National Grid : Annual Report and Accounts 2023/24 - Interactive

Delivering the energy transition now

Annual Report and Accounts 2023/24

Strategic Report

Highlights

Group financial highlights

Statutory earnings	Underlying EPS (p)*	Group Return on
per share (EPS) (p)		Equity (RoE) (%)
60.0p	78.0p	8.9%

• Prior year comparatives have been restated to reflect the change in our underlying earnings definition to remove the deferred tax in UK regulated businesses (UK ET and UK ED).

Group operational highlights

Group safety	Scope 1 and 2	Employee
performance	greenhouse gas	engagement (%)
	emissions**
(lost time injuries (LTIs)	(CO2 equivalent, million tonnes)
per 100,000 hours worked
in 12-month period)	6.9	81%
0.08

• In setting our new near-term Science Based Targets initiative (SBTi) approved targets, we follow the WRI/WBCSD GHG Protocol guidance and recalculated our new baseline (2018/19), aligning with our Recalculation Policy. This includes recalculating 2022/23 and 2021/22 comparative figures to reflect improved calculation methodology.

Inside this report Strategic Report

National Grid at a glance	2
Our business model	4
Chair's statement	6
Chief Executive's review	7
Evolving our strategy	10
Our business environment	12
Succeeding with our strategy	16
Our key performance indicators	18
Internal control and
risk management	22
Our principal risks
and uncertainties	24
Viability statement	31
Our business units	32
Our commitment to being
a responsible business	37
Our stakeholders	42
Task Force on Climate-related
Financial Disclosures	44
Financial review	60

Corporate Governance

Chair's statement	74
Corporate Governance overview	76
Our Board	78
Board focus during the year	80
Key decisions and engagement	82
How the Board monitors culture	84

Further reading

Online report

The PDF of our Annual Report and Accounts 2023/24 includes a full search facility. You can find the document by visiting:

nationalgrid.com/investors/ resources

Responsible business

National Grid annually publishes its Responsible Business Report (RBR), which reports progress on the responsible business agenda, including towards the commitments made in the Responsible Business Charter (RBC). The RBR will be published in due course. You can find both documents by visiting:

nationalgrid.com/responsibility

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 2023/24 was $1.26 to £1 (2022/23: $1.22 to £1).

Further reading

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

Alternative performance measure In addition to International Financial Reporting Standards (IFRS) figures, management also uses a number

of alternative measures to assess performance. Definitions and reconciliations to statutory financial information can be found on pages 242 - 256. These measures are highlighted with the symbol above.

PwC Assured Data

Denotes information subject to limited assurance by PricewaterhouseCoopers LLP (see page 19 for full definition).

Board engagement	85
Committee reports	88
Directors' Remuneration Report	98

Financial Statements

Statement of Directors'
responsibilities	116
Independent Auditor's Report	117
Consolidated financial statements	127
Company financial statements	212

Additional Information

The business in detail	220
Internal control and risk factors	226
Shareholder information	232
Other disclosures	238
Other unaudited
financial information	242
Commentary on consolidated
financial statements	257
Definitions and glossary of terms	259
Want more information or help?	263
Cautionary statement	264

Cover image						Throughout the report
					there are QR codes
An overhead lines person working on electricity						you can scan to view
						content online.

transmission infrastructure in the UK.

Simply open the camera

app on your smartphone

to scan the code.

1

National Grid plc

Annual Report and Accounts 2023/24

National Grid at a glance

Our vision

is to be at the heart of a clean, fair and affordable

Our values

Do the right thing

Find a	Make it
better way	happen

energy future.

Our purpose is to

Stand up for safety every day

Put our customers first

Be inclusive, supporting and caring for each other

Speak up, challenge and act where something doesn't feel right

Take personal ownership for delivering results

Be bold and act with passion and purpose

Focus on progress over perfection

Follow the problem through to the end

Embrace the power and opportunity of diversity

Increase efficiency to help with customer affordability

Work with others to find solutions for customers

Commit to learning and new ideas

Where and how we are active in the energy value stream

Generation Transmission Distribution

Generation is the production of	Transmission networks transport energy	Distribution networks take high-voltage
electricity from fossil fuel and nuclear	over long distances at high voltage	electricity and high-pressure gas from
power stations, as well as from	(in the case of electricity) and high	the transmission networks, and deliver
renewable sources such as wind	pressure (in the case of gas) safely and	it at lower voltages and reduced
and solar.	efficiently from where it is produced,	pressures to homes and businesses,
	and onward to the distribution networks.	such that it can be used by consumers.

