National Grid : Results Statement

National Grid	2020/21 Full Year Results Statement

Building a platform to lead the energy transition

London | 20 May 2021: National Grid, a leading energy transmission and distribution company, today announces its Full Year results for the period ending 31 March 2021.

John Pettigrew, Chief Executive, said:

"In the past year we have successfully navigated the challenges of COVID-19, delivered over £5 billion of capital investment and achieved a solid underlying financial performance. This is testament to the strength and resilience of our business model and the unwavering commitment of our employees.

We also announced the transformational acquisition of WPD which will ensure National Grid is at the heart of the energy transition in the UK and enhance the future growth profile of the Group. National Grid has an exciting future, with numerous opportunities in the UK and US to provide energy security and support the delivery of net zero. Our critical role in the energy sector, alongside our position as a principal partner at COP26, provides us with a unique opportunity to call for more ambitious action towards a clean energy future and a strong platform from which to generate value for all our stakeholders.

Our confidence in the Group's prospects is reflected in the ambitious five-year outlook for capital investment, asset growth and earnings, which we are announcing today."

Financial Summary

Year ended 31 March - continuing operations

		Statutory results				Underlying1
		2021	2020	% change	2021	2020	% change
Operating profit (£m)		2,895	2,780	4 %		3,283	3,454	(5)%
Profit before tax (£m)		2,083	1,754	19 %		2,407	2,493	(3)%
Earnings per share (p)		46.6	36.8	27 %		54.2		58.2	(7)%
Dividend per share (p)		49.16		48.57	1 %		49.16		48.57	1 %
Capital investment (£m)		5,047	5,405	(7)%		5,047	5,405	(7)%

3,523 million weighted average shares for 2020/21 (2019/20: 3,461 million).

Highlights

• Transactions progressing, WPD acquisition approved by shareholders - we expect WPD completion by July.
• Regulatory milestones reached with the RIIO-2 Final Determination and Joint Proposal for KEDNY-KEDLI.
• COP26 principal partner and new Scope 3 targets set for the Group.
• Statutory operating profit up 4% to £2.9 billion principally driven by environmental exceptional charges made in the prior year, partly offset by increased under-recoveries and higher storm costs.
• Solid financial performance with underlying operating profit down 5% to £3.3 billion primarily driven by the impact of COVID-19.
• £5.0 billion of capex across the Group, including continued investment in UK and US critical infrastructure and the commissioning of IFA2 between the UK and France.
• Recommended final dividend to bring full year dividend to 49.16p, up 1.2%, in line with policy.

Financial Outlook and Guidance

• Financial outlook over the 5 year period 2020/21 to 2025/26:

1 'Underlying' represents statutory results from continuing operations, but excluding exceptional items, remeasurements, major storm costs (when greater than $100m) and timing. These and a number of other terms and performance measures used in this document are not defined within accounting standards and may be applied differently by other organisations. We have provided definitions of these terms on page 69 and 70 and reconciliations of these measures on pages 69 to 80. These measures are not a substitute for IFRS measures, however the Group believes such information is useful in assessing the performance of the business on a comparable basis.

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National Grid	2020/21 Full Year Results Statement

• • Total cumulative capex of £30-£35 billion;
  • Asset growth CAGR2 of 6-8% backed by strong balance sheet;
  • Driving underlying EPS CAGR of 5-7%;
  • Credit metrics to remain within current rating thresholds.
• This guidance is based on the inclusion of WPD, the sale of NECO (Rhode Island) completing in Q1 of CY2022 and the sale of a majority stake of Gas Transmission being completed during FY2022/23.

