NG. National Grid Plc

STRATEGIC OVERVIEW

Strong reliability performance during a period of high growth

National Grid has reported strong reliability across our UK and US networks for the half year.

Despite severe weather events across a number of our jurisdictions, our teams were thoroughly prepared and restored outages rapidly and well within regulatory requirements. This includes our New York region where the average time to restore 95% of customers was 12 hours, and in Massachusetts where the average time was 16 hours.

In the UK, the National Energy System Operator (NESO) recently published its Winter Outlook report for the UK. The NESO is forecasting an electricity capacity margin of 8.8%, slightly higher than last year's, and broadly in line with recent winters. In New York, the PSC published its Electric and Gas Utility Winter readiness report in October that sees adequate supplies of gas and electricity to meet the demands of residential and commercial customers across the state this winter.

Overall, we remain confident in delivering our usual high standard of reliability across our networks in the months ahead and remain vigilant as we move through winter in both the UK and the US.

Safety performance

During the half year, we recorded a Group Lost Time Injury Frequency Rate (LTIFR) of 0.10*, compared to 0.08 at year end and against our Group target of 0.10. We continue to make strong progress under our Stand Up for Safety campaign, launched in August 2022, and our three-year Group Safety Strategy. The campaign is underpinned by our company-wide principles of Safe to Say, Safe Choices, Safe to Stop and Safe to Learn. As we expand our investment programme with additional contractors, we have introduced Group-wide contractor management guidelines to improve oversight and drive consistency, and created supply chain task forces to integrate safety into our planning.

*  Employee and contractor lost time injury frequency rate per 100,000 hours worked.

Half-year operating financial performance

Our statutory operating profit is presented on page 18 which includes the impact of exceptional items, remeasurements, timing and the impact of deferred tax in our UK regulated businesses (NGET and NGED) and a reconciliation to our APMs is presented on page 61.

We achieved underlying operating profit on a continuing basis of £2.0 billion, an increase of 14% at actual exchange rates (15% at constant currency) versus the prior period. This was principally driven by: increased rates in our New York businesses; higher revenues in UK Electricity Transmission; a lower charge to the environmental provision in New York; and a higher contribution from the ESO; partially offset by lower profits in NGV.

1.  '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 59 to 64.

For the half year, Group capital investment for continuing operations reached £4,603 million, £657 million higher than the prior period at constant currency (£726 million higher at actual exchange rates). This was principally driven by higher connection spend in UK Electricity Transmission, and increased spend on early ASTI projects; higher spend in New York through our Smart Path Connect and CLCPA electric projects, as well as additional gas network spend in our LPP replacement programme; partially offset by lower spend at Viking Link following commissioning in the prior year; and the ESO being classified as held for sale.

Delivering a step change in infrastructure investment

As the energy transition accelerates at pace, National Grid is well positioned to deliver the significant increase in investment that we announced in May 2024.

At our Full Year results, we made several important announcements, launching a new phase of growth for the Company. These included:

■  a new five-year financial framework with around £60 billion of capital investment across the Group between now and 2029;

■ a £7 billion Rights Issue, forming a key part of our comprehensive funding plan to deliver this investment and growth;

■   a refreshed strategy, to become the pre-eminent pureplay networks business across our jurisdictions; and

■ our intention to sell our National Grid Renewables and Grain LNG businesses as we deliver this refreshed strategy.

During the last six months we have made good progress in delivering each of these. In June, we successfully completed the £7 billion equity raise, one of the largest ever rights issues by a UK listed company. National Grid Renewables and Grain LNG are now held for sale following our announced intention to sell both businesses; and we continue to move forward with the significant uplift in our capital investment plan which, over the next five years, will be almost double the investment delivered over the last five years. This is being driven primarily by the large increase in UK investment through our ASTI projects, as well as continued investment in our US energy networks, including our Upstate Upgrade in New York. Through these actions, we are positioning the Company to help deliver the energy transition in our jurisdictions, and to deliver for both our customers and shareholders.