Supply

Supply of electricity and gas involves buying and selling it on to customers as well as customer services, billing and the collection of customer accounts. End-users include industrial, commercial and residential consumers.

2

National Grid plc

Annual Report and Accounts 2023/24

Strategic Report

Where we operate

United Kingdom

North America

Our core, regulated businesses focus on electricity transmission and distribution. We also balance national energy supply and demand as the system operator in Great Britain (GB). In the second half of calendar year 2024, this part of our business is expected to separate from the Group to form the core of the National Energy System Operator (NESO).

UK principal offices

Owned office space: Bristol, Cardiff, Castle Donnington, Plymouth, Warwick and Wokingham1.

Leased office space: London

Our core, regulated businesses focus on transmission, distribution and retail of gas and electricity.

US principal offices

Owned office space: Syracuse, Buffalo and Melville in New York. Northborough in Massachusetts.

Leased office space: Waltham and Boston in Massachusetts. Brooklyn in New York.

Our business units

UK Electricity Transmission	National Grid Ventures	New England (NE)
(UK ET)	(NGV)

We own and operate the high-voltage electricity transmission (ET) network in England and Wales.

The Strategic Infrastructure (SI) business

unit was established on 1 April 2023 to deliver major UK ET infrastructure projects through the Accelerated Strategic Transmission Investment (ASTI) framework.

UK Electricity Distribution (UK ED)

We own and operate the electricity distribution networks for the East Midlands, West Midlands, the South West and South Wales. The UK ED business includes a Distribution System Operator (DSO) which is overseen by an independent panel.

UK Electricity System

Operator (ESO)

We currently operate as the electricity

system operator across GB. Upon separation, this will form the core of NESO.

NGV's portfolio includes six electricity interconnectors between the UK and Europe, liquefied natural gas (LNG) import, storage and regasification, contracted thermal generation and Federal Energy Regulatory Commission (FERC) regulated transmission in the US.

As part of evolving our strategy to focus on networks and streamlining our business on 23 May 2024, we will be announcing the sale of Grain LNG, our UK LNG business, and National Grid Renewables, our US onshore renewables business.

Other activities

Other activities primarily relate to National Grid Partners, the venture capital investment and innovation arm of National Grid, as well as UK property, insurance and corporate activities.

We own and operate electricity transmission networks in Massachusetts, New Hampshire and Vermont. In Massachusetts, we also own and operate electricity and gas distribution networks.

New York (NY)

We own and operate gas and electricity transmission and distribution networks across upstate New York. We also own and operate gas distribution networks in New York City and on Long Island. We act as a regulated supplier to approximately 4.2 million residential and commercial customers across gas and electricity.

Further reading pages 32 - 36

1. Ownership of the Wokingham site will move with NESO.

Regulatory asset value (RAV),	Statutory operating profit (%)	Underlying operating profit (%)
rate base and other assets (%)

3

National Grid plc

Annual Report and Accounts 2023/24

Our business model

We use internal resources and strong relationships to do business, drawing on our technical expertise and culture to deliver value for our stakeholders and wider society.

Our resources and relationships

Internal resources

Physical assets

Our electricity and gas networks are built to last

for many decades and account for most of our asset base, which we continue to invest in. In the US,

we also own large-scale renewables.

Funding

We fund our business through a combination of shareholders' equity and debt. We maintain an appropriate mix of the two and manage financial risks prudently.

Colleagues

We are immensely proud of our people, who represent the diverse communities we serve. Together, we have spent decades installing and managing critical energy infrastructure, forging crucial relationships and building a culture of ambitious, diligent

and compassionate service.

Strong relationships

Our business relies on strong relationships with our stakeholders. These include the following:

Our customers, who depend on us to connect them to the energy they use and who (through a portion of their energy bills) pay to use our networks. These also include (in our transmission businesses) the electricity generators and gas suppliers who own the energy that flows through our cables and gas pipes.

