dividend paid to qualifying
19 July 2024 shareholders
============================== ==============================================
7 November 2024 2024 /25 half-year results
============================== ==============================================
CAUTIONARY STATEMENT
This announcement 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 1934, as amended. These
statements include information with respect to National Grid's (the
Company) financial condition, its results of operations and
businesses, strategy, plans and objectives. Words such as 'aims',
'anticipates', 'expects', 'should', 'intends', 'plans', 'believes',
'outlook', 'seeks', 'estimates', 'targets', 'may', 'will',
'continue', 'project' and similar expressions, as well as
statements in the future tense, identify forward-looking
statements. This document also references climate-related targets
and climate-related risks which differ from conventional financial
risks in that they are complex, novel and tend to involve
projection over long-term scenarios which are subject to
significant uncertainty and change. These forward-looking
statements are not guarantees of National Grid's future performance
and are subject to assumptions, risks and uncertainties that could
cause actual future results to differ materially from those
expressed in or implied by such forward-looking statements or
targets. Many of these assumptions, risks and uncertainties relate
to factors that are beyond National Grid's ability to control,
predict or estimate precisely, such as changes in laws or
regulations, including announcements from and decisions by
governmental bodies or regulators, including those relating to the
RIIO-T2 and RIIO-ED2 price controls and proposals for the future of
the electricity system operator in the United Kingdom; the timing
of construction and delivery by third parties of new generation
projects requiring connection; breaches of, or changes in,
environmental, climate change and health and safety laws or
regulations, including breaches or other incidents arising from the
potentially harmful nature of its activities; network failure or
interruption (including any that result in safety and/or
environmental events), the inability to carry out critical non
network operations and damage to infrastructure, due to adverse
weather conditions including the impact of major storms as well as
the results of climate change, due to counterparties being unable
to deliver physical commodities, or due to the failure of or
unauthorised access to or deliberate breaches of National Grid's IT
systems and supporting technology; failure to adequately forecast
and respond to disruptions in energy
supply; performance against regulatory targets and standards and
against National Grid's peers with the aim of delivering
stakeholder expectations regarding costs and efficiency savings, as
well as against targets and standards designed to deliver net zero;
and customers and counterparties (including financial institutions)
failing to perform their obligations to the Company. Other factors
that could cause actual results to differ materially from those
described in this announcement include fluctuations in exchange
rates, interest rates and commodity price indices; restrictions and
conditions (including filing requirements) in National Grid's
borrowing and debt arrangements, funding costs and access to
financing; regulatory requirements for the Company to maintain
financial resources in certain parts of its business and
restrictions on some subsidiaries' transactions such as paying
dividends, lending or levying charges; the delayed timing of
recoveries and payments in National Grid's regulated businesses,
and whether aspects of its activities are contestable; the funding
requirements and performance of National Grid's pension schemes and
other post-retirement benefit schemes; the failure to attract,
develop and retain employees with the necessary competencies,
including leadership and business capabilities, and any significant
disputes arising with National Grid's employees or the breach of
laws or regulations by its employees; the failure to respond to
market developments, including competition for onshore
transmission; the threats and opportunities presented by emerging
technology; the failure by the Company to respond to, or meet its
own commitments as a leader in relation to, climate change
development activities relating to energy transition, including the
integration of distributed energy resources; and the need to grow
the Company's business to deliver its strategy, as well as
incorrect or unforeseen assumptions or conclusions (including
unanticipated costs and liabilities) relating to business
development activity, including the integration of its UK
Electricity Distribution business, the sale of its UK Gas
Transmission business, and the separation and transfer of the ESO
to the public sector. For further details regarding these and other
assumptions, risks and uncertainties that may impact National Grid,
please read the Strategic Report section and the 'Risk factors' on
pages 225 to 228 of National Grid's most recent Annual Report and
Accounts, as updated by the principal risks and uncertainties
statement on page 60 of this announcement. In addition, new factors
emerge from time to time and National Grid cannot assess the
potential impact of any such factor on its activities or the extent
to which any factor, or combination of factors, may cause actual
future results to differ materially from those contained in any
forward-looking statement. Except as may be required by law or
regulation, the Company undertakes no obligation to update any of
its forward-looking statements, which speak only as of the date of
this announcement.
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
Consolidated
income statement
for the six
months ended 30
September
Before
exceptional Exceptional
items and items and
remeasurements remeasurements Total
2023 Notes GBPm GBPm GBPm
================ ======= ============================== =============================== =========================
Continuing
operations
Revenue 2 (a),3 8,489 - 8,489
Provision for
bad and
doubtful
debts (91) - (91)
Other operating
costs 4 (6,508) 83 (6,425)
Other operating
income 12 - 12
================ ======= ============================== =============================== =========================
Operating profit 2 (b),4 1,902 83 1,985
Finance income 4 ,5 123 (8) 115
Finance costs 4 ,5 (834) 34 (800)
Share of
post-tax
results of
joint
ventures and
associates 2 (b),4 59 12 71
================ ======= ============================== =============================== =========================
Profit before
tax 2 (b),4 1,250 121 1,371
Tax 4 ,7 (287) (20) (307)
================ ======= ============================== =============================== =========================
Profit after tax
from continuing
operations 4 963 101 1,064
Profit after tax
from
discontinued
operations 6 7 58 65
================ ======= ============================== =============================== =========================
Total profit for
the period
(continuing
and
discontinued) 970 159 1,129
================ ======= ============================== =============================== =========================
Attributable to:
Equity
shareholders of
the parent 969 159 1,128
Non-controlling
interests 1 - 1
================ ======= ============================== =============================== =========================
Earnings per
share (pence)
Basic earnings
per share
(continuing) 8 28.8
Diluted earnings
per share
(continuing) 8 28.7
Basic earnings
per share
(continuing
and
discontinued) 8 30.6
Diluted earnings
per share
(continuing
and
discontinued) 8 30.5
================ ======= ============================== =============================== =========================
Before
exceptional Exceptional
items and items and
remeasurements remeasurements Total
2022 (1) Notes GBPm GBPm GBPm
================ ======= ============================== =============================== =========================
Continuing
operations
Revenue 2 (a),3 9,444 - 9,444
Provision for
bad and
doubtful
debts (52) - (52)
Other operating
costs 4 (7,636) (61) (7,697)
Other operating
income 4 - 544 544
================ ======= ============================== =============================== =========================
Operating profit 2 (b),4 1,756 483 2,239
Finance income 4 ,5 69 (32) 37
Finance costs 4 ,5 (801) 140 (661)
Share of
post-tax
results of
joint
ventures and
associates 2 (b),4 70 (19) 51
================ ======= ============================== =============================== =========================
Profit before
tax 2 (b),4 1,094 572 1,666
Tax 4 ,7 (177) (270) (447)
================ ======= ============================== =============================== =========================
Profit after tax
from continuing
operations 4 917 302 1,219
Profit after tax
from
discontinued
operations 6 121 (84) 37
================ ======= ============================== =============================== =========================
Total profit for
the period
(continuing
and
discontinued) 1,038 218 1,256
================ ======= ============================== =============================== =========================
Attributable to:
Equity
shareholders of
the parent 1,038 218 1,256
Non-controlling
interests - - -
================ ======= ============================== =============================== =========================
Earnings per
share (pence)
Basic earnings
per share
(continuing) 8 33.4
Diluted earnings
per share
(continuing) 8 33.2
Basic earnings
per share
(continuing
and
discontinued) 8 34.4
Diluted earnings
per share
(continuing
and
discontinued) 8 34.2
================ ======= ============================== =============================== =========================
1. Comparative amounts have been re-presented to reflect the
classification of the Further Acquisition Agreement (the FAA
option) as held for sale and within discontinued operations.
.
Consolidated statement of comprehensive income
for the six months ended 30 September
2023 2022(1)
Notes GBPm GBPm
============================================================= ===== ================ ===============
Profit after tax from continuing operations 1,064 1,219
Profit after tax from discontinued operations 65 37
Other comprehensive income from continuing operations
Items from continuing operations that will never
be reclassified to profit or loss:
Remeasurement losses on pension assets and post-retirement
benefit obligations 12 (263) (631)
Net (losses)/gains in respect of cash flow hedging
of capital expenditure (2) 14
Tax on items that will never be reclassified to profit
or loss 64 159
============================================================= ===== ================ ===============
Total items from continuing operations that will
never be reclassified to profit or loss (201) (458)
============================================================= ===== ================ ===============
Items from continuing operations that may be reclassified
subsequently to profit or loss:
Retranslation of net assets offset by net investment
hedge 118 2,360
Exchange differences reclassified to the consolidated
income statement on disposal - (145)
Net gains in respect of cash flow hedges 201 450
Net gains/(losses) in respect of cost of hedging 40 (64)
Net losses on investments in debt instruments measured
at fair value through other
comprehensive income (16) (47)
Share of other comprehensive income of associates,
net of tax - 1
Tax on items that may be reclassified subsequently
to profit or loss (59) (86)
============================================================= ===== ================ ===============
Total items from continuing operations that may
be reclassified subsequently
to profit or loss 284 2,469
============================================================= ===== ================ ===============
Other comprehensive income for the period, net of
tax, from continuing operations 83 2,011
Other comprehensive loss for the period, net of tax,
from discontinued operations 6 (9) (86)
============================================================= ===== ================ ===============
Other comprehensive income for the period, net of
tax 74 1,925
============================================================= ===== ================ ===============
Total comprehensive income for the period from continuing
operations 1,147 3,230
Total comprehensive income/(loss) for the period
from discontinued operations 6 56 (49)
============================================================= ===== ================ ===============
Total comprehensive income for the period 1,203 3,181
============================================================= ===== ================ ===============
Attributable to:
Equity shareholders of the parent
From continuing operations 1,146 3,227
From discontinued operations 56 (49)
=================================== =============== ===============
1,202 3,178
================================== =============== ===============
Non-controlling interests 1 3
=================================== =============== ===============
1. Comparative amounts have been re-presented to reflect the
classification of the FAA option within the UK Gas Transmission
business disposal group.
