The consideration payable by PPL Energy for the NECO Sale is US$3.8 billion (GBP2.7 billion) in cash, subject to a customary U.S. style completion accounts adjustment. In addition, National Grid USA will receive dividends, of approximately US$52 million for FY21 and an equivalent amount for FY22 on a pro rata basis up to the date of completion.

National Grid USA, PPL Energy and PPL each have made certain customary representations, warranties and covenants in the NECO SPA, which are subject to post-completion indemnification customary for U.S. style transactions.

Completion of the NECO Sale is conditional upon completion of the WPD Acquisition having occurred and receipt of certain antitrust and regulatory approvals in the U.S. and other customary conditions to completion. The NECO Sale is expected to complete before the end of the first quarter of 2022.

The NECO SPA may be terminated by either party if, among other things, the conditions to completion have not been satisfied or waived by the date that is twelve months from signing, subject to two three-month automatic extensions under certain circumstances or if the WPD SPA is terminated. There are no termination fees payable by any of the parties under the NECO SPA.

National Grid USA and PPL Energy will enter into a transitional services agreement in order to ensure a smooth continuation of the services provided by the Group to NECO for an interim period following completion. 


   7.         Intentions for the WPD Group

National Grid admires and greatly values the skills, knowledge and expertise of WPD's existing management and employees and therefore its current intention is to preserve the current WPD organisation, including the existing management team and culture, to ensure continuity of its strong track record. National Grid expects existing WPD personnel to continue to contribute to WPD's success and is therefore committed to attracting and retaining WPD talent. National Grid intends to maintain the WPD headquarters in Bristol and offices in other key locations, within the Group, and for WPD to be an important pillar of National Grid's UK business going forward. 


   8.         Financial effects of the Transactions and dividend policy

The Transactions are expected to be significantly earnings accretive from year one, generate a return in excess of National Grid's cost of capital and, taken together with the proposed NGG Sale, continue to be earnings accretive in the longer term.

Following the WPD Acquisition, National Grid's overall portfolio mix is expected to continue to deliver strong asset growth as well as superior long term regulated asset base growth, which alongside attractive returns are expected to continue to deliver a strong cash generation profile and further underpin our sustained progressive dividend policy.

On 2 March 2021, the Board announced that it had reviewed the Group's dividend policy in light of the RIIO-2 Final Determination and that from FY2021/22 onwards, the Group's dividend policy will aim to deliver annual dividend per share growth in line with UK CPIH inflation. The Board confirms that this policy is unaffected by the proposed transactions which further support this dividend policy.

National Grid remains committed to retaining an efficient balance sheet and a strong overall investment grade credit rating going forward 


   9.            Expected timetable to Completion

The WPD Acquisition is a Class 1 transaction under the Listing Rules and is therefore conditional upon the approval of shareholders at a General Meeting. National Grid will shortly publish a shareholder circular containing further details of the WPD Acquisition, the Board's recommendation, and the notice of the General Meeting which is expected to be held in late April 2021. Completion of the WPD Acquisition is expected to occur within the next four months and completion of the NECO Sale is expected to occur before the end of the first quarter of 2022.

FURTHER INFORMATION ON WPD, NECO AND NGG

Information on WPD

The WPD Group had gross assets of GBP16.0 billion at 31 March 2020 and reported a profit before tax of GBP750 million for the financial year to 31 March 2020.

The operations of each of the four DNOs owned by WPD are regulated under a distribution licence which, in conjunction with the agreed RIIO-ED1 regulatory framework, sets the requirements that WPD needs to deliver for its customers and the associated revenues it is allowed to earn for the eight-year period from 1 April 2015 to 31 March 2023. In addition to the base level of revenue which the DNOs are allowed to earn, there are incentives to innovate, and incentives relating to customer satisfaction, complaints handling, stakeholder engagement, connections and supply interruptions. The achievement or not of these targets can result in revenue rewards or penalties relating to these activities.

