Full Year Results - National Grid/media/Files/N/... · Full Year Results London |Thursday 16 May 2013. This presentation contains certain statements that are neither reported financial

2012/13

Full YearResults

London | Thursday 16 May 2013

This presentation contains certain statements that are neither reported financial results nor other historical information. These statements are

forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities

Exchange Act of 1934, as amended. These statements include information with respect to National Grid’s financial condition, its results of

operations and businesses, strategy, plans and objectives. Words such as ‘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. 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. Many of these assumptions, risks and uncertainties relate to factors that are beyond National Grid’s ability to control or estimate

precisely, such as changes in laws or regulations, presentations from and decisions by governmental bodies or regulators (including the

timeliness of consents for construction projects); breaches of, or changes in, environmental, climate change and health and safety laws or

regulations, including breaches arising from the potentially harmful nature of its activities; network failure or interruption (and National Grid’s

actual or perceived response thereto), the inability to carry out critical non network operations and damage to infrastructure, due to adverse

weather conditions including the impact of Superstorm Sandy and other major storms as well as the results of climate change or due to

unauthorised access to or deliberate breaches of National Grid’s IT systems or otherwise; performance against regulatory targets and standards

Cautionary statement

2

unauthorised access to or deliberate breaches of National Grid’s IT systems or otherwise; performance against regulatory targets and standards

and against National Grid’s peers with the aim of delivering stakeholder expectations regarding costs and efficiency savings, including those

related to investment programmes and internal transformation projects (including the US foundation programme); and customers and

counterparties failing to perform their obligations to the Company. Other factors that could cause actual results to differ materially from those

described in this presentation 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; inflation; 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 loss of key personnel or the ability to attract, train or retain qualified personnel and any

significant disputes arising with the National Grid’s employees or the breach of laws or regulations by its employees; and incorrect or

unforeseen assumptions or conclusions (including financial and tax impacts and other unanticipated effects) relating to business development

activity, including assumptions in connection with joint ventures.

For further details regarding these and other assumptions, risks and uncertainties that may impact National Grid, please read the Business

Review section including the ‘Risk factors’ on pages 41 to 43 of National Grid’s most recent Annual Report on Form 20-F, as updated by

National Grid’s unaudited half-year financial information for the six months ended 30 September 2012 published on 15 November 2012. 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 presentation.

2012/13

Full YearResults

Key Highlights

Steve Holliday | Chief Executive

Introduction

Two years of transition

� Business wide change

� Step change to US performance

� Increasing capital investments

4

Exceptional clarity…

… for the majority of our business

… around financing our growth

… priorities for our leadership team

Agenda

� Highlights

� Business review and financial priorities

� Strategy, growth and returns

5

� Strategy, growth and returns

Good financial performance

Profit before tax1 £2,742m

Operating profit1 £3,644m

�

�

6%

4%

Capital Investment2 £3,700m 9%

�

6

1 Constant currency figures calculated by applying the average 2013 rate ($1.57 to £1.00) to 2012 results (when the average rate was $1.60 to £1.00)

2 Including investment in joint ventures

3 Prior year EPS adjusted to reflect the impact of additional shares issued as scrip dividend

Note Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations

All numbers include the impact of timing and storms

Earnings

EPS3

Dividend per share

£2,055m 12%

�

56.1p 12%

�

40.85p 4%

�

£3,700m 9%

�

UKSecure a good RIIO

outcome despite early

financing proposals

Key strategic prioritiesLast two years

�US

Implement major restructuring

Increase jurisdictional focus

Conclude important rate

case filings

7

�

�

UK RIIO outcome

� Around £25bn investment allowance in essential

infrastructure over 8 years

� Clear framework to focus delivery of investment, customer

service and returns ��

8

� Continued incentives to reward customer focus

� Significant incentives around total expenditure

� Underpinned by effective financing framework

– Appropriate costs of debt and equity, capital structures

and transition arrangements

��

UK Operational Progress

� Continued ramp up of major investments

� Grew regulated asset value by £1.6bn, up 7%

9

� In September, launched new UK operating model

- 12 month programme to reshape UK business

- objective to focus business on RIIO outcomes

US Strategic Progress

� Four rate cases approved in Rhode

Island and New York jurisdictions

� Agreed new long term power supply

10

� Agreed new long term power supply

agreement on Long Island

� Extension of rates in KEDNY for two

years agreed

‘Superstorm’ Sandy

11

US Operational Progress

� Implemented new back office SAP system

– replaced multiple legacy platforms

� Invested over £1.1bn or $1.8bn to improve

infrastructure and customer service

12

– replaced multiple legacy platforms

– addresses many regulatory audit findings

– improve information for future filings

� Delivered good rate base growth of 4% and

improved underlying returns to 9.2%

Safety and reliability

Safety

� Major incidents down significantly

� Lost time injury frequency rate of 0.13

� Key focus across the

13

Key focus across the whole business

Service

and

reliability

� UK network reliability remains high

� US building stronger community relationships and improving standards of service

