£60 billion investment plan - building now, at pace, for the
future
London | 23 May 2024:
National Grid, a leading energy transmission and
distribution company, today announces its Full Year results for the
period ended 31 March 2024. Alongside
these results the company has announced a fully underwritten equity
raise of £7 billion through a Rights Issue.
John Pettigrew, Chief Executive, said:
"Today is a defining moment for
National Grid as we announce a significant increase in investment
that cements our position as a leader in the energy transition on
both sides of the Atlantic.
Governments and regulators are
moving with increased urgency to attract the levels of investment
required to meet their net zero ambitions, giving us improved
visibility and confidence over our medium term investment plan.
That is why we're announcing today a new five-year financial
framework. We will be investing £60 billion in the five years to
the end of March 2029 - that's nearly double the level of
investment of the past five years. We expect this significant
step-up in capital investment will deliver annual group asset
growth of around 10%, and 6-8% underlying EPS CAGR from a 2024/25
baseline, supported by a comprehensive financing plan that includes
a £7 billion equity raise.
This is an unprecedented time for
our industry that is creating significant opportunities for
National Grid today, over the next five years and for decades to
come. Our new five-year investment plan will deliver long-term
value and returns for our shareholders, support over 60,000 more
jobs, and accelerate the decarbonisation of the energy system for
the digital, electrified economies of the future.
Our readiness to take this step is
underscored by another year of strong financial and operational
performance, with underlying operating profit and underlying EPS
both up 6% at constant currency, with record investment of £8.2
billion across the Group. In the UK, our 17 major onshore and
offshore transmission projects are moving ahead at pace, and in the
US our $4 billion 'Upstate Upgrade' is underway representing the
largest investment in New York's electricity transmission network
for over a century. Our sixth interconnector, the Viking Link to
Denmark, came online in December and is the world's longest onshore
and subsea HVDC cable, demonstrating the world-class capabilities
within National Grid.
Alongside our new five-year
financial framework, we are also today further evolving our
strategy to focus on networks and will therefore be streamlining
our business as we announce our intention to sell Grain LNG, our UK
LNG asset, and National Grid Renewables, our US onshore renewables
business."
Financial Summary - Year ended 31
March
Continuing operations only (not
including UK Gas Transmission)
|
|
Statutory
results
|
|
Underlying1,2
|
|
Underlying at constant
currency1,3
|
|
2024
|
2023
|
%
change
|
|
2024
|
2023
|
%
change
|
|
2023
|
%
change
|
Operating profit
(£m)
|
4,475
|
4,879
|
(8%)
|
|
4,773
|
4,582
|
4%
|
|
4,518
|
6%
|
Profit before tax
(£m)
|
3,048
|
3,590
|
(15%)
|
|
3,395
|
3,258
|
4%
|
|
3,215
|
6%
|
Earnings per share
(p)
|
60.0
|
74.2
|
(19%)
|
|
78.0
|
74.5
|
5%
|
|
73.6
|
6%
|
Dividend per share
(p)
|
58.52
|
55.44
|
6%
|
|
|
|
|
|
|
|
Capital
investment4 (£m)
|
8,235
|
7,593
|
8%
|
|
|
|
|
|
|
|
3,692 million weighted average shares for 2023/24
(2022/23: 3,659
million).
1. Prior
year comparatives have been restated to reflect the change in our
underlying earnings definition to remove the deferred tax in UK
regulated businesses (NGET and NGED).
2. 'Underlying' represents statutory results from continuing
operations, but excluding exceptional items, remeasurements, major
storm costs (when greater than $100 million), timing and the impact
on underlying results of deferred tax in our UK regulated
businesses (NGET and NGED). 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 85 and reconciliations of these measures on pages 87 to 91.
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.
3. Constant currency
calculated using current year average exchange rate of $1.262
(2023: actual average exchange rate was $1.216).
4. Prior
year comparatives have been restated to reflect the change in our
'capital investment' definition (an alternative performance
measure, or APM), which now comprises: additions to property, plant
and equipment and intangible assets, equity contributions to joint
ventures and associates and capital expenditure prepayments made
during the period; but no longer includes the Group's investments
by National Grid Partners. This definition now aligns with our
statutory segmental disclosure of capital investment in note 2(c)
to the financial statements and as such, is no longer considered to
be an APM.
Highlights
A
new exciting phase
■ A refreshed strategy; to be a pre-eminent pureplay networks
business[1].
■ A significant step up in investment, around £60 billion over
the five years to March 2029, nearly double the prior five years.
This is expected to drive 10% Group asset growth CAGR, with
group assets heading towards £100 billion
by 2029.
■ Of the £60 billion capital investment over the five years to
March 2029, around £51 billion aligned to the EU Taxonomy to
decarbonise energy networks.
■ Nearly 80% of capital investment going into our Electricity
Networks; Group mix moving towards 80%/20% electricity/gas by
2029.
■ Investment programme backed by a balanced, comprehensive
financing plan, including a £7 billion fully-underwritten Rights
Issue, providing funding clarity out to at least the end of
RIIO-T3.
■ Streamlining of the group -
announcing our intention to sell Grain LNG, our UK LNG business,
and National Grid Renewables, our US onshore renewables
business.
Strong financial delivery
■ Underlying operating profit of £4.8
billion was up 4% at actual
exchange rates (6% at constant currency). This was principally
driven by growth in revenues in UK Electricity Transmission through
the RIIO-T2 price control, non-recurrence of Western Link
liquidated damages, and higher rates in New York and New
England[2]; partly offset by lower
RIIO-ED2 incentives for UK Electricity Distribution, lower
interconnector revenues, and lower property sales principally
related to the St William transaction.
■ Statutory operating profit for continuing operations was down
8% to £4.5 billion. This was principally driven by non-cash
exceptional charges in 2023/24 versus gains on disposals (NECO and
our Millennium investment) in the prior year; partly offset by
favourable timing and commodity swings and higher underlying
performance versus the prior year. Statutory earnings per share
(EPS) for continuing operations was down by 19% to 60.0p from 74.2p in the prior year.
■ Underlying EPS was up by 5% compared
to the prior year at actual exchange rates (6% at constant currency), driven by the above reasons
impacting underlying operating profit.
■ Recommended final dividend of 39.12p
to bring full year dividend to 58.52p, up
5.55% and in line with policy.
Record capital investment across our energy
networks
■ Capital investment of £8.2 billion
for continuing operations, an increase of 8% at actual exchange rates (11% on the prior year at constant currency). This
increase was principally driven by early investment relating to
Accelerated Strategic Transmission Investment (ASTI) in our UK
Electricity Transmission business, increased spend on our new
transmission projects in New York, including our Smart Path Connect
project, and higher asset condition and Grid Modernization spend in
New England; partially offset by lower investment in NGV compared
to the prior period due to lower spend on projects including the
IFA1 Sellindge converter station rebuild, Grain LNG expansion and
Viking Link interconnector as these projects neared
completion.
Entered a new phase of capital
delivery
■ Good progress on early ASTI projects, including the signing
of joint construction projects with ScottishPower Energy Networks
for Eastern Green Link 1 (EGL1) in August, and with Scottish and
Southern Electricity Networks (SSEN)
Transmission for Eastern Green Link 2 (EGL2) in June.
Construction contracts signed for both projects.
■ Development consent granted for our Yorkshire GREEN ASTI
project; planning examination completed for development consent of
our Bramford to Twinstead network reinforcement project.
■ Launched the 'Great Grid Partnership' with seven industry
partners that will initially help to deliver network design and
construction works on nine major onshore ASTI projects (part of a
£9 billion supply chain framework which will also support
infrastructure projects beyond 2030).
■ Launched our HVDC supply chain framework which, together with
SSEN Transmission and ScottishPower Energy Networks, aims to secure
the supply chain required for offshore cabling requirements across
UK networks beyond 2030.
■ Launched our $4 billion 'Upstate Upgrade', a collection of
more than 70 transmission enhancement projects through 2030 to
deliver a modernised, stronger, and cleaner energy network in
Upstate New York.
■ Executed contracts to secure the supply chain for the Upstate
Upgrade, including circuit breakers and power
transformers.
■ Received approval for our Propel NY Energy transmission
project on Long Island, a partnership between New York Transco and
the New York Power Authority, which will bring offshore wind into
the state.
■ Commissioned our sixth interconnector, the 1,400 MW Viking
Link to Denmark, the world's longest subsea
interconnector.
Continued capital re-allocation from National
Gas Transmission
■ Completed the sale of a further 20% equity interest in
National Gas Transmission to the consortium led by Macquarie Asset
Management and British Columbia Investment Management Corporation
(the Consortium), on equivalent financial terms to the 60% stake
sold to the Consortium in January 2023.
■ Agreed a new option with the same Consortium, exercisable
between 1 May 2024 and 31 July 2024, allowing it to acquire the
remaining interest.
Good
regulatory progress underpinning future growth
■ Welcomed the enactment of the UK Energy Act 2023 which
provides for an operationally independent National Energy System
Operator (NESO), introduces onshore competition for networks and
implements a 'net zero' duty for Ofgem.
■ Further progress from Ofgem and government to support the
step-up in investment required across UK energy networks, namely
the Future System and Network Regulation (FSNR), Ofgem's Sector
Specific Methodology Consultation (SSMC), and the Electricity
System Operator's 'Beyond 2030' publication.
■ Filed a joint proposal for new rates at our downstate New
York gas distribution businesses, KEDNY and KEDLI, including an
allowed Return on Equity (RoE) of 9.35%, and an increase of around
30% in capital investment compared to 2022/23.
■ Filed for new rates for Massachusetts Electric (MECO),
requesting a five-year rate plan with a RoE of 10.5%.
■ Filed the final version of our Electric Sector Modernization
Plan (ESMP) in Massachusetts, proposing $2 billion of investment
over the next five years in our electric distribution network to
help meet state clean energy goals[3].
Delivering on our responsible business and
decarbonisation commitments
■ UK Electricity Transmission delivered network reliability of
99.999998%. Overall reliability of over 99.9% across all our
electricity networks.
■ Updated our Responsible Business Charter to reflect our new
portfolio, focused on key pillars: environment, customers and
communities, and our people.
■ Achieved a 5.9% reduction in our
Scope 1 and 2 emissions versus 2022/23, a
11.8% reduction against the 2018/19
baseline. Total Scope 3 greenhouse gas (GHG)
emissions reduced by 1.7% year-on-year. Against
our SBTi approved target (which excludes sold electricity) our
Scope 3 GHG emissions increased by 0.8% principally driven
by associated emissions linked to increased procurement spend for
new energy infrastructure.
■ Connected 3,030 MW of renewable energy across our UK and US
transmission and distribution networks, an increase of 2,344 MW
compared to the prior year.
■ 78% of all Group capital
expenditure[4] was aligned with EU Taxonomy principles for
sustainable investment, compared to 75% in
the prior year.
■ Continued to provide financial support to those severely
affected by higher energy costs through our Energy Support Fund,
with £13 million distributed in our UK and US network
jurisdictions.
■ Provided almost 78,000 hours of
employee volunteering across our communities, having now reached
36% of our ten year Group commitment of
500,000 volunteering hours.
■ Group Executive diversity reached 53.8%, an increase of 8.3%
on the prior year. We remain on track for
our 2025 management gender and ethnic
diversity goals, reaching 35% and 17.6% respectively in
2023/24.
Delivered above our Group efficiency
target
■ Delivered a further £139 million of Group efficiency savings
during the year taking the cumulative efficiency savings to £513
million at actual exchange rates, significantly above our target of
£400 million savings by the end of 2023/24.
Financial Outlook and
Guidance
■ Guidance is based on our continuing businesses, as defined by
IFRS, including the UK Electricity System
Operator (ESO) until disposal. It excludes the minority
stake in National Gas Transmission, which is classified as a
discontinued operation.
■ Financial outlook over the five year period from 2024/25 to
2028/29:
■ Total cumulative capital investment of around £60
billion;
■ Group asset growth CAGRi of around 10% backed by
strong balance sheet;
■ Driving underlying EPS CAGRii of 6-8% from a
2024/25 EPS baseline, once adjusted for the Rights
Issueiii,iv;
■ Credit metrics consistent with current Group
rating;
■ Regulatory gearing to fall to low 60% by March 2025, then
trending back to the high-60% range by the end of
RIIO-T3.
■ For 2024/25, whilst we continue to expect strong operational
performance across the Group, we expect underlying EPS to be
broadly in line with our underlying 2023/24 EPS once this has been
adjusted by the number of bonus shares issued as part of the Rights
Issue. We then expect underlying EPS CAGR of 6-8% from a 2024/25
baseline, through to 2028/29, assuming an exchange rate of
£1:$1.25.
i. Group asset
compound annual growth rate from a FY24 baseline. Forward years
based on assumed USD FX rate of 1.25; and long run UK CPIH and US
CPI. Assumes sale of ESO, Grain LNG, and National Grid Renewables
before 2029. Assumes remaining 20% stake in UK Gas Transmission
treated as a discontinued operation and therefore does not
contribute group asset growth.
ii. Underlying
EPS compound annual growth rate from FY25 baseline. Forward years
based on assumed USD FX rate of 1.25; long run UK CPIH, US CPI and
interest rate assumptions and scrip uptake of 25%. Assumes sale of
ESO, Grain LNG, and National Grid Renewables before 2029. Assumes
remaining 20% stake in UK Gas Transmission treated as a
discontinued operation and therefore does not contribute to
underlying EPS.
iii. For more detail
on share count, see the 2024/25 Forward Guidance section. Our
2023/24 comparative underlying EPS of 70.8 pence per share is
estimated based on the weighted average number of shares of
3,692 million adjusted for 374 million new shares (being the number
of New Shares classified as 'bonus shares' pursuant to IAS33
calculated based on the closing middle-market share price of
£11.275 on 22 May 2024). For 2024/25 all bonus shares will be
included in the EPS calculation along with the pro-rated number of
fully subscribed shares once the proposed Rights Issue
completes.
iv. The securities
offered with respect to the proposed Rights Issue will not be and
have not been registered under the Securities Act of 1933 and may
not be offered or sold in the United States absent registration or
an applicable exemption from registration requirements.
Financial Key Performance
Indicators
Year ended 31 March
|
|
|
|
(£ million)
|
2024
|
2023
|
change %
|
Underlying operating profit (continuing) at constant
currency1:
|
|
|
|
UK Electricity
Transmission
|
1,314
|
1,107
|
19%
|
UK Electricity
Distribution
|
1,152
|
1,230
|
(6%)
|
UK Electricity System
Operator
|
80
|
31
|
158%
|
New England (prior year includes
NECO)
|
802
|
788
|
2%
|
New York
|
1,016
|
842
|
21%
|
National Grid Ventures
|
469
|
489
|
(4%)
|
Other
|
(60)
|
31
|
(294%)
|
Underlying operating profit (continuing) at constant
currency
|
4,773
|
4,518
|
6%
|
|
|
|
|
Capital investment (continuing) at constant
currency1:
|
|
|
|
UK Electricity
Transmission
|
1,912
|
1,301
|
47%
|
UK Electricity
Distribution
|
1,247
|
1,220
|
2%
|
UK Electricity System
Operator
|
85
|
108
|
(21%)
|
New England (prior year excludes
NECO)
|
1,673
|
1,470
|
14%
|
New York
|
2,654
|
2,363
|
12%
|
National Grid Ventures
|
662
|
955
|
(31%)
|
Other
|
2
|
13
|
(85%)
|
Capital investment (continuing) at constant
currency
|
8,235
|
7,430
|
11%
|
|
|
|
|
RCF/Net debt
|
9.2
|
9.3
|
-10bps
|
|
|
|
|
As at 31 March
|
|
|
|
Net debt
|
(43,607)
|
(40,973)
|
6%
|
|
|
|
|
UK RAV
|
30,356
|
28,292
|
7%
|
US rate base (£m at constant
currency)
|
25,097
|
22,517
|
11%
|
Total Group RAV and rate base (£m)
|
55,453
|
50,809
|
9%
|
NGV and Other businesses
(£m)
|
7,593
|
6,639
|
14%
|
Total (£m)
|
63,046
|
57,448
|
10%
|
|
|
|
|
Regulated asset growth
|
9.7%
|
11.4%
|
-170bps
|
Group return on equity
|
8.9%
|
11.0%
|
-210bps
|
1. Constant currency
calculated using current year average exchange rate of $1.262
(2023: actual average exchange rate was $1.216). See pages 88-91
for details. Statutory capital investment definition amended in
year to include capital expenditure prepayments and additional
equity investments in joint ventures and associates. Prior year
comparatives have been restated, as explained on page 1.
ESG Key Performance
Indicators
|
PwC
assurance1
|
2024
|
2023
|
change
|
Scope 1 and 2 greenhouse gas
emissions (ktonnes CO2e)
|
|
6,852
|
7,284²
|
(5.9%)
|
Scope 3 greenhouse gas emissions
(ktonnes CO2e)
|
|
27,384
|
27,867²
|
(1.7%)
|
Renewable energy connected to the
UK Transmission and Distribution Grids (MW)
|
|
2,444
|
132
|
1,752%
|
Renewable energy connected to the
US Transmission and Distribution Grids (MW)
|
|
586
|
554
|
6%
|
Group Lost Time Injury Frequency
Rate (LTIFR)
|
|
0.08
|
0.11
|
(0.03)
|
Employee engagement
index
|
|
81%
|
81%
|
-
|
Diversity percentage of the
workforce
|
|
|
|
|
Percentage female
|
|
24.6%
|
23.5%
|
1.1%
|
Percentage ethnically and racially
diverse
|
|
18.6%
|
17.5%
|
1.1%
|
1. We
engaged PricewaterhouseCoopers LLP (PwC) to undertake a limited
assurance engagement, using International Standard on Assurance
Engagements (ISAE) 3000 (Revised) 'Assurance Engagements other than
Audits or Reviews of Historical Financial Information' and ISAE
3410 'Assurance engagements on Greenhouse Gas Statements' over a
range of data points within our Responsible Business Report (RBR).
The metrics identified with the leaf symbol above have been
extracted from the RBR and included in the scope of their work.
Details of PwC's full limited assurance opinion and National Grid's
Reporting Methodology are set out in the RBR.
2. In setting our new
near-term science-based targets, we follow the WRI/WBCSD GHG
Protocol guidance and recalculated our new baseline (2018/19),
aligning with our Recalculation Policy. This includes recalculating
FY23 comparative figures to reflect improved calculation
methodology.
Contacts
|
|
Investor Relations
|
Nick Ashworth
|
+44 (0) 7814 355
590
|
Angela Broad
|
+44 (0) 7825 351
918
|
James Flanagan
|
+44 (0) 7970 778
952
|
Media
|
Molly Neal
|
+44 (0) 7583 102
727
|
Danielle Dominey-Kent
|
+44 (0) 7977 054
575
|
Lyndsey Evans
|
+44 (0) 7714 672
052
|
Brunswick
|
Dan Roberts
|
+44 (0) 7980 959
590
|
Results presentation and
webcast
|
John Pettigrew (CEO) and Andy Agg
(CFO) will host the results presentation at the IET London, 2 Savoy
Place, WC2R 0BL, at 09:15 (BST) today. A
live webcast and Q&A will also be available. Please use this
link to join via a laptop, smartphone or tablet:
https://www.nationalgrid.com/investors/events/results-centre. A
replay of the webcast will be available soon after the event at the
same link.
|
UK (and International)
|
+44 (0) 330 551
0200
|
UK (Toll Free)
|
0808 109 0700
|
US (Local)
|
+1 786 697 3501
|
Password
|
Quote "National Grid Full Year"
when prompted by the operator
|
|
The Annual Report and Accounts
2023/24 (ARA) will be published later
today. When published, the ARA will be available on National Grid's
website at nationalgrid.com/investors
|
|
|
|
|
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 84 to 86.
|
|
|
|
|
STRATEGIC OVERVIEW
Good operational performance in a year of record network
investment
In 2023/24, National Grid delivered good operational
performance with high levels of network reliability. Transmission
and distribution reliability remained steady at c.99-100% across
all of our networks, demonstrating the effects of our continued
investment in network reinforcement and
the steadfast commitment of our operational teams. High levels of
network reliability were also achieved despite 13 named storms
across our networks in the UK, and 13 major storm events across our
New England and New York service territories.
Safety performance
During the year, we achieved a
Lost Time Injury Frequency Rate (LTIFR)[5]
of 0.08, compared to 0.11 in 2022/23 and against our Group target of
0.10.
In August 2023, one of our UK
Electricity Distribution employees
tragically lost his life at a site in Ludlow, Shropshire, after
falling from height whilst performing overhead line work. Following
this tragedy, we worked closely with the individual's family,
friends and colleagues to support them. We also launched an
internal investigation in response to this incident, and we have
reinforced measures across our operations to seek to prevent such
tragedies. We continue to cooperate with the ongoing Health and
Safety Executive investigation.
In December 2023, one of our
Massachusetts employees tragically lost
his life after being struck by a vehicle driven by a member of the
public, with two other colleagues sustaining injuries. A police
officer, who was supporting our crew at the site, also lost his
life. We have extended support to our team and the families
affected through our Employee Assistance Programme. This incident
has underscored the unpredictable nature of our work environment,
prompting us to continue our efforts in safeguarding our employees
and partners.
A
record year of capital investment: full-year financial
performance
Group financial performance in
2023/24 was strong in an environment that has seen supply chain
inflation driven by higher demand from network owners across the
global market.
Our statutory operating profit is presented on page 21 which
includes the impact of exceptional items, remeasurements, major
storms and timing. A reconciliation to our Alternative Performance
Measures (APMs) is presented on page 87.
As set out in our recent pre-close
statement, going forward we will be reporting underlying earnings
excluding the impact of deferred tax in our UK regulated businesses
(NGET and NGED). Across the Group, underlying operating profit for
continuing operations increased by £255
million at constant currency to £4,773
million, an increase of 6% on the
prior year (4% at actual exchange rates).
This performance was principally driven by growth in UK Electricity
Transmission revenues through the RIIO-T2 price control,
non-recurrence of Western Link liquidated damages, and higher rates
in New York and New England[6]; partly
offset by lower RIIO-ED2 incentives for UK Electricity
Distribution, and lower property sales principally related to the
St William transaction.
Capital investment for continuing
operations increased by £805 million
at constant currency to a record
£8,235 million, an increase of
11% on the prior year (8% at actual exchange rates). This increase was
principally driven by early investment relating to ASTI in our UK
Electricity Transmission business, increased spend on our new
transmission projects in New York including our Smart Path Connect
project, and higher asset condition and Grid Modernization spend in
New England; partially offset by lower investment in NGV compared
to the prior year due to lower spend on projects including the IFA1
Sellindge converter station rebuild, Grain LNG expansion and Viking
interconnector as these projects neared completion.
When combined with RAV indexation,
capital investment drove Group asset growth of 9.7%, within our 8-10% Compound Annual Growth Rate
(CAGR) we published as part of our updated five-year financial
guidance in November 2022.
Return on Equity (RoE)
Across the Group, we achieved a
RoE of 8.9% in 2023/24, down on the prior year by 210 basis points
(bps). This decrease was driven principally by a lower contribution
from UK Electricity Distribution in the first year of RIIO-ED2,
lower non-regulated profits reflecting property sales in the prior
year, lower interconnector revenues, and a higher opening equity
which was driven by prior period performance, growth and RAV
indexation.
In the UK, we completed the third
year of RIIO-T2 in our UK Electricity Transmission business where
we delivered a RoE of 8.0%, up 50bps on
the prior year. This includes 100bps of
outperformance, principally reflecting delivery of capital projects
during the year. For UK Electricity Distribution, we delivered a
RoE of 8.5%, which included 110bps of
outperformance, mainly driven by our totex
efficiency programme including optimisation of our IT and digital
programmes, and synergy benefits across the
Group.
In the US, New York achieved a RoE
of 8.5%, broadly in line with the prior
year. This was principally driven by higher IT investments,
partially offset by lower controllable costs delivered through our
efficiency programme along with slightly higher Smart Path Connect
recoveries. In New England, the achieved RoE increased by 90bps to
9.2% helped by a net 50bps of one-offs
largely related to the recovery of historical property tax.
For further information on RoEs
for each of our business entities, please refer to the Business
Review section on pages 32 to 53.
A
new phase of capital delivery: positioning the Group for future
growth
Our financial performance reflects
our role in the energy transition and a new phase of capital
delivery that is firmly underway. With capital investment reaching
a record £8,235 million in 2023/24, we
have stepped up our investment in the 17 major onshore and offshore
ASTI projects in the UK, whilst in the US we are progressing a
number of major transmission projects to unlock renewable
generation and upgrade infrastructure across our
jurisdictions.
The progress we have made during
the course of the year with partners, across supply chains, and on
policy measures, and across both the UK and US Northeast, gives us
more confidence around the scale and profile of our investment
programme through the rest of this decade, and the regulatory
frameworks that will sit around this investment. This confidence is
shown in the announcement of our new five-year financial framework
to March 2029, which is expected to see a near doubling of
investment across the Group over the coming five years, to around
£60 billion, versus the past five years. For further information on
our new framework, please refer to the Five-Year Financial
Framework section on page 18.
UK: The Great Grid Upgrade and ASTI
In March 2023, we announced The
Great Grid Upgrade, our plan to build new transmission
infrastructure, and upgrade the existing grid, to bring clean,
green energy from where it is generated to where it is needed by
homes and businesses. The Great Grid Upgrade is the largest
overhaul of the grid in generations. In the next six years we will
be required to build more than five times the amount of new
electricity transmission infrastructure than has been built in the
past 30 years.
The 17 ASTI projects, awarded to
us by Ofgem in December 2022, form a significant part of this grid
upgrade. In August, Ofgem published transmission licence
modifications which formally placed the ASTI projects into
Transmission Operators' licences, including our own. The projects
will focus on upgrading the East Coast
transmission network in support of the UK government's 50 GW 2030
offshore wind target. We anticipate total capital investment across
the 17 projects to be in the mid-to-high teens of billions of
pounds range with the majority of investment to be deployed towards
the end of this decade. ASTI projects will be delivered by our
Strategic Infrastructure (SI) business unit and, as each project is
commissioned, they will be transferred to UK
Electricity Transmission.
We have made good progress on our
early ASTI projects in 2023/24. This includes the signing of joint
construction projects with ScottishPower Energy Networks for
Eastern Green Link 1 (EGL1) in August, and with SSEN Transmission for Eastern Green Link 2 (EGL2) in
June. For EGL1, Prysmian Group was selected in December to supply
400 kilometres of HVDC cable between England and Scotland, with GE
Vernova's Grid Solutions and MYTILINEOS
selected to supply the converter stations and civils respectively.
The design phase of the link begins in 2024 with construction in
2025. The total investment for the joint
construction project is £2.5 billion, of which National Grid's
share is £1.5 billion. For EGL2, the joint
venture signed a contract in February, also with the Prysmian
Group, to supply around 1,000 kilometres of HVDC cable for the
project, as well as signing a contract with Hitachi Energy and the
Royal BAM Group for converter stations at either end of the cable.
This represents a significant milestone for the project as we make
progress towards the delivery phase. When complete, EGL2,
connecting Peterhead in Scotland to Drax in England, will be the
longest HVDC cable in the UK and the country's single largest
electricity transmission project ever. The total investment for the
joint construction project is £4.4
billion, of which National Grid's share is £2.4 billion. Between them, both
EGL1 and EGL2 will provide enough energy to power around four
million homes.
In March, the Secretary of State
for Energy Security and Net Zero granted a development consent order for Yorkshire GREEN, our ASTI project to build 7 kilometres of new
overhead lines, underground cables and two substations between
Shipton and Monk Fryston. This follows the conclusion of the
examination period in September and the issue of a recommendation
report by the Planning Inspectorate in December. The project will
upgrade and reinforce the high-voltage power network so that more
low-carbon energy can be supplied to homes and businesses in
Yorkshire, with construction due to commence this summer and
project completion expected in 2028. In the same month, the
Planning Inspectorate completed its examination phase of the
development consent for our Bramford to Twinstead network
reinforcement project which will reinforce part of the East Coast
transmission network through 18 kilometres of new overhead line and
around 11 kilometres of underground cable. Strengthening the
network here is vital to deliver cleaner, greener electricity
efficiently, reliably, and safely and to support the UK's move to
net zero.
Looking ahead, we anticipate other
ASTI projects to progress in 2024/25, including consultations on
the Norwich to Tilbury and Brinsworth to High Marnham transmission projects, whilst consultations
have also commenced on our EGL3 and EGL4 projects.
UK: securing the supply chain
To enable the delivery of The
Great Grid Upgrade we have made positive steps in securing the
necessary supply chain partners. In May 2023, we launched the
'Great Grid Partnership' to identify supply chain partners to help
to initially deliver nine major onshore ASTI projects. At the end
of April 2024, we selected seven partners to provide an initial
£4.5 billion worth of network infrastructure design and
construction work out to 2030. Specifically, two design and
consenting service partners (Arup/AECOM and WSP), and five
construction partners (Laing O'Rourke, Omexon-Taylor Woodrow,
Murphy, Morgan Sindall Infrastructure and Morrison Energy Services) are joining National Grid in
the Great Grid Partnership. This is an important milestone that
will enable us to help deliver the significant new electricity
network infrastructure required to move more clean energy from
where it is generated to where it is needed, helping the UK meet
its net zero ambitions.
By creating these long-term
strategic contractual relationships, National Grid will be
well-positioned to overcome constraints while driving learning and
innovation. This 'enterprise' partnership model is designed to
deliver integrated planning and working between projects, enabling
the supply chain to combine capacity, capability, knowledge and
experience to accelerate delivery and deliver cost efficiencies, in
turn delivering value for money for consumers. It is also a model
that we have successfully used before on our London Power Tunnel
projects.
Within the year we also launched
our HVDC supply chain framework which, together with SSEN Transmission and ScottishPower Energy Networks, aims to secure the
supply chain required for over 14,000 kilometres of cabling
requirements across UK networks out to and beyond 2030. The
framework, which has the provision for around £60 billion of
investment, will enable National Grid to create longer-term
strategic contractual relationships as well as provide a mechanism
to secure not only our existing requirements but also anticipated
future capacity. It also aims to reduce the administrative burden
of individual tenders so that the Company becomes a more attractive
client for the supply chain. Our ambition is to procure a long-term
framework for all SI and NGV future needs - including cables,
converters and civils - in collaboration with our joint venture
partners.
These contractual arrangements
with the supply chain not only highlight our confidence in being
able to deliver ASTI projects efficiently, with 20% of our project
portfolio now contracted with the supply chain, but represent a
significant boost to the UK supply chain that will help deliver the
energy transition, underlining our commitment to investing in jobs,
skills and people required to deliver net-zero.
UK: National Gas Transmission
In July, we announced the sale of
a further 20% in National Gas Transmission to a consortium led by
Macquarie Asset Management and British Columbia Investment
Management Corporation (the Consortium), with the equity sale on
equivalent financial terms to the original 60% transaction
(acquired by the same consortium) that was completed in January
2023. The 20% sale was completed on 11 March 2024 following the
same National Security and Investment (NSI) clearance process as
the initial 60% tranche. This has now taken the Consortium's equity
stake in National Gas Transmission to 80%. The Consortium has an
option to acquire the remaining 20% interest, exercisable between 1
May 2024 and 31 July 2024. If the option is partially exercised by
the Consortium, National Grid will have the right to put the
remainder of its equity interest in National Gas Transmission to
the Consortium, which can be exercised by National Grid between 1
December 2024 and 31 December 2024. If one or both of these options
are exercised, the consideration for the remaining interest is
expected to be paid in cash to National Grid on equivalent
financial terms to the original 60% transaction, subject to certain
adjustments.
Following the completion of the
20% equity stake sale in National Gas
Transmission to the Consortium in March 2024, National
Grid's asset base moved to around 75% electricity, up from 60% in
March 2021.
United States (New York) - Upstate Upgrade
In March, we announced plans to
invest more than $4 billion in transmission network infrastructure
in New York. The 'Upstate Upgrade' is a collection of more than 70
transmission enhancement projects through 2030 to deliver a
modernised, stronger, and cleaner energy
network in Upstate New York. In addition to generating thousands of
new jobs, the investment will help the state meet its climate goals
outlined in the Climate Leadership and Community Protection Act
(CLCPA).
The Upstate Upgrade - the largest
investment in New York's electricity transmission network for over
a century - will focus on three key areas: (1) improving the energy
network's resilience by reinforcing and upgrading infrastructure
such as transmission lines and substations to help reduce outages
during extreme weather events (this will include constructing,
rebuilding, and modernising over 1,000 miles of transmission line
and 45 substations); (2) creating over 1,700 new construction jobs;
and (3) powering upstate New York's energy
future by ensuring the network can meet increasing electric demand
and transmitting clean power produced in New York.
Key projects in the Upstate
Upgrade include:
■ Smart Path
Connect - the project, for which
National Grid's share of capital investment is $550 million,
includes the rebuild and upgrade of approximately 55 miles of our
Adirondack-Porter 230 kV transmission circuits to 345 kV in
Northern New York. It remains on track for energisation in December
2025.
■ CLCPA Phase 1
- construction has begun on the first stage of
our substation upgrade as part of the $800 million Phase 1 funding
for transmission upgrades. This also includes projects such as
Inghams-Rotterdam and Churchtown to
Pleasant Valley circuit rebuilds (129 miles) to support 330
MW of incremental headroom capacity for renewable
generation.
■ CLCPA Phase 2
- engineering contracts were awarded in October
2023 for transmission projects as part of the $2.1 billion Phase 2
funding for transmission networks and modernising the electric
network.
On the supply chain, contracting
has been executed to secure the supply of critical, high demand materials required for these
upgrades including circuit breakers and power transformers. In
November, National Grid hosted a supplier conference in Albany, New
York, with 16 of the largest contractors in the US invited to
discuss our vision and CLCPA projects. The key objectives were to
discuss CLCPA work packages and encourage supplier engagement and
relationships to support the growing portfolio. Of the 16 suppliers
invited, 14 are now active participants in the CLCPA 2 bid
event.
We also continue to grow strategic
relationships with major contractors as part of the Supply Chain
Transformation programme launched in 2023.
The programme seeks to deliver two major outcomes with suppliers to
aid becoming a 'Client of Choice'. Firstly, to partner more closely
with the supply chain to ensure our strategies and goals are
aligned; and secondly, to enhance our scale as a group to be able
to secure wider, longer-term contracts
with our suppliers.
Transmission investment through National Grid
Ventures
Whilst we are entering a new phase
of capital delivery through our regulated businesses, we are also
pursuing new transmission opportunities through our non-regulated
business, National Grid Ventures (NGV).
NGV had a successful year through
New York Transco, a partnership of New York's major utilities, of
which NGV has a share of 28.3%. In June 2023, New York Transco's
Propel NY Energy transmission project was selected by the New York
Independent System Operator (NYISO) to deliver increased
transmission capacity between the mainland and Long Island. The
project is in partnership with the New York Power Authority and
follows the bid New York Transco submitted in October 2021 as part
of the NYISO's Long Island Offshore Wind Export Public Policy
Transmission Need solicitation. Total investment for the project is
$2.8 billion, of which NGV's capital contribution is around $340
million.
In the same month, our New York
Energy Solution transmission line upgrade project was fully
energised. This project was selected by the NYISO to provide
transmission upgrades to New York's power system, while enhancing
reliability and facilitating upstate clean energy resources to
downstate demand centres. Total investment for the project is $670
million, of which NGV's capital contribution is around $100
million.
UK regulatory progress
We have been encouraged by the
good progress made during the year by government and Ofgem to
support the step-up in investment required across UK energy
networks. We are particularly pleased to see many of the areas we
highlighted in our Spring Policy Paper now being acted upon. As we
deliver our new contractual model for working with the supply chain
it is important that we see the regulatory and legislative support
necessary to support this and the investment required to upgrade
the grid network. This is also critical to ensuring we build a
transmission network that will serve society, protect the
environment, and underpin economic growth for decades to
come.
Delivering the future electricity network - National
Grid
In May 2023, we published our
Spring Policy Paper, 'Delivering for 2035: Upgrading the grid for a
secure, clean and affordable energy future'. The paper outlined
five priority areas of action for government and Ofgem to ensure
electricity networks can fully play their part in decarbonising the
power sector by 2035. These included (1) reforming the planning
system, centred around a strategic spatial energy
plan; (2) ensuring the regulatory and governance framework
is set up for delivery; (3) transforming how clean energy connects
to the grid and accelerating decarbonisation projects; (4) putting communities and
consumers at the forefront of the transition; and (5) developing
supply chain capacity and a skills pipeline across the
country.
The recommendations we made in the
publication are critical to reforming the scale and pace of the
energy transition needed over the next decade, particularly in
transmission, to enable the decarbonisation of the UK power sector
by 2035. Since the publication of the paper we have been pleased to
see a number of positive developments that have supported our call
for reform.
Legislative and regulatory change
In August, we welcomed the
publication of the Electricity Networks Commissioner's (ENC's)
report and its recommendations aimed at significantly reducing
timelines for delivering onshore and offshore transmission network
infrastructure. Many of the recommendations align with our priority
areas. In particular, we supported the ENC's recommendation for a
strategic spatial approach to planning energy infrastructure and
the robust need case this would provide.
We were also pleased to see a
number of the planning points we had advocated in our Spring Policy
Paper in the Chancellor's Autumn Statement in November. This
included updated National Policy Statements for Energy which give
transmission infrastructure 'Critical National Priority' status,
and a Transmission Acceleration Action Plan which aims to shorten
the time taken for new-build transmission projects to seven years
through a range of initiatives aligned with our recommendations,
including:
■ the creation of a Strategic Spatial Energy Plan which will
create certainty for industry by identifying optimal generation
locations and the infrastructure needed to meet future demand and
net zero commitments;
■ the development of a Centralised Strategic Network Plan
(CSNP) which will create a blueprint for the transmission network,
establishing the need case and strategic options for our projects
to move towards consent; and
■ a 'minded to' position on community benefits associated with
new transmission infrastructure which will provide greater clarity
for both the communities that host our infrastructure and the teams
developing these project proposals.
In October, we welcomed the
passing of the Energy Act 2023 which established important policy
and governance foundations to deliver on the UK's net zero
ambitions. It enables the separation of the Electricity System
Operator (ESO) from National Grid and the formation of the
independent National Energy System Operator (NESO) which we expect
will complete later this calendar year. The Energy Act also
introduced a net zero duty for Ofgem, widening the regulator's
remit to consider net zero targets as part of its decision
making.
In the same month, we also
welcomed Ofgem's publication of the Future System and Network
Regulation (FSNR) Framework Decision, setting out the overarching
framework for the network price controls for electricity and gas
transmission, and gas distribution, which will run from April 2026,
known as 'RIIO-3'. For electricity transmission, the main points
from the FSNR Decision included the continuation of five-year price
controls, the setting of returns to ensure that necessary capital
is attracted to support grid expansion, and the evolution of a
RIIO-style framework, with the introduction of a major projects
regime for significant network investments identified in the
CSNP.
