National Grid H2 2025 Earnings Report

National Grid EPS Results

• Actual EPS: N/A
• Consensus EPS: $2.82
• Beat/Miss: N/A
• One Year Ago EPS: N/A

National Grid Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $16.34 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

National Grid Announcement Details

• Quarter: H2 2025
• Date: 5/22/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 15, 2025
• Conference Call Time: 4:15AM ET

National Grid (NYSE:NGG) transmits and distributes electricity and gas. It operates through UK Electricity Transmission, UK Electricity Distribution, UK Electricity System Operator, New England, New York, National Grid Ventures, and Other segments. The UK Electricity Transmission segment provides electricity transmission and construction work services in England and Wales. The UK Electricity Distribution segment offers electricity distribution services in Midlands, and South West of England and South Wales. The UK Electricity System Operator segment provides balancing services for supply and demand of electricity on Great Britain's electricity transmission system; and acts as an agent on behalf of transmission operators. The New England segment offers electricity and gas distribution, and electricity transmission services in New England. The New York segment provides electricity and gas distribution, and electricity transmission services in New York. The National Grid Ventures segment provides transmission services through electricity interconnectors and LNG importation at the Isle of Grain, as well as sale of renewables projects. The Other segment engages in the leasing and sale of commercial property, as well as insurance activities in the United Kingdom. The company was founded in 1990 and is headquartered in London, the United Kingdom.

National Grid H2 2025 Earnings Call Transcript

Key Takeaways

• National Grid has set out a five-year plan focused on pure-play networks, committing to £60 billion of capital investment to drive ~10 % asset growth and 6–8 % EPS growth, funded in part by a £7 billion equity raise securing financing to 2031.
• For FY24, the group delivered underlying operating profit up 12 % to £5.4 billion, EPS up 2 % to 73.3 p, record capital investment of £9.8 billion (10.5 % RAV growth) and a final dividend of 30.88 p (total 46.72 p, +3.21 %).
• Capital delivery accelerated across all regions, with all six wave-one ASD projects now under construction in the UK, over 350 miles of US gas mains replaced, progress on SmartPath Connect in New York and initial phases of the $4 billion upstate upgrade.
• Regulatory and policy progress includes ratification of over 70 % of US CapEx in new rate plans, Ofgem’s TI-2030 connections reform and planning reforms in the UK, and anticipated approval of Massachusetts’ $2 billion electricity sector modernization plan.
• National Grid’s resilient business model—supported by strong regulatory frameworks, inflation and FX protections, matched debt financing and robust cost control—underpins its maintained investment-grade rating and FY26 guidance of >£11 billion CapEx and ~6 % EPS growth.

Presentation

[Angela Broad, Director of Investor Relations at National Grid]

Good morning, and welcome to National Grid's full year results presentation. I'm Angela Broad, Head of Investor Relations, and it's great to have so many of you on the call today. Your attention to the cautionary statement at the front of the pack. As usual, a q and a with John and Andy will follow the presentation. Please join via the conference call to ask a question or use the tab at the bottom of the webcast to submit a written question.

[Angela Broad, Director of Investor Relations at National Grid]

All of today's materials are available on our website. And of course, for any further queries after the call, please do feel free to reach out to me or one of the IR team. So with that, I'd now like to hand you over to our CEO, John Pettigrew. John?

[John Pettigrew, CEO & Executive Director at National Grid]

Many thanks, Angela. Good morning, everyone. Thank you for joining us to discuss our full year results. I hope to see many of you later today at our Building Our Energy Future event for a deep dive on major capital projects we're delivering across The UK and the Northeast US. As ever, I'm here with Andy Ag, and once we've been through our respective presentations, we'll be happy to answer your questions.

[John Pettigrew, CEO & Executive Director at National Grid]

Last May, we announced a refined strategy focused on pure play networks. We also set out a new five year financial framework on our plans for £60,000,000,000 of capital investment. This will drive asset growth around 10% per annum and underlying earnings per share growth of six to 8% whilst maintaining a strong balance sheet and delivering an inflation protected dividend. Alongside this, we set out our comprehensive financing strategy, including our £7,000,000,000 equity raise, providing clarity over our funding to at least 2031. In the first year of the five year framework, we've accomplished a huge amount despite a turbulent economic and geopolitical environment.

[John Pettigrew, CEO & Executive Director at National Grid]

We've delivered record capital investment of £9,800,000,000 in line with our plan and 20% higher than last year. This reflects the scale of the activity across all of our regulated businesses, including significant progress within our Asty portfolio, where all six of our wave one projects are now under construction. A step up in asset health and network reinforcement in electricity distribution, over 350 miles of gas mains replacement across Massachusetts and New York, and good progress with our SmartPath Connect project in US electricity transmission. We've also secured the supply chain and delivery mechanisms for more than two thirds of our £60,000,000,000 of capital investment. For ASD, this includes contracts for the delivery of 12 onshore and two offshore projects while also making good progress on Eastern Greenlinks 3 And 4 and SeaLink.

[John Pettigrew, CEO & Executive Director at National Grid]

And in New York, we've made further progress with our $4,000,000,000 upstate upgrade, awarding contracts for the first phase as well as the engineering works for phase two. The policy and regulatory agenda on both sides of Atlantic has also continued to move forward, further enhancing visibility on our investment plan. In The UK, the government published its clean power action plan in December, and Ofgem published its decision on connections reform last month, which embeds is it ready and is it needed criteria into the connections process. This will deliver a rationalized queue of projects aligned with the clean power plan and clarify the specific investments and locations required in the outer years of t three. New legislation on planning reforms was also introduced in March, which aims to reduce the time it takes to deliver infrastructure projects.

[John Pettigrew, CEO & Executive Director at National Grid]

Whilst these reforms will be more impactful in the twenty thirties, there's an there are important measures in the bill that have the potential to further derisk our ASCII projects. In The US, we refreshed all three of our New York rate plans and agreed new rates for our electricity distribution business in Massachusetts over the last year. Altogether, this means that we've now agreed over 70% of our US investment with regulators over our five year frame. We also expect to receive approval for our electricity sector modernization plan in Massachusetts, where we file for up to $2,000,000,000 of capital investment over the next five years to help deliver the state's clean energy policy. So the combination of these firm foundations of our resilient business model, which provides strong regulatory protections from macroeconomic uncertainty and no significant exposure to energy prices or merchant risk, means that we're very well positioned and hugely confident in our ability to deliver our £60,000,000,000 investment program.

[John Pettigrew, CEO & Executive Director at National Grid]

We'll have much more to share on capital delivery at our investor event this afternoon where we'll showcase the sheer scale of our electricity transmission projects and how we've transformed the way we're delivering them. So turning now to some of the key highlights for the year. We've delivered a strong performance with underlying operating profit increased 12% to £5,400,000,000 at constant currency. This reflects robust operational performance as a result of increased regulated revenues and flat controllable costs achieved through our focus on agreeing the right regulatory frameworks and efficient delivery. Underlying earnings per share was slightly ahead of guidance at 73.3p and up 2%, reflecting the impact of a higher share count following the rights issue.