Group portfolio changes in the Half Year

In September, we were pleased to reach agreement with the UK government on the terms of the sale of the ESO for an enterprise value of £630 million[3]. The transaction, which completed on 1 October, was an important milestone for the creation of an independent National Energy System Operator (NESO). The NESO will take on responsibility for strategic planning for Great Britain's energy infrastructure as well as advising the government and Ofgem on the most efficient way to achieve Great Britain's net zero goals. It represents the conclusion of several years' collaboration between National Grid, the government and Ofgem, with the decision to establish a 'future system operator' as an independent public corporation brought into law through the Energy Act 2023. Moving forward, we will partner with NESO colleagues in a new way as they formally take on responsibility for ensuring Great Britain's energy system is secure and affordable. There will be some services that we will continue to deliver to the NESO under transitional service agreements.

In the same month, we were pleased to complete the sale of the final 20% equity interest in National Gas Transmission to a consortium of long-term infrastructure investors led by Macquarie Asset Management. This followed the consortium exercising its option for the remaining 20% in July. The consideration for this equity stake was on equivalent financial terms to the original 60% transaction (acquired by the same consortium) that was completed in January 2023, and the 20% sale completed in March 2024. We now expect National Grid's asset base to move to around 80% electric by 2028/29, up from 60% in 2021.

Delivering the next phase of capital investment

During the half year, we delivered another record level of capital investment for a six-month period at £4,603 million, on track to deliver around £10 billion for the full year in line with guidance and our five-year financial framework. This has been driven principally by the significant increase in network investment we are seeing across both our UK and US jurisdictions.

UK - progress on ASTI project delivery

During the half year, we continued to make good progress on our early ASTI investments with construction commencing on five of our 17 projects. The five projects are:

■  Yorkshire Green - the upgrade and reinforcement of 40 kilometres of transmission lines in Yorkshire, including the installation of 33 new pylons and two new substations. Site access and establishment works began in June and continue to progress well.

■  North London reinforcement - replacing an existing 275 kV overhead line with a 400 kV line from Pelham substation, Hertfordshire, to Waltham Cross substation in Epping Forest, and then to Tottenham substation in Haringey. Site establishment works began in the summer and continue to progress well, including ground investigation works for the overhead lines.

■   Eastern Green Link 1 (EGL1) - our joint construction project with ScottishPower Energy Networks to deliver a 2 GW HVDC cable between Torness, Scotland, and County Durham, England, to help unlock Scotland's renewable energy reserves. Site establishment works began in September 2024.

■  Eastern Green Link 2 (EGL2) - our joint construction project with Scottish and Southern Energy Networks (SSEN) to construct a 2 GW HVDC cable between Peterhead, Scotland, and Drax, England. In September, we held simultaneous 'groundbreaking' ceremonies with SSEN at either end of the £4.3 billion project. This included the start of construction at the new Wren Hall converter station at Drax, North Yorkshire.

■ Bramford to Twinstead - our project to reinforce part of the East Coast transmission network through 18 kilometres of new overhead line and around 11 kilometres of underground cable. We began construction of the Twinstead Green Grid Supply Point in September 2023. In September this year, the project received a Development Consent Order from the Secretary of State for Energy Security and Net Zero. We are now mobilising this work across the wider project, having awarded Main Works Contracts to Balfour Beatty in the summer.

We are also in the final stages of procuring the supply chain for our Tilbury to Grain infrastructure upgrade. This project involves replacing the existing 1960s Thames Cable Tunnel beneath the Thames from Tilbury to Gravesend. The existing tunnel, which houses 400 kV transmission cables, is nearing the end of its useful life and our proposals include the construction of a new tunnel and cabling. Mains Works Contracts are due to be awarded later this year with construction to start in early 2025.

UK - ASTI project consultations

During the half year, we continued to make good progress on our other ASTI projects with public consultations held over the summer period covering eight other ASTI projects. In total, we held 58 in-person consultations across these projects with over 7,600 people attending those events, and we reached a further 750 people through online webinars. As part of our wider engagement to support these events, we sent over 250,000 targeted newsletters to the communities potentially impacted by our proposals.

This included the statutory consultation for the two Norwich to Tilbury projects where we are proposing to build 180 kilometres of new transmission line to reinforce the high voltage power network in East Anglia and enable the connection of new offshore wind generation. From 23 April through 15 July, we ran our first stage consultation for Eastern Green Link 3 (EGL3) and Eastern Green Link 4 (EGL4). Both projects are new offshore high voltage links between Scotland and England which, when commissioned, will together transmit enough electricity to supply up to four million homes. We anticipate submitting an application for development consent to the Planning Inspectorate in 2026.

