National Grid plc

Good morning everyone and welcome to National Grid's half-year 2027 results presentation. Six months ago, I set a clear direction for National Grid to build on our strong foundations, sharpen performance and advance us as a world-class business. Since then, we've simplified the organisation, enhanced accountability, accelerated delivery of our capital program and increasingly deployed technology to improve our business. Today, I'd like to bring to life how the initiatives we're driving are already having an impact through improving performance and underpinning our confidence in growth. I'll then hand over to Andy for our financial performance and outlook before we take questions. Let me start with the key messages from the first half. In May, I introduced our new strategic framework with the brilliant basics designed to drive better performance across the business, Thank you very much. Capital investment increased by one third in the first half, with important project milestones completed. As a result, we've upgraded our capital investment guidance for the year. Our progress, together with some one-off fair value gains within national grid partners, supported strong first half EPS growth and means we're also slightly upgrading our full year EPS growth guidance. Second, We're changing how National Grid operates as we drive the big shifts. Some highlights include simplifying the organisation to create clearer accountability and better quality decision making, scaling practical technology and AI tools to improve productivity and delivery, and shaping policy outcomes that support affordability and resilience. Third, we continue to build momentum in our discipline growth. Here, we're focused primarily on our core regulated businesses as we continue to help shape the long-term regulatory environment with ED3 and our upcoming US rate cases as examples, while at the same time exploring adjacencies that will support longer-term growth, where there's a strong portfolio fit and opportunity to earn attractive returns with our investment in Joulent as an example. and in turn, this will support customer affordability, deliver better outcomes for our wider stakeholders and underpins our compelling investor proposition with double-digit investor returns. Our capital delivery combined with our focus on sharpening performance is translating into strong financial outcomes. Capital investment increased 32% to £6.7 billion, a new record for the first half. We now expect full-year investment of £13.5 billion, putting us firmly on the run rate required to deliver at least £70 billion by the end of FY31. Thank you for watching. We're therefore slightly upgrading our full-year EPS growth guidance to 15-16%. The Board has also declared an interim dividend of 16.97 pence per share, a year-on-year increase of 3.8%. This is in line with our policy that aims to deliver an inflation-protected progressive dividend. Andy will come back to the financials in more detail later. For now, let me turn to how we're delivering our strategy. The external environment continues to evolve rapidly with many of the energy market drivers of change supporting growth in our business. Geopolitics and the macroeconomic environment remain complex with the Middle East conflict putting direct pressure on consumer energy bills. Energy security and affordability are therefore amongst the most critical topics for governments, regulators and our customers. The pace of change in technology and customer needs is accelerating, presenting both an opportunity to evolve how we run our business and creating a large demand runway. This is accentuated by the scale of electrification needed to support the energy transition. We must therefore get more capacity from our existing networks through leveraging technology at scale while at the same time investing to build network capacity needed for the future. Thank you so much for joining us. Let me start with capital and the delivery of our largest ever investment program. Thank you very much. Thank you very much. In electricity transmission, investment rose by 71% to £2.9 billion. This primarily reflects the ramp-up of ASTI investment to £1.5 billion, along with other major projects to reinforce the network and connect new generation. We're also using technology to improve our capital delivery. For instance, we're using Sensat's infrastructure visualisation mapping technology to test different construction options against real-world constraints before we get to site, reducing in-person visits, enabling earlier decisions and reducing overheads. and the UK's fourth largest battery project in Newport. This is more than double the generation connected in the whole of FY26 and demonstrates our significant momentum. As we continue to invest in asset health to enhance our resilience and support connections. We're currently finalising our ED3 business plan, which is reaffirming our planned investment of £9 billion over the coming five years. This is 40% higher than the previous period and will support vital economic development in our Midlands, South West and Wales service areas, consistent with the Government's devolution agenda. Thank you for watching. All six of our Wave 1 ASTI projects are now in construction, with the majority of these projects due to complete by March 2031. Of course, across a portfolio of this