Our contractors and suppliers, who have complementary experience, skills and resources, and with whom we agree mutually beneficial contractual arrangements and, wherever possible, take advantage of economies of scale and use sustainable and global sourcing opportunities.

National and regional governments and local communities, with whom we work to deliver networks that meet local and national needs.

The regulators and agencies who set the prices

we can charge and amounts we can invest for providing an economic, efficient and non-discriminatory service as well as health, safety and environmental standards.

What we do

Transmission

Our transmission networks deliver electricity to homes and commercial properties via distribution networks, and directly to industrial properties. We also facilitate the connection of generation assets to the transmission system.

Distribution and supply

In the UK and US, we deliver natural gas and electricity safely and reliably to millions of consumers connected to our distribution networks. In the US, we act as an energy supplier for many of our customers. Where they choose to buy electricity or gas from third parties, they pay us for distribution only.

Electricity interconnection

Interconnectors are high-voltage cables used to connect the electricity systems of neighbouring countries.

They allow capacity holders and system operators to trade excess power and balance supply and demand to maintain security of supply.

We have interconnectors linking GB to France, Belgium, Norway, the Netherlands and Denmark.

System operation

We ensure that supply and demand are balanced in real time across GB electricity transmission (ESO) and in our distribution licence areas (DSO). In the US, we are the DSO, but Independent System Operators are responsible for transmission.

Renewables

We are working with our partners to accelerate the development of a clean energy future. In the US, we have made significant investments in large-scale renewable energy projects, including wind and solar. In the UK,

we are not permitted to own generation assets.

Storage

In the US, we own and operate battery storage assets. This includes full scale systems in our regulated Massachusetts business and via NGV, as well as demonstration projects in our regulated businesses in both Massachusetts and New York. In the UK, our transmission license prevents us from owning electricity storage. We own and operate Grain LNG import terminal, one of only three terminals in the UK and one of the largest in Europe. Our world-class facility plays

an important role in ensuring secure energy supply in the UK. We also own LNG storage and liquefaction facilities in the US.

Generation

In the US, we own and operate electricity generation facilities on Long Island. Also on Long Island, we operate modern solar and battery storage projects with NextEra Energy Resources.

Why it matters

Full-year dividend

on page 6

Financial strength

By managing our operations safely and efficiently for the long term, we generate substantial cash flows. Coupled with long-term debt financing, this enables us to invest in growing our asset base and fund our dividend.

Efficient investment and lower capital costs

Efficient investment in our networks will deliver strong and sustainable growth in our regulated asset base over the long term. Innovation and flexibility reduce the amount of network reinforcement that is needed to deliver the capacity required for net zero.

Shareholder returns

Going forward, and following the rebasing of the 2023/24 dividend per share (DPS) following the Rights Issue, the Board will aim to grow annual DPS in line with UK CPIH, thus maintaining the DPS in real terms. The Board will review this policy regularly, taking into account a range of factors including expected business performance and regulatory developments.

Doing the right thing

Beyond the financial benefits for our Company and shareholders, all of us at National Grid are driven by a common vision to make our energy systems as clean, fair, affordable and safe

as possible.

4

National Grid plc Annual Report and Accounts 2023/24

Strategic Report

Further reading on our stakeholders

pages 42 - 43

How we create value

Our technical expertise

We combine our extensive skills, knowledge and capabilities with innovation to ensure we continuously create value for shareholders, customers and wider stakeholders alike.

Our expertise includes the following:

Engineering and asset management We invest in and maintain our assets across their life as safely, efficiently, reliably and sustainably as possible.

Safe Operations

We aim to provide excellent service

to all our customers. We operate safely and reliably, restoring power quickly after outages.

Capital project delivery

We add value for our stakeholders

by ensuring safe and effective delivery of large and complex infrastructure projects, ranging from large portfolios of smaller works to substantial standalone projects.

Modelling and forecasting

We have developed in-house modelling capability in the US and the UK to conduct scenario-based analysis to inform business planning and thought leadership as well as providing peer-review to planners elsewhere

in the industry.

Innovation

We are developing new technologies and innovations, both within our own businesses and through investment in external emerging technology companies, to optimise efficiency and help deliver net zero.

Our culture and values

Every day we strive to do the right thing, find a better way, and make it happen. Safety is our highest priority for our employees and the public.