Lost time injury frequency rate is a combined employee and contractor rate

Summary

14

� Well positioned for future

� Major regulatory agreements updated

covering over 80% of asset base

� Significant clarity in the medium term

2012/13

Full YearResults

Business Review

Andrew Bonfield | Finance Director

� Year on year timing effects of £67m

� Higher revenues driven by roll-over year, asset growth

and RPI

� BSIS losses more than offset by strong performance

from other incentives

UK Transmission 44% of Group Operating Profit

Operating profit

19%

277

(24) (7)

Operating profit excluding timing

14%

16

Visual representation only – not to scale

Business performance, excluding exceptional items, remeasurements and stranded cost recoveries

Post retirement costs represent pensions and other post employment benefits

1,354 1,609

67

(24) (7)(58)

2012 operating profit timing net regulated income regulated controllable

operating costs

post retirement costs depreciation & amortisation

2013 operating profit

£m

� Year on year timing effects of £(32)m

� Higher revenues driven by RPI

� Inflation and depreciation increased costs, together with

reduced benefit from metering work

UK Gas Distribution22% of Group Operating Profit

85

Operating profit

4%


9%

17




763 794

3

(32)

(13) (2)

(10)

2012 operating profit

timing net regulated income

regulated controllable

operating costs

post retirement costs

depreciation & amortisation

other 2013 operating profit

£m

� Year on year timing effects of £(37)m

� Income driven by recovery of New York deferred costs

� Investment in information systems, environmental

expenses and depreciation increased costs

US Regulated34% of Group Operating Profit

135

33(19)

Operating profit

3%

3%Operating profit excluding timing

and major storms

18



Constant currency figures calculated by applying the average 2013 rate ($1.57 to £1.00) to 2012 results (when the average rate was $1.60 to £1.00)


1,212 1,253

33

(37)

(19)(29)

(17)(58)

2012 operating profit at constant currency

timing major storm costs

net regulated income

regulated controllable operating

costs

post retirement

costs

depreciation & amortisation

bad debts other 2013 operating

profit

£m

US progress in 2012/13

US achieved Return on Equity (%)

8.3%�6.9% 8.8%�

Actual return � as percentage of allowed return �

9.2%�

19RoEs represent calendar year returns. Regulated assets are closing fiscal year balances.

US Regulated Assets

$14.3bn $14.5bn $15.0bn

$1.7bn $1.9bn $2.2bn

2009/10 2010/11 2011/12

Rate Base

Regulated Assetsoutside rate base

�

2012/13

�

� One off costs related to US storms and systems

– ‘Superstorm’ Sandy self-insurance costs

� No contribution from Onstream in metering

Other activities

Operating profit excluding major

storms and systems

Operating loss

£130m

£(12)m

0 2

20




187

(12)

130

(24)

(35)

(51)

(91)

2012 operatingprofit at

constantcurrency

Grain LNG Property Metering Other 2013 operating

profit excluding

storms and

US system costs

increases

Major

storms

US

systems

2013 operatingprofit

£m

US systems

� Essential investments to improve legacy

systems

– allow delivery of cost savings

– address findings of Liberty and

Overland audit

21

Overland audit

� Higher resource requirements have driven

costs

� Steady progress in solving implementation

issues

48*

130 168

94 61

Regulated controllable operating costs

� Reported increase of £56m: 1% increase on a real basis

� Inflation and cost increases mitigated by efficiency programmes

2

Regulated controllable operating costs

Group efficiency metric

1,950 2,006

2011/12 2012/13

£m

bad debts

pensions & OPEBs

inflation

reg controllable costs

22

1 Regulated controllable costs excluding bad debts, pensions and other post employment benefits (OPEBs). Constant currency

figures calculated by applying the average 2013 rate ($1.57 to £1.00) to 2012 results (when the average rate was $1.60 to £1.00)