Consolidated statement of changes in equity
for the six months ended 30 September
Share Other Total
Share premium Retained equity share-holders' Non-controlling Total
capital account earnings reserves equity interests equity
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================= ===== ============= ============= ============= ============= ============== =============== =============
At 1 April 2023 488 1,302 31,608 (3,860) 29,538 24 29,562
Profit for the
period - - 1,128 - 1,128 1 1,129
Other
comprehensive
(loss)/income
for the period - - (199) 273 74 - 74
================= ===== ============= ============= ============= ============= ============== =============== =============
Total
comprehensive
income
for the period - - 929 273 1,202 1 1,203
Equity dividends 9 - - (1,325) - (1,325) - (1,325)
Scrip
dividend-related
share
issue 1 (1) - - - - -
Issue of treasury
shares - - 20 - 20 - 20
Transactions in
own shares - - (1) - (1) - (1)
Share-based
payments - - 19 - 19 - 19
Cash flow hedges
transferred
to the statement
of financial
position, net
of tax - - - 2 2 - 2
================= ===== ============= ============= ============= ============= ============== =============== =============
At 30 September
2023 489 1,301 31,250 (3,585) 29,455 25 29,480
================= ===== ============= ============= ============= ============= ============== =============== =============
At 1 April 2022 485 1,300 26,611 (4,563) 23,833 23 23,856
Profit for the
period - - 1,256 - 1,256 - 1,256
Other
comprehensive
(loss)/income
for the period - - (564) 2,486 1,922 3 1,925
================= ===== ============= ============= ============= ============= ============== =============== =============
Total
comprehensive
income
for the period - - 692 2,486 3,178 3 3,181
Equity dividends 9 - - (1,119) - (1,119) - (1,119)
Scrip
dividend-related
share
issue 1 (1) - - - - -
Issue of treasury
shares - - 14 - 14 - 14
Transactions in
own shares - 5 (3) - 2 - 2
Share-based
payments - - 20 - 20 - 20
Cash flow hedges
transferred
to the statement
of financial
position, net
of tax - - - 3 3 - 3
================= ===== ============= ============= ============= ============= ============== =============== =============
At 30 September
2022 486 1,304 26,215 (2,074) 25,931 26 25,957
================= ===== ============= ============= ============= ============= ============== =============== =============
Consolidated statement of financial
position
30 September
2023 31 March 2023
Notes GBPm GBPm
=========================================== ===== =============================== ===============================
Non-current assets
Goodwill 9,905 9,847
Other intangible assets 2 (c) 3,717 3,604
Property, plant and equipment 2 (c) 67,396 64,433
Other non-current assets 570 567
Pension assets 12 2,352 2,645
Financial and other investments 871 859
Investments in joint ventures and
associates 1,414 1,300
Derivative financial assets 10 325 276
=========================================== ===== =============================== ===============================
Total non-current assets 86,550 83,531
=========================================== ===== =============================== ===============================
Current assets
Inventories and current intangible assets 931 876
Trade and other receivables 3,340 3,883
Current tax assets 18 43
Financial and other investments 11 1,680 2,605
Derivative financial assets 10 60 153
Cash and cash equivalents 11 227 163
Assets held for sale 6 1,441 1,443
=========================================== ===== =============================== ===============================
Total current assets 7,697 9,166
=========================================== ===== =============================== ===============================
Total assets 94,247 92,697
=========================================== ===== =============================== ===============================
Current liabilities
Borrowings 11 (2,691) (2,955)
Derivative financial liabilities 10 (321) (222)
Trade and other payables (4,465) (5,068)
Contract liabilities (159) (252)
Current tax liabilities (231) (236)
Provisions (361) (288)
Liabilities held for sale 6 (51) (109)
=========================================== ===== =============================== ===============================
Total current liabilities (8,279) (9,130)
=========================================== ===== =============================== ===============================
Non-current liabilities
Borrowings 11 (42,106) (40,030)
Derivative financial liabilities 10 (1,116) (1,071)
Other non-current liabilities (1,004) (921)
Contract liabilities (1,904) (1,754)
Deferred tax liabilities (7,318) (7,181)
Pensions and other post-retirement benefit
obligations 12 (615) (694)
Provisions (2,425) (2,354)
=========================================== ===== =============================== ===============================
Total non-current liabilities (56,488) (54,005)
=========================================== ===== =============================== ===============================
Total liabilities (64,767) (63,135)
=========================================== ===== =============================== ===============================
Net assets 29,480 29,562
=========================================== ===== =============================== ===============================
Equity
Share capital 489 488
Share premium account 1,301 1,302
Retained earnings 31,250 31,608
Other equity reserves (3,585) (3,860)
=========================================== ===== =============================== ===============================
Total shareholders' equity 29,455 29,538
Non-controlling interests 25 24
=========================================== ===== =============================== ===============================
Total equity 29,480 29,562
=========================================== ===== =============================== ===============================
Consolidated cash flow statement
for the six months ended 30 September
2023 2022
Notes GBPm GBPm
========================================= ===== ================================ ================================
Cash flows from operating activities
Operating profit from continuing
operations 2 (b) 1,985 2,239
Adjustments for:
Exceptional items and remeasurements 4 (83) (483)
Other fair value movements (19) 31
Depreciation, amortisation and
impairment 2 (c) 1,021 932
Share-based payments 19 20
Changes in working capital 119 (306)
Changes in provisions 39 82
Changes in pensions and other
post-retirement
benefit obligations 27 (54)
Cash flows relating to exceptional items (46) (101)
========================================= ===== ================================ ================================
Cash generated from operations -
continuing
operations 3,062 2,360
Tax paid (201) (88)
========================================= ===== ================================ ================================
Net cash flow from operating activities
- continuing operations 2,861 2,272
========================================= ===== ================================ ================================
Net cash flow from operating activities
- discontinued operations - 256
========================================= ===== ================================ ================================
Cash flows from investing activities
Purchases of intangible assets (269) (224)
Purchases of property, plant and
equipment (3,210) (3,258)
Disposals of property, plant and
equipment 18 63
Investments in joint ventures and
associates (151) (376)
Dividends received from joint ventures
and associates 121 107
Disposal of interest in The Narragansett
Electric Company(1) - 2,968
Disposal of financial and other
investments 65 70
Acquisition of financial investments (32) (62)
Contributions to National Grid Renewables
and Emerald Energy Venture LLC (5) (8)
Net movements in short-term financial
investments 885 599
Interest received 69 20
Cash inflows on derivatives 103 -
Cash outflows on derivatives (4) (377)
Cash flows relating to exceptional items 4 - 33
========================================= ===== ================================ ================================
Net cash flow used in investing
activities
- continuing operations (2,410) (445)
========================================= ===== ================================ ================================
Net cash flow used in investing
activities
- discontinued operations - (181)
========================================= ===== ================================ ================================
Cash flows from financing activities
Proceeds from issue of treasury shares 20 14
Transactions in own shares (1) 2
Proceeds received from loans 3,033 9,047
Repayments of loans (839) (9,049)
Payments of lease liabilities (61) (78)
Net movements in short-term borrowings (444) 380
Cash inflows on derivatives 68 201
Cash outflows on derivatives (60) (230)
Interest paid (779) (669)
Dividends paid to shareholders 9 (1,325) (1,119)
========================================= ===== ================================ ================================
Net cash flow used in financing
activities
- continuing operations (388) (1,501)
========================================= ===== ================================ ================================
Net cash flow used in financing
activities
- discontinued operations - (334)
========================================= ===== ================================ ================================
Net increase in cash and cash equivalents 63 67
Reclassification to held for sale - (5)
Exchange movements 1 15
Net cash and cash equivalents at start
of period 163 182
========================================= ===== ================================ ================================
Net cash and cash equivalents at end
of period 227 259
========================================= ===== ================================ ================================
1. The balance for the period ended 30 September 2022 consists
of cash proceeds received, net of cash disposed.
Notes to the financial statements
1. Basis of preparation and new accounting standards,
interpretations and amendments
The half year financial information covers the six month period
ended 30 September 2023 and has been prepared in accordance with
IAS 34 'Interim Financial Reporting' as issued by the International
Accounting Standards Board (IASB) and as adopted by the United
Kingdom (UK); and the Disclosure and Transparency Rules of the
Financial Conduct Authority. This condensed set of financial
statements comprises the unaudited financial information for the
half years ended 30 September 2023 and 2022, together with the
audited consolidated statement of financial position as at 31 March
2023. The half year financial information has been prepared
applying consistent accounting policies to those applied by the
Group for the year ended 31 March 2023 and are expected to be
applicable for the year ending 31 March 2024. The notes to the
unaudited financial information are prepared on a continuing basis
unless otherwise stated.
The financial information for the six months ended 30 September
2023 does not constitute statutory accounts as defined in Section
434 of the Companies Act 2006. It should be read in conjunction
with the statutory accounts for the year ended 31 March 2023, which
were prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the IASB and as adopted by the UK,
and have been filed with the Registrar of Companies. The Deloitte
LLP audit report on those statutory accounts was unqualified, did
not contain an emphasis of matter and did not contain a statement
under Section 498 of the Companies Act 2006.
The key sources of estimation uncertainty and areas of judgement
for the period ended 30 September 2023 are aligned to those
disclosed in the Annual Report and Accounts for year ended 31 March
2023, with the following amendments:
-- whilst the entirety of the UK Electricity System Operator
(ESO) is expected to transfer out of the Group to become part of an
independent system operator public body, the Independent System
Operator and Planner (ISOP), we have concluded that the held for
sale criteria were not met as at 30 September 2023 due to the ESO
not being available for sale in its present condition given the
formation of the ISOP at the half year remained subject to
legislative approval. The Group has identified this as an
additional area of judgement in the period. The ESO was
subsequently classified as held for sale at the end of October 2023
(see note 17); and
-- the value attributable to GasT TopCo Limited in determining
the fair value of the options over the Group's 40% interests (see
note 6) is no longer considered to represent a key source of
estimation uncertainty.
Our consolidated income statement and segmental analysis (see
note 2) separately identify financial results before and after
exceptional items and remeasurements. The Directors believe that
presentation of the results in this way is relevant to an
understanding of the Group's financial performance. Presenting
financial results before exceptional items and remeasurements is
consistent with the way that financial performance is measured by
management and reported to the Board and improves the comparability
of reported financial performance from year to year. Items which
are classified as exceptional items or remeasurements are defined
in the Annual Report and Accounts for the year ended 31 March
2023.
1. Basis of preparation and new accounting standards,
interpretations and amendments (continued)
Going concern
As part of the Directors' consideration of the appropriateness
of adopting the going concern basis of accounting in preparing the
half year financial information, the Directors have considered the
Group's principal risks (discussed on page 60) alongside potential
downside business cash flow scenarios impacting the Group's
operations. The Directors specifically considered both a base case
and a reasonable worst-case scenario for business cash flows. The
assessment is prepared on the conservative assumption that the
Group has no access to the debt capital markets.
The main additional cash flow impacts identified in the
reasonable worst-case scenario are:
-- the timing of the sale of assets classified as held for
sale;
-- adverse impacts of inflation and incremental spend on our
capital expenditure programme;
-- adverse impact from timing across the Group (i.e. a net
under-recovery of allowed revenues or reductions in
over-collections) and slower collections of outstanding
receivables;
-- higher operating and financing costs than expected; including
non-delivery of planned efficiencies across the Group; and
-- the potential impact of further significant storm costs in
the US.
As part of their analysis, the Board also considered the
following potential levers at their discretion to improve the
position identified by the analysis if the debt capital markets are
not accessible:
-- the payment of dividends to shareholders;
-- significant changes in the phasing of the Group's capital
expenditure programme, with elements of non-essential works and
programmes delayed; and
-- a number of further reductions in operating expenditure
across the Group.
As at 30 September 2023, the Group had undrawn committed
facilities available for general corporate purposes amounting to
GBP8.0 billion. Based on these available liquidity resources and
having considered the reasonable worst-case scenario, and the
further levers at the Board's discretion, the Group has not
identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant
doubt on its ability to continue as a going concern for the
foreseeable future, a period not less than 12 months from the date
of this report.
In addition to the above, the ability to raise new and extend
existing financing was separately included in the analysis, and the
Directors noted the c.GBP3.0 billion of new long-term senior debt
issued in the period from 1 April to 30 September 2023 as evidence
of the Group's ability to continue to have access to the debt
capital markets if needed.
Based on the above, the Directors have concluded the Group is
well placed to manage its financing and other business risks
satisfactorily, and have a reasonable expectation that the Group
will have adequate resources to continue in operation for at least
12 months from the signing date of these consolidated interim
financial statements. They therefore consider it appropriate to
adopt the going concern basis of accounting in preparing the half
year financial information.
New IFRS accounting standards, interpretations and amendments
adopted in the period
There are no new standards, interpretations or amendments,
issued by the IASB or by the IFRS Interpretations Committee
(IFRIC), that are applicable for the period commencing on 1 April
2023 and have had a material impact on the Group's results.
New IFRS accounting standards, interpretations and amendments
not yet adopted
There are no new accounting standards and amendments to existing
standards that have been issued, but are not yet effective or have
not yet been endorsed by the UK that were not disclosed in our
Annual Report and Accounts. The Group has not early adopted any
standard, amendment or interpretation that has been issued but is
not yet effective.
2. Segmental analysis
Revenue and the results of the business are analysed by
operating segment, based on the information the Board use
internally for the purposes of evaluating the performance of each
operating segment and determining resource allocation between them.
The Board is National Grid's chief operating decision maker (as
defined by IFRS 8 'Operating Segments') and assesses the
profitability of a profit measure that excludes certain income and
expenses. We call that measure 'adjusted profit'. Adjusted profit
excludes exceptional items and remeasurements (as defined in note
4) and is used by management to monitor financial performance as it
is considered that it aids the comparability of our reported
financial performance from year to year. As a matter of course, the
Board also considers profitability by segment, excluding the effect
of major storms and timing adjustments relating to revenue and
certain pass-through costs. However, the measure of profit
disclosed in this note is operating profit before exceptional items
and remeasurements, as this is the measure that is most consistent
with the IFRS results reported within these financial
statements.
In the year ended 31 March 2023, the National Grid Ventures
(NGV) operating segment met the quantitative thresholds set out in
IFRS 8 to be identified as the Group's sixth separate reportable
segment. Accordingly, the Group's operating segments were modified
and the data relating to previous periods has been restated to
reflect this change. The results of our six principal businesses
are reported to the Board and are accordingly treated as reportable
operating segments. All other operating segments are either
reported to the Board on an aggregated basis or do not meet the
quantitative threshold in order to be considered a separate
operating segment. The following table describes the main
activities for each reportable operating segment:
UK Electricity The high-voltage electricity transmission networks in
Transmission England and Wales. This includes our Accelerated Strategic
Transmission Investment projects to connect more clean,
low-carbon power to the transmission network in England
and Wales.