scale, not every project will go exactly to plan. For instance, we've learned from our experience of the ASTI framework and the Eagle One delay event, and we're applying those lessons to drive better performance across the program. That includes identifying a 100-day schedule improvement on Eagle 1 through generative scheduling as we work to get back on track, while Yorkshire Green and Eagle True are tracking ahead of schedule. On Wave 2, our first two projects at Pentier to Trossfinneth are now in construction, with the remaining nine Wave 2 ASTI projects also progressing through the planning and consenting processes. For instance, we secured the development consent order for C-Link last week, enabling us to move the project into its next phase and the outcome on Norwich to Tilbury is due early next year. Last week we also made our DCO submissions for Eagle 3 and 4 and expect to submit all remaining ASTI project planning submissions by the end of March 2027. ASTI is therefore moving steadily from development into construction. As you can see on the slide, we remain on track for our key delivery schedule dates and the ASTI-related Rio T3 investment, with 15% of Wave 1 and 5% of Wave 2 deployed in the first half. Recent project milestones bring the progress to life. At Grain to Tilbury, we've deployed a tunnel boring machine to create a cable route under the Thames River, replacing and upgrading infrastructure installed in the 1960s. The team completed the 2.2km Thames Crossing in September, 49 days ahead of schedule. Caroline, as the tunnel boring machine is known, was named by local schools in honour of Dame Carolyn Haslett, who was a pioneer for women in the electrical engineering industry. And this was a pioneering piece of equipment as well, with its bar scale requiring us to build a shaft at Tilbury using Europe's largest vertical shaft sinking machine. Elsewhere, our Yorkshire Green project is progressing well and is expected to be the first of our ASTI portfolio to go live on the system. And we also energised a 1.4 gigawatt offshore wind farm. Cordy and Carl will provide more detail on our progress at the UK Transmission Investor Deep Dive event, which is planned for December. Turning now to the US, where we've successfully grown our rate base by over 70% since 2020. This growth is underpinned by multiple drivers, including ongoing network resilience, accelerating industrial and consumer demand, and the need for additional system capacity. Importantly, we're seeing that demand directly within our service territories as we progress discussions with large load customers in areas including advanced manufacturing and data centres. Thank you for joining us. and electricity with local regulators supporting the need for modernisation. Thank you for joining us. Our connections will allow Micron to invest more than $100 billion in central New York and create approximately 9,000 direct jobs, in addition to almost 50,000 jobs across the broader regional economy and supply chain. With the state now attracting a significant and growing semiconductor manufacturing ecosystem. We also completed our SmartPath Connect transmission project and began refurbishing a major century-old transmission line in Massachusetts. and how investment is translating into additional capacity, reliability and economic growth. To this point, I've focused on capital delivery and how strong project management is enabling us to deliver to schedule and budget. A brilliant basic. But a world-class network operator must also maximise the value of its existing infrastructure and enhance the customer experience. That's why we're also focused on sharpening performance across our existing assets, our customer service and our corporate functions. Our investment in asset health in the UK is supporting world-class transmission reliability, strong distribution performance, and improved interconnector availability. In the US, we've rolled out the Lighthouse Frontline Productivity Pilot that I spoke about in May, across our 15 downstate New York gas business operations. In some of our early locations, this is helping us to get crews to their first jobs 15% faster, We're now rolling it out across our locations in upstate New York Ass. Our focus on assets is designed to help us maintain and enhance our strong reliability and safety KPIs. These are the key performance indicators of our progress, supported by a suite of operational metrics that we track closely to ensure we're driving the leading indicators of our asset health. Thank you for joining us. All of which is driving improved customer satisfaction scores across both the UK and the US. And in our functions, common data and new digital tools are improving productivity. Thank you very much. Thank you very much. examples of this include using ai tools such as grid care to unlock network capacity and our focus on affordability helping to enroll over 65 000 more of our us customers onto low income discount rates over the past year in the uk our interconnectors both support increased energy security and directly benefit consumers when they outperform with 400 million pounds in payments and a further £300 million forecast to be paid over the next two and a half years subject to Ofgem approval. Second, we want to improve the customer experience, which is a journey of better technology tools and a change in