2 Regulated controllable costs excluding bad debts, including pensions and OPEBs unadjusted for inflation, divided by asset base. Asset base: mid-year UK regulatory

asset value plus mid-year US rate base. At constant currency

* Includes £5m of inflation related to bad debts, pensions and OPEBs

1

6.86.6

2011/12 2012/13

� Operating profit up £148m, excluding timing and severe

weather

� Revenue increase led by UK and New York deferrals

� Other activities impacted by systems costs

Operating profit

497

33(56) (38)(85)

Operating profit

4%


and major storms 4%

23





3,516 3,644

(2) (18)

(38)(85) (55)

(148)

2012 operating profit at constant currency

timing major storms

net regulated income

controllable operating

costs

post retirement

costs

depreciation &

amortisation

bad debts other other activities

2013 operating

profit

£m

£(142)m y-o-y headwind

Started 2012/13

£110m over-recovered

Ended

£126m over-recovered

Impacts of timing

£3.6bnoperating

£16m in year timing 2012/13

24

Starting numbers restated for finalisation of UK timing (‘k’) and US stranded cost reclassifications


£(2)m y-o-y

impact in 2012/13

£(142)m including £126m closing balance


operating profit


Interest

Finance costs1

£920mBroadly unchanged

25

Broadly unchanged

at constant currency

Business performance, excluding exceptional items, remeasurements and stranded cost recoveries1 Constant currency figures calculated by applying the average 2013 rate ($1.57 to £1.00) to 2012 results (when the average rate was $1.60 to £1.00)

� Continued refinancing of

historic debt

� Lower accretions on RPI

linked debt

Hybrid bond

� £2.1bn raised in National Grid’s

first hybrid bond issuance

� Effective interest rate of 5.45%

� Rating agencies provide 50%

equity credit

26

equity credit

� Supports ongoing capital

investment programme

Interest, tax and earnings

Tax

25%at £(686)m

Earnings per share

12%group

rate

Finance costs1

£920mUnchanged at constant

27

at £(686)m 12%at 56.1p

Business performance, excluding exceptional items, remeasurements and stranded cost recoveries1 Constant currency figures calculated by applying the average 2013 rate ($1.57 to £1.00) to 2012 results (when the average rate was $1.60 to £1.00)

up� Lower UK corporate

tax rate

� Prior year adjustments

Unchanged at constant

currency

� Continued refinancing of

historic debt

� Lower accretions on RPI

linked debt

Year ended 31 March 2013 £m

Operating profit 3,644

Depreciation & amortisation 1,361

Net operating cash flow

£4.1bn

Cash flows

28


Operating cash flows from continuing operations before exceptional items, remeasurements, stranded cost recoveries and taxation

Pensions (413)

Working capital & other (443)

Net operating cash flow 4,149

2013 2012

UK Transmission 1,680 1,397

UK Gas Distribution 666 645

US Regulated 1,124 1,052

£m

Capital investment

29

Other activities 216 281

Joint ventures 14 13

Total 3,700 3,388

London power tunnels

30

2013 2012

UK Transmission 1,680 1,397

UK Gas Distribution 666 645

US Regulated 1,124 1,052

£m

Capital investment

31

Other activities 216 281

Joint ventures 14 13

Total 3,700 3,388

Cash flows and balance sheet

Year ended 31 March 2013 £m

Operating profit 3,644

Depreciation & amortisation 1,361

Pensions (413)


Net operating cash flow

£4.1bnOperating cash flowafter cash capital investment

792

32

Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations

Operating cash flows from continuing operations before exceptional items, remeasurements, stranded cost recoveries and taxation