The detail of the frameworks will
be developed by Ofgem through its sector specific methodology
phase. This began in December with the publication of the
regulator's Sector Specific Methodology Consultation (SSMC) for our
UK Electricity Transmission business relating to the RIIO-T3
regulatory period. The consultation provided the framework on which
we will base our UK Electricity
Transmission business plan for RIIO-T3 which is due for submission
in late 2024. In our response to the SSMC
in March 2024, we welcomed Ofgem's recognition of the need to
deliver clear signals and direction so as to provide certainty and
assurance to investors that projects are viable, investable and
deliverable. We also highlighted that Ofgem's investment needs
assessment must allow projects to move at pace, that its cost
assessment must recognise supply chain competition and volatility,
that the incentives package must evolve to reflect the value that
transmission operators deliver to customers, and that the financial
framework must reflect the scale of the investment we must deliver
and the changed macroeconomic environment. These approaches will
enable National Grid to continue delivering world class networks at
the lowest cost for consumers. In addition, the SSMC confirmed that
the overarching RIIO-T3 framework will
provide a foundation for the Electricity Distribution price control
which will start in April 2028.
We expect the final methodology
decision will be made by Ofgem in summer 2024, whilst the precise
framework and process for Electricity Distribution will be
consulted on separately in late 2024.
Looking beyond 2030
In March 2024, the ESO published
the transitional Centralised Strategic Network Plan (tCSNP2),
referenced as 'Beyond 2030', which sets out the network required to
achieve a low carbon grid by 2035 (in line with the 6th UK Carbon
Budget). This follows the publication of the first tCSNP in 2022,
also referred to as the Holistic Network Design (HND), which set
out the network reinforcement options required to connect 23 GW of
offshore wind, including the 17 ASTI projects that are now within
National Grid's transmission operating license.
The tCSNP2 sets out the network
reinforcement required against the ESO's 'Leading the Way' Future
Energy Scenario (which achieves net zero power sector emissions by
2034), and to support an additional 21 GW of wind in Scotland
identified under the HND Follow-Up Exercise (HNDFUE) in 2022/23. It
sees up to £58 billion of investment into the electricity
transmission networks to be delivered through the 2030s, across all
UK transmission operators, as well as a 65% growth in Great
Britain's electricity demand between 2023 and 2035. For National
Grid, tCSNP2 sees 35 'investment signals' to develop into projects
of various sizes required for ongoing expansion and reinforcement
of the grid network. We continue to mature and develop these
projects with Ofgem and the
ESO.
Driving connections reform across our transmission and
distribution networks
During the year, National Grid
launched a new reform initiative to accelerate grid connections
across our transmission and distribution networks.
On transmission, the ESO has
worked with stakeholders, including UK Electricity Transmission, to
improve and reform the connections process to the transmission
network. This includes two major aspects: a shorter term Five Point
Plan, and a longer full connection reform process. The transmission
connection queue now stands at over 700 GW for Great Britain which
represents a significant oversubscription of what is required to
meet the scenarios in the ESO Future Energy Scenario
publication.
One of the key changes on the Five
Point Plan has been the introduction of 'Queue Management' clauses
into connection agreements. This allows the ESO the right to
terminate connections for customers who miss key milestones in
their project development, an important measure as we look to move
to a 'first ready, first connected' process. Ofgem made the code
modification required to enable this in November 2023. In addition
to Queue Management, measures introduced through the Five Point
Plan (which NGET worked on collaboratively
with the ESO) include changes to how battery projects are modelled
and updating background modelling assumptions, which have the
potential to accelerate the connections dates for up to 70 GW of
projects currently in the queue. For longer-term reform, the ESO
published a consultation in the summer, to which National Grid (as
one of the UK's transmission operators) responded with a
recommended solution. We continue to work with Ofgem to understand
a way forward that can expedite the implementation and delivery of
the benefits of the proposed connection reform.
We also took further action on
connections reform across our UK Electricity Distribution network.
In September, we announced plans to release 10 GW of grid capacity
for the connection of renewable generation assets to our
distribution network. This followed engagement with the ESO, Ofgem
and the UK government to find solutions to speed up the connection
of low carbon technologies. Through a new agreement with the ESO,
projects connecting at distribution level that require additional
transmission network reinforcement will be offered the chance to
connect under an interim, non-firm connection arrangement. In
return for an earlier connection, the interim arrangements would
mean some projects could be curtailed when there is too much
generation on the system, such as on some of the windiest and
sunniest summer days.
In September, we began replacing
the current 'first come, first served' connection model with a
'first ready, first connected' approach on our UK Electricity
Distribution network. This updated approach will accelerate the
connection of 'shovel ready' projects to allow more low carbon
projects to connect faster. As a result, these changes will allow
customers to accelerate their connection dates and provide a more
agile approach to managing connection requests. We also continue to
work with members of the Energy Networks Association (ENA) on
reforming the connection process to distribution networks. This
includes promoting mature projects that are closer to delivery
above those that may be 'blocking' the queue, and changing how
transmission and distribution networks coordinate connections,
improving their interactivity. During the year, we removed 95
projects from the distribution connection queue totalling 2.25
GW.
Offshore Hybrid Assets (OHA) - next phase of
interconnection
In 2022, Ofgem opened an OHA pilot
seeking to work with selected developers on establishing an
investible OHA regime. OHAs are the next phase of interconnection,
not only linking two countries but also connecting with offshore
wind generation. The two projects in the Ofgem OHA pilot are
LionLink (to the Netherlands) and Nautilus (to Belgium), both NGV
projects, providing us an opportunity to shape the OHA regime and
prepare it for future investment. In March, Ofgem granted a
'minded-to-approve' decision for LionLink and we are now working
with our partner, TenneT, to ensure the project meets the approval
conditions. However, Nautilus did not receive a 'minded-to-approve'
with one of the main reasons cited by Ofgem being high estimated
constraint costs associated with the project. We continue to work
with our partner, Elia, to provide further evidence to address
Ofgem's concerns through our consultation response in May. We
expect Ofgem to make a final decision on LionLink, Nautilus and the
OHA regime parameters in the second half of calendar year
2024.
US regulatory progress
We have seen equally good momentum
on regulatory progress across our US jurisdictions during the
year.
New York rate filings
On 10 April 2024, we filed a Joint
Proposal with New York Public Service Commission (PSC) Staff for a
three-year rate settlement at our downstate gas distribution
businesses, KEDNY and KEDLI. This follows our initial rate filing
for the businesses in April 2023. The proposed
settlement includes funding for capital investment of $924 million
for KEDNY and $646 million for KEDLI in the first rate year (an
increase of around 30% on 2022/23), and a RoE of 9.35% which
compares to 8.8% under the prior rate settlement. It will fund
programmes necessary to modernise the gas network and continue a
safe and reliable service for our customers. In addition, it
maintains a focus on customer affordability through delivering
efficiencies and bill assistance programmes, and includes
programmes to reduce methane emissions, promote non-gas
alternatives, and expand energy efficiency in support of the
State's environmental goals. A final decision from the New York PSC
is expected in the next few months. For further details please
refer to the Business Review section on page 46.
We also remain on track to file
for new rates for our upstate New York electric and gas
distribution business, Niagara Mohawk (NIMO), before summer this
calendar year.
New York transmission investment
In July, we received Federal
Energy Regulatory Commission (FERC) approval for cost recovery on
our Smart Path Connect transmission rebuild and refurbishment
project in upstate New York. The order included a 10.3%
RoE with a 50:50 debt:equity ratio, with
cost recovery effective from 1 April 2023. The project, to develop
110 miles of transmission lines in partnership with the New York
Power Authority (NYPA), will unlock more than 1,000 MW of existing
renewable resources, deliver significant production cost savings
and emissions reductions, and will decrease transmission
congestion. The project is on track to be completed by
2025.
Massachusetts - Electric Sector Modernization Plan (ESMP) and
rate filings
In January, we filed our final
ESMP with the Department for Public Utilities (DPU) in
Massachusetts. The plan outlines the investment required in our
electric distribution network over the next five years and beyond
to help the state meet its clean energy goals under the 2050 Clean
Energy and Climate Plan (CECP). Under the ESMP, we have proposed to
invest up to $2 billion over the next five years across the
following areas:
■ Network
infrastructure - upgraded power
lines, transformers, substations, to make the network more
resilient, connect clean energy and plan in advance for growth in
demand from electrification;
■ Technology and
platforms - new planning tools for
smarter decision making, including new data and monitoring systems
to ensure system stability, and new IT infrastructure;
and
■ Customer
programmes - helping customers
reduce their carbon footprint and drive smart energy
use.
In our filing, we sought DPU
approval to take forward the plan investment and define the
appropriate cost recovery approach. The DPU is now considering the
filing and we expect the regulator to issue an order on our proposal in August. The proposed
investment under the ESMP is not currently part of any rate order
for our service territory.
In November, we filed for new
rates for our Massachusetts Electric business. Our filing requested
a five-year rate plan with a RoE of 10.5% and a revenue increase of
$131 million in the first rate year. The rate plan introduces a
comprehensive performance plan that includes a new capital recovery
mechanism. This will adjust rates annually to recover the costs of
the Company's core investment needs as well as any approved
projects or programmes in the ESMP up to a recovery cap. The
proposal also includes a Performance Based Rate Mechanism (PBRM)
focused on core operations and maintenance (O&M) expense. Overall, the total requested capital
expenditure in this filing, together with that under the ESMP,
could reach up to $6 billion across the five years if the DPU
accepts our investment proposals for both the MECO rate filing and
the ESMP. The rate filing is currently progressing through the
'evidentiary' phase of the process, and we anticipate the DPU
making a final rate order in September 2024.
The Future of Gas - Massachusetts and New
York
In December, the Massachusetts DPU
issued Order DPU 20-80, an investigation into the role of local gas
distribution companies (LDCs) in achieving the state's 2050 climate
goals. The Order establishes a framework to implement the
decarbonisation pathway established in the state's 2050 Climate and
Clean Energy Plan. The main requirement is for LDCs to consider
Non-Pipeline Alternatives (NPAs) as a condition of recovering
additional investment in distribution networks and must provide
evidence when there is no NPA. The Order is clear, however, that
existing investments in natural gas infrastructure by LDCs will not
be affected. We are now working with other utilities in the state
to deliver a plan by 2025 that takes into account the requirements
of the Order. This will involve working with electric utilities in
jurisdictions where we are the gas network operator, and vice
versa, to deliver against the need for NPAs. The Order does not
impact the current rate order for our Massachusetts Gas business
which runs to October 2026.
In New York, the PSC is
considering issues relating to the future of gas in its Gas System
Planning Proceeding. Gas distribution companies are required to
submit Long Term Gas Plans which are consistent with the state's
CLCPA on a three year cycle. The initial Long
Term Gas Plan filings for KEDNY, KEDLI and NIMO are required
to be submitted by 31 May 2024, following which there will be a
stakeholder engagement process with the final plan submitted in
December 2024.
Community Offshore Wind (COSW)
In April 2024, the New York State
Energy Research and Development Authority (NYSERDA) announced that
no final awards would be made to the provisional awardees of New
York's third offshore wind solicitation due to an inability of
developers to agree to contract terms with their manufacturing
partners. The New York Governor subsequently announced a path
forward for New York's offshore wind industry, including a
supportive manufacturing and logistics Request for Proposals (RfP)
to grow the domestic supply chain in New York and a Request for
Information (RfI) to inform future development for the state's
fifth offshore wind solicitation.
The NYSERDA announcement followed
our submission of 1.3 GW to New York's fourth large-scale offshore
wind bid solicitation in December. However, following the
announcement of the successful bidders in January, COSW was not
selected but instead placed on a 'waitlist', a new part of the
bidding process. COSW also submitted an offtake bid for a further
1.3 GW in August in response to the New Jersey Board of Public
Utilities (BPU) solicitation. Following
careful consideration, COSW withdrew its proposal, determining the
offtake design would not allow us to deliver an affordable project
for residents of New Jersey and for the state's climate
goals.
COSW will look to participate in
future offshore wind bid solicitation rounds and we expect to see
these moving forward in due course.
Efficiency savings significantly above our three-year
target
In 2023/24, we delivered a further
£139 million of Group efficiency savings taking cumulative savings
to £513 million at actual exchange rates. This significantly
exceeds our £400 million savings target that we announced in
November 2021, and that we committed to deliver by the end of
2023/24, and has been delivered against a strong inflationary
backdrop whilst growing the asset base by 9.7%.
Our Group efficiency savings have
been delivered through the year across four key areas:
■ Digital
improvements - in the UK, we have
consolidated work management programmes, reducing licensing and
support costs in UK Electricity Transmission. In the US, we have
shifted customers to e-billing; introduced a web portal for
customer self-service; and introduced 'OnMyWay', automating work
schedules for our field workers.
■ Continuous
improvement - in the UK, we have
increased productivity and reduced low value work allowing the
redeployment of labour in UK Electricity Transmission to capital
projects as our capital workload increases; in the US, we have
achieved savings through redesigning transmission line inspections,
greater use of drones for asset health inspections, and extending
the life of transmission towers with a new steel coating
technology.
■ Process
improvement - in our US customer
service centres, we have reduced call volumes by providing
self-service options; introduced new automated messaging to direct
customers online to resolve their queries, thereby increasing
availability of staff to deal with more complex calls; and
introduced new processes to resolve customer calls first time,
reducing the requirement for 'call-backs'.
■ Supply chain
optimisation - across the Group, we
have driven contract efficiencies through consolidating our IT data
centres; and utilising contract management strategies to enable us
to reduce external third party spend.
Delivering as a Responsible Business
Our Responsible Business Charter
Since we launched our first
Responsible Business Charter three years ago the external
environment has continued to change and our business has evolved
significantly with the repositioning of our portfolio. To reflect
these changes, we updated the Charter in September following
engagement with stakeholders and with a focus on three core
pillars: our environment; our customers and community; and our
people. Each of these pillars is underpinned by our Responsible Business Fundamentals - committing to safely,
reliably and efficiently connecting millions of people to the
energy they use - with the previous pillars of economy and
governance now embedded within these new focus areas.
Progress on our environment pillar
Following the update to our
Responsible Business Charter, our new aim is to reduce Scope 1 and
2 green house gas (GHG) emissions by 60% by 2030, from a 2018/19
baseline[7], whilst
remaining committed to reducing Scope 3 emissions excluding sold
electricity by 37.5% by 2034. We recognise the need for
urgent action this decade and have worked with the Science Based
Target initiative (SBTi) to align our near-term targets to their
1.5°C pathway. As part of this validation, we have also set a range
of sub-targets which align to SBTi's more ambitious power sector
pathway and which require higher decarbonisation of specific
material emissions, such as generation and sold electricity. We now
plan to update our Climate Transition Plan in June 2024 to reflect
these new targets, which will be put to an advisory shareholder
vote at the 2024 Annual General Meeting (AGM).
In 2023/24, we achieved a 5.9%
reduction in our Scope 1 and 2 emissions, or a 11.8% reduction
against the 2018/19 baseline. Our total Scope 3 GHG emissions
decreased by 1.7% year-on-year. Against our SBTi approved target
(which excludes sold electricity) our Scope 3 GHG emissions have
increased by 0.8% since 2018/19. This was principally driven by
emissions linked to our higher annual spend in relation to
purchased goods and services (including capital investment) within
our supply chain, with the bulk of these emissions coming from
resource-intensive activities associated with constructing new
energy infrastructure. Longer term, we expect a decline in the
carbon intensity of materials and sectors and anticipate a
reduction in our supply chain emissions. We aim to accelerate this
by actively encouraging our suppliers to establish action plans and
adopt science-based decarbonisation targets of their
own.
During the year, we also connected
3,030 MW of renewable energy across our UK and US transmission and
distribution networks, an increase of 2,344 MW compared to the
prior year. In addition, the commissioning of our Viking Link to
Denmark in December 2023 increased our interconnector capacity by
1.4 GW.
As we delivered another record
year of capital investment, we also reached a higher proportion of
green capital investment at 78% of Group
capital expenditure[8] (versus 75% in the
prior year). This amounted to £6.0 billion of
green capital investment (versus £5.6 billion in the prior year)
which was aligned with EU Taxonomy principles for
sustainable investment.
We also continued to work with our
supply chain during the year to establish decarbonisation roadmaps
and Science Based Targets (SBTs). To help reduce our Scope 3 GHG
emissions, we have continued to engage with our key suppliers that
form a large part of our emissions linked to the goods and services
we procure. We are asking the top 50% of US suppliers by emissions
to set a decarbonisation roadmap plan towards a SBT by 2025/26. For
our equivalent top 80% of UK suppliers, we are asking them to go
one step further by formally committing to set target(s) with the
SBTi by 2025/26.
During 2023/24, we enhanced how we
calculate the emissions of our purchased goods and services
(including capital goods) as part of our Climate Transition Plan
(CTP). The change in methodology has affected the emissions profile
associated with our suppliers, leading us to revise our list of
carbon strategic suppliers. We will continue engaging and working
with suppliers in partnership to identify common challenges and to
help decarbonise our business. Our CDP Supplier Engagement
programme in 2023 included 50 carbon strategic suppliers in the UK
and 74 in the US that in aggregate accounts for over 30% of our GHG
emissions from our purchased goods and services (including capital
goods). Next year, we will revise our list of carbon strategic
suppliers as a result of the change in our methodology for
calculating the emissions of our purchased goods and services and
in 2024/25 we will report on our progress to meet our stated SBT
supply chain engagement targets for the US and the UK.
In December 2023, we partnered
with the UK Government, We Mean Business Coalition and Climate
Action, amongst other organisations, at COP28, participating in
over 110 events and discussions on accelerating the energy
transition. Our focus was on achieving system-wide resilience,
developing reliable and clean power systems, and delivering a just
and equitable transition. We welcomed the final COP28 agreement
published by governments which included two new global goals to
triple renewable energy capacity and double energy efficiency by
2030, recognising the need to transition away from fossil fuels in
a just and equitable manner, in line with 1.5ºC and achieving net
zero by 2050.
Progress on our customers and community
pillar
In 2023/24, we made good progress
on making sure our economic and social role has the greatest impact
on the communities we serve. In the UK and US, with the support of
our charity partners, we continued to provide financial support to
those severely affected by rising energy costs through our Energy
Support Fund. This winter, our UK partners received £11.3 million,
while our US partners received approximately $1.8 million. In the
UK, the funding helped expand our UK Electricity Distribution
Community Matters Fund, offering grants to customers struggling
with fuel poverty; our support for home visit, customer advice and
fuel vouchers through the National Energy Foundation and Fuel Bank
Foundation; and our support for Citizens Advice by funding an
additional 15 full-time caseworkers, delivering support to an
additional 2,400 people with specialist advice.
In Massachusetts, we continued to
provide support to those customers severely affected by rising
energy costs. This winter, we hosted over 185 in-person customer
savings events which helped connect our most vulnerable customers
to available resources. We facilitated more than $18 million in
home energy assistance funding and bill relief for our customers.
Additionally, we enrolled more than 250,000 customers on an
income-based discount rate, as well as nearly 31,000 customers in
arrears management programmes. In New York, through our September
Week of Service and other community events, we continued to have a
positive impact on our communities through volunteering at over 400
different events. In addition, Project C was honoured by
CenterState Corporation for Economic
Opportunity (CEO) as their 2023 Community
Visionary Award winner citing us as an 'unwavering partner' for our
communities.
During the year, we continued to
engage directly in our communities through volunteering. In total,
colleagues across the Group volunteered 77,918 hours across our communities in 2023/24. In the
US, we recorded over 47,000 volunteering hours, whilst in the UK we
recorded over 30,000 hours. Cumulatively, National Grid colleagues
have now volunteered 179,480 hours since the publication of our
Responsible Business Charter in 2020, achieving 36% of our ten year
Group commitment of 500,000 volunteering hours. We also made good
progress in skills development in 2023/24, with 18,907 people provided access to skills development
through National Grid programmes in the UK and the US.
Cumulatively, we have now delivered skills development for
30,730 people in our communities achieving
68% of our ten year commitment of
45,000.
Progress on our people pillar
In 2023/24, we welcomed a number
of new additions to our Group Executive
team, including Carl Trowell (President, Strategic Infrastructure),
Katie Jackson (President, National Grid Ventures), Lisa Wieland
(President, New England) and Courtney Geduldig (Chief Corporate
Affairs Officer). As of March 2024, Group Executive
diversity[9] stood at 53.8%, an increase
of 8.3 percentage points on the prior year. The diversity of
National Grid's Board stood at 45.5%, down by 4.5 percentage points
on the prior year and below our 50% goal by 2025, principally
through the departures of Thérèse Esperdy and Liz Hewitt, with
Jacqui Ferguson joining the Board in January 2024.
For management gender and
ethnicity diversity representation, we ended 2023/24 with figures
of 35% for gender and 17.6% for ethnicity, both higher than the
prior year which were 32.6% and 16.7% respectively; we remain on
track to attain our 2025 goals of 35% and 20%. Our new talent (new
recruitment) gender diversity reached 31.6% in 2023/24, an increase
of 0.8% on the prior year. We also saw a notable increase in the
number of ethnically diverse new talent joining National Grid
during the year at 32.3% compared to 24.8% reported in the prior
year.
Finally, this year we received
over 24,000 responses to our annual independently managed employee
engagement survey Grid:voice, the highest
number of colleagues to ever complete the survey. Our employee
engagement index score remained at 81% favourable, four points
above the highest performing companies. Our 'Safe to Say'
Grid:voice score remains stable year-on-year at 71%.
Board changes
On 17 May 2023, we announced that
Thérèse Esperdy would step down from the Board as a Non-Executive
Director on 31 December 2023 after serving more than nine
years.
On 21 September 2023, we announced
that Ian Livingston would succeed Thérèse Esperdy as the Senior
Independent Director on 31 December 2023.
On 11 December 2023, we announced
that Jacqui Ferguson would join the National Grid Board as an
independent Non-Executive Director with effect from 1 January 2024;
and that Liz Hewitt would step down from the Board on 31 January
2024.
FIVE-YEAR FINANCIAL
FRAMEWORK
Our five-year financial framework
is based on our continuing businesses, as defined by IFRS,
including the ESO until disposal. It excludes the minority stake in
National Gas Transmission, which is classified as a discontinued
operation. Following our announcement that we plan to sell these
businesses, we have also excluded Grain LNG and National Grid
Renewables within the period to 2028/29.
Capital investment and Group asset growth
We expect to invest around £60
billion across our energy networks and adjacent businesses, in the
UK and US, over the five-year period to 2028/29, with group assets
trending towards £100 billion by March 2029. Of the £60 billion
investment over the five years to March 2029, around £51 billion is
considered to be aligned with the principles of the EU Taxonomy
legislation as at the date of reporting.
In the UK, we expect around £23
billion of investment in Electricity Transmission for asset health
and anticipatory system reinforcement to facilitate offshore
generation and other new onshore system connections. This also
includes the investment across our 17 Accelerated Strategic
Transmission Investment (ASTI) projects, as we invest in the
critical infrastructure required to enable the energy transition
and a decarbonised electricity network in the 2030s. We expect our
Electricity Distribution network to invest around £8 billion over
the five years to 2028/29 in asset replacement, reinforcement and
new connections, facilitating the infrastructure for electric
vehicles, heat pumps and directly connected generation.
In our US regulated businesses, we
expect to invest around £17 billion in New York, and £11 billion in
New England, over the five years to 2028/29. From over half of our
investment in the prior 5 year plan going to safety related
projects in our gas networks, we now expect to invest nearly 60% in
this plan into our electricity networks, as we see a step up in
investment for renewable connections, transmission network
upgrades, and digital capabilities to enable the energy
transition.
NGV has committed capex of around
£1 billion over the five years to 2028/29, including low levels of
maintenance investment across the six operational
interconnectors.
With the large step up in
investment, we expect to see higher group asset growth of around
10% CAGR through to 2028/29.
Group gearing
We remain committed to a strong,
overall investment grade credit rating. We expect to maintain
credit metrics above our thresholds for our current group credit
ratings through to at least the end of the RIIO-T3 price control
period, with current thresholds of 10% for S&P's FFO/adjusted
net debt, and 7% for Moody's RCF/adjusted net debt. Following
completion of the Rights Issue, we expect regulatory gearing to be
in the low 60% range by March 2025, and then trend back towards the
high 60% range by the end of RIIO-T3.
Group earnings growth and dividend growth
We expect our CAGR in underlying
EPS to be in the 6-8% range from a 2024/25 baseline (guidance
below)*. This includes our long-run average scrip
uptake assumption of 25% per annum, which will underpin our
sustainable, progressive dividend policy into the
future.
For 2024/25, whilst we continue to
expect strong operational performance across the Group, we expect
underlying EPS to be broadly in line with our underlying 2023/24
EPS once this has been adjusted by the number of bonus shares
issued as part of the proposed Rights Issue. We then expect
underlying EPS CAGR of 6-8% from a 2024/25 baseline, through to
2028/29, assuming an exchange rate of £1:$1.25.
We will maintain a progressive
level of total dividend growing from the current level that the
Board has recommended for the year to March 2024. This equates to a
total DPS of 58.52p/share for 2023/24 which will then be rebased
given the increased number of shares following the Rights Issue. We
then aim to grow the DPS in line with UK CPIH in keeping with the
current dividend policy (for details of our dividend policy please
refer to page 29).
*For more detail on share count,
see the 2024/25 Forward Guidance section. Our 2023/24 comparative
underlying EPS of 70.8 pence per share is estimated based on the
weighted average number of shares of 3,692 million adjusted for 374
million new shares (being the number of New Shares classified as
'bonus shares' pursuant to IAS33 calculated based on the closing
middle-market share price of £11.275 on 22 May 2024). For 2024/25
all bonus shares will be included in the EPS calculation along with
the pro-rated number of fully subscribed shares once the proposed
Rights Issue completes.
2024/25 FORWARD
GUIDANCE
This forward guidance is based on
our continuing businesses, as defined by IFRS. It excludes the
minority stake in National Gas Transmission which is classified as
held for sale within discontinued operations, but includes the ESO
which is held for sale within continuing operations before it is
assumed to be sold and transferred to the UK Government in this
calendar year.
The outlook and forward guidance
contained in this statement should be reviewed, together with the
forward-looking statements set out in this release, in the context
of the cautionary statement. The forward guidance in this section
is presented on an underlying basis and excludes remeasurements and
exceptional items, deferrable major storm costs (when greater than
$100 million), timing and the impact on underlying results of
deferred tax in our UK regulated businesses (NGET and
NGED).
UK Electricity
Transmission
Underlying net revenue is
expected to increase by over £150 million compared to 2023/24
primarily driven by higher allowances as a result of growing RAV,
including returns on increasing ASTI investment, and indexation.
Depreciation is expected to be up to £50 million higher in the year
due to the increasing asset base.
We expect to deliver around 100bps
of outperformance in the fourth year of RIIO-T2 in Operational
Return on Equity. This is
in line with our target to deliver 100 basis points of operational
outperformance on average through the five-year period of the
RIIO-T2 price control.
UK Electricity
Distribution
Underlying net revenue is
expected to increase by up to £100 million compared to 2023/24,
driven by allowances on a higher RAV following continued investment
and indexation. Depreciation is expected to offset around half of
this increase, reflecting the increasing asset base.
In line with our target, we expect
to deliver around 100-125 basis points of outperformance in the
second year of RIIO-ED2 in operational Return on Equity.
UK Electricity System Operator
(ESO)
Underlying operating profit is expected to be around a half of 2023/24 as a result of the
expected disposal in the year.
Under the RIIO-2 price control,
totex in ESO is no longer subject to the totex incentive mechanism
and is instead regulated under a pass-through mechanism, with cost
increases or efficiencies trued-up in the following
year.
New England
Underlying net revenue is
expected to be over $250 million higher, driven by rate increases.
This is expected to be offset by around $80 million higher
depreciation as a result of the increasing asset base and $70
million other costs, driven by continued investment and business
growth.
Return on Equity for New
England is expected to be slightly lower than 2023/24, which had a
one-off benefit relating to the regulatory recovery of a historical
property tax matter. Excluding the one-off benefits, New England
Return on Equity is expected to modestly improve from
2023/24.
New York
Underlying net revenue is
expected to be nearly $450 million higher, including increases from
proposed rate settlements, primarily KEDNY/KEDLI. Depreciation is
expected to be around $100 million higher, reflecting the
increasing asset base, and environmental costs are expected to be
around $100 million lower, driven by reserve increases which
occurred in 2022/23.
Return on Equity for New York
is expected to be marginally improved from 2023/24 because of the
KEDNY/KEDLI rate settlement.
NGV and Other
activities
In NGV, we expect operating profit to be over £100
million lower than 2023/24 driven by expected lower interconnector
revenues.
We also expect other activities'
underlying operating loss to be greater year-on-year by around £50
million driven by expected lower returns from our captive insurance
provider where we benefited from unusually low claims in
2023/24.
Joint Ventures and
Associates
Our share of the profit after tax of joint ventures and
associates is expected to be around £10 million lower than 2023/24
as a result of lower revenues in our joint venture interconnectors
partially offset by growth in revenues from renewables projects in
our Emerald Joint Venture.
Interest and Tax (continuing
operations)
Net finance costs in 2024/25
are expected to be over £100 million lower than 2023/24 as a result
of expected favourable movements on inflation linked debt and
variable rate movements. Reduced costs also reflect the expected
receipt of proceeds from the Rights Issue being used to finance our
increasing investment, reducing the need for debt issuances in
2024/25.
For the full year 2024/25, the
underlying effective tax
rate, excluding the share of post-tax profits from joint
ventures and associates, is expected to be around 15%. This is
calculated following the new definition of underlying earnings
which excludes the impact of deferred tax on underlying results of
our UK regulated businesses (NGET and NGED).
Investment, Growth and Net
Debt
Overall Group capital investment for continuing
operations in 2023/24 is expected to be around £10
billion.
Group Asset Growth is
expected to be around 10% reflecting an increase in investment,
predominantly increasing ASTI investment, offsetting lower UK RAV
indexation.
Depreciation is expected to
increase, reflecting the impact of continued high levels of capital
investment.
Operating cash flow generated
from continuing operations (excluding acquisitions, disposals and
transaction costs) is expected to decrease by around 5% compared to
2023/24 principally driven by the impact of ESO's significant
2023/24 timing over recovery reversing in 2024/25, mostly offset by
increased underlying performance.
Net debt is expected to
decrease by around £0.5 billion (from £43.6 billion as at 31 March
2024) at a GBP:USD rate of 1.25, driven by the receipt of proceeds
from the Rights Issue largely financing our continued levels of
significant investment in critical clean energy infrastructure,
with regulatory gearing reducing to the low 60% range. The forecast
excludes the expected sale proceeds from the ESO disposal and the
remaining 20% stake in National Gas Transmission.
Weighted average number of shares
(WAV) is expected to be approximately 4,688 million in 2024/25.
Prior to the impact of the Rights Issue, we expected WAV to be
3,750 million shares in 2024/25. We are expecting an increase of
approximately 938 million representing the full effect of the bonus
element alongside a pro-rating of the fully subscribed shares. In
accordance with IFRS, the number of fully paid shares are
calculated as the number of shares, at the theoretical ex-rights
price, that would generate the proceeds of the Rights Issue. The
bonus shares are then the remaining new shares that are expected to
be issued. We plan to update this Forward Guidance at Half Year
once the Rights Issue has completed.
FINANCIAL REVIEW
In managing the business, we focus
on various non-IFRS measures which provide meaningful comparisons
of performance between years, monitor the strength of the Group's
balance sheet as well as profitability and reflect the Group's
regulatory economic arrangements. Such alternative and regulatory
performance measures are supplementary to, and should not be
regarded as a substitute for, IFRS measures, which we refer to as
statutory results. We explain the basis of
these measures and, where practicable, reconcile these to statutory
results in 'Alternative performance measures/non-IFRS
reconciliations' on pages 84 to 102. Also, we distinguish between
adjusted results, which exclude exceptional items and
remeasurements, and underlying results, which further take account
of: (i) volumetric and other revenue timing differences arising
from our regulatory contracts; (ii) major storm costs which are
recoverable in future periods, where these are in excess of $100
million (in aggregate) in the year; and (iii) the impact of
deferred tax on underlying results in our UK regulated businesses
(NGET and NGED); none of which give rise to economic gains or
losses.
Performance for the year ended 31
March
Financial summary for continuing operations
(£ million)
|
2023/24
|
2022/23
|
change %
|
Accounting profit:
|
|
|
|
Gross revenue
|
19,850
|
21,659
|
(8%)
|
Other operating income
|
12
|
989
|
(99%)
|
Operating costs
|
(15,387)
|
(17,769)
|
(13%)
|
Statutory operating
profit
|
4,475
|
4,879
|
(8%)
|
Net finance costs
|
(1,464)
|
(1,460)
|
-%
|
Share of joint ventures and
associates
|
37
|
171
|
(78%)
|
Tax
|
(831)
|
(876)
|
(5%)
|
Non-controlling
interest
|
(1)
|
-
|
-%
|
Statutory IFRS earnings (note
7)
|
2,216
|
2,714
|
(18%)
|
Exceptional items and
remeasurements (after tax)
|
884
|
(379)
|
n/m
|
Timing and major storm costs
(after tax)
|
(523)
|
214
|
n/m
|
Deferred tax on underlying profits
in NGET and NGED
|
302
|
178
|
n/m
|
Underlying
earnings1
|
2,879
|
2,727
|
6%
|
EPS - statutory IFRS (pence) (note
7)
|
60.0p
|
74.2p
|
(19%)
|
EPS - underlying1
|
78.0p
|
74.5p
|
5%
|
Dividend per share
|
58.5p
|
55.4p
|
6%
|
Dividend cover -
underlying1
|
1.3
|
1.3
|
-%
|
|
|
|
|
Economic profit:
|
|
|
|
Value Added1
|
2,931
|
4,807
|
(39%)
|
Group RoE1
|
8.9%
|
11.0%
|
-210bps
|
|
|
|
|
Capital investment and asset growth:
|
|
|
|
Capital investment (note 2
(c))2
|
8,235
|
7,593
|
8%
|
Asset growth1
|
9.7%
|
11.4%
|
-170bps
|
|
|
|
|
Balance sheet strength:
|
|
|
|
RCF/adjusted net debt
(Moody's)1
|
9.2%
|
9.3%
|
-10bps
|
Net debt (note 29)
|
43,607
|
40,973
|
6%
|
Add: held for sale net
debt
|
(23)
|
-
|
n/m
|
Net debt (including held for
sale)1
|
43,584
|
40,973
|
6%
|
Group regulatory
gearing1
|
69%
|
71%
|
-200bps
|
1. Non-GAAP alternative
performance measures (APMs) and/or regulatory performance measures
(RPMs). For further details see 'Alternative performance
measures/non-IFRS reconciliations' on pages 84-102. Our definition
of underlying results has been amended in 2023/24 to exclude the
impact of deferred tax on our underlying results in our UK
regulated businesses (NGET and NGED). Comparative amounts have been
restated accordingly.
2. Our definition of capital
investment has changed and now aligns with our statutory measure
(see note 2 (c)). Comparative amounts have been
restated.
Statutory IFRS earnings from
continuing operations were £2,216 million in 2023/24, £498 million
(18%) lower than last year (2023: £2,714 million) due to a variety
of different components. Statutory earnings were adversely impacted
by £1,011 million exceptional net charges before tax in 2023/24
(including a £496 million environmental provision in New York and a
£498 million provision in UK Electricity System Operator for
estimated timing over-recoveries expected to be transferred through
the disposal process in 2024/25), compared with a favourable impact
from £935 million exceptional net gains in the prior year. These
were partly offset by £290 million favourable year-on-year
remeasurements of commodity and financial derivatives, £945 million
favourable year-on-year revenue timing over-recoveries, the net
impact of tax on all these items, along with an improvement in
underlying business performance for the Group. Statutory EPS for
continuing operations of 60.0p was 14.2p lower than the prior year.
The net exceptional charge of £852 million (2023: £619 million net
gain) and remeasurement losses of £32
million (2023: £240 million net losses) are explained in further
detail in note 4 to the financial statements.
Our 'adjusted' results exclude the
impacts from exceptional items and remeasurements as explained on
page 86. In 2023/24,
adjusted earnings from continuing operations were £3,100 million up
£765 million, or 33% from the prior year. Adjusted earnings in
2023/24 included a timing over-recovery after tax of £688 million
(2023: £26 million under-recovery) and major storm costs (after
tax) of £165 million (2023: £188 million). As a result adjusted
operating profit of £5,462 million was up £1,168 million (2023:
£4,294 million). Adjusted net finance costs of £1,479 million were
£35 million lower, benefiting from lower inflation. Share of
profits from joint ventures and associates of £101 million was down
£89 million related to high interconnector revenues in the prior
year. Adjusted tax of £983 million was £348 million higher,
primarily driven by higher profits and the increase in the UK
corporation tax rate.
As explained above, our 'underlying' results exclude the
total impact of exceptional items, remeasurements, timing, major
storm costs and deferred tax in UK regulated businesses (NGET and
NGED). A reconciliation between these alternative performance
measures and our statutory performance is detailed on page
87.
Underlying operating profit for
continuing operations was up 4% (6% at constant currency), driven
by higher allowed revenues in UK Electricity Transmission, rate
increases in KEDNY/KEDLI and NIMO along with lower controllable
costs in New York, and the benefit of held for sale accounting
treatment within UK Electricity System Operator. Partly offsetting
these factors, UK Electricity Distribution performance was lower,
driven by lower incentives under the ED-2 price control and
National Grid Ventures operating profit was lower as a result of
lower revenues at our IFA1 interconnector. New England profits were
broadly comparable, with the prior year including two months'
profit in respect of our Rhode Island business which was disposed
in May 2022. Our joint ventures and associates' contribution
reduced (mainly UK interconnector revenues). Net financing costs
were marginally lower as the impact of inflation on index-linked
debt reduced alongside the impact of the bridge loan held last year
as part of our strategic pivot; partly offset by the impact of
higher interest rates. Other interest was adverse year on year.
Underlying profit after tax increased by 6% (7% increase at
constant currency) and resulted in a 5% increase (6% increase at
constant currency) in underlying EPS to 78.0p.
Capital investment of £8,235
million was £642 million (8%) higher than 2022/23, or £805 million
(11%) higher at constant exchange rates, driven by increased
investment in UK Electricity Transmission, driven by the
Accelerated Strategic Transmission Investment (ASTI) programme,
increased capital expenditure in New York, New England and UK
Electricity Distribution, partly offset by lower investment in
National Grid Ventures (following prior year investment on Viking,
Grain LNG and IFA1). Higher capital investment partly offset by
reduced year-on-year RAV indexation from lower inflation resulted
in asset growth of 9.7% in the year (2023: 11.4%).