Other consultations currently underway include:

■  Brinsworth to High Marnham overhead line upgrade - to build three new substations to support the upgrade of the existing Brinsworth to Chesterfield, and Chesterfield to High Marnham overhead lines from Yorkshire to Nottinghamshire.

■ Chesterfield to Willington new 400 kV line - to build a new 60-kilometre, 400 kV line between a new substation in Chesterfield and an existing substation at Willington, South Derbyshire. The new substation at Chesterfield to be consented as part of the Brinsworth to High Marnham upgrade project.

■  Sea Link offshore cable link - to reinforce the transmission network between Suffolk and Kent via a new, primarily offshore, cable link. Following our statutory consultation at the end of 2023, we undertook targeted local consultation over the summer. We anticipate submitting an application for a development consent order in early 2025.

■   North Humber to High Marnham new 400 kV line - to build a new 400 kV transmission line between a new substation in Hull, East Riding of Yorkshire, and a new substation at High Marnham in Nottinghamshire. The upgrade is required to increase the capability of the transmission network between the north of England and the Midlands, as well as to facilitate the connection of proposed new offshore wind planned in the area. Following our Stage 1 consultation in 2023, we ran a 'localised' consultation between 9 July and 6 August 2024 to seek views about a potential alternative corridor between South Wheatley and High Marnham.

UK - ASTI supply chain

Across our ASTI projects, mobilisation under the Great Grid Partnership is progressing well. This is part of a £9 billion supply chain framework to secure the network design and construction work to deliver nine ASTI projects and support projects beyond 2030. As part of this, we are working with seven strategic partners to agree on the initial allocation of work by the end of December 2024.

Our procurement programme for HVDC and converter stations is also entering its final stages, with contracts for the remaining offshore ASTI projects due to be awarded in the first part of 2025. Altogether, we are confident that by the first part of next year we will have secured the 'tier 1' supply contractors for all 17 confirmed ASTI projects that were awarded to us in our operational licences in 2023.

United States (New York) - Upstate Upgrade

In March 2024, we announced plans to invest more than $4 billion in transmission network infrastructure in New York. The 'Upstate Upgrade', the largest investment in New York's electricity transmission network for over a century, is a collection of more than 70 transmission enhancement projects through to 2030. In addition to delivering a modernised, stronger, and cleaner energy network in upstate New York, these projects will also generate over 1,700 new jobs.

Progress on these projects has continued during the half year, with a further $218 million capital investment. Our Smart Path Connect project - the rebuild and upgrade of 110 circuit miles of 230 kV to 345 kV transmission lines in northern New York - reached the halfway point of construction, slightly ahead of schedule. The project remains on track for energisation in December 2025.

On our $800 million CLCPA Phase 1 investment programme, construction has progressed well on the first stage of our substation upgrade. This also includes projects such as Inghams to Rotterdam circuit rebuilds (111 miles) to support 330 MW of incremental headroom capacity for renewable generation.

Our Upstate Upgrade also includes CLCPA Phase 2 investments, part of the $2.1 billion Phase 2 funding which covers 400 circuit miles of 115 kV line rebuilds, five new substations and nine line rating upgrade projects which support increasing our system capacity to connect additional renewable generation. This includes our Black River to Porter circuit rebuild projects which will upgrade approximately 172 circuit miles of our 115 kV system in Jefferson, Lewis, and Oneida counties, and our Colton to Nicholville circuit rebuild, which will upgrade approximately 18 miles of our 115 kV system in St. Lawrence County.

Through this investment, total network capacity in upstate New York will be increased supporting the interconnection of new renewable generation. During the half-year, the Procurement and Construction RFP covering Phase 2 investments was issued to the market. This follows the awarding of engineering contracts for transmission projects in October 2023. We continue to grow strategic relationships with major contractors as part of our Supply Chain Transformation programme launched in 2023, which seeks to deliver two major outcomes with suppliers to aid becoming a 'Client of Choice'. Firstly, to partner more closely with the supply chain to ensure our strategies and goals are aligned; and secondly, to use our scale as a group to secure wider, longer-term contracts with our suppliers.

UK regulatory and policy progress

We welcomed a number of developments in UK policy and regulation during the half year. Our engagement with the new UK government has been positive, reflecting the strength of our existing relationships as the administration begins to make progress against the energy priorities they set out, including the establishment of the NESO. In addition, we have also seen and welcomed Ofgem's SSMD document that continues to recognise 'investability' as a priority when considering the formation of new price control regulation for RIIO-T3.