Net operating cash flow 4,149

Operating cash flow

after cash capital investment792

Net debt 21,429

£792mNet debt

£21.4bn

Operating return measures

Operating return measures

Regulators

10

12

6

7

8 UK* US

10.3 10.39.9 9.8

9.2

6.7

6.36.0 6.1

33US ROEs presented on a calendar year basis

*UK returns presented on a weighted average vanilla basis

0

2

4

6

8

2009 2010 2011 2012

Allowed Achieved

0

1

2

3

4

5

6

2009/10 2010/11 2011/12 2012/13

Allowed Achieved

% r

etu

rn o

n e

qu

ity

% v

an

illa

re

turn

6.9

8.38.8

9.2

5.0 5.0 5.0 4.8

6.0

Return on Capital Employed

UK movement reflects

continued cost management

Gas Transmission incentives

and rollover revenues


2011/12 2012/13

�

2010/11

8.5%

7.1%

34

UK

US

8.8%

7.7%

and rollover revenues

8.6%

7.6*%

US reflects cost

savings, higher

revenues under

new rate plans

and deferral

recoveries

�

�

* Excluding major storm impacts

*

Group Return on EquityKey measure of overall value creation

Shareholder value

Group Return on Equity

2012/132011/122010/11

35

11.3% 11.7%10.8%

Overall return for

shareholders on

investment in assets

reflecting actual

financing structure

and goodwill

* Excluding the impact of major storms

**

Guidance for 2013/14

� Revenue increases under UK RIIO price controls

� Guidance on incentive performance & depreciation

� Adjustments for deferral recoveries and storms

� Finance costs will be restated for £200m non-cash IAS19

36

Finance costs will be restated for £200m non-cash IAS19

pensions adjustment

� Underlying interest expected to increase due to carry

costs of pre-financing and increased net debt

� Tax rate 28%

� Capital investment between £3.6bn–£3.9bn

Performance focus going forward

“Delivering regulatory outputs at lowest possible total cash cost”

� Totex key driver of returns - focuses on cash efficient investment

� Asset growth remains significant, drives long-term revenue

growth

� Regulatory outputs continue to drive meaningful incentives

UK

37

“Invest in approved assets, customer service and efficiency”

� Incremental capex continues to earn good marginal returns

� Strong customer service supports regulatory outcomes

� Performing within allowances key to delivering returnsUS

Efficient, sustainable performance

� Focus on profit growth and a high level of cash conversionNon-Reg

Total return for National Grid

Credit Rating A-• Focus on profits,

efficiency and cash

~ 6% per annum• Organic growth led

by RIIO & US reg. investments

totalshareholder

return=

38

Funding• Scrip alternative• Earnings impact of

hybrids etc.

investments

Other projects• Subject to a total

return test

=dividend yield

+growth in the

per share value ofshareholders’

equity

2012/13

Full YearResults

Strategy, growth and returns

Steve Holliday | Chief Executive

Outlook for regulated asset growthNext five years

~ £35bn

> £45bn

US regulated

40

US regulated

UK gas distribution

UK transmission

Dividend policy

“We aim to grow the ordinary

dividend at least in line with the

41

dividend at least in line with the

rate of RPI inflation each year

for the foreseeable future”

Line of sight

� Align employee goals and

behaviours

� Reinforce a performance

culture …

…organic growth

…efficiency

42

…efficiency

…outputs & customer needs

…innovation

…to drive incentive

performance, returns and

cash generation

UKStreamline organisation and

deliver outputs to drive

outperformance under RIIO

Key strategic priorities2013/14

43

UK ‘delivering RIIO’ seminar

� 6 August 2013 – King’s Place, London

� John Pettigrew (UK Chief Operating Officer) and key

operational managers

� How we plan to deliver outputs and behaviours to maximise

44

� How we plan to deliver outputs and behaviours to maximise

our performance

� For joining instructions contact the Investor Relations team

UKStreamline organisation and

deliver outputs to drive

outperformance under RIIO

Key strategic priorities2013/14

USBuild on new rate cases

and systems to enhance

customer service and drive

efficiencies

45

Conclusion and Outlook

� Good financial and solid operating performance

� Strong asset growth and attractive pipeline of

investment opportunities to sustain growth

46

investment opportunities to sustain growth

� Period of significant clarity for our businesses

2012/13

Full YearResults

Appendix

UK Transmission

For the year ended 31 March (£m) 2013 2012

Revenue 4,246 3,804

Depreciation & amortisation (489) (431)

Regulated controllable costs (367) (343)

Post retirement costs (47) (40)

Other costs incl. pass through (1,734) (1,636)

Total UK Transmission operating profit 1,609 1,354

� At actual currency

� Business performance, excluding exceptional items, remeasurements and stranded cost recoveries 48

UK TransmissionOperating profit


Electricity Transmission Owner 1,046 854

Electricity System Operator (3) 11

Other electricity 6 11

Sub total – Electricity Transmission 1,049 876

Gas Transmission Owner 271 186

Gas System Operator 258 272

Other gas - 1

Sub total – Gas Transmission 529 459

French Interconnector 23 19

LNG Storage 8 -

Sub total – Other 31 19

Total Transmission operating profit 1,609 1,354



UK Transmission Gas System Operator

For the year ended 31 March (£m) 2013 2012 2011 2010

Revenue drivers 132 136 79 81

Incentives performance 16 16 23 24

Cost recovery* 283 252 269 293

Timing impacts - 33 9 (6)