Reconciliation of different
measures of profitability and earnings
In calculating adjusted profit
measures, where we consider it is in the interests of users of the
financial statements to do so we exclude certain discrete items of
income or expense that we consider to be exceptional in nature. The
table below reconciles our statutory profit measures for continuing
operations, at actual exchange rates, to adjusted and underlying
versions. Further information on exceptional items and
remeasurements is provided in notes 2,
4 and 5.
Reconciliation of profit and earnings from continuing
operations
|
Operating
profit
|
|
Profit after
tax
|
|
Earnings per share
(pence)
|
(£ million)
|
2024
|
2023
|
|
2024
|
2023
|
|
2024
|
2023
|
Statutory results
|
4,475
|
4,879
|
|
2,217
|
2,714
|
|
60.0
|
74.2
|
Exceptional items
|
1,011
|
(935)
|
|
852
|
(619)
|
|
23.1
|
(16.9)
|
Remeasurements
|
(24)
|
350
|
|
32
|
240
|
|
0.9
|
6.5
|
Adjusted results
|
5,462
|
4,294
|
|
3,101
|
2,335
|
|
84.0
|
63.8
|
Timing
|
(915)
|
30
|
|
(688)
|
26
|
|
(18.6)
|
0.7
|
Major storm costs
|
226
|
258
|
|
165
|
188
|
|
4.4
|
5.2
|
Deferred tax on underlying results
in NGET and NGED
|
-
|
-
|
|
302
|
178
|
|
8.2
|
4.8
|
Underlying results
|
4,773
|
4,582
|
|
2,880
|
2,727
|
|
78.0
|
74.5
|
Discontinued operations
On 31 January 2023, we sold 60% of
our interest in the National Gas Transmission in exchange for £2.2
billion cash consideration and we also received approximately £2.0
billion from additional debt financing. The 60% interest in
National Gas Transmission was purchased by a
consortium of long-term infrastructure investors which also
held an option to acquire our remaining 40% interest. The
consortium partially exercised this option on 11 March 2024 for
total consideration of £681 million, reducing our retained minority
interest to 20%. Further details are provided in the 'Assets held
for sale and discontinued operations' note to the financial
statements. The results of our 100% share of this business
(including metering) are presented as discontinued operations for
the 10 months fully owned to 31 January 2023. Both the 100% owned
business and the retained minority equity investment have been
classified as a business held for sale. The Group has not applied
equity accounting in relation to the retained interest, resulting
in no subsequent profits being recognised from the date of sale of
our 60% interest onwards.
Timing
over/(under)-recoveries
In calculating underlying profit,
we exclude regulatory revenue timing over- and under-recoveries,
major storm costs (defined below) and deferred tax on underlying
results of our UK regulated business (NGET and NGED), also defined
below. Under the Group's regulatory frameworks, most of the
revenues we are allowed to collect each year are governed by
regulatory price controls in the UK and rate plans in the US. If
more than this allowed level of revenue is collected, an adjustment
will be made to future prices to reflect this over-recovery;
likewise, if less than this level of revenue is collected, an
adjustment will be made to future prices in respect of the
under-recovery. These variances between allowed and collected
revenues and timing of revenue collections for pass-through costs
give rise to 'timing' over- and under-recoveries.
The following table summarises
management's estimates of such amounts for the two years ended 31
March 2024 for continuing and discontinued operations. All amounts
are shown on a pre-tax basis and, where appropriate, opening
balances are restated for exchange adjustments and to correspond
with subsequent regulatory filings and calculations, and are
translated at the 2023/24 average exchange rate of
$1.26:£1.
Timing over/(under)-recoveries
|
(£ million)
|
2024
|
20231
|
Balance at start of year
(restated)
|
39
|
(60)
|
In-year (under)/over-recovery -
continuing operations
|
915
|
(30)
|
In-year (under)/over-recovery -
discontinued operations
|
-
|
12
|
Disposal of UK Gas
Transmission/NECO
|
-
|
131
|
Balance at end of year
|
954
|
53
|
1. March
2023 balances restated to correspond with 2022/23 regulatory
filings and calculations.
In 2023/24, we experienced timing
over-recoveries of £363 million in UK Electricity Transmission,
under-recoveries of £159 million in UK Electricity Distribution,
over-recoveries of £800 million in UK Electricity System Operator
(BSUoS revenues have been significantly more than system balancing
costs following the introduction of fixed price tariffs),
under-recoveries of £69 million in New England, and
under-recoveries of £20 million in New York. In calculating the
post-tax effect of these timing recoveries, we impute a tax rate
based on the regional marginal tax rates, consistent with the
relative mix of UK and US balances.
Major storm costs
We also take account of the impact
of major storm costs in the US where the aggregate amount is
sufficiently material in any given year. Such costs (net of certain
deductibles and allowances) are recoverable under our rate plans
but are expensed as incurred under IFRS. Accordingly, where the net
total cost incurred exceeds $100 million in any given year, we
exclude the net costs from underlying earnings. In
2023/24, we incurred deferrable storm costs,
which are eligible for future recovery of $285 million (2023: $314
million).
Deferred tax in UK regulated
businesses
We also exclude deferred tax in
our UK regulated businesses (NGET and NGED). In the 2023 Spring
budget, the UK government introduced 'full expensing' tax relief
for qualifying capital expenditure to encourage greater levels of
investment from businesses. This change became permanent in
November 2023. To represent underlying profitability more closely
aligned to our regulatory agreements, and to align with UK peers,
we will now report underlying earnings and underlying EPS excluding
the impact of deferred tax in our UK regulated businesses (NGET and
NGED). This change in calculation of underlying results has been
applied to comparative periods. In 2023/24, we excluded £302
million (2023: £178 million) of deferred tax charges from our
underlying results.
Segmental income
statement
The tables below set out operating
profit on adjusted and underlying bases, both of which exclude the
gain of £4.8 billion on the disposal of our UK Gas Transmission
business in 2022/23.
|
Adjusted
results
|
|
Underlying
results
|
(£ million)
|
2024
|
2023
|
change %
|
|
2024
|
20231
|
change %
|
UK Electricity
Transmission
|
1,677
|
995
|
69
|
|
1,314
|
1,107
|
19
|
UK Electricity
Distribution
|
993
|
1,091
|
(9)
|
|
1,152
|
1,230
|
(6)
|
UK Electricity System
Operator
|
880
|
238
|
270
|
|
80
|
31
|
158
|
New England
|
643
|
708
|
(9)
|
|
802
|
819
|
(2)
|
New York
|
860
|
741
|
16
|
|
1,016
|
874
|
16
|
National Grid Ventures
|
469
|
490
|
(4)
|
|
469
|
490
|
(4)
|
Other activities
|
(60)
|
31
|
(294)
|
|
(60)
|
31
|
(294)
|
Total operating profit
-
continuing
|
5,462
|
4,294
|
27
|
|
4,773
|
4,582
|
4
|
Net finance costs
|
(1,479)
|
(1,514)
|
(2)
|
|
(1,479)
|
(1,514)
|
(2)
|
Share of post-tax results of joint
ventures and associates
|
101
|
190
|
(47)
|
|
101
|
190
|
(47)
|
Profit before tax - continuing
|
4,084
|
2,970
|
37
|
|
3,395
|
3,258
|
4
|
Tax - continuing
|
(983)
|
(635)
|
55
|
|
(515)
|
(531)
|
(3)
|
Profit after tax - continuing
|
3,101
|
2,335
|
33
|
|
2,880
|
2,727
|
6
|
Earnings per share (pence)
-
continuing
|
84.0
|
63.8
|
32
|
|
78.0
|
74.5
|
5
|
1. Prior year comparatives
have been restated to reflect the change in our underlying earnings
definition to remove the deferred tax in UK regulated businesses
(NGET and NGED).
Statutory operating profit
decreased in the year, primarily as a result of exceptional net
charges of £1,011 million in 2023/24 (compared with exceptional net
gains of £935 million in 2022/23). This was partly offset by £945
million favourable year-on-year movements in timing net
over-recoveries, £374 million favourable
year-on-year movements in commodity derivative
remeasurements, improved underlying performance in UK Electricity
Transmission, New York, and New England (once the impact of Rhode
Island disposal in 2022/23 is considered), a UK Electricity System
Operator accounting benefit (no depreciation following
classification as held for sale), but lower property sales in
'Other activities' than 2022/23. Excluding
exceptional items and remeasurements, adjusted operating profit
increased by £1,168 million (27%) or 29% on a constant currency
basis. Major storm costs were £32 million lower than the prior
year. The reasons for the movements in underlying operating profit
are described in the Business Review.
Financing costs, share of post-tax
joint ventures and associates and taxation - continuing
Net finance costs
Net finance costs (excluding
derivative remeasurements) for the year
were 2% lower than last year at £1,479 million, with the £35
million reduction driven by a lower accretion charge on our index
linked debt, the impact of the bridge facility held last year to
complete the strategic pivot which was repaid in 2022/23, offset by
the impact of higher interest rates on refinancing completed in the
current year (including higher interest costs in our US
businesses). Other interest was adverse year-on-year reflecting
higher discount unwind on provisions offset by higher pensions
related interest. The effective interest rate for continuing
operations of 4.2% is 20bps lower than the prior year
rate.
Joint ventures and associates
The Group's share of net profits
from joint ventures and associates on a statutory basis decreased
by £134 million. Of this decrease, £45 million relates to
year-on-year derivative remeasurement losses in our NG Renewables
joint venture. On an adjusted basis, the share of net profits from
joint ventures and associates decreased by £89 million compared
with 2022/23, mostly reflecting lower BritNed revenues driven by
lower auction prices.
Tax
The statutory tax charge for
continuing operations was £831 million
(2023: £876 million) including the impact
of tax on exceptional items and remeasurements of £152 million credit (2023: £241
million charge). The adjusted tax charge for continuing
operations was £983 million (2023:
£635 million), resulting in an effective
tax rate for continuing operations (excluding profits from joint
ventures and associates) of 24.7% (2023: 22.8%).
Our underlying tax (a non-GAAP
measure) takes our adjusted tax charge and further excludes the tax
impacts on timing and major storm costs and deferred tax in our UK
regulated businesses (NGET and NGED). The underlying tax charge for
the year was £515 million (2023: £531 million).
The underlying effective tax rate
(excluding joint ventures and associates) of 15.6% was 170bps lower
than last year (2023: 17.3%). This reflects a lower UK tax charge
in 2023/24 primarily due to more capital expenditure qualifying for
full expensing in 2023/24 than qualified for super-deductions in
2022/23, offset by the increase in the UK corporation tax
rate.
Cash flow, net debt and
funding
Net debt is the aggregate of cash
and cash equivalents, borrowings, current financial and other
investments and derivatives (excluding commodity contract
derivatives) as disclosed in note 11 to
the financial statements. 'Adjusted net debt'
used for the RCF/adjusted net debt calculation is principally
adjusted for pension deficits and hybrid debt instruments. For a
full reconciliation see page 93. The
following table summarises the Group's cash flow for the year,
reconciling this to the change in net debt.
Summary cash flow statement
|
(£ million)
|
2024
|
2023
|
change %
|
Cash generated from continuing operations
|
7,281
|
6,432
|
13
|
Cash capital investment (net of
disposals and exceptional insurance recoveries)
|
(7,588)
|
(7,167)
|
(6)
|
Disposal of Millennium
|
-
|
497
|
(100)
|
Dividends from JVs and
associates
|
176
|
190
|
(7)
|
Business net cash (outflow)/inflow from continuing
operations
|
(131)
|
(48)
|
n/m
|
Net interest paid
|
(1,479)
|
(1,365)
|
(8)
|
Net tax paid
|
(342)
|
(89)
|
n/m
|
Cash dividends paid
|
(1,718)
|
(1,607)
|
(7)
|
Other cash movements
|
16
|
17
|
(6)
|
Net cash outflow (continuing)
|
(3,654)
|
(3,092)
|
(18)
|
Disposal of UK Gas Transmission
and Metering and NECO1
|
681
|
6,995
|
(90)
|
Discontinued operations
|
102
|
(9)
|
n/m
|
Repayment of bridge loan to
acquire National Grid Electricity Distribution
|
-
|
(8,200)
|
100
|
Other, including net financing
raised in year
|
3,298
|
4,271
|
(23)
|
Increase/(decrease) in cash and cash
equivalents
|
427
|
(35)
|
n/m
|
|
|
|
|
Reconciliation to movement in net debt
|
|
|
|
Increase/(decrease) in cash and
cash equivalents
|
427
|
(35)
|
n/m
|
Repayment of bridge loan to
acquire National Grid Electricity Distribution
|
-
|
8,200
|
(100)
|
Less: other net cash flows from
investing and financing transactions
|
(3,298)
|
(4,271)
|
23
|
Net debt reclassified to held for
sale
|
(23)
|
-
|
n/m
|
Impact of foreign exchange
movements on opening net debt
|
466
|
(1,293)
|
n/m
|
Other non-cash
movements
|
(206)
|
(765)
|
73
|
(Increase)/decrease in net debt
|
(2,634)
|
1,836
|
n/m
|
Net debt at start of
year
|
(40,973)
|
(42,809)
|
4
|
Net debt at end of year
|
(43,607)
|
(40,973)
|
(6)
|
1. Cash
proceeds of £3,081 million for NECO and £4,032 million for UK Gas
Transmission, less balance of cash and cash equivalents disposed
with these businesses.
Cash flow generated from
continuing operations was £7.3 billion, £0.8 billion higher than
last year, mainly due to timing over-recoveries (primarily in UK
Electricity System Operator as a consequence of BSUoS revenues
being higher than system balancing costs) and also higher revenues
in UK Electricity Transmission and New York compared with 2022/23.
These factors were partly offset by adverse year-on-year working
capital movements (driven by higher payables at March 2023) and
higher spend on provisions. Cash expended on investment activities
increased as a result of continued growth in our regulated
businesses (including prepayments of capital investment on ASTI
offshore projects in UK Electricity Transmission). The £7.6 billion
(2023: £7.2 billion) outflow is net of insurance recoveries related
to the rebuild of the IFA1 interconnector in the UK. The disposal
of our Millennium Pipeline investment in October 2022 also
generated £497 million of proceeds in 2022/23.
Net interest paid increased as a
result of a higher average level of net debt and increased interest
rates on borrowings. The Group made net tax
payments of £342 million (2023: £89 million) for continuing
operations during 2023/24. This increase mainly related to
higher taxable profits driven by over-recovered revenues in the UK
Electricity System Operator. Prior year cash tax was also reduced
by the offset of tax losses against gains on the sale of NECO and
Millennium alongside refunds received in respect of US tax
settlements for historical years.
The higher cash dividend of £1,718
million reflected a higher dividend per share due to the annual
inflationary increase, partly offset by a higher scrip uptake of
18% (2023: 15%).
In 2022/23, we completed the sale
of NECO for £3,081 million and the sale of 60% of the UK Gas
Transmission and metering business for proceeds of £4,032 million.
In 2023/24 we sold a further 20% interest in UK Gas Transmission
for £681 million and received a dividend payment of £102 million in
discontinued operations. Non-cash movements primarily reflect
changes in the sterling-dollar exchange rate, accretions on
index-linked debt, lease additions and other derivative fair value
movements, offset by the amortisation of fair value adjustments on
acquired debt.
The Board has considered the
Group's ability to finance normal operations as well as funding a
significant capital programme. This includes stress testing of the
Group's finances under a 'reasonable worst-case' scenario,
assessing the timing of the sale of businesses held for sale and
the further levers at the Board's discretion to ensure our
businesses are adequately financed. As a result, the Board has
concluded that the Group will have adequate resources to do
so.
FINANCIAL STRENGTH
Our overall Group credit rating
remains at a strong investment grade level, BBB+/Baa1 with stable
outlook
During the year we raised £5.6
billion of new long-term senior debt to refinance maturing debt and
to fund a portion of our significant capital programme. In 2022/23,
the £8.2 billion bridge financing facility to fund the purchase of
the UK Electricity Distribution business was fully repaid following
receipt of proceeds from the sales of NECO and a 60% stake in our
UK Gas Transmission and Metering business.
As at 22 May 2024, we have £7.9
billion of undrawn committed facilities available for general
corporate purposes, all of which have expiry dates beyond May 2025.
National Grid's balance sheet remains robust, with strong overall
investment grade ratings from Moody's, Standard & Poor's
(S&P) and Fitch.
Regulatory gearing, measured as
net debt as a proportion of total regulatory asset value and other
business invested capital reduced in the year to 69% as at 31 March 2024. This
was lower than the previous year end level of 71%, with benefits from £0.9 billion in-year timing
over-recoveries and the £0.7 billion proceeds from the sale of a
further 20% stake in National Gas Transmission. Taking into account the benefit of our
hybrid debt, adjusted gearing as at 31 March 2024 was 67%.
Retained cash flow as a proportion
of adjusted net debt was 9.2%. We remain
committed to maintaining the current strong overall investment
grade credit rating for the Group. National Grid currently has
strong investment grade credit ratings across almost all of its
major operating companies, as well as senior unsecured debt ratings
at the holding company, National Grid plc, at Baa2/BBB levels from
each of Moody's, S&P and Fitch. We consider these ratings
optimise our cost of capital and deliver appropriate access to
capital markets. We expect to maintain
credit metrics above our thresholds for our current group credit
ratings through to the end of the RIIO-T3 price control period,
with thresholds of 10% for S&P's FFO/adjusted net debt, and 7%
for Moody's RCF/adjusted net debt.
Dividend increase of 5.55%
recommended for 2023/24
The Board has recommended an
increase in the final dividend to 39.12p per ordinary share
($2.4939 per American Depository Share), which will be paid on 19
July 2024 to shareholders on the register of members as at 7 June
2024. If approved, this will bring the full-year dividend to 58.52p
per ordinary share, an increase of 5.55% over the 55.44p per
ordinary share in respect of the financial year ended 31 March
2023. This is in line with the increase in average UK CPIH
inflation for the year ended 31 March 2024 as set out in our
dividend policy.
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.
At 31 March 2024, National Grid
plc had £12.5 billion of distributable reserves, which is
sufficient to cover more than five years of forecast Group
dividends. If approved, the final dividend will absorb
approximately £1,455 million of shareholders' funds. The 2023/24
dividend is covered approximately 1.3x by underlying
earnings.
The Directors consider the Group's
capital structure at least twice a year when proposing an interim
and final dividend and aim to maintain distributable reserves that provide adequate cover for
dividend payments.
A scrip dividend alternative will
again be offered in respect of the 2023/24 final
dividend.
GROWTH AND VALUE ADDED
A balanced portfolio to deliver
asset and dividend growth
National Grid seeks to create
value for shareholders through developing a balanced portfolio of
businesses that offer an attractive combination of asset growth and
cash returns.
Strong organic growth driven by
critical investment
In 2023/24, the Group achieved asset growth of
9.7% driven by our capital investment
programme alongside RAV indexation. This investment continued our
focus on building and maintaining world-class networks that are
safe, reliable, resilient and ready for the future. It is
specifically focused on our regulated businesses, with the
objective of upgrading and modernising ageing infrastructure, in
both the UK and US, to meet the changing needs of customers and to
drive the decarbonisation of energy supply.
In 2024/25, we expect Group capital investment to be
around £10 billion for continuing operations.
We are confident that this
high-quality growth will continue to generate attractive returns
for shareholders and add to our long-term investment proposition of
sustainable asset and income growth.
£8.2 billion of capital investment
for continuing operations in 2023/24, 8% higher at actual exchanges
rates (11% higher at constant currency)
We continued to make significant
investments in critical energy infrastructure during 2023/24. Total capital investment for continuing
operations across the Group was £8,235
million, an increase of £642
million, 8% (or 11% at constant currency) compared to the prior
year.
Capital investment
|
|
|
|
|
|
|
|
|
Year ended 31 March (£
million)
|
|
At actual exchange
rates
|
|
At constant
currency
|
|
2024
|
2023¹
|
% change
|
|
2024
|
2023¹
|
% change
|
UK Electricity
Transmission
|
|
1,912
|
1,301
|
47%
|
|
1,912
|
1,301
|
47%
|
UK Electricity
Distribution
|
|
1,247
|
1,220
|
2%
|
|
1,247
|
1,220
|
2%
|
UK Electricity System
Operator
|
|
85
|
108
|
(21%)
|
|
85
|
108
|
(21%)
|
New England (including
NECO)
|
|
1,673
|
1,527
|
10%
|
|
1,673
|
1,470
|
14%
|
New York
|
|
2,654
|
2,454
|
8%
|
|
2,654
|
2,363
|
12%
|
National Grid Ventures
|
|
662
|
970
|
(32%)
|
|
662
|
955
|
(31%)
|
Other¹
|
|
2
|
13
|
(85%)
|
|
2
|
13
|
(85%)
|
Total capital investment - continuing
|
|
8,235
|
7,593
|
8%
|
|
8,235
|
7,430
|
11%
|
UK Gas Transmission
|
|
-
|
301
|
(100%)
|
|
-
|
301
|
(100%)
|
Total capital investment - continuing and
discontinued
|
|
8,235
|
7,894
|
4%
|
|
8,235
|
7,731
|
7%
|
1. Comparative amounts have been represented to reflect the
reclassification of our US LNG operations from New England to NGV
following an internal reorganisation in the year and the change in
presentation for capital investments.
Capital investment represents
additions to property, plant and equipment, prepayments to
suppliers to secure production capacity in relation to our capital
projects, non-current intangibles and additional equity investments
in joint ventures and associates. Segmental information used for
internal decision making was revised in the year to include the
capital expenditure prepayments and additional equity investments
in joint ventures and associates. Accordingly, comparative
information for the year ended 31 March 2023 has been re-presented
to reflect the change in the Group's segmental measure in the
year.
Capital investment in UK
Electricity Transmission increased by £611 million compared with
2022/23 primarily due to increased expenditure in respect of ASTI
projects (including capacity payments made to secure the supply
chain) and additional spend in customer connections and asset
operations. UK Electricity Distribution increased by £27 million
primarily due to additional asset health funding in ED-2, including
overhead line clearance, growth in connections partly offset by
lower reinforcement capital expenditure. In New England, capital investment increased by £146 million
(£203 million increase on a constant
currency basis) primarily due to higher electric capital investment
driven by transmission asset conditioning and higher gas investment
driven by the Gas System Enhancement Plan (GSEP - our programme to
accelerate the replacement of leak-prone pipe (LPP) across our gas
business). In New York, capital investment was
£200 million higher (£291 million higher at constant currency),
primarily due to increased electricity network reinforcement
(driven by the Smart Path Connect and CLCPA programmes) as well as
higher gas capital investment driven by main replacement work
including leak prone pipe and system integrity work. Capital
investment in NGV decreased by £308 million (£293 million lower at
constant currency) following the higher capital investment last
year on largely completed projects during
2022/23.
In discontinued operations, UK Gas
Transmission capital investment in the prior year of £301 million
represented capital investment prior to disposal of the business in
January 2023.
Achieved asset growth of 9.7%
compared to 11.4% last year
During 2023/24, our combined regulated asset base and NGV and
Other business assets increased by £5,598
million. UK RAV increased 7.3%
including the impact of higher CPI inflation on RAV indexation,
partly offset by RAV depreciation. The US rate base grew strongly
by 11.5% during the year. NGV and Other
businesses increased as a result of ongoing capital
investment.
For detailed calculations of asset
growth see pages 100 to 101.
Assets
|
|
|
|
|
Year ended 31 March (£
million at constant currency)
|
|
2024
|
2023
|
% change
|
UK RAV
|
|
30,356
|
28,292
|
7.3%
|
US rate base
|
|
25,097
|
22,517
|
11.5%
|
Total RAV and rate base
|
|
55,453
|
50,809
|
9.1%
|
NGV and Other
businesses
|
|
7,593
|
6,639
|
14.4%
|
Total
|
|
63,046
|
57,448
|
9.7%
|
Value Added of £2,931 million
impacted by lower inflation on UK RAV indexation
Value Added, which reflects the
key components of value delivery to shareholders (i.e. dividend and
growth in the economic value of the Group's assets, net of growth
in net debt), was £2.9 billion in 2023/24. This was lower than last
year's £4.8 billion, principally driven by lower RAV indexation in
UK Electricity Transmission and UK Electricity Distribution, and
lower National Grid Ventures and Other profits. Of the £2.9 billion
Value Added, £1.7 billion was paid to shareholders as cash
dividends and £1.2 billion was retained in the business. Value
Added per share was 79.4p compared with 131.4p in 2022/23. Value
Growth is normalised for long-run inflation assumptions by
adjusting Value Added for the difference between actual experienced
inflation on UK RAV indexation and index-linked debt and the
equivalent movements at a long-run assumed inflation rate of 2%
CPIH or 3% RPI, and dividing this result by the equity base used to
calculate Group RoE (at closing exchange rates). Value Growth was
9.5% compared with 12.4% in 2022/23. For
detailed calculations of Value Added see pages 100 to
101.
BUSINESS REVIEW
In addition to IFRS based profit
measures, National Grid calculates a number of additional
regulatory performance metrics to aid understanding of the
performance of the regulated businesses. These metrics aim to
reflect the impact of performance in the current year on future
regulatory revenue allowances. This includes the creation of future
regulatory revenue adjustment balances and the impact of current
year performance on the regulated asset base. These metrics also
seek to remove the impacts on current year revenues relating to
'catch up' or 'sharing' of elements of prior year performance, for
example the sharing of prior year efficiencies with
customers.
These metrics include Return on Equity, Regulated Financial Performance and
Regulated Asset Value or Regulated
Rate Base. Further detail on these is provided on pages 93
to 101.
Year ended 31 March
|
Regulatory
Debt:
Equity
assumption
|
|
Achieved
Return on
Equity
|
|
Base or
Allowed
Return on
Equity
|
%
|
|
2024
|
2023
|
|
2024
|
2023
|
UK Electricity
Transmission
|
55/45
|
|
8.0
|
7.5
|
|
7.0
|
6.3
|
UK Electricity
Distribution
|
60/40
|
|
8.5
|
13.2
|
|
7.4
|
9.6
|
UK Gas Transmission
|
60/40
|
|
-
|
7.8
|
|
-
|
6.6
|
New England1
|
Avg.
45/55
|
|
9.2
|
8.3
|
|
9.9
|
9.9
|
New York
|
Avg.
52/48
|
|
8.5
|
8.6
|
|
8.9
|
8.9
|
Group Return on Equity
|
|
|
8.9
|
11.0
|
|
n/a
|
n/a
|
1. Figure for 2023 excludes
NECO.
As at 31 March
|
RAV, Rate Base or other
business assets
|
|
Total regulated and other
balances1
|
(£ million, at constant
currency)
|
2024
|
2023
|
|
2024
|
2023
|
UK Electricity
Transmission
|
18,462
|
17,150
|
|
17,940
|
17,009
|
UK Electricity
Distribution
|
11,469
|
10,787
|
|
11,611
|
10,776
|
UK Electricity System
Operator
|
425
|
355
|
|
(452)
|
277
|
New England2
|
8,710
|
7,728
|
|
10,565
|
9,852
|
New York
|
16,387
|
14,789
|
|
17,425
|
15,818
|
Total regulated
|
55,453
|
50,809
|
|
57,089
|
53,732
|
NGV and Other balances
|
7,593
|
6,639
|
|
7,213
|
6,735
|
Group regulated and other balances
|
63,046
|
57,448
|
|
64,302
|
60,467
|
1. March 2023 balances restated for opening balance adjustments
to correspond with 2022/23 regulatory
filings and calculations.
2. Figure for 2023 excludes
NECO.
UK ELECTRICITY
TRANSMISSION
Operational highlights
In 2023/24, we achieved excellent
operational performance, maintaining our world-class record for
reliability. Despite extensive flooding during the winter, and 13
named storms, we achieved a network reliability of 99.999998%
during the year.
Capital investment reached
£1,912 million across our UK ET network,
up 47% from the prior year as part of our
expected £11 billion capital investment over the
RIIO-T2 regulatory period (2021-2026). This was driven by over £400
million on investment in our early ASTI projects, including over
£180 million to secure supply chain
contracts for the EGL1 and EGL2 projects. In addition, higher
capital investment was driven by additional spend in customer
connections and asset health expenditure. For further information
on our ASTI projects, please refer to page 8 in the Strategic
Overview section.
Enabling the energy transition for all
Our capital delivery has remained
strong in 2023/24. During the year, we connected 2,970 MW of
generation and 314 MVA of demand capacity to the network, including
the first 1,200 MW phase of the world's largest offshore wind farm
at Dogger Bank, and the UK's first transmission connected solar
farm, Larks Green (70 MW). We also reached significant milestones
on our major in-flight projects, notably the installation of
overhead lines on all 116 new T-pylons as part of the Hinkley
Connection Project, and the final tunnelling breakthrough on our £1
billion London Power Tunnels 2 (LPT2) project.
Alongside connecting green energy
to the network, we remain committed to reducing our SF6
emissions by 50% by 2030. Whilst we fell slightly short of meeting
our 2023/24 SF6 target for UK ET (232 ktCO2e
versus a target of 228 ktCO2e), we have identified a
number of actions to repair top leaking assets in 2024/25 and set
out a plan to achieve our 2030 ambitions. We have also collaborated
closely with suppliers and universities and successfully trialled
innovative leak repair technology, enabling us to avoid outages and
keep electricity flowing whilst we work.
Delivering for our customers efficiently
UK ET delivered £17 million
of efficiency and synergy savings in 2023/24,
driven by leveraging the opportunities provided by the acquisition
of the UK ED business.
Against the backdrop of a rapidly
growing pipeline of customers looking to connect to the
transmission network, our extensive engagement with Ofgem, the
Department for Energy Security & Net Zero (DESNZ) and NESO has
helped drive significant progress on connections reform in support
of the Connections Action Plan (CAP). New queue management
arrangements will ensure projects meet contractual milestones or
face being removed to make way for connection-ready schemes. Our
collaborative work with distribution networks is unlocking
significant capacity for regional connections and updated
approaches to the treatment of storage is enabling the acceleration
of connections at transmission and distribution level. We will
continue advocating for further reform in 2024/25 (for further
information on connections reform please refer page 12 in the
Strategic Overview section).
Growing our organisational capability
Our Transmission Network Control
Centre (TNCC) has played an important role in ensuring network
reliability over the last decade. With more sources of energy
generation and demand connecting to our network, and a need to stay
at the cutting edge of cyber protection, we are building a new
Electricity Transmission Control Centre (ETCC). The new facility
will use a state of the art, purpose-built integrated network
control system (SCADA) and bring together security, cyber and
transmission network control functions ready for the low-carbon
energy future.
We have transformed our
procurement processes and collaborating more closely than ever with
our supply chain so that we can deliver our ASTI and other major
projects at pace. To leverage the full capabilities of our supply
chain, we have established a collaborative and integrated HVDC
Framework and Enterprise Delivery Model. The HVDC framework secures
offshore supply chains, while our enterprise delivery model
addresses onshore constraints. These arrangements are based on
long-term relationships and incentivised outputs, giving us quicker
access to our supply chain in a constrained market. For further
information, please refer to page 8 in the Strategic Overview
section.
Empowering colleagues for greater
performance
Our combined (employee and
contractor) Lost Time Injury rate was 0.14 for
2023/24 - 0.08 for employees, and 0.19 for contractors. The
majority (73%) of incidents were from our contractors, reflecting
that we deliver our capital construction works through our
contractors, not our direct labour force. We are continuing to work
with contractors to drive through the required improvements in
their performance. Behavioural safety is key to making the next
step in our safety maturity and we have developed and rolling out
our behavioural safety programme, 'Safe Choices for All', designed
to improve safety by addressing the root causes of unsafe
behaviour.
For further examples of progress
against each of our pillars, please refer to page 32 of our 2023/24
Annual Report and Accounts.
Operating profit in
2023/24
UK Electricity Transmission
statutory operating profit was £681 million higher in the year. In
2023/24, there were £2 million of exceptional costs related to our
cost-efficiency programme (2023: £2 million) and
integration costs of £1 million (2023: £nil). Timing
over-recoveries of £363 million in 2023/24 compared with £112
million under-recoveries in 2022/23. This is mainly due to a
favourable net impact of capital allowances, lower
under-collections of Transmission Network Use of System (TNUoS)
revenues driven by lower volumes and the impact of higher inflation
in the prior year, an over-recovery of pass-through costs and
higher recovery of prior period balances compared with
2022/23.
Adjusted operating profit
increased by £682 million (69%), but this was primarily driven by
£475 million of favourable year-on-year timing movements.
Underlying operating profit increased by 19%. Underlying net
revenues were £265 million (14%) higher principally from the impact
of last year's revenue reduction related to the return of £147
million for Western Link liquidated damages (received in earlier
years), alongside higher revenues from continued investment growth
and RAV indexation.
Regulated controllable costs were
£7 million (3%) higher from the impact of inflationary and workload
increases mostly offset by efficiency savings. Other costs were
higher, mainly relating to profit from sale of assets in the prior
year and an increase in higher network innovation allowance
costs.
The higher depreciation and
amortisation principally reflects a higher asset base as a result
of continued investment.
UK Electricity Transmission
|
|
(£ million)
|
2024
|
2023
|
% change
|
Revenue
|
2,735
|
1,987
|
38
|
Operating costs
|
(1,061)
|
(994)
|
7
|
Statutory operating profit
|
1,674
|
993
|
69
|
Exceptional items
|
3
|
2
|
50
|
Adjusted operating profit
|
1,677
|
995
|
69
|
Timing
|
(363)
|
112
|
n/m
|
Underlying operating profit
|
1,314
|
1,107
|
19
|
|
|
|
|
Underlying net revenue
|
2,147
|
1,882
|
14
|
Regulated controllable
costs
|
(248)
|
(241)
|
3
|
Post-retirement
benefits
|
(38)
|
(31)
|
23
|
Other operating costs
|
(26)
|
(19)
|
37
|
Depreciation and
amortisation
|
(521)
|
(484)
|
8
|
Underlying operating profit
|
1,314
|
1,107
|
19
|
Timing
|
363
|
(112)
|
n/m
|
Adjusted operating profit
|
1,677
|
995
|
69
|
Return on Equity
RoE for the year, normalised for a
long-run CPIH inflation rate of 2%, was 8.0%. This includes 100bps of totex outperformance,
principally reflecting delivery of capital projects in RIIO-T2
including Protection and Control work, Harker Super Grid
Transformer replacement, and generation connections. The principal
components of RoE are shown in the table below:
Year ended 31 March
|
2024
|
2023
|
Base return (including avg. 2%
long-run inflation)1
|
7.0
|
6.3
|
Totex incentive
mechanism2
|
1.1
|
1.1
|
Other revenue
incentives
|
(0.1)
|
0.1
|
Return including in year incentive
performance
|
8.0
|
7.5
|
Pre-determined additional
allowances and other income
|
-
|
-
|
Return on Equity
|
8.0
|
7.5
|
1. Assuming regulatory
gearing at 55%.
2. Excludes impact of
exceptional restructuring costs (post sharing)
For Regulated Financial
Performance, please refer to page 94.
Regulated Financial Position up
6%
In the year, RAV grew by 8% driven
by ongoing investment coupled with RAV indexation (3.8% 2023/24
versus 8.9% 2022/23).
|
2024
|
2023
|
Opening Regulated Asset Value
(RAV)
|
17,150
|
15,471
|
Asset additions (slow money) -
actual
|
1,660
|
1,180
|
Performance RAV or assets
created
|
68
|
68
|
Inflation adjustment (actual
CPIH)
|
658
|
1,373
|
Depreciation and
amortisation
|
(1,074)
|
(1,020)
|
Closing RAV
|
18,462
|
17,072
|
|
|
|
Opening balance of other regulated
assets and (liabilities)
|
(159)
|
(268)
|
Movement
|
(363)
|
108
|
Closing balance
|
(522)
|
(160)
|
|
|
|
Closing Regulated Financial Position
|
17,940
|
16,912
|
UK ELECTRICITY
DISTRIBUTION
Operational highlights
In 2023/24, we achieved excellent
operational performance with a network reliability of
99.99261%.
The start of RIIO-ED2 has marked a
new phase of capital delivery. In the first year of the price
control we are on track to deliver our £7.5 billion investment
programme across the ED2 regulatory period, along with our core
business plan commitments. In 2023/24, we invested £1,247 million in our UK Electricity Distribution
network, up 2% from the prior year. This
increase was driven principally by additional workload funding in
RIIO-ED2, specifically for asset replacement and non-operational
capex (including IT and vehicles) and growth in connecting new
customers, particularly renewables, to the grid network.
Our larger capital investment
projects remain on track, including the £65 million Hinkley Point
connection to link the new nuclear power station
and UK Electricity Transmission's 400 kV circuit between Bridgwater
and Seabank. The vast majority of works are now complete and
UK Electricity Transmission has taken on the responsibility for the
works at Seabank. The project is expected to complete in
2024.
During the year, we saw 13 named
storms across the network, a notable increase compared to an
average of six storms over the past five years. During the four
major storms impacting our region, the business saw 878 faults
impacting over 126,549 customers. With the prompt deployment of
field resources, including a fleet of five helicopters, we were
able to restore 126,445 customers within 24 hours and only 104
customers were not restored within the guaranteed
timeframes.
Enabling the energy transition for all
Working with the ESO, Ofgem and
the UK Government, we released 10 GW of capacity in our network
during the year to help accelerate projects in the connections
pipeline. This is part of our work with the Energy Networks
Association (ENA) to find innovative solutions to speed up the
connection of low-carbon technologies to the grid network. For
further information on reforms to the connections pipeline process,
please refer to page 12 in the Strategic Overview
section.
We are committed to lower cost
energy transition options such as flexibility services. In 2023/24,
we maintained our position as the largest flexibility provider in
the UK with 846 MW flexibility contracted to date, an increase of
11% on the prior year. In addition to the existing sources of
flexibility, we have been investigating the potential for customers
to flex their power requirements for heat pumps with our
EQUINOX project, an innovative trial that
will enable distribution network operators to unlock flexibility
from residential electric heat pumps to help reduce electricity
usage. Our first successful trials won the Heat Pump Project of the
year award at the 2023 H&V News
Awards. Building on this, we have now expanded the trial by
enrolling over 1,000 customers in the next phase of testing. As
part of our pledge to promote net zero in communities we serve, a
school in Gloucestershire has become the first to install solar
panels with funding from us.
Delivering for our customers efficiently
The Group has delivered £39
million of Electricity Distribution synergy totex benefits to date,
keeping us on track to deliver our £100 million
target over three years. These synergies have come through
procurement strategy and management, reviewing how we run and
operate the 48 sites we share with UK ET and operational delivery,
and aligning with wider Group functions (including IT, insurance
and pensions). We have also tested how UK ED can collaborate with
UK ET moving forward and have launched a programme to align the
investment plans and joint ways of working of both business
units.
We also maintained a high level of
customer satisfaction with a score of 9/10, managing to achieve a
net reward despite tougher targets in the first year of
RIIO-ED2.