Contacts

Investor Relations

Nick Ashworth	[phone]
Angela Broad	[phone]
Jon Clay	[phone]
James Flanagan	[phone]
Caroline Dawson	[phone]
Peter Kennedy	[phone]

Media

Molly Neal	[phone]
Surinder Sian	[phone]

Teneo

Charles Armitstead	[phone]

Webcast details

Management will host a live webcast and Q&A at 09:15 (BST) today. The webcast link is https://streamstudio.world-television.com/786-1014-28364/en(registration required). Please use this link to join via a laptop, smartphone or tablet. Participants can register to ask a question via the webcast screen. A replay of the webcast will be available soon after the event at nationalgrid.com/investors

For participants unable to join the webcast the presentation is available in audio-only using the following details:

UK dial-in numbers	+44	(0) 203 936 2999 (Local)
US dial-in numbers	[phone] (Local)
All other locations	+44	20 3936 2999
Access Code	131 833

The 2021 Annual Report and Accounts (ARA) is expected to be publicly available on 8 June 2021. You can view or download the ARA from National Grid's website at nationalgrid.com/investorsor request a free printed copy by contacting [e-mail]

Use of Alternative Performance Measures

Throughout this release we use a number of alternative (or non-IFRS) and regulatory performance measures to provide users with a clearer picture of the regulated performance of the business. This is in line with how management monitor and manage the business day-to-day. Further detail and definitions for all alternative performance measures are provided on pages 69 to 80.

2 Compound Annual Growth Rate

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National Grid	2020/21 Full Year Results Statement

2020/21 OVERVIEW

A good performance despite the challenge of COVID-19

In 2020/21, National Grid delivered good operational progress with high levels of network reliability across all our service territories - this despite the significant challenges throughout the year from COVID-19.

During the year, we achieved a Lost Time Injury Frequency Rate (LTIFR)3 of 0.1, in line with our Group target of 0.1, and an improvement on prior year. In the US, we achieved an LTIFR of 0.12 compared to 0.16 in the prior year. Tragically, one of our US contractors lost his life in November at our Investment Recovery Center in Syracuse, New York. We immediately initiated an investigation into the cause, as did the contractors, and we have reviewed procedures to ensure that lessons learned are shared extensively across the Group. National Grid Ventures (NGV) saw LTIFR rise to 0.15, compared to 0.05 in the prior year, through three minor site accidents. In the UK, we delivered our best ever year of safety with a LTIFR of 0.04 compared to 0.07 in the prior year.

Across the Group, capital investment decreased by £210 million at constant currency to £5,047 million, a decrease of 4% (or 7% at actual exchanges rates). This decrease was principally driven by lower UK Gas Transmission spend (completion of the River Humber Gas Pipeline Replacement Project); lower interconnector capex and non-recurrence of the National Grid Renewables (formerly Geronimo) acquisition for NGV; partially offset by higher US spend on network repairs following increased storm activity, increased US transmission project spend, and higher capital spend on UK Electricity Transmission projects (Hinkley-Seabank and London Power Tunnels 2). When combined with RPI inflation, capital expenditure drove Group asset growth of 5.6%.

A strong operational response to COVID-19

Across the year, COVID-19 has had a significant impact on the way we work. As the crisis unfolded, we successfully implemented business continuity plans in the UK and US to keep our employees safe, to ensure the safety and well-being of our customers, and to maintain network reliability across the communities we serve.

In the UK, the March 2020 lockdown meant there was an initial suspension of our capital programmes allowing us to put appropriate arrangements in place such as PPE and social distancing. Across the year, our capex programme was largely unaffected by COVID-19 as we worked closely with contractors and suppliers across all our projects to minimise delays, including major projects such as the London Power Tunnels 2, the IFA2 and North Sea Link interconnectors, and the Hinkley-Seabank connection. During the summer, electricity demand fell on occasions to 20% below expected levels with zero carbon sources making up their largest ever share of the power mix. For our Electricity System Operator (ESO) business, this meant our control room engineers taking more actions, on more days, increasing and decreasing sources of power to maintain system stability and security.

