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14 January 2010
National Grid plcInvestor Update
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Cautionary statement
Unless otherwise stated, all financial data of National Grid contained in this presentation is as reported under IFRS. This presentation contains certain
statements that are neither reported financial results nor other historical information. These statements are forward-looking 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, results of operations and businesses, strategy, plans and objectives. Words such as
“anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “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 delays in obtaining, or adverse conditions contained in, regulatory approvals and contractual consents, unseasonable weather affecting the demand for
electricity and gas, competition and industry restructuring, changes in economic conditions, currency fluctuations, changes in interest and tax rates, changes in
energy market prices, changes in historical weather patterns, changes in laws, regulations or regulatory policies, developments in legal or public policy
doctrines, the impact of changes to accounting standards, technological developments and the ability to access capital markets and other sources of credit in a
timely manner on acceptable terms, especially considering the recent deterioration of market conditions in the global economy and financial markets. Other
factors that could cause actual results to differ materially from those described in this presentation include the ability to integrate the businesses relating to
announced or recently completed acquisitions with National Grid’s existing business to realise the expected synergies from such integration, the availability of
new acquisition opportunities and the timing and success of future acquisition opportunities, the timing and success or other impact of the sales of National
Grid’s non-core businesses, the failure for any reason to achieve reductions in costs or to achieve operational efficiencies, the failure to retain key
management, the behaviour of UK electricity market participants on system balancing, the timing of amendments in prices to shippers in the UK gas market,
the performance of National Grid’s pension schemes and the regulatory treatment of pension costs, and any adverse consequences arising from outages on or
otherwise affecting energy networks, including gas pipelines owned or operated by National Grid. For a more detailed description of some of these
assumptions, risks and uncertainties, together with any other risk factors, please see National Grid’s filings with and submissions to the US Securities and
Exchange Commission (the “SEC”) (and in particular the "Risk Factors" and "Operating and Financial Review" sections in its most recent Annual Report on
Form 20-F). Except as may be required by law or regulation, National Grid undertakes no obligation to update any of its forward-looking statements. The
effects of these factors are difficult to predict. 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 results to differ materially from those contained in any forward-looking
statement. The contents of any website referenced herein do not form part of this document.
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National Grid plc
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About us…
National Grid is an international electricity and gas company and one of the largest investor-owned energy companies in the world. We play a vital role in delivering gas and electricity to many millions of people across Great Britain and northeastern US in an efficient, reliable and safe manner.
Key Stats as at 31 March 2009
- Over 27,500 employees
- Market Capitalisation of £16.8bn* ($27bn)**
- Adjusted EPS up 6% to 50.9p
- Interest Cover of 3.1x within target range
- Revenue of £15.6bn ($25bn)**
NOTES* As at Jan 13th , 2010**Assuming a rate of $1.6/£1.
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Electricity - UK
UK
Gas – UK Electricity – US
Gas – US
National Grid is one of the world's largest utilities…
Our business model…
Low riskStrong investment pipeline
driving future growthBuilding on constructive regulatory relationships
Driving out-performance and creating value
Where we operate
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We are a low risk business…
NOTES(a) Measured on a business performance basis. Business performance results are the primary financial performance measure used by National Grid, being the results
for continuing operations before exceptional items, remeasurements and stranded cost recoveries. Remeasurements comprise gains or losses recorded in the income statement arising from changes in the fair value of commodity contracts and derivative financial instruments to the extent that hedge accounting is not achieved or is not fully effective. Stranded cost recoveries are costs associated with historic generation investment and related contractual commitments that were not recovered through the sale of those investments – these recoveries end in 2011.
