National Grid plc (LON:NG), a leading energy transmission and distribution company, has announced its Half-Year results for the period ended 30 September 2023.
John Pettigrew, Chief Executive, said:
“Today we’ve announced solid results, and reconfirmed our full-year guidance, as we continue to enhance critical energy infrastructure across the communities we serve.
This financial performance reflects our role at the heart of the energy transition and a new phase of capital delivery that is firmly underway. Capital investment in our regulated networks reached a record £3.5 billion in this half year, as we step up our investment in 17 major onshore and offshore transmission projects in the UK. In the US, we’re now progressing a number of major transmission projects to unlock renewable generation and upgrade infrastructure across our jurisdictions. And we’re delivering this critical investment at the same time as ensuring affordability for our customers, having now exceeded our £400 million efficiency savings target earlier than planned.
In recognition of this strong progress, we are today updating our 2020/21 to 2025/26 five-year financial framework, which will modestly enhance our asset and EPS growth within our existing ranges. And whilst we’re pleased to see momentum around policy reform on both sides of the Atlantic, we now look forward to seeing announcements and consultations translated into decisions and action in order to deliver the energy transition. We’re ready to meet the opportunities, and are set up to tackle the challenges ahead, to deliver a clean, fair and affordable energy future for all.”
| Financial Summary Six months ended 30 September: continuing operations1 | |||||||||
| Statutory results2 | Underlying3 | ||||||||
| Unaudited | 2023 | 2022 | % change | 2023 | 2022 | % change | |||
| Operating profit (£m) | 1,985 | 2,239 | (11%) | 1,796 | 2,117 | (15%) | |||
| Profit before tax (£m) | 1,371 | 1,666 | (18%) | 1,144 | 1,455 | (21%) | |||
| Earnings per share (p) | 28.8 | 33.4 | (14%) | 23.8 | 32.4 | (27%) | |||
| Dividend per share (p) | 19.40 | 17.84 | 9% | ||||||
| Unaudited | 2023 | 2022 | % change | ||||||
| Capital investment4 (£m) | 3,868 | 3,883 | 0% | ||||||
1. Excluding UK Gas Transmission which is held as a discontinued operation. Amounts above are presented at actual currency.
2. For statutory EPS and profit before tax in 2022, comparative amounts have been re-presented to reflect the classification of the Further Acquisition Agreement (the FAA option) as held for sale and within discontinued operations.
3. ‘Underlying’ represents statutory results from continuing operations, but excluding exceptional items, remeasurements and timing. Further detail and definitions for all alternative performance measures (including constant currency) are provided on page 63.
4. Capital investment, an Alternative Performance Measure (APM), represents statutory capital expenditure of £3,706 million (2022: £3,717 million) plus contributions to joint ventures and associates and NG Partners additions. Further detail and reconciliations are provided on page 63.
Highlights
Solid financial delivery across the half year
■ Solid underlying operating profit on a continuing basis of £1.8 billion. Whilst this performance is in line with expectations, non-recurring items reported in 2022/23 explain why underlying operating profit is down 15% at actual exchange rates (14% at constant currency) versus the prior period. These items in the prior half year included: St William property land sales (£201 million); a two month contribution from the Narragansett Electric Company (NECO) (£53 million); and insurance proceeds received at our IFA1 interconnector following a fire in September 2021 (£70 million). Underlying EPS for continuing operations of 23.8p, down from 32.4p in the prior period, in line with our expectation of underlying EPS to have a greater weighting to the second half.
■ Statutory operating profit down 11% to £2.0 billion, driven principally by gains on NECO and St William land sales in the prior period, partly offset by favourable timing. Statutory EPS of 28.8p, down from 33.4p in the prior period.
■ Interim dividend of 19.40p/ordinary share* in line with policy (17.84p/ordinary share in the prior period).
* This represents 35% of the total dividend per share of 55.44p in respect of the last financial year to 31 March 2023, in line with the Group’s dividend policy.
Highlights continued
Record regulatory capital investment driving the energy transition
■ Capital investment of £3.9 billion for continuing operations, £70 million higher than the prior period at constant currency (£15 million lower at actual exchange rates). Of this total, capital investment in our regulated networks[1] reached a record £3.5 billion, up 10% on the prior period at constant currency (7% at actual exchange rates).
■ Group capital investment was principally driven by higher connections spend and 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, such as our Smart Path Connect project; higher asset condition and Grid Modernization spend in New England; partially offset by lower investment in National Grid Ventures (NGV) compared to the prior period due to lower spend on the IFA1 Sellindge converter station rebuild, Isle of Grain expansion and Viking interconnector as these projects near completion.
Good, early progress on ASTI projects
■ Welcomed Ofgem’s decision to place 17 ASTI projects into our UK Electricity Transmission operating licence.