================ ==================================================================
UK Electricity The electricity distribution networks of NGED in the
Distribution East Midlands, West Midlands and South West of England
and South Wales.
================ ==================================================================
UK Electricity The Great Britain system operator. The ESO has not met
System Operator the criteria to be classified as held for sale as at
30 September 2023.
================ ==================================================================
New England Gas distribution networks, electricity distribution networks
and high-voltage electricity transmission networks in
New England.
================ ==================================================================
New York Gas distribution networks, electricity distribution networks
and high-voltage electricity transmission networks in
New York.
================ ==================================================================
National Grid Comprises all commercial operations in LNG at the Isle
Ventures of Grain in the UK and Providence, Rhode Island in the
US, our electricity generation business in the US, our
electricity interconnectors in the UK and our investment
in National Grid Renewables Development LLC, our renewables
business in the US. NGV operates outside our regulated
core business. Our US LNG operations were reclassified
from the New England segment following an internal reorganisation
in the period.
================ ==================================================================
The New England and New York segments typically experience
seasonal fluctuations in revenue and operating profit due to higher
delivery volumes during the second half of the financial year, for
example as a result of colder weather over the winter months
driving increased heating demand. These seasonal fluctuations have
a consequential impact on the working capital balances (primarily
trade debtors and accrued income) in the consolidated statement of
financial position at 30 September 2023 when compared to 31 March
2023. The majority of UK revenues are derived from the supply of
network capacity rather than the supply of commodities and
therefore are not subject to the same seasonal fluctuations as in
New York and New England.
Other activities that do not form part of any of the segments in
the above table primarily relate to our UK property business
together with insurance and corporate activities in the UK and US
and the Group's investments in technology and innovation companies
through National Grid Partners.
2. Segmental analysis (continued)
(a) Revenue
2023 2022(2)
==================================== ====================================== ======================================
Sales Sales Sales Sales
Total between to third Total between to third
sales segments(1) parties sales segments(1) parties
Six months ended 30 September GBPm GBPm GBPm GBPm GBPm GBPm
==================================== ========== ============== ========== ========== ============== ==========
Operating segments - continuing
operations:
UK Electricity Transmission 1,356 (19) 1,337 969 (14) 955
UK Electricity Distribution 850 (2) 848 1,005 (8) 997
UK Electricity System Operator 1,734 (17) 1,717 2,060 (15) 2,045
New England 1,441 - 1,441 1,760 - 1,760
New York 2,365 - 2,365 2,758 - 2,758
National Grid Ventures 666 (27) 639 685 (9) 676
Other 142 - 142 253 - 253
==================================== ========== ============== ========== ========== ============== ==========
Total revenue from continuing
operations 8,554 (65) 8,489 9,490 (46) 9,444
==================================== ========== ============== ========== ========== ============== ==========
Geographical areas:
UK 4,309 4,589
US 4,180 4,855
==================================== ========== ============== ========== ========== ============== ==========
Total revenue from continuing
operations 8,489 9,444
==================================== ========== ============== ========== ========== ============== ==========
1. Sales between operating segments are priced having regard to
the regulatory and legal requirements to which the businesses are
subject. The analysis of revenue by geographical area is on the
basis of destination. There are no material sales between the UK
and US geographical areas.
2. Comparative amounts have been re-presented to reflect NGV as
a separate operating segment.
(b) Operating profit/(loss)
Before exceptional Exceptional After exceptional
items and remeasurements items and remeasurements items and remeasurements
2023 2022(1) 2023 2022(1) 2023 2022(1)
================
Six months ended
30 September GBPm GBPm GBPm GBPm GBPm GBPm
================ ================= ================= ================== ================== ================== =================
Operating
segments -
continuing
operations:
UK
Electricity
Transmission 839 499 (1) (6) 838 493
UK
Electricity
Distribution 476 531 (4) (9) 472 522
UK
Electricity
System
Operator 443 147 - (1) 443 146
New England (32) 193 (15) 527 (47) 720
New York (30) (18) 38 (8) 8 (26)
National Grid
Ventures 219 259 91 49 310 308
Other (13) 145 (26) (69) (39) 76
================ ================= ================= ================== ================== ================== =================
Total operating
profit
from continuing
operations 1,902 1,756 83 483 1,985 2,239
================ ================= ================= ================== ================== ================== =================
Geographical
areas:
UK 1,956 1,550 60 (32) 2,016 1,518
US (54) 206 23 515 (31) 721
================ ================= ================= ================== ================== ================== =================
Total operating
profit
from continuing
operations 1,902 1,756 83 483 1,985 2,239
================ ================= ================= ================== ================== ================== =================
1. Comparative amounts have been re-presented to reflect NGV as
a separate operating segment.
Before exceptional Exceptional After exceptional
items and remeasurements items and remeasurements items and remeasurements
==================================== ====================================
2023 2022(1) 2023 2022(1) 2023 2022(1)
===============
Six months
ended 30
September GBPm GBPm GBPm GBPm GBPm GBPm
=============== ================= ================= ================== ================= ================= =================
Reconciliation
to profit
before tax:
Operating
profit from
continuing
operations 1,902 1,756 83 483 1,985 2,239
Share of
post-tax
results
of joint
ventures and
associates 59 70 12 (19) 71 51
Finance
income 123 69 (8) (32) 115 37
Finance costs (834) (801) 34 140 (800) (661)
=============== ================= ================= ================== ================= ================= =================
Total profit
before tax
from
continuing
operations 1,250 1,094 121 572 1,371 1,666
=============== ================= ================= ================== ================= ================= =================
1. Comparative amounts have been re-presented to reflect the
classification of the FAA option as held for sale and within
discontinued operations.
2. Segmental analysis (continued)
(c) Capital expenditure
Capital expenditure represents additions to property, plant and
equipment and other intangible assets but excludes additional
investments in and loans to joint ventures and associates.
Net book value
of property,
plant and equipment Depreciation,
and other intangible amortisation
assets Capital expenditure and impairment
======================================= ========================================== ==========================================
30 September 31 March 30 September 30 September 30 September 30 September
2023 2023(1) 2023 2022(1) 2023 2022(1)
GBPm GBPm GBPm GBPm GBPm GBPm
=============== =================== ================== ==================== ==================== ==================== ====================
Operating
segments:
UK
Electricity
Transmission 16,030 15,483 800 629 (250) (235)
UK
Electricity
Distribution 13,940 13,462 608 584 (105) (104)
UK
Electricity
System
Operator 434 411 75 42 (52) (40)
New England 13,781 13,033 789 801 (204) (184)
New York 22,937 21,730 1,257 1,242 (321) (292)
National Grid
Ventures 3,956 3,880 175 410 (84) (73)
Other 35 38 2 9 (5) (4)
=============== =================== ================== ==================== ==================== ==================== ====================
Total 71,113 68,037 3,706 3,717 (1,021) (932)
=============== =================== ================== ==================== ==================== ==================== ====================
Geographical
areas:
UK 33,475 32,343 1,649 1,594 (464) (432)
US 37,638 35,694 2,057 2,123 (557) (500)
=============== =================== ================== ==================== ==================== ==================== ====================
Total 71,113 68,037 3,706 3,717 (1,021) (932)
=============== =================== ================== ==================== ==================== ==================== ====================
By asset type:
Property,
plant and
equipment 67,396 64,433 3,449 3,490 (868) (829)
Other
intangible
assets 3,717 3,604 257 227 (153) (103)
=============== =================== ================== ==================== ==================== ==================== ====================
Total 71,113 68,037 3,706 3,717 (1,021) (932)
=============== =================== ================== ==================== ==================== ==================== ====================
1. Comparative amounts have been re-presented to reflect NGV as
a separate operating segment and the reclassification of our US LNG
operations from New England to NGV following an internal
reorganisation in the period.
3. Revenue
Under IFRS 15 'Revenue from Contracts with Customers', revenue
is recorded as or when the Group satisfies a performance obligation
by transferring a promised good or service to a customer. A good or
service is transferred when the customer obtains control of that
good or service.
The transfer of control of our distribution or transmission
services coincides with the use of our network, as electricity and
gas pass through our network and reach our customers. The Group
principally satisfies its performance obligations over time and the
amount of revenue recorded corresponds to the amounts billed and
accrued for volumes of gas and electricity delivered/transferred
to/from our customers.
Revenue for
the
six months UK Electricity National
ended 30 UK Electricity UK Electricity System New New Grid
September Transmission Distribution Operator England York Ventures Other Total
2023 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============= ==================== ==================== ==================== ============= ============= =============== =========== ===========
Revenue under
IFRS
15
Transmission 1,299 - 5 43 283 426 - 2,056
Distribution - 810 - 1,329 2,047 - - 4,186
System
Operator - - 1,712 - - - - 1,712
Other(1) 9 36 - 4 7 75 - 131
============= ==================== ==================== ==================== ============= ============= =============== =========== ===========
Total IFRS 15
revenue 1,308 846 1,717 1,376 2,337 501 - 8,085
============= ==================== ==================== ==================== ============= ============= =============== =========== ===========
Other revenue
Generation - - - - - 181 - 181
Other(2) 29 2 - 65 28 (43) 142 223
============= ==================== ==================== ==================== ============= ============= =============== =========== ===========
Total other
revenue 29 2 - 65 28 138 142 404
============= ==================== ==================== ==================== ============= ============= =============== =========== ===========
Total revenue
from
continuing
operations 1,337 848 1,717 1,441 2,365 639 142 8,489
============= ==================== ==================== ==================== ============= ============= =============== =========== ===========
Geographic
split
of revenue
for the
six months
ended UK Electricity National
30 UK Electricity UK Electricity System New New Grid
September Transmission Distribution Operator England York Ventures Other Total
2023 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=========== =================== ==================== ================== ============ ============ =============== ============ =============
Revenue
under IFRS
15
UK 1,308 846 1,717 - - 430 - 4,301
US - - - 1,376 2,337 71 - 3,784
=========== =================== ==================== ================== ============ ============ =============== ============ =============
Total IFRS
15 revenue 1,308 846 1,717 1,376 2,337 501 - 8,085
=========== =================== ==================== ================== ============ ============ =============== ============ =============
Other
revenue
UK 29 2 - - - (50) 27 8
US - - - 65 28 188 115 396
=========== =================== ==================== ================== ============ ============ =============== ============ =============
Total other
revenue 29 2 - 65 28 138 142 404
=========== =================== ==================== ================== ============ ============ =============== ============ =============
Total
revenue
from
continuing
operations 1,337 848 1,717 1,441 2,365 639 142 8,489
=========== =================== ==================== ================== ============ ============ =============== ============ =============
1. The UK Electricity Transmission and UK Electricity
Distribution other IFRS 15 revenue principally relates to
engineering recharges, which are the recovery of costs incurred for
construction work requested by customers, such as the re-routing of
existing network assets. Within NGV, the other IFRS 15 revenue
principally relates to revenue generated from our NG Renewables
business.
2. Other revenue, recognised in accordance with accounting
standards other than IFRS 15, includes property sales by our UK
commercial property business, rental income, income arising in
connection with the Transition Services Agreements in place
following the sales of The Narragansett Electric Company (NECO) and
the UK Gas Transmission business, and an adjustment to NGV revenue
in respect of the interconnector cap and floor and Use of Revenue
regimes constructed by Ofgem.