� $ earnings exposure minimised by our natural debt hedge
� +/-10 cent move ≈ +/-£10m on earnings(a)LowCurrency
� No commodity exposure under UK agreements
� US rate-plans pass through commodity costsVery low
Commodity (energy)
� No UK demand exposure
� Residual exposure under some US rate plans – diminishing risk as new rate case filings include demand decoupling
LowDemand
� UK revenues RPI indexed, nominal US revenues (variety of protections against high inflation under US regulation)
� Over 50% of net debt index linked / floating rate
LowInflation / deflation
� ~95% of our activities(a) are regulated
� Portfolio of ~20 regulatory agreements
� Historically predictable revenues and cash flows
LowRegulation
NotesExposureRisk factor
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National Grid structure with Group borrowing facilities
National Grid plcBaa1 / BBB+ / BBB+
National Grid Holdings One plcNR / BBB+ / NR
National Grid USAA3 / BBB+ / NR
Niagara Mohawk Power Corp A3 / A- / NR
National Grid Gas plcA3 / A- / A
National Grid ElectricityTransmission plc
A3 / A- / A
Massachusetts Electric A3 / A- / NR
New England Power A3 / A- / NR
Granite State Electric
Nantucket Electric
Narragansett Electric A3 / A- / NR
KeySpan Corp Baa1 / A- / A-
KeySpan Gas East Corp A3 / A / A
The Brooklyn Union Gas Company NR / A / A+
Colonial Gas Co A3 / A- / NRBoston Gas Co. Baa1 / A- / NREssex Gas Co.EnergyNorth Natural Gas Inc
National Grid Generation LLC Baa1/ A- /NR
National Grid Electricity
Transmission plc
USCP $1bn: nil outstanding
ECP $1bn: nil outstanding
€15bn EMTN programme (joint with NGET)
National Grid plc
USCP $3bn: nil outstanding
ECP $1.5bn: c. $203m outstanding
€15bn EMTN programme (joint with NGET):
National Grid in issue € 6.03bn; NGET € 3.27bn
National Grid USA Group
$2bn NGUSA commercial paper programme: nil outstanding
€4bn NGUSA EMTN programme: €0.1bn issued
National Grid Gas plc
USCP $2.5bn: nil outstanding
ECP $1.25bn: nil outstanding
€10bn EMTN programme: €5.78bn issued
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09/10 Interim Results
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Financial headlines
� Very strong results
� Operating profit up 6%
� Profit before tax up by 16%
� Earnings per share up by 31%
� Sound financial position
� Funding for 2009/10 completed
� Operating cash flow up £747m*
� Credit ratings confirmed with stable outlook
� Well positioned for 2009/10
� Business performance, excluding exceptional items, remeasurements, and stranded cost recoveries for continuing operations.
� Operating profit, profit before tax, earnings per share performance and operating cash flow at actual FX.
* Pre tax operating cash flow on a business performance basis.
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£70m up
2008 2009
Operating profit
Operating profit
£1,149m£1,079m
at actual FX
� Operating profit before exceptional items, remeasurements and stranded cost recoveries
� Business performance, excluding exceptional items, remeasurements, and stranded cost recoveries for continuing operations.
£m
Transmission UK 549
Transmission US 88
Gas Distribution UK 385
Gas Distribution US (132)
Electricity Distribution & Generation US 169
Other activities 90
Operating Profit 1,149
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£747m up
Six months ended 30 September 2009 £m
Operating profit 1,149
Depreciation & amortisation 585
Pensions (409)
Working capital & other 282
Net operating cash flow 1,607
2008 2009
Operating cash flow
Net operating cash flow
£1,607m
£860m
at actual FX
� Significant improvement:
� Higher operating profit
� Working capital improvement
� Lower pensions payments
� Pre tax operating cash flow on a business performance basis.
� Business performance, excluding exceptional items, remeasurements, and stranded cost recoveries for continuing operations.
� Further details on pensions including IAS19 data and regulatory recovery principles available in the appendix.
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Interest, tax, and exchange rates
6 months ended 30 September 2009 2008
Net finance cost, actual FX (£m) (504) (524)
6 months ended 30 September 2009 2008
Tax, actual FX (£m) (93) (125)
6 months ended 30 September 2009 2008
Average $ / £ rate for the period 1.55 1.92
Closing $ / £ rate 1.60 1.78
£(7)m
14.3%
£20m down
Net finance costs
Effective tax rate
Full-year rate expected to be ~29%
Net currency benefit/(impact)
on earnings
� Business performance, excluding exceptional items, remeasurements, and stranded cost recoveries for continuing operations.
