National Grid : 18 Jun 2020 - NG Focus

NG.Focus

Investor Relations | June 2020

One of the world's largest publicly listed utilities focused on transmission and distribution of electricity and gas. We play a vital role in connecting millions of people to the energy they use safely, reliably and efficiently.

Investment proposition

We aim to be a low risk business, focused on generating shareholder value through both dividends and asset growth by investing in essential assets under primarily regulated market conditions, to service long-term sustainable consumer-led demands

New York Stock Exchange NGG

Financial performance in 19/20

Business highlights in 19/20

• • Underlying operating profit up 1% to £3.5bn

  • • Business continuity plans successfully implemented in response to COVID-19

• • COVID-19 impact on earnings, primarily driven by a £117m increased provision for US bad debts

• • Underlying EPS down 1% to 58.2p reflecting improved regulated performance, offset by non-recurrence of prior year one-off benefits

  • • Continued progress on 2050 net zero emissions target; achieved 70% reduction on 1990 baseline; new interim target to achieve 80% by 2030

  • • Record capital investment of £5.4bn leading to strong asset growth of 9%

• • Group RoE of 11.7% (2019: 11.8%)

  • • Published long-term gas options for New York

• • Achieved 99% of allowed RoE in the US (9.3%)

  • • Business plans submitted for RIIO-2

• • Recommended final dividend to bring full year dividend to 48.57p, up 2.6%, in line with policy

  • • Cost efficiency programmes delivered around £100m savings

• • FY21 outlook: assumed COVID-19 underlying operating profit impact of approximately £400m

• • First renewable project commissioned through Geronimo since acquisition in July

1. Underlying results excluding exceptional items, remeasurements, timing and major storm costs

Strong and efficient balance sheet

Gearing and debt profile as at 31 March 2020

• • Appropriate level of debt funding for strong credit ratings, with gearing at 63%

  RPI linked 25%

• • Target retained cash flow (RCF) to net debt above 9%

  Debt 63%

  Floating£28.6bn rate 10%

  Fixed Rate 65%

• • Single A credit rating for UK operating companies and majority of US operating companies; NG plc rated BBB+

• • Scrip dividend option provides flexibility for growth

*Net debt includes 100% of hybrid debt, borrowings, associated derivatives and cash and current financial investments

London Stock Exchange

NG.

Good regulatory progress in 2019/20

US returns

* At actual currency

Capital investment $4.2bn

FY19: $3.5bn

Rate base $25.6bn

FY19: $22.9bn

Assets outside rate base $2.7bn

FY19: $2.5bn

Underlying operating profit £1.6bn

FY19: £1.6bn*

FY20 US Regulated capital investment

FERCMassachusetts

Rhode Island

New York

Regulation

• • All distribution rates have been refreshed within the last 3 years

• • ~50/50 debt:equity regulatory capital structure

• • Nominal returns provide a faster cash return

2019/20 RoE/Rate base ($m)

Rhode Island

Electric 11.9%

Rhode Island

FERC Mass

Gas 8.8%

NiMo Gas 8.7%NiMo Electric

KEDNY

7.7%

$0$25.6bn

Strong performance in the US in FY20

• • Rate base growth of 12%

• • Consistent achieved return on equity; 99% of allowed

• • Delivered over $30m of savings this year and remain on course to deliver $50m in 20/21

Rate case outlook

CY2020

KEDNY filing 1

KEDLI filing 1

2021

2022

2023

MA gas filing

MECO filing

NiMo rate filingRhode Island gas filing Rhode Island electric filing

1 Currently in settlement discussions with the regulator with new rates expected to be backdated to 1 April 2020

National Grid Ventures & Other

Capital investment £885m

FY19: £623m

Operating profit £242m

FY19: £400m

NG Ventures & Other

Total contribution £330m

FY19: £440m

Post-tax share £88m

FY19: £40m

Joint Ventures

• • NGV includes long term assets with a low risk profile and stable cash flows

• • Own and operate 4GW of electricity interconnection between UK and Europe, with a further 3.8GW under construction