Planning and permitting reform

In July, we were pleased to see the King's Speech (which sets out the government's legislative agenda) include expected legislation to reform the planning system. This will help accelerate the delivery of critical infrastructure, which National Grid has been advocating for in recent years. In the same month, the Ministry of Housing, Communities and Local Government (MHCLG) issued a consultation to seek views on proposed reforms to the National Planning Policy Framework (NPPF). As part of the consultation, proposed amendments were made to give significant weight to benefits associated with renewable and low carbon energy generation when assessing planning proposals.

We responded to the consultation with a number of key points, including the need to:

■   recognise electricity network infrastructure and its role in delivering the government's energy objectives;

■   ensure existing network assets are protected in any new grey belt developments; and

■ recognise the importance of network upgrades and connections to facilitate the modern, digital economy, including data centres.

The consultation closed on 24 September and we now await the government's response.

RIIO-T3 and Sector Specific Methodology Decision

In July, Ofgem published its SSMD for our UK Electricity Transmission business relating to the RIIO-T3 regulatory period (effective from April 2026 through to March 2031). This follows the regulator's Sector Specific Methodology Consultation (SSMC) in December 2023 which recognised the need to deliver clear signals as well as certainty for investors that projects are viable, investable and deliverable. As part of this consultation, we highlighted the need for regulation to allow projects to move at pace, and that the financial framework must reflect the scale of the investment we need to deliver over the RIIO-T3 period.

Overall, we welcomed Ofgem's recognition in the SSMD that an appropriate financial framework is required to retain and attract capital that the sector requires as we embark on a significant step up in investment. The regulator set out an initial cost of equity range of 4.57-6.35% which it will use as it considers cross checks, forward-looking risks, and the need to ensure the price control is 'investable'. Within the SSMD, Ofgem also concluded its inflation consultation, with the introduction of a nominal return on fixed rate debt, which will allow better matching of allowances to actual debt costs and faster recovery of cash.

Submission of Company business plans in December 2024 is the next step of a regulatory process that will run through to the final determination at the end of 2025. We will include the outcomes of SSMD in our UK Electricity Transmission business plan for RIIO-T3, and we will continue to engage constructively with Ofgem, as well as wider stakeholders, to agree the right policy and regulatory frameworks to deliver a net zero energy system.

Connections reform - progress across our networks

At the end of September, the transmission connection pipeline for Great Britain stood at 552 GW, with 417 GW of this capacity contracted to connect to our transmission network in England & Wales. We are pleased that we now have consensus with Government, Ofgem and the NESO on the need to reduce and reorder the connections pipeline to ensure that priority is placed on connecting the right technologies in the right places at the right time, to help reach the UK's net zero goals. To this end, the NESO and Ofgem continue to work through the reform process to put in place a long-term solution.

In June 2023, the ESO recommended the implementation of the Target Model Option Four (TMO4) designed to reform the connections process. TMO4 is based upon a 'first ready, first connected' approach to connections, rather than the current 'first to contract, first to connect' system. Under TMO4, new projects would enter the connections process at a 'first gate' and would be required to satisfy criteria to arrive at a 'second gate'. The second gate would allow the project to obtain a queue position and a connection date.

In September, we welcomed Ofgem's open letter on connections reform which directed the ESO and industry to consider stronger alignment between future connection arrangements and government strategic energy plans. This is consistent with a recommendation made by our UK Electricity Transmission business in our response to the ESO's TMO4 consultation, and we support the recommendation that 'strategic need' should be incorporated into the reformed connection arrangements criteria. The NESO will use Clean Power 2030 (see below) as a basis and plan to implement code changes to manage the connections queue based on technology needs. During the half year, the ESO continued to progress TMO4 with the process set to 'go live' in the second quarter of calendar year 2025 (we anticipate an Ofgem decision on the proposals in the first quarter).

Across our UK Electricity Distribution network, we have led the way through the industry's Technical Limits initiative where we signed 13 offers for over 283 MW of distribution network connections, with an average acceleration in connection date of around nine years (we were the first Distribution Network Operator (DNO) to connect a project under this initiative). We also removed 190 projects during the half year, amounting to 3.7 GW of capacity from the contracted connections queue. We are now focused on reallocating this capacity through better queue management to more ready projects.