Total operating costs excluding depreciation (154) (154) (171) (192)

(19)Depreciation (19) (11) (12) (14)

Operating profit 258 272 197 186


� Business performance, excluding exceptional items, remeasurements and stranded cost recoveries

* Including recovery of gas permit income, pension & tax allowances, system operation costs and recovery of transportation owner revenue foregone

50

UK Transmission Electricity System Operator

For the year ended 31 March (£m) 2013 2012 2011 2010

Incentive performance (30) (20) 15 15

Prior year BSIS incentive adjustment - - - 5

Cost recovery 925 931 683 1,103

Total operating costs excluding depreciation (885) (889) (644) (1,060)

Depreciation (13) (11) (11) (11)

Operating profit (3) 11 43 52



51

UK TransmissionDepreciation & Amortisation


Electricity Transmission Owner 310 270

Electricity System Operator 13 11

Sub total – Electricity Transmission 323 281

Gas Transmission Owner 142 133

Gas System Operator 19 11

Sub total – Gas Transmission 161 144

French Interconnector 4 4

LNG Storage 1 2

Sub total – Other 5 6

Total UK Transmission depreciation & amortisation 489 431


� Business performance, excluding exceptional items, remeasurements and stranded cost recoveries52

UK Gas Distribution


Revenue 1,714 1,605


Regulated controllable costs (317) (304)


Other costs inc pass through (301) (248)

Total UK Gas Distribution operating profit 794 763



US Regulated


Revenue 7,918 7,516


Regulated Controllable costs (1,322) (1,279)


Bad debt (61) (92)

Major storms (85) (116)

Other costs inc pass through (4,687) (4,383)

Total US Regulated operating profit 1,253 1,190



Metering, Grain LNG and Property


Revenue 319 368


Operating costs (excluding depreciation & amortisation) (81) (83)

Metering operating profit (1) 150 174

Revenue 209 208



1 Included in the results of Metering for the year ended 31 March 2012 are £38m revenue , £17m depreciation, £9m operating costs and £12m

operating profit relating to Onstream up to the date of disposal (October 2011)




Grain LNG operating profit 86 86

Revenue 53 62

Depreciation & amortisation (1) -


Property operating profit 27 25

55

Exchange rates

For the year ended 31 March 2013 2012

Closing $ / £ rate 1.52 1.60

Average $ / £ rate for the period 1.57 1.60

For the year ended 31 March (£m) 2013

Impact on operating profit * 21

Impact on interest * (9)

Impact on tax, JVs and minority interests * (5)

Net impact on earnings * 7

Impact on net debt ** (624)

Impact on book value of assets ** 692

* Currency impact calculated by applying the average 2013 rate to 2012 results

** Currency impact calculated by applying the March 2013 rate to March 2012 balances

� Business performance, excluding exceptional items, remeasurements and stranded cost recoveries56

Pensions & other post-retirement benefit obligations (IAS19 data)

UK US

At 31 March 2013 (£m) ESPS NGUK PS Pensions OPEBs NG total

Market value of assets 1,943 15,449 4,378 1,515 23,285

Present value of liabilities (2,563) (15,998) (5,117) (3,106) (26,784)

Net liability (620) (549) (739) (1,591) (3,499)

Deferred taxation 143 126 303 637 1,209

Liability net of taxation (477) (423) (436) (954) (2,290)

Discount rates 4.3 4.3 4.7 4.7

� OPEBs = other post employment benefits 57

Timing impacts

£m UK Transmission

UK Gas Distribution

US Regulated Total

2012/13 Opening balance * (22) 2 130 110

2012/13 over/(under) recovery 46 (10) (20) 16

2012/13 Closing balance to return / (recover) 24 (8) 110 126

2011/12 Opening balance (7) (20) 101 74

2011/12 over/(under) recovery (21) 22 17 18

2011/12 Closing balance to return / (recover) (28) 2 118 92

Year on year timing variance 67 (32) (37) (2)

* Restated for finalisation of K and recovery of stranded overs and unders through the regulated segment.

• All USD balances stated using the average 2013 rate ($1.57 o £1.00)58

UK Transmission and UK DistributionRegulated asset value (“RAV”) and returns

RAV* and returns reported by regulatory entity as at 31 March 2013 for UK

UK Electricity Transmission (a) UK Gas Transmission (b) UK Gas Distribution

Regulator Ofgem Ofgem Ofgem

Rate base / RAV £10,145m £5,340m £8,330m

Base allowed return4.75%

(‘vanilla’ return)

4.75%


4.94%


(a) Includes electricity system operator regulatory asset base of £93m. The system operator is subject to annual price controls.