[John Pettigrew, CEO & Executive Director at National Grid]

A record £9,800,000,000 of capital investment helped to drive regulated asset growth of 10.5%. And in accordance with our policy to grow the dividend in line with The UK CPIH, the board has declared a final dividend of 30.88p per share. This takes the total dividend for the year to 46.72p, an increase of 3.21% on last year's rebased dividend. Moving next to reliability and safety. Reliability has remained strong across our UK and US networks despite severe weather events across our jurisdictions.

[John Pettigrew, CEO & Executive Director at National Grid]

An example of this is storm Dara last December, a once in a decade storm that hit our UK electricity distribution networks causing significant damage across the Southwest, South Wales, and West Midlands. Our teams work tirelessly around the clock, restoring power to 95% of customers within forty eight hours. Last week, the NISO published its interim report investigating the outage following the fire at our North Hyde substation in March. We welcome the report, establishes a timeline and sequence of events and outlines further steps required to deliver the final report in June. On safety, our lost time injury frequency rate was naught point one, in line with our group target.

[John Pettigrew, CEO & Executive Director at National Grid]

As our workload increases, we continue to invest heavily in attracting, developing, retaining a qualified and competent workforce with robust training programs built around a culture of safety. We've also set protocols for our contractors so that high safety standards are maintained right across the workforce. Turning to our operating performance across the group, starting with UK electricity transmission. Investment increased by 57% to £3,000,000,000 reflecting the ramp up in the first wave of six ASD projects, major substation upgrades, and a further four gigawatts of generation being connected to the network. This included The UK's largest battery storage unit at Lakeside in North Yorkshire and a 1.2 gigawatt offshore wind farm in Dogger Bank.

[John Pettigrew, CEO & Executive Director at National Grid]

The business delivered a return on equity of 8.3%, outperforming its allowed return by a hundred basis points. Turning to regulatory developments. In December, we submitted our £35,000,000,000 riot three business plan, representing the most significant investment in The UK's electricity transmission network in a generation. This ambitious plan will nearly double the power that can flow across the country, direct directly connecting 35 gigawatts of generation and 19 gigawatts of demand and create optionality for further 26 gigawatts, all whilst maintaining world class levels of reliability. Our submission also included clear evidence of the need for an investable financial framework, including a real 6.3% allowed cost of equity, appropriate levels of cash generation, and incentive mechanisms that will deliver benefits to both networks and consumers.

[John Pettigrew, CEO & Executive Director at National Grid]

Under our proposals, we expect our investment plans to avoid constraint costs around £12,000,000,000 over the price control period, offsetting the impact of investment to customer bills. In addition, we'll we're also pleased to see Ofgem's decision on the advanced procurement mechanism. This will provide funding for transmission owners to secure supply chain capacity, covering items like switchgear and transformers. This builds on the approach Ofgem adopted under the ASTRY regime, and we plan to utilize the framework from the middle of this year. Finally, on policy developments, in addition to the connections reform I mentioned earlier, the government published its planning and infrastructure bill.

[John Pettigrew, CEO & Executive Director at National Grid]

The bill includes a number of proposals that are important to us, including giving certain projects the flexibility to choose the type of consenting regime used and providing opportunities to accelerate the consenting process. The bill also includes proposals intended to increase public acceptability of electricity transmission projects alongside guidance for wider community benefits. Moving to strategic infrastructure. This will get a lot of focus this afternoon, but to summarize, we now have the Great Grid partnership up and running, the HVDC framework agreement in place, the supply chain secured for all 12 onshore projects, all wave one projects under construction, and we've continued to build our internal capabilities, and the workforce now stands at over a thousand employees. So in the last year, we put the platform in place and delivery is well underway.

[John Pettigrew, CEO & Executive Director at National Grid]

Carl and his team will provide a lot more detail on our progress later today. Turning to UK electricity distribution. Capital investment increased by 14% to £1,400,000,000 driven by increased spending on asset health, network reinforcement, and connecting nearly 600 megawatts of renewable generation. The business achieved a return on equity of 7.9%. And whilst this reflects the benefit of our synergy savings program, it was heavily impacted by cost from Stormdara as well as lower than anticipated allowances from Ofgem's real price effects mechanism that haven't matched what we were expecting when the price control was agreed.

[John Pettigrew, CEO & Executive Director at National Grid]

We're working hard to address the ongoing headwind and expect performance to improve over the remainder of the price control period. This year, we also made good progress in developing our role as this distribution system operator or DSO, including our leading role in the development of flexibility markets. We now operate the largest market across all DSOs, allowing us to avoid over 200 gigawatt hours of renewable generation curtailment, lowering costs for consumers. On the regulatory front, Ofgem published the e d three framework decision at the April, which gives us an early indication of their thinking in the next price control period and is the starting point for the development of the sector specific methodology. And as I mentioned earlier, we were pleased to see Ofgem's decision on connections reform.

[John Pettigrew, CEO & Executive Director at National Grid]

Electricity distribution has been playing a leading role in driving forward these reforms. And over the last year, we've been able to implement the industry's technical limits initiative, accelerating the connection office dates on around three gigawatts of distributed generation and removed over four gigawatts of capacity from connections queues. Turning to The US. Our investment in New York increased by 24% to £3,300,000,000. This reflects a further 218 miles of gas mains replacement and a continued ramp up in our $4,000,000,000 upstate upgrade program, including the reinforcement and upgrade works as part of CLCPA phase one and continued strong progress on SmartPath Connect, where we're rebuilding over a hundred miles of transmission lines to connect large scale renewable generation.

[John Pettigrew, CEO & Executive Director at National Grid]

Again, we'll have much more to say on our upstate upgrade program this afternoon. We achieved a return on equity of 8.7%, ninety four % of allowed, and 20 basis points higher than the prior year, reflecting strong performance in our downstate gas businesses in the first year of our new rate plans. On the regulatory front, we reached a joint proposal in April on new rates for Niagara Mohawk business, which includes an improved return on equity of 9.5%, increased CapEx around 50% over the three years, reflecting our step up in electricity transmission investment, and funding to modernize our electric and gas networks and support New York's clean energy goals. The joint proposal also includes provisions to mitigate bill impacts for customers by spreading increases over the three years of the plan and putting in place assistance programs for low income households. In New England, capital investment increased by five percent to £1,800,000,000, reflecting continued gas means replacement and increased asset condition and grid modernization work across our electric network.