We maintain high standards of ethical business. We also promote behaviours aligned with our values by providing an internal helpline for raising concerns, acting on feedback from our employee survey and recognising our employees through a Group-wide appreciation system, which was refreshed this year. This recognises both what they achieve and how they have achieved it.

Strategy and risk management

As the energy industry continues its transition to a cleaner future, our strategy articulates our priorities clearly, while positioning our business to bring long-term economic benefits into the regions where we operate. We regularly review our strategy and update our priorities accordingly.

We have well-established governance structures that include comprehensive risk management, strong controls and financial discipline.

The value we create

Customers

We enable the delivery of safe, reliable, resilient and affordable energy to customers in the communities we serve. We do this through operational excellence and financial discipline, keeping bills fair and affordable for our customers.

Investors

We aim to be a low-risk, dependable investment proposition, focused on generating shareholder value through dividends and asset growth. We deliver essential assets under primarily regulated market conditions and service long-term, sustainable consumer-led demands.

Colleagues

We aim to create a diverse, equitable and inclusive environment where our colleagues can make a positive contribution, develop their careers and reach their full potential.

Suppliers and contractors

We maintain responsible and efficient supply chains, develop new suppliers and align our interests with those of our suppliers and customers.

Communities and governments

We help national and regional governments formulate and deliver their energy policies and commitments. The taxes we pay help fund essential public services. We have an important role to play in sustainability, enabling the transition to a low-carbon future.

Regulators

Further reading on our strategy on pages 16 - 17 Internal control and risk management on pages 22 - 23

Our commitment to being a responsible business on pages 37 - 41 How the Board monitors culture on page 84

We aim to build trust with our regulators through constructive, transparent engagement and by striving to consistently deliver our commitments to a high standard.

Why it	Clean energy future	Fairness and	Job	Tax contribution and
matters		affordability	creation	economic impact
In addition to our own commitment	The transition to clean energy	We are providing employment	We recognise that our tax contribution
	to reduce our greenhouse gas	should be affordable for all,	opportunities and supporting	supports public services and the wider
	(GHG) emissions to net zero	and we will play our role in	our colleagues in developing	economy, and we endeavour to pay the
	by 2050, we are working with	ensuring no one is left behind,	the skills necessary to build a net	right amount of tax, at the right time, in
	governments and regulators	helping the places where	zero energy system. In 2023/24,	accordance with relevant tax laws. The
	to help them meet their carbon	we operate reach their	the direct and indirect economic	direct and indirect impact of our activities
	reduction targets and deliver	emissions targets.	impact of our activity supported	in 2023/24 helped to generate £3.6 billion
	the energy transition.		201,000 jobs in our regions.	in tax receipts across the UK and US.

5

National Grid plc

Annual Report and Accounts 2023/24

Chair's statement

We're translating policy support into full-scale construction programmes that create jobs, uplift communities, and ensure that the energy systems will be sufficiently flexible and resilient for the future.

Dear Fellow Shareholder,

Economies across the globe are focused on the critical need to invest in infrastructure. The motivations for doing so may differ - some are propelled by the need to address climate change through decarbonisation; others wish to use investment to jumpstart their economies; for others it's about being able to provide for future manufacturing and technology capability to maintain their edge. Global geopolitics and territorial security, including energy security, have moved up the hierarchy of priorities for virtually every country.

While the motivations may differ, the exigency is the same - to build for the future, to build at pace, and to build now.

National Grid is well positioned against this backdrop. The policymakers in the regions in which we do business - the UK and the US

- are of one mind on the urgency of investing

Final dividend of

39.12p

per share proposed to be paid on 19 July 2024

in energy infrastructure, particularly electricity transmission and distribution. It's now up to us to translate this policy support into full-scale construction programmes that create jobs, uplift communities, and ensure that the energy systems will be sufficiently flexible and resilient for the future.

Over the next six years, we anticipate that National Grid will commission vastly more new and upgraded infrastructure than it has in the previous 30 years. To give a sense of scale with just one example, our UK Strategic Infrastructure business unit will be installing over 7,456 miles (12,000 kilometres) of new cables across 17 new projects (including onshore and offshore conductor cables). That's equivalent to the diameter of planet Earth.