(b) Includes gas system operator regulatory asset base of £60m. The system operator is subject to annual price controls.

* Details of returns and rate base for all rate plans can be found at www.nationalgrid.com. 59

Achieved return 5.4% 7.5% 6.0%

Equity / debt (assumed) 40 / 60 40 / 60 37.5 / 62.5

Sharing factors (shareholder retention at RoE)100%

plus incentive schemes

100%


100%


Next price control beginsNew RIIO price control

from April 2013

New RIIO price control

from April 2013

New RIIO price control

from April 2013

Equity / debt (assumed) 40 / 60 37.5 / 62.5 35 / 65

Base allowed return (assumed CoD 2.92%) 4.55% 4.38% 4.24%

Efficiency incentive rate 46.9% 44.4% 63%

New York Jurisdiction Regulated asset base (“Rate base”) and returns

Rate bases are reported by regulatory entity as at 31 March 2013. Returns are those for the calendar year ended 31 December 2012

Long Island(KEDLI)

Downstate New York(KEDNY)

Upstate New York(NMPC Gas)

Upstate New York(NMPC Electric)

Regulator New York PSC New York PSC New York PSC New York PSC

Rate base / RAV $1,902m $2,132m $923m $3,971m

Base allowed return9.8% 9.8% 9.3% 9.3%

60


(RoE)

9.8%

(RoE)

9.3%

(RoE)

9.3%

(RoE)

Achieved return 7.2% 11.0% 5.3% 8.7%

Equity / debt (assumed) 45 / 55 45 / 55 48 / 52 48 / 52

Sharing factors (shareholder retention at RoE)

100% to 10.5%

50% to 12.5%

35% to 13.5%

0% above 13.5%

100% to 10.5%

50% to 12.5%

35% to 13.5%

0% above 13.5%

100% to 9.3%

50% to 10.3%

25% to 11.3%

10% above 11.3%

100% to 9.3%

50% to 10.3%

25% to 11.3%

10% above 11.3%

Last / next rate case filingEffective from

January 2008

Effective from

January 2008 (a)

Effective from

April 2013

Effective from

April 2013

a) Awaiting approval of new settlement effective from January 2013.

� Details of returns and rate base for all rate plans can be found at www.nationalgrid.com. National Grid’s estimate of US rate base: regulatory filings or an alternative US GAAP invested capital measure where

either recent rate base filings are not available or where the actual filed rate base currently excludes certain regulatory asset balances.

Massachusetts and Rhode Island Jurisdiction Regulated asset base (“Rate base”) and returnsRate bases are reported by regulatory entity as at 31 March 2013. Returns are those for the calendar year ended 31 December 2012

Massachusetts Electric (a)

MassachusettsGas (b)

Narragansett

Electric (Distribution)

Narragansett Gas

Regulator Massachusetts DPU Massachusetts DPU Rhode Island PUC Rhode Island PUC

Rate base / RAV $1,747m $1,373m $552m $411m


(a) Includes Nantucket Electric. The Massachusetts electric rate base includes $33m relating to transmission assets

(b) Massachusetts Gas currently comprises two separate entities: Boston Gas and Colonial Gas. Base allowed and achieved ROEs are weighted averages (using rate base).

� Details of returns and rate base for all rate plans can be found at www.nationalgrid.com. National Grid’s estimate of US rate base: regulatory filings or an alternative US GAAP invested

capital measure where either recent rate base filings are not available or where the actual filed rate base currently excludes certain regulatory asset balances. 61


RoE

9.75%

RoE

9.5%

RoE

9.5%

RoE

Achieved return 8.3% 12.2% 6.4% 5.1%

Equity / debt (assumed) 50 / 50 50 / 50 49 / 51 49 / 51

Sharing factors (shareholder retention at RoE)100% to 10.35%

50% above10.35%100%

100% to 9.5%

50% to 10.5%

25% above 10.5%

100% to 9.5%

50% to 10.5%

25% above 10.5%

Last / next rate case filingEffective from

January 2010

Effective from

November 2010

Effective from

February 2013

Effective from

February 2013

FERC JurisdictionRegulated asset base (“Rate base”) and returns

Rate bases are reported by regulatory entity as at 31 March 2013. Returns are those for the calendar year ended 31 December 2012

New England Power

Narragansett

Electric (Transmission)

CanadianInterconnector (a)

Long Island Generation (b)

Regulator FERC FERC FERC FERC

Rate base / RAV $1,006m $527m $37m $464m


a) National Grid retains 100% of the return it earns on its stake of ~54% in the Canadian Interconnector.

b) Long Island generation rate base includes peaking plant rate base of $101m

c) Represents a weighted average of our continuing generation (50:50) and peak generation (30:70) plants.

d) Awaiting FERC approval of new settlement effective from May 2013.