culture about what good looks like. We're already well on the way to digitising and simplifying our customer interactions and are redesigning journeys end-to-end. We're also strengthening our storm and winter response for what is already turning out to be another challenging winter period. Third, we want to enable faster connections to the grid. Connections reform is creating a clearer route for viable projects, but it's been a challenging and frustrating process for some of our customers. We're doing all that we can to support our customers through the process, and we're leveraging innovation to move faster where we can in a complex ecosystem. However, the long-term solution does require whole system change. We're therefore actively advocating for the steps needed to deliver connections and reduce costs for our customers. Fortunately, the government's recent budget announcements offered some clear policy directions that we embrace. Together, these initiatives turn investment and operational improvement into more affordable, reliable outcomes for customers and ultimately translate into stronger performance for our investors. It's also part of what will differentiate National Grid as a world-class operator. The big shifts help us scale these improvements across National Grid. The first is leadership, people and performance led by Emma, where we're targeting clearer accountability and better quality decisions at pace while building stronger capabilities and attracting talent. Thank you for joining us. The second is technology and innovation, where we're scaling proven tools to strengthen cyber defenses, accelerate capital delivery, unlock capacity, optimize asset reliability and enhance the customer experience. Alice is now bringing this together in her new role, leading the combined team. Examples in the first half include Exogego's underground mapping technology, which has reduced changed orders on several major projects, and Envelio's mapping analytics, which are helping us identify areas where capacity exists on our network to assist developers with site selection and speed up customer connections. For customers, we're beginning to roll out the market-leading Kraken platform Our third big shift is external positioning, where we're shaping policy and regulatory outcomes that support affordability, resilience and growth, led by Cordy in the UK and Sally in the US. As you'd expect, we've been progressing our price controls and rate cases in both the UK and the US. This includes the one-year rate stabilisation submitted for Kedney and Kedley in downstate New York, keeping customer bills flat for one year in the current affordability environment. Cordy has also led on the recently published UK electricity network sector growth plan, and we've made our own supply chain commitment on the back of it. Thank you for joining us. Each one is intended to help us move faster, raise productivity and deliver stronger outcomes for all of our stakeholders. The third element of our framework is disciplined growth, growing our core while building future optionality. Our priority remains sustainable long-term growth in our regulated networks, which means continuing to shape the future policy and regulatory frameworks that enable this growth. For instance, we're finalising our ED3 business plan, responding to off-gem scenarios which point to further growth in capital investment across the next five-year price control. We also expect to submit multi-year rate cases over the coming months in downstate New York Ass, Kedney and Kedley, and our upstate NIMO businesses. At the same time, Thank you for listening. We'll see you next time. In the UK, this could include interconnectors and offshore hybrid assets, and in the US, competitive transmission and innovative solutions for large load customers. Jewelent is a good example. It gives us exposure to growing data centre power demand beyond the US northeast, while offering the potential for attractive risk-adjusted returns above our regulated business. The majority of our $1.75 billion investment will support the development of Project Kilby, a 2.7 gigawatt co-located data centre power facility in West Texas. The project is already at an advanced stage. A 50-50 joint venture with Chevron has been established, EPC contracts are being finalised and all the turbines and other critical equipment have been secured, with delivery expected over the next 12 months. Importantly, A 20-year power purchase agreement has been signed with Microsoft, providing long-term, predictable cash flows with a AAA-rated customer. The remaining development milestones are being progressed, with first power targeted for 2028. And as you can see from this simplified view of the site, we bring more than capital. Kilby involves kilometres of wires and substations to create a multi-gigawatt islanded mini-grid. We bring deep power system expertise. Thank you for joining us. So, to conclude before the financials. We set a clear direction in May, and the first half shows we're following through. Capital investment is accelerating, major projects are progressing, and the changes we're making to the organisation are sharpening performance. And I'm pleased to have been able to share a number of examples that evidence our execution to date and how we're delivering for our customers. Thank you Zoe and good morning everyone.