[John Pettigrew, CEO & Executive Director at National Grid]

Our achieved return on equity was 9.1%, ninety two % of allowed, benefiting from six months of the new rate agreements in our Massachusetts electric business. We've also seen a greater focus on affordability in the state following increased bills from a colder winter. To assist Massachusetts gas customers, we agreed with the regulators to reduce winter gas bills by 10% during March and April with a deferral to be recovered over the summer. On the regulatory front in September, the DPU issued its rate case order for our Massachusetts electric business approving a five year plan with an allowed return of 9.35%. The order includes a new regulatory recovery mechanism that provides timely funding for growing capital investment, an updated performance based rate mechanism providing inflation protection for operating and maintenance cost, and increased allowances to cover the increasing cost of storms.

[John Pettigrew, CEO & Executive Director at National Grid]

Taken together, these enhanced recovery mechanisms are helping us to earn closer to the allowed return. And as I mentioned earlier, the DPU has also approved our electricity sector modernization plan for anticipatory investments to support the decarbonization of our networks. And from a policy perspective, last month, we submitted our climate compliance plan, setting up a strategy to enable our Massachusetts gas network to advance state decarbonization goals whilst maintaining safe, reliable, and cost effective service for our customers. And finally, last November, governor Healy approved legislation that reforms the permitting process for utility infrastructure. This new approach sets maximum time frames for approvals capital projects in the state.

[John Pettigrew, CEO & Executive Director at National Grid]

And finally, in National Grid Ventures, capital investment was 43% lower at 378,000,000 following completion of the Viking Link to Denmark last year. During the year, we've seen good operation performance across the National Grid Ventures portfolio, including good availability from our interconnector fleet, high levels of availability and utilization at our Long Island generation business, and at our Grain LNG terminal where we're making good progress on the construction of the new tank. On the regulatory front, last month, Ofgem published the decision on the regulatory framework for offshore hybrid assets, an important next step as we continue to develop our LineLink project as a next generation interconnector. So as I said at the start, we've achieved significant progress across all areas of the business in the last year as we continue to efficiently deliver safe, secure, and clean networks for the future. Let me stop there and hand over to Andy to walk you through the numbers before I come back and talk about priorities for the coming year.

[John Pettigrew, CEO & Executive Director at National Grid]

Andy.

[Andy Agg, CFO & Executive Director at National Grid]

Thank you, John, 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. I want to start by expanding on what John has said about National Grid's financial resilience. The visibility that our business model provides and the stability it gives is unwavering, however volatile the macro environment, including times such as now. A large part of that can be attributed to our regulatory frameworks, but it is also a consequence of our efficient delivery with controllable costs broadly flat this year and our robust procurement and financing strategies.

[Andy Agg, CFO & Executive Director at National Grid]

Together, these enable us to manage the impacts of inflation and cost pressures, changing interest rates and fluctuations in exchange rates. And importantly, that enables us to deliver stable and predictable growth through our significant capital program. Many of you will also know that we have substantial inflation and cost protections, particularly in our UK regulated businesses with indexation of our regulated asset base. In The US, around 90% of our supply chain is domestically sourced, and even if higher costs do come through, we can manage this through alternative suppliers or the pace of discretionary spend, with any additional spend ultimately being picked up in the following rate case. We're also positioned so that the impact of exchange rate volatility from our US businesses is limited.

[Andy Agg, CFO & Executive Director at National Grid]

We consistently hedge around 70 of our US gross assets with dollar denominated debt. This means from an earnings perspective, our general rule of thumb is that for every 5¢ move in the average US dollar to sterling exchange rate, we only expect to see a 1p impact on EPS on an annualized basis. Finally, from a financing perspective, our regulated operating businesses broadly match leverage to our regulatory frameworks, which enables us to efficiently recover debt costs. We also hold around 30% of our debt book at the HoldCo level maturities out to the 2030s, and any higher expected interest costs of refinancing have been factored into our five year financial frame. We've also set out our comprehensive financing plan, which sees us fully funded until at least the end of RIIO T3.

[Andy Agg, CFO & Executive Director at National Grid]

So as I say, all of these things add up to create a very stable platform from which to operate and deliver on our plans. Now let me take you through our financial performance. I'm pleased to be reporting a strong start to our five year plan. Underlying operating profit on a continuing basis increased by £589,000,000 to £5,400,000,000, up 12% on the prior year. This was mainly driven by strong performance across our regulated businesses, including higher revenues and strong cost efficiency, partly offset by expected lower revenues from our interconnectors.

[Andy Agg, CFO & Executive Director at National Grid]

Higher operating profit combined with lower finance costs has led to an underlying earnings per share increase of 2% to 73.3p per share, slightly above guidance and including the impact of a higher share count following the rights issue. Group return on equity was 9%, supported by the growth in our regulated earnings offset by a higher denominator reflecting the rights issue. In line with our policy, the board has recommended a final dividend of 30.88p, taking the full year dividend to 46.72p per share, representing a 3.2% increase compared to the prior year rebased dividend and in line with average CPIH inflation. As John said, we've continued to deliver record levels of investment with capital investment from continuing operations increasing 20% to £9,850,000,000, helping drive regulated asset growth of 10.5%. Now turning to our business segments.

[Andy Agg, CFO & Executive Director at National Grid]

And starting with UK electricity transmission, where underlying operating profit was £1,400,000,000, 9 percent higher than last year. This was helped by increased totex allowances, indexation and higher allowed returns, partly offset by increased depreciation, reflecting growth in the asset base. Capital investment of £3,000,000,000 was up 57% versus the prior year. This included the ramp up of our Wave 1 ASTI project spend, including Eastern Greenlinks 1 And 2, as well as the four onshore projects, and construction activities on new customer connections, partly offset by lower spend on London Power Tunnels 2 and the Hinkley connection. We've achieved an 8.3% return on equity, delivering outperformance of 100 basis points, and we remain on track to achieve 100 basis points of average annual outperformance throughout RIIO T2.

[Andy Agg, CFO & Executive Director at National Grid]

We also saw underlying operating profit of GBP 115,000,000 from our electricity system operator over the first half of the year prior to its sale to the UK government. Moving to UK electricity distribution. Underlying operating profit was £1,200,000,000, 50 1 million pounds higher than the prior year, reflecting an increase in revenues from indexation, partly offset by higher depreciation and one off costs and incentive revenue impacts following the severity of storm Dara. Capital investment was £1,400,000,000, 14 percent higher than last year, with increased investment in asset replacement and reinforcement work. We are on track to deliver our £100,000,000 group synergies target by 2026, having achieved £88,000,000 as of the end of this year from areas such as procurement and operations.

[Andy Agg, CFO & Executive Director at National Grid]

We achieved an ROE of 7.9% in the year, outperforming our allowance by 20 basis points, which is lower than our aim to achieve 100 to 125 basis points of outperformance. This reflects the one off impacts from Storm Dara and an impact arising from the real price effects or RPE mechanism, where lower than anticipated allowances due to reductions in commodity indices since the start of the RIIO ED2 period have not tracked actual costs incurred. We're working hard to mitigate this headwind and expect to improve in year outperformance towards 100 basis points by the end of ED2. Moving now to The US. Our New York business achieved an 8.7 return on equity, 94% of its allowance and 20 basis points higher than last year.