■ Signed JVs with SP Transmission plc (ScottishPower) for Eastern Green Link 1 in August, and with Scottish Hydro Electric Transmission plc (SSE) for Eastern Green Link 2 in June; selected suppliers for converter stations and cables at the Eastern Green Links 1 and 2 offshore projects, received planning consents on the English side of the links.
■ Launched the procurement process for the enterprise model to deliver the majority of our onshore projects.
Continued capital re-allocation from National Gas Transmission
■ Agreed to sell a further 20% equity interest in National Gas Transmission to the consortium led by Macquarie Asset Management and British Columbia Investment Management Corporation, 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.
Strong regulatory progress underpinning future growth
■ Welcomed the Energy Act 2023 receiving Royal Assent and passing into UK legislation.
■ Published our ‘Delivering for 2035’ policy paper, outlining five priority areas where action is required by the UK government and Ofgem to ensure networks can play their part in decarbonising the power sector by 2035.
■ Welcomed the Electricity Networks Commissioner’s (ENC) report and its recommendations for a strategic spatial energy plan reducing timelines on transmission infrastructure delivery.
■ Began the first year of new price controls under RIIO-ED2, running for five years until 31 March 2028.
■ Planning to move forward in settlement negotiations with the New York Public Service Commission (PSC) for new rates at KEDNY-KEDLI, hoping to reach a Joint Proposal in the first quarter of calendar year 2024.
■ Filed 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 (not part of any rate order we currently have in Massachusetts).
■ Community Offshore Wind JV successful in New York’s offshore wind solicitation with a provisional offtake award of 1.3 GW.
■ 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.
■ Our Twin States Clean Energy Link, a 1.2 GW transmission project, selected by US Department of Energy (DOE) to move to the next stage of negotiation under the DOE’s Transmission Facilitation Program.
Support for our communities and customers
■ Working to return £200 million of interconnector revenues to UK consumers that we announced in May 2022, and the further £100 million that we announced in May 2023.
■ As part of our two-year winter support fund we announced last year, £19 million will be available to support our most vulnerable customers this coming winter.
■ Received two Edison Electric Institute Awards in June for outstanding storm response for the two most severe winter storms in New England last year (on 23 December 2022, and 13 March 2023).
Highlights continued
Further progress on our Group efficiency programme and synergies
■ Achieved a further £53 million of Group efficiency savings during the half year[2]. This is in addition to the £373 million reported at the end of 2022/23 and takes cumulative efficiency savings under the programme to £426 million, exceeding our £400 million target that we committed to deliver by the end of 2023/24.
■ Delivered £18 million to date of our £100 million UK Electricity Distribution synergy target.
Updating our responsible business commitments
■ Published our third Responsible Business Report, setting out the progress we have made against our commitments over the last year, including a 70% reduction in Scope 1 and 2 emissions versus a 1990/91 baseline, representing a 7.5% reduction versus the prior year.
■ Updated our Responsible Business Charter to reflect our new portfolio, focused on three key pillars: environment; customers & communities; and our people.
■ Published new Science Based Targets initiative (SBTi) aligned near-term targets, including a new aim to reduce Scope 1 and 2 emissions by 60% by 2030 from a 2018/19 baseline, whilst remaining committed to reducing Scope 3 emissions by 37.5% by 2034 (achieving these targets is subject to a number of external dependencies, including policies in our jurisdictions which deliver the energy transition).
Financial Outlook and Guidance
■ 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.
■ We have today updated our Five-Year Financial Framework for the period 2020/21 to 2025/26:
■ total cumulative capital investment of around £42 billion, modestly enhancing our asset and EPS growth;
■ asset growth CAGR* of 8-10% backed by our strong balance sheet;
■ driving underlying EPS CAGR of 6-8% from the 2020/21 EPS baseline of 54.2 pence per share†;
■ credit metrics consistent with current Group rating; and
■ regulatory gearing to remain in the low 70% range.
■ Accelerated Strategic Transmission Investment (ASTI): as part of the total cumulative capital investment of around £42 billion over the 2020/21 to 2025/26 period, we expect to deliver around £3 billion of capital investment across our 17 ASTI projects. As we progress work on these projects, our current best estimate for total outturn investment (in £bn) is in the mid-to-high teens range.
■ Excluding the ESO accounting benefit as highlighted in our Forward Guidance on page 15, for 2023/24 we continue to expect underlying EPS to be modestly below 2022/23 levels following the UK government change to the capital allowances legislation from 1 April 2023. We expect this change to have a 6-7p per share impact on EPS, albeit no economic impact over the long term. Without this change, underlying EPS was forecast to grow within our 6-8% CAGR range between 2022/23 and 2023/24, assuming an exchange rate of £1:$1.20.
* Compound Annual Growth Rate
† Full-year underlying EPS (2020/21) as reported on 20 May 2021.
Results presentation webcast
An audio webcast and live Q&A with management will be held at 09:15 (BST) today. 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.
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