Mobilising the global supply chain on behalf of our customers and navigating the complexity of planning and permitting are twin challenges

• but the Board feels confident that our organisation is up to the demands that such a significant programme will bring.

Alongside our financial results, National Grid announced a significant increase in investment that cements our position as a leader in the energy transition on both sides of the Atlantic, as well as a fully underwritten equity raise

of £7 billion through a Rights Issue,

which provides shareholders with the pre-emptive opportunity to fund and benefit from our higher growth strategy.

None of this would be possible without people. Often in this Chair's letter, I express appreciation to our people for what they do. This year is no exception. But it seems appropriate to widen the expression of gratitude to include our alliance partners who are working with us in new ways, our regulators who are setting supportive frameworks under which we can make these investments, the technologists who are inventing the future

as we modernise our infrastructure, and the many communities and stakeholders who are on this journey with us.

But this vision of reconfiguring the energy system is only possible if investors support our programme. On behalf of the Board and our organisation, we thank you, our shareholders, for your continued support of the Company.

Paula Rosput Reynolds

Chair

Full-year dividend (pence per share)

The 2024 Annual General Meeting (AGM) of National Grid plc will be held as a hybrid event at 11.00am on Wednesday 10 July 2024. More details on the arrangements for this year's AGM, including how to attend virtually, can be found at: nationalgrid.com/investors

6

National Grid plc

Annual Report and Accounts 2023/24

Strategic Report

Chief Executive's review

We have moved firmly into a new phase of capital delivery, with more than £30 billion of investment over the past five years, and we see unprecedented levels of growth ahead.

Context in which we are operating

Over the past 12 months, National Grid has maintained focus on delivering for our customers and for you, our shareholders, against a complex landscape of macroeconomic and geopolitical challenges. High inflation and the ongoing cost-of-living crisis continue to be felt in both countries in which we operate, while geopolitical tensions across the world have continued to highlight the importance

of energy security and affordability.

It is a privilege to enable the provision of energy to regions that, collectively, generate around £16.8 trillion of economic activity, and to be trusted to build the infrastructure today that will serve our customers' needs tomorrow and for decades to come. What we do counts, and we never take it for granted.

From the completion of the tunnelling at London Power Tunnels to the commissioning of the longest subsea High-Voltage Direct Current (HVDC) cable in the world, to the energisation of the New York Energy Solution transmission project, we have delivered projects which will change the energy landscape for years to come. Each one of these, and the many other projects we have in flight, will contribute to reducing consumer bills in the long term, enhance the energy security and resilience of the countries where we operate, and enable the decarbonisation

of their respective economies.

Further reading: Our business units pages 32 - 36

There is, of course, an element of short-term uncertainty, with potential political change on the horizon in both the US and the UK. But our deep engagement with our key stakeholders is starting to pay off. The vital role of energy networks in achieving net zero has been recognised, and we have seen an increased focus by policymakers and regulators to remove the blockers to the energy transition.

The need for a strategic spatial energy plan

• a strategic and holistic approach towards deciding what energy infrastructure the UK needs, and therefore what needs to be built, where and when - is widely recognised; we've seen thinking start to progress on planning processes for nationally significant projects, and the start of a reformed approach to connect projects to the grid more efficiently and effectively.

In the US, we have seen a major programme of infrastructure investment authorised in New York; in Massachusetts, there are ongoing proceedings where serious consideration is being given to grid modernisation and the future role of natural gas, with recognition that the two grids are interrelated in assuring the resiliency of the Northeast US.

Business highlights

We care passionately about connecting projects to the grid as fast as possible and have connected more than 3 GW in the UK in the 12-month period, including Dogger Bank, the world's largest wind farm, and Viking Link, our interconnector with Denmark, which is the longest land and subsea cable in the world. Based on industry modelling, there is already more than enough capacity in the connections pipeline to meet the UK's net zero target.

But the connections pipeline continues to grow every month, with many projects unlikely to be developed.

That is why we have been pushing hard for the fundamental reforms that are needed to enable us to connect clean energy projects faster.

The Connections Action Plan made a good start, and proposals such as removing stalled projects from the connections pipeline and raising entry requirements for new projects looking to connect were a welcome step. We are continuing to work closely with the government and the regulator to achieve the further reforms necessary.