[Andy Agg, CFO & Executive Director at National Grid]

Underlying operating profit was £1,450,000,000 40 3 percent higher than the prior year. This reflects rate increases in our downstate gas businesses and cost efficiencies enabling us to deliver broadly flat controllable costs, partly offset by higher depreciation on our increased asset base. Capital investment was £3,300,000,000 20 4 percent up on the prior year. This was driven by higher electric investment, including our upstate upgrade projects with SmartPath Connect on track to energize in December 2025 as well as higher gas investment driven by a further ramp up in gas mains replacement under our updated downstate rate cases. In New England, the return on equity was 9.1%, ninety two % of its allowance.

[Andy Agg, CFO & Executive Director at National Grid]

This was 10 basis points lower than the prior year and 40 basis points higher after adjusting for a one off property tax recovery last year. Underlying operating profit was £924,000,000 up 15%. This was driven by higher rates in our gas and electricity businesses, including through our new capital tracker, and delivery of cost efficiencies, partly offset by higher depreciation and other costs. Capital investment was £1,750,000,000 5 percent higher, driven by higher electric investments for increased asset health and maintenance work and the advanced metering infrastructure rollout. We also continued to invest in our gas networks, including the replacement of 135 miles of gas mains this year.

[Andy Agg, CFO & Executive Director at National Grid]

Moving to National Grid Ventures. Underlying operating profit including joint ventures was £455,000,000, 1 hundred and 16 million pounds lower than the prior year. Higher profitability from a full year of Viking operations was more than offset by expected lower revenues on IFA2 and the North Sea Link. Capital investment was £378,000,000, down 43%, reflecting the commissioning of our Viking lint interconnector last year and the classification under IFRS of National Grid Renewables and Grain LNG as held for sale from the September, which means investments into these businesses are excluded from reported group capital investment. During the year, our community offshore wind joint venture paused development activity in line with the broader slowdown of The US offshore wind industry.

[Andy Agg, CFO & Executive Director at National Grid]

Whilst there are longer term trends that give us confidence in the need for offshore wind generation in the Northeast, significant nearer term policy uncertainty has led us to recognize an accounting impairment as an exceptional charge. We recorded an operating loss for other activities of £143,000,000, including adverse fair value movements in the National Grid Partners portfolio. Net finance costs were £1,360,000,000, 1 hundred and 16 million pounds lower than the prior year, with the benefits of lower net debt following the rights issue and lower inflation on index linked debt, partly offset by the impact of higher refinancing costs where we have issued £3,200,000,000 during the year. For the full year, the underlying effective tax rate, excluding the share of joint ventures, was 15.4%, twenty basis points lower than the prior year. This reflects higher levels of capital expenditure qualifying for full expensing compared to last year.

[Andy Agg, CFO & Executive Director at National Grid]

Underlying earnings were £3,500,000,000 with EPS at 73.3p, up 2% on the prior year. Moving now to cash flow. Cash generated from continuing operations was £7,000,000,000, down 4% compared to the prior year. This decrease was driven by timing as we returned balancing charges within the ESO in the first half of the year following over recoveries in the prior year. Net cash inflow at £954,000,000 was £4,600,000,000 higher than the prior year, reflecting the proceeds of our rights issue, partly offset by the increase in capital investment.

[Andy Agg, CFO & Executive Director at National Grid]

Combined with disposal proceeds from the ESO and the remaining 20% stake in gas transmission, we saw a reduction in net debt of £1,700,000,000 to £41,400,000,000. Moving to our FY '26 guidance, which is presented at an assumed exchange rate of $1.3 to sterling. EPS growth is expected to be at the lower end of the 6% to 8% range, reflecting the headwind of a slightly weaker dollar. Capital investment is expected to be over £11,000,000,000 next year, driving asset growth of around 11%. And net debt is expected to increase by just over £6,000,000,000, excluding expected proceeds from the National Grid Renewables and Grain LNG sales.

[Andy Agg, CFO & Executive Director at National Grid]

As usual, detailed business unit guidance has been provided in our results statement. Turning to the five year framework. As I said at the beginning, as a result of our visibility and resilience, we are reconfirming our financial framework from April 2024 to March 2029. We still expect to invest around £60,000,000,000 over five years, driving asset growth of around 10% and EPS growth of 6% to 8% from this year's baseline of 73.3p. Our aim remains to grow the dividend in line with average CPIH, and we remain committed to maintaining our current investment grade credit rating.

[Andy Agg, CFO & Executive Director at National Grid]

With that, I'll hand you back to John.

[John Pettigrew, CEO & Executive Director at National Grid]

Many thanks, Andy. Before we move to your questions, I want to spend just a few minutes setting up National Grid's priorities for the coming year and the journey we're on to support economic development, energy security, and decarbonization across our jurisdictions. Starting in The US, where nearly half of our investment will be spent over the five year frame. From a regulatory perspective, we have a number of key priorities. In New York, having reached a joint proposal for our Niagara Mohawk business, we'll continue to engage with the PSC ahead of the anticipated approval by the commission in the summer.

[John Pettigrew, CEO & Executive Director at National Grid]

In Massachusetts, we'll continue to work with the DPU to agree the recovery mechanisms under the electric sector modernization plan. We'll also be preparing our next rate filing for Massachusetts Gas, and we'll work with the DPU to put forward a plan that balances investment needs and customer affordability. On policy, we'll continue to work closely on its state energy plan to develop a comprehensive road map to a clean, resilient, and affordable future for our customers. In Massachusetts, having filed our climate compliance plan last month, we'll be supporting the discovery phase over the coming months, and we'll work with the state as they advance the energy affordability bill. And across our US businesses, we're supporting our policymakers to understand the impacts and opportunities of increasing demand growth from data centers, and we're supporting federal policymakers as they begin to look at resource adequacy in the region.

[John Pettigrew, CEO & Executive Director at National Grid]

Moving to The UK, in electricity transmission, our priority will be to continue to ramp up capital delivery, including commissioning two further circuits of our London power tunnels project. Our primary regulatory focus for the year is to reach agreement with Ofgem on an investable realty free framework that will allow us to deliver at the unprecedented scale and pace that is needed to meet The UK's ambitious climate goals. We expect Ofgem's draft determination to be published in June with a final determination in December ahead of a new regulatory period starting in April 2026. We'll also be focused on supporting the NESA with the recontracting of the connections queue, which in turn will clarify the specific investments and locations required in the outer years of t three. Staying on the topic of connections, we're also seeing significant increases in data center requests with 15 gigawatts of signed contracts now in our pipeline.