We have continued to digitalise
the connection journey for our customers, extending our programme
to other Low Carbon Technologies (LCT) after a successful
implementation of our self-serve online tool for EV charger
applications last year. We made over 80,000 LCT connections during
the year, with 89% of direct enquiries approved on the same day. We
have implemented changes to our license through the Network Access
Significant Code Review, allowing networks to pick up a greater
proportion of reinforcement costs for both demand and generation,
lowering connection costs for customers.
Growing our organisational capability
We have mobilised our new
operating model, building on the strength of our local delivery
expertise through the introduction of critical central planning
functions of Customer Excellence, Distribution System Operator
(DSO) and Asset Management. This will ensure we are well placed to
meet the predicted changes in requirements and future increases in
customer demand. As part of this, we have introduced an independent
DSO Panel, which is progress against our commitments to enable
efficient and transparent governance within our functionally
separate DSO. The panel is made up of industry experts representing
a broad range of stakeholder views to strategically scrutinise the
DSO outputs.
Empowering colleagues for great performance
In response to feedback from
previous employee surveys, we performed a
complete review of our communication channels and styles to ensure
that there is a more effective two-way dialogue across the
business. As a result, the 2023 employment
survey saw a 12-point improvement in engagement scores. We have
also continued to focus on our 'Safe to say' initiative launched
last year. This includes improving the number of channels through
which staff can be empowered to flag concerns and offer ideas. Our
2023 'Safe to say' scores saw an increase of 11%.
For further examples of progress
against each of our pillars, please refer to page 33 of our 2023/24
Annual Report and Accounts.
Operating profit in
2023/24
UK Electricity Distribution
statutory operating profit was £94 million lower in the year,
reflecting lower incentives under RIIO ED-2 price control that
commenced this financial year, mainly driven by changes in the
incentive regime compared with RIIO ED-1.
In 2023/24,
there were £18 million of exceptional costs related to the
integration of the business into the wider Group (2023: £22
million). Adjusted operating profit reduced by 9% including the
impact of £20 million adverse year-on-year timing movements. Timing
under-recoveries of £159 million in 2023/24 are mainly due to an
under-recovery for inflation true-ups and the return of prior
period balances.
Underlying operating profit
reduced by £78 million (6%). Underlying net revenues were £45
million lower than the prior year due to lower incentives under
RIIO ED-2, lower engineering recharge revenue and lower Smart
Metering sales, partly offset by the impact of higher
inflation.
Regulated controllable costs were
£35 million (15%) higher than the prior year from the impact of
inflationary and workload increases, partly offset by efficiencies
achieved.
Depreciation and amortisation
remains in line with the prior year with the impact of increasing
asset base offset by other fair value movements.
UK Electricity Distribution
|
|
|
|
(£ million)
|
2024
|
2023
|
% change
|
Revenue
|
1,795
|
2,045
|
(12)
|
Operating costs
|
(820)
|
(976)
|
(16)
|
Statutory operating profit
|
975
|
1,069
|
(9)
|
Exceptional items
|
18
|
22
|
(18)
|
Adjusted operating profit
|
993
|
1,091
|
(9)
|
Timing
|
159
|
139
|
n/m
|
Underlying operating profit
|
1,152
|
1,230
|
(6)
|
|
|
|
|
Underlying net revenue
|
1,721
|
1,766
|
(3)
|
Regulated controllable
costs
|
(270)
|
(235)
|
15
|
Post-retirement
benefits
|
(20)
|
(24)
|
(17)
|
Other operating costs
|
(56)
|
(54)
|
4
|
Depreciation and
amortisation
|
(223)
|
(223)
|
-
|
Underlying operating profit
|
1,152
|
1,230
|
(6)
|
Timing
|
(159)
|
(139)
|
n/m
|
Adjusted operating profit
|
993
|
1,091
|
(9)
|
Return on Equity above base
levels
In 2023/24, the first year of
RIIO-ED2, RoE was 8.5%. This includes
110bps outperformance, mainly driven by a combination of benefits
achieved in our totex efficiency programme, including optimisation
of our IT and digital programme, and synergy benefits across the
Group. The principal components of the difference are shown in the
table below:
For the year ended 31 March
|
2024
|
2023
|
Base return (including avg. 2%
long-run inflation)
|
7.4
|
9.6
|
Totex incentive
mechanism
|
1.1
|
0.9
|
Other revenue
incentives
|
-
|
2.7
|
Return on Equity
|
8.5
|
13.2
|
For Regulated Financial
Performance, please refer to page 94.
Regulated Financial Position up
8%
In the year, RAV grew by 6% driven
by ongoing investment coupled with RAV indexation of 3.8% (2023:
13.6%).
|
2024
|
2023
|
Opening Regulated Asset Value
(RAV)
|
10,787
|
9,248
|
Asset additions (slow money) -
actual
|
979
|
971
|
Performance RAV or assets
created
|
51
|
22
|
Inflation adjustment (2024: actual
CPIH; 2023: actual RPI)
|
430
|
1,261
|
Depreciation and
amortisation
|
(778)
|
(729)
|
Closing RAV
|
11,469
|
10,773
|
|
|
|
Opening balance of other regulated
assets and (liabilities)
|
(32)
|
51
|
Movement
|
174
|
(68)
|
Closing balance
|
142
|
(17)
|
|
|
|
Closing Regulated Financial Position
|
11,611
|
10,756
|
UK ELECTRICITY SYSTEM OPERATOR
(ESO)
Operational highlights
The ESO has performed well in
2023/24. Capital investment stood at £85 million during the year,
£23 million lower than prior period primarily because ESO was
reclassified as an 'asset held for sale' on 27 October 2023,
partially offset by higher IT spend prior to the
reclassification.
This year, we have built further
system resilience and delivered the second year of our Demand
Flexibility Service, giving us valuable insight to support the
future of flexibility services. In December, we launched the first
phase of our 'Open Balancing Platform', which will support the bulk
dispatch of battery storage units and Balancing Mechanism Units.
The Platform will further optimise the operation of the grid
network by enabling smaller generation assets to receive
instructions from the ESO control room. Further stages will be
delivered over the next year to integrate additional services into
the Platform, such that by 2027 it is expected to replicate and
replace the existing Electricity Balancing System, Balancing
Mechanism and Ancillary Services Dispatch Platform.
The ESO has also continued to work
at pace and cross-industry towards long-term reforms to the
connections process, to unblock the queue and pave the way for
investment, ensuring the grid is ready to help deliver the energy
transition. For further information on the connections reform
process, please refer to page 12 of the Strategic Overview
section.
Progress on ESO separation
The Energy Act 2023, which
received Royal Assent in October, includes legislation to enable
the separation of the ESO from National Grid and the formation of a
National Energy System Operator (NESO) in 2024. Previously denoted
as the Future System Operator (or FSO), NESO will be an
independent, public corporation with responsibility for planning
Britain's electricity and gas networks and operating the
electricity system. The new organisation will be founded on the
current activities and capabilities of the ESO, but will also take
on new roles with a whole system perspective across energy sectors.
It will play a central role along with other key stakeholders in
ensuring that Britain's energy system is secure and affordable, as
well as forging the path to a sustainable future. We expect to
complete the sale and transfer of the ESO to the Government later
this calendar year.
Operating profit in
2023/24
UK Electricity System Operator
statutory operating profit increased by £145 million in the year as
a result of £593 million favourable year-on-year timing
over-recoveries, partly offset by a £498 million exceptional
provision for the return (in future periods) of the estimated
remaining balance of over-collected revenues at the date of
disposal. Under IFRS a regulatory liability is not usually
recognised on balance sheet for the return of such over-recoveries,
however due to the intended disposal of this business during
2024/25, a liability has been recognised because these amounts are
expected to be settled through the planned sale process in
2024/25.
During 2023/24, UK Electricity
System Operator had a timing over-recovery of £800 million (2023:
£207 million net over-recovery including the
collection of under-recovered balances from prior years). The
2023/24 over-recovery is the result of higher revenues
collected through the BSUoS fixed price tariffs compared with total
system balancing costs incurred for the year. The over-recovered
position is £877 million at 31 March 2024, which from an ESO
perspective, will be returned to customers by adjusting tariffs in
2024/25 and in future periods as required. In 2022/23, £1 million
of exceptional costs were incurred as part of our broader cost
efficiency programme.
Adjusted operating profit
increased by £642 million driven by the £593 million year-on-year
timing movement and also the impact of no further depreciation
following classification as 'held for sale'. Excluding the impact
of timing, underlying operating profit increased by £49 million.
Underlying net revenue was £52 million higher, but broadly offset
by increased costs as a result of the expected higher volume of
work under RIIO-2 and additional Future System Operator
costs ahead of separation of this business.
Depreciation and amortisation was £40 million lower,
representing depreciation being charged for only the first
seven months of the year, up to 27 October 2023, the date the
business was classified as 'held for sale'.
UK Electricity System Operator
|
|
(£ million)
|
2024
|
2023
|
% change
|
Revenue
|
3,788
|
4,690
|
(19)
|
Operating costs
|
(3,406)
|
(4,453)
|
(24)
|
Statutory operating profit
|
382
|
237
|
61
|
Exceptional items
|
498
|
1
|
n/m
|
Adjusted operating profit
|
880
|
238
|
270
|
Timing
|
(800)
|
(207)
|
286
|
Underlying operating profit
|
80
|
31
|
158
|
|
|
|
|
Underlying net revenue
|
383
|
331
|
16
|
Controllable costs
|
(212)
|
(175)
|
21
|
Post-retirement
benefits
|
(21)
|
(17)
|
24
|
Other operating costs
|
(9)
|
(7)
|
29
|
Depreciation and
amortisation
|
(61)
|
(101)
|
(40)
|
Underlying operating profit
|
80
|
31
|
158
|
Timing
|
800
|
207
|
286
|
Adjusted operating profit
|
880
|
238
|
270
|
NEW ENGLAND
Operational highlights
During 2023/24, we achieved an
excellent operational performance across our New England regulated
business with an electric distribution network reliability of
99.94327% and an electric transmission reliability of 99.97549%. In
our Massachusetts Gas business, we achieved a 99% response time to
leaks within 60 minutes and replaced a further 131 miles of Leak
Prone Pipe (LPP).
Investment in the safety and
reliability of our networks has continued, with capital investment
higher year-on-year by £203 million to £1,673
million at constant currency. This increase was principally
driven by higher investment in our electric transmission network,
and higher gas network investment driven by our Gas System
Enhancement Plan (GSEP - our programme to accelerate the
replacement of LPP across our gas business).
National Grid was pleased to
receive two Edison Electric Institute Awards in June 2023 for
outstanding storm response for the two most severe winter storms in
New England in the prior year (on 23 December 2022, and 13 March
2023). During 2023/24, the New England Emergency Response
Organization was activated on 15 occasions in response to several
significant weather events. Activations included response to
Hurricane Lee in July, as well as a winter storm in December that
affected over 187,000 customers at peak and proved to be one of the
most impactful storms to our customers in many years. Emergency
Response Teams were well-prepared to respond safely and restored
all outages rapidly, well within regulatory requirements. For the
December storm, we were able to restore most customers within 48
hours, a rate of 100 customers per minute, the best recovery
performance in almost 15 years. Our teams continue to exercise,
train rigorously, and prepare for storm and non-storm emergency
events to best serve our customers.
Enabling the energy transition for all
In January, we filed our final
Electric Sector Modernization Plan (ESMP) with the Department for
Public Utilities (DPU) in Massachusetts. The plan outlines the
investment required in our electric distribution network over the
next five years and beyond to help the state meet its clean energy
goals under the 2050 Clean Energy and Climate Plan (CECP). Under
the ESMP, we have proposed to invest up to $2 billion over the next
five years across the following areas:
■ Network
infrastructure: upgraded power
lines, transformers, substations, to make the network more
resilient, connect clean energy and plan in advance for growth in
electric demand;
■ Technology and
platforms: new planning tools for
smarter decision making, including new data and monitoring systems
to ensure system stability, and new IT infrastructure;
and
■ Customer
programmes: help customers reduce
carbon footprint, drive smart energy use.
The DPU is now considering the
filing and we expect the regulator to issue an Order on our
proposal in August. The proposed investment under the ESMP is not
currently part of any rate order for our service
territory.
We continue to install Fault
Location Isolation and System Restoration (FLISR) units across our
network which now covers 20% of our customer base, delivering
benefits from 'self-healing' networks and improved reliability. We
also connected over 200 MW of distributed energy resources over the
last year, installed heat pumps in more than 15,000 residential
households (with over 1,500 at no cost to customers in our income
eligible programmes), and deployed 391 fast charging EV
installations.
In addition to our electric
network plans, we will build support for the use of renewable
natural gas in our system to achieve our fossil-free fuel goals,
while exploring alternative fuel sources and creating clean energy
jobs.
Delivering for our customers efficiently
As part of our Group wide
efficiency programme, we have delivered £120 million of savings to
the New England business over the last three years, with £31
million reached in 2023/24.
During the year, we set out to
improve customer experience by inviting all colleagues to engage
with a 'Find It & Fix It' process. This focuses on the core
principles of delivering incremental, quick value for our
customers, as well as communicating early and often with impacted
customers and our employee ambassadors. Over 165 customer issues
have been resolved in Massachusetts with the help of the Find It
& Fix It programme, including resolving issues related to
estimated bills and metering. We also established an Account
Management function to provide additional support to our large
commercial customers and developers.
The Massachusetts Advanced Meter
Infrastructure (AMI) programme successfully kicked off in September
2023 with stakeholder engagement across business teams. Our
improved self-service and digital channels continue to improve
customer experience and have reduced the number of calls by over
two million. In 2023/24, the Gas Business Enablement (GBE)
programme deployed new technology to enable digital workforce
management, asset management, and construction work management
capabilities across Massachusetts. This reduces paper and manual
work and enables better decision-making in asset
investments.
Growing our organisational capability
In spring 2023, we launched our
state-wide Strategic Workforce Development Program partnering with
educational institutions and non-profits to provide trainees from
historically underrepresented groups with career exposure,
development, and employment opportunities within National Grid and
the greater clean energy industry through our suite of four clean
energy academies. We have hired almost 70 graduates of our
programmes who are now working across the business, and we have
positively impacted nearly 1,000 work-ready adults, college, high
school, and middle school students across Massachusetts.
Empowering colleagues for great performance
We have recently made
organisational changes within our New England Electric and Customer
Account Management teams aimed at empowering our colleagues,
enhancing our customer focus, increasing our investments, and
ensuring scalability for the future. To support the growth and
development of our staff in New England, we have placed a high
priority on leadership development through a range of internal
programmes to ensure they are fully prepared to embrace the
challenges and opportunities that lie ahead, including the
potential brought by digitisation to our system. By encouraging our
employees to focus on a forward-looking approach, we will continue
on our path to delivering smarter, stronger, and cleaner energy
solutions.
Colleagues in the region surpassed
our yearly Grid for Good goal with nearly 19,000 volunteer hours,
an excellent achievement that fosters engagement and our commitment
to serving our communities.
For further examples of progress
against each of our pillars, please refer to page 34 of our 2023/24
Annual Report and Accounts.
Return on Equity
RoE increased 90bps from prior
year to 9.2%. This principally reflects
rate increases and the recovery of a historical property tax matter
in Massachusetts, partly offset by higher capital investments in
both Massachusetts Gas and Massachusetts Electric.
|
|
Return on
Equity
|
|
Rate Base ($m) as at 31
March
|
Regulated Entity
|
|
FY24
|
FY23
|
FY22
|
Allowed most
recent
(%)
|
|
2024
|
2023
|
% change
|
Massachusetts Gas
|
|
9.2
|
8.6
|
6.9
|
9.7
|
|
4,759
|
4,170
|
14
|
Massachusetts Electric
|
|
7.6
|
5.9
|
7.1
|
9.6
|
|
3,541
|
3,106
|
14
|
Total Massachusetts
|
|
8.6
|
7.4
|
7.0
|
9.7
|
|
8,300
|
7,276
|
14
|
|
|
|
|
|
|
|
|
|
|
New England Power
|
|
11.1
|
11.1
|
10.9
|
10.6
|
|
2,646
|
2,420
|
9
|
Canadian Interconnector &
Other
|
|
11.1
|
11.1
|
11.1
|
11.1
|
|
48
|
59
|
(19)
|
Total FERC
|
|
11.1
|
11.1
|
10.9
|
10.6
|
|
2,694
|
2,479
|
9
|
|
|
|
|
|
|
|
|
|
|
Total New England
|
|
9.2
|
8.3
|
8.3
|
9.9
|
|
10,994
|
9,755
|
13
|
Regulated Financial
Position
Overall, the New England rate base
increased by $1.2 billion (13%) to $11.0 billion driven
by increased capital expenditure partially offset by depreciation
and deferred tax movements.
New England Regulated Assets
|
|
|
|
($ billion as at 31
March)
|
2024
|
2023
|
% change
|
Rate Base excluding working
capital
|
10.7
|
9.6
|
11
|
Working capital in Rate
Base
|
0.3
|
0.2
|
50
|
Total Rate Base
|
11.0
|
9.8
|
13
|
Regulated assets outside Rate Base
excluding working capital
|
2.5
|
2.5
|
-
|
Working capital outside Rate
Base
|
(0.2)
|
0.1
|
(300)
|
Total regulated assets outside Rate Base
|
2.3
|
2.6
|
(12)
|
Total New England Regulated Assets
|
13.3
|
12.4
|
7
|
|
|
|
|
£ billion as at 31
March
|
2024
|
2023
|
% change
|
Total New England Regulated Assets at actual
currency
|
10.6
|
10.1
|
5
|
Total New England Regulated Assets at constant
currency
|
10.6
|
9.9
|
7
|
Operating profit in
2023/24
New England
|
|
|
|
|
(£ million)
|
2024
|
2023
|
2023 at constant
currency
|
% change at actual
currency
|
Revenue
|
3,948
|
4,427
|
4,263
|
(11)
|
Operating costs
|
(3,307)
|
(3,295)
|
(3,173)
|
-
|
Statutory operating profit
|
641
|
1,132
|
1,090
|
(43)
|
Exceptional items
|
17
|
(456)
|
(439)
|
n/m
|
Remeasurements
|
(15)
|
32
|
31
|
n/m
|
Adjusted operating profit
|
643
|
708
|
682
|
(9)
|
Timing
|
69
|
39
|
37
|
n/m
|
Major storm costs
|
90
|
72
|
69
|
25
|
Underlying operating profit
|
802
|
819
|
788
|
(2)
|
|
|
|
|
|
Underlying net revenue
|
2,364
|
2,371
|
2,283
|
-
|
Regulated controllable
costs
|
(701)
|
(755)
|
(728)
|
(7)
|
Post-retirement
benefits
|
(7)
|
(27)
|
(26)
|
(74)
|
Bad debt expense
|
(79)
|
(58)
|
(55)
|
36
|
Other operating costs
|
(355)
|
(319)
|
(307)
|
11
|
Depreciation and
amortisation
|
(420)
|
(393)
|
(379)
|
7
|
Underlying operating profit
|
802
|
819
|
788
|
(2)
|
Timing
|
(69)
|
(39)
|
(37)
|
n/m
|
Major storm costs
|
(90)
|
(72)
|
(69)
|
25
|
Adjusted operating profit
|
643
|
708
|
682
|
(9)
|
New England's statutory operating
profit decreased by £491 million, principally as a result of the
non-recurrence of the £511 million exceptional net gain on disposal
of NECO in 2022/23. Exceptional items also included £6 million of charges related to our cost efficiency
programme (2023: £27 million), £11 million of transaction costs
related to disposal of NECO (2023: £36 million) and an £8 million
exceptional credit in 2022/23 related to the discount rate on
environmental provisions. Major storm costs were £18 million
higher than 2022/23, commodity
remeasurements were £47 million favourable
to the prior year and timing under-recoveries were £30 million
higher year-on-year driven by returning commodity over-recoveries
from 2022/23.
Excluding the above items, the
impacts of partial year ownership of NECO in 2022/23 and
unfavourable year-on-year foreign exchange movements are partially
offset by improved underlying performance in the remaining New
England businesses.
Adjusted operating profit
decreased by £65 million (9%) at actual exchange rates. Adjusted
operating profit includes the impact of major storm costs which
were £18 million higher than the prior year (but as in 2022/23,
these passed our $100 million threshold in
aggregate with New York, so are excluded from our underlying
results) along with £30 million unfavourable year-on-year
timing movements.
Underlying operating profit
decreased by £17 million (2%, at actual FX rates). The impact of
not owning our Rhode Island business for two months in 2023/24
reduced underlying operating profit by £52 million (6%) and
movements in foreign exchange reduced 2023/24 underlying operating
profit by £31 million (4%). Unless stated otherwise, the following
commentary is presented excluding the impact of the disposal of
NECO in May 2022 and also excluding the impact of foreign currency
movements. Underlying net revenue was £7 million lower, but £81
million higher at constant currency and £176 million higher after
excluding the impact of the disposal of NECO, driven by the
benefits of rate case increments in Massachusetts
Gas and Massachusetts Electric and higher wholesale network
revenues. New England controllable costs decreased by £3 million as
a result of efficiency savings partially offset by inflation and
workload increases. Bad debt expense increased by £25 million as a
result of higher accounts receivable in 2023/24, driven by
increased net revenue (on a constant currency basis). Depreciation
and amortisation increased as a result of higher investment. Other
costs were higher due to increases in environmental reserves and
capital-related operating and maintenance costs partially offset by
the benefit of a gain on a pension buyout.
NEW YORK
Operational highlights
In 2023/24, we achieved an
excellent operational performance across our New York regulated
business with an electric distribution network availability of
99.92823% and an electric transmission network availability of
99.97168%. Investment in our networks continued during the year
with capital spend increasing year-on-year by £291 million to
£2,654 million at constant currency. This
increase was principally through higher electric investment driven
by our Smart Path Connect project, transmission projects associated
with CLCPA Phases 1 and 2, and higher gas capital investment driven
by mains replacement (including Leak Prone Pipe and system
integrity spend). This was partially offset by lower right of use
lease assets, driven by the non-recurrence of Volney-Marcy and
Gowanus leases in the prior year.
Across our New York business, we
continued with gas safety and reliability investments including the
replacement of a further 206 miles of leak prone pipe.
Between October and end of March,
New York Electric Operations prepared 17 times for storms and
severe weather, including eight major storm events. For the full
year, we prepared 49 times and had 13 major storms events. This is
an equal amount of storm activity to the prior year, but in general
slightly increased compared to previous years. Where our service
territories were affected by storm activity in 2023/24, we restored
electricity to 95% of disconnected customers from the peak within
12 hours, which was a total of 1.4 million customers. The most
impactful storm event was Winter Storm Finn in January 2024 which
impacted 202,000 customers.
Enabling the energy transition for all
Our Upstate Upgrade is a
collection of more than 70 transmission enhancement projects
through 2030 to deliver a modernised, stronger, and cleaner energy
network in Upstate New York. In addition to generating thousands of
new jobs, the investment will help the state meet its climate goals
outlined in the Climate Leadership and Community Protection Act
(CLCPA). The upgrade includes the following large-scale
transmission projects:
■ Smart Path
Connect - the project, for which
National Grid's share of capital investment is $550 million,
includes the rebuild and upgrade of approximately 55 miles of our
Adirondack-Porter 230 kV transmission circuits to 345 kV in
Northern New York. It remains on track for energisation in December
2025.
■ CLCPA Phase 1
- construction has begun on the first stage of
our substation upgrade as part of the $800 million Phase 1 funding
for transmission upgrades. This also includes projects such as
Inghams-Rotterdam and Churchtown to Pleasant Valley circuit
rebuilds (129 miles) to support 330 MW of incremental headroom
capacity for renewable generation.
■ CLCPA Phase 2
- engineering contracts were awarded in October
2023 for transmission projects as part of the $2.1 billion Phase 2
funding for transmission networks and modernising the electric
network.
Our KEDNY-KEDLI Joint Proposal
contains a number of provisions supporting New York's clean energy
goals. These include continued investment to significantly reduce
system leaks and associated emissions, and programmes in support of
non-pipe alternatives, including specific programmes related to LPP
project retirements, reinforcements and main extensions. In
addition, the Joint Proposal extends our commitment to not market
new gas connections and conversions during the term of the rate
plans, and we will instead encourage applicants requesting new or
expanded service to consider electrification options.
As we continue to develop a
smarter, stronger, cleaner energy network, decarbonising our gas
networks is a priority for our New York business. The KEDNY-KEDLI
Joint Proposal funds investment and programmes that will
significantly reduce system leaks and associated emissions. Through
main replacement and leak repairs, we are targeting reductions to
leak inventories of more than 80% at KEDNY and 90% at KEDLI from
the levels a few years ago. We will also be deploying advanced leak
detection technology to identify and repair the higher emitting
leaks on the system. To help customers manage their energy usage,
the Joint Proposal provides for approximately $75 million annually
for energy efficiency, and we are providing up to $2 million/year
for weatherisation health and safety programmes to address barriers
to energy efficiency for low-to-moderate income and disadvantaged
community households.
During the year, we were also
awarded $11.4 million in economic development funds to support
various projects across Western New York, including the
construction of the first North American facility that will produce
clean, carbon-free hydrogen. Funds will also support an onsite,
lithium battery storage device, providing a greener backup power
alternative for the Buffalo Niagara Medical Campus.
Delivering for our customers efficiently
As part of our Group wide
efficiency programme, we have delivered £177 million of savings to
the New York business over the last three years, with £48 million
delivered in 2023/24. This has helped reduce cost pressures on our
customers and deliver flat controllable costs for over 3 years in a
volatile inflationary environment. Our new field-based dispatch
tools in both Gas and Electric continue to improve routing and the
bundling of work across our footprint, reducing fuel costs by 20%
and the number of 'truck rolls' by 20,000. In addition, the further
roll out of self-service channels in our customer operations has
reduced call volumes by 17%.
Our ongoing commitment to
customers and communities has continued during 2023/24. To
celebrate the third year of our Project C initiative, we expanded
the Company's annual day of service to a week of service. This
included more than 2,000 company employee volunteers engaging in
200 events taking place in communities across New York. This year's
theme, 'Live together. Grow together.', highlighted the importance
of creating meaningful change in the communities we serve. As part
of the week of service our employees also pledged to complete Acts
of Kindness, including collecting and donating books, food and
clothing to a local charity, and donating blood to a blood bank.
Across the whole Project C initiative, New York employees also
contributed over 16,000 hours of volunteering in local communities
during the year.
Growing our organisational capability
Our KEDNY-KEDLI Joint Proposal
also makes provision for more than 200 extra full time employees
(FTE) by the end of the third year of the multi-year rate proposal.
The FTEs will help build our core front line operations and
customer teams leveraging several of our workforce development
programmes that seek to hire and train employees from under
represented communities.
This year we also celebrated the
graduation of the first class from the New York City Housing
Authority (NYCHA) Clean Energy Academy programme, which National
Grid helps fund. This innovative workforce development programme
seeks to train 250 public housing residents over four years for
promising careers delivering the clean energy and sustainability
transition. The programme seeks to connect resident trainees with
NYCHA contractors who will be performing nearly half a billion
dollars of retrofit and renewable energy projects at NYCHA
developments through 2026.
Empowering colleagues for great performance
Since launching Project C in
September 2021, National Grid has supported 100,000 local
businesses, launched 1,000 community partnerships, planted or
donated 2,300 trees, trained 3,400 workers to grow the clean energy
workforce, and adopted 60 parks to revitalise gathering spaces. In
addition, employees have volunteered over 28,000 hours in their New
York communities. As part of the company's Responsible Business
Charter, National Grid has committed to amassing 500,000 volunteer
hours by 2030.
For further examples of progress
against each of our pillars, please refer to page 35 of our 2023/24
Annual Report and Accounts.
Return on Equity
During the year, we achieved an
RoE of 8.5%, 10bps below the 8.6%
delivered in 2023/24. This was principally driven by a lower RoE in
our upstate New York (NIMO) business, largely offset by a higher
RoE compared to prior year at KEDNY-KEDLI.
|
|
Return on
Equity
|
|
Rate Base ($m) as at 31
March
|
Regulated Entity
|
|
FY24
|
FY23
|
FY22
|
Allowed most
recent
(%)
|
|
2024
|
2023
|
% change
|
KEDNY
|
|
9.0
|
9.2
|
8.1
|
8.8
|
|
6,454
|
6,048
|
7
|
KEDLI
|
|
9.7
|
9.2
|
11.0
|
8.8
|
|
4,149
|
3,774
|
10
|
NMPC Gas
|
|
6.0
|
7.1
|
8.1
|
9.0
|
|
1,765
|
1,800
|
(2)
|
NMPC Electric
|
|
8.1
|
8.1
|
8.5
|
9.0
|
|
8,317
|
7,045
|
18
|
Total New York
|
|
8.5
|
8.6
|
8.8
|
8.9
|
|
20,685
|
18,667
|
11
|
Regulated Financial
Position
Overall, the New York rate base
increased by $2.0 billion (11%) to $20.7 billion driven
by increased capital expenditure partially offset by depreciation
and deferred tax movements.
New York Regulated Assets
|
|
|
|
($ billion as at 31
March)
|
2024
|
2023
|
% change
|
Rate Base excluding working
capital
|
20.3
|
18.2
|
12
|
Working capital in Rate
Base
|
0.4
|
0.5
|
(20)
|
Total Rate Base
|
20.7
|
18.7
|
11
|
Regulated assets outside Rate Base
excluding working capital
|
1.7
|
1.2
|
42
|
Working capital outside Rate
Base
|
(0.4)
|
0.1
|
n/m
|
Total regulated assets outside Rate Base
|
1.3
|
1.3
|
-
|
Total New York Regulated Assets
|
22.0
|
20.0
|
10
|
|
|
|
|
£ billion as at 31
March
|
2024
|
2023
|
% change
|
Total New York Regulated Assets at actual
currency
|
17.4
|
16.2
|
7
|
Total New York Regulated Assets at constant
currency
|
17.4
|
15.8
|
10
|
Operating profit in
2023/24
New York
|
|
|
|
|
(£ million)
|
2024
|
2023
|
2023 at constant
currency
|
% change at actual
currency
|
Revenue
|
6,094
|
6,994
|
6,734
|
(13)
|
Operating costs
|
(5,732)
|
(6,453)
|
(6,213)
|
(11)
|
Statutory operating profit
|
362
|
541
|
521
|
(33)
|
Exceptional items
|
506
|
(118)
|
(113)
|
n/m
|
Remeasurements
|
(8)
|
318
|
306
|
n/m
|
Adjusted operating profit
|
860
|
741
|
714
|
16
|
Timing
|
20
|
(53)
|
(51)
|
n/m
|
Major storm costs
|
136
|
186
|
179
|
(27)
|
Underlying operating profit
|
1,016
|
874
|
842
|
16
|
|
|
|
|
|
Underlying net revenue
|
4,057
|
3,984
|
3,836
|
2
|
Regulated controllable
costs
|
(1,057)
|
(1,151)
|
(1,108)
|
(8)
|
Post-retirement
benefits
|
(21)
|
(2)
|
(2)
|
n/m
|
Bad debt expense
|
(96)
|
(157)
|
(151)
|
(39)
|
Other operating costs
|
(1,209)
|
(1,180)
|
(1,136)
|
2
|
Depreciation and
amortisation
|
(658)
|
(620)
|
(597)
|
6
|
Underlying operating profit
|
1,016
|
874
|
842
|
16
|
Timing
|
(20)
|
53
|
51
|
n/m
|
Major storm costs
|
(136)
|
(186)
|
(179)
|
(27)
|
Adjusted operating profit
|
860
|
741
|
714
|
16
|
New York statutory operating
profit decreased by £179 million, principally as a result of £624 million higher exceptional charges,
partly offset by £326 million favourable year-on-year movements in
commodity contract remeasurements. The exceptional items swing
includes a £156 million gain in 2022/23 for increasing the discount
rate on environmental provisions and a £496 million charge for the
increase in environmental provisions to reflect updates on the
scope and design of remediation activities related to certain of
our sites. Other exceptional items (related to our cost efficiency
programme) were £28 million lower than the prior year. Timing
under-recoveries of £20 million in 2023/24 compared with timing
over-recoveries of £53 million in 2022/23 primarily driven by lower
auction sale prices on transmission wheeling, higher commodity
under-recovery and under-recovery of Smart Path Connect incentives.
Major storm costs of £136 million were £50 million lower
year-on-year, driven by non-recurrence of Storm Elliott, but as in
2022/23, the total costs passed our threshold ($100 million in
aggregate with New England) and so are excluded from our underlying
results. These factors, offset by increased underlying operating
profit, driven primarily by rate increases and controllable cost
efficiencies, reduced statutory operating profit to £362
million.
Adjusted operating profit
increased by £119 million (16%), impacted by £73 million
year-on-year unfavourable timing movements, offset by lower
year-on-year major storm costs of £50 million and underlying
operating profit increasing by £142 million (16%), including a £32
million decrease as a result of foreign exchange movements.
Adjusted for the impact of foreign currency, underlying operating
profit increased by £174 million (21%) compared with 2022/23.
Underlying net revenues increased by £73 million (£221 million
increase at constant currency) from the benefits of rate case
increases in KEDNY, KEDLI and NIMO alongside early recovery of
expenditure on our Smart Path Connect programme. Regulated
controllable costs were £51 million lower year-on-year, with
increased workload and the impact of inflation being more than
offset by cost efficiency savings and one-off items in 2022/23 not
recurring. Provisions for bad and doubtful debts decreased by £55
million driven by non-recurrence of write-offs related to the
COVID-19 arrears management programme recorded in 2022/23.
Depreciation and amortisation increased due to the growth in
assets. Other costs (on an underlying basis) were higher due to
increased property taxes and higher costs on funded programmes
(offset by rate increases), and higher pension buy out gain in
2022/23.
NATIONAL GRID VENTURES
(NGV)
Operational highlights
NGV businesses have performed well
in 2023/24. We currently have six interconnectors in operation,
with a capacity of 7.8 GW connecting the UK with France, the
Netherlands, Belgium, Denmark, and Norway. IFA2 has performed well
again this year, with strong auctions results helping to offset an
outage following a cable fault (annual availability was 71.2%). Our
BritNed and NEMO interconnectors have also
performed well with availability reaching 98.0% and 96.8%
respectively. Finally, in its second full year of operation, North
Sea Link (NSL) has performed well at full operational capacity, and
availability of 95.9% across the year. Overall, total
interconnector availability increased 7% following the IFA1 return
to service and improved availability on NSL.
National Grid Ventures
|
|
|
|
|
(£ million)
|
2024
|
2023
|
2023 at constant
currency
|
% change at actual
currency
|
Revenue
|
1,389
|
1,341
|
1,322
|
4
|
Operating costs
|
(831)
|
(384)
|
(379)
|
116
|
Statutory operating profit
|
558
|
957
|
943
|
(42)
|
Exceptional items
|
(89)
|
(467)
|
(454)
|
n/m
|
Underlying/adjusted operating profit
|
469
|
490
|
489
|
(4)
|
|
|
|
|
|
Statutory post-tax share of JVs and
associates
|
38
|
184
|
184
|
(79)
|
Remeasurements
|
64
|
19
|
18
|
237
|
Adjusted post-tax share of JVs and
associates
|
102
|
203
|
202
|
(50)
|
|
|
|
|
|
Analysed by
business:
|
|
|
|
|
Interconnectors
|
306
|
355
|
355
|
(14)
|
Grain LNG
|
149
|
131
|
131
|
14
|
NG Generation
|
29
|
33
|
32
|
(12)
|
Other
|
(15)
|
(29)
|
(29)
|
(48)
|
Adjusted operating profit
|
469
|
490
|
489
|
(4)
|
|
|
|
|
|
Interconnectors
|
69
|
164
|
164
|
(58)
|
NG Renewables
|
22
|
16
|
16
|
38
|
Millennium
|
-
|
14
|
13
|
(100)
|
Other
|
11
|
9
|
9
|
22
|
Adjusted post-tax share of JVs and
associates
|
102
|
203
|
202
|
(50)
|
Total NGV contribution
(adjusted/underlying)
|
571
|
693
|
691
|
(18)
|
|
|
|
|
|
Interconnectors
|
192
|
434
|
434
|
(56)
|
NG Renewables
|
271
|
146
|
141
|
86
|
Grain LNG
|
104
|
162
|
162
|
(36)
|
NG Generation
|
24
|
93
|
90
|
(74)
|
Community Offshore Wind
|
45
|
7
|
7
|
n/m
|
Other
|
26
|
128
|
121
|
(80)
|
Capital investment
|
662
|
970
|
955
|
(32)
|
National Grid Ventures' statutory
operating profit of £558 million in 2023/24 includes an exceptional
gain of £89 million. Of this exceptional gain, £92 million relates
to property damage insurance proceeds received following the fire
at our French interconnector (IFA1) in September 2021, offset by £3
million of exceptional costs incurred as part of the broader cost
efficiency programme. National Grid Ventures' statutory operating
profit in 2022/23 included exceptional items related to a £335
million gain from the sale of a stake in Millennium Pipeline, a
£130 million credit for property damage proceeds (again related to
the IFA1 fire) and a £3 million credit for increasing the discount
rate on environmental provisions, offset by £1 million of
exceptional costs incurred as part of the broader cost efficiency
programme. Our underlying and adjusted
results exclude the impact of these exceptional items.
Underlying and adjusted operating
profit was £21 million lower than 2022/23. Overall interconnector
profit decreased versus prior year reflecting non-recurrence of
prior year business interruption insurance recoveries in IFA1
relating to the September 2021 fire, along with lower capacity
prices. This is partially offset by improved availabilities in our
North Sea Link interconnector (which benefited from an increase in
the revenue cap following an Ofgem review) and improved performance
in our Grain LNG business.
Capital investment
National Grid Ventures' capital
investment, which includes investment in joint ventures and
associates, was £308 million lower than
the prior year (£293 million lower at
constant currency). This decrease was driven primarily by the
non‑recurrence of capital spend on projects in the prior year,
namely the IFA converter station rebuild, capital expenditure on
Viking Link, and spend on the Grain LNG capacity expansion. This
decrease was partly offset by higher investment in Emerald Energy
LLC (National Grid Renewables) and Community Offshore Wind LLC
(COSW).
Enabling the energy transition for all
Our sixth interconnector, Viking
Link, became operational in December 2023, connecting Lincolnshire
in the UK with Revsing in Denmark. It is currently restricted by
the Danish System Operator to 1,100 MW, although we have seen long
periods of operation above this to 1,400 MW when day ahead system
conditions allow. We expect to increase to the full 1,400 MW by
mid-2026 following Danish West Coast network upgrades. It is the
world's longest land and subsea interconnector stretching for 475
miles (765 kilometres) between the two countries with capacity to
provide enough green energy for up to 2.5 million UK
homes.