In the US, our COVID-19 Health and Safety Plan served as a guideline for all employees and contractors throughout the year. We have ensured that safety expectations have been made clear for new ways of working, allowing us to deliver our critical investment whilst limiting the impact of the pandemic on our capital delivery programme. Updated working guidance has continued for our field force including limits on team sizes and single occupancy in vehicles. Our teams have continued to reconnect customers speedily during a year of significantly increased storm activity, working successfully through lockdown and social distancing requirements. We also conducted more than 32,000 virtual home energy assessments in New England when in-person home energy assessments were suspended due to COVID-19.

Supporting our communities

Throughout the year, our employees have continued to support our communities through volunteering and providing time to support charities and the most vulnerable. As part of this, we set up Grid for Good to help address the effects of the economic downturn in the UK and US which has seen youth unemployment double during the pandemic.

In the UK, the Company made donations to the National Emergency Fund and Trussell Trust, and we donated 400 tablet devices to University Hospitals Birmingham. National Grid was also one of 200 signatories to an open letter from UK business leaders to Government calling for the alignment of economic recovery plans with the

3 Employee and contractor lost time injury frequency rate per 100,000 hours worked.

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National Grid	2020/21 Full Year Results Statement

UK's wider environmental and climate goals, and for 100,000 jobs to be created in the energy sector as we work towards net zero.

In the US, the Company has provided economic development grants to seven Western New York initiatives to grow the regional economy following COVID-19. Financial donations were made to support hunger relief and services for people in need and struggling due to the impact of the pandemic. We also donated to Feeding America's hunger action month, a partnership with Feeding America who support over 45 food banks across Massachusetts, New York and Rhode Island. This is an example of the Company's ongoing efforts to support local communities with charitable donations in the US since the beginning of the pandemic.

Supporting our customers

Throughout the year the Company has continued to provide ways to help customers manage their bills. In the US, we suspended our debt collection and customer terminations resulting in lower customer collections and additional provisioning for doubtful debts. As part of our upstate New York rate plan filing, we proposed up to $50 million in COVID-19 relief to support our most economically vulnerable customers as well as businesses struggling from the financial impact of the pandemic. We also decided to postpone by three months our Niagara Mohawk filing for new rates in upstate New York. Our response to the COVID-19 pandemic has also led to improvements in customer satisfaction. In Q4 2020, the Cogent Energy Report, a national survey of 140 US utilities, ranked our response to the pandemic as fifth out of twenty five large Eastern US electric utilities.

In the UK, we took a leading role in the industry, actively supporting Ofgem's measures to protect customers by relaxing network charge payment terms for suppliers and shippers facing cash flow challenges as a result of COVID-19. The procurement team also kept in regular contact with our critical suppliers to ensure early identification of potential supply chain issues and to ensure the necessary support was available where required.

Financial impact on our business

We previously guided that the impact of COVID-19 on 2020/21 underlying operating profit was expected to be around £400 million. Our teams have worked hard to mitigate COVID-19 related costs throughout the year, and we are pleased that the estimated out-turn is £355 million (before cost recoveries), below the expected impact we previously guided to.

In addition, we have recognised £59 million as revenue recovery for the commodity portion of some of our COVID-19 bad debts. Therefore, our year end underlying operating profit impact from COVID-19 is £296 million, with the broad areas driving this remaining unchanged. Our estimated impact for each is as follows:

• a residual bad debt cost of £120 million;
• a shortfall of revenue under existing rate plans of £78 million, principally through the suspension of late payment fees in the US, fewer US customers requesting 'protected status' due to the moratoriums on disconnections, and lower customer income in the UK;
• a £70 million impact from delays to agreeing a settlement for our filing for new rates in KEDNY and KEDLI, downstate New York; and
• net direct costs of £28 million relating to enabling safe working (PPE, cleaning, sequestering staff, IT for remote access) and costs associated with delays to a number of planned capex works.

We also guided to a cash flow impact from COVID-19 of up to £1 billion. The estimated cash impact for the full year is around £600 million. As our regions emerge from COVID-19 during FY2021/22, we continue to expect an impact to be felt from weaker demand, some lower revenues and lower cash collection from our US customers. As we have guided previously, we remain confident that we will be able to recover a majority of these COVID-19 related costs either through existing regulatory mechanisms or through separate filings.