[John Pettigrew, CEO & Executive Director at National Grid]

Our RIIO t three plan has been developed to meet this demand, and we're also supporting the government's recently formed AI Energy Council. Here, we're working to meet the challenges of increased power demand, including proposals for AI growth zones dedicated to data center development. On the policy front, we expect to see the planning legislation progress through parliament and will continue to advocate for wider planning reforms. Through our input into the NESO, we'll support progress on the longer term strategic spatial energy plan, which should align with the government's forthcoming industrial strategy. And we want to see a skill strategy developed, which together with industry creates a collective view of the workforce needed for 2,030 and beyond.

[John Pettigrew, CEO & Executive Director at National Grid]

In strategic infrastructure, our priority is to continue to ramp up the ASD program where we'll be focused on stepping up work on the six wave one projects that are now under construction and finalizing the procurement contracts for the remaining offshore projects. Once complete, we'll have secured t one supplier contractors for all 17 of our ASD projects. We'll also be focused on the consenting process with a total of eight consultations planned this year. In our electricity distribution business, our priority is to complete our targeted £100,000,000 synergy benefits and deliver improved returns. And following the publication of the e d three framework decision document, we look forward to engaging in the sector specific methodology consultation later in the year.

[John Pettigrew, CEO & Executive Director at National Grid]

Turning finally to National Grid Ventures, our priorities will be to complete the sale of National Grid Renewables, agree the sale of Grain LNG having launched the process at the April, and to continue the development of our LionLink project in The UK and the Propel transmission project through our New York Transco joint venture. So in summary, it's been another year of enormous progress. As you'll have seen, I've recently announced my decision to retire from National Grid, and I'm delighted that the board has appointed Zoe Yojnovich as my successor. She has all the attributes required to deliver on the significant growth opportunity ahead. I'm looking forward to welcoming Zoe to in the autumn and working with her before handing over the reins in November.

[John Pettigrew, CEO & Executive Director at National Grid]

It's been an immense honor for me to work with so many talented people over the years and to lead the company I joined as a graduate. I'm very proud that Nashgrid is leading the way to a new energy era, building the next generation of networks to unleash the energy needed to meet increasing demand. We're delivering extraordinary change at National Grid, implementing the largest ever overhaul of our networks across all the jurisdictions that we serve. In a turbulent and unpredictable world, National Grid is a beacon of stability with an investment proposition that provides high asset growth, strong earnings growth, and an inflation protected dividend. In this context, we remain focused on delivering secure, affordable, and clean energy for our customers and communities whilst providing long term value returns for our shareholders.

[John Pettigrew, CEO & Executive Director at National Grid]

As you've heard, there is much to do in the coming months, and I remain fully focused on ensuring we don't miss a beat so that I leave National Grid in the strongest possible position for its future success. Let me stop there and give you the opportunity to ask questions. Okay. So there are lots of questions coming through. So I'm gonna start with Dominic, from Barclays, and then after that, I'll go to Sarah at Morgan Stanley.

[John Pettigrew, CEO & Executive Director at National Grid]

So, Dominic, would you like to ask your question?

[Dominic Nash, Head of European Utilities Research at Barclays]

Hi there. Yes. Thank you. It's, it's, Dominic Nash from from Barclays. Firstly, on, RIIO t three, we clearly have the DD date now in the diary for the June 25.

[Dominic Nash, Head of European Utilities Research at Barclays]

You submitted your your business plans in December with, I think, a 35,000,000,000, top tax program. And and since then, clearly, there's been a few movements in in UK policy and a few sort of projects sort of falling out and and and going sort of left and right. What do you on your conversations that you've had with Ofgem, what do you expect to see different in the DD to sort of your business plan with regards to CapEx to the real nominal split in the in the debt calculation and on the returns where I think Ofgem was 5.5% real, and I think you you you requested 6.3. And then the second question is just sort of following up on that is that the Iberian blackout a couple of weeks ago, what sort of discussions have you had with sort of with policymakers and and with the with with The UK sort of regulators on kind of what happened, what the impact here, and and what sort of opportunities or changes are are potentially needed in The UK to ensure that something like

[Dominic Nash, Head of European Utilities Research at Barclays]

that doesn't doesn't happen here? Thank you.

[John Pettigrew, CEO & Executive Director at National Grid]

Okay. Thanks, Dominic. There's quite a lot in that. So why don't I start on Rue 23? I'll ask Andy to talk about nominal debt, and then I'll come back on the, the Spain blackout.

[John Pettigrew, CEO & Executive Director at National Grid]

I mean, as you said, we made the, the business plan submission in December, and I'd say since then, we've had really productive conversations with Ofgem. As you expect, you know, we're in this sort of last few months of the RIIO t three process that has been going for, you know, two and a half years, I think. What I'd say is our focus at the moment is very much on the financial framework. You might be aware we had a roundtable with our investors and Ofgem recently, and I'd like to thank our investors who attended that, who directly, you know, reinforced the message that we've been giving Ofgem around the importance of investable framework for Rio '2 '3. Our focus continues to be as it was when we when we made the submission in December.

[John Pettigrew, CEO & Executive Director at National Grid]

You know, there are three elements to the financial framework. The first is the returns. We've been very clear that we believe that in the range that Ofgem set out, the the base return should be at the top end. And in our submission, we talked about 6.3 being an appropriate level. But also on top of that, the cash characteristics need to be right, to get the right balance of earnings growth and asset growth and also that the incentives, are there as well to get to a sensible return that's comparable to what we see internationally.

[John Pettigrew, CEO & Executive Director at National Grid]

So all of that conversations are going on as you'd expect. In terms of the investment levels, you know, in terms of ASD, which is a big part of the electricity transmission, we don't see the recent announcements impacting on that investment profile. And the 35,000,000,000 that we submitted is consistent with everything that we talked about with regards to ASD, and the 60,000,000,000. So electricity transmission makes up about 23 of the 60, different time frames, but about 23 is consistent with the 35 we submitted in the business plan. Andy, do want just talk about nominal debt?

[Andy Agg, CFO & Executive Director at National Grid]

Yes. And thanks, Dominic. Yeah. I think Ofgem were fairly clear in their SSMD about signaling the direction of travel on on moving to a sort of a nominal debt approach. We've seen nothing since then that would indicate, you know, that's less likely than it was.

[Andy Agg, CFO & Executive Director at National Grid]

Obviously, we'll have to wait and see what comes out on on the June 25, but everything we're seeing at the moment is is that, you know, remains the most likely direction of travel. But I think as John said, you you know, for us, that's that's one element of of ensuring that the total package gives us, you know, the the right balance and and including cash characteristics overall. Clearly, a move to nominal debt does, to accelerate some level of cash, but it's only a portion of, I think, of the overall level that that we we've asked for in our business plan. So, yes, that's that's what we'll be looking for on the twenty fifth.

