National Grid : Annual Report and Accounts 2020/21 - Interactive

Annual Report and Accounts 2020/21

Bring Energy to Life

Annual Report

and Accounts 2020/21

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National Grid plc Annual Report and Accounts 2020/21

Bring Energy to Life

National Grid operates at the heart of the energy system, connecting millions of people safely, reliably and efficiently to the energy they use every day.

Highlights

Group financial highlights

We have continued to make strategic and operational progress while maintaining excellent safety levels across all our networks. We have retained a focus on our environmental sustainability record and employee engagement.

Statutory EPS (p)*

46.6		44.3
	36.8
20/21	19/20	18/19

Underlying EPS (p)*

54.2	58.2	58.9
20/21	19/20	18/19

Group Return on Equity (RoE)** %

	12.0	12.1
10.6
20/21	19/20	18/19

• From continuing operations.
• Group RoE in 2018/19 and 2019/20 has been recalculated to reflect the revision to decrease the comparative goodwill balances (see note 1F on page 137 for details).

Group operational highlights

Group safety performance (lost time injuries per 100,000 hours worked in 12-month period)

	0.12
0.10		0.10
20/21	19/20	18/19

Scope 1 and 2 greenhouse gas emissions (CO2 equivalent, m tonnes)

6.9	6.5	7.0
20/21	19/20	18/19

Employee
engagement (%)
81	77	73
20/21	19/20	18/19

Further reading

Front cover

We're excited to be a principal partner for COP26. COP stands for Conference of the Parties.

We're getting behind the conference because it's a unique chance to call for a more ambitious action towards a clean energy future.

For more information

nationalgrid.com/responsibility/environment/cop26

Online report

The PDF of our Annual Report and Accounts 2020/21 includes a full search facility. You can find the document by visiting the 'About us' section at nationalgrid.com/about-us/annual-report-and-accounts.

QR codes

Throughout the report there are

QR codes that you can scan to easily view content online. Simply open your camera app on your smartphone device to scan the code.

More detail

Throughout this report you can find links to further detail within this document.

Responsible business

National Grid has published its first annual Responsible Business Report (RBR). The RBR reports progress on the responsible business agenda, including against the commitments made in our Responsible Business Charter (RBC). You can find both documents by visiting nationalgrid.com/responsibility.

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Contents

1. Strategic Report
Business model	2
ur response to COVID-19	8
Chairman's Statement	10
Chief Executive's review	12
Our business environment	15
Delivering against our strategy	18
Key performance indicators	20
Innovation	23
Internal control and risk management	24
Viability statement	28
Financial review	30
Principal operations - UK	40
Principal operations - US	42
National Grid Ventures and other activities	44
Our stakeholders
- Section 172(1) statement	46		3. Financial Statements
Our commitment to being
		Statement of Directors' responsibilities	116
a responsible business	52
	Independent auditor's report	117
Task Force on Climate-related
		Consolidated financial statements	129
Financial Disclosures (TCFD)	61
			Company financial statements	217
2. Corporate Governance
		4. Additional Information
Governance at a Glance	68
Letter from the Chairman	69		The business in detail	226
			Internal control and risk factors	236
Statement of application of and
compliance with the UK Corporate			Shareholder information	240
Governance Code	70
	Other disclosures	245
Our Board	72
	Other unaudited financial information	250
Corporate Governance overview	74
	Commentary on consolidated
Audit Committee	83		financial statements	260
Finance Committee	88		Five‑year summary financial information	262
Safety, Environment and Health Committee	89		Definitions and glossary of terms	263
Nominations Committee	90		Want more information or help?	267
Directors' Remuneration Report	92		Cautionary statement	268

Picture by

Niamh O'Sullivan

US

Runner-up

Age group 12-16

Reporting currency

Our financial results are reported in sterling. We convert our US business results at the weighted average exchange rate during the year, which for 2020/21 was $1.34

to £1 (2019/20: $1.29 to £1).

Alternative performance measures

In addition to IFRS figures, management also use a number of 'alternative measures' to assess performance. Definitions and reconciliations to statutory financial information can be found on pages 250 - 259. These measures are highlighted with the symbol above.

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National Grid plc Annual Report and Accounts 2020/21

Strategic Report

Business model

Our business at a glance

National Grid plc is one of the world's largest investor-owned energy utilities, committed to delivering electricity and gas safely, reliably and efficiently to the customers and communities we serve.

Key:

UK Electricity Transmission (including ESO) UK Gas Transmission

US Regulated (New England and New York) National Grid Ventures and other activities

Statutory operating profit (%)

36%

12%

46%

6%

Underlying operating profit (%)

34%

13%

46%

7%

RAV, rate base and other assets (%)

32%

14%

44%

10%

National Grid owns a range of high-quality,long-term assets with low commercial risk profiles, typically supported by long-term contracts or stable regulatory arrangements. Our current operating model comprises our core regulated businesses, being UK Electricity Transmission, including the UK Electricity System Operator, UK Gas Transmission and our US Regulated business, which together generated over 90% of our operating profits this year. Alongside these, we also own a diverse and growing portfolio of commercial energy operations which form our National Grid Ventures business, and are reported on together with certain other non-core activities of the Group.

Our new operating model

National Grid's vision is to be at the heart of a clean, fair and affordable energy future in an industry sector where the pace of change is accelerating with increasing focus on decarbonisation, digitalisation and decentralisation. Faced with this, and in order to ensure we can effectively and efficiently deliver the financial, customer and regulatory outcomes that will help us on our journey towards net zero, building on the opportunities offered by digitalisation, from 1 April 2021, we are changing our operating model as a company, alongside the changes we are making to our culture as described on page 18.

The building blocks of this new operating model will be six business units, being:

• UK Electricity Transmission;
• the UK Electricity System Operator;
• UK Gas Transmission;
• New England;
• New York; and
• National Grid Ventures and other activities

which will each be run as end-to-end enterprises within the Group portfolio.

On 18 March 2021, National Grid announced it had agreed to buy Western Power Distribution (WPD) from PPL Corporation. At the same time, and conditional on the WPD Acquisition, we agreed to sell our Rhode Island electricity and gas distribution business to PPL and we announced that we will be initiating a process for the sale of a majority stake in our UK Gas Transmission and metering business later this year.

Conditional on completion of the purchase, WPD will form an additional UK business unit.

1,744

miles (2,806 kilometres) of underground electricity cable (2019/20: 1,391 miles; 2,239 kilometres)

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4,740

miles (7,627 kilometres) of high-pressure gas pipe (2019/20: 4,740 miles; 7,630 kilometres)