3. Revenue (continued)
Revenue for
the
six months UK Electricity National
ended UK Electricity UK Electricity System New New Grid
30 September Transmission Distribution Operator England York Ventures(1) Other(1) Total
2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============= ==================== =================== =================== ============= ============= ============== =========== ===========
Revenue under
IFRS
15
Transmission 931 - 77 53 117 306 - 1,484
Distribution - 940 - 1,675 2,617 - - 5,232
System
Operator - - 1,968 - - - - 1,968
Other(2) 16 43 - 4 6 69 - 138
============= ==================== =================== =================== ============= ============= ============== =========== ===========
Total IFRS 15
revenue 947 983 2,045 1,732 2,740 375 - 8,822
============= ==================== =================== =================== ============= ============= ============== =========== ===========
Other revenue
Generation - - - - - 224 - 224
Other(3) 8 14 - 28 18 77 253 398
============= ==================== =================== =================== ============= ============= ============== =========== ===========
Total other
revenue 8 14 - 28 18 301 253 622
============= ==================== =================== =================== ============= ============= ============== =========== ===========
Total revenue
from
continuing
operations 955 997 2,045 1,760 2,758 676 253 9,444
============= ==================== =================== =================== ============= ============= ============== =========== ===========
Geographic
split
of revenue
for the
six months
ended UK Electricity National
30 UK Electricity UK Electricity System New New Grid
September Transmission Distribution Operator England York Ventures(1) Other(1) Total
2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=========== ==================== =================== ================== ============ ============ ============== ============ ===========
Revenue
under IFRS
15
UK 947 983 2,045 - - 310 - 4,285
US - - - 1,732 2,740 65 - 4,537
=========== ==================== =================== ================== ============ ============ ============== ============ ===========
Total IFRS
15 revenue 947 983 2,045 1,732 2,740 375 - 8,822
=========== ==================== =================== ================== ============ ============ ============== ============ ===========
Other
revenue
UK 8 14 - - - 83 199 304
US - - - 28 18 218 54 318
=========== ==================== =================== ================== ============ ============ ============== ============ ===========
Total other
revenue 8 14 - 28 18 301 253 622
=========== ==================== =================== ================== ============ ============ ============== ============ ===========
Total
revenue
from
continuing
operations 955 997 2,045 1,760 2,758 676 253 9,444
=========== ==================== =================== ================== ============ ============ ============== ============ ===========
1. Comparative amounts have been re-presented to reflect NGV as
a separate operating segment.
2. The UK Electricity Transmission and UK Electricity
Distribution other IFRS 15 revenue principally relates to
engineering recharges, which are the recovery of costs incurred for
construction work requested by customers, such as the re-routing of
existing network assets. Within NGV, the other IFRS 15 revenue
principally relates to revenue generated from our NG Renewables
business.
3. Other revenue, recognised in accordance with accounting
standards other than IFRS 15, includes property sales by our UK
commercial property business, rental income and income arising in
connection with the Transition Services Agreement with PPL Rhode
Island Holdings, LLC following the sale of NECO. In the period
ended 30 September 2022 the Group also recognised other income
relating to an insurance claim.
4. Exceptional items and remeasurements
To monitor our financial performance, we use an adjusted
consolidated profit measure that excludes certain income and
expenses. We exclude items from adjusted profit because, if
included, these items could distort understanding of our
performance in the period and the comparability between periods.
With respect to restructuring costs, these represent additional
expenses incurred that are not related to normal business and
day--to-day activities. These can take place over multiple
reporting periods given the scale of the Group, the nature and
complexity of the transformation initiatives and due to the impact
of strategic transactions.
Remeasurements comprise unrealised gains or losses recorded in
the consolidated income statement arising from changes in the fair
value of certain financial assets and liabilities categorised as
held at fair value through profit and loss (FVTPL). Once the fair
value movements are realised (for example, when the derivative
matures), the previously recognised fair value movements are then
reversed through remeasurements and recognised within earnings
before exceptional items and remeasurements. These assets and
liabilities include commodity contracts and derivative financial
instruments to the extent that hedge accounting is either not
achieved or is not effective. We have also classified the
unrealised gains or losses reported in profit and loss on certain
additional assets treated as FVTPL within remeasurements. These
relate to financial assets (which fail the 'solely payments of
principal and interest test' under IFRS 9), the money market fund
investments used by Group Treasury for cash management purposes and
the net foreign exchange gains and losses on borrowing activities.
These are offset by foreign exchange losses and gains on financing
derivatives measured at fair value. In all cases, these fair values
increase or decrease because of changes in foreign exchange,
commodity or other financial indices over which we have no
control.
Exceptional
items Remeasurements Total
Six months ended 30 September 2023 GBPm GBPm GBPm
====================================== ======================== ========================= =========================
Included within operating profit from
continuing
operations
Cost efficiency programme (39) - (39)
Transaction, separation and
integration
costs(1) (11) - (11)
IFA1 fire insurance proceeds 92 - 92
Net gains on commodity contract
derivatives - 41 41
====================================== ======================== ========================= =========================
42 41 83
====================================== ======================== ========================= =========================
Included within net finance costs
(note
5)
Net gains on derivative financial
instruments - 34 34
Net losses on financial assets at
fair value
through profit and loss - (8) (8)
====================================== ======================== ========================= =========================
- 26 26
====================================== ======================== ========================= =========================
Included within share of post-tax
results
of joint ventures and associates
Net gains on financial instruments - 12 12
====================================== ======================== ========================= =========================
- 12 12
====================================== ======================== ========================= =========================
Total included within profit before
tax
from continuing operations 42 79 121
Tax on exceptional items and
remeasurements 1 (21) (20)
====================================== ======================== ========================= =========================
Total exceptional items and
remeasurements
after tax from
continuing operations 43 58 101
====================================== ======================== ========================= =========================
1. Transaction, separation and integration costs represent the
aggregate of distinct activities undertaken by the Group in the
periods presented.
4. Exceptional items and remeasurements (continued)
Exceptional
items Remeasurements Total
Six months ended 30 September 2022(1) GBPm GBPm GBPm
======================================== ======================== ======================== ========================
Included within operating profit from
continuing
operations
Net gain on disposal of NECO 511 - 511
Cost efficiency programme (61) - (61)
Transaction, separation and
integration
costs(2) (65) - (65)
IFA1 fire insurance proceeds 33 - 33
Net gains on commodity contract
derivatives - 65 65
======================================== ======================== ======================== ========================
418 65 483
======================================== ======================== ======================== ========================
Included within net finance costs (note
5)
Net gains on derivative financial
instruments - 140 140
Net losses on financial assets at fair
value
through profit and loss - (32) (32)
======================================== ======================== ======================== ========================
- 108 108
======================================== ======================== ======================== ========================
Included within share of post-tax
results
of joint ventures and associates
Net losses on financial instruments - (19) (19)
======================================== ======================== ======================== ========================
- (19) (19)
======================================== ======================== ======================== ========================
Total included within profit before tax
from continuing operations 418 154 572
Tax on exceptional items and
remeasurements (221) (49) (270)
======================================== ======================== ======================== ========================
Total exceptional items and
remeasurements
after tax from
continuing operations 197 105 302
======================================== ======================== ======================== ========================
1. Comparative amounts have been re-presented to reflect the
classification of the FAA option as held for sale and within
discontinued operations.
2. Transaction, separation and integration costs represent the
aggregate of distinct activities undertaken by the Group in the
periods presented.
Cost efficiency programme: During the period, the Group incurred
a further GBP39 million (2022: GBP61 million) of costs in relation
to the major cost efficiency programme announced in November 2021,
that targeted at least GBP400 million savings per annum across the
Group by the end of three years. The costs recognised in the period
primarily relate to redundancy provisions, employee costs and
professional fees incurred in delivering the programme. Whilst the
costs incurred during the period do not meet the quantitative
threshold to be classified as exceptional on a standalone basis,
when taken in aggregate with the GBP142 million of costs incurred
since the announcement of the programme, the costs qualify for
exceptional treatment in line with our exceptional items policy.
Estimated costs expected to be incurred over the remainder of the
programme to 31 March 2024 remain consistent with those disclosed
in the Annual Report and Accounts for year the ended 31 March 2023.
The total cash outflow for the period in relation to these costs
was GBP28 million (2022: GBP38 million).
Transaction, separation and integration costs: During the
period, GBP11 million (2022: GBP65 million) of transaction and
separation costs were incurred in relation to the disposals of NECO
and the UK Gas Transmission business (see note 6) and the
integration of NGED. The costs incurred primarily relate to legal
fees, professional fees, and employee costs. The costs have been
classified as exceptional, consistent with similar costs for the
year ended 31 March 2023 and past precedent. The total cash outflow
for the period in relation to these costs was GBP9 million (2022:
GBP59 million).
IFA1 interconnector insurance recovery: In September 2021, a
fire at the IFA1 converter station in Sellindge, Kent caused
significant damage to infrastructure on-site. In the period, the
Group recognised net insurance claims of GBP92 million (2022: GBP33
million) which were recognised as exceptional in line with our
exceptional items policy and consistent with related claims in the
prior year. The total cash inflow in the period in relation to the
property damage insurance proceeds was GBPnil (2022: GBP33
million).
Net gain on disposal of NECO: During the prior period, the Group
recognised a gain of GBP511 million on the disposal of 100% of the
share capital of NECO to PPL Rhode Island Holdings, LLC for cash
consideration of GBP3.1 billion ($3.9 billion). The receipt of cash
was recognised within net cash used in investing activities within
the consolidated cash flow statement.
5. Finance income and costs
2023 2022(1)
Six months ended 30 September Notes GBPm GBPm
=========================================================== ===== ================ ================
Finance income before exceptional items and remeasurements
Interest income from financing activities 52 14
Net interest on pensions and other post-retirement
benefit obligations 51 41
Other interest income 20 14
=========================================================== ===== ================ ================
123 69
=========================================================== ===== ================ ================
Finance costs before exceptional items and remeasurements
Interest expense on financial instruments(2) (903) (878)
Unwinding of discount on provisions (50) (42)
Other interest (8) 8
Less: interest capitalised(3) 127 111
=========================================================== ===== ================ ================
(834) (801)
=========================================================== ===== ================ ================
Net finance costs before exceptional items and
remeasurements (711) (732)
Total exceptional items and remeasurements(4) 4 26 108
=========================================================== ===== ================ ================
Net finance costs including exceptional items
and remeasurements
from continuing operations (685) (624)
=========================================================== ===== ================ ================
1. Comparative amounts have been re-presented to reflect the
classification of the FAA option as held for sale and within
discontinued operations.
2. Finance costs include principal accretion on inflation-linked
debt of GBP149 million (2022: GBP240 million) and income related to
principal accretion on inflation-linked swaps of GBP18 million
(2022: GBP5 million expense).
3. Interest on funding attributable to assets in the course of
construction in the current period was capitalised at a rate of
4.7% (2022: 4.3%). In the UK, capitalised interest qualifies for a
current year tax deduction with tax relief claimed of GBP21 million
(2022: GBP13 million). In the US, capitalised interest is added to
the cost of property, plant and equipment and qualifies for tax
depreciation allowances.
4. Includes a net foreign exchange gain on borrowing activities,
offset by foreign exchange losses and gains on financing
derivatives measured at fair value.
6. Assets held for sale and discontinued operations
Assets and businesses are classified as held for sale when their
carrying amounts are recovered through sale rather than through
continuing use. They only meet the held for sale condition when the
assets are ready for immediate sale in their present condition,
management is committed to the sale and it is highly probable that
the sale will complete within one year. Depreciation ceases on
assets and businesses when they are classified as held for sale and
the assets and businesses are impaired if their carrying value
exceeds their fair value less expected costs to sell.
The results and cash flows of assets or businesses classified as
held for sale or sold during the year, that meet the criteria of
being a major separate line of business or geographical area of
operation, are shown separately from our continuing operations, and
presented within discontinued operations in the income statement
and cash flow statement.
The following assets and liabilities were classified as held for
sale:
30 September 2023 31 March 2023
=========== ============================================================== ==========================================================
Total Total Total Total
assets liabilities Net assets assets liabilities Net assets
held held for held for held for held for held for
for sale sale sale sale sale sale
GBPm GBPm GBPm GBPm GBPm GBPm
=========== ================== ==================== ==================== ================== ================== ==================
Investment
in GasT
TopCo
Limited 1,441 - 1,441 1,443 - 1,443
FAA option - - - - (109) (109)
FAA forward - (7) (7) - - -
RAA option - (44) (44) - - -
=========== ================== ==================== ==================== ================== ================== ==================
Net assets
held for
sale 1,441 (51) 1,390 1,443 (109) 1,334
=========== ================== ==================== ==================== ================== ================== ==================
On 31 January 2023, the Group disposed of 100% of the UK Gas
Transmission business for cash consideration of GBP4.0 billion and
a 40% interest in a newly incorporated UK limited company, GasT
TopCo Limited. The other 60% was purchased by Macquarie
Infrastructure and Real Assets (MIRA) and British Columbia
Investment Management Corporation (BCI) (together, the
'Consortium'). The Group also entered into a Further Acquisition
Agreement (the FAA option) with the Consortium over its remaining
40% interest. The Group's interest in GasT TopCo Limited was
immediately classified as held for sale with effect from 31 January
2023 together with the FAA option, as detailed in note 10 of the
Annual Report and Accounts for the year ended 31 March 2023. The
Group has not applied equity accounting in relation to its
investment in GasT TopCo Limited.