[John Pettigrew, CEO & Executive Director at National Grid]

In terms of the the incident in Spain, Dominic, I mean, I think I think we're all waiting to see what comes out of the investigation. As far as I'm aware, there is no clarity yet on the root cause. Lots of speculation and lots of hypothesis. I mean, I do think it is massively important that given the increasing dependency society has on electricity, you know, not just for lighting, but for heat and transport going forward, that actually things like resilience are looked at very carefully. I can talk about The UK in terms of, you know, I've seen some of the hypothesis around renewables.

[John Pettigrew, CEO & Executive Director at National Grid]

And, you know, when the, National Energy System Operator was part of National Grid as the electricity system operator, you know, we started several years ago looking at, pathway products as we call them, which are effectively technical products that would be needed to support a renewable system. So things like, frequency response from different sources, voltage control, reactive power, and inertia. And I know the, you know, the national energy system operator holds a certain level of inertia on the system depending on how much renewables are there. So that standard's in place in The UK. But the reality is we need to wait to see what comes out of the investigation, what the root cause is, and then from that, we'll be able to to learn any lessons that are relevant for The UK.

[Dominic Nash, Head of European Utilities Research at Barclays]

Thank you.

[John Pettigrew, CEO & Executive Director at National Grid]

Okay. So I was gonna go to Sarah next from Morgan Stanley. And then after that, I'll go to Pavin at JPMorgan. So, Sarah, would you like to ask your question?

[Analyst]

Yes. Thank you very much. But first and foremost, John, congratulations for all you've achieved during your time at Grid. I've got two questions, please. The first one, it's slightly different, but similar vein to Dom's second question.

[Analyst]

Mine's specifically related to NESO's final recommendations and conclusion report on the North Hyde Substation fire that we're expecting by the June that you mentioned. Just wondering what you expect to see in that that's tangible for the direction of investment needs? Or maybe put differently, what would you like to see in that final report? And then secondly, a high level question, please. And given the upcoming CEO succession, I feel like it's very much obligatory to ask a reflective question.

[Analyst]

So, John, I'm curious. How would you pitch the National Grid equity story today versus how you would have pitched it on day one in the CEO seat? Thank you.

[John Pettigrew, CEO & Executive Director at National Grid]

Thank you, Sarah. You've made me laugh this morning. Nothing else. Look. Let me talk about the North Hyde incident.

[John Pettigrew, CEO & Executive Director at National Grid]

So so first of all, as you can imagine, we were we were pleased to see the interim report that came out from NESA last week. I think it was really sensible to set out the time frame, the sequence, and the next steps, as an initial sort of part of the report. We are working closely with NESA. We're providing all the information, that you can imagine that is needed for that type of investigation. I'm hopeful that the report that comes out in June will cover all aspects of of the incident.

[John Pettigrew, CEO & Executive Director at National Grid]

So as you know, from our perspective, it was a very rare event. You know, in my very long career, I can't remember a circumstance that we've had such a ferocious fire that's taken out the substation. But also power was also available into the local area until Heathrow right through that throughout two other substations. So I'm hoping it will look at the, you know, the specifics of the asset failure at the substation. It will look at broader resilience issues.

[John Pettigrew, CEO & Executive Director at National Grid]

It will look at the interaction between transmission distribution and and national critical infrastructure, and it will look more broadly around, you know, the changing nature of networks as they go forward. From this from the scope of the, the terms of reference I've seen, I think it will cover all those aspects, and we'll look forward to seeing the report when it comes out at the June. In terms of, I I I didn't quite get the question, but in terms of the, as the as I move on from National Grid, you know, the proposition that National Grid makes today to its equity investors is very clear. You know, it is very much a a a growth and dividend proposition. And as you know, we've set out for the next five years that we're looking to grow the asset base by 10%, and we're looking to grow the dividend.

[John Pettigrew, CEO & Executive Director at National Grid]

Our policy is to grow it in line with CPIH, and that very much is the focus for National Grid. I think from where I started back in 2016, you know, growth was significantly lower, back then. We were more typical, perhaps of what people expect in the utility. But as we look forward, you know, growth is an important part of the proposition. And that is all underpinned, I think, by the fact that, you know, as we said in our results today, you know, what natural grid is, it's very predictable, it's very stable, and has an incredibly resilient business model, in a world in which there's quite a lot of turbulence.

[John Pettigrew, CEO & Executive Director at National Grid]

So that proposition of growth and yield, but also stability and predictability, I think, is the key to an equity proposition for our investors.

[Analyst]

Perfect. Thank you.

[John Pettigrew, CEO & Executive Director at National Grid]

Thanks, Sarah. Okay. So we'll go to Palin, and then after that, we'll go to Mark at UBS.

[Pavan Mahbubani, Vice President - Equity Research at JP Morgan]

Hi, team. Good morning. Thank you for for taking my question. And and, John, I'd like to echo Tom and and Sarah's congratulations on on your career at National Grid. My my two questions are, firstly, you mentioned, John, in in your speech some of the measures you're taking on on affordability in Massachusetts.

[Pavan Mahbubani, Vice President - Equity Research at JP Morgan]

I guess, if you can go into a bit more detail on what you're seeing on affordability pressure in The U. S, any pressure you're seeing on returns and how your conversations are going with The U. S. Regulators and with U. S.

[Pavan Mahbubani, Vice President - Equity Research at JP Morgan]

Policymakers on this topic? And my second question is on the planning and infrastructure bill. I appreciate it may not have on your five year frame, and I think you say this in your statement. But are there any can you talk about any positives that could be there in the five year frame or or certainly beyond that, how we should think about that affecting National Grid, please? Thank you.

[John Pettigrew, CEO & Executive Director at National Grid]

Yeah. Thanks, Parvin. I mean, in terms of affordability, I mean, I think you're aware that National Grid thinks very carefully and thoughtfully around any rate case that we're doing to make sure we get the balance right between the investment that, you know, many of our regulators and policymakers wants to make and ultimately affordability. And therefore, we have lots of deep conversations with our regulators to make sure that any submission reflects that. In New York, you'll have seen that in terms of you know, if I take our latest rate case in NIMO, we got a joint proposal which is for three years.

[John Pettigrew, CEO & Executive Director at National Grid]

And within that, we've actually, smoothed out the increase in the bills over that three year period to reflect the fact that, you know, commodity prices have been quite high in The US during the winter, and therefore that's, you know, mitigated the impact for customers whilst doing the investment we need. We also set aside about $290,000,000 to support vulnerable customers over that rate case period with nearly a hundred million in the first year. So, that's us working closely with the regulator to make sure we got that balance right. In terms of returns then in New York, you know, as you saw in the joint proposal, we're actually got a joint proposal that increases our returns, I think reflecting the nature of investments that we're doing from, from nine to nine and a half percent for Niagara Mohawk. And similarly, in Downstate New York, you would have seen the three year rate case there where we saw an increase to 9.35.