• • Geronimo acquisition to provide US renewable generation opportunities

• • St. William joint venture with Berkley Group to unlock land value

Continued solid performance in the UK in 2019/20

UK RoE Combined 12.4%

FY19: 12.4%

Electricity Transmission

Other key financial metrics

Capital investment £1.0bn

FY19: £0.9bn

Regulated asset value £14.1bn

FY19: £13.5bn

Underlying operating profit £1.2bn

FY19: £1.1bn

Regulation

• • Single regulatory body - Ofgem

• • 8-year RIIO price control through to 2021

• • Incentives to promote innovative and efficient capital investments benefitting customers and shareholders

• • Cost allowances and revenues linked to RPI

• • Remunerated in part through RPI asset indexation

Gas Transmission

Other key financial metrics

Capital investment £0.2bn

FY19: £0.3bn

Regulated asset value £6.3bn

FY19: £6.2bn

Adjusted operating profit £0.4bn

FY19: £0.3bn

Good performance in the UK in FY20

• • Achieved outperformance of 230bps through innovation and efficiency

• • Focus on customer savings; over £700m generated to date under RIIO

• • Continued investment in maintaining the network

• • Delivered over £70m of savings this year and remain on course to deliver £100m in 20/21

Timeline on RIIO-T2

Final determination

Draft business plans submitted

Stakeholder group report to Ofgem

ESG performance and priorities

Environment

Enabling a fair and affordable transition to a clean energy economy

Net Zero

scope 1 and 2 GHG emissions by 2050 (1990 baseline)

70% reduction achieved in FY20

Economy

Growing portfolio of high quality assets

Assets by segment as at 31 March 2020

NG Ventures & Other 9%

US Regulated 46%UK Electricity Transmission 31%

UK Gas Transmission 14%

• • Power and heat networks at the heart of the energy system

• • Targeting annual asset growth of 5-7%*

*Assuming long run UK RPI Inflation of 3%

FY21 forecast capital investment by segment

Other

UK TransmissionNG Ventures

US Regulated

• • US regulated driven by mandated gas pipe replacement programmes; electric network resiliency, storm hardening and grid modernization; and decarbonisation of energy

• • UK regulated driven by asset health and network resilience

• • NG Ventures driven by interconnector programme

Key measures to deliver shareholder value

1. Underlying results excluding exceptional items, remeasurements, timing and major storm costs

Value added (at constant currency)

Captures total return per share created on an operational basis

Net asset growth +

Cash dividend

-

Growth in adjusted net debt =

Value added

Note: value added excludes Cadent sales proceeds

Group return on equity (RoE)

12.3% 12.3% 11.7% 11.8% 11.7%
15/16	16/17	17/18	18/19	19/20

2019/20

£3.7bn +

Dividend policy to grow DPS at least in line with UK RPI

£0.9bn

£2.0bn

58.9p/share

£2.6bn =

-

*Excludes 84.375p special interim dividend related to sale of UK Gas Distribution (NGGD)

Important notice

This document 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 'aims', 'anticipates', 'expects', 'should', 'intends', 'plans', 'believes', 'outlook', 'seeks', 'estimates', 'targets', 'may', 'will', 'continue', 'project' and similar expressions, as well as statements in the future tense, identify forward-looking statements. Furthermore, this document, which is provided for information only, does not constitute summary financial statements and does not contain sufficient information to allow for as full an understanding of the results and state of affairs of National Grid, including the principal risks and uncertainties facing National Grid, as would be provided by the full Annual Report and Accounts, including in particular the Strategic Report section and the 'Risk factors' section on pages 212 to 215 of National Grid's most recent Annual Report and Accounts for the year ended 31 March 2019 as updated by National Grid's unaudited half-year financial information for the six months ended 30 September 2019, published on 14 November 2019. Copies of the most recent Annual Report and Accounts are available online atwww.nationalgrid.comor from Equiniti Limited. Except as may be required by law or regulation, National Grid undertakes no obligation to update any of its forward-looking statements, which speak only as of the date of this document. The content of any website references herein do not form part of this document.

Further information

Nick Ashworth

Director of Investor Relations (Interim)

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Jon Clay

Investor Relations Officer T [phone] M [phone]

National Grid plc 1-3 Strand

London WC2N 5EH United Kingdom

James Flanagan

Investor Relations Manager (US)

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Caroline Dawson

Investor Relations Manager

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Peter Kennedy

Investor Relations Manager

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@Grid_Media

investors.nationalgrid.com