On 19 July 2023, following the partial exercise of the FAA
option by the Consortium, the Group agreed to sell a further 20%
out of the remaining 40% interests in GasT TopCo Limited (the FAA
forward). Completion is expected in the second half of calendar
year 2023, subject to regulatory approval. As part of the
transaction, the Group entered into a new option agreement with the
Consortium, the Remaining Acquisition Agreement (the RAA option),
to replace the FAA option for the potential sale of all or part of
the remaining 20% equity interest in GasT TopCo Limited. The RAA
option is exercisable, at the Consortium's option, between 1 May
2024 and 31 July 2024. If the RAA option is partially exercised by
the Consortium, the Group will have the right to put the remainder
of its interests in GasT TopCo Limited to the Consortium, which can
be exercised by the Group between 1 December 2024 and 31 December
2024.
The FAA forward to complete the sale of 20% of GasT TopCo
Limited is a Level 3 derivative and some of the assumptions which
are used to determine the fair value are specific to the contract
and not readily observable in active markets. The most significant
unobservable input is the valuation of GasT TopCo Limited's
unlisted equity.
The RAA option is also a Level 3 derivative. Significant
unobservable inputs include the valuation and volatility of GasT
TopCo Limited's unlisted equity. These inputs are used as part of a
Black-Scholes option pricing model to provide the reported fair
values.
The disposal of the Group's interests in GasT TopCo Limited is
considered to be the final stage of the plan to dispose of the UK
Transmission business first announced in 2021. As a result, the
results of the business prior to the recognition of the associate
and any remeasurements pertaining to the financial derivatives
noted above are shown separately from the continuing business for
all periods presented on the face of the income statement as a
discontinued operation. This is also reflected in the statement of
comprehensive income, as well as earnings per share (EPS) being
shown split between continuing and discontinued operations.
6. Assets held for sale and discontinued operations
(continued)
The summary income statements for the periods ended 30 September
2023 and 2022 are as follows:
Before exceptional
items Exceptional
and remeasurements items and remeasurements Total
2023 2022(1) 2023 2022(1) 2023 2022(1)
GBPm GBPm GBPm GBPm GBPm GBPm
============== ==================== ==================== ==================== ==================== ==================== ====================
Discontinued
operations
Revenue - 805 - - - 805
Other
operating
costs - (465) - 6 - (459)
============== ==================== ==================== ==================== ==================== ==================== ====================
Operating
profit - 340 - 6 - 346
Finance income 9 9 - - 9 9
Finance
costs(2) - (173) 61 (88) 61 (261)
============== ==================== ==================== ==================== ==================== ==================== ====================
Profit/(loss)
before
tax 9 176 61 (82) 70 94
Tax (2) (55) (3) (2) (5) (57)
============== ==================== ==================== ==================== ==================== ==================== ====================
Profit/(loss)
after
tax from
discontinued
operations 7 121 58 (84) 65 37
============== ==================== ==================== ==================== ==================== ==================== ====================
1. Comparative amounts have been re-presented to reflect the
classification of the FAA option as held for sale and within
discontinued operations.
2. Exceptional finance costs include the remeasurement of the
FAA option, the FAA forward and the RAA option.
The summary statements of comprehensive income are as
follows:
2023 2022(1)
GBPm GBPm
============================================================= ==================== ====================
Profit after tax from discontinued operations 65 37
Other comprehensive (loss)/income from discontinued
operations
Items from discontinued operations that will never
be reclassified to profit or loss:
Remeasurement losses on pension assets and post-retirement
benefit obligations - (126)
Tax on items that will never be reclassified to profit
or loss - 31
============================================================= ==================== ====================
Total losses from discontinued operations that will
never be reclassified to profit or loss - (95)
============================================================= ==================== ====================
Items from discontinued operations that may be reclassified
subsequently to profit or loss:
Net gains in respect of cash flow hedges - 8
Net gains in respect of cost of hedging - 4
Net losses on investments in debt instruments measured
at fair value through other
comprehensive income (12) -
Tax on items that may be reclassified subsequently
to profit or loss 3 (3)
============================================================= ==================== ====================
Total (losses)/gains from discontinued operations
that may be reclassified subsequently to profit or
loss (9) 9
============================================================= ==================== ====================
Other comprehensive loss for the period, net of tax,
from discontinued operations (9) (86)
============================================================= ==================== ====================
Total comprehensive income/(loss) for the period from
discontinued operations 56 (49)
============================================================= ==================== ====================
1. Comparative amounts have been re-presented to reflect the
classification of the FAA option as held for sale and within
discontinued operations.
7. Tax from continuing operations
The tax charge from continuing operations for the six month
period ended 30 September 2023 is GBP307 million (2022: GBP447
million), and before tax on exceptional items and remeasurements,
is GBP287 million (2022: GBP177 million). It is based on
management's estimate of the weighted average effective tax rate by
jurisdiction expected for the full year. The effective tax rate
excluding tax on exceptional items and remeasurements is 22.9%
(2022: 16.2%), which includes the impact of our share of post-tax
results of joint ventures and associates. The half year effective
tax rate before exceptional items and remeasurements, including our
share of post-tax results of joint ventures and associates,
primarily reflects seasonality of earnings in the US Group and
increase in the UK statutory tax rate from 19% to 25% from 1 April
2023.
For the full year, we expect the Group's effective tax rate
excluding tax on exceptional items and remeasurements to be around
25% which includes the impact of our share of post-tax results of
joint ventures and associates. The effective tax rate for the year
ended 31 March 2023 before exceptional items and remeasurements was
21.4% including the impact of our share of post-tax results of
joint ventures and associates.
The legislation implementing the Organisation for Economic
Co-operation and Development's (OECD) proposals for a global
minimum corporation tax rate ('Pillar 2') was enacted into UK law
on 11 July 2023. The legislation includes an income inclusion rule
and a domestic minimum tax, which together are designed to ensure a
minimum effective tax rate of 15% in each country in which the
Group operates. Similar legislation is being enacted by other
governments around the world. The legislation is effective for
National Grid from 1 April 2024 and therefore the rules do not
impact the Group's consolidated financial statements for year ended
31 March 2024. We have applied the mandatory exception in the UK to
recognising and disclosing information about the deferred tax
assets and liabilities related to Pillar 2 income taxes in
accordance with the amendments to IAS 12 published by the IASB on
23 May 2023. The Group's work is ongoing to assess the potential
impact in the financial statements for year ended 31 March
2025.
8. Earnings per share
Earnings per share (EPS), excluding exceptional items and
remeasurements are provided to reflect the adjusted profit
subtotals used by the Group, as set out in note 1. The earnings per
share calculations are based on profit after tax attributable to
equity shareholders of the parent company which excludes
non-controlling interests.
(a) Basic earnings per share
Earnings EPS Earnings EPS
2023 2023 2022(1) 2022(1)
========================================
Six months ended 30 September GBPm pence GBPm pence
======================================== ================= ================= ================== ==================
Profit after tax before exceptional
items
and remeasurements - continuing 962 26.1 917 25.1
Exceptional items and remeasurements
after
tax - continuing 101 2.7 302 8.3
======================================== ================= ================= ================== ==================
Profit after tax from continuing
operations
attributable to the parent 1,063 28.8 1,219 33.4
======================================== ================= ================= ================== ==================
Profit after tax before exceptional
items
and remeasurements - discontinued 7 0.2 121 3.3
Exceptional items and remeasurements
after
tax - discontinued 58 1.6 (84) (2.3)
======================================== ================= ================= ================== ==================
Profit after tax from discontinued
operations
attributable to the parent 65 1.8 37 1
======================================== ================= ================= ================== ==================
Total profit after tax before
exceptional
items and remeasurements 969 26.3 1,038 28.4
Total exceptional items and
remeasurements
after tax 159 4.3 218 6.0
======================================== ================= ================= ================== ==================
Total profit after tax attributable to
the parent 1,128 30.6 1,256 34.4
======================================== ================= ================= ================== ==================
2023 2022
millions millions
======================================== ================= ================= ================== ==================
Weighted average number of shares -
basic 3,682 3,651
======================================== ================= ================= ================== ==================
1. Comparative amounts have been re-presented to reflect the
classification of the FAA option as held for sale and within
discontinued operations.
(b) Diluted earnings per share
Earnings EPS Earnings EPS
2023 2023 2022(1) 2022(1)
======================================
Six months ended 30 September GBPm pence GBPm pence
====================================== ==================== ================= ================= ==================
Profit after tax before exceptional
items
and remeasurements - continuing 962 26.0 917 25.0
Exceptional items and remeasurements
after
tax - continuing 101 2.7 302 8.2
====================================== ==================== ================= ================= ==================
Profit after tax from continuing
operations
attributable to the parent 1,063 28.7 1,219 33.2
====================================== ==================== ================= ================= ==================
Profit after tax before exceptional
items
and remeasurements - discontinued 7 0.2 121 3.3
Exceptional items and remeasurements
after
tax - discontinued 58 1.6 (84) (2.3)
====================================== ==================== ================= ================= ==================
Profit after tax from discontinued
operations
attributable to the parent 65 1.8 37 1
====================================== ==================== ================= ================= ==================
Total profit after tax before
exceptional
items and remeasurements 969 26.2 1,038 28.3
Total exceptional items and
remeasurements
after tax 159 4.3 218 5.9
====================================== ==================== ================= ================= ==================
Total profit after tax attributable to
the parent 1,128 30.5 1,256 34.2
====================================== ==================== ================= ================= ==================
2023 2022
millions millions
====================================== ==================== ================= ================= ==================
Weighted average number of shares -
diluted 3,700 3,668
====================================== ==================== ================= ================= ==================
1. Comparative amounts have been re-presented to reflect the
classification of the FAA option as held for sale and within
discontinued operations.
9. Dividends
Cash
dividend Scrip
Pence paid dividend
per share GBPm GBPm
=============================================== =============== ================ =================
Ordinary dividends
Final dividend in respect of the year ended 31
March 2023 37.60 1,325 56
Interim dividend in respect of the year ended
31 March 2023 17.84 488 163
Final dividend in respect of the year ended 31
March 2022 33.76 1,119 114
=============================================== =============== ================ =================
The Directors are proposing an interim dividend of 19.40 pence
per share to be paid in respect of the year ending 31 March 2024.
This would absorb approximately GBP716 million of shareholders'
equity.
A final dividend for the year ended 31 March 2023 of 37.60 pence
per share was paid in August 2023. The cash dividend paid was
GBP1,325 million with an additional GBP56 million settled via a
scrip issue.
10. Fair value measurement
Assets and liabilities measured at fair value
Included in the statement of financial position are certain
financial assets and liabilities which are measured at fair value.
The following table categorises these assets and liabilities by the
valuation methodology applied in determining their fair value using
the fair value hierarchy described on page 197 of the Annual Report
and Accounts for the year ended 31 March 2023.
30 September 2023 31 March 2023
================================================================= ================================================================
Level Level Level Total Level Level Level Total
1 2 3 GBPm 1 2 3 GBPm
GBPm GBPm GBPm GBPm GBPm GBPm
================= ============== =============== =============== =============== ============== ============== =============== ===============
Assets
Investments held
at fair value
through
profit and loss 1,007 - 483 1,490 1,764 - 452 2,216
Investments held
at fair value
through
other
comprehensive
income(1) - 388 - 388 - 407 - 407
Financing
derivatives - 309 20 329 - 341 22 363
Commodity
contract
derivatives - 54 2 56 - 62 4 66
================= ============== =============== =============== =============== ============== ============== =============== ===============
1,007 751 505 2,263 1,764 810 478 3,052
================= ============== =============== =============== =============== ============== ============== =============== ===============
Liabilities
Financing
derivatives - (1,219) (95) (1,314) - (997) (122) (1,119)
Commodity
contract
derivatives - (78) (45) (123) - (134) (40) (174)
Contingent
consideration(2) - - (10) (10) - - (19) (19)
================= ============== =============== =============== =============== ============== ============== =============== ===============
- (1,297) (150) (1,447) - (1,131) (181) (1,312)
================= ============== =============== =============== =============== ============== ============== =============== ===============
Total 1,007 (546) 355 816 1,764 (321) 297 1,740
================= ============== =============== =============== =============== ============== ============== =============== ===============
1. Investments held include instruments which meet the criteria
of IFRS 9 or IAS 19.