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National Grid	2020/21 Full Year Results Statement

Operational and regulatory progress in 2020/21

Across the Group, we achieved an RoE of 10.6% in 2020/21, down 140 basis points against prior year (2019/20: 12.0%4). This was principally driven by a year-on-year fall in the US Regulated RoE through additional impacts associated with COVID-19 and a significant increase in non-deferrable storm activity. UK Transmission RoE was broadly similar to prior year.

We have continued to make good progress in our US regulatory strategy as we align our rate filings and agreements with the environmental goals of the states where we operate. We have filed a Joint Proposal for new rates for our downstate New York businesses KEDNY-KEDLI, and during the year filed for new rates for Niagara Mohawk in upstate New York and for our Massachusetts Gas business. In the UK, we have accepted the majority of the RIIO-2 Final Determination and we have continued to make good progress on our interconnector and renewable portfolios.

A year of continued growth in the US regulated business

We achieved good operational performance across our US regulated business during 2020/21 with an electric distribution network reliability of 99.92%, despite the significant challenges of COVID-19 and increased storms. In addition, investment in the safety and reliability of our US networks has continued, with capex increasing year-on-year.

During the year, the financial performance of the US regulated business was impacted by additional costs of COVID-19, and a greater number of storms, with our achieved RoE decreasing by 210 basis points to 7.2% (excluding COVID-19 related bad debts). Adjusting for these headwinds, and the impact of rate case delays, the RoE would have been 8.6% or 92% of the allowed return.

The level of major and minor storm activity increased significantly across our service territories during the year, with the number of major storms more than doubling to 36, up from 15 in the prior year. In the face of this challenge, we delivered an excellent record in reconnecting customers across our service territories affected by storms. In October, we saw our service territories experience the third most impactful storm in the last 15 years. Over 550,000 customers lost power in New York during this storm, but we managed to reconnect 95% in less than 72 hours and avoided incurring any penalties or fines. Our operational response to increased storms has continued to be strong, particularly with the need to manage our Incident Command Structure remotely through COVID-19 restrictions.

As a result of this increased activity we saw deferrable storm costs of $201 million, up from $98 million in the prior year, and non-deferrable storm costs of $168 million, up from $74 million incurred in the prior year. The increase in non-deferrable storm costs is related to the higher number of minor storms driven by both increased activity and the fact that our restoration performance meant fewer storms met the classification of 'major storm'. To address this, we are taking a proactive approach that includes proposing new minor storm thresholds and funding levels in current and future rate cases, continued investment in network resiliency, enhancing our strategic planning, and adopting new technology to optimise our performance.

The severe weather conditions in 2020 caused extensive tree damage and impacted our electric infrastructure and reliability performance in comparison to other years, particularly in Massachusetts. Across the north-east region, the state was the most severely impacted and as a result we missed our electric service reliability targets for the year. We estimate that we will incur a service quality penalty of approximately $14 million in CY 2022. We are committed to providing a safe and reliable service and meeting our customers' expectations and we will continue to work to improve our reliability performance. Initiatives include expanding and enhancing our vegetation management programs, adopting new technology to optimise our operational performance, and engaging with outside experts to perform a study of weather impacts on our system. We expect these initiatives to improve performance and better manage the impact of severe weather events going forward.

Our US Regulated business invested $4.3 billion in the year, up 4% on prior year (at constant currency), helping to drive strong rate base growth of 8% for the regulated business. This increase and delivery of our capital investment programme was despite the impact of COVID-19 and the requirement to reschedule our capex programme at the beginning of lockdown in the spring of 2020. Around half of this capex, $2.1 billion, was across our gas distribution networks, of which 85% was mandated for safety and reliability purposes. This includes our Leak-Prone Pipe Replacement programme which this year saw a further 350 miles of pipeline

4 Revised from 11.7% in 2019/20

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