We have continued to deliver record levels of capital expenditure across National Grid, and this is set to increase still further,

as we look to deliver The Great Grid Upgrade

• the 12 onshore and 5 offshore projects which Ofgem awarded us in December 2022 under the Accelerated Strategic Transmission Investment (ASTI) framework.

7

National Grid plc

Annual Report and Accounts 2023/24

Chief Executive's review continued

That's why we set up our Strategic Infrastructure business unit in April 2023, which now comprises 374 people focused on capital delivery. We've made significant progress during the year, with our Yorkshire GREEN project receiving planning consent from the Secretary of State to begin construction this year, and our Eastern Green Link 1 and 2 joint construction projects are also due to begin in the coming year.

We are very mindful of the critical role that local communities play in hosting net zero infrastructure. We are deeply committed to engaging and consulting on our projects but, more than that, to ensuring that local communities are appropriately recognised for the role they play in delivering the energy transition for the benefit of all, and were pleased to respond to the UK government's community benefits framework consultation.

To support the delivery of these vital infrastructure projects at pace, we've also transformed our procurement processes and are collaborating more closely than ever with our supply chain. We've established

a £59 billion HVDC cable framework and Enterprise Delivery Model - the Great Grid Partnership - to give us faster access to our supply chain in a constrained market.

In the US, in conjunction with partners New York Transco and the New York Power Authority, we are constructing Propel NY, a project to remove bottlenecks from the New York high-voltage grid. We are also undertaking the Upstate Upgrade, an approximate $4 billion investment of at least 70 transmission enhancement projects, which we will deliver over the next six years to support a more resilient energy network in upstate New York and help reach the state's climate goals.

We also remain committed, with the support of our state regulators, to replacing aged gas pipelines, thereby assuring safety, reliability and a material reduction in methane emissions.

Increased demand on the Grid

Artificial Intelligence (AI) and advanced computing are putting significant demands on power systems. This is a development we have been tracking for some time, along with other new demands on the horizon for energy-intensive industries such as giga factories, data centres and biopharmaceuticals. These demands are challenging the independent system planners in the UK

and the US to revise their forecasts and plans for new generation.

Ensuring our transmission is in the right place at the right time is an essential element to meeting these future demands, and our projects and plans are well aligned with

the Grid's wider requirements.

Nevertheless, as an industry, utilities are having to refresh some of our assumptions on demand growth. In the UK, the ESO has used demand response programmes to balance supply and demand, mostly due to the variability of wind and solar resources. There is potential for greater use of such programmes, and we expect that we will deploy them in the US as more smart meters are installed to enable the response to

be calibrated.

However, growing demand - particularly at the times of system peak - makes the interplay between the electricity grid and the natural gas network an area of particular focus.

In Massachusetts, which is subject to extreme winter weather and limitations on imports

of both gas and electricity, we have signed a 6-year contract with Everett LNG import terminal to ensure the resilience of the energy system in Massachusetts. This contract fills a deficit in our peak day portfolio, where the simultaneous demands on the gas and electricity systems on the coldest winter days create a reliability risk.

We continue to embrace other opportunities to decarbonise while preserving, first and foremost, the reliability of our service to customers.

Regulation

We are deeply engaged with our regulators on rate cases in the US and price controls in the UK, to help evolve regulatory frameworks for the future that reflect the right balance of risk, returns and incentives, thereby delivering for customers, stakeholders and investors.

Our UK ED business is in the first year of

its five-yearRIIO-ED2 regulatory framework, and is on track to deliver its £7.5 billion investment programme.

In our UK ET business, we will be preparing our final submission to Ofgem in the year ahead for the RIIO-T3 price control which will be in place from 2026 to 2031.

In the US, we submitted our Electric Sector Modernization Plan (ESMP) to the Massachusetts Department of Public Utilities (MADPU) in January, outlining our plans and commitment to delivering a clean, fair and affordable energy future for all our customers while meeting the goals set out in the state's 2050 Clean Energy and Climate Plan.

We are also progressing the rate filing for Massachusetts Electric Company (MECO), which we filed in November 2023. And in New York, we have filed for a joint proposal for KEDNY and KEDLI and remain on track to file for new rates for Niagara Mohawk (NIMO) before summer this calendar year.

8

National Grid plc

Annual Report and Accounts 2023/24