2. Contingent consideration relates to the acquisition of
National Grid Renewables Development LLC.
The estimated fair value of total borrowings, excluding lease
liabilities, using market values at 30 September 2023 is GBP38,354
million (31 March 2023: GBP38,219 million).
Our level 1 financial investments and liabilities held at fair
value are valued using quoted prices from liquid markets and
primarily comprise investments in short-term money market
funds.
Our level 2 financial investments held at fair value primarily
include bonds with a tenor greater than one year and are valued
using quoted prices for similar instruments in active markets, or
quoted prices for identical or similar instruments in inactive
markets. Alternatively, they are valued using models where all
significant inputs are based directly or indirectly on observable
market data.
10. Fair value measurement (continued)
Our level 2 financing derivatives include cross-currency,
interest rate and foreign exchange derivatives. We value these
derivatives by discounting all future cash flows by externally
sourced market yield curves at the reporting date, taking into
account the credit quality of both parties. These derivatives can
be priced using liquidly traded interest rate curves and foreign
exchange rates, and therefore we classify our vanilla trades as
level 2 under the IFRS 13 framework.
Our level 2 commodity derivatives include over-the-counter gas
swaps and power swaps as well as forward physical gas deals. We
value our contracts based on market data obtained from the New York
Mercantile Exchange (NYMEX) and the Intercontinental Exchange (ICE)
where forward monthly prices are available. We discount based on
externally sourced market yield curves at the reporting date,
taking into account the credit quality of both parties and
liquidity in the market. Our commodity contracts can be priced
using liquidly traded swaps. Therefore we classify our vanilla
trades as level 2 under the IFRS 13 framework.
Our level 3 financing derivatives include inflation-linked
swaps, where the market is illiquid. In valuing these instruments
we use in-house valuation models and obtain external valuations to
support each reported fair value.
Our level 3 commodity contract derivatives primarily consist of
our forward purchases of electricity and gas that we value using
proprietary models. Derivatives are classified as Level 3 where
significant inputs into the valuation technique are neither
directly nor indirectly observable (including our own data, which
are adjusted, if necessary, to reflect the assumptions market
participants would use in the circumstances).
Our level 3 investments include equity instruments accounted for
at fair value through profit and loss. These equity holdings are
part of our corporate venture capital portfolio held by National
Grid Partners and comprise a series of relatively small,
early-stage non-controlling minority interest unquoted investments
where prices or valuation inputs are unobservable. Fifteen equity
investments (out of thirty-three) are fair valued based on the
latest transaction price (a price within the last 12 months),
either being the price we paid for the investments, marked to a
latest round of funding and adjusted for our preferential rights or
based on an internal model. In addition, we have eighteen
investments without a transaction in the last 12 months that
underwent an internal valuation process using the Black-Scholes
Murton Option Pricing Model (OPM Backsolve). Between 12 and 18
months a blend between OPM Backsolve and other techniques are
utilised such as proxy group revenue multiples, discounted cash
flow, comparable company analysis and probability weighted expected
return approach in order to triangulate a valuation. After 18
months the valuation is based on these alternative methods as the
last fundraising price is no longer a reliable basis for
valuation.
Our level 3 investments also include our investment in Sunrun
Neptune 2016 LLC, which is accounted for at fair value through
profit and loss. The investment is fair valued by discounting
expected cash flows using a weighted average cost of capital
specific to Sunrun Neptune 2016 LLC.
10. Fair value measurement (continued)
The impacts on a post-tax basis of reasonably possible changes
in significant assumptions used in valuing assets and liabilities
classified within level 3 of the fair value hierarchy are as
follows:
Financing Commodity
derivatives contract derivatives Other
================================== =================================== ====================================
2023 2022 2023 2022 2023 2022
=============
Six months GBPm GBPm
ended 30
September GBPm GBPm GBPm GBPm
============= ================ ================ ================ ================= ================= =================
10% increase
in commodity
prices - - 15 35 - -
10% decrease
in commodity
prices - - (15) (36) - -
+10% market
area price
change - - 12 7 - -
-10% market
area price
change - - (11) (7) - -
+20 basis
point
increase in
Limited
Price Index
(LPI) market
curve (38) (51) - - - -
-20 basis
point
decrease in
LPI market
curve 38 51 - - - -
+20 basis
point
increase
between
Retail Price
Index (RPI)
and
Consumer
Price Index
(CPI) 36 17 - - - -
-20 basis
point
decrease
between
RPI and CPI
market
curves (33) (16) - - - -
+50 basis
points
change in
discount
rate - - - - (8) (9)
-50 basis
points
change in
discount
rate - - - - 9 10
+10% change
in venture
capital
price - - - - 30 -
-10% change
in venture
capital
price - - - - (30) -
============= ================ ================ ================ ================= ================= =================
The impacts disclosed above were considered on a contract by
contract basis with the most significant unobservable inputs
identified. A reasonably possible change in assumptions for other
level 3 assets and liabilities would not result in a material
change in fair values.
The changes in fair value of our level 3 financial assets and
liabilities in the six months to 30 September are presented
below:
Commodity
Financing contract
derivatives derivatives Other(1) Total
========================== ============================ ============================ ============================
2023 2022 2023 2022 2023 2022 2023 2022
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=============== ============ ============ ============= ============= ============= ============= ============= =============
At 1 April (100) (187) (36) 44 433 376 297 233
Net
gains/(losses)
through
the
consolidated
income
statement for
the
period(2,3) 25 76 (4) 44 26 30 47 150
Purchases - (133) (10) (56) 11 37 1 (152)
Settlements - - 7 (4) 3 (4) 10 (8)
=============== ============ ============ ============= ============= ============= ============= ============= =============
At 30
September(4) (75) (244) (43) 28 473 439 355 223
=============== ============ ============ ============= ============= ============= ============= ============= =============
1. Other comprises our investments in Sunrun Neptune 2016 LLC
and the investments made by National Grid Partners, which are
accounted for at fair value through profit and loss and the
contingent consideration arising from the acquisition of National
Grid Renewables Development LLC. Net gains and loss are recognised
within finance income and costs in the income statement.
2. Gains of GBP25 million (2022: gains of GBP93 million) are
attributable to derivative financial instruments held at the end of
the reporting period and have been recognised in finance costs in
the income statement.
3. Losses of GBP15 million (2022: losses of GBP23 million) are
attributable to the commodity contract derivative financial
instruments held at the end of the reporting period and have been
recognised in other operating costs in the consolidated income
statement.
4. There were no reclassifications in or out of level 3 (2022:
none).
The Group also has a number of financial instruments which are
not measured at fair value in the balance sheet. The carrying value
of current financial assets at amortised cost approximates their
fair values, primarily due to short-dated maturities.
11. Net debt
Net debt is comprised as follows:
30 September 31 March
2023 2023
GBPm GBPm
=========================================================== ================== ================
Cash and cash equivalents 227 163
Current financial investments 1,680 2,605
Borrowings and bank overdrafts (44,797) (42,985)
Financing derivatives(1) (985) (756)
=========================================================== ================== ================
Net debt (net of related derivative financial instruments) (43,875) (40,973)
=========================================================== ================== ================
1. Includes GBP4 million liability (31 March 2023: GBP4 million
liability) in relation to the hedging of capital expenditure. The
cash flows related to these derivatives are included within
investing activities in the consolidated cash flow statement which
is in the same manner as the transactions which are the subject of
the hedges. The financing derivatives balance included in net debt
exclude the commodity derivatives.
The following table splits out the total derivative balances on
the face of the consolidated statement of financial position by
category:
30 September 2023 31 March 2023
====================================================== =====================================================
Assets Liabilities Total Assets Liabilities Total
GBPm GBPm GBPm GBPm GBPm GBPm
============ ================= ================ ================= ================= ================ ================
Financing
derivatives 329 (1,314) (985) 363 (1,119) (756)
Commodity
contract
derivatives 56 (123) (67) 66 (174) (108)
============ ================= ================ ================= ================= ================ ================
Total
derivative
financial
instruments 385 (1,437) (1,052) 429 (1,293) (864)
============ ================= ================ ================= ================= ================ ================
12. Pensions and other post-retirement benefit obligations
30 September 31 March
2023 2023
GBPm GBPm
=========================================================== =================== =================
Present value of funded obligations (17,502) (18,934)
Fair value of plan assets 19,570 21,246
=========================================================== =================== =================
2,068 2,312
Present value of unfunded obligations (264) (292)
Other post-employment liabilities (67) (69)
=========================================================== =================== =================
Net defined benefit asset 1,737 1,951
=========================================================== =================== =================
Presented in consolidated statement of financial position:
Assets 2,352 2,645
Liabilities (615) (694)
=========================================================== =================== =================
1,737 1,951
=========================================================== =================== =================
30 September 31 March
Key actuarial assumptions 2023 2023
========================================== ============ ========
Discount rate - UK past service 5.55% 4.80%
Discount rate - US 5.70% 4.85%
Rate of increase in RPI - UK past service 3.19% 3.17%
========================================== ============ ========
The net pensions and other post-retirement benefit (OPEB)
obligations position, as recorded under IAS 19, at 30 September
2023 was an asset of GBP1,737 million (31 March 2023: GBP1,951
million asset). The movement of GBP214 million primarily reflects
asset performance being less than the discount rate at the start of
the period, partially offset by increases in discount rates
resulting in a decrease in liabilities.
Net actuarial losses of GBP263 million have been reflected
within the consolidated statement of comprehensive income. There
was a loss of GBP1,754 million (UK GBP1,155 million; US GBP599
million) relating to asset performance which reflects returns on
assets, both in the UK and US, being less than the discount rate at
the beginning of the year. Changes in actuarial assumptions led to
a gain on liabilities of GBP1,491 million (UK GBP793 million; US
GBP698 million). This primarily reflected movements in discount
rates which resulted from large increases in corporate bond
yields.
The pension and OPEB surpluses in both the UK and the US of
GBP1,377 million and GBP975 million respectively (31 March 2023:
GBP1,672 million and GBP973 million) continue to be recognised as
assets under IFRIC 14 as explained on page 175 of the Annual Report
and Accounts for the year ended 31 March 2023.
13. Commitments and contingencies
At 30 September 2023, there were commitments for future energy
purchase agreements of GBP13,824 million (31 March 2023: GBP19,194
million) and future capital expenditure contracted but not provided
for in relation to the acquisition of property, plant and equipment
of GBP3,218 million (31 March 2023: GBP2,936 million).
We also have contingencies in the form of certain guarantees and
letters of credit. These are described in further detail in note 30
to the Annual Report and Accounts for the year ended 31 March
2023.
Litigation and claims
Through the ordinary course of our operations, we are party to
various litigation, claims and investigations. We do not expect the
ultimate resolution of any proceedings to have a material adverse
effect on our results of operations, cash flows or financial
position.
14. Exchange rates
The consolidated results are affected by the exchange rates used
to translate the results of our US operations and US dollar
transactions. The US dollar to pound sterling exchange rates used
were:
Year ended
31 March
30 September 2023 2022 2023
==================================== ==== ==== ==========
Closing rate applied at period end 1.22 1.12 1.23
Average rate applied for the period 1.25 1.21 1.22
==================================== ==== ==== ==========
15. Related party transactions
Related party transactions in the six months ended 30 September
2023 were substantially the same in nature to those disclosed in
note 31 of the Annual Report and Accounts for the year ended 31
March 2023. There were no other related party transactions in the
period that have materially affected the financial position or
performance of the Group.
16. Additional disclosures in respect of guaranteed
securities
Niagara Mohawk Power Corporation, a wholly owned subsidiary of
the Group, has issued preferred shares that are listed on a US
national securities exchange and are guaranteed by National Grid
plc. This guarantor commits to honour any liabilities should the
company issuing the debt have any financial difficulties. In order
to provide debt holders with information on the financial stability
of the company providing the guarantee, we are required to disclose
individual financial information for this company. We have chosen
to include this information in the half year financial
information.