[John Pettigrew, CEO & Executive Director at National Grid]

So I think the regulators are thoughtful in making sure that, you know, it is an investable proposition as we do this significant investment, but we are careful as we think about affordability. In Massachusetts, you would have seen, you know, as a reference in my speech, you know, high commodity prices during the winter meant our gas customers were struggling a bit, and then we were very happy to work with the regulator to provide a 10% discount on bills in March and April, which will then recover in the summer when commodity prices are low. And as we look forward, again, we will be very thoughtful both in terms of how do we deliver the investment needed in our in our rate case for Massachusetts Gas and how do we reflect that in affordability. And you may have seen this week actually that the the governor of Massachusetts has launched, an initial affordability bill. It's a 20 page document, and we will work through that with the governor's office and the PSC to see how we can support and contribute towards that as it goes through the sort of various machinations of committees and the senate and and congress and so on.

[John Pettigrew, CEO & Executive Director at National Grid]

So that's sort of how we think about affordability, but it's an important issue, you're quite right to raise it. In terms of billing and infrastructure, the the planning and infrastructure bill, I mean, a lot of what's in that bill are things that National Grid has been advocating for. So we're we're sort of really pleased with that the government is moving forward with that. So there's a lot in there that will streamline the planning process and make it more effective and shorter. There is some legislation in there to make the ability to challenge more focused.

[John Pettigrew, CEO & Executive Director at National Grid]

And, of course, there's, proposals for things like community benefits. There's also been a recent amendment actually to shorten the statutory consultation process that, again, could potentially take about a year out of the planning process in The UK. So we're very supportive of all of that. And in my speech, I referenced the fact that it will help to derisk, I think, some of the ASDU projects, and some of the legislation will absolutely do that. But most of the ASDU projects were already in train.

[John Pettigrew, CEO & Executive Director at National Grid]

So, you know, as you've heard, our six projects that are phase one are already have planning and are in construction. We've got eight consultations running this year. So the time the legislation goes through, we would have been through the majority of our ASD projects in terms of the planning process. So I think it really helps us as we move into the twenty thirties and beyond.

[Pavan Mahbubani, Vice President - Equity Research at JP Morgan]

Thank you.

[John Pettigrew, CEO & Executive Director at National Grid]

Okay. Thanks, Pavi. I'll go to Mark next and then, Ahmed from Jefferies. So, Mark, would you like to ask your questions?

[Mark Freshney, Executive Director at UBS Group]

Hey, John. No. So firstly, congratulations on the shareholder returns you've generated over the last nine or ten years. And looking looking forward to seeing, where you move on to once you retire from National Grid. But I have two questions.

[Mark Freshney, Executive Director at UBS Group]

One for you, John, one for Andy. John, e g l one, which you haven't mentioned, is sixteen months late, very early on in the project. It's a 2 and a half billion project. And I think Ofgem's minded, you know, from their wording in their document there. They clearly minded to give you you a penalty you and your partners a penalty for that.

[Mark Freshney, Executive Director at UBS Group]

Given, you know, you speak a lot about the framework agreements and booking out the supply chain, but the supply chain is is struggling. So how can we be sure that we're not gonna see other further delays like this sixteen months delayed to e g l one? My second question for for Andy is just on Community Wind. When we spoke previously, my understanding was National Grid has certain protections to put the project back to your partners RWE. You've written off what would seem most, if not all of it, today.

[Mark Freshney, Executive Director at UBS Group]

Is there any chance of you recovering some of the cash somehow from that? Or or or is that 300,000,000 completely a a sunk cost and now an impaired cost? Thank you.

[John Pettigrew, CEO & Executive Director at National Grid]

Thanks, Mark, and thanks for your comments as well. I mean, in terms of EG1, I don't think you you should infer anything about the other ASD projects when it, when you look at EG1. E g one actually has quite a long history, and a lot of it was developed under the Lotte process rather than the ASD process and all the regulatory frames that we put in place around that. Having said that, you know, at the point at which we were asked to take the project forward, because there was a debate about whether it was gonna be put competition or not, we immediately went out to the market to see what was available in the supply chain. And the reaction from the supply chain was they could they could support it but in a slightly different time frame.

[John Pettigrew, CEO & Executive Director at National Grid]

You've seen the consultation for Ofgem, in which they've said that they're not minded to give us the extension. But one of the things they say in the consultation is that they don't feel that we provided sufficient evidence on what the world's world supply chain looks like. So, that consultation is still live. As you can imagine, are going back to Ofgem. We believe we have significant evidence to demonstrate, that actually there was a limitation in terms of the time scales that that supply chain could deliver at the point at which we were asked to take that project forward.

[John Pettigrew, CEO & Executive Director at National Grid]

For the other ASDU projects, as you know, we've got an awful lot of things in place, including advanced procurement mechanisms and also licensability, associated with the supply chain. So I don't think you should read anything across from e g one for the other projects. We'll talk a lot more about this this afternoon at our event, but, you know, our focus at the moment is providing that data to Ofgem and the evidence to Ofgem that they require to get them comfortable that actually making a move in the date is an appropriate thing to do. Andy?

[Andy Agg, CFO & Executive Director at National Grid]

Yeah.

[Andy Agg, CFO & Executive Director at National Grid]

Morning, Mark.

[Andy Agg, CFO & Executive Director at National Grid]

Thanks for the question. I guess just to to remind you what I said in the presentation this morning, you know, we've worked very closely and continue to work very closely with our partner RWE on both the the short term decisions around the the pause in our development activity on community offshore wind, but also continuing to be alive to, you know, how that may evolve in the future, and very much, you know, looking to continue to see options to take forward that commercial opportunity. So what we've announced this morning is very much an accounting impairment, given the short term uncertainty created by some of the recent pronouncements and other activities, in the Northeast. From a county perspective, we believe it's appropriate to impair the value. To your question, it's we've fully, impaired our investment down to zero, with the $3.00 £3,000,000 that we've disclosed this morning.

[Andy Agg, CFO & Executive Director at National Grid]

But as I said, and John said in his remarks, I think we continue to view that there are likely further energy needs in in the Northeast. And, you know, to the extent that means this project comes back on, we will be, you know, very close work working with RVE to pursue that. In terms of the protective rights, I think we've always said that, yes, we do have them, but they're attached to, you know, particular milestones through the course of the project. And, of course, that will therefore be dependent on on whether those projects go ahead as to whether those rights, come into play.

[Mark Freshney, Executive Director at UBS Group]

Okay. Thank you very much, gentlemen.

[John Pettigrew, CEO & Executive Director at National Grid]

Thank you, Mark. So I'll go to Ahmed now at Jefferies and then perhaps deeper at Bernstein. So, Ahmed.

[Ahmed Farman, Head of European Utilities & Clean Energy Research at Jefferies Financial Group]

Yes. Thank you, John. And and firstly, again, best wishes from from my side as well. I have three questions. Actually, just coming back to the comments you made about affordability in in in the New York region.