In the US, National Grid
Renewables has begun onsite construction on its Unbridled solar
project located in Kentucky. At 160 megawatts (MW), Unbridled is
anticipated to be the largest producer of clean, solar energy in
the state once it reaches operations in 2024. In Ohio, Amazon Solar
Farm Ohio - Yellowbud - a 274 MW solar
project, commenced commercial operation. Construction has also
started at neighbouring projects, namely the Ross County Solar
Project and the Fayette Solar Project, which once operational will
deliver a combined 167.5 MW of clean solar power. In South Dakota,
onsite field construction started at its Wild Springs Solar
Project. The 128 MWAC solar project is the
largest solar energy project in the state to-date. In February,
National Grid Renewables announced the start of on-site
construction for two solar projects in its home state of Minnesota;
the Fillmore County and Louise Solar Projects totalling 95 MW and
have a Power Purchase Agreement (PPA) with Xcel Energy.
COSW will look to participate in
future New York and New Jersey offshore wind bid solicitation
rounds and expect to see these moving forward in due course. We
continue to believe in the fundamental need of offshore wind in the
Northeast US to help deliver energy transition and decarbonisation
goals. For further information on COSW, please refer to page 14 of
the Strategic Overview section.
On transmission, NGV's 90 mile
(149 kilometres) Propel NY Energy electric
project (a partnership with Avangrid, Central Hudson and Con
Edison) was selected by the New York Independent System Operator
(NYISO) to help connect the future expansion of offshore wind
capacity to the grid network.
Delivering for our customers efficiently
In the UK, we have made good
progress on the CAP 25 expansion project at Grain LNG. When
complete in 2025, the increased capacity - together with existing
capacity at Grain LNG - will play an increasingly critical role in
energy security by supplying up to 33% of UK gas demand. In
February, we announced two capacity agreements with Sonatrach and
Venture Global that will further strengthen the security of supply
of LNG to the UK. During the year, the new 190,000 m3 storage tank reached a number of
construction milestones from successfully raising the roof of the
tank to completing concreting. The project has created more than
800 jobs during construction. In the US, in May 2023 we
commissioned our new Fields Point Liquefier at our Providence LNG
facility, expanding its operating capacity to serve customers
across Massachusetts.
Empowering colleagues for great performance
NGV actively encourages everyone
to speak out about safety, with an emphasis on reporting at all
levels. In the latest Grid:voice survey,
93% of colleagues said they felt their manager encourages them to
talk openly about safety indicating good progress towards a
'Proactive Safety Culture'. Improvements have been made across the
board in terms of leadership and employee engagement, highlighting
the continued need for conversations around safety where we have
increased our focus on reducing high risk, and severity events with
communication campaigns and deep dive activities.
In 2023, NGV launched a series of
wellbeing events to promote mental and physical wellbeing. Sessions
included men's health, mental health and Time to Talk coffee
drop-in sessions which proved popular with employees. In addition
to internal programmes, Grain has refined
its wellbeing strategy to encompass our employee's highest health
risks from available data. Several dedicated activities including
'Beat the burnout' for shift teams and musculoskeletal health
(MSK) awareness month were included in our
plans. Grain is also leading the way in external advocacy of mental
health and wellbeing matters in sponsoring local events such as the
Kent Mental Wellbeing Awards (having previously been award winners)
and representatives speaking at seminars. National Grid Renewables
received recognition for its excellence in workplace safety and
health during the 2023 Minnesota Safety and Health Conference. In
May, National Grid Renewables was among 210 employers to be
honoured through the awards programme, coordinated by the Minnesota
Safety Council.
For further examples of progress
against each of our pillars, please refer to page 36 of our 2023/24
Annual Report and Accounts.
OTHER ACTIVITIES
Highlights
Other activities primarily relate
to UK property, insurance and corporate activities, as well as
National Grid Partners, the corporate investment and innovation arm
of National Grid. In UK Land and Property, we continue to make good
progress with the divestment of the surplus property portfolio. In
this fiscal year, we completed on the sale of 30 sites, realising
approximately £30 million profit.
Other
|
|
|
|
|
(£ million)
|
2024
|
2023
|
2023 at constant
currency
|
% change at actual
currency
|
Revenue
|
244
|
317
|
313
|
(23)
|
Operating costs
|
(361)
|
(367)
|
(363)
|
(2)
|
Statutory operating (loss)/profit
|
(117)
|
(50)
|
(50)
|
134
|
Exceptional items
|
(57)
|
(81)
|
(81)
|
n/m
|
Underlying/adjusted operating (loss)/profit
|
(60)
|
31
|
31
|
(294)
|
|
|
|
|
|
Analysed by
business:
|
|
|
|
|
Property
|
30
|
216
|
216
|
(86)
|
NG Partners
|
(13)
|
(25)
|
(25)
|
(48)
|
Corporate and other
activities
|
(77)
|
(160)
|
(160)
|
(52)
|
Adjusted operating (loss)/profit
|
(60)
|
31
|
31
|
(294)
|
Other activities statutory
operating loss of £117 million (2023: £50 million loss) includes an
exceptional charge of £46 million related to the cost efficiency
programme (2023: £25 million), £5 million of costs for the
separation of UK Gas Transmission (2023: £31 million) and £6
million of integration costs for UK Electricity Distribution (2023:
£16 million).
Adjusted operating loss was £60
million (including corporate costs) in 2023/24 compared with £31
million profit in 2022/23. This decrease mainly relates to property
site sales in the previous year, primarily related to the sale of
15 sites to St William. This is partially offset by lower corporate
costs, which in the prior year included support payments to
charitable causes and employees in respect of the energy crisis,
and increased insurance income through insurance captives and
claims.
PROVISIONAL 2023/24 FINANCIAL
TIMETABLE
Date
|
Event
|
23 May 2024
|
2023/24 Full-Year Results
|
6 June 2024
|
Ordinary shares go ex-dividend for
2023/24 final dividend
|
6 June 2024
|
ADRs go ex-dividend for
2023/24 final dividend
|
7 June 2024
|
Record date for 2023/24 final dividend
|
13 June 2024
|
Scrip reference price announced
for 2023/24 final dividend
|
24 June 2024 (5pm London
time)
|
Scrip election date for
2023/24 final dividend
|
10 July 2024
|
2024 Annual General Meeting
|
19 July 2024
|
2023/24 final dividend paid to qualifying shareholders
|
7 November 2024
|
2024/25 Half-Year Results
|
20 November 2024
|
ADRs go ex-dividend for
2024/25 interim dividend
|
21 November 2024
|
Ordinary shares go ex-dividend for
2024/25 interim dividend
|
22 November 2024
|
Record date for 2024/25 interim dividend
|
28 November 2024
|
Scrip reference price announced
for 2024/25 interim dividend
|
9 December 2024 (5pm London time)
|
Scrip election date for
2024/25 interim dividend
|
13 January 2025
|
2024/25 interim dividend paid to qualifying shareholders
|
American Depositary Receipt (ADR) Deposit
Agreement
The Company's Deposit agreement
under which the ADRs are issued allows a fee of up to $0.05 per ADR
to be charged for any cash distribution made to ADR holders,
including cash dividends. ADR holders who receive cash in relation
to the 2022/23 final dividend will be charged a fee of $0.02 per
ADR by the Depositary prior to distribution of the cash
dividend.
CAUTIONARY STATEMENT
This announcement 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 (the Company) 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. This document also references
climate-related targets and climate-related risks which differ from
conventional financial risks in that they are complex, novel and
tend to involve projection over long term scenarios which are
subject to significant uncertainty and change. These
forward-looking statements are not guarantees of National Grid's
future performance and are subject to assumptions, risks and
uncertainties that could cause actual future results to differ
materially from those expressed in or implied by such
forward-looking statements or targets. Many of these assumptions,
risks and uncertainties relate to factors that are beyond National
Grid's ability to control, predict or estimate precisely, such as
changes in laws or regulations and decisions by governmental bodies
or regulators, including those relating to current and upcoming
price controls in the UK and rate cases in the US, as well as the
future of system operation in the UK; the timing of construction
and delivery by third parties of new generation projects requiring
connection; breaches of, or changes in, environmental, climate
change and health and safety laws or regulations, including
breaches or other incidents arising from the potentially harmful
nature of its activities; network failure or interruption, the
inability to carry out critical non-network operations and damage
to infrastructure, due to adverse weather conditions including the
impact of major storms as well as the results of climate change,
due to counterparties being unable to deliver physical commodities;
reliability of and access to IT systems, including or due to the
failure of or unauthorised access to or deliberate breaches of
National Grid's systems and supporting technology; failure to
adequately forecast and respond to disruptions in energy supply;
performance against regulatory targets and standards and against
National Grid's peers with the aim of delivering stakeholder
expectations regarding costs and efficiency savings, as well as
against targets and standards designed to support its role in the
energy transition; and customers and counterparties (including
financial institutions) failing to perform their obligations to the
Company. Other factors that could cause actual results to differ
materially from those described in this announcement include
fluctuations in exchange rates, interest rates and commodity price
indices; restrictions and conditions (including filing
requirements) in National Grid's borrowing and debt arrangements,
funding costs and access to financing; regulatory requirements for
the Company to maintain financial resources in certain parts of its
business and restrictions on some subsidiaries' transactions such
as paying dividends, lending or levying charges; the delayed timing
of recoveries and payments in National Grid's regulated businesses,
and whether aspects of its activities are contestable; the funding
requirements and performance of National Grid's pension schemes and
other post-retirement benefit schemes; the failure to attract,
develop and retain employees with the necessary competencies,
including leadership and business capabilities, and any significant
disputes arising with National Grid's employees or breaches of laws
or regulations by its employees; the failure to respond to market
developments, including competition for onshore transmission; the
threats and opportunities presented by emerging technology; the
failure by the Company to respond to, or meet its own commitments
as a leader in relation to, climate change development activities
relating to energy transition, including the integration of
distributed energy resources; and the need to grow the Company's
business to deliver its strategy, as well as incorrect or
unforeseen assumptions or conclusions (including unanticipated
costs and liabilities) relating to business development activity,
including the sale of a stake in its UK Gas Transmission and
Metering business, its strategic infrastructure projects and joint
ventures and the separation and transfer of the ESO to the public
sector. For further details regarding these and other assumptions,
risks and uncertainties that may impact National Grid, please read
the Strategic Report section and the 'Risk factors' on pages 226 to
231 of National Grid's Annual Report and Accounts for the year
ended 31 March 2024, which is published today. In addition, new
factors emerge from time to time and National Grid cannot assess
the potential impact of any such factor on its activities or the
extent to which any factor, or combination of factors, may cause
actual future results to differ materially from those contained in
any forward-looking statement. Except as may be required by law or
regulation, the Company undertakes no obligation to update any of
its forward-looking statements, which speak only as of the date of
this announcement. This announcement is for informational purposes
only and does not constitute an offer to sell or the solicitation
of an offer to buy any securities. The securities mentioned herein
have not been, and will not be, registered under the Securities Act
or the securities laws of any state or other jurisdiction, and may
not be offered or sold in the United States absent registration or
an applicable exemption from registration requirements. No public
offering of securities is being made in the United
States.
Consolidated income statement
for the years ended 31 March
2024
|
Notes
|
|
Before
exceptional
items and
remeasurements
£m
|
Exceptional
items and
remeasurements
(see note 4)
£m
|
Total
£m
|
|
|
Continuing operations
|
|
|
|
|
|
|
Revenue
|
2(a),3
|
|
19,850
|
-
|
19,850
|
|
Provision for bad and doubtful
debts
|
|
|
(179)
|
-
|
(179)
|
|
Other operating costs
|
4
|
|
(14,221)
|
(987)
|
(15,208)
|
|
Other operating income
|
|
|
12
|
-
|
12
|
|
Operating profit
|
2(b)
|
|
5,462
|
(987)
|
4,475
|
|
Finance income
|
4,5
|
|
244
|
4
|
248
|
|
Finance costs
|
4,5
|
|
(1,723)
|
11
|
(1,712)
|
|
Share of post-tax results of joint
ventures and associates
|
|
|
101
|
(64)
|
37
|
|
Profit before tax
|
2(b)
|
|
4,084
|
(1,036)
|
3,048
|
|
Tax
|
4,6
|
|
(983)
|
152
|
(831)
|
|
Profit after tax from continuing
operations
|
|
|
3,101
|
(884)
|
2,217
|
|
Profit after tax from discontinued
operations
|
9
|
|
13
|
61
|
74
|
|
Total profit for the year (continuing and
discontinued)
|
|
|
3,114
|
(823)
|
2,291
|
|
Attributable to:
|
|
|
|
|
|
|
Equity shareholders of the
parent
|
|
|
3,113
|
(823)
|
2,290
|
|
Non-controlling interests from
continuing operations
|
|
|
1
|
-
|
1
|
|
Earnings per share (pence)
|
|
|
|
|
|
|
Basic earnings per share
(continuing)
|
7
|
|
|
|
60.0
|
|
Diluted earnings per share
(continuing)
|
7
|
|
|
|
59.7
|
|
Basic earnings per share
(continuing and discontinued)
|
7
|
|
|
|
62.0
|
|
Diluted earnings per share
(continuing and discontinued)
|
7
|
|
|
|
61.7
|
|
2023
|
Notes
|
|
Before
exceptional
items
and remeasurements
£m
|
Exceptional
items
and remeasurements
(see
note 4)
£m
|
Total
£m
|
|
|
Continuing operations
|
|
|
|
|
|
|
Revenue
|
2(a),3
|
|
21,659
|
-
|
21,659
|
|
Provision for bad and doubtful
debts
|
|
|
(220)
|
-
|
(220)
|
|
Other operating costs
|
4
|
|
(17,158)
|
(391)
|
(17,549)
|
|
Other operating income
|
4
|
|
13
|
976
|
989
|
|
Operating profit
|
2(b)
|
|
4,294
|
585
|
4,879
|
|
Finance income
|
4,5
|
|
166
|
(28)
|
138
|
|
Finance costs
|
4,5
|
|
(1,680)
|
82
|
(1,598)
|
|
Share of post-tax results of joint
ventures and associates
|
|
|
190
|
(19)
|
171
|
|
Profit before tax
|
2(b)
|
|
2,970
|
620
|
3,590
|
|
Tax
|
4,6
|
|
(635)
|
(241)
|
(876)
|
|
Profit after tax from continuing
operations
|
|
|
2,335
|
379
|
2,714
|
|
Profit after tax from discontinued
operations
|
9
|
|
320
|
4,763
|
5,083
|
|
Total profit for the year (continuing and
discontinued)
|
|
|
2,655
|
5,142
|
7,797
|
|
Attributable to:
|
|
|
|
|
|
|
Equity shareholders of the
parent
|
|
|
2,655
|
5,142
|
7,797
|
|
Non-controlling interests from
continuing operations
|
|
|
-
|
-
|
-
|
|
Earnings per share (pence)
|
|
|
|
|
|
|
Basic earnings per share
(continuing)
|
7
|
|
|
|
74.2
|
|
Diluted earnings per share
(continuing)
|
7
|
|
|
|
73.8
|
|
Basic earnings per share
(continuing and discontinued)
|
7
|
|
|
|
213.1
|
|
Diluted earnings per share
(continuing and discontinued)
|
7
|
|
|
|
212.1
|
|
Consolidated statement of comprehensive
income
for the years ended 31 March
|
|
|
2024
|
2023
|
|
Notes
|
|
£m
|
£m
|
Profit after tax from continuing operations
|
|
|
2,217
|
2,714
|
Profit after tax from discontinued
operations
|
|
|
74
|
5,083
|
Other comprehensive income from
continuing operations
|
|
|
|
|
Items from continuing operations that will never be
reclassified to profit or loss:
|
|
|
|
|
Remeasurement (losses)/gains on
pension assets and post-retirement benefit obligations
|
|
|
(218)
|
(1,362)
|
Net (losses)/gains in respect of
cash flow hedging of capital expenditure
|
|
|
(37)
|
10
|
Tax on items that will never be
reclassified to profit or loss
|
|
|
59
|
341
|
Total items from continuing operations that will never be
reclassified to profit or loss
|
|
|
(196)
|
(1,011)
|
Items from continuing operations that may be reclassified
subsequently to profit or loss:
|
|
|
|
|
Retranslation of net assets offset
by net investment hedge
|
|
|
(335)
|
883
|
Exchange differences reclassified
to the consolidated income statement on disposal
|
9
|
|
-
|
(170)
|
Net gains/(losses) in respect of
cash flow hedges
|
|
|
240
|
-
|
Net gains/(losses) in respect of
cost of hedging
|
|
|
26
|
(16)
|
Net gains/(losses) on investment
in debt instruments measured at fair value through other
comprehensive income
|
|
|
21
|
(25)
|
Share of other comprehensive
income of associates, net of tax
|
|
|
-
|
1
|
Tax on items that may be
reclassified subsequently to profit or loss
|
|
|
(66)
|
11
|
Total items from continuing operations that may be
reclassified subsequently to profit or loss
|
|
|
(114)
|
684
|
Other comprehensive (loss)/income
for the year, net of tax from continuing operations
|
|
|
(310)
|
(327)
|
Other comprehensive income/(loss)
for the year, net of tax from discontinued operations
|
9
|
|
10
|
(227)
|
Other comprehensive loss for the year, net of
tax
|
|
|
(300)
|
(554)
|
Total comprehensive income for the
year from continuing operations
|
|
|
1,907
|
2,387
|
Total comprehensive income for the
year from discontinued operations
|
9
|
|
84
|
4,856
|
Total comprehensive income for the year
|
|
|
1,991
|
7,243
|
Attributable to:
|
|
|
|
|
Equity shareholders of the parent
|
|
|
|
|
From continuing
operations
|
|
|
1,906
|
2,386
|
From discontinued
operations
|
|
|
84
|
4,856
|
|
|
|
1,990
|
7,242
|
Non-controlling interests
|
|
|
|
|
From continuing
operations
|
|
|
1
|
1
|
Consolidated statement of changes in equity
for the years ended 31 March
|
Share
capital
£m
|
Share
premium
account
£m
|
Retained
earnings
£m
|
Other equity reserves
£m
|
|
Total
share-holders'
equity
£m
|
Non-
controlling
interests
£m
|
|
Total
equity
£m
|
At 1 April 2022
|
485
|
1,300
|
26,611
|
(4,563)
|
|
23,833
|
23
|
|
23,856
|
Profit for the year
|
-
|
-
|
7,797
|
-
|
|
7,797
|
-
|
|
7,797
|
Other comprehensive (loss)/income
for the year
|
-
|
-
|
(1,253)
|
698
|
|
(555)
|
1
|
|
(554)
|
Total comprehensive income for the
year
|
-
|
-
|
6,544
|
698
|
|
7,242
|
1
|
|
7,243
|
Equity dividends
|
-
|
-
|
(1,607)
|
-
|
|
(1,607)
|
-
|
|
(1,607)
|
Scrip dividend-related share
issue1
|
3
|
(3)
|
-
|
-
|
|
-
|
-
|
|
-
|
Issue of treasury
shares
|
-
|
-
|
16
|
-
|
|
16
|
-
|
|
16
|
Transactions in own
shares
|
-
|
5
|
(4)
|
-
|
|
1
|
-
|
|
1
|
Share-based payments
|
-
|
-
|
48
|
-
|
|
48
|
-
|
|
48
|
Cash flow hedges transferred to
the statement of financial position, net of tax
|
-
|
-
|
-
|
5
|
|
5
|
-
|
|
5
|
1 April 2023
|
488
|
1,302
|
31,608
|
(3,860)
|
|
29,538
|
24
|
|
29,562
|
Profit for the year
|
-
|
-
|
2,290
|
-
|
|
2,290
|
1
|
|
2,291
|
Other comprehensive loss for the
year
|
-
|
-
|
(168)
|
(132)
|
|
(300)
|
-
|
|
(300)
|
Total comprehensive income/(loss)
for the year
|
-
|
-
|
2,122
|
(132)
|
|
1,990
|
1
|
|
1,991
|
Equity dividends
|
-
|
-
|
(1,718)
|
-
|
|
(1,718)
|
-
|
|
(1,718)
|
Scrip dividend-related share
issue1
|
5
|
(6)
|
-
|
-
|
|
(1)
|
-
|
|
(1)
|
Issue of treasury
shares
|
-
|
-
|
21
|
-
|
|
21
|
-
|
|
21
|
Transactions in own
shares
|
-
|
2
|
(6)
|
-
|
|
(4)
|
-
|
|
(4)
|
Share-based payments
|
-
|
-
|
37
|
-
|
|
37
|
-
|
|
37
|
Tax on share-based
payments
|
-
|
-
|
2
|
-
|
|
2
|
-
|
|
2
|
Cash flow hedges transferred to
the statement of financial position, net of tax
|
-
|
-
|
-
|
2
|
|
2
|
-
|
|
2
|
At 31 March 2024
|
493
|
1,298
|
32,066
|
(3,990)
|
|
29,867
|
25
|
|
29,892
|
1. Included within the share premium account are costs
associated with scrip dividends.
Consolidated statement of financial
position
as at 31 March
|
|
|
2024
|
2023
|
|
Notes
|
|
£m
|
£m
|
Non-current assets
|
|
|
|
|
Goodwill
|
|
|
9,729
|
9,847
|
Other intangible assets
|
|
|
3,431
|
3,604
|
Property, plant and
equipment
|
|
|
68,907
|
64,433
|
Other non-current
assets1
|
|
|
848
|
620
|
Pension assets
|
10
|
|
2,407
|
2,645
|
Financial and other
investments
|
|
|
880
|
859
|
Investments in joint ventures and
associates
|
|
|
1,420
|
1,300
|
Derivative financial
assets
|
|
|
324
|
276
|
Total non-current
assets
|
|
|
87,946
|
83,584
|
Current assets
|
|
|
|
|
Inventories and current intangible
assets
|
|
|
828
|
876
|
Trade and other
receivables1
|
|
|
3,415
|
3,830
|
Current tax assets
|
|
|
11
|
43
|
Financial and other
investments
|
|
|
3,699
|
2,605
|
Derivative financial
assets
|
|
|
44
|
153
|
Cash and cash
equivalents
|
|
|
559
|
163
|
Assets held for sale
|
9
|
|
1,823
|
1,443
|
Total current assets
|
|
|
10,379
|
9,113
|
Total assets
|
|
|
98,325
|
92,697
|
Current liabilities
|
|
|
|
|
Borrowings
|
|
|
(4,859)
|
(2,955)
|
Derivative financial
liabilities
|
|
|
(335)
|
(222)
|
Trade and other
payables
|
|
|
(4,076)
|
(5,068)
|
Contract liabilities
|
|
|
(127)
|
(252)
|
Current tax liabilities
|
|
|
(220)
|
(236)
|
Provisions
|
|
|
(298)
|
(288)
|
Liabilities held for
sale
|
9
|
|
(1,474)
|
(109)
|
Total current
liabilities
|
|
|
(11,389)
|
(9,130)
|
Non-current liabilities
|
|
|
|
|
Borrowings
|
|
|
(42,213)
|
(40,030)
|
Derivative financial
liabilities
|
|
|
(909)
|
(1,071)
|
Other non-current
liabilities
|
|
|
(880)
|
(921)
|
Contract liabilities
|
|
|
(2,119)
|
(1,754)
|
Deferred tax
liabilities
|
|
|
(7,519)
|
(7,181)
|
Pensions and other post-retirement
benefit obligations
|
10
|
|
(593)
|
(694)
|
Provisions
|
|
|
(2,811)
|
(2,354)
|
Total non-current
liabilities
|
|
|
(57,044)
|
(54,005)
|
Total liabilities
|
|
|
(68,433)
|
(63,135)
|
Net assets
|
|
|
29,892
|
29,562
|
Equity
|
|
|
|
|
Share capital
|
|
|
493
|
488
|
Share premium account
|
|
|
1,298
|
1,302
|
Retained earnings
|
|
|
32,066
|
31,608
|
Other equity reserves
|
|
|
(3,990)
|
(3,860)
|
Total shareholders' equity
|
|
|
29,867
|
29,538
|
Non-controlling
interests
|
|
|
25
|
24
|
Total equity
|
|
|
29,892
|
29,562
|
1. In the year we have
revised our policy in relation to the classification of capital
expenditure prepayments between current and non-current in order to
align these to the operating cycles of the underlying assets to
which they relate. Accordingly, comparative amounts have been
represented to reflect this change.
Consolidated cash flow statement
for the years ended 31 March
|
|
|
2024
|
2023
|
|
Notes
|
|
£m
|
£m
|
Cash flows from operating activities
|
|
|
|
|
Total operating profit from
continuing operations
|
2(b)
|
|
4,475
|
4,879
|
Adjustments for:
|
|
|
|
|
Exceptional items and
remeasurements
|
4
|
|
987
|
(585)
|
Other fair value
movements
|
|
|
(16)
|
21
|
Depreciation, amortisation and
impairment
|
|
|
2,061
|
1,984
|
Share-based payments
|
|
|
37
|
48
|
Changes in working
capital
|
|
|
(49)
|
286
|
Changes in provisions
|
|
|
(154)
|
23
|
Changes in pensions and other
post-retirement benefit obligations
|
|
|
31
|
(46)
|
Cash flows relating to exceptional
items
|
|
|
(91)
|
(178)
|
Cash generated from operations -
continuing operations
|
|
|
7,281
|
6,432
|
Tax paid
|
|
|
(342)
|
(89)
|
Net cash inflow from operating activities - continuing
operations
|
|
|
6,939
|
6,343
|
Net cash inflow from operating activities - discontinued
operations
|
|
|
-
|
555
|
Cash flows from investing activities
|
|
|
|
|
Purchases of intangible
assets
|
|
|
(549)
|
(567)
|
Purchases of property, plant and
equipment
|
|
|
(6,904)
|
(6,325)
|
Disposals of property, plant and
equipment
|
|
|
52
|
87
|
Investments in joint ventures and
associates
|
|
|
(332)
|
(443)
|
Dividends received from joint
ventures, associates and other investments
|
|
|
176
|
190
|
Disposal of interest in the UK Gas
Transmission business1
|
9
|
|
681
|
4,027
|
Disposal of interest in The
Narragansett Electric Company1
|
|
|
-
|
2,968
|
Disposal of interest in Millennium
Pipeline Company LLC
|
|
|
-
|
497
|
Disposal of financial and other
investments
|
|
|
102
|
116
|
Acquisition of financial
investments
|
|
|
(81)
|
(95)
|
Contributions to National Grid
Renewables and Emerald Energy Venture LLC
|
|
|
(19)
|
(19)
|
Net movements in short-term
financial investments
|
|
|
(1,141)
|
586
|
Interest received
|
|
|
148
|
65
|
Cash inflows on
derivatives
|
|
|
123
|
-
|
Cash outflows on
derivatives
|
|
|
-
|
(362)
|
Cash flows relating to exceptional
items
|
|
|
143
|
79
|
Net cash flow used in investing activities - continuing
operations
|
|
|
(7,601)
|
804
|
Net cash flow from/(used in) investing activities -
discontinued operations
|
|
|
102
|
(564)
|
Cash flows from financing activities
|
|
|
|
|
Proceeds from issue of treasury
shares
|
|
|
20
|
16
|
Transactions in own
shares
|
|
|
(4)
|
1
|
Proceeds received from
loans
|
|
|
5,563
|
11,908
|
Repayment of loans
|
|
|
(1,701)
|
(15,260)
|
Payments of lease
liabilities
|
|
|
(118)
|
(155)
|
Net movements in short-term
borrowings
|
|
|
544
|
(511)
|
Cash inflows on
derivatives
|
|
|
86
|
190
|
Cash outflows on
derivatives
|
|
|
(58)
|
(118)
|
Interest paid
|
|
|
(1,627)
|
(1,430)
|
Dividends paid to
shareholders
|
|
|
(1,718)
|
(1,607)
|
Net cash flow from/(used in) financing activities -
continuing operations
|
|
|
987
|
(6,966)
|
Net cash flow used in financing activities - discontinued
operations
|
|
|
-
|
(207)
|
Net increase/(decrease) in cash and cash
equivalents
|
|
|
427
|
(35)
|
Reclassification to held for
sale
|
|
|
(30)
|
9
|
Exchange movements
|
|
|
(1)
|
7
|
Cash and cash equivalents at start
of year
|
|
|
163
|
182
|
Cash and cash equivalents at end of year
|
|
|
559
|
163
|
1. The
balance for the year ended 31 March 2023 consists of cash proceeds
received, net of cash disposed.
1. Basis of preparation and recent accounting
developments
The full year financial
information contained in this announcement, which does not
constitute statutory accounts as defined in Section 434 of the
Companies Act 2006, has been derived from the statutory accounts
for the year ended 31 March 2024, which
will be filed with the Registrar of Companies in due course.
Statutory accounts for the year ended 31 March
2023 have been filed with the Registrar of Companies. The
auditors' report on each of these statutory accounts was
unqualified and did not contain a statement under Section 498 of
the Companies Act 2006.
The full year financial
information has been prepared in accordance with the accounting
policies applicable for the year ended 31 March
2024 which are consistent with those applied in the
preparation of our Annual Report and Accounts for the year ended
31 March 2023, with the exception of any
new standards or interpretations adopted during the
year.
Our income statement and segmental
analysis separately identify financial results before and after
exceptional items and remeasurements. We continue to use a columnar
presentation as we consider it improves the clarity of the
presentation, and assists users of the financial statements to
understand the results. The Directors believe that presentation of
the results in this way is relevant to an understanding of the
Group's financial performance. The inclusion of total profit for
the period from continuing operations before exceptional items and
remeasurements forms part of the incentive target set annually for
remunerating certain Executive Directors and accordingly we believe
it is important for users of the financial statements to understand
how this compares to our results on a statutory basis and period on
period.
Areas of judgement and key sources of estimation
uncertainty
Areas of judgement that have the
most significant effect on the amounts recognised in the financial
statements are:
• categorisation of certain items as exceptional items or
remeasurements and the definition of adjusted earnings (see notes 4
and 7). In applying the Group's exceptional items framework, we
have considered a number of key matters, as detailed in note
4;
• the
judgement that it is appropriate to classify our 20% equity
investment in GasT TopCo Limited, together with the RAA option, as
held for sale, as detailed in note 9; and
• the
judgement that, notwithstanding legislation enacted and targets
committing the states of New York and Massachusetts to achieving
net zero greenhouse gas emissions by 2050, these do not shorten the
remaining useful economic lives (UELs) of our US gas network
assets, which we consider will have an expected use and utility
beyond 2050 (see key sources of estimation uncertainty
below).
Key sources of estimation
uncertainty that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are:
• the cash
flows and real discount rates applied in determining the US
environmental provisions, in particular relating to three Superfund
sites and certain other legacy Manufacturing Gas Plant (MGP) sites
(see note 4);
• the
estimates made regarding the UELs of our gas network assets due to
uncertainty over the pace of delivery of the energy transition and
the multiple pathways by which it could be delivered. Our estimates
consider anticipated changes in customer behaviour and developments
in new technology, the potential to decarbonise fuel through the
use of renewable natural gas and green hydrogen, and the
feasibility and affordability of increased electrification;
and
• the
valuation of liabilities for pensions and other post-retirement
benefits (see note 10).
1. Basis of preparation and recent accounting
developments continued
Disposal of the UK Electricity System Operator
(ESO)
As described further in note 9, at
the end of October 2023, the legislation required to enable the
separation of the ESO and the formation of the National Energy
System Operator (NESO) was passed through Parliament. The NESO is
expected to be established as an independent Public Corporation
this calendar year, with responsibilities across both the
electricity and gas systems. As a result, the Group took the
judgement to classify the associated assets and liabilities of the
ESO as held for sale in the consolidated statement of financial
position at the end of October 2023. The ESO has not met the
criteria for classification as a discontinued operation and
therefore its results have not been separately disclosed on the
face of the income statement, and are instead included within the
results from continuing operations.
Disposal of the UK Gas Transmission
business
Following the Group's disposal of
a 60% controlling stake in the UK Gas Transmission business in the
year ended 31 March 2023, the Group completed the sale of a further
20% of its retained interest in the business (held through GasT
TopCo Limited) on 11 March 2024. The other 80% of GasT TopCo
Limited is owned by Macquarie Infrastructure and Real Assets (MIRA)
and British Columbia Investment Management Corporation (BCI)
(together, the Consortium). The Group's remaining 20% interest in
GasT TopCo Limited is classified as an investment in an associate
on the basis that the Group has a significant influence over the
business.
The remaining 20% interest is
subject to an option agreement with the Consortium, the Remaining
Acquisition Agreement (RAA), which on 9 July 2023 replaced the
previous Further Acquisition Agreement (FAA) under which the 20%
disposal in the year was executed. The RAA option is exercisable,
at the Consortium's option, between 1 May 2024 and 31 July 2024. If
the RAA option is partially exercised by the Consortium, the Group
will have the right to put the remainder of its interests in GasT
TopCo Limited to the Consortium, which can be exercised by the
Group between 1 December 2024 and 31 December 2024. Taking into
consideration the timing of the RAA exercise window, the Group has
continued to classify its remaining interest in GasT TopCo Limited
as held for sale and has not equity accounted for its share of the
associate's results.
The loss on the 20% disposal of
GasT TopCo Limited and the remeasurements in relation to the FAA
option and the RAA option have been recorded within discontinued
operations. As an associate held for sale, the Group has not
recognised any share of results in the year ended 31 March 2024.
The classification impacts on the consolidated income statement,
the consolidated statement of comprehensive income and the
consolidated cash flow statement, as well as earnings per share
(EPS) split between continuing and discontinued
operations.
New accounting standards and interpretations effective for
the year ended 31 March
2024
The Group adopted the following
new standards and amendments to standards which have had no
material impact on the Group's results or financial statement
disclosures:
• IFRS 17
'Insurance Contracts';
• amendments to IAS 1 and IFRS Practice Statement 2 - 'Making
Materiality Judgements';
• amendments to IAS 12 'International Tax Reform - Pillar Two
Model Rules'; and
• amendments to IAS 8 'Accounting Policies, Changes in
Accounting Estimates and Errors'.
1. Basis of preparation and recent accounting
developments continued
New accounting standards not yet adopted
The following new accounting
standards and amendments to existing standards have been issued but
are not yet effective or have not yet been endorsed by the
UK:
• amendments to IFRS 10 and IAS 28 'Sale or Contribution of
Assets between an Investor and its Associate or Joint
Venture';
• amendments to IAS 1 'Classification of Liabilities as Current
or Non‑current';
• amendments to IAS 1 'Non-current Liabilities with
Covenants';
• amendments to IAS 7 and IFRS 7 'Supplier Finance
Arrangements';
• amendments to IFRS 16 'Lease Liability in a Sale and
Leaseback'; and
• amendments to IAS 21 'The Effects of Changes in Foreign
Exchange Rates'.
Effective dates will be subject to
the UK endorsement process.
The Group is currently assessing
the impact of the above standards, but they are not expected to
have a material impact.
The Group has not adopted any
other standard, amendment or interpretation that has been issued
but is not yet effective.
Date of approval
This announcement was approved by
the Board of Directors on 22 May 2024.
2. Segmental analysis
Revenue and the results of the
business are analysed by operating segment, based on the
information the Board of Directors uses internally for the purposes
of evaluating the performance of each operating segment and
determining resource allocation between them. The Board is National
Grid's chief operating decision maker (as defined by IFRS 8
'Operating Segments') and assesses the profitability of operations
principally on the basis of a profit measure that excludes certain
income and expenses. We call that measure 'adjusted profit'.
Adjusted profit excludes exceptional items and remeasurements (as
defined in note 4) and is used by
management to monitor financial performance as it is considered
that it aids the comparability of our reported financial
performance from year to year. As a matter of course, the Board
also considers profitability by segment, excluding the effects of
timing and major storms. However, the measure of profit disclosed
in this note is operating profit before exceptional items and
remeasurements, as this is the measure that is most consistent with
the IFRS results reported within these financial
statements.
The results of our six principal
businesses are reported to the Board of Directors and are
accordingly treated as reportable operating segments. All other
operating segments are reported to the Board of Directors on an
aggregated basis. The following table describes the main activities
for each reportable operating segment:
UK Electricity
Transmission
|
The high-voltage electricity
transmission networks in England and Wales. This includes our
Accelerated Strategic Transmission Investment projects to connect
more clean, low-carbon power to the transmission network in England
and Wales.
|
UK Electricity
Distribution
|
The electricity distribution
networks of NGED in the East Midlands, West Midlands and South West
of England and South Wales.
|
UK Electricity System
Operator
|
The Great Britain system operator.
The ESO met the criteria to be classified as held for sale at the
end of October 2023.
|
New England
|
Gas distribution networks,
electricity distribution networks and high-voltage electricity
transmission networks in New England.
|
New York
|
Gas distribution networks,
electricity distribution networks and high-voltage electricity
transmission networks in New York.
|
National Grid Ventures
|
Comprises all commercial
operations in LNG at the Isle of Grain in the UK and Providence,
Rhode Island in the US, our electricity generation business in the
US, our electricity interconnectors in the UK and our investment in
National Grid Renewables Development LLC, our renewables business
in the US. Whilst NGV operates outside our regulated core business,
the electricity interconnectors in the UK are subject to indirect
regulation by Ofgem regarding the level of returns they can earn.
Our US LNG operations were reclassified from the New England
segment following an internal reorganisation in the
year.
|
Other activities that do not form
part of any of the segments in the above table primarily relate to
our UK property business together with insurance and corporate
activities in the UK and US and the Group's investments in
technology and innovation companies through National Grid
Partners.
2. Segmental analysis continued
(a) Revenue
Revenue primarily represents the
sales value derived from the generation, transmission and
distribution of energy, together with the sales value derived from
the provision of other services to customers. Refer to note
3 for
further details.