I'd like to highlight that as usual we're presenting our results on an underlying basis and at constant currency. So, starting with our overall performance in the first half. We've delivered strong results with growth in underlying operating profit to £2.6 billion, a 13% increase on the prior year, primarily driven by higher regulated revenues in UK electricity transmission, reflecting a step up in the scale of delivery under T3. High revenues in our US regulated businesses reflecting the growing asset base and two one-off fair value gains from successful capital markets transactions in our National Grid Partners investment portfolio. Strong operating profit growth led to a 22% increase in earnings per share to 36.5 pence. Thank you for watching. In line with our progressive dividend policy, the Board has declared an interim dividend of 16.97 pence per share, representing 35% of last year's full-year dividend. Moving now to our business segments and starting in the UK with electricity transmission. We are now into the first year of execution under the Rio T3 framework, which will see us invest £31 billion over the next five years to double the network capacity across England and Wales, connect 35 GW of supply and 19 GW of demand, and help avoid significant constraint costs for consumers. In the first half, capital investment was £2.9 billion, 71% higher than the prior period, as we deploy a higher level of capital from the step-up into the Rio T3 framework, enabled by the strong ASTI project delivery progress Zoe highlighted earlier, as well as ongoing investment across our asset health programmes. Reflecting this faster pace of delivery, underlying operating profit was £1.2 billion, up 45% compared with the prior period, with higher allowed revenues partially offset by higher depreciation from the increased capital investment. In our electricity distribution business, underlying operating profit was £550 million, broadly in line with the prior year, reflecting higher revenues from indexation, offset by higher depreciation and additional maintenance costs driven by the extreme heat over the summer. Capital investment was £834 million in the first half. An increase of 10% compared to the prior period, primarily driven by increased asset health and connections investment, and higher load-related network reinforcement. Turning now to the US, where, as usual, profitability in both businesses is weighted to the second half, reflecting the typical seasonality. Underlying operating profit for New York was £487 million, 9% higher than the prior year, from higher net revenue driven by asset-based growth and the recovery of previously unremunerated costs. This was partially offset by an increase in depreciation, reflecting our ongoing investment programme, and higher costs, including property taxes. Captain investment was £1.8 billion, 11% higher than the prior year, driven by increased investment in our upstate transmission upgrade projects and reinforcement of our distribution networks. In New England, underlying operating profit was £266 million, 10% lower than the prior period. Higher net revenues in the period were driven by asset-based growth and our capital tracker mechanisms. These were more than offset by higher costs, including a one-off provision, alongside higher depreciation and other investment-related costs from the increasing capital programme. Capital investment was £1.1 billion, 14% higher than the prior year, driven by increased asset condition and system capacity investments and our ongoing gas mains replacement activity. Moving to National Grid Ventures, where the underlying contribution was £174m, including joint ventures. The year-on-year decrease of £53m was primarily due to the disposal of grain LNG in the prior year, partially offset by stronger interconnected performance. Capital investment across National Grid Ventures was £100m, reflecting ongoing maintenance expenditure, including refurbishment of the I4One interconnector. In addition, we have invested £941m into the Julent joint venture during the first half, and expect the remainder of the full £1.3bn to be deployed in the coming months, as we work towards a final investment decision on Project Kilby. Other activities, including joint ventures, reported a loss of £24 million. Centrally held corporate costs were partially offset by £84 million of one-off fair value gains within our National Grid Partners investment portfolio. As a reminder, National Grid Partners is our corporate venture capital and innovation arm, investing in emerging technologies that can create strategic and financial value for the group. Zoe has already mentioned a number of the portfolio businesses we are working with to accelerate and scale innovation across our businesses. We also recognise one-off fair value gains in the period related to two