During the half year, UK Electricity Distribution chaired the TMO4 impacts group for the Electricity Networks Association (ENA), taking a lead role in representing DNOs. In collaboration with other group members we are developing some further improvements to the revised connections queue management process. In addition, UK Electricity Distribution also created an internal team dedicated to the acceleration of connections and are updating internal policies to enable adoption of a 'first ready, first needed, first connected' approach.

Clean Power by 2030

In August, the government commissioned the ESO to provide "practical advice on achieving clean power by 2030 for Great Britain". This places a requirement on the NESO to provide a range of pathways that enables the government's clean power 2030 goal, including different energy generation and demand mixes. Based on these scenarios, the NESO presented a view of a number of network reinforcements required to deliver Clean Power 2030 alongside wider analysis such as opportunities, risks and actions needed to enable delivery of the pathways. As part of this, the NESO has been working with DNOs to understand how demand flexibility can be used as an effective lever to help balance a clean energy system.

From a connections perspective, the NESO, Ofgem and government are aligned that the CP2030 scenario will feed into the 'system need' criteria under the NESO's new TMO4 gated process, a key enabler to rationalising the connection pipeline (see above).

Strategic planning for energy infrastructure

In October, the UK, Scottish and Welsh governments jointly commissioned the NESO to produce a Strategic Spatial Energy Plan (SSEP) for Great Britain. This will take a longer-term view of a spatial strategy for energy infrastructure, serving as a 'blueprint' from which future plans will flow, such as the Centralised Strategic Network Plan (CSNP). The stated goal of the SSEP is "to help accelerate and optimise the transition to clean, affordable and secure energy across Great Britain", and while it is ultimately anticipated to cover the whole energy system, its first iteration will focus on infrastructure for electricity generation and storage, including relevant hydrogen assets. NESO will publish its consultation on methodology for the SSEP later this year, and deliver the plan in 2026.

Ofgem RIIO-ED3 Framework Consultation

On 6 November, Ofgem released its RIIO-ED3 Framework Consultation which asks 65 wide-ranging questions to help shape the next price control. All NESO published pathways show increased electrification of demand and decentralised renewable generation during ED3 and beyond. Ofgem stated in the framework consultation that ensuring electricity distribution networks have the necessary capacity is a key priority for the ED3 framework. We expect to submit a response early in the new year.

US regulatory and policy progress

We have continued to see good regulatory and policy progress across our US jurisdictions during the half year.

New York rate agreements and filings

On 10 April 2024, we filed a Joint Proposal with the New York Public Service Commission (PSC) for a three-year rate settlement at our downstate gas distribution businesses, KEDNY and KEDLI. The Joint Proposal was approved by the Commission on 15 August. The rate agreement included funding for capital investment of $924 million for KEDNY and $646 million for KEDLI in the first rate year (an increase of around 30% on 2022/23), and a Return on Equity (RoE) of 9.35% which compares to 8.8% under the prior rate settlement. It will fund programmes necessary to modernise the gas network and continue a safe and reliable service for our customers. In addition, it maintains a focus on customer affordability through bill assistance programmes, and includes initiatives to reduce methane emissions, promote non-gas alternatives, and expand energy efficiency in support of the State's environmental goals.

On 28 May, we filed for new rates for our Niagara Mohawk (NIMO) electric and gas distribution business in upstate New York. We requested a four-year rate plan with a 10.0% RoE; $1.7 billion capital investment for electric, and $338 million for gas, in the first rate year; and a revenue increase of $525 million for electric and $148 million for gas, also in the first rate year. In addition, the filing includes targeted programmes to better serve residential, commercial and industrial customers, and enhanced energy affordability programmes and services to enable clean energy and energy efficiency benefits for disadvantaged communities.

On 26 September, the PSC and twelve other parties submitted responses to our NIMO rate filing. The PSC proposed a lower increase to our revenue and capital expenditure requirements, but also supported key elements of our filing including a RoE of 9.5% versus our current allowed RoE of 9.0%. In addition, the PSC supported increased funding for major and minor storms and is also supportive of proposed investments and programmes to run the core business. The filing continues to progress and we anticipate an outcome of the rate filing in spring/summer 2025.