� Details of returns and rate base for all rate plans can be found at www.nationalgrid.com. National Grid’s estimate of US rate base: regulatory filings or an alternative US GAAP invested capital measure where

either recent rate base filings are not available or where the actual filed rate base currently excludes certain regulatory asset balances. 62


RoE

11.14%

RoE

13.0%

RoE

10.75%

RoE

Achieved return 11.6% 11.6% 13.0% 13.6%

Equity / debt (assumed) 65 / 35 50 / 50 40 / 60 45 / 55 (c)

Sharing factors (shareholder retention at RoE) 100% 100% 100% Incentives

Last / next rate case filing Monthly formula rates Monthly formula rates Monthly formula ratesEffective from

February 2009 (d)


Year ended 31 March 2013 Year ended 31 March 2012

£m UK US

(Storm adjusted)US UK

US

(Storm adjusted)US

Statutory Operating Profit

Exceptional items, remeasurements and stranded cost

recoveries

2,329

74

1,522

(184)

1,437

(184)

2,093

24

1,270

36

1,154

36

Business Performance Operating Profit

Depreciation and amortisation

2,403

750

1,338

430

1,253

430

2,117

682

1,306

406

1,190

406

IFRS EBITDA

In-year timing

3,153

(36)

1,768

20

1,683

20

2,799

(1)

1,712

(17)

1,596

(17)

IFRS EBITDA excluding timing 3,117 1,788 1,703 2,798 1,695 1,579

63

IFRS EBITDA excluding timing 3,117 1,788 1,703 2,798 1,695 1,579

Regulatory adjustments

Regulatory depreciation

RPI indexation (post tax)

Pension adjustment

UK Repex adjustment

UK regulatory deferred taxation

(1,085)

666

(83)

(228)

175

(430)

-

(180)

-

-

(430)

-

(180)

-

-

(1,014)

606

(79)

(223)

251

(406)

-

(137)

-

-

(406)

-

(137)

-

-

Adjusted profit before tax 2,562 1,178 1,093 2,339 1,152 1,036

Tax rate

Tax

24.0%

(615)

40.0%

(471)

40.0%

(437)

26.0%

(608)

40.0%

(461)

40.0%

(415)

Adjusted profit after tax 1,947 707 656 1,731 691 621

Opening capital employed 22,207 9,217 9,217 20,194 9,074 9,074

Post tax RoCE 8.8% 7.7% 7.1% 8.6% 7.6% 6.8%

Group Return on EquityCalculation

For the year ended 31 March (£m)2013

(storm adjusted)2013

2012(storm adjusted)

2012 2011

Regulatory operating profit per ROCE 3,740 3,655 3,491 3,375 3,295

IFRS operating profit for non-regulated companies and post tax share

of JV’s +57 6 195 195 126

Treasury managed interest deduction + (1,057) (1,057) (1,042) (1,042) (1,150)

Group tax charge + (732) (686) (802) (755) (722)

Tax adjustment for ROCE adjustments and non treasury interest 89 89 60 60 100

Adjusted profit for RoE 2,097 2,007 1,902 1,833 1,649

Opening capital employed 31,424 31,424 29,272 29,272 27,727

Non-regulated companies opening net book value 979 979 1,205 1,205 1,110Non-regulated companies opening net book value 979 979 1,205 1,205 1,110

Joint ventures 341 341 356 356 250

Opening Goodwill 4,776 4,776 4,776 4,776 5,102

Group enterprise value 37,520 37,520 35,609 35,609 34,189

Opening net debt * (19,597) (19,597) (18,731) (18,731) (18,925)

Group equity value 17,923 17,923 16,878 16,878 15,264

Group RoE – nominal (adjusted group profit after tax / group equity value)