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Focus for 2009/10
Regulation
Driving efficiency
Disciplinedinvestment
� Regulatory progress in the US
� Constructive UK regulatory developments
� On track for improvement in efficiency metric
� $140m run rate KeySpan synergy savings
� Invested £1.5bn
� Already funded £1.3bn for 2010/11
� Credit ratings confirmed as stable
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Funding
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£(22)bn
£m
Net debt at 1 April 2009 (22,673)
Operating cash flow(a) 1,607
Interest & tax (599)
Investment(b) (1,461)
Dividends (420)
Other(c) 108
Net change in net debt (765)
Non-cash movements (mainly FX) 1,458
Net debt at 30 September 2009 (21,980)
1 April 2009 30 September 2009
Net debt
Closing net debt
£(22.0)bn£(22.7)bn
(a) Pre-tax operating cash flows on a business performance basis.
(b) Investment excluding Joint Ventures.
(c) Includes cash flows relating to exceptional items, stranded cost recoveries, and other items.
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Sound financial position
� 2009/10 funding complete
� £1.3bn pre-funding for 2010/11
� Credit ratings affirmed with stable outlook
� Rating metrics set to significantly strengthen this year
� First US OpCo issuances in 10 years
� 2009/10 and 2010/11 floating interest rates substantially ‘locked in’
2009/10
funding
requirement*
Funding to
date
2010/11
funding**
Working capital improvement Issued Pre-funding 2010/11
£2.5bn
£3.4bn
£0.4bn
£3.8bn
£1.3bn
~£3.0bn
* 2009/10 funding requirement as at 31 March 2009 based on an FX rate of $1.44 to £1.00.
** 2010/11 funding requirement as at 30 September 2009 based on an FX rate of $1.60 to £1.00.
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Recent funding – loans and bonds
-200
0
200
400
600
800
1,000
1,200
1,400
Jan
-08
Feb
-08
Mar-
08
Ap
r-08
May-0
8
Ju
n-0
8
Ju
l-08
Au
g-0
8
Sep
-08
Oct-
08
No
v-0
8
Dec-0
8
Jan
-09
Feb
-09
Mar-
09
Ap
r-09
May-0
9
Ju
n-0
9
Ju
l-09
Au
g-0
9
Sep
-09
Oct-
09
No
v-0
9
MECONIMONGUSANGNGETNGGas
$/£=1.45
Total funding for January 2008 to November 2009 was c.£7.7bn
£m equiv.
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Group Committed Facilities
0
500
1000
1500
2000
2500
3000
3500
4000
Oct-
09
Nov-0
9
Dec-0
9
Jan-1
0
Feb-1
0
Mar-
10
Apr-
10
May-1
0
Jun-1
0
Jul-10
Aug-1
0
Sep-1
0
Oct-
10
Nov-1
0
Dec-1
0
Jan-1
1
Feb-1
1
Mar-
11
Maturity
Total Amount (£m)*
KeySpan Corp
New England Power
NG Gas
NG ElectricityTransmission
National Grid plc
*USD/GBP = 1.6
Liquidity support – committed bank lines and cash
� c. £1.5bn of available cash at 30th September 2009
� Potential to hold more cash or increase bank lines
� c. £3bn of undrawn committed bank lines.
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Funding policies
Counterparty risk
� Controlled through credit limits, approvals and monitoring
procedures
� For multiple transactions with a single counterparty we usually use
a master netting agreement to reduce exposure to credit risk
Debt maturity profile as at 16th Nov 09 at £1=$1.67
Refinancing risk
� Controlled through limits on the amount of financing
obligations arising in any given year
� Limits the amount of debt falling due for refinancing in
any given time frame
Foreign exchange risk management
� Principle foreign exchange risk is $US
� ‘Natural hedge’: manage $US financial liabilities to match $US cash flows
� Hedge certain contractually committed foreign exchange transactions
Interest rate risk management
� We minimise total financing costs to manage interest cost and total financing cost below pre-set limits
� Exposure managed using fixed-rate and floating rate debt, interest rate swaps, swap options & forward rate agreements
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Treasury contacts
� Malcolm Cooper (Group Tax and Treasury Director):
D: +44 (0)20 7004 3340 [email protected]
� Andrew Kluth (Assistant Treasurer, Funding):
D: +44 (0)20 7004 3365 [email protected]
� Andy Mead (Senior Corporate Banking Manager):
D: +44 (0)20 7004 3369 [email protected]
� David Morgan (Senior Structured Finance Manager):
D: +44 (0)20 7004 3379 [email protected]
Group website: www.nationalgrid.com
Detailed debt investor information: www.nationalgrid.com/corporate/Investor+Relations/Debt
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Appendix
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Current US regulatory position
Regulatory entity Base allowed return Achieved return
New England Power
Narragansett (electricity transmission)
Canadian interconnector
KEDNY
KEDLI
11.14% 11.7%
11.14% 11.6%
13.0% 13.5%
9.8% 11.9%
9.8% 11.1%
Previously agreed
33%
(a) Includes Long Island generation rate base of $574m.