New York regulatory proceedings

In August 2024, the New York PSC initiated a proceeding to proactively identify and develop future grid infrastructure needs to address energy loads driven initially by transportation and building electrification. The PSC directed New York's utility providers to submit a portfolio of urgent electric infrastructure upgrades to address the demand from electric vehicles and electrification of buildings. Each utility project proposal, including National Grid's, are due to be submitted to the PSC in November 2024. The PSC also required the New York utilities to jointly develop a long-term proactive planning and cost recovery framework to meet continued demands from electrification, including from industrial load and demand attributable to economic development. The proactive planning framework is due to be submitted to the PSC in December 2024.

Massachusetts rate orders and filings

On 30 September, the Massachusetts Department of Public Utilities (DPU) issued a 5-year rate case order for our Massachusetts Electric business (MECO). This follows the filing for new rates that we made in November 2023. The order was only the second issued by the current DPU Commission following the change in the Massachusetts administration.

One of the key features of this innovative rate order is a new capital recovery mechanism that adjusts annually to recover MECO's increases in core investment costs, up to a recovery cap equivalent to 3% of MECO's total annual revenue. The tracker will reduce the time taken to recover capital spend enabling us to earn closer to the allowed RoE moving forward. Other features included: a RoE of 9.35%; a Performance Based Rate Mechanism to provide inflation protection against core operations and maintenance (O&M) expense; improved recovery of storm costs with an incremental $60 million per year; and an earnings sharing mechanism triggered when actual RoE exceeds 100 basis points above the allowed RoE, with incremental earnings shared 75/25 between customers and the company. Additionally, the order includes approval of the first-of-its-kind tiered low-income discount rate which is designed to address energy burdens and promote rate equity. New rates became effective on 1 October 2024.

Massachusetts Electric Sector Modernization Plan outcome

On 29 August, we welcomed the DPU's order approving our Electric Sector Modernization Plan (ESMP). The proposed plan, filed with the DPU in January 2023, 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). It proposes up to $2 billion investment over the next five years across the following areas: network infrastructure, including upgraded power lines, transformers, substations; technology and platforms, including new planning tools for smarter decision making; new data and monitoring systems; and customer programmes, including help for customers seeking to reduce their carbon footprint and drive smart energy use.

The ESMP cost recovery mechanism will be determined in a future proceeding that will conclude by 30 June 2025, as will the final level of investment and projects. As a result, the ESMP start date is scheduled for 1 July 2025 for a duration of five years, concluding 30 June 2030. All electric utilities in Massachusetts will have an ESMP across this period and each is expected to provide the DPU with forecasts by September 2029 for the next ESMP which is expected to run from 2030 through 2035.

FERC regulatory proceedings

Whilst not directly applicable to the Group, in October the Federal Energy Regulatory Commission (FERC) issued a decision to change FERC's RoE methodology for the Midcontinent Independent System Operator (MISO) region which lowered RoEs. Given pending cases filed at FERC over the last decade challenging New England RoE methodology, the Group will continue to monitor these regulatory proceedings.

Progress at National Grid Ventures (NGV)

Community Offshore Wind (COSW)

COSW, our joint venture with RWE, continues to respond to offshore wind solicitations from the authorities in New York and New Jersey to secure offtake contracts for the 3 GW+ seabed lease in the New York Bight.

In July 2024, COSW submitted an offtake bid for up to 1.3 GW in response to the New Jersey Board of Public Utilities (BPU) solicitation. This was followed in October with offtake bids of up to 2.7 GW to the New York State Energy Research and Development Authority (NYSERDA). We await selection decisions, expected by the end of calendar year 2024.

US NGV transmission projects

During the half year, our New York Transco joint venture submitted its 'Energy Link NY' proposals to the New York Independent System Operator (NYISO) for the city's Public Policy Transmission Need (NY PPTN). The project would consist of multiple HVDC transmission links to connect over 5 GW of offshore wind to the New York City grid network. NYISO is currently evaluating proposals from four bidders and plans to make an award in the second half of calendar year 2025.

UK Offshore Hybrid Assets (OHAs)

We have continued to lead the way on future interconnector development and continue to work with Ofgem to establish the regulatory regime for Offshore Hybrid Assets (OHAs). OHAs are the next phase of interconnection, not only linking two countries but also connecting with offshore wind generation. Our projects, LionLink (a joint venture with TenneT), and Nautilus (a joint venture with Elia) are two UK pilots that would fall into this asset class, paving the way for a more efficient and interconnected North Sea grid. We expect Ofgem to confirm the LionLink and Nautilus OHA regulatory framework parameters by the end of this calendar year. This will enable us to progress to a Final Investment Decision (FID) during 2027/28.