The following summarised financial information is given in
respect of Niagara Mohawk Power Corporation as a result of National
Grid plc's guarantee, dated 29 October 2007, of Niagara Mohawk
Power Corporation's 3.6% and 3.9% issued preferred shares, which
amount to $23 million. National Grid plc's guarantee of Niagara
Mohawk Power Corporation's preferred shares is full and
unconditional. There are no restrictions on the payment of
dividends by Niagara Mohawk Power Corporation or limitations on
National Grid plc's guarantee of the preferred shares, and there
are no factors that may affect payments to holders of the
guaranteed securities.
The following summarised financial information for National Grid
plc and Niagara Mohawk Power Corporation is presented on a combined
basis and is intended to provide investors with meaningful and
comparable financial information, and is provided pursuant to the
early adoption of Rule 13-01 of Regulation S-X in lieu of the
separate financial statements of Niagara Mohawk Power
Corporation.
Summarised financial information is presented, on a combined
basis, as at 30 September 2023. The combined amounts are presented
under IFRS measurement principles. Intercompany transactions
between National Grid plc and Niagara Mohawk Power Corporation have
been eliminated. Investments in other non-issuer and non-guarantor
subsidiaries are included at cost, subject to impairment.
National
Grid plc
and Niagara
Mohawk Power
Corporation
combined
GBPm
================================================== ============================
Combined statement of financial position
Non-current loans to other subsidiaries 126
Non-current assets 12,033
Current loans to other subsidiaries 15,557
Current assets 1,526
Current loans from other subsidiaries (6,893)
Current liabilities (1,263)
Non-current loans from other subsidiaries (2,080)
Non-current liabilities (13,703)
================================================== ============================
Net assets(1) 5,303
================================================== ============================
Equity 5,303
================================================== ============================
Combined income statement - continuing operations
Revenue 1,594
Operating costs (1,330)
================================================== ============================
Operating profit 264
Other income from other subsidiaries -
Other income and costs, including taxation (51)
================================================== ============================
Profit after tax 213
================================================== ============================
1. Excluded from net assets above are investments in other
consolidated subsidiaries with a carrying value of GBP14,480
million.
17. Post balance sheet events
At the end of October 2023, legislation required to enable the
separation of the ESO and formation of the ISOP was passed through
Parliament. The ISOP is expected to be established as a Public
Corporation in 2024, with responsibilities across both the
electricity and gas systems. As a result, the Group took the
judgement to classify the associated assets and liabilities of the
ESO as held for sale in the consolidated statement of financial
position at the end of October 2023 and the ESO will be measured at
the lower of its carrying amount or fair value less costs to sell,
which will take into consideration the current over-collection of
allowed revenues as disclosed on page 19.
Principal risks and uncertainties
When preparing the half year financial information the risks as
reported in the Annual Report and Accounts for the year ended 31
March 2023 (principal risks on pages 20-24 and inherent risks on
pages 225-228) were reviewed to ensure that the disclosures
remained appropriate and adequate. Below is a summary of our key
risks as at 30 September 2023:
People risks
-- Failure to build capability and leadership capacity required
to deliver our vision and strategy because of ineffective
succession planning and recruitment into leadership roles.
Financial risks
-- Failure to fund our business efficiently as a result of lack
of access to a wide pool of investors, market volatility,
unsatisfactory regulatory outcomes or unsatisfactory financial or
operational performance of the business, leading to a lack of
access to capital, impacting our ability to achieve our strategic
objectives.
Strategic risks
-- Failure to identify and/or deliver upon actions necessary to
meet our climate change targets and enable the wider energy
transition because of poor management of threats and opportunities
associated with migrating climate change, leading to a reputational
impact of not enabling us to meet our net zero commitments.
-- Failure to influence future energy policies and secure
satisfactory regulatory agreements because of lack of insight or
unsuccessful negotiations, leading to poor regulatory outcomes,
energy policies that negatively impact our operations, impacts on
market prices, reduced financial performance, fines/penalties,
increased costs to remain compliant and/or reputational damage.
-- Failure to position ourselves appropriately to societal and
political expectations because of a failure to proactively monitor
the landscape or, to anticipate and respond to changes leading to
reputational damage, political intervention, threats to the Group's
licences to operate, and our ability to achieve our objectives.
Operational risks
-- Failure to adequately anticipate and manage disruptive forces
on our systems because of a cyber-attack, poor recovery of critical
systems or malicious external or internal parties, resulting in an
inability to operate the network, damage to assets, loss of
confidentiality and integrity and/or availability of systems.
-- Catastrophic asset failure or bulk system failure because
failure of a critical asset or system, substandard operational
performance or inadequate maintenance, over-pressurisation,
leak-prone pipe, third-party damage and undetected system
anomalies, leading to a significant public and employee safety
and/or environmental event.
-- Failure to predict and respond to a significant disruption of
energy supply because of climate change, asset failure, storms,
attacks, market failure or other emergency events leading to
significant customer harm, lasting reputational damage with
customers, regulators, and politicians, material financial losses,
loss of franchise, and damage to investor confidence.
-- Failure to effectively predict or respond to fluctuations in
energy supply and inability to balance supply and customer demand,
or appropriately respond to energy supply constraints, due to
external, system or human factors leading to adverse impacts on
customers and/or the public.
-- Failure to deliver on our major capital project programme
within the required timeframes because of: a lack of a clearly
defined regulatory and financial frameworks to incentivise
investment; complex planning requirements; external impacts on
supply chain; or a failure to demonstrate clear long-term economic
benefits to communities, leading to increased costs, compromised
quality and reputational damage and detrimentally impacting our
ability to deliver our clean energy transition strategy.
Statement of Directors' Responsibilities
The half year financial information is the responsibility of,
and has been approved by, the Directors. The Directors are
responsible for preparing the half year financial information in
accordance with the Disclosure Guidance and Transparency Rules
(DTR) of the United Kingdom's Financial Conduct Authority.
The Directors confirm that to the best of their knowledge:
a) the condensed consolidated interim financial statements have
been prepared in accordance with IAS 34 'Interim Financial
Reporting' as issued by the International Accounting Standards
Board and as adopted by the United Kingdom;
b) the half year management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
c) the half year management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
The Directors of National Grid plc are listed in the Annual
Report and Accounts for the year ended 31 March 2023, with the
exception of the changes in the period which are listed on page
13.
By order of the Board
.......................... ..........................
John Pettigrew Andy Agg
8 November 2023 8 November 2023
Chief Executive Chief Financial Officer
Independent Review Report to National Grid plc
Conclusion
We have been engaged by the Company (National Grid plc) to
review the condensed consolidated set of financial statements in
the half-yearly financial report for the six months ended 30
September 2023 which comprises the consolidated income statement,
the consolidated statement of comprehensive income, the
consolidated statement of changes in equity, the consolidated cash
flow statement and related notes 1 to 17 (collectively referred to
as the 'interim financial information').
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2023 is not prepared, in all material respects, in
accordance with United Kingdom adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council for use in the
United Kingdom (ISRE (UK) 2410). A review of interim financial
information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with United Kingdom adopted
international accounting standards. The condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 34, 'Interim Financial Reporting'.
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the Directors have inappropriately
adopted the going concern basis of accounting or that the Directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410; however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of the Directors
The Directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the Directors are
responsible for assessing the Group's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the Company a conclusion on the
condensed consolidated set of financial statements in the
half-yearly financial report. Our Conclusion, including our
Conclusion Relating to Going Concern, are based on procedures that
are less extensive than audit procedures, as described in the Basis
for Conclusion paragraph of this report.
Use of our report
This report is made solely to the Company in accordance with
ISRE (UK) 2410. Our work has been undertaken so that we might state
to the Company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company, for our review work, for this
report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
8 November 2023
Alternative performance measures/non-IFRS reconciliations
Within the Half Year Results Statement, a number of financial
measures are presented. Some of these measures have been
categorised as alternative performance measures (APMs), as per the
European Securities and Markets Authority (ESMA) guidelines and the
Securities and Exchange Commission (SEC) conditions for use of
non-IFRS Financial Measures.
An APM is a financial measure of historical or future financial
performance, financial position, or cash flows, other than a
financial measure defined under IFRS. The Group uses a range of
these measures to provide a better understanding of its underlying
performance. APMs are reconciled to the most directly comparable
IFRS financial measure where practicable.
The Group has defined the following financial measures as APMs
derived from IFRS within the Half Year Results Statement: net
revenue, the various adjusted operating profit, earnings and
earnings per share metrics detailed in the 'adjusted profit
measures' section below and capital investment (including capital
investment (regulated networks)). For each of these we present a
reconciliation to the most directly comparable IFRS measure.
Net revenue and underlying net revenue
'Net revenue' is revenue less pass-through costs, such as system
balancing costs, and gas and electricity commodity costs in the US.
Pass-through costs are fully recoverable from our customers and are
recovered through separate charges that are designed to recover
those costs with no profit. Any over- or under-recovery of these
costs is returned to, or recovered from, our customers. Underlying
net revenue further adjusts this to remove the impact of 'timing',
i.e. the in-year difference between allowed and collected revenues,
including revenue incentives, as governed by our rate plans in the
US or regulatory price controls in the UK (but excluding
totex-related allowances and adjustments).
2023
================= ================ ================= ================= =================
Pass-
Gross through Underlying
Six months ended 30 revenue costs Net revenue Timing net revenue
September GBPm GBPm GBPm GBPm GBPm
======================== ================= ================ ================= ================= =================
UK Electricity
Transmission 1,356 (104) 1,252 (183) 1,069
UK Electricity
Distribution 850 (114) 736 87 823
UK Electricity System
Operator 1,734 (1,123) 611 (409) 202
New England 1,441 (690) 751 250 1,001
New York 2,365 (806) 1,559 149 1,708
National Grid Ventures 666 - 666 - 666
Other 142 - 142 - 142
Sales between segments (65) - (65) - (65)
======================== ================= ================ ================= ================= =================
Total from continuing
operations 8,489 (2,837) 5,652 (106) 5,546
======================== ================= ================ ================= ================= =================
2022
================= ================= ================= ================= =================
Pass-
Gross through Underlying
Six months ended 30 revenue costs Net revenue Timing net revenue
September GBPm GBPm GBPm GBPm GBPm
======================= ================= ================= ================= ================= =================
UK Electricity
Transmission 969 (90) 879 65 944
UK Electricity
Distribution 1,005 (199) 806 48 854
UK Electricity System
Operator 2,060 (1,783) 277 (95) 182
New England 1,760 (820) 940 123 1,063
New York 2,758 (1,316) 1,442 220 1,662
National Grid Ventures 685 - 685 - 685
Other 253 - 253 - 253
Sales between segments (46) - (46) - (46)
======================= ================= ================= ================= ================= =================
Total from continuing
operations 9,444 (4,208) 5,236 361 5,597
======================= ================= ================= ================= ================= =================
Adjusted profit measures:
In considering the financial performance of our business and
segments, we use various adjusted profit measures in order to aid
comparability of results year-on-year. The various measures are
presented on page 17 and reconciled below.
Adjusted results: These exclude the impact of exceptional items
and remeasurements that are treated as discrete transactions under
IFRS and can accordingly be classified as such. Further details of
these items are included in note 4.
Underlying results: Further adapts our adjusted results to take
account of volumetric and other revenue timing differences arising
due to the in-year difference between allowed and collected
revenues, including revenue incentives, as governed by our rate
plans in the US or regulatory price controls in the UK (but
excluding totex-related allowances and adjustments). As defined on
page 56 of the Annual Report and Accounts for the year ended 31
March 2023, major storm costs are costs (net of certain
deductibles) that are recoverable under our US rate plans but
expensed as incurred under IFRS. Where the total incurred costs
(after deductibles) exceed $100 million in any given year we also
exclude the net amount from underlying earnings. Group underlying
EPS is one of the incentive targets set annually and part of the
LTPP target for remunerating certain Executive Directors.