Sales between operating segments
are priced considering the regulatory and legal requirements to
which the businesses are subject. The analysis of revenue by
geographical area is on the basis of destination. There are no
material sales between the UK and US geographical areas.
|
2024
|
|
2023
|
|
Total
sales
|
Sales
between
segments
|
Sales
to third
parties
|
|
Total
sales
|
Sales
between
segments
|
Sales
to
third
parties
|
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
Operating segments - continuing
operations:
|
|
|
|
|
|
|
|
UK Electricity
Transmission
|
2,735
|
(40)
|
2,695
|
|
1,987
|
(41)
|
1,946
|
UK Electricity
Distribution
|
1,795
|
(5)
|
1,790
|
|
2,045
|
(12)
|
2,033
|
UK Electricity System
Operator
|
3,788
|
(35)
|
3,753
|
|
4,690
|
(31)
|
4,659
|
New England
|
3,948
|
-
|
3,948
|
|
4,427
|
-
|
4,427
|
New York
|
6,094
|
-
|
6,094
|
|
6,994
|
-
|
6,994
|
National Grid Ventures
|
1,389
|
(57)
|
1,332
|
|
1,341
|
(58)
|
1,283
|
Other
|
244
|
(6)
|
238
|
|
317
|
-
|
317
|
Total revenue from continuing operations
|
19,993
|
(143)
|
19,850
|
|
21,801
|
(142)
|
21,659
|
|
|
|
|
|
|
|
|
Split by geographical areas -
continuing operations:
|
|
|
|
|
|
|
|
UK
|
|
|
9,063
|
|
|
|
9,611
|
US
|
|
|
10,787
|
|
|
|
12,048
|
Total revenue from continuing operations
|
|
|
19,850
|
|
|
|
21,659
|
2. Segmental analysis continued
(b) Operating profit
A reconciliation of the operating
segments' measure of profit to profit before tax from continuing
operations is provided below. Further details of the exceptional
items and remeasurements are provided in note 4.
|
Before exceptional items and
remeasurements
|
|
Exceptional items and
remeasurements
|
|
After exceptional items and
remeasurements
|
|
2024
|
2023
|
|
2024
|
2023
|
|
2024
|
2023
|
|
£m
|
£m
|
|
£m
|
£m
|
|
£m
|
£m
|
Operating segments - continuing
operations:
|
|
|
|
|
|
|
|
|
UK Electricity
Transmission
|
1,677
|
995
|
|
(3)
|
(2)
|
|
1,674
|
993
|
UK Electricity
Distribution
|
993
|
1,091
|
|
(18)
|
(22)
|
|
975
|
1,069
|
UK Electricity System
Operator
|
880
|
238
|
|
(498)
|
(1)
|
|
382
|
237
|
New England
|
643
|
708
|
|
(2)
|
424
|
|
641
|
1,132
|
New York
|
860
|
741
|
|
(498)
|
(200)
|
|
362
|
541
|
National Grid Ventures
|
469
|
490
|
|
89
|
467
|
|
558
|
957
|
Other
|
(60)
|
31
|
|
(57)
|
(81)
|
|
(117)
|
(50)
|
Total operating profit from continuing
operations
|
5,462
|
4,294
|
|
(987)
|
585
|
|
4,475
|
4,879
|
|
|
|
|
|
|
|
|
|
Split by geographical area -
continuing operations:
|
|
|
|
|
|
|
|
|
UK
|
3,923
|
2,825
|
|
(487)
|
26
|
|
3,436
|
2,851
|
US
|
1,539
|
1,469
|
|
(500)
|
559
|
|
1,039
|
2,028
|
Total operating profit from continuing
operations
|
5,462
|
4,294
|
|
(987)
|
585
|
|
4,475
|
4,879
|
|
Before exceptional items and
remeasurements
|
|
Exceptional items and
remeasurements
|
|
After exceptional items and
remeasurements
|
|
2024
|
2023
|
|
2024
|
2023
|
|
2024
|
2023
|
|
£m
|
£m
|
|
£m
|
£m
|
|
£m
|
£m
|
Reconciliation to profit before
tax:
|
|
|
|
|
|
|
|
|
Operating profit from continuing
operations
|
5,462
|
4,294
|
|
(987)
|
585
|
|
4,475
|
4,879
|
Share of post-tax results of joint
ventures and associates
|
101
|
190
|
|
(64)
|
(19)
|
|
37
|
171
|
Finance income
|
244
|
166
|
|
4
|
(28)
|
|
248
|
138
|
Finance costs
|
(1,723)
|
(1,680)
|
|
11
|
82
|
|
(1,712)
|
(1,598)
|
Profit before tax from continuing
operations
|
4,084
|
2,970
|
|
(1,036)
|
620
|
|
3,048
|
3,590
|
The following items are included
in the total operating profit by segment:
Depreciation, amortisation and impairment
|
2024
|
2023
|
£m
|
£m
|
Operating segments:
|
|
|
UK Electricity
Transmission
|
(521)
|
(484)
|
UK Electricity
Distribution
|
(223)
|
(223)
|
UK Electricity System
Operator
|
(61)
|
(101)
|
New England
|
(420)
|
(393)
|
New York
|
(658)
|
(620)
|
National Grid Ventures
|
(166)
|
(149)
|
Other
|
(12)
|
(14)
|
Total
|
(2,061)
|
(1,984)
|
|
|
|
Asset type:
|
|
|
Property, plant and
equipment
|
(1,769)
|
(1,700)
|
Non-current intangible
assets
|
(292)
|
(284)
|
Total
|
(2,061)
|
(1,984)
|
2. Segmental analysis continued
(c) Capital investment
Capital investment represents
additions to property, plant and equipment, prepayments to
suppliers to secure production capacity in relation to our capital
projects, non-current intangibles and additional equity investments
in joint ventures and associates. Segmental information used for
internal decision making was revised in the year to include the
capital expenditure prepayments and additional equity investments
in joint ventures and associates. Accordingly, comparative
information for the year ended 31 March 2023 has been re-presented
to reflect the change in the Group's segmental measure in the
year.
|
2024
|
20231
|
|
£m
|
£m
|
Operating segments:
|
|
|
UK Electricity
Transmission
|
1,912
|
1,301
|
UK Electricity
Distribution
|
1,247
|
1,220
|
UK Electricity System
Operator
|
85
|
108
|
New England
|
1,673
|
1,527
|
New York
|
2,654
|
2,454
|
National Grid Ventures
|
662
|
970
|
Other
|
2
|
13
|
Total
|
8,235
|
7,593
|
|
|
|
Asset type:
|
|
|
Property, plant and
equipment
|
7,124
|
6,783
|
Non-current intangible
assets
|
481
|
578
|
Equity investments in joint
ventures and associates
|
332
|
197
|
Capital expenditure
prepayments
|
298
|
35
|
Total
|
8,235
|
7,593
|
1. Comparative amounts have been represented to reflect the
reclassification of our US LNG operations from New England to NGV
following an internal reorganisation in the year and the change in
presentation for capital investments.
(d) Geographical analysis of non-current
assets
Non-current assets by geography
comprise goodwill, other intangible assets, property, plant and
equipment, investments in joint ventures and associates and other
non-current assets.
|
2024
|
2023
|
|
£m
|
£m
|
Split by geographical
area:
|
|
|
UK
|
40,065
|
38,043
|
US
|
44,270
|
41,761
|
|
84,335
|
79,804
|
|
|
|
Reconciliation to total
non-current assets:
|
|
|
Pension assets
|
2,407
|
2,645
|
Financial and other
investments
|
880
|
859
|
Derivative financial
assets
|
324
|
276
|
Non-current assets
|
87,946
|
83,584
|
3. Revenue
Revenue arises in the course of
ordinary activities and principally comprises:
• transmission
services;
• distribution services;
and
• generation
services.
Transmission services,
distribution services and certain other services (excluding rental
income) fall within the scope of IFRS 15 'Revenue from Contracts
with Customers', whereas generation services (which solely relate
to the contract with the Long Island Power Authority (LIPA) in the
US) are accounted for under IFRS 16 'Leases' as rental income, also
presented within revenue. Revenue is recognised to reflect the
transfer of goods or services to customers at an amount that
reflects the consideration to which the Group expects to be
entitled to in exchange for those goods or services and excludes
amounts collected on behalf of third parties and value added tax.
The Group recognises revenue when it transfers control over a
product or service to a customer.
Revenue in respect of regulated
activities is determined by regulatory agreements that set the
price to be charged for services in a given period based on
pre-determined allowed revenues. Variances in service usage can
result in actual revenue collected exceeding (over-recoveries) or
falling short (under-recoveries) of allowed revenues. Where
regulatory agreements allow the recovery of under-recoveries or
require the return of over-recoveries, the allowed revenue for
future periods is typically adjusted. In these instances, no assets
or liabilities are recognised for under- or over-recoveries
respectively, because the adjustment relates to future customers
and services that have not yet been delivered.
Revenue in respect of
non-regulated activities primarily relates to the sale of capacity
on our interconnectors, which is determined at auctions. Capacity
is sold in either day, month, quarter or year ahead tranches. The
price charged is determined by market fundamentals rather than
regulatory agreement. The interconnectors are subject to indirect
regulation with regards to the levels of returns they are allowed
to earn. Where amounts fall below this range they receive top-up
revenues; where amounts exceed this range, they must pass-back the
excess. In these instances, assets or liabilities are recognised
for the top-up or pass-back respectively.
The following is a description of
principal activities, by reportable segment, from which the Group
generates its revenue. For more detailed information about our
segments, see note 2.
(a) UK Electricity Transmission
The UK Electricity Transmission
segment principally generates revenue by providing electricity
transmission services in England and Wales. Our business operates
as a monopoly regulated by Ofgem, which has established price
control mechanisms that set the amount of annual allowed returns
our business can earn (along with the Scottish and Offshore
transmission operators amongst others).
The transmission of electricity
encompasses the following principal services:
• the
supply of high-voltage electricity - revenue is recognised based on
usage. Our performance obligation is satisfied over time as our
customers make use of our network. We bill monthly in arrears and
our payment terms are up to 60 days. Price is determined prior to
our financial year end with reference to the regulated allowed
returns and estimated annual volumes; and
• construction work (principally for connections) - revenue is
recognised over time, as we provide access to our network.
Customers can either pay over the useful life of the connection or
upfront. Where the customer pays upfront, revenues are deferred as
a contract liability and released over the life of the
asset.
For other construction where there
is no consideration for any future services (for example
diversions), revenues are recognised as the construction work is
completed.
3. Revenue continued
(b) UK Electricity Distribution
The UK Electricity Distribution
segment principally generates revenue by providing electricity
distribution services in the Midlands and South West of England and
South Wales. Similar to UK Electricity Transmission, UK Electricity
Distribution operates as a monopoly in the jurisdictions that it
operates in and is regulated by Ofgem.
The distribution of electricity
encompasses the following principal services:
• electricity distribution - revenue is recognised based on
usage by customers (over time), based upon volumes and price. The
price control mechanism that determines our annual allowances is
similar to UK Electricity Transmission. Revenues are billed monthly
and payment terms are typically within 14 days;
and
• construction work (principally for connections) - revenue is
recognised over time as we provide access to our network. Where the
customer pays upfront, revenues are deferred as a contract
liability and released over the life of the
asset.
For other construction where there
is no consideration for any future services, revenues are
recognised as the construction work is completed.
(c) UK Electricity System Operator
The UK Electricity System Operator
earns revenue for balancing supply and demand of electricity on
Great Britain's electricity transmission system, where it acts as
principal. Balancing services are regulated by Ofgem and revenue,
which is payable by generators and suppliers of electricity, is
recognised as the service is provided.
The UK Electricity System Operator
also collects revenues on behalf of transmission operators,
principally National Grid Electricity Transmission plc and the
Scottish and Offshore transmission operators, from users
(electricity suppliers) who connect to or use the transmission
system. As the UK Electricity System Operator acts as an agent in
this capacity, it records transmission network revenues net of
payments to transmission operators.
(d) New England
The New England segment
principally generates revenue by providing electricity and gas
supply and distribution services and high-voltage electricity
transmission services in New England. Supply and distribution
services are regulated by the Massachusetts Department of Public
Utilities (MADPU) and transmission services are regulated by the
Federal Energy Regulatory Commission (FERC), both of whom regulate
the rates that can be charged to customers.
The supply and distribution of
electricity and gas and the provision of electricity transmission
facilities encompasses the following principal services:
• electricity and gas supply and distribution and electricity
transmission - revenue is recognised based on usage by customers
(over time). Revenues are billed monthly and payment terms are 30
days; and
• construction work (principally for connections) - revenue is
recognised over time as we provide access to our network. Where the
customer pays upfront, revenues are deferred as a contract
liability or customer contributions (where they relate to
government entities) and released over the life of the
connection.
(e) New York
The New York segment principally
generates revenue by providing electricity and gas supply and
distribution services and high-voltage electricity transmission
services in New York. Supply and distribution services are
regulated by the New York Public Service Commission (NYPSC) and
transmission services are regulated by the FERC, both of which
regulate the rates that can be charged to customers.
The supply and distribution of
electricity and gas and the provision of electricity transmission
facilities encompasses the following principal services:
• electricity and gas supply and distribution and electricity
transmission - revenue is recognised based on usage by customers
(over time). Revenues are billed monthly and payment terms are 30
days; and
• construction work (principally for connections) - revenue is
recognised over time as we provide access to our network. Where the
customer pays upfront, revenues are deferred as a contract
liability or customer contributions (where they relate to
government entities) and released over the life of the
connection.
3. Revenue continued
(f) National Grid Ventures
National Grid Ventures generates
revenue from electricity interconnectors, LNG at the Isle of Grain
in the UK and Providence, Rhode Island in the US, National Grid
Renewables and rental income.
The Group recognises revenue from
transmission services through interconnectors and LNG importation
at the Isle of Grain and Providence by means of customers' use of
capacity and volumes. Revenue is recognised over time and is billed
monthly. Payment terms are up to 60 days.
Electricity generation revenue is
earned from the provision of energy services and supply capacity to
produce energy for the use of customers of LIPA through a power
supply agreement, where LIPA receives all of the energy and
capacity from the asset until at least 2028. The arrangement is
treated as an operating lease within the scope of the leasing
standard where we act as lessor, with rental income being recorded
as other revenue, which forms part of total revenue. Lease payments
(capacity payments) are recognised on a straight-line basis and
variable lease payments are recognised as the energy is
generated.
Other revenue in the scope of IFRS
15 principally includes sales of renewables projects from National
Grid Renewables to Emerald Energy Venture LLC (Emerald), which is
jointly controlled by National Grid and Washington State Investment
Board (WSIB). National Grid Renewables develops wind and solar
generation assets in the US, whilst Emerald has a right of first
refusal to buy, build and operate those assets. Revenue is
recognised as it is earned.
Other revenue, recognised in
accordance with standards other than IFRS 15, primarily comprises
adjustments in respect of the interconnector cap and floor and Use
of Revenue regimes constructed by Ofgem for certain wholly owned
interconnector subsidiaries. Under the cap and floor regime, where
an interconnector expects to exceed its total five-year cap, a
provision and reduction in revenue is recognised in the current
reporting period. Where an interconnector does not expect to reach
its five-year floor, either an asset will be recognised where a
future inflow of economic benefits is considered virtually certain,
or a contingent asset will be disclosed where the future inflow is
concluded to be probable. Under the Use of Revenue framework, any
revenues in excess of an agreed incentive level must be passed on
as savings to consumers. Where the obligation to transfer excess
revenues arises, a payable and reduction in revenue is recognised
in the current reporting period.
(g) Other
Revenue in Other relates to our UK
commercial property business and insurance. Revenue is
predominantly recognised in accordance with standards other than
IFRS 15 and comprises property sales by our UK commercial property
business (including sales to the St William joint venture, which
was disposed of in the year ended 31 March 2022). Property sales
are recorded when the sale is legally completed.
3. Revenue continued
(h) Disaggregation of revenue
In the following tables, revenue
is disaggregated by primary geographical market and major service
lines. The table below reconciles disaggregated revenue with the
Group's reportable segments (see note 2).
Revenue for the year ended
31 March 2024
|
UK Electricity
Transmission
£m
|
UK Electricity
Distribution
£m
|
UK Electricity System
Operator
£m
|
New
England
£m
|
New
York
£m
|
National Grid
Ventures
£m
|
Other
£m
|
Total
£m
|
Revenue under IFRS 15
|
|
|
|
|
|
|
|
|
Transmission1
|
2,591
|
-
|
(10)
|
73
|
493
|
869
|
-
|
4,016
|
Distribution
|
-
|
1,712
|
-
|
3,786
|
5,500
|
-
|
-
|
10,998
|
System Operator
|
-
|
-
|
3,763
|
-
|
-
|
-
|
-
|
3,763
|
Other2
|
25
|
73
|
-
|
8
|
15
|
168
|
4
|
293
|
Total IFRS 15 revenue
|
2,616
|
1,785
|
3,753
|
3,867
|
6,008
|
1,037
|
4
|
19,070
|
Other revenue
|
|
|
|
|
|
|
|
|
Generation
|
-
|
-
|
-
|
-
|
-
|
360
|
-
|
360
|
Other3
|
79
|
5
|
-
|
81
|
86
|
(65)
|
234
|
420
|
Total other revenue
|
79
|
5
|
-
|
81
|
86
|
295
|
234
|
780
|
Total revenue from continuing operations
|
2,695
|
1,790
|
3,753
|
3,948
|
6,094
|
1,332
|
238
|
19,850
|
1. The UK
Electricity System Operator transmission revenue in the year
represents transmission revenues collected, net of payments made to
transmission owners.
2. The UK
Electricity Transmission and UK Electricity Distribution other IFRS
15 revenue principally relates to engineering recharges, which are
the recovery of costs incurred for construction work requested by
customers, such as the rerouting of existing network assets. Within
NGV, the other IFRS 15 revenue principally relates to revenue
generated from our National Grid Renewables
business.
3. Other
revenue, recognised in accordance with accounting standards other
than IFRS 15, includes property sales by our UK commercial property
business, rental income, income arising in connection with the
Transition Services Agreements following the sales of NECO and the
UK Gas Transmission business in the prior year, and an adjustment
to NGV revenue in respect of the interconnector cap and floor and
Use of Revenue regimes constructed by Ofgem.
Geographical split for the year ended 31
March 2024
|
UK Electricity
Transmission
£m
|
UK Electricity
Distribution
£m
|
UK Electricity System
Operator
£m
|
New
England
£m
|
New
York
£m
|
National Grid
Ventures
£m
|
Other
£m
|
Total
£m
|
Revenue under IFRS 15
|
|
|
|
|
|
|
|
|
UK
|
2,616
|
1,785
|
3,753
|
-
|
-
|
878
|
1
|
9,033
|
US
|
-
|
-
|
-
|
3,867
|
6,008
|
159
|
3
|
10,037
|
Total IFRS 15 revenue
|
2,616
|
1,785
|
3,753
|
3,867
|
6,008
|
1,037
|
4
|
19,070
|
Other revenue
|
|
|
|
|
|
|
|
|
UK
|
79
|
5
|
-
|
-
|
-
|
(76)
|
22
|
30
|
US
|
-
|
-
|
-
|
81
|
86
|
371
|
212
|
750
|
Total other revenue
|
79
|
5
|
-
|
81
|
86
|
295
|
234
|
780
|
Total revenue from continuing operations
|
2,695
|
1,790
|
3,753
|
3,948
|
6,094
|
1,332
|
238
|
19,850
|
3. Revenue continued
Revenue for the year
ended
31 March 2023
|
UK
Electricity Transmission
£m
|
UK
Electricity Distribution
£m
|
UK
Electricity System Operator
£m
|
New
England
£m
|
New
York
£m
|
National
Grid Ventures
£m
|
Other
£m
|
Total
£m
|
Revenue under IFRS 15
|
|
|
|
|
|
|
|
|
Transmission
|
1,868
|
-
|
126
|
52
|
567
|
791
|
-
|
3,404
|
Distribution
|
-
|
1,951
|
-
|
4,314
|
6,373
|
-
|
-
|
12,638
|
System Operator
|
-
|
-
|
4,533
|
-
|
-
|
-
|
-
|
4,533
|
Other1
|
31
|
77
|
-
|
8
|
13
|
131
|
-
|
260
|
Total IFRS 15 revenue
|
1,899
|
2,028
|
4,659
|
4,374
|
6,953
|
922
|
-
|
20,835
|
Other revenue
|
|
|
|
|
|
|
|
|
Generation
|
-
|
-
|
-
|
-
|
-
|
394
|
-
|
394
|
Other2
|
47
|
5
|
-
|
53
|
41
|
(33)
|
317
|
430
|
Total other revenue
|
47
|
5
|
-
|
53
|
41
|
361
|
317
|
824
|
Total revenue from continuing operations
|
1,946
|
2,033
|
4,659
|
4,427
|
6,994
|
1,283
|
317
|
21,659
|
1. The UK
Electricity Transmission and UK Electricity Distribution other IFRS
15 revenue principally relates to engineering recharges, which are
the recovery of costs incurred for construction work requested by
customers, such as the rerouting of existing network assets. Within
NGV, the other IFRS 15 revenue principally relates to revenue
generated from our National Grid Renewables
business.
2. Other
revenue, recognised in accordance with accounting standards other
than IFRS 15, includes property sales by our UK commercial property
business, rental income, income arising in connection with the
Transition Services Agreements following the sales of NECO and the
UK Gas Transmission business, and a provision and adjustment to NGV
revenue in respect of the interconnector cap and floor regime
constructed by Ofgem. In the year ended 31 March 2023, the Group
also recognised other income relating to an insurance
claim.
Geographical split for the year
ended 31 March 2023
|
UK
Electricity Transmission
£m
|
UK
Electricity Distribution
£m
|
UK
Electricity System Operator
£m
|
New
England
£m
|
New
York
£m
|
National
Grid Ventures
£m
|
Other
£m
|
Total
£m
|
Revenue under IFRS 15
|
|
|
|
|
|
|
|
|
UK
|
1,899
|
2,028
|
4,659
|
-
|
-
|
799
|
-
|
9,385
|
US
|
-
|
-
|
-
|
4,374
|
6,953
|
123
|
-
|
11,450
|
Total IFRS 15 revenue
|
1,899
|
2,028
|
4,659
|
4,374
|
6,953
|
922
|
-
|
20,835
|
Other revenue
|
|
|
|
|
|
|
|
|
UK
|
47
|
5
|
-
|
-
|
-
|
(31)
|
205
|
226
|
US
|
-
|
-
|
-
|
53
|
41
|
392
|
112
|
598
|
Total other revenue
|
47
|
5
|
-
|
53
|
41
|
361
|
317
|
824
|
Total revenue from continuing operations
|
1,946
|
2,033
|
4,659
|
4,427
|
6,994
|
1,283
|
317
|
21,659
|
Contract liabilities represent
revenue to be recognised in future periods relating to
contributions in aid of construction of £2,246 million
(2023: £2,006 million).Revenue is
recognised over the life of the asset. The asset lives for
connections in UK Electricity Transmission, UK Electricity
Distribution, New England and New York are 40 years, 69 years, 51
years and up to 51 years respectively. The weighted average
amortisation period is 32 years.
Future revenues in relation to
unfulfilled performance obligations not yet received in cash amount
to £6.1 billion (2023: £5.0 billion). £1.9 billion (2023: £1.8
billion) relates to connection contracts in UK Electricity
Transmission which will be recognised as revenue over 24 years and
£3.8 billion (2023: £2.7 billion) relates to revenues to be earned
under Grain LNG contracts until 2045. The remaining amount will be
recognised as revenue over two years.
The amount of revenue recognised
for the year ended 31 March 2024 from performance obligations
satisfied (or partially satisfied) in previous periods, mainly due
to changes in the estimate of the stage of completion, is £nil
(2023: £nil).
4. Exceptional items and
remeasurements
To monitor our financial
performance, we use an adjusted consolidated profit measure that
excludes certain income and expenses. We exclude items from
adjusted profit because, if included, these items could distort
understanding of our performance for the year and the comparability
between periods. This note analyses these items, which are included
in our results for the year but are excluded from adjusted
profit.
|
2024
|
2023
|
|
£m
|
£m
|
Included within operating profit
|
|
|
Exceptional items:
|
|
|
Transaction, separation and
integration costs1
|
(44)
|
(117)
|
Cost efficiency
programme
|
(65)
|
(100)
|
IFA fire
|
92
|
130
|
Changes in environmental
provisions
|
(496)
|
176
|
Provision for UK electricity
balancing costs
|
(498)
|
-
|
Net gain on disposal of
NECO
|
-
|
511
|
Net gain on disposal of Millennium
Pipeline Company LLC
|
-
|
335
|
|
(1,011)
|
935
|
Remeasurements - commodity
contract derivatives
|
24
|
(350)
|
|
(987)
|
585
|
Included within finance income and costs
|
|
|
Remeasurements:
|
|
|
Net gains/(losses) on financial
assets at fair value through profit and loss
|
4
|
(28)
|
Net gains on financing
derivatives
|
11
|
82
|
|
15
|
54
|
Included within share of post-tax results of joint ventures
and associates
|
|
|
Remeasurements:
|
|
|
Net losses on financial
instruments
|
(64)
|
(19)
|
Total included within profit before tax
|
(1,036)
|
620
|
Included within tax
|
|
|
Tax on exceptional
items
|
159
|
(316)
|
Tax on remeasurements
|
(7)
|
75
|
|
152
|
(241)
|
Total exceptional items and remeasurements after
tax
|
(884)
|
379
|
Analysis of total exceptional items and remeasurements after
tax
|
|
|
Exceptional items after
tax
|
(852)
|
619
|
Remeasurements after
tax
|
(32)
|
(240)
|
Total exceptional items and remeasurements after
tax
|
(884)
|
379
|
1. Transaction, separation and integration costs represent the
aggregate of distinct activities undertaken by the Group in the
years presented.
Exceptional items
Management uses an exceptional
items framework that has been discussed and approved by the Audit
& Risk Committee. This follows a three-step process which
considers the nature of the event, the financial materiality
involved and any particular facts and circumstances. In considering
the nature of the event, management focuses on whether the event is
within the Group's control and how frequently such an event
typically occurs. With respect to restructuring costs, these
represent additional expenses incurred that are not related to the
normal business and day-to-day activities. These can take place
over multiple reporting periods given the scale of the Group, the
nature and complexity of the transformation initiatives and due to
the impact of strategic transactions. In determining the facts and
circumstances, management considers factors such as ensuring
consistent treatment between favourable and unfavourable
transactions, the precedent for similar items, the number of
periods over which costs will be spread or gains earned, and the
commercial context for the particular transaction. The exceptional
items framework was last updated in March 2022.
Items of income or expense that
are considered by management for designation as exceptional items
include significant restructurings, write-downs or impairments of
non-current assets, significant changes in environmental or
decommissioning provisions, integration of acquired businesses,
gains or losses on disposals of businesses or investments and
significant debt redemption costs as a consequence of transactions
such as significant disposals or issues of equity, and the related
tax, as well as deferred tax arising on changes to corporation tax
rates.
4. Exceptional items and
remeasurements continued
Costs arising from efficiency and
transformation programmes include redundancy costs. Redundancy
costs are charged to the consolidated income statement in the year
in which a commitment is made to incur the costs and the main
features of the restructuring plan have been announced to affected
employees.
Set out below are details of the
transactions against which we have considered the application of
our exceptional items framework in each of the years for which
results are presented.
2024
Transaction, separation and integration
costs
During the year, separation costs
of £11 million were incurred in relation to
the disposal of NECO, £6 million in
relation to the disposal of the UK Gas Transmission business and
£27 million in connection with the
integration of NGED. The costs incurred primarily relate to
professional fees, relocation costs and employee costs. The costs
have been classified as exceptional in accordance with our
exceptional items policy. Whilst the transaction, separation and
integration costs incurred during the period do not meet the
quantitative threshold to be classified as exceptional on a
standalone basis, when taken in aggregate with
the £340 million of costs in previous periods, the costs qualify
for exceptional treatment in line with our exceptional items
policy. The total cash outflow for the period was £33 million. The Group is entitled to cost recovery in
relation to the separation of the ESO. Accordingly, these costs
have not been classified as exceptional.
Cost efficiency programme
During the period, the Group
incurred a further £65 million of costs in relation to the major
cost efficiency programme announced in November 2021, that targeted
at least £400 million savings per annum across the Group by the end
of three years. The costs recognised in the period primarily relate
to redundancy provisions, employee costs and professional fees
incurred in delivering the programme. Whilst the costs incurred
during the period do not meet the quantitative threshold to be
classified as exceptional on a standalone basis, when taken in
aggregate with the £142 million of costs incurred since the
announcement of the programme, the costs qualify for exceptional
treatment in line with our exceptional items policy. The total cash
outflow for the period was £53 million. The cost efficiency
programme completed in the year.
Fire at IFA converter station
In September 2021, a fire at the
IFA1 converter station in Sellindge, Kent caused significant damage
to infrastructure on site. In the period, the Group recognised net
insurance claims of £92 million, which were recognised as
exceptional in line with our exceptional items policy and
consistent with related claims in the prior year. The total cash
inflow in the period in relation to the insurance proceeds was £92
million.
Changes in environmental provisions
In the US, we recognise
environmental provisions related to the remediation of the Gowanus
Canal and the former manufacturing gas plant facilities previously
owned or operated by the Group or its predecessor companies. The
sites are subject to both state and federal environmental
remediation laws in the US. Potential liability for the historical
contamination may be imposed on responsible parties jointly and
severally, without regard to fault, even if the activities were
lawful when they occurred. The provisions and the Group's share of
estimated costs are re-evaluated at each reporting period. During the second half of the financial year,
following discussions with the New York State Department of
Environmental Conservation and the Environmental Protection
Agency on the scope and design of remediation activities related to
certain of our responsible sites, we have re-evaluated our
estimates of total costs and increased our provision by £496
million. Under the terms of our rate plans, we are entitled to
recovery of environmental clean-up costs from rate payers in future
reporting periods. Such recoveries through overall allowed revenues
are not classified as exceptional in the future periods that they
occur due to the extended duration over which such costs are
recovered and the immateriality of the recoveries in any given
year.
Provision for UK electricity balancing
costs
During the year, the ESO's
operating profit increased due to a substantial over-recovery of
allowed revenues received under its regulatory framework. As
described in note 3, under IFRS a corresponding liability is not
recognised for the return of over-recoveries as this relates to
future customers and services that have not yet been delivered. At
the end of October 2023, legislation required to enable the
separation of the ESO and the formation of the NESO was passed
through Parliament and accordingly, the Group took the judgement to
classify the assets and liabilities of the ESO as held for sale
(see note 9). An element of the over-recoveries will now be settled
through the sale process and it no longer represents an
unrecognised regulatory liability for the Group. Accordingly, a
liability has been recognised for the over-recovered revenues which
are forecasted to transfer through the disposal.
4. Exceptional items and
remeasurements continued
2023
Transaction, separation and integration
costs
Separation costs of £39 million
were incurred in relation to the disposal of NECO, £38 million in
relation to the disposal of a majority stake in our UK Gas
Transmission business and £40 million in connection with the
integration of NGED. The costs incurred primarily relate to legal
fees, bankers' fees, professional fees and employee costs. The
costs have been classified as exceptional, consistent with similar
costs for the years ended 31 March 2022 and 2021, and in line with
the exceptional items policy. The total cash outflow for the period
was £84 million.
Cost efficiency programme
The Group incurred a further £100
million of costs in relation to the major cost efficiency programme
announced in November 2021. The costs recognised primarily related
to property costs, employee costs and professional fees incurred in
delivering the programme. Whilst the costs incurred during the
period did not meet the quantitative threshold to be classified as
exceptional on a standalone basis, when taken in aggregate with the
£42 million of costs incurred in the year ended 31 March 2022, the
costs qualified for exceptional treatment in line with our
exceptional items policy. The total cash outflow for the period was
£85 million.
Fire at IFA converter station
In September 2021, a fire at the
IFA1 converter station in Sellindge, Kent caused significant damage
to infrastructure on site. In the year, the Group recognised £130
million of insurance claims (net of asset
write-offs), which have been recognised as exceptional in line with
our exceptional items policy. The total cash inflow for the period
was £79 million.
Changes in environmental provisions
The real discount rate applied to
the Group's environmental provisions was revised to 1.5% (2023:
0.5%) to reflect the substantial and sustained change in US
government bond yield curves. The principal impact of this rate
increase was a £165 million decrease in our US environmental
provisions and a £11 million decrease in our UK environmental
provision. The weighted average remaining duration of our cash
flows was around 10.5 years.
Net gain on disposal of NECO
On 25 May 2022, the Group
completed the sale of a wholly owned subsidiary, NECO, to PPL Rhode
Island Holdings, LLC for cash consideration of £3.1 billion. As a result, the Group derecognised net assets
of £2.7 billion, resulting in a pre-tax gain of £511 million. The
receipt of cash was recognised within net cash used in investing
activities within the consolidated cash flow statement.
Net gain on disposal of Millennium Pipeline Company
LLC
The Group recognised a gain of
£335 million on the disposal of its entire 26.25% equity interest
in the Millennium Pipeline Company LLC associate to DT Midstream
for cash consideration of £497 million. The receipt of cash was
recognised within net cash used in investing activities within the
consolidated cash flow statement.
4. Exceptional items and
remeasurements continued
Remeasurements
Remeasurements comprise unrealised
gains or losses recorded in the consolidated income statement
arising from changes in the fair value of certain of our financial
assets and liabilities accounted for at fair value through profit
and loss (FVTPL). Once the fair value movements are realised (for
example, when the derivative matures), the previously recognised
fair value movements are then reversed through remeasurements and
recognised within earnings before exceptional items and
remeasurements. These assets and liabilities include commodity
contract derivatives and financing derivatives to the extent that
hedge accounting is not available or is not fully
effective.
The unrealised gains or losses
reported in profit and loss on certain additional assets and
liabilities treated at FVTPL are also classified within
remeasurements. These relate to financial assets (which fail the
'solely payments of principal and interest test' under IFRS 9), the
money market fund investments used by Group Treasury for cash
management purposes and the net foreign exchange gains and losses
on borrowing activities. These are offset by foreign exchange gains
and losses on financing derivatives measured at fair value. In all
cases, these fair values increase or decrease because of changes in
foreign exchange, commodity or other financial indices over which
we have no control.
We report unrealised gains or
losses relating to certain discrete classes of financial assets
accounted for at FVTPL within adjusted profit. These comprise our
portfolio of investments made by National Grid Partners, our
investment in Sunrun Neptune 2016 LLC and the contingent
consideration arising on the acquisition of National Grid
Renewables (all within NGV). The performance of these assets
(including changes in fair value) is included in our assessment of
adjusted profit for the relevant business units.
Remeasurements excluded from
adjusted profit are made up of the following categories:
i. Net gains/(losses) on commodity contract derivatives
represent mark-to-market movements on certain physical and
financial commodity contract obligations in the US. These contracts
primarily relate to the forward purchase of energy for supply to
customers, or to the economic hedging thereof, that are required to
be measured at fair value and that do not qualify for hedge
accounting. Under the existing rate plans in the US, commodity
costs are recoverable from customers although the timing of
recovery may differ from the pattern of costs
incurred;
ii. Net
gains/(losses) on financing derivatives comprise gains and losses
arising on derivative financial instruments, net of interest
accrued, used for the risk management of interest rate and foreign
exchange exposures and the offsetting foreign exchange losses and
gains on the associated borrowing activities. These exclude gains
and losses for which hedge accounting has been effective and have
been recognised directly in the consolidated statement of other
comprehensive income or are offset by adjustments to the carrying
value of debt. Net foreign exchange gains and losses on financing
derivatives used for the risk management of foreign exchange
exposures are offset by foreign exchange losses and gains on
borrowing activities;
iii. Net
gains/(losses) on financial assets measured at FVTPL comprise gains
and losses on the investment funds held by our insurance captives
which are categorised as FVTPL; and
iv. Unrealised
net gains/(losses) on derivatives and other financial instruments
within our joint ventures and associates.
5. Finance income and costs
|
|
2024
|
2023
|
|
|
£m
|
£m
|
Finance income
|
|
|
|
Net interest income on pensions
and other post-retirement benefit obligations
|
|
100
|
85
|
Interest income on financial
instruments:
|
|
|
|
Bank deposits and other financial
assets
|
|
139
|
80
|
Dividends received on equities
held at fair value through other comprehensive income
(FVOCI)
|
|
1
|
1
|
Other income
|
|
4
|
-
|
|
|
244
|
166
|
Finance costs
|
|
|
|
Interest expense on financial
liabilities held at amortised cost:
|
|
|
|
Bank loans and
overdrafts
|
|
(140)
|
(328)
|
Other borrowings1
|
|
(1,424)
|
(1,330)
|
Interest on derivatives
|
|
(277)
|
(170)
|
Unwinding of discount on
provisions
|
|
(102)
|
(88)
|
Other interest
|
|
(31)
|
(13)
|
Less: interest
capitalised2
|
|
251
|
249
|
|
|
(1,723)
|
(1,680)
|
Remeasurements - Finance income
|
|
|
|
Net gains/(losses) on FVTPL
financial assets
|
|
4
|
(28)
|
|
|
4
|
(28)
|
Remeasurements - Finance costs
|
|
|
|
Net gains on financing
derivatives³
|
|
|
|
Derivatives designated as hedges
for hedge accounting
|
|
13
|
22
|
Derivatives not designated as
hedges for hedge accounting
|
|
(2)
|
60
|
|
|
11
|
82
|
Total remeasurements - Finance income and
costs
|
|
15
|
54
|
|
|
|
|
Finance income
|
|
248
|
138
|
Finance costs4
|
|
(1,712)
|
(1,598)
|
|
|
|
|
Net finance costs from continuing
operations
|
|
(1,464)
|
(1,460)
|
1. Includes interest expense on lease
liabilities.
2. Interest on funding attributable to assets in the course of
construction in the current year was capitalised at a rate of 4.7%
(2023: 4.7%). In the UK, capitalised interest qualifies for a
current year tax deduction with tax relief claimed of £39 million
(2023: £30 million). In the US, capitalised interest is added to
the cost of property, plant and equipment, and qualifies for tax
depreciation allowances.
3. Includes a net foreign exchange gain on borrowing and
investment activities of £271 million (2023: £86 million loss)
offset by foreign exchange gains and losses on financing
derivatives measured at fair value and the impacts of hedge
accounting.
4. Finance
costs include principal accretion on inflation-linked liabilities
of £208 million (2023: £483 million).
6. Tax
Tax charged to the consolidated income statement - continuing
operations
|
2024
|
2023
|
|
£m
|
£m
|
Tax before exceptional items and
remeasurements
|
983
|
635
|
Exceptional tax on items not
included in profit before tax (see note 4)
|
-
|
-
|
Tax on other exceptional items and
remeasurements
|
(152)
|
241
|
Total tax reported within
exceptional items and remeasurements
|
(152)
|
241
|
Total tax charge from continuing operations
|
831
|
876
|
Tax as a percentage of profit before tax
|
2024
|
2023
|
|
%
|
%
|
Before exceptional items and
remeasurements - continuing operations
|
24.1
|
21.4
|
After exceptional items and
remeasurements - continuing operations
|
27.3
|
24.4
|
|
2024
|
2023
|
|
£m
|
£m
|
Current tax:
|
|
|
UK corporation tax at 25% (2023: 19%)
|
410
|
161
|
UK corporation tax adjustment in
respect of prior years
|
(36)
|
-
|
|
374
|
161
|
Overseas corporation
tax
|
82
|
225
|
Overseas corporation tax
adjustment in respect of prior years
|
(90)
|
(16)
|
|
(8)
|
209
|
Total current tax from continuing
operations
|
366
|
370
|
Deferred tax:
|
|
|
UK deferred tax
|
388
|
255
|
UK deferred tax adjustment in
respect of prior years
|
43
|
13
|
|
431
|
268
|
Overseas deferred tax
|
(40)
|
233
|
Overseas deferred tax adjustment
in respect of prior years
|
74
|
5
|
|
34
|
238
|
Total deferred tax from continuing
operations
|
465
|
506
|
|
|
|
Total tax charge from continuing operations
|
831
|
876
|
Factors that may affect future tax charges
The main UK corporation tax rate
is 25% with effect from 1 April 2023. Deferred tax balances as at
31 March 2024 have been calculated at 25%.
The US government continues to
consider changes to federal tax legislation, but as no changes have
been substantively enacted at the balance sheet date, deferred tax
balances as at 31 March 2024 have been calculated at the prevailing
tax rates based on the current tax laws.