(b) Includes Granite State and Nantucket electric rate bases, totalling $131m.
Settlement reached / pending (a)
Rhode Island (gas) 7.6%
NiMo (gas) 4.8%
New Hampshire (gas) 4.4%
14%47%
To be filed/ already filed in the next 15 months (b)
Massachusetts Electric Company 7.0%
Rhode Island (electric) (filed June 2009) 2.3%
NiMo (electric) 6.7%
Boston gas
Colonial gas 8.3%
Essex gas
Massachusetts gas
53%
100%
% of US rate base
10.5%10.2%
9.54%
10.35%
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99% fully remunerated
2009/10 Disciplined capital investment
£0.5bn £0.6bn
£0.2bn
£1.6bn
£1.1bn
£0.2bn
£2.6bn
Plan Remuneration
Transmission Gas Distribution
Elec. Dist. & Gen. Non-regulated
� Not fully remunerated
� Customer contracts
� Within the next few years
� Within the year
£3.4bnCapital investment
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2006 Utility sector potential investment
2006 worldwide investment to 2020
Generation
Networks $6trn
� Replacement of ageing assets
� Major new transmission build
� 20% investment in US
$10trn
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2009 Greater clarity on growth potential
� Asset replacement
� Emerging energy policy
� Climate change
� Diversity of supply
2009 UK investment to 2020
2009 US electricity investment
to 2030
Electricity Networks
c$1trn
Generation
Generation
Networks c£70bn
£200bn
$1.5-2trnDisciplined
approach to investment
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Predictability of regulated cash flows is a key factor in our ratings – Group credit ratings
A/---A/---A3/---KeySpan Gas East Corporation
A+/---A/---Not ratedThe Brooklyn Union Gas Company
A-/---A-/A2Baa1/P2KeySpan Corporation
Not ratedA-/--Baa1/--Boston Gas Company
Not ratedA-3/---A3/---Colonial Gas Company
Not ratedA-3A2A32/---The Narragansett Electric Co.
Not ratedA-/A2A3/--Niagara Mohawk Power Corporation
Not ratedBBB+/A2A3/P2National Grid USA
Not ratedA-/A2A3/P2New England Power Co.
Not ratedA-/A2A32/P2Massachusetts Electric Co.
1NGG is also rated “A/Stable” by JCR 2Issuer rating 3Corporate credit rating
Not ratedA-3/---Baa12/---National Grid Generation LLC
A/---A-3/---A3/---National Grid Gas Holdings Limited
A/F2A-/A2A3/P2National Grid Gas plc1
Not ratedBBB+/A2Not ratedNational Grid Holdings One plc
A/F2A-/A2A3/P2National Grid Electricity Transmission plc
BBB+/F2BBB+/A2Baa1/P2National Grid plc
FitchS&PMoody’s Senior Unsecured / Short-Term ratings
The ratings set forth above are not a recommendation to purchase, hold or sell National Grid’s notes, that may be issued from time to time, inasmuch as the ratings do not comment as to market price or suitability for a particular investor. The ratings are based on current information we have furnished to the rating agencies and information obtained by the rating agencies from othersources. The ratings are only accurate as of the date hereof and may be changed, superseded or withdrawn as a result of changes in, or unavailability of, such information and, therefore, a prospective purchaser should check the current ratings before purchasing National Grid’s notes.