Constant currency: 'Constant Currency Basis' refers to the
reporting of the actual results against the results for the same
period last year which, in respect of any US dollar
currency-denominated activity, have been translated using the
weighted average US dollar exchange rate for the six months ended
30 September 2023, which was $1.25 to GBP1.00. The weighted average
rate for the six months ended 30 September 2022, was $1.21 to
GBP1.00. Assets and liabilities as at 30 September 2023 have been
retranslated at the closing rate at 30 September 2023 of $1.22 to
GBP1.00. The closing rate for the balance sheet date 31 March 2023
was $1.23 to GBP1.00.
Alternative performance measures/non-IFRS reconciliations
(continued)
Reconciliation of Statutory, Adjusted and Underlying Profits and
Earnings - at actual exchange rates - continuing operations
Major
Exceptionals storm
Statutory and remeasurements Adjusted Timing costs Underlying
=============
Six months GBPm GBPm GBPm GBPm GBPm GBPm
ended 30
September
2023
============= ================= ======================== =================== ================== ================== ===================
UK
Electricity
Transmission 838 1 839 (183) - 656
UK
Electricity
Distribution 472 4 476 87 - 563
UK
Electricity
System
Operator 443 - 443 (409) - 34
New England (47) 15 (32) 250 - 218
New York 8 (38) (30) 149 - 119
National Grid
Ventures 310 (91) 219 - - 219
Other* (39) 26 (13) - - (13)
============= ================= ======================== =================== ================== ================== ===================
Total
operating
profit 1,985 (83) 1,902 (106) - 1,796
Net finance
costs (685) (26) (711) - - (711)
Share of
post-tax
results
of JVs and
associates 71 (12) 59 - - 59
============= ================= ======================== =================== ================== ================== ===================
Profit before
tax 1,371 (121) 1,250 (106) - 1,144
Tax (307) 20 (287) 19 - (268)
============= ================= ======================== =================== ================== ================== ===================
Profit after
tax 1,064 (101) 963 (87) - 876
============= ================= ======================== =================== ================== ================== ===================
*Includes
Property. 6 - 6 - - 6
Major
Exceptionals storm
Statutory(1) and remeasurements(1) Adjusted Timing costs Underlying
=============
Six months GBPm GBPm GBPm GBPm GBPm GBPm
ended 30
September
2022
============= ================ ======================== ================== ================== ================== ==================
UK
Electricity
Transmission 493 6 499 65 - 564
UK
Electricity
Distribution 522 9 531 48 - 579
UK
Electricity
System
Operator 146 1 147 (95) - 52
New England 720 (527) 193 123 - 316
New York (26) 8 (18) 220 - 202
National Grid
Ventures 308 (49) 259 - - 259
Other* 76 69 145 - - 145
============= ================ ======================== ================== ================== ================== ==================
Total
operating
profit 2,239 (483) 1,756 361 - 2,117
Net finance
costs (624) (108) (732) - - (732)
Share of
post-tax
results
of JVs and
associates 51 19 70 - - 70
============= ================ ======================== ================== ================== ================== ==================
Profit before
tax 1,666 (572) 1,094 361 - 1,455
Tax (447) 270 (177) (96) - (273)
============= ================ ======================== ================== ================== ================== ==================
Profit after
tax 1,219 (302) 917 265 - 1,182
============= ================ ======================== ================== ================== ================== ==================
*Includes
Property. 227 - 227 - - 227
1. Comparative amounts have been re-presented to reflect the
classification of the FAA option as held for sale and within
discontinued operations.
Reconciliation of Adjusted and Underlying Profits - at constant
currency
At constant currency
================ ======================================================================================================
Adjusted
at actual Constant Major
exchange currency storm
rate adjustment Adjusted Timing costs Underlying
=============
Six months GBPm GBPm GBPm GBPm GBPm GBPm
ended 30
September
2022
============= ================ ====================== ================== ================== ================== ==================
UK
Electricity
Transmission 499 - 499 65 - 564
UK
Electricity
Distribution 531 - 531 48 - 579
UK
Electricity
System
Operator 147 - 147 (95) - 52
New England 193 (8) 185 119 - 304
New York (18) 1 (17) 212 - 195
National Grid
Ventures 259 (1) 258 - - 258
Other* 145 - 145 - - 145
============= ================ ====================== ================== ================== ================== ==================
Total
operating
profit 1,756 (8) 1,748 349 - 2,097
Net finance
costs (732) 11 (721) - - (721)
Share of
post-tax
results
of JVs and
associates 70 (1) 69 - - 69
============= ================ ====================== ================== ================== ================== ==================
Profit before
tax 1,094 2 1,096 349 - 1,445
============= ================ ====================== ================== ================== ================== ==================
*Includes
Property. 227 - 227 - - 227
Alternative performance measures/non-IFRS reconciliations
(continued)
Earnings per share calculations from continuing operations - At
actual exchange rates
The table below reconciles the profit after tax from continuing
operations per the previous tables back to the earnings per share
from continuing operations for each of the adjusted profit
measures. Earnings per share is only presented for those adjusted
profit measures that are at actual exchange rates, and not for
those at constant currency.
Profit
after tax Weighted
Six months attributable average
ended 30 Profit Non-controlling to the number Earnings
September after tax interest parent of shares per share
2023 GBPm GBPm GBPm Millions pence
=============== ==================== ====================== ==================== =================== ===================
Statutory 1,064 (1) 1,063 3,682 28.8
Adjusted (also
referred to
as Headline) 963 (1) 962 3,682 26.1
Underlying 876 (1) 875 3,682 23.8
=============== ==================== ====================== ==================== =================== ===================
Profit
after tax Weighted
Six months attributable average
ended 30 Profit Non-controlling to the number Earnings
September after tax interest parent of shares per share
2022 GBPm GBPm GBPm Millions pence
=============== ==================== ==================== ==================== =================== ====================
Statutory(1) 1,219 - 1,219 3,651 33.4
Adjusted (also
referred to
as Headline) 917 - 917 3,651 25.1
Underlying 1,182 - 1,182 3,651 32.4
=============== ==================== ==================== ==================== =================== ====================
1. Comparative amounts have been re-presented to reflect the
classification of the FAA option as held for sale and within
discontinued operations.
Timing impacts from continuing operations
Under the Group's regulatory frameworks, the majority of the
revenues that National Grid is allowed to collect each year are
governed by a regulatory price control or rate plan. If National
Grid collects more than this allowed level of revenue, the balance
must be returned to customers in subsequent years, and if it
collects less than this level of revenue, it may recover the
balance from customers in subsequent years. These variances between
allowed and collected revenues give rise to 'over and
under-recoveries'. A number of costs in the UK and the US are
pass-through costs (including commodity and energy efficiency costs
in the US), and are fully recoverable from customers. Timing
differences between costs of this type being incurred and their
recovery through revenues are also included in over and
under-recoveries. In the UK, timing differences include an
estimation of the difference between revenues earned under revenue
incentive mechanisms and associated revenues collected. UK timing
balances and movements exclude adjustments associated with changes
to controllable cost (totex) allowances or adjustments under the
totex incentive mechanism. Opening balances of over and
under-recoveries have been restated where appropriate to correspond
with regulatory filings and calculations.
UK Electricity UK Electricity UK Electricity New New
Transmission Distribution System Operator England(1) York(1) Total
GBPm GBPm GBPm GBPm GBPm GBPm
====================== ===================== ===================== ========================== ================= ================ =================
1 April 2023 opening
balance(2) (217) (119) 78 (394) 699 47
Over/(under)-recovery 183 (87) 409 (250) (149) 106
====================== ===================== ===================== ========================== ================= ================ =================
30 September 2023
closing
balance
to (recover)/return (34) (206) 487 (644) 550 153
====================== ===================== ===================== ========================== ================= ================ =================
UK Electricity UK Electricity UK Electricity New New
Transmission Distribution System Operator England(1) York(1) Total
GBPm GBPm GBPm GBPm GBPm GBPm
====================== ===================== ===================== ========================== ================= ================ =================
1 April 2022 opening
balance (85) 25 (127) (332) 636 117
Over/(under)-recovery (65) (48) 95 (119) (212) (349)
Disposal in the
year(3) - - - (17) - (17)
====================== ===================== ===================== ========================== ================= ================ =================
30 September 2022
closing
balance
to (recover)/return (150) (23) (32) (468) 424 (249)
====================== ===================== ===================== ========================== ================= ================ =================
1. New England and New York in-year over/(under)-recovery and
all New England and New York balances have been translated using
the average exchange rate for the half year ended 30 September
2023.
2. Opening balances have been restated to reflect the
finalisation of calculated over/(under)-recoveries in the UK and
the US.
3. Disposal of NECO (Rhode Island) in May 2022.
Alternative performance measures/non-IFRS reconciliations
(continued)
Capital investment
Capital investment is not a statutory measure as it is not a
defined term under IFRS. 'Capital investment' or 'investment'
refers to additions to plant, property and equipment and intangible
assets, and contributions to joint ventures and associates. We also
include the Group's investments by National Grid Partners during
the period (which are classified for IFRS purposes as non-current
financial assets on the Group consolidated statement of financial
position). References to 'capital investment' or 'capital
expenditure' in our regulated networks include the following
segments: UK Electricity Transmission, UK Electricity Distribution,
UK Electricity System Operator, New England and New York, but
exclude National Grid Ventures and 'Other'.
At actual exchange
rates At constant currency
============================================== ================================================
2023 2022 (1) 2023 2022 (1)
===================== ======== ========
Six months ended 30
September GBPm GBPm % change GBPm GBPm % change
===================== ================ ================== ======== ================== ================== ========
UK Electricity
Transmission 800 629 27% 800 629 27%
UK Electricity
Distribution 608 584 4% 608 584 4%
UK Electricity System
Operator 75 42 79% 75 42 79%
New England(2) 789 801 (1%) 789 771 2%
New York 1,257 1,242 1% 1,257 1,195 5%
National Grid
Ventures 175 410 (57%) 175 407 (57%)
Other 2 9 (78%) 2 9 (78%)
===================== ================ ================== ======== ================== ================== ========
Group capital
expenditure
(continuing) 3,706 3,717 0% 3,706 3,637 2%
Memo: Capital
expenditure
(regulated networks) 3,529 3,298 7% 3,529 3,221 10%
2023 2022 (1)
====================================================== ========
Six months ended 30 September - at actual exchange
rates GBPm GBPm % change
====================================================== ================= ================= ========
Capital expenditure 3,706 3,717 0%
Equity investments in joint ventures and associates 151 129 17%
Increase in financial assets (National Grid Partners) 11 37 (70%)
====================================================== ================= ================= ========
Group capital investment (continuing) 3,868 3,883 0%
Memo: Capital investment (regulated networks) 3,529 3,298 7%
2023 2022 (1)
====================================================== ========
Six months ended 30 September - at constant currency GBPm GBPm % change
====================================================== ================= ================= ========
Capital expenditure 3,706 3,637 2%
Equity investments in joint ventures and associates 151 124 22%
Increase in financial assets (National Grid Partners) 11 37 (70%)
====================================================== ================= ================= ========
Group capital investment (continuing) 3,868 3,798 2%
Memo: Capital investment (regulated networks) 3,529 3,221 10%
1. Comparative amounts have been re-presented to reflect NGV as
a separate operating segment and the reclassification of our US LNG
operations from New England to NGV following an internal
reorganisation in the period.
2. New England comparative amounts include NECO.
[1] UK Electricity Transmission, UK Electricity Distribution, UK
Electricity System Operator, New England and New York.
[2] Excluding UK Electricity Distribution, UK Gas Transmission
and Metering and the UK Electricity System Operator.
[3] ASTI capital expenditure is reported as part of the UK Electricity Transmission segment.
[4] The reliability standard is set at less than three hours Loss of Load Expectation (LOLE).
[5] Excluding UK Electricity Distribution, UK Gas Transmission
and Metering and the UK Electricity System Operator.
[6] Our previous SBT was to reduce Scope 1 and 2 emissions by
50% by 2030 from a 2015/16 baseline.
[7] Full-year underlying EPS (2020/21) as reported on 20 May 2021.
[8] With our 40% stake in National Gas Transmission accounted
for as held for sale, it is not included in our underlying EPS
guidance for 2023/24.
[9] ASTI capital expenditure is reported as part of the UK Electricity Transmission segment.
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END
IR BPBTTMTTMTMJ
(END) Dow Jones Newswires
November 09, 2023 02:00 ET (07:00 GMT)
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