In addition to the DNOs, the WPD Group also consists of other smaller subsidiaries including WPD Smart Metering Limited, WPD Telecoms Limited and South Western Helicopters Limited. The primary purpose of these businesses is to support the DNOs and network related activities of the WPD Group, and they also provide certain services to third parties. The WPD Group also owns property companies to facilitate the management of non-network and investment properties of the WPD Group. These smaller subsidiaries, other than the property companies, generated an EBITDA of GBP11 million in the year to 31 March 2020. The property companies own properties with an asset value of GBP94 million at 31 March 2020.

Information on NECO

NECO had gross assets of US$5.2 billion at 31 March 2020 and reported an operating profit of US$206 million and net profit of US$122 million for the financial year to 31 March 2020 under U.S. GAAP.

Its electricity and gas distribution businesses are regulated by Rhode Island Public Utilities Commission and its electricity transmission business is regulated by the Federal Energy Regulatory Commission ("FERC"). NECO's service area covers substantially all of Rhode Island, equivalent to approximately 1,045 square miles and with a population in excess of one million. NECO's energy delivery business consists of electricity distribution facilities and a natural gas distribution system that provides utility energy delivery services to residential, commercial and industrial customers within its service area. NECO also owns transmission facilities that are operated by an affiliate, the New England Power Company, which is the designated FERC transmission operator in its service area.

Information on NGG

NGG had gross assets of GBP10.6 billion at 31 March 2020 and reported a profit before tax of GBP356 million for the financial year to 31 March 2020.

IMPORTANT NOTICES

Persons into whose possession this announcement comes should inform themselves about, and observe, any applicable restrictions and legal, exchange control or regulatory requirements in relation to the distribution of this announcement and the transactions referred to herein. Any failure to comply with such restrictions or requirements may constitute a violation of the securities laws of any such jurisdiction. The contents of this announcement should not be construed as legal, business or tax advice.

Notice to all shareholders

Any reproduction or distribution of this announcement, in whole or in part, and any disclosure of its contents or use of any information contained in this announcement for any purpose is prohibited.

The contents of this announcement should not be construed as legal, business or tax advice. Each shareholder should consult his, her or its own legal adviser, financial adviser or tax adviser for legal, financial or tax advice, respectively.

Notice to overseas shareholders

The release, publication or distribution of this announcement in certain jurisdictions may be restricted by law. Persons who are not resident in the United Kingdom or who are subject to other jurisdictions should inform themselves of, and should observe, any applicable requirements. Any failure to comply with these requirements may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law, the companies and persons involved in the transactions disclaim any responsibility or liability for the violation of such requirements by any person.

Non-IFRS financial measures

The following non-IFRS financial measures are referred to in this announcement:

-- Asset growth: 'Asset growth' is the annual percentage increase in our RAV (UK) and rate base (US) and other business balances (including the assets of National Grid Ventures and National Grid Partners) calculated at constant currency.

-- Regulatory asset base: A regulatory construct based on predetermined principles not based on IFRS. Regulatory asset base effectively represents the invested capital on which National Grid is authorised to earn a cash return. By investing efficiently in its networks, National Grid adds to its regulated asset base over the long term, and this in turn contributes to delivering shareholder value. National Grid's regulated asset base is comprised of the Group's RAV in the UK, plus its rate base in the US.

Exchange rate

Throughout this announcement, unless otherwise stated, the USD to GBP exchange rate used is $1.39 to GBP1.00.

No profit forecast or estimates

No statement in this announcement is intended as a profit forecast or estimate for any period and no statement in this announcement should be interpreted to mean that earnings or earnings per share ("EPS") for National Grid, WPD and the Group (both before and after completion of the transactions), as applicable, for the current or future financial years, would necessarily match or exceed the historical published earnings or EPS for National Grid or WPD, as applicable.

Websites

Neither the content of National Grid's website nor any website accessible by hyperlinks on National Grid's website is incorporated in, or forms part of, this announcement.

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03-18-21 0315ET