successful portfolio company capital market transactions. With the cash sale of Dragos, a critical infrastructure-focused cyber security company, to Accenture, and fair value gains arising from the IPO of EROC, which builds and operates modular power systems for industrial businesses. Turning to cash flow and the balance sheet, cash generated for operations was £4.1 billion, up 14% compared to the prior year. This increase is driven by improved group cash generation. Net debt increased by £4.5 billion in the period to £48.6 billion, with cash inflows from operations being more than offset by strong capital investment, our investment in jubilant, interest and dividend payments. For the full year, we now expect net debt to increase by a further £4 billion, including the remaining jubilant funding. Net finance costs were £722 million, an increase of 6% compared with the prior year, due to higher average net debt, partially offset by higher capitalised interest, as our investment programme ramps up. I presented this slide in May, and I'm repeating it because I think it's important to reiterate just how resilient our regulated business model is, given the volatile macroeconomic environment. In the UK, inflation protection across our regulated asset base supports real equity returns. In the US, revenue indexation, cost recovery and the ability to pace investment help us manage inflation. We also have limited exposure to the current volatility in wholesale energy costs with full recovery of energy procured for US customers. and we manage currency risk deliberately, hedging around 70% of our US assets with dollar-denominated debt. Together, these protections limit volatility and reinforce the visibility of our long-term growth, supporting our differentiated investment case. Moving specifically to interest rates, given their focus across the wider market and where our business has limited exposure, Around 75% of our debt book is covered by operating company-level recovery mechanisms. In the UK, the RAV-weighted trailing debt tracker closely matches our actual issuance profile, and we have a strong track record of financing outperformance. In the US, actual debt costs are reflected in rates, as well as a forecast of debt costs in New York, while the regular rate-case cycle provides opportunities to reset the allowed cost of debt. We carefully manage the interest rate exposure on the remaining portion of the debt book, with only around 10% of our net debt being rate sensitive. And in the UK, indexation of allowed equity returns to real gilt yields provides a further partial hedge against higher rates. In terms of our holding company debt, our average issuance tenor is 7 to 10 years, with maturities extending well into the 2030s. Global Funding Markets and Currencies to Issue Efficiently Against that resilient backdrop, we remain firmly on track to deliver our five-year financial framework to FY31. The upgrades to our FY27 guidance provide clear evidence for that progress. Capital investment is now expected to be higher at around £13.5 billion, reflecting a slightly faster pace of supply chain delivery, and underlying EPS growth is now expected to be 15-16%. As mentioned earlier, net debt will be around £4 billion higher, including the remaining jubilant funding. That near-term delivery strengthens our confidence in the five-year framework, with our capital investment programme of at least £70 billion, underpinning around 10% annual asset growth and underlying EPS growth of 8% to 10% per annum from the FY26 baseline. Alongside that growth, we continue to offer a progressive inflation-protected dividend policy and expect to maintain credit metrics above our current thresholds to at least FY31. Let me finish with what this means for investors. Our investment programme is underpinned by multiple investment drivers, providing high visibility growth alongside a business model that is resilient to macroeconomic volatility, which provides a unique stability. That combination supports our five-year framework, which is designed to deliver a compelling investor proposition with attractive and consistent double-digit investor returns. So, thank you for listening, and we will now go to the audio Q&A. Andrew, over to you.

Thank you Andy and good morning everyone. My name is Andrew Downey, I'm Interim Director Investor Relations at National Grid. I'm joined by Zoe and Andy in the room and we're now going to take questions. For those who are dialed into the conference call, just a reminder that you'll need to press star 1 to let the operator know that you wish to ask a question. So with that, we're going to go to questions. We'll start with a conference call and then we'll go to any on the webcast. We'll start with Pavan first and then we'll go to Mark and Rob Pullin as the first three questions. Pavan, if you're online.