National Grid 2021/22 Half Year Results Statement

John Pettigrew  

Chief Executive

“I'm very pleased with the Group's financial, strategic and regulatory progress in the last six months. In the UK, we have made a strong start to the new RIIO-T2 period in electricity transmission, and we are preparing our business plan submission for WPD. In the US, we have completed a full refresh of rates across our distribution businesses. In National Grid Ventures, we commissioned the North Sea Link, our new interconnector to Norway.

Whilst delivering this strong performance, we have completed our acquisition of WPD, launched the process to sell a majority stake in National Grid Gas and the sale of our Rhode Island business is on track to be finalised by the end of our financial year, progressing our strategic pivot towards higher growth electricity, all made possible by the commitment of our people.

Looking ahead, the new organisational structure that we have implemented, alongside a major cost efficiency programme, will ensure we are in a strong position to capitalise on the significant growth opportunities ahead. Our focus will be on delivering critical and green investment to enable the decarbonisation of power, transport and heat, and lead a clean, fair and affordable energy transition across the jurisdictions we serve.”

1.  Excluding UK Gas Transmission which is held as a discontinued operation. Comparative figures have been re-presented accordingly.

2.  'Underlying' represents statutory results from continuing operations, but excluding exceptional items, remeasurements and timing. Further detail and definitions for all alternative performance measures are provided on page 56.

Highlights

Strong financial delivery

• Underlying operating profit up 47% to £1.4bn. Excluding the first time contribution of £257m from Western Power Distribution (WPD), underlying operating profit was up 20% driven by the first six months of operations at IFA2, reduced impact from COVID-19 compared to the prior year, and higher UK Electricity Transmission net revenue as we accelerate our investment for the energy transition at the start of RIIO-T2.
• Statutory operating profit up 55% to £1.5bn, including £350m of commodity mark-to-market gains.
• Underlying EPS for continuing operations up 66% to 22.8p reflecting improved performance, acquisition of WPD and non-treasury interest benefits in the first half.
• Statutory EPS of 10.5p, down 25% as a result of the remeasurement of deferred tax balances at the new UK rate of 25% which comes into effect from 1 April 2023.
• Interim dividend 17.21p/share in line with policy (17.00p/share in the prior period).

Significant capital investment

• Capital investment of £2.8bn for continuing operations, up 15% principally through WPD capex, and higher UK Electricity Transmission, partially offset by lower capital investment in NGV as our £350m IFA2 interconnector became operational.
• Work completed on the 1,400MW North Sea Link (NSL) to Norway, following our £620m investment.

Highlights continued

Strategic pivot towards higher growth electricity

• Completed WPD acquisition.
• Rhode Island sale and majority stake sale in National Grid Gas on track.

Good regulatory progress

• Finalised our CMA appeal process for RIIO-T2, which saw the removal of the outperformance wedge.
• Targeting to deliver 100 basis points of operational outperformance on average through the five-year period in UK Electricity Transmission.
• New rate agreements for KEDNY-KEDLI and Massachusetts Gas. Joint Proposal for Niagara Mohawk submitted, expecting approval by end of the calendar year.

New organisational structure and efficiency programme

• Implemented a new operating model with seven business units across the Group as we look to deliver the financial, customer and regulatory outcomes that will be required on the journey to net zero.
• New cost efficiency programme to save at least £400m per annum across the Group by the end of 3 years.

Delivering on our responsibility commitments

• Published our first Responsible Business Report, measuring the Group's progress against ESG targets.

Updating full year outlook

• Given the strong start to the year, we now expect to deliver full year underlying EPS significantly above the top end of our 5 – 7% range. This is primarily driven by early commissioning of our new NSL interconnector, coupled with higher auction prices across our interconnector portfolio, which is expected to deliver around £100 million higher operating profit.