11.7% 11.2% 11.3% 10.9% 10.8%

+ Excluding exceptional items, remeasurements and stranded cost recoveries

* 2011 includes a £3.2bn adjustment to normalise for Rights Issue64

Interest cover – calculation

For the year ended 31 March (£m) 2013 2012 2011

Interest expense (P&L) 2,172 2,218 2,415

Hybrid interest reclassified as dividend (2) - -

Capitalised interest 122 124 129

Interest on pensions debt adjustment 60 67 30

Interest on decommissioning liabilities adjustment 1 5 5

Interest on lease rentals adjustment 36 32 30

Pensions interest on scheme liabilities (1,153) (1,203) (1,231)

Unwinding of discounts on provisions (75) (72) (128)

Adjusted interest expense 1,161 1,171 1,250

Net cash inflow from operating activities 3,750 4,228 4,858

Interest income on financial instruments 30 28 25

Dividends received 21 26 9

Working capital adjustment 410 (146) (185)Working capital adjustment 410 (146) (185)

Current pension service cost (177) (159) (165)

add back employer pension contributions 425 415 408

add back interest on pensions debt adjustment 60 67 30

add back lease rentals 109 97 89

add back decommissioning liabilities adjustment

Corporation tax

1(117)

5

(135)

5

(110)

Prior year adjustment (if negative) (239) (149) (163)

add back cash tax paid (for continuing operations) 287 259 (4)

Adjusted funds from operations 4,560 4,536 4,797

Interest cover (adjusted funds from operations / adjusted interest expense) 3.9x 3.9x 3.8x

♦ Business performance, excluding exceptional items, remeasurements and stranded cost recoveries 65

Efficiency metric – calculation

For the year ended 31 March (£m) 2013 2012 2011

Adjusted regulated controllable costs (at constant currency, excluding bad debt expense)(a) 2,174 2,080 2,114

Regulated asset base

UK regulatory asset value(b) 22,564 20,615 19,101

UK capital additions adjustment(c) 1,173 1,021 1,050

Depreciation adjustment(d) (543) (507) (455)

23,195 21,129 19,696

US rate base (at constant currency)(e) 9,217 9,242 9,136US rate base (at constant currency)(e) 9,217 9,242 9,136

US capital additions adjustment (at constant currency)(f) 562 536 547

Depreciation adjustment(g) (215) (210) (222)

9,564 9,568 9,461

Total adjusted regulated asset base 32,759 30,697 29,157

Efficiency: adjusted regulated controllable costs / adjusted regulated asset base

6.6% 6.8% 7.3%

(a) 2012 & 2011 constant currency figures calculated by applying the average 2013 rate ($1.57 to £1.00) to 2012 and 2011 results.

(b) Opening UK RAV inflated to mid year prices.

(c) Adjustment to reflect mid-year growth in the asset base – adds 50% of the full year UK regulated capital investment.

(d) Adjustment to reflect mid-year depreciation – deducts 50% of the full year UK regulated depreciation.

(e) Opening rate base. Constant currency figures calculated by applying the average 2013 rate ($1.57 to £1.00) to 2012 and 2011 results.

(f) Adjustment to reflect mid-year growth in the asset base – adds 50% of full year US regulated capital investment.

(g) Adjustment to reflect mid-year depreciation – deducts 50% of the full year US depreciation66

Weighted average number of shares

For the year ended 31 March 2013 2012

Number of shares (millions):

Prior period as reported (weighted average) 3,565

Scrip dividend shares 94

Current period weighted average 3,664 -

67

Current period weighted average 3,664 -

Weighted average number of shares (2012 restated) 3,664 3,659

Business performance earnings (£m) 2,055 1,828

Business performance EPS (2012 restated) 56.1p 50.0p

UK Transmission

For the year ended 31 March 2013 (£m) RevenueDep’n &

Amortisation

Operating

Costs

Operating

Profit

Electricity Transmission Owner 2,165 (310) (809) 1,046

Electricity System Operator 895 (13) (885) (3)

Other Electricity 51 - (45) 6

Subtotal – Electricity Transmission 3,111 (323) (1,739) 1,049

Gas Transmission Owner 655 (142) (242) 271

Gas System Operator 431 (19) (154) 258Gas System Operator 431 (19) (154) 258

Other Gas 8 - (8) -

Subtotal – Gas Transmission 1,094 (161) (404) 529

French Interconnector 38 (4) (11) 23

LNG Storage 19 (1) (10) 8

Internal eliminations (16) - 16 -

Total Transmission 4,246 (489) (2,148) 1,609



Documents

Full Year Results - National Grid/media/Files/N/... · Full Year Results London |Thursday 16 May 2013. This presentation contains certain statements that are neither reported financial