The legislation implementing the
Organisation for Economic Co-operation and Development's (OECD)
proposals for a global minimum corporation tax rate (Pillar Two)
was enacted into UK law on 11 July 2023. The legislation includes
an income inclusion rule and a domestic minimum tax, which together
are designed to ensure a minimum effective tax rate of 15% in each
country in which the Group operates. Similar legislation is being
enacted by other governments around the world. The legislation is
effective for National Grid from 1 April 2024 and therefore the
rules do not impact the Group's consolidated financial statements
for year ended 31 March 2024. The Group has applied the mandatory
exception in the UK to recognising and disclosing information about
the deferred tax assets and liabilities related to Pillar Two
income taxes in accordance with the amendments to IAS 12 published
by the IASB on 23 May 2023. The Group does not expect there to be a
material impact on our future tax charges.
7. Earnings per share (EPS)
Adjusted earnings and EPS, which
exclude exceptional items and remeasurements, are provided to
reflect the adjusted profit subtotals used by the Company.
For further details of exceptional items and
remeasurements, see note 4. We have included reconciliations from this additional EPS
measure to earnings for both basic and diluted EPS to provide
additional detail for these items. The EPS calculations are
based on profit after tax attributable to equity shareholders of
the parent company which excludes non-controlling
interests.
(a) Basic EPS
|
Earnings
|
EPS
|
Earnings
|
EPS
|
|
2024
|
2024
|
2023
|
2023
|
|
£m
|
pence
|
£m
|
pence
|
Adjusted earnings from continuing
operations
|
3,100
|
84.0
|
2,335
|
63.8
|
Exceptional items and
remeasurements after tax from continuing operations
(see note 4)
|
(884)
|
(24.0)
|
379
|
10.4
|
Earnings from continuing operations
|
2,216
|
60.0
|
2,714
|
74.2
|
Adjusted earnings from
discontinued operations (see note 9)
|
13
|
0.3
|
320
|
8.7
|
Exceptional items and
remeasurements after tax from discontinued operations
|
61
|
1.7
|
4,763
|
130.2
|
Earnings from discontinued operations
|
74
|
2.0
|
5,083
|
138.9
|
Total adjusted earnings
|
3,113
|
84.3
|
2,655
|
72.5
|
Total exceptional items and
remeasurements after tax (including discontinued
operations)
|
(823)
|
(22.3)
|
5,142
|
140.6
|
Total earnings
|
2,290
|
62.0
|
7,797
|
213.1
|
|
|
|
|
|
|
|
2024
|
|
2023
|
|
|
millions
|
|
millions
|
Weighted average number of
ordinary shares - basic
|
|
3,692
|
|
3,659
|
(b) Diluted EPS
|
Earnings
|
EPS
|
Earnings
|
EPS
|
|
2024
|
2024
|
2023
|
2023
|
|
£m
|
pence
|
£m
|
pence
|
Adjusted earnings from continuing
operations
|
3,100
|
83.6
|
2,335
|
63.5
|
Exceptional items and
remeasurements after tax from continuing operations
(see note 4)
|
(884)
|
(23.9)
|
379
|
10.3
|
Earnings from continuing operations
|
2,216
|
59.7
|
2,714
|
73.8
|
Adjusted earnings from
discontinued operations
|
13
|
0.3
|
320
|
8.7
|
Exceptional items and
remeasurements after tax from discontinued operations
(see note 9)
|
61
|
1.7
|
4,763
|
129.6
|
Earnings from discontinued operations
|
74
|
2.0
|
5,083
|
138.3
|
Total adjusted earnings
|
3,113
|
83.9
|
2,655
|
72.2
|
Total exceptional items and
remeasurements after tax (including discontinued
operations)
|
(823)
|
(22.2)
|
5,142
|
139.9
|
Total earnings
|
2,290
|
61.7
|
7,797
|
212.1
|
|
|
|
|
|
|
|
2024
|
|
2023
|
|
|
millions
|
|
millions
|
Weighted average number of
ordinary shares - diluted
|
|
3,709
|
|
3,676
|
8. Dividends
|
2024
|
|
2023
|
|
Pence
per share
|
Cash
dividend
paid
£m
|
Scrip
dividend
£m
|
|
Pence
per
share
|
Cash
dividend
paid
£m
|
Scrip
dividend
£m
|
Interim dividend in respect of the
current year
|
19.40
|
393
|
320
|
|
17.84
|
488
|
163
|
Final dividend in respect of the
prior year
|
37.60
|
1,325
|
56
|
|
33.76
|
1,119
|
114
|
|
57.00
|
1,718
|
376
|
|
51.60
|
1,607
|
277
|
The Directors are proposing a
final dividend for the year ended 31 March 2024 of 39.12p per share
that would absorb approximately £1,455 million of shareholders'
equity (assuming all amounts are settled in cash). It will be paid
on 19 July 2024 to shareholders who are on the register of members
at 7 June 2024 (subject to shareholders' approval at the AGM). A
scrip dividend will be offered as an alternative.
9. Assets held for sale and discontinued
operations
(a) Assets held for sale
The following assets and
liabilities were classified as held for sale:
|
2024
|
|
2023
|
|
Total
assets
held for
sale
£m
|
Total liabilities held for
sale
£m
|
Net assets held for
sale
£m
|
|
Total
assets
held
for
sale
£m
|
Total
liabilities held for
sale
£m
|
Net
assets held for
sale
£m
|
UK Electricity System
Operator
|
1,134
|
(1,427)
|
(293)
|
|
-
|
-
|
-
|
Investment in GasT TopCo
Limited
|
689
|
-
|
689
|
|
1,443
|
-
|
1,443
|
FAA option
|
-
|
-
|
-
|
|
-
|
(109)
|
(109)
|
RAA option
|
-
|
(47)
|
(47)
|
|
-
|
-
|
-
|
Net assets held for sale
|
1,823
|
(1,474)
|
349
|
|
1,443
|
(109)
|
1,334
|
UK Electricity System Operator
At the end of October 2023,
legislation required to enable the separation of the ESO and the
formation of the NESO was passed through Parliament. The NESO is
expected to be established as a Public Corporation this calendar
year, with responsibilities across both the electricity and gas
systems. The assets and liabilities are consequently presented as
held for sale in the consolidated financial statements for the year
ended 31 March 2024.
Based on the scale and
pass-through nature of the ESO, it is not considered a separate
major line of business or geographic operation under IFRS 5 for
treatment as a discontinued operation, and its disposal is not part
of a single coordinated plan being undertaken by the Group.
Accordingly, the results of the ESO have not been separately
disclosed on the face of the income statement.
The following assets and
liabilities of the ESO were classified as held for sale at 31 March
2024.
|
|
£m
|
Intangible assets
|
|
405
|
Property, plant and
equipment
|
|
113
|
Trade and other
receivables
|
|
563
|
Pension asset
|
|
17
|
Cash and cash
equivalents
|
|
30
|
Financing derivatives
|
|
6
|
Total assets
|
|
1,134
|
Borrowings
|
|
(13)
|
Other liabilities
|
|
(916)
|
Provision for UK electricity
balancing costs (note 4)
|
|
(498)
|
Total liabilities
|
|
(1,427)
|
Net liabilities
|
|
(293)
|
No impairment losses were
recognised on reclassification of the ESO assets and liabilities
classified to held for sale. The ESO generated profit after tax of
£178 million for the year ended 31 March 2024 (2023: £182 million
profit; 2022: £12 million loss).
9. Assets held for sale and discontinued
operations continued
The UK Gas Transmission business
On 31 January 2023, the Group
disposed of 100% of the UK Gas Transmission business for cash
consideration of £4.0 billion and a 40% interest in a newly
incorporated UK limited company, GasT TopCo Limited. The other 60%
was purchased by MIRA and BCI (together, the Consortium). On
disposal, the Group recognised an investment in GasT TopCo Limited
of £1.4 billion. As a result, the Group derecognised net assets of
£0.6 billion and the gain on disposal, after transaction costs, was
£4.8 billion. The Group also entered into a Further Acquisition
Agreement (the FAA option) with the Consortium over its remaining
40% interest. Both the investment in GasT TopCo Limited and the FAA
option were immediately classified as held for sale. The Group has
not applied equity accounting in relation to its investment in GasT
TopCo Limited.
On 11 March 2024, the FAA option
was partially exercised by the Consortium and the Group disposed of
20% of the 40% interest in GasT TopCo Limited that was acquired on
31 January 2023. The total sales proceeds were £681 million and the
loss on disposal, after transaction costs, was £4
million.
As part of the transaction, the
Group also entered into a new option agreement with the Consortium,
the Remaining Acquisition Agreement (the RAA option), to replace
the FAA option for the potential sale of all or part of the
remaining 20% equity interest in GasT TopCo Limited. The RAA option
is exercisable, at the Consortium's option, between 1 May 2024 and
31 July 2024. If the RAA option is partially exercised by the
Consortium, the Group will have the right to put the remainder of
its interests in GasT TopCo Limited to the Consortium, which can be
exercised by the Group between 1 December 2024 and 31 December
2024.
The RAA option is a Level 3
derivative, which is accounted for at fair value, and the
assumptions which are used to determine fair value are specific to
the contract and not readily observable in active markets.
Significant unobservable inputs include the valuation and
volatility of GasT TopCo Limited's unlisted
equity. These inputs are used as part of a Black-Scholes option
pricing model to provide the reported fair values. The fair value
of the option as at 31 March 2024
is £47 million. The RAA option will be
extinguished when the option is either exercised or lapses. The
option cannot be cash settled.
(b) Discontinued operations
UK
Gas Transmission
The disposal of the Group's
interests in GasT TopCo Limited is considered to be the final stage
of the plan to dispose of the UK Gas Transmission business which
was first announced in 2021. As a discontinued operation, the
results of the business prior to the recognition of the associate
and any remeasurements pertaining to the financial derivatives
noted above are shown separately from the continuing business for
all periods presented on the face of the income statement. This is
also reflected in the statement of comprehensive income, as well as
EPS being shown split between continuing and discontinued
operations.
The summary income statements for
the years ended 31 March 2024 and 2023 are as follows:
|
Before exceptional
items
and
remeasurements
|
|
Exceptional
items
and
remeasurements
|
|
Total
|
|
2024
|
2023
|
|
2024
|
2023
|
|
2024
|
2023
|
|
£m
|
£m
|
|
£m
|
£m
|
|
£m
|
£m
|
Discontinued operations
|
|
|
|
|
|
|
|
|
Revenue
|
-
|
1,604
|
|
-
|
-
|
|
-
|
1,604
|
Other operating costs
|
-
|
(890)
|
|
-
|
1
|
|
-
|
(889)
|
Operating profit
|
-
|
714
|
|
-
|
1
|
|
-
|
715
|
Finance income
|
17
|
15
|
|
-
|
6
|
|
17
|
21
|
Finance
costs1
|
-
|
(310)
|
|
62
|
(53)
|
|
62
|
(363)
|
Profit before tax
|
17
|
419
|
|
62
|
(46)
|
|
79
|
373
|
Tax
|
(4)
|
(99)
|
|
3
|
6
|
|
(1)
|
(93)
|
Profit after tax from
discontinued operations
|
13
|
320
|
|
65
|
(40)
|
|
78
|
280
|
(Loss)/gain on disposal
|
-
|
-
|
|
(4)
|
4,803
|
|
(4)
|
4,803
|
Total profit after tax from
discontinued operations
|
13
|
320
|
|
61
|
4,763
|
|
74
|
5,083
|
1. Exceptional finance costs include the remeasurement of the
FAA and RAA options.
9. Assets held for sale and discontinued
operations continued
The summary statements of
comprehensive income for discontinued operations for the years
ended 31 March 2024 and 2023 are as follows:
|
2024
|
2023
|
|
£m
|
£m
|
Profit after tax from discontinued
operations
|
74
|
5,083
|
Other comprehensive (loss)/income from discontinued
operations
|
|
|
Items from discontinued operations
that will never be reclassified to profit or loss:
|
|
|
Remeasurement (losses)/gains on
pension assets and post-retirement benefit obligations
|
-
|
(313)
|
Net losses on financial liability
designated at fair value through profit and loss attributable to
changes in own credit risk
|
-
|
-
|
Tax on items that will never be
reclassified to profit or loss
|
-
|
78
|
Total (losses)/gains from discontinued operations that will
never be reclassified to profit or loss
|
-
|
(235)
|
Items from discontinued operations
that may be reclassified subsequently to profit or loss:
|
|
|
Net gains in respect of cash flow
hedges
|
-
|
6
|
Net gains/(losses) in respect of
cost of hedging
|
-
|
4
|
Net gains on investments in debt
instruments measured at fair value through other comprehensive
income
|
13
|
-
|
Tax on items that may be
reclassified subsequently to profit or loss
|
(3)
|
(2)
|
Total gains/(losses) from discontinued operations that may be
reclassified subsequently to profit or loss
|
10
|
8
|
Other comprehensive income/(loss) for the year, net of tax
from discontinued operations
|
10
|
(227)
|
Total comprehensive income for the year from discontinued
operations
|
84
|
4,856
|
Details of the cash flows relating
to discontinued operations are set out within the consolidated cash
flow statement. Cash inflows from investing activities in the year
comprised dividends received from GasT TopCo Limited of £102
million.
10. Pensions and other post-retirement benefit
obligations
|
2024
|
2023
|
|
£m
|
£m
|
Present value of funded
obligations
|
(17,601)
|
(18,934)
|
Fair value of plan
assets
|
19,733
|
21,246
|
|
2,132
|
2,312
|
Present value of unfunded
obligations
|
(266)
|
(292)
|
Other post-employment
liabilities
|
(52)
|
(69)
|
Net defined benefit asset
|
1,814
|
1,951
|
Represented by:
|
|
|
Liabilities
|
(593)
|
(694)
|
Assets
|
2,407
|
2,645
|
|
1,814
|
1,951
|
The net pensions and other
post-retirement benefit obligations position, as recorded under IAS
19, at 31 March 2024 was a net asset of £1,814 million
compared to a net asset of £1,951 million at 31 March
2023. The movement of £137 million
reflects falls in asset values, partially offset by changes in UK
and US financial assumptions that resulted in a decrease in
liabilities.
Actuarial Assumptions:
|
UK
pensions
|
|
US
pensions
|
|
US other
post-retirement
benefits
|
|
2024
|
2023
|
|
2024
|
2023
|
|
2024
|
2023
|
|
%
|
%
|
|
%
|
%
|
|
%
|
%
|
Discount rate - past
service
|
4.87
|
4.80
|
|
5.15
|
4.85
|
|
5.15
|
4.85
|
Discount rate - future
service
|
4.92
|
4.80
|
|
5.15
|
4.85
|
|
5.15
|
4.85
|
Rate of increase in RPI - past
service
|
3.05
|
3.17
|
|
n/a
|
n/a
|
|
n/a
|
n/a
|
Rate of increase in RPI - future
service
|
2.92
|
3.07
|
|
n/a
|
n/a
|
|
n/a
|
n/a
|
Salary increases
|
3.10
|
3.11
|
|
4.50
|
4.50
|
|
4.50
|
4.50
|
Initial healthcare cost trend
rate
|
n/a
|
n/a
|
|
n/a
|
n/a
|
|
7.10
|
6.80
|
Ultimate healthcare cost trend
rate
|
n/a
|
n/a
|
|
n/a
|
n/a
|
|
4.50
|
4.50
|
11. Net debt
Net debt is comprised as
follows:
|
2024
|
2023
|
|
£m
|
£m
|
Cash and cash
equivalents
|
559
|
163
|
Current financial
investments
|
3,699
|
2,605
|
Borrowings
|
(47,072)
|
(42,985)
|
Financing derivatives¹
|
(793)
|
(756)
|
|
(43,607)
|
(40,973)
|
1. The derivatives balance
included in net debt excludes the commodity derivative liabilities
of £83 million (2023: assets of £108
million).
12. Reconciliation of net cash flow to movement in net
debt
|
2024
|
2023
|
|
£m
|
£m
|
Increase/(decrease) in cash and
cash equivalents
|
427
|
(48)
|
Increase/(decrease) in financial
investments
|
993
|
(651)
|
(Increase)/decrease in
borrowings
|
(2,976)
|
5,268
|
Increase in related
derivatives1
|
140
|
455
|
Change in debt resulting from cash
flows
|
(1,416)
|
5,024
|
Changes in fair value of financial
assets and liabilities and exchange movements
|
703
|
(1,242)
|
Net interest charge on the
components of net debt
|
(1,689)
|
(1,755)
|
Other non-cash
movements
|
(209)
|
(283)
|
Movement in net debt (net of
related derivative financial instruments) in the year
|
(2,611)
|
1,744
|
Net debt (net of related
derivative financial instruments) at start of year
|
(40,973)
|
(42,809)
|
Reclassification to held for
sale
|
(23)
|
92
|
Net debt (net of related derivative financial instruments) at
end of year
|
(43,607)
|
(40,973)
|
1. The derivatives balance
included in net debt excludes the commodity derivative liabilities
of £83 million (2023: assets of £108
million).
|
2024
|
|
2023
|
|
Borrowings
and other
£m
|
Financing
derivatives
£m
|
|
Borrowings
and
other
£m
|
Financing
derivatives
£m
|
Cash flows per financing
activities section of cash flow statement:
|
|
|
|
|
|
Proceeds received from
loans
|
5,563
|
-
|
|
11,908
|
-
|
Repayment of loans
|
(1,701)
|
-
|
|
(15,260)
|
-
|
Payments of lease
liabilities
|
(118)
|
-
|
|
(155)
|
-
|
Net movements in short-term
borrowings
|
544
|
-
|
|
(511)
|
-
|
Cash inflows on
derivatives
|
-
|
86
|
|
-
|
190
|
Cash outflows on
derivatives
|
-
|
(58)
|
|
-
|
(118)
|
Interest paid
|
(1,330)
|
(297)
|
|
(1,277)
|
(153)
|
Cash flows per financing
activities section of cash flow statement
|
2,958
|
(269)
|
|
(5,295)
|
(81)
|
Adjustments:
|
|
|
|
|
|
Non-net debt-related
items
|
18
|
-
|
|
27
|
-
|
Derivative cash (outflow)/inflow
in relation to capital expenditure
|
-
|
(5)
|
|
-
|
(12)
|
Derivative cash (outflow)/inflow
included in revenue
|
-
|
11
|
|
-
|
-
|
Derivative cash inflows per
investing section of cash flow statement
|
-
|
123
|
|
-
|
-
|
Derivative cash outflows per
investing section of cash flow statement
|
-
|
-
|
|
-
|
(362)
|
Cash flows relating to financing liabilities within net
debt
|
2,976
|
(140)
|
|
(5,268)
|
(455)
|
|
|
|
|
|
|
Analysis of changes in net debt:
|
|
|
|
|
|
Borrowings
|
2,976
|
-
|
|
(5,268)
|
-
|
Financing derivatives
|
-
|
(140)
|
|
-
|
(455)
|
Cash flow movements relating to financing liabilities within
net debt
|
2,976
|
(140)
|
|
(5,268)
|
(455)
|
13. Post balance sheet events
On 22 May 2024, the Board resolved
to offer a fully underwritten Rights Issue to raise gross proceeds
of £7 billion.
Alternative performance measures/non-IFRS
reconciliations
Within the Annual Report, a number
of financial measures are presented. These measures have been
categorised as alternative performance measures (APMs), as per the
European Securities and Markets Authority (ESMA) guidelines and the
Securities and Exchange Commission (SEC) conditions for use of
non-GAAP financial measures.
An APM is a financial measure of
historical or future financial performance, financial position, or
cash flows, other than a financial measure defined under IFRS. The
Group uses a range of these measures to provide a better
understanding of its underlying performance. APMs are reconciled to
the most directly comparable IFRS financial measure where
practicable.
The Group has defined the
following financial measures as APMs derived from IFRS: net
revenue, the various adjusted operating profit, earnings and
earnings per share metrics detailed in the 'adjusted profit
measures' section below, net debt, funds from operations (FFO), FFO
interest cover and retained cash flow (RCF)/adjusted net debt. For
each of these we present a reconciliation to the most directly
comparable IFRS measure. We present 'constant currency' comparative
period performance and capital investment by applying the current
year average exchange rate to the relevant US dollar amounts in the
comparative periods presented, to remove the year-on-year impact of
foreign exchange translation.
We also have a number of APMs
derived from regulatory measures which have no basis under IFRS; we
call these Regulatory Performance Measures (RPMs). They comprise:
Group RoE, operating company RoE, regulated asset base, regulated
financial performance, regulatory gearing, Asset growth, Value
Added, including Value Added per share and Value Growth. These
measures include the inputs used by utility regulators to set the
allowed revenues for many of our businesses.
We use RPMs to monitor progress
against our regulatory agreements and certain aspects of our
strategic objectives. Further, targets for certain of these performance measures are included in the Company's
Annual Performance Plan (APP) and LTPP and contribute to how we
reward our employees. As such, we believe
that they provide close correlation to the economic value we
generate for our shareholders and are therefore important
supplemental measures for our shareholders to understand the
performance of the business and to ensure a complete understanding
of Group performance.
As the starting point for our RPMs
is not IFRS, and these measures are not governed by IFRS, we are
unable to provide meaningful reconciliations to any directly
comparable IFRS measures, as differences between IFRS and the
regulatory recognition rules applied have built up over many years.
Instead, for each of these we present an explanation of how the
measure has been determined and why it is important, and an
overview as to why it would not be meaningful to provide a
reconciliation to IFRS.
Alternative performance measures
Net revenue and underlying net revenue
'Net revenue' is revenue less
pass-through costs, such as UK system balancing costs and gas and
electricity commodity costs in the US. Pass-through costs are fully
recoverable from our customers and are recovered through separate
charges that are designed to recover those costs with no profit.
Where revenue received or receivable exceeds the maximum amount
permitted by our regulatory agreement, adjustments will be made to
future prices to reflect this over-recovery. No liability is
recognised, as such an adjustment to future prices relates to the
provision of future services. Similarly, no asset is recognised
where a regulatory agreement permits adjustments to be made to
future prices in respect of an under-recovery. 'Underlying net
revenue' further adjusts net revenue to remove the impact of
'timing', i.e. the in-year difference between allowed and collected
revenues, including revenue incentives, as governed by our rate
plans in the US or regulatory price controls in the UK (but
excluding totex-related allowances and adjustments).
Year ended 31 March 2024
|
Gross
revenue
£m
|
Pass-
through
costs
£m
|
Net
revenue
£m
|
Timing
£m
|
Underlying
net
revenue
£m
|
UK Electricity
Transmission
|
2,735
|
(225)
|
2,510
|
(363)
|
2,147
|
UK Electricity
Distribution
|
1,795
|
(233)
|
1,562
|
159
|
1,721
|
UK Electricity System
Operator
|
3,788
|
(2,605)
|
1,183
|
(800)
|
383
|
New England
|
3,948
|
(1,653)
|
2,295
|
69
|
2,364
|
New York
|
6,094
|
(2,057)
|
4,037
|
20
|
4,057
|
National Grid Ventures
|
1,389
|
-
|
1,389
|
-
|
1,389
|
Other
|
244
|
-
|
244
|
-
|
244
|
Sales between segments
|
(143)
|
-
|
(143)
|
-
|
(143)
|
Total - continuing operations
|
19,850
|
(6,773)
|
13,077
|
(915)
|
12,162
|
Discontinued operations
|
-
|
-
|
-
|
-
|
-
|
Total
|
19,850
|
(6,773)
|
13,077
|
(915)
|
12,162
|
Year ended 31 March 2023
|
Gross
revenue1
£m
|
Pass-
through
costs
£m
|
Net
revenue
£m
|
Timing
£m
|
Underlying
net
revenue
£m
|
UK Electricity
Transmission
|
1,987
|
(217)
|
1,770
|
112
|
1,882
|
UK Electricity
Distribution
|
2,045
|
(418)
|
1,627
|
139
|
1,766
|
UK Electricity System
Operator
|
4,690
|
(4,152)
|
538
|
(207)
|
331
|
New England
|
4,427
|
(2,095)
|
2,332
|
39
|
2,371
|
New York
|
6,994
|
(2,957)
|
4,037
|
(53)
|
3,984
|
National Grid Ventures
|
1,341
|
-
|
1,341
|
-
|
1,341
|
Other
|
317
|
-
|
317
|
-
|
317
|
Sales between segments
|
(142)
|
-
|
(142)
|
-
|
(142)
|
Total - continuing operations
|
21,659
|
(9,839)
|
11,820
|
30
|
11,850
|
Discontinued operations
|
1,604
|
(658)
|
946
|
(12)
|
934
|
Total
|
23,263
|
(10,497)
|
12,766
|
18
|
12,784
|
1. Excluding exceptional income.
Adjusted profit measures
In considering the financial
performance of our business and segments, we use various adjusted
profit measures in order to aid comparability of results
year-on-year. The
various measures are presented on pages 21 to 28
and reconciled below.
Adjusted results:
These exclude the impact of
exceptional items and remeasurements that are treated as discrete
transactions under IFRS and can accordingly be classified as such.
This is a measure used by management that is used to derive part of
the incentive target set annually for remunerating certain
Executive Directors, and further details of these items are
included in note 4.
Underlying results:
Further adapts our adjusted
results for continuing operations to take account of volumetric and
other revenue timing differences arising due to the in-year
difference between allowed and collected revenues, including
revenue incentives, as governed by our rate plans in the US or
regulatory price controls in the UK (but excluding certain
totex-related allowances and adjustments or allowances for pension
deficit contributions). For 2023/24, as
highlighted below, our underlying results
exclude £915 million (2022/23: £30 million) of timing differences
as well as £226 million (2022/23: £258 million) of major storm
costs (as costs exceeded our $100 million threshold in both years).
We expect to recover major storm costs incurred through regulatory
mechanisms in the US. Underlying results also exclude deferred tax
in our UK regulated business (NGET and NGED). Our UK regulated
revenue contain an allowance for current tax, but not for deferred
tax, so excluding the IFRS deferred tax charge aligns our
underlying results APM more closely with our regulatory performance
measures.
Constant currency: 'Constant
Currency Basis' refers to the reporting of the actual results
against the results for the same period last year which, in respect
of any US dollar currency denominated activity, have been
translated using the average US dollar exchange rate for the year
ended 31 March 2024, which was $1.26 to
£1.00. The average rate for the year ended 31
March 2023, was $1.22 to £1.00. Assets and liabilities as at
31 March 2023 have been retranslated at
the closing rate at 31 March 2024 of $1.26
to £1.00. The closing rate for the reporting date 31 March 2023 was $1.23 to £1.00.
Reconciliation of statutory, adjusted and underlying profits
from continuing operations at actual exchange
rates
Year ended 31 March 2024
|
Statutory
£m
|
Exceptionals and remeasurements
£m
|
Adjusted
£m
|
Timing
£m
|
Major
storm costs
£m
|
Deferred
tax on underlying profits in
NGET and
NGED
£m
|
Underlying
£m
|
UK Electricity
Transmission
|
1,674
|
3
|
1,677
|
(363)
|
-
|
-
|
1,314
|
UK Electricity
Distribution
|
975
|
18
|
993
|
159
|
-
|
-
|
1,152
|
UK Electricity System
Operator
|
382
|
498
|
880
|
(800)
|
-
|
-
|
80
|
New England
|
641
|
2
|
643
|
69
|
90
|
-
|
802
|
New York
|
362
|
498
|
860
|
20
|
136
|
-
|
1,016
|
National Grid Ventures
|
558
|
(89)
|
469
|
-
|
-
|
-
|
469
|
Other
|
(117)
|
57
|
(60)
|
-
|
-
|
-
|
(60)
|
Total operating profit
|
4,475
|
987
|
5,462
|
(915)
|
226
|
-
|
4,773
|
Net finance costs
|
(1,464)
|
(15)
|
(1,479)
|
-
|
-
|
-
|
(1,479)
|
Share of post-tax results of joint
ventures and associates
|
37
|
64
|
101
|
-
|
-
|
-
|
101
|
Profit before tax
|
3,048
|
1,036
|
4,084
|
(915)
|
226
|
-
|
3,395
|
Tax
|
(831)
|
(152)
|
(983)
|
227
|
(61)
|
302
|
(515)
|
Profit after tax
|
2,217
|
884
|
3,101
|
(688)
|
165
|
302
|
2,880
|
Year ended 31 March 2023
|
Statutory
£m
|
Exceptionals and remeasurements
£m
|
Adjusted
£m
|
Timing
£m
|
Major
storm costs
£m
|
Deferred
tax on underlying profits in
NGET and
NGED
£m
|
Underlying1
£m
|
UK Electricity
Transmission
|
993
|
2
|
995
|
112
|
-
|
-
|
1,107
|
UK Electricity
Distribution
|
1,069
|
22
|
1,091
|
139
|
-
|
-
|
1,230
|
UK Electricity System
Operator
|
237
|
1
|
238
|
(207)
|
-
|
-
|
31
|
New England
|
1,132
|
(424)
|
708
|
39
|
72
|
-
|
819
|
New York
|
541
|
200
|
741
|
(53)
|
186
|
-
|
874
|
National Grid Ventures
|
957
|
(467)
|
490
|
-
|
-
|
-
|
490
|
Other
|
(50)
|
81
|
31
|
-
|
-
|
-
|
31
|
Total operating profit
|
4,879
|
(585)
|
4,294
|
30
|
258
|
-
|
4,582
|
Net finance costs
|
(1,460)
|
(54)
|
(1,514)
|
-
|
-
|
-
|
(1,514)
|
Share of post-tax results of joint
ventures and associates
|
171
|
19
|
190
|
-
|
-
|
-
|
190
|
Profit before tax
|
3,590
|
(620)
|
2,970
|
30
|
258
|
-
|
3,258
|
Tax
|
(876)
|
241
|
(635)
|
(4)
|
(70)
|
178
|
(531)
|
Profit after tax
|
2,714
|
(379)
|
2,335
|
26
|
188
|
178
|
2,727
|
1. Prior
year comparatives have been restated to reflect the change in our
underlying earnings definition to remove the deferred tax in UK
regulated businesses (NGET and NGED).
Reconciliation of adjusted and underlying earnings from
continuing operations at constant currency
|
|
|
At constant
currency
|
Year ended 31 March 2023
|
Adjusted
at actual exchange
rate
|
|
Constant
currency adjustment
|
Adjusted
|
Timing
|
Major
storm costs
|
Deferred
tax on underlying profits in
NGET and
NGED
|
Underlying1
|
£m
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
UK Electricity
Transmission
|
995
|
|
-
|
995
|
112
|
-
|
-
|
1,107
|
UK Electricity
Distribution
|
1,091
|
|
-
|
1,091
|
139
|
-
|
-
|
1,230
|
UK Electricity System
Operator
|
238
|
|
-
|
238
|
(207)
|
-
|
-
|
31
|
New England
|
708
|
|
(26)
|
682
|
37
|
69
|
-
|
788
|
New York
|
741
|
|
(27)
|
714
|
(51)
|
179
|
-
|
842
|
National Grid Ventures
|
490
|
|
(1)
|
489
|
-
|
-
|
-
|
489
|
Other
|
31
|
|
-
|
31
|
-
|
-
|
-
|
31
|
Total operating profit
|
4,294
|
|
(54)
|
4,240
|
30
|
248
|
-
|
4,518
|
Net finance costs
|
(1,514)
|
|
22
|
(1,492)
|
-
|
-
|
-
|
(1,492)
|
Share of post-tax results of joint
ventures and associates
|
190
|
|
(1)
|
189
|
-
|
-
|
-
|
189
|
Profit before tax
|
2,970
|
|
(33)
|
2,937
|
30
|
248
|
-
|
3,215
|
Tax
|
(635)
|
|
8
|
(627)
|
(4)
|
(68)
|
178
|
(521)
|
Profit after tax
|
2,335
|
|
(25)
|
2,310
|
26
|
180
|
178
|
2,694
|
Attributable to non-controlling
interests
|
-
|
|
-
|
-
|
-
|
-
|
-
|
-
|
Earnings
|
2,335
|
|
(25)
|
2,310
|
26
|
180
|
178
|
2,694
|
Earnings per share (pence)
|
63.8
|
|
(0.7)
|
63.1
|
0.7
|
4.9
|
4.9
|
73.6
|
1. Prior
year comparatives have been restated to reflect the change in our
underlying earnings definition to remove the deferred tax in UK
regulated businesses (NGET and NGED).
Earnings per share calculations from continuing operations -
at actual exchange rates
The table below reconciles the
profit after tax from continuing operations as per the previous
tables back to the earnings per share from continuing operations
for each of the adjusted profit measures. Earnings per share is
only presented for those adjusted profit measures that are at
actual exchange rates, and not for those at constant
currency.
Year ended 31 March 2024
|
Profit after
tax
£m
|
Non-controlling
interest
£m
|
Profit after tax
attributable to the parent
£m
|
Weighted
average
number of
shares
Millions
|
Earnings
per share
pence
|
Statutory
|
2,217
|
(1)
|
2,216
|
3,692
|
60.0
|
Adjusted
|
3,101
|
(1)
|
3,100
|
3,692
|
84.0
|
Underlying
|
2,880
|
(1)
|
2,879
|
3,692
|
78.0
|
Year ended 31 March
2023
|
Profit
after tax
£m
|
Non-controlling interest
£m
|
Profit
after tax attributable to the parent
£m
|
Weighted
average
number
of
shares
Millions
|
Earnings
per
share
pence
|
Statutory
|
2,714
|
-
|
2,714
|
3,659
|
74.2
|
Adjusted
|
2,335
|
-
|
2,335
|
3,659
|
63.8
|
Underlying1
|
2,727
|
-
|
2,727
|
3,659
|
74.5
|
1. Prior
year comparatives have been restated to reflect the change in our
underlying earnings definition to remove the deferred tax in UK
regulated businesses (NGET and NGED).
Reconciliation of total Group statutory operating profit to
adjusted earnings (including and excluding the impact of timing,
major storm costs and deferred tax on underlying profits in NGET
and NGED)
|
Adjusted
|
|
Underlying
|
|
2024
|
2023
|
|
2024
|
20231
|
|
£m
|
£m
|
|
£m
|
£m
|
Continuing operations
|
|
|
|
|
|
Adjusted operating
profit
|
5,462
|
4,294
|
|
4,773
|
4,582
|
Adjusted net finance
costs
|
(1,479)
|
(1,514)
|
|
(1,479)
|
(1,514)
|
Share of post-tax results of joint
ventures and associates
|
101
|
190
|
|
101
|
190
|
Adjusted profit before
tax
|
4,084
|
2,970
|
|
3,395
|
3,258
|
Adjusted tax
|
(983)
|
(635)
|
|
(515)
|
(531)
|
Adjusted profit after
tax
|
3,101
|
2,335
|
|
2,880
|
2,727
|
Attributable to non-controlling
interests
|
(1)
|
-
|
|
(1)
|
-
|
Adjusted earnings from continuing
operations
|
3,100
|
2,335
|
|
2,879
|
2,727
|
Exceptional items after
tax
|
(852)
|
619
|
|
(852)
|
619
|
Remeasurements after
tax
|
(32)
|
(240)
|
|
(32)
|
(240)
|
Earnings from continuing operations
|
2,216
|
2,714
|
|
1,995
|
3,106
|
|
|
|
|
|
|
|
Including timing, major
storm costs and deferred tax on underlying profits in NGET and
NGED
|
|
Excluding timing, major
storm costs and deferred tax on underlying profits in NGET and
NGED
|
|
2024
|
2023
|
|
2024
|
20231
|
|
£m
|
£m
|
|
£m
|
£m
|
Discontinued operations
|
|
|
|
|
|
Adjusted operating
profit
|
-
|
714
|
|
-
|
702
|
Adjusted net finance
costs
|
17
|
(295)
|
|
17
|
(295)
|
Share of post-tax results of joint
ventures and associates
|
-
|
-
|
|
-
|
-
|
Adjusted profit before
tax
|
17
|
419
|
|
17
|
407
|
Adjusted tax
|
(4)
|
(99)
|
|
(4)
|
(97)
|
Adjusted profit after
tax
|
13
|
320
|
|
13
|
310
|
Attributable to non-controlling
interests
|
-
|
-
|
|
-
|
-
|
Adjusted earnings from
discontinued operations
|
13
|
320
|
|
13
|
310
|
Exceptional items and gain on
disposal after tax
|
(4)
|
4,811
|
|
(4)
|
4,811
|
Remeasurements after
tax
|
65
|
(48)
|
|
65
|
(48)
|
Earnings from discontinued operations
|
74
|
5,083
|
|
74
|
5,073
|
|
|
|
|
|
|
Total Group (continuing and discontinued
operations)
|
|
|
|
|
|
Adjusted operating
profit
|
5,462
|
5,008
|
|
4,773
|
5,284
|
Adjusted net finance
costs
|
(1,462)
|
(1,809)
|
|
(1,462)
|
(1,809)
|
Share of post-tax results of joint
ventures and associates
|
101
|
190
|
|
101
|
190
|
Adjusted profit before
tax
|
4,101
|
3,389
|
|
3,412
|
3,665
|
Adjusted tax
|
(987)
|
(734)
|
|
(519)
|
(628)
|
Adjusted profit after
tax
|
3,114
|
2,655
|
|
2,893
|
3,037
|
Attributable to non-controlling
interests
|
(1)
|
-
|
|
(1)
|
-
|
Adjusted earnings from continuing
and discontinued operations
|
3,113
|
2,655
|
|
2,892
|
3,037
|
Exceptional items after
tax
|
(856)
|
5,430
|
|
(856)
|
5,430
|
Remeasurements after
tax
|
33
|
(288)
|
|
33
|
(288)
|
Total Group earnings from continuing and discontinued
operations
|
2,290
|
7,797
|
|
2,069
|
8,179
|
1. Prior
year comparatives have been restated to reflect the change in our
underlying earnings definition to remove the deferred tax in UK
regulated businesses (NGET and NGED).
Reconciliation of adjusted EPS to statutory earnings
(including and excluding the impact of timing, major storm costs
and deferred tax on underlying profits in NGET and
NGED)
|
Including timing, major
storm costs and deferred tax on underlying profits in NGET and
NGED
|
|
Excluding timing, major
storm costs and deferred tax on underlying profits in NGET and
NGED
|
|
2024
|
2023
|
|
2024
|
20231
|
Year ended 31 March
|
pence
|
pence
|
|
pence
|
pence
|
Adjusted EPS from continuing
operations
|
84.0
|
63.8
|
|
78.0
|
74.5
|
Exceptional items and
remeasurements after tax from continuing operations
|
(24.0)
|
10.4
|
|
(24.0)
|
10.4
|
EPS from continuing
operations
|
60.0
|
74.2
|
|
54.0
|
84.9
|
Adjusted EPS from discontinued
operations
|
0.3
|
8.7
|
|
0.3
|
8.5
|
Exceptional items and
remeasurements after tax from discontinued operations
|
1.7
|
130.2
|
|
1.7
|
130.2
|
EPS from discontinued
operations
|
2.0
|
138.9
|
|
2.0
|
138.7
|
Total adjusted EPS from continuing and discontinued
operations
|
84.3
|
72.5
|
|
78.3
|
83.0
|
Total exceptional items and
remeasurements after tax from continuing and discontinued
operations
|
(22.3)
|
140.6
|
|
(22.3)
|
140.6
|
Total Group EPS from continuing and discontinued
operations
|
62.0
|
213.1
|
|
56.0
|
223.6
|
1. Prior
year comparatives have been restated to reflect the change in our
underlying earnings definition to remove the deferred tax in UK
regulated businesses (NGET and NGED).