Delivering our synergy target - Electricity Distribution

Following the acquisition of UK Electricity Distribution, we have continued to make good progress on achieving £100 million of group synergies before the end of 2025/26. During the half year, we delivered further synergies to take the cumulative total to £58 million, over half of our target. This has been achieved through: (a) leveraging our increased buying power and supplier base across the Group including bulk purchase of assets and contract optimisation; (b) shared sites and operational delivery, where we are reviewing how we can work collaboratively across 48 joint UK Electricity Transmission and UK Electricity Distribution sites, with pilots at Rugeley and Willington underway; and c) cost savings through IT and insurance initiatives.

Our responsible business commitments

National Grid has a critical role in enabling net zero and ensuring that the benefits of the energy transition are shared with everyone. 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.

During the half year, we published our second Climate Transition Plan (CTP) which outlines our greenhouse gas (GHG) emissions reduction targets and our roadmap to achieve net zero by 2050. This refreshed CTP provides a credible pathway to meet our science-based climate targets, encompassing both direct actions and dependencies on policies, regulations and the decarbonisation of our supply chains. It is important to note that emissions reductions will not follow a linear trajectory, resulting in potential year-on-year fluctuations.

Combustion of oil and gas at our National Grid Generation facilities on Long Island is a key source of our Scope 1 emissions. These assets experienced a notable increase in generation this year, attributable to contractual obligations with the Long Island Power Authority (LIPA), as National Grid fulfilled a temporary surge in demand. This was due to an unplanned maintenance outage at a third-party power plant which was brought back into service in August. Generation running conditions are expected to remain as normal for the remainder of the year, provided there are no other unforeseen circumstances. We therefore expect 2024/25 scope 1 GHG emissions to be higher than 2023/24.

SF₆ emissions from our electric equipment is another focus area of Scope 1 emissions, the majority of which (~80%) is in our UK Electricity Transmission network. During the half year, UK Electricity Transmission made good progress repairing leaks. Additionally, Ofgem's Strategic Innovation Fund (SIF) recently awarded UK Electricity Transmission £8.5 million for a project to develop a long-term strategy to reduce SF₆ dependency in consultation with industry partners.

To help reduce our Scope 3 GHG emissions, we have continued to engage with key strategic suppliers that form a large part of our emissions linked to the goods and services we procure. We closely collaborate to ensure transparency and understanding of our new Science-Based Targets. Given our involvement in global supply chains, achieving emissions reductions in our construction projects relies on close collaboration with suppliers.

Across the Group, our colleagues have volunteered 40,707 hours in our communities during the half year (15,508 in the UK and 25,199 in the US). Cumulatively, National Grid colleagues have now volunteered 220,187 hours since the publication of the Responsible Business Charter in 2020, achieving 44% of our ten-year Group commitment of 500,000 hours.

Since the end of 2023/24, the overall Board diversity has remained at 45.5%. Individually, the Board aspires to comprise at least one Director from a minority ethnic background and at least 40% women. Presently, two Directors are from an ethnic minority background but, as a result of recent changes in Board composition, female representation currently stands at 36.4%. Given the Board's desire to stagger the induction of new Directors, gender balance is expected to be restored in due course. There is no change in the overall diversity of our Group Executive since 2023/24 which stands at 53.9%. Since year end, gender and ethnically diverse colleagues have risen from circa 7,100 to 7,400 and 5,300 to 5,600 respectively[4].

We are pleased that our efforts to create an inclusive environment are being recognised by third parties. National Grid has been rated one of the top 50 employers in the UK for social mobility. The Social Mobility Index (SMI) is the leading authority on employer-led social mobility and was created to provide annual benchmarking and assessments for UK employers. Last year, we made good progress, moving from ranking 71 to 49; this year, we have made significant improvements in the right direction and improved our position by a further 7 places with a new ranking of 42.

In 2024 National Grid took part in the Workforce Disclosure Initiative for the seventh consecutive year. We were awarded a disclosure score of 85% compared to the sector average of 62%.