Timing impacts
Under the Group's regulatory
frameworks, the majority of the revenues that National Grid is
allowed to collect each year are governed by a regulatory price
control or rate plan. If we collect more than the allowed revenue,
adjustments will be made to future prices to reflect this
over-recovery, and if we collect less than the allowed level of
revenue, adjustments will be made to future prices to reflect the
under-recovery. A number of costs in the UK and the US are
pass-through costs (including commodity and energy efficiency costs
in the US) and are fully recoverable from customers. Timing
differences between costs of this type being incurred and their
recovery through revenues are also included in over and
under-recoveries. In the UK, timing differences include an
estimation of the difference between revenues earned under revenue
incentive mechanisms and associated revenues collected. UK timing
balances and movements exclude adjustments associated with changes
to controllable cost (totex) allowances or adjustments under the
totex incentive mechanism. Opening balances of over and
under-recoveries have been restated where appropriate to correspond
with regulatory filings and calculations. New England and New York
in-year over/(under)-recovery and all New England and New York
balances have been translated using the average exchange rate of
$1.26 for the year ended 31 March
2024.
|
UK
Electricity
Transmission
£m
|
UK
Electricity
Distribution
£m
|
UK
Electricity System
Operator
£m
|
New
England
£m
|
New
York
£m
|
Continuing
£m
|
Discontinued
£m
|
Total
£m
|
1 April 2023 opening
balance1
|
(213)
|
(124)
|
77
|
(384)
|
683
|
39
|
-
|
39
|
(Under)/over-recovery
|
363
|
(159)
|
800
|
(69)
|
(20)
|
915
|
-
|
915
|
31
March 2024 closing balance to
(recover)/return2
|
150
|
(283)
|
877
|
(453)
|
663
|
954
|
-
|
954
|
|
UK
Electricity Transmission
£m
|
UK
Electricity Distribution
£m
|
UK
Electricity System Operator
£m
|
New
England
£m
|
New
York
£m
|
Continuing
£m
|
Discontinued
£m
|
Total
£m
|
1 April 2022 opening
balance1
|
(95)
|
22
|
(129)
|
(330)
|
632
|
100
|
(160)
|
(60)
|
(Under)/over-recovery
|
(112)
|
(139)
|
207
|
(37)
|
51
|
(30)
|
12
|
(18)
|
Disposals
|
-
|
-
|
-
|
(17)
|
-
|
(17)
|
148
|
131
|
31
March 2023 closing balance to
(recover)/return2,3
|
(207)
|
(117)
|
78
|
(384)
|
683
|
53
|
-
|
53
|
1. Opening
balances have been restated to reflect the finalisation of
calculated over/(under)-recoveries in both the UK and the US and
also adjusted for the regulatory time value of money impact on
opening balances, where appropriate, in the UK.
2. The
closing balance at 31 March 2024 was £954 million over-recovered
(translated at the closing rate of $1.26:£1). 31 March 2023 was £59
million over-recovered (including discontinued operations and
translated at the closing rate of $1.23:£1).
Capital investment
We have updated our definition of
capital investment this year. 'Capital investment' or 'investment'
both refer to additions to property, plant and equipment and
intangible assets, including capital prepayments plus equity
contributions to joint ventures and associates during the period.
This measure of capital investment is aligned with how we present
our segmental information (see note 2(c) to the financial
statements for further details). References to 'capital investment'
in our regulated networks include the following segments: UK
Electricity Transmissions, UK Electricity Distribution, UK
Electricity System Operator, New England and New York, but exclude
National Grid Ventures and 'Other'. Capital investment measures are
presented at actual exchange rates, but are also shown on a
constant currency basis to show the year-on-year comparisons
excluding any impact of foreign currency translation
movements.
|
At actual exchange
rates
|
|
At constant
currency
|
Year ended 31 March
|
2024
|
2023
|
%
|
|
2024
|
2023
|
%
|
£m
|
£m
|
change
|
|
£m
|
£m
|
change
|
UK Electricity
Transmission
|
1,912
|
1,301
|
47
|
|
1,912
|
1,301
|
47
|
UK Electricity
Distribution
|
1,247
|
1,220
|
2
|
|
1,247
|
1,220
|
2
|
UK Electricity System
Operator
|
85
|
108
|
(21)
|
|
85
|
108
|
(21)
|
New England
|
1,673
|
1,527
|
10
|
|
1,673
|
1,470
|
14
|
New York
|
2,654
|
2,454
|
8
|
|
2,654
|
2,363
|
12
|
Capital investment (regulated networks)
|
7,571
|
6,610
|
15
|
|
7,571
|
6,462
|
17
|
National Grid Ventures
|
662
|
970
|
(32)
|
|
662
|
955
|
(31)
|
Other
|
2
|
13
|
(85)
|
|
2
|
13
|
(85)
|
Group capital investment - continuing
|
8,235
|
7,593
|
8
|
|
8,235
|
7,430
|
11
|
Discontinued operations
|
-
|
301
|
(100)
|
|
-
|
301
|
(100)
|
Group capital investment - total
|
8,235
|
7,894
|
4
|
|
8,235
|
7,731
|
7
|
Capital expenditure
Capital expenditure (for the
purposes of measuring green capex aligned to EU Taxonomy) comprises
additions to property, plant and equipment and intangible assets,
but excludes capital prepayments and equity contributions to joint
ventures and associates during the period.
|
2024
|
2023
|
£m
|
£m
|
Asset type:
|
|
|
Property, plant and
equipment
|
7,124
|
6,783
|
Non-current intangible
assets
|
481
|
578
|
Transfers from
prepayments
|
43
|
70
|
Group capital expenditure - continuing
|
7,648
|
7,431
|
Equity investments in joint
ventures and associates
|
332
|
197
|
Capital expenditure
prepayments
|
298
|
35
|
Transfers to capital expenditure
additions
|
(43)
|
(70)
|
Group capital investment - continuing
|
8,235
|
7,593
|
Net debt
See notes 11 and 12 for reconciliation
of net debt.
Funds from operations and interest cover
FFO are the cash flows generated
by the operations of the Group. Credit rating metrics, including
FFO, are used as indicators of balance sheet strength.
Year ended 31 March
|
2024
|
2023¹
|
£m
|
£m
|
Interest expense (income statement)
|
1,723
|
1,680
|
Hybrid interest reclassified as
dividend
|
(38)
|
(39)
|
Capitalised interest
|
251
|
249
|
Pensions interest
adjustment
|
9
|
11
|
Unwinding of discount on
provisions
|
(102)
|
(88)
|
Pension interest
|
94
|
85
|
Adjusted interest expense
|
1,937
|
1,898
|
Net cash inflow from operating activities
|
6,939
|
6,343
|
Interest received on financial
instruments
|
148
|
65
|
Interest paid on financial
instruments
|
(1,627)
|
(1,430)
|
Dividends received
|
176
|
190
|
Working capital
adjustment
|
49
|
(286)
|
Excess employer pension
contributions
|
27
|
116
|
Hybrid interest reclassified as
dividend
|
38
|
39
|
Add back accretions
|
208
|
483
|
Difference in net interest expense
in income statement to cash flow
|
(253)
|
(395)
|
Difference in current tax in
income statement to cash flow
|
(24)
|
(281)
|
Cash flow from discontinued
operations
|
-
|
555
|
Funds from operations (FFO)
|
5,681
|
5,399
|
FFO interest cover ((FFO + adjusted interest
expense)/adjusted interest expense)
|
3.9x
|
3.8x
|
1. Numbers for 2023 reflect the calculations for the total Group as
based on the published accounts for that year.
Retained cash flow/adjusted net debt
RCF/adjusted net debt is one of
two credit metrics that we monitor in order to ensure the Group is
generating sufficient cash to service its debts, consistent with
maintaining a strong investment-grade credit rating. We calculate
RCF/adjusted net debt applying the methodology used by Moody's, as
this is one of the most constrained calculations of credit
worthiness. The net debt denominator includes adjustments to take
account of the equity component of hybrid debt.
Year ended 31 March
|
2024
|
20231
|
£m
|
£m
|
Funds from operations (FFO)
|
5,681
|
5,399
|
Hybrid interest reclassified as
dividend
|
(38)
|
(39)
|
Ordinary dividends paid to
shareholders
|
(1,718)
|
(1,607)
|
RCF
|
3,925
|
3,753
|
Borrowings
|
47,072
|
42,985
|
Less:
|
|
|
50% hybrid debt
|
(1,034)
|
(1,049)
|
Cash and cash
equivalents
|
(578)
|
(126)
|
Financial and other
investments
|
(3,084)
|
(1,764)
|
Underfunded pension
obligations
|
266
|
292
|
Borrowings in held for
sale
|
13
|
-
|
Adjusted net debt (includes pension
deficit)
|
42,655
|
40,338
|
RCF/adjusted net debt
|
9.2%
|
9.3%
|
1. Numbers for 2023 reflect
the calculations for the total Group as based on the published
accounts for that year.
Regulatory performance measures
Regulated financial performance - UK
Regulatory financial performance
is a pre-interest and tax measure, starting at segmental operating
profit and making adjustments (such as the elimination of all
pass-through items included in revenue allowances and timing) to
approximate regulatory profit for the UK regulated activities. This
measure provides a bridge for investors between a well-understood
and comparable IFRS starting point and through the key adjustments
required to approximate regulatory profit. This measure also
provides the foundation to calculate Group RoE.
Under the UK RIIO regulatory
arrangements the Company is incentivised to deliver efficiencies
against cost targets set by the regulator. In total, these targets
are set in terms of a regulatory definition of combined total
operating and capital expenditure, also termed 'totex'. The
definition of totex differs from the total combined regulated
controllable operating costs and regulated capital expenditure as
reported in this statement according to IFRS accounting principles.
Key differences are capitalised interest, capital contributions,
exceptional costs, costs covered by other regulatory arrangements
and unregulated costs.
For the reasons noted above, the
table below shows the principal differences between the IFRS
operating profit and the regulated financial performance, but is
not a formal reconciliation to an equivalent IFRS
measure.
UK
Electricity Transmission
Year ended 31 March
|
2024
|
2023
|
£m
|
£m
|
Adjusted operating
profit
|
1,677
|
995
|
Movement in regulatory
'IOUs'
|
(363)
|
107
|
UK regulatory notional deferred
taxation adjustment
|
219
|
73
|
RAV indexation - 2% CPIH long-run
inflation
|
343
|
309
|
Regulatory vs IFRS depreciation
difference
|
(553)
|
(536)
|
Fast money/other
|
(119)
|
37
|
Pensions
|
(2)
|
(44)
|
Performance RAV created
|
68
|
68
|
Regulated financial performance
|
1,270
|
1,009
|
UK Electricity Distribution
Year ended 31 March
|
2024
|
2023
|
£m
|
£m
|
Adjusted operating
profit
|
993
|
1,091
|
Less non-regulated
profits
|
(8)
|
(46)
|
Movement in regulatory
'IOUs'
|
158
|
88
|
UK regulatory notional deferred
taxation adjustment
|
38
|
65
|
RAV indexation - 2% CPIH (2023: 3%
RPI) long-run inflation
|
216
|
277
|
Regulatory vs IFRS depreciation
difference
|
(555)
|
(506)
|
Fast money/other
|
(36)
|
11
|
Pensions
|
-
|
(157)
|
Performance RAV created
|
50
|
22
|
Regulated financial performance
|
856
|
845
|
UK Electricity System Operator
Year ended 31 March
|
2024
|
2023
|
£m
|
£m
|
Adjusted operating
profit
|
880
|
238
|
Movement in regulatory
'IOUs'
|
(800)
|
(223)
|
UK regulatory notional deferred
taxation adjustment
|
2
|
(4)
|
RAV indexation - 2% CPIH long-run
inflation
|
7
|
7
|
Regulatory vs IFRS depreciation
difference
|
(19)
|
32
|
Fast money/other
|
(29)
|
(2)
|
Pensions
|
-
|
(11)
|
Performance RAV created
|
-
|
-
|
Regulated financial performance
|
41
|
37
|
UK Gas Transmission
Year ended 31 March
|
2024
|
2023
|
£m
|
£m
|
Adjusted operating
profit
|
-
|
714
|
Less non-regulated
profits
|
-
|
(129)
|
Movement in regulatory
'IOUs'
|
-
|
(24)
|
UK regulatory notional deferred
taxation adjustment
|
-
|
28
|
RAV indexation - 2% CPIH long-run
inflation
|
-
|
109
|
Regulatory vs IFRS depreciation
difference
|
-
|
(331)
|
Fast money/other
|
-
|
(1)
|
Pensions
|
-
|
(9)
|
Performance RAV created
|
-
|
5
|
Regulated financial performance
|
-
|
362
|
Regulated financial performance - US
New England
Year ended 31 March
|
2024
|
2023
|
£m
|
£m
|
Adjusted operating
profit
|
643
|
708
|
Major storm costs
|
90
|
72
|
Timing
|
69
|
39
|
Depreciation
adjustment1
|
-
|
(18)
|
US GAAP pension
adjustment
|
29
|
34
|
Regulated financial performance
|
831
|
835
|
1. The
depreciation adjustment relates to the impact of the cessation of
depreciation for NECO under IFRS following reclassification as held
for sale.
New York
Year ended 31 March
|
2024
|
2023
|
£m
|
£m
|
Adjusted operating
profit
|
860
|
741
|
Provision for bad and doubtful
debts (COVID-19), net of recoveries¹
|
(34)
|
(21)
|
Major storm costs
|
136
|
186
|
Timing
|
20
|
(53)
|
US GAAP pension
adjustment
|
42
|
11
|
Regulated financial performance
|
1,024
|
864
|
1. New
York financial performance includes an adjustment reflecting our
expectation for future recovery of COVID-19 related provisions for
bad and doubtful debts.
Total regulated financial performance
Year ended 31 March
|
2024
|
2023
|
£m
|
£m
|
UK Electricity
Transmission
|
1,270
|
1,009
|
UK Electricity
Distribution
|
856
|
845
|
UK Electricity System
Operator
|
41
|
37
|
UK Gas Transmission
|
-
|
362
|
New England
|
831
|
835
|
New York
|
1,024
|
864
|
Total regulated financial performance
|
4,022
|
3,952
|
New England and New York timing, major storms costs and
movement in UK regulatory 'IOUs' -
Revenue related to performance in one year may be recovered in
later years. Where revenue received or receivable exceeds the
maximum amount permitted by our regulatory agreement, adjustments
will be made to future prices to reflect this over-recovery. No
liability is recognised under IFRS, as such an adjustment to future
prices relates to the provision of future services. Similarly, no
asset is recognised under IFRS where a regulatory agreement permits
adjustments to be made to future prices in respect of an
under-recovery. In the UK, this is calculated as the movement in
other regulated assets and liabilities.
Performance RAV - UK
performance efficiencies are in part remunerated by the creation of
additional RAV which is expected to result in future earnings under
regulatory arrangements. This is calculated as in-year totex
outperformance multiplied by the appropriate regulatory
capitalisation ratio and multiplied by the retained company
incentive sharing ratio.
Pension adjustment - Cash
payments against pension deficits in the UK are recoverable under
regulatory contracts. In US regulated operations, US GAAP pension
charges are generally recoverable through rates. Revenue recoveries
are recognised under IFRS but payments are not charged against IFRS
operating profits in the year. In the UK this is calculated as cash
payments against the regulatory proportion of pension deficits in
the UK regulated business, whereas in the US it is the difference
between IFRS and US GAAP pension charges.
2% CPIH and 3% RPI RAV indexation - Future UK revenues are expected to be set using an asset
base adjusted for inflation. This is calculated as UK RAV
multiplied by 2% long-run CPIH inflation assumption under RIIO-2
and a 3% long-run RPI inflation assumption under RIIO-1.
UK regulatory notional deferred taxation
adjustment - Future UK revenues are
expected to recover cash taxation cost including the unwinding
of deferred taxation balances created in the
current year. This is the difference between: (1) IFRS underlying
EBITDA less other regulatory adjustments; and (2) IFRS
underlying EBITDA less other regulatory adjustments less current
taxation (adjusted for interest tax shield) then grossed up at full
UK statutory tax rate.
Regulatory depreciation - US
and UK regulated revenues include allowance for a return of
regulatory capital in accordance with regulatory assumed asset
lives. This return does not form part of regulatory
profit.
Fast/slow money adjustment -
The regulatory remuneration of costs incurred is split between
in-year revenue allowances and the creation of additional RAV. This
does not align with the classification of costs as operating costs
and fixed asset additions under IFRS accounting principles. This is
calculated as the difference between IFRS classification of costs
as operating costs or fixed asset additions and the regulatory
classification.
Regulated asset base
The regulated asset base is a
regulatory construct, based on predetermined principles not based
on IFRS. It effectively represents the invested capital on which we
are authorised to earn a cash return. By investing efficiently in
our networks, we add to our regulated asset base over the long
term, and this in turn contributes to delivering shareholder value.
Our regulated asset base comprises our regulatory asset value in
the UK plus our rate base in the US.
Maintaining efficient investment
in our regulated asset base ensures we are well positioned to
provide consistently high levels of service to our customers and
increases our revenue allowances in future years. While we have no
specific target, our overall aim is to achieve around 10% growth in
regulated asset base each year through continued investment in our
networks in both the UK and US.
In the UK, the way in which our
transactions impact RAV is driven by principles set out by Ofgem.
In a number of key areas these principles differ from the
requirements of IFRS, including areas such as additions and the
basis for depreciation. Further, our UK RAV is adjusted annually
for inflation. RAV in each of our retained UK businesses has
evolved over the period since privatisation in 1990 and, as a
result, historical differences between the initial determination of
RAV and balances reported under UK GAAP at that time still persist.
In the case of UK ED, differences arise as the result of
acquisition fair value adjustments (where PP&E at acquisition
has been valued above RAV). Due to the above, substantial
differences exist in the measurement bases between RAV and an IFRS
balance metric, and therefore it is not possible to provide a
meaningful reconciliation between the two.
In the US, rate base is a
regulatory measure determined for each of our main US operating
companies. It represents the value of property and other assets or
liabilities on which we are permitted to earn a rate of return, as
set out by the regulatory authorities for each jurisdiction. The
calculations are based on the applicable regulatory agreements for
each jurisdiction and include the allowable elements of assets and
liabilities from our US companies. For this reason, it is not
practical to provide a meaningful reconciliation from the US rate
base to an equivalent IFRS measure. However, we include the
calculation below.
'Total regulated and other
balances' for our UK regulated businesses include the under- or
over-recovery of allowances that those businesses target to collect
in any year, which are based on the regulator's forecasts for that
year. Under the UK price control arrangements, revenues will be
adjusted in future years to take account of actual levels of
collected revenue, costs and outputs delivered when they differ
from those regulatory forecasts. In the US, other regulatory assets
and liabilities include regulatory assets and liabilities which are
not included in the definition of rate base, including working
capital where appropriate.
'Total regulated and other
balances' for NGV and other businesses includes assets and
liabilities as measured under IFRS, but excludes certain assets and
liabilities such as pensions, tax, net debt and goodwill. This
included a £101 million deferred balance for separation and
transaction costs incurred in 2021/22 related to the sale of NECO
and UK Gas Transmission, which has been released to offset against
the proceeds received on disposal of these businesses in
2022/23.
|
RAV, rate base or other
business balances
|
|
Total
regulated
and other
balances
|
As at 31 March
(£m at constant currency)
|
2024
|
2023¹
|
|
20242,3
|
20231,2,3
|
UK Electricity
Transmission
|
18,462
|
17,150
|
|
17,940
|
17,009
|
UK Electricity
Distribution
|
11,469
|
10,787
|
|
11,611
|
10,776
|
UK Electricity System
Operator
|
425
|
355
|
|
(452)
|
277
|
New England
|
8,710
|
7,728
|
|
10,565
|
9,852
|
New York
|
16,387
|
14,789
|
|
17,425
|
15,818
|
Total regulated
|
55,453
|
50,809
|
|
57,089
|
53,732
|
National Grid Ventures and other
business balances
|
7,593
|
6,639
|
|
7,213
|
6,735
|
Total Group regulated and other balances
|
63,046
|
57,448
|
|
64,302
|
60,467
|
1. Figures
relating to prior periods have, where appropriate, been
re-presented at constant currency, for segmental reorganisation,
opening balance adjustments following the completion of the UK
regulatory reporting pack process and finalisation of US
balances.
2. Includes totex-related regulatory IOUs of £514 million (2023:
£502 million) and over-recovered timing balances of £744 million
(2023: £246 million under-recovered).
3. Includes assets for construction work-in-progress of £2,068
million (2023: £2,267 million), other regulatory assets related to
timing and other cost deferrals of £1,279 million (2023: £754
million) and net working capital liabilities of £455 million (2023:
£133 million net working capital assets).
New England and New York rate base
and other total regulated and other balances for 31 March 2023 have
been re-presented in the table above at constant currency. At
actual currency the values were £10.1 billion and £16.2 billion
respectively.
Group return on equity (RoE)
Group RoE provides investors with
a view of the performance of the Group as a whole compared with the
amounts invested by the Group in assets attributable to equity
shareholders. It is the ratio of our regulatory financial
performance to our measure of equity investment in assets. It
therefore reflects the regulated activities as well as the
contribution from our non-regulated businesses together with joint
ventures and non-controlling interests.
We use Group RoE to measure our
performance in generating value for our shareholders, and targets
for Group RoE are included in the incentive mechanisms for
executive remuneration within both the APP and LTPP
schemes.
Group RoE is underpinned by our
regulated asset base. For the reasons noted above, no
reconciliation to IFRS has been presented, as we do not believe it
would be practical. However, we do include the calculations
below.
Calculation: Regulatory
financial performance including a long-run inflation assumption (3%
RPI for RIIO-1; 2% CPIH for RIIO-2), less adjusted interest and
adjusted taxation divided by equity investment in
assets:
• adjusted
interest removes accretions above long-run inflation rates,
interest on pensions, capitalised interest in regulated operations
and unwind of discount rate on provisions;
• adjusted
taxation adjusts the Group taxation charge (before exceptional
items and remeasurements) for differences between IFRS profit
before tax and regulated financial performance less adjusted
interest; and
• equity
investment in assets is calculated as the total opening UK
regulatory asset value, the total opening US rate base plus
goodwill plus opening net book value of National Grid Ventures and
other activities (excluding certain amounts such as pensions, tax
and commodities) and our share of joint ventures and associates,
minus opening net debt as reported under IFRS restated to the
weighted average sterling-dollar exchange rate for the
year.
Group RoE
Year ended 31 March
|
2024
|
2023
|
£m
|
£m
|
Regulated financial
performance
|
4,022
|
3,952
|
Operating profit of other
activities - continuing operations
|
467
|
595
|
Operating profit of other
activities - discontinued operations
|
-
|
113
|
Group financial performance
|
4,489
|
4,660
|
Share of post-tax results of joint
ventures and associates1
|
174
|
202
|
Non-controlling
interests
|
(1)
|
-
|
Adjusted total Group interest
charge (including discontinued)
|
(1,613)
|
(1,546)
|
Total Group tax charge (including
discontinued)
|
(983)
|
(734)
|
Tax on adjustments
|
270
|
7
|
Total Group financial performance
after interest and tax
|
2,336
|
2,589
|
Opening rate base/RAV
|
50,806
|
55,558
|
Opening other balances
|
7,973
|
5,410
|
Opening goodwill
|
11,444
|
12,253
|
Opening strategic pivot (asset
swap) adjustment2
|
(3,464)
|
-
|
Opening capital
employed
|
66,759
|
73,221
|
Opening net debt
|
(40,505)
|
(49,691)
|
Opening equity
|
26,254
|
23,530
|
Group RoE
|
8.9%
|
11.0%
|
1. 2024
includes £73 million (2023: £12 million) in respect of the Group's
retained minority interest in National Gas
Transmission.
2. Following the completion of our strategic pivot, regulatory
gains on the disposal of NECO and UK Gas Transmission (based on the
proceeds received less the RAV, rate base and other related
balances used to calculate the Group RoE denominator) have been
deducted against the IFRS goodwill recognised on the acquisition of
National Grid Electricity Distribution in calculating the total
denominator used to calculate Group RoE. For this metric, the
purchase of NGED and the sales of both NECO and UK Gas Transmission
are deemed to be linked transactions and so the opening equity
reflects the impact of these as asset swaps rather than as
unrelated transactions.
UK and US regulated RoE
Year ended 31 March
|
Regulatory
Debt:
Equity
assumption
|
|
Achieved
Return
on Equity
|
|
Base or
Allowed
Return on
Equity
|
|
2024
%
|
2023
%
|
|
2024
%
|
2023
%
|
UK Electricity
Transmission
|
55/45
|
|
8.0
|
7.5
|
|
7.0
|
6.3
|
UK Electricity
Distribution
|
60/40
|
|
8.5
|
13.2
|
|
7.4
|
9.6
|
UK Gas Transmission
|
60/40
|
|
-
|
7.8
|
|
-
|
6.6
|
New England
|
Avg. 45/55
|
|
9.2
|
8.3
|
|
9.9
|
9.9
|
New York
|
Avg. 52/48
|
|
8.5
|
8.6
|
|
8.9
|
8.9
|
UK businesses' regulated RoEs
UK regulated businesses' RoEs are
a measure of how the businesses are performing against the
assumptions used by our UK regulator. These returns are calculated
using the assumption that the businesses are financed in line with
the regulatory adjudicated capital structure, at the cost of debt
assumed by the regulator, and that inflation is equal to a long-run
assumption of 3% RPI under RIIO-1 and 2% CPIH under RIIO-2. They
are calculated by dividing elements of out/under-performance versus
the regulatory contract (i.e. regulated financial performance
disclosed above) by the average equity RAV in line with the
regulatory assumed capital structure and adding to the base allowed
RoE.
These are important measures of UK
regulated businesses' performance, and our operational strategy
continues to focus on these metrics. These measures can be used to
determine how we are performing under the RIIO framework and also
help investors to compare our performance with similarly regulated
UK entities. Reflecting the importance of these metrics, they are
also key components of the APP scheme.
The respective businesses' UK RoEs
are underpinned by their RAVs. For the reasons noted above, no
reconciliation to IFRS has been presented, as we do not believe it
would be practical.
US businesses' regulated RoEs
US regulated businesses' RoEs are
a measure of how the businesses are performing against the
assumptions used by the US regulators. This US operational return
measure is calculated using the assumption that the businesses are
financed in line with the regulatory adjudicated capital structure
and allowed cost of debt. The returns are divided by the average
rate base (or where a reported rate base is not available, an
estimate based on rate base calculations used in previous rate
filings) multiplied by the adjudicated equity portion in the
regulatory adjudicated capital structure.
These are important measures of
our New England and New York regulated businesses' performance, and
our operational strategy continues to focus on these metrics. This
measure can be used to determine how we are performing and also
helps investors compare our performance with similarly regulated US
entities. Reflecting the importance of these metrics, they are also
key components of the APP scheme.
The New England and New York
businesses' returns are based on a calculation which gives
proportionately more weighting to those businesses which have a
greater rate base. For the reasons noted above, no reconciliations
to IFRS for the RoE measures have been presented, as we do not
believe it would be practical to reconcile our IFRS balance sheet
to the equity base.
The table below shows the
principal differences between the IFRS result of the New England
and New York segments, and the 'returns' used to derive their
respective US jurisdictional RoEs. In outlining these differences,
we also include the aggregated business results under US GAAP for
New England and New York jurisdictions.
In respect of 2022/23, this
measure is the aggregate operating profit of our US OpCo entities'
publicly available financial statements prepared under US GAAP for
the New England and New York jurisdictions respectively. For
2023/24, this measure represents our current estimate, since local
financial statements have yet to be prepared.
|
2024
|
2023
|
|
£m
|
£m
|
Underlying IFRS operating profit for New England
segment
|
802
|
819
|
Underlying IFRS operating profit for New York
segment
|
1,016
|
874
|
Weighted average £/$ exchange
rate
|
$1.262
|
$1.216
|
|
New
England
|
|
New York
|
|
2024
|
2023
|
|
2024
|
2023
|
|
$m
|
$m
|
|
$m
|
$m
|
Underlying IFRS operating profit for US
segments
|
1,013
|
995
|
|
1,283
|
1,060
|
Adjustments to convert to US GAAP as applied in our US OpCo
entities
|
|
|
|
|
|
Adjustment in respect of customer
contributions
|
(29)
|
(26)
|
|
(37)
|
(34)
|
Pension accounting
differences1
|
43
|
39
|
|
63
|
12
|
Environmental charges recorded
under US GAAP
|
10
|
(3)
|
|
21
|
58
|
Storm costs and recoveries
recorded under US GAAP
|
(56)
|
(54)
|
|
6
|
(39)
|
Removal of partial year Rhode
Island in year of disposal
|
-
|
(65)
|
|
-
|
-
|
Other regulatory deferrals,
amortisation and other items
|
(139)
|
(217)
|
|
(155)
|
86
|
Results for US regulated OpCo entities, aggregated under US
GAAP2
|
842
|
669
|
|
1,181
|
1,143
|
Adjustments to determine regulatory operating profit used in
US RoE
|
|
|
|
|
|
Adjustment for COVID-19-related
provision for bad and doubtful debts3
|
-
|
-
|
|
-
|
(171)
|
Net other
|
14
|
113
|
|
151
|
171
|
Regulatory operating profit
|
856
|
782
|
|
1,332
|
1,143
|
Pensions1
|
60
|
(17)
|
|
159
|
219
|
Regulatory interest
charge
|
(199)
|
(176)
|
|
(374)
|
(339)
|
Regulatory tax charge
|
(196)
|
(159)
|
|
(305)
|
(279)
|
Regulatory earnings used to determine US
RoE
|
521
|
430
|
|
812
|
744
|
1. Following a change in US GAAP accounting rules, an element of
the pensions charge is reported outside operating profit with
effect from 2019.
2. Based
on US GAAP accounting policies as applied by our US regulated OpCo
entities.
3. US RoE
included an adjustment reflecting our expectation for future
recovery of COVID-19-related bad and doubtful debt costs in
2020/21. The adjustment is being unwound as regulated assets are
recognised in respect of the same debts in our US GAAP
accounts.
|
New
England
|
|
New York
|
|
2024
|
2023
|
|
2024
|
2023
|
|
$m
|
$m
|
|
$m
|
$m
|
US equity base (average for the
year)
|
5,645
|
5,155
|
|
9,517
|
8,670
|
US jurisdiction RoE
|
9.2%
|
8.3%
|
|
8.5%
|
8.6%
|
Asset growth, Value Added, Value Added per share and Value
Growth
To help readers' assessment of the
financial position of the Group, the table below shows an
aggregated position for the Group, as viewed from a regulatory
perspective. The asset growth and Value Added measures included in
the table below are calculated in part from financial information
used to derive measures sent to and used by our regulators in the
UK and US, and accordingly inform certain of the Group's regulatory
performance measures, but are not derived from, and cannot be
reconciled to, IFRS. These alternative performance measures include
regulatory assets and liabilities and certain IFRS assets and
liabilities of businesses that were classified as held for sale
under IFRS 5.
Asset growth is the annual
percentage increase in our RAV and rate base and other
non-regulated business balances (including our investments in NGV,
UK property and other assets and US other assets) calculated at
constant currency.
Value Added is a measure that
reflects the value to shareholders of our cash dividend and the
growth in National Grid's regulated and non-regulated assets (as
measured in our regulated asset base, for regulated entities), and
corresponding growth in net debt. It is a key metric used to
measure our performance and underpins our approach to sustainable
decision making and long-term management incentive
arrangements.
Value Added is derived using our
regulated asset base and, as such, it is not practical to provide a
meaningful reconciliation from this measure to an equivalent IFRS
measure due to the reasons set out for our regulated asset
base. The calculation is set out on page
101.
Value Added per share is
calculated by dividing Value Added by the weighted average number
of shares (3,692 million) set out in note 7.
Value Growth of 9.5%
(2023: 12.4%) is derived
from Value Added by adjusting Value Added to normalise for our
estimate of the long-run inflation rate (3% RPI for RIIO-1,
2% CPIH for RIIO-2) on RAV indexation and index-linked debt
interest accretions. In 2024, the numerator for Value Growth was
£2,503 million (2023:
£2,902 million). The denominator is Group equity as used in the
Group RoE calculation, adjusted for foreign exchange
movements.
The tables below include related
balances and net debt up to the dates of disposal for NECO (25 May
2022) and the UK Gas Transmission and Metering (31 January 2023),
despite being reclassified as held for sale under IFRS.
|
2023/24
|
£m constant currency
|
31 March
2024
|
31 March
2023
|
Value
Added
|
Change
|
UK RAV
|
30,356
|
28,292
|
2,064
|
7%
|
US rate base
|
25,097
|
22,517
|
2,580
|
11%
|
Total RAV and rate base
|
55,453
|
50,809
|
4,644
|
9%
|
National Grid Ventures and
other
|
7,593
|
6,639
|
954
|
14%
|
Total assets (used to calculate asset
growth)
|
63,046
|
57,448
|
5,598
|
10%
|
UK other regulated
balances1
|
(1,257)
|
(230)
|
(1,027)
|
|
US other regulated
balances2,3
|
3,489
|
3,153
|
791
|
|
Other balances
|
(976)
|
96
|
(1,072)
|
|
Total assets and other balances
|
64,302
|
60,467
|
4,290
|
|
|
|
|
|
|
Cash dividends
|
|
|
1,718
|
|
Adjusted net debt
movement
|
|
|
(3,077)
|
|
Value Added
|
|
|
2,931
|
|
1. Includes totex-related regulatory IOUs of £514 million,
under-recovered timing balances of £744 million.
2. Change
in year excludes a £455 million reduction in US other regulated
balances related to tax assets for net operating losses that were
utilised in 2023/24 to offset tax due on disposal of NECO, which
was sold in 2022/23.
3. Includes assets for construction work-in-progress of £2,068
million, other regulatory assets related to timing and other cost
deferrals of £1,279 million and net
working capital liabilities of £455 million.
|
2022/23
|
£m constant currency
|
31 March
2023
|
Disposal
of
NECO
and UK
Gas Transmission1
|
31 March
2022
|
Value
Added
|
Change
|
UK RAV
|
28,205
|
(6,989)
|
31,577
|
3,617
|
11%
|
US rate base
|
23,038
|
(2,476)
|
23,628
|
1,886
|
8%
|
Total RAV and rate base
|
51,243
|
(9,465)
|
55,205
|
5,503
|
10%
|
National Grid Ventures and
other
|
6,604
|
(143)
|
5,374
|
1,373
|
26%
|
Total assets (used to calculate asset
growth)
|
57,847
|
(9,608)
|
60,579
|
6,876
|
11%
|
UK other regulated
balances2
|
(255)
|
(141)
|
75
|
(189)
|
|
US other regulated
balances3
|
3,226
|
(250)
|
2,792
|
684
|
|
Other balances
|
108
|
1,239
|
(808)
|
(323)
|
|
Total assets and other balances
|
60,926
|
(8,760)
|
62,638
|
7,048
|
|
|
|
|
|
|
|
Cash dividends
|
|
|
|
1,607
|
|
Adjusted net debt
movement1
|
|
|
|
(3,848)
|
|
Value Added
|
|
|
|
4,807
|
|
1. The
disposal of NECO on 25 May 2022 and UK Gas Transmission on 31
January 2023 resulted in an increase in assets which has been
excluded from the total change in the year used to calculate asset
growth and Value Added for 2022/23. The decrease in RAV and rate
base and other regulated balances relating to the businesses
disposed along with the net debt disposed and cash proceeds
received (plus associated transaction costs) are excluded from the
total adjusted net debt movement in the year used to calculate
asset growth and Value Added.
2. Includes totex-related regulatory IOUs of £502 million,
under-recovered timing balances of £246 million.
3. Includes assets for construction work-in-progress of £2,319
million, other regulatory assets related to timing and other cost
deferrals of £771 million and net working capital assets of £136
million.
Figures relating to prior periods
have, where appropriate, been re-presented at constant currency,
for opening balance adjustments following the completion of the UK
regulatory reporting pack process and finalisation of US
balances.
Regulatory gearing
Regulatory gearing is a measure of
how much of our investment in RAV and rate base and other elements
of our invested capital (including our investments in NGV, UK
property and UK other assets and US other assets) is funded through
debt. Comparative amounts as at 31 March 2023 are presented at
historical exchange rates and have not been restated for opening
balance adjustments.
As at 31 March
|
2024
|
2023
|
|
£m
|
£m
|
UK RAV
|
30,356
|
28,205
|
|
US rate base
|
25,097
|
23,038
|
|
Other invested capital included in
gearing calculation
|
7,593
|
6,604
|
|
Total assets included in gearing
calculation
|
63,046
|
57,847
|
|
Net debt (including 100% of hybrid
debt and held for sale)
|
(43,584)
|
(40,973)
|
change
|
Group gearing (based on 100% of
net debt including held for sale)
|
69%
|
71%
|
(2)%
pts
|
Group gearing (excluding 50% of
hybrid debt from net debt) including held for sale
|
67%
|
69%
|
(2)%
pts
|
[1]For
further information, please refer to our announcement made today,
"National Grid plc - 7 for 24 fully underwritten Rights Issue to
raise c.£7 billion;
New 5-year investment framework for FY25-29; Deliver £60bn
investment in energy infrastructure."
[2]Excluding two months' contribution from Narragansett Electric
Company (NECO) in 2022/23.
[3]If
approved, this would be in addition to the capital investment
requested under the MECO filing.
[4]KPI
relates to capital expenditure as defined in Article 8 of the EU
Taxonomy regulation. It does not include 'equity investments to
joint ventures and associates' or 'capital expenditure
prepayments'.
[5]Employee and contractor lost time injury frequency rate per
100,000 hours worked.
[6]Excluding Narragansett Electric Company from
2022/23.
[7]Our
previous SBT was to reduce Scope 1 and 2 emissions by 50% by 2030
from a 2015/16 baseline.
[8]KPI
relates to capital expenditure as defined in Article 8 of the EU
Taxonomy regulation. It does not include 'equity investments to
joint ventures and associates' or 'capital expenditure
prepayments'.
[9]A
diverse employee is defined as a colleague who identifies as a
woman, as a person with a disability, part of the LGBTQ+ community
or from an under-represented ethnic/racially diverse
background.