[Ahmed Farman, Head of European Utilities & Clean Energy Research at Jefferies Financial Group]

I saw some some press commentary, you know, from from the New York governor yesterday, which which talks about, you know, the affordability and how sort of the bill rises sort of coming through from from rates rates reviews. And and that's obviously sort of coming despite sort of the measures that you have highlighted. So how should we think about particularly around the nine o process from here? Is there is there something more to be done? Could the process be longer from here, or does this need to be better engagement between the stakeholders on on what's actually sort of getting implemented?

[Ahmed Farman, Head of European Utilities & Clean Energy Research at Jefferies Financial Group]

So that's my first question. My second question is I would be interested in your perspective on on the other sort of sort of big debate of zonal pricing in in The UK, particularly if you think that would sort of that could play a big role in defining transmission investments into the 2030 period in The UK? And then finally, one for sort of Andy. Andy, you know, does the guidance for this year seems to be, you know, ahead of of where consensus expectations are? Is there anything specifically you will call out where you you sort of see the outlook better versus consensus?

[Ahmed Farman, Head of European Utilities & Clean Energy Research at Jefferies Financial Group]

Thank you.

[John Pettigrew, CEO & Executive Director at National Grid]

Thanks, Ahmed. I mean, in terms of I'll start with affordability and then zone within our I'll need to control the guidance. In terms of the affordability, I mean, I'll just reiterate, think, what I've said, which is we work very closely, not just with the PSC, but with the governor's office to make sure we get the balance right. And I was pleased that, you know, the joint proposal that we put forward was one that enabled us to be able to make those investments. It's about 5 and a half billion across the three years, both electricity and gas, but with a single digit increase in bills.

[John Pettigrew, CEO & Executive Director at National Grid]

And we didn't see any intervention from the governor in the same ways, that's happened with, you know, other utilities to be to be to be blunt. So, I think we've tried to get the balance right recognizing what's going on in New York. And as I said, there's quite a major investment in supporting vulnerability with the $290,000,000 as well, which has been supported by PSC staff. So, I think we're in a reasonable shape, but we're very conscious around that. In terms of zonal pricing, look.

[John Pettigrew, CEO & Executive Director at National Grid]

I mean, we spend a lot of time thinking about zonal pricing. It doesn't immediately impact on national grid, to be honest, and people are talking about implementation because it's incredibly complex over a sort of five year period. So something for the early twenty thirties, so it's not gonna impact on our £60,000,000,000 capital investment program. Lots of debate in the industry as everybody's aware. I mean, we can see that there are potential advantages for zonal pricing in terms of things like price discovery, locational signals, and resolution of operational constraints.

[John Pettigrew, CEO & Executive Director at National Grid]

But at the same time, we can also see there's just a huge amount going on in the industry at the moment with retail reform, connections reform, the rollout of smart meters, the scale of investment right across the the industry that requires a degree of sort of stability and certainty so that people are comfortable with that. So I think the bar for any incremental change on top of what's already going on should be very, very high. And my sense at the moment is that probably now is probably not the right time for introducing a major reconstruction of how the market operates through zonal pricing and that, you know, in the twenty thirties, the networks will look very different. And I think maybe that's the time when you might potentially look at the advantages of zonal pricing. But to do it today, I think, it just doesn't feel like the right time.

[John Pettigrew, CEO & Executive Director at National Grid]

Andy?

[Andy Agg, CFO & Executive Director at National Grid]

Yes. And and morning, Ahmed. Thanks for the question. Yeah. As as you'd be aware, this this is the first time we're giving formal in year guidance for FY '26.

[Andy Agg, CFO & Executive Director at National Grid]

Previously, we've obviously given our five year frame, where we've guided to the six to 8% CAGR, over the five years. And I I think previously, we said that there was there was no reason we wouldn't expect sort of things to be relatively linear. So no. There are no real surprises for us. As you see, we've guided to being within the six to 8% range next year, or in FY '26, albeit towards the lower end, with the impact of of the dollar move.

[Andy Agg, CFO & Executive Director at National Grid]

That will continue to come from investment driven growth in our businesses, and obviously, some of the new rate cases coming in, in The US, as John's mentioned as well. So, you know, continued asset growth in The UK and asset and rate case growth coming from our US businesses.

[Ahmed Farman, Head of European Utilities & Clean Energy Research at Jefferies Financial Group]

Thank you.

[John Pettigrew, CEO & Executive Director at National Grid]

Thanks, Ahmed. So let me go to Deepa at Bernstein. Then after Deepa, I'll go to, Martin at Bank of America. So, Deepa?

[Deepa Venkateswaran, Senior Analyst at Bernstein]

Thank you so much. Congratulations, Sean, and thank you so much for your leadership. The two questions that I had, one was on ED underperformance. So you're now guiding that the outperformance is lower. Obviously, this year, you have a storm impact, but could you walk through what exactly is the cost item that's deviating on the RPEs?

[Deepa Venkateswaran, Senior Analyst at Bernstein]

And is there any sort of read across to v o t three? Could something similar kind of pop up there, and what mechanisms will you use that? And my second question is on your Rio T three plan, out of the 35,000,000,000 of CapEx, roughly 9,000,000,000 or so is is unconfirmed sort of projects. So was just wondering, given everything else you've been seeing with the connections just for twenty thirty clean power plans, do you expect a substantial chunk of that 9,000,000,000 to also get implemented during riot three, and I do recognize that your your five year payment, the t three frame is is off by a couple of years. Right?

[Deepa Venkateswaran, Senior Analyst at Bernstein]

So, where would you see that that 35,000,000,000 realistically, being delivered in riot three? Thank you.

[John Pettigrew, CEO & Executive Director at National Grid]

Okay. Sure.

[Andy Agg, CFO & Executive Director at National Grid]

Yeah. Good morning, Deepa. Thanks for the question. Yes. So as as we said this morning, I think we've seen two headwinds, flowing through the electricity distribution ROE, for the for the year.

[Andy Agg, CFO & Executive Director at National Grid]

One was the, due to storm Dara, where we've seen, you know, pretty much unprecedented, certainly in recent memory, severity of that in the storm's impact, and that's flowed through both in terms of direct costs, but also in terms of how it impacts the incentive, the customer incentive performance and and connections incentives. That's about, you know, about half of the the impact, and then the other half has come through from the RPEs. And the the issue there, again, I said in my presentation, is is the way the indices are set up, within ED two, means that effectively, they're they're they're more generic indices, and what they've what they've done is is performs those indices hasn't really tracked the cost experience that we've seen. I think we view this this as a sector wide issue. We've you know, if you look across some of the other DNOs, and it is definitely something that we would look to, you know, take forward into the the conversations with Ofgem around ED three, obviously, very early stages there.

[Andy Agg, CFO & Executive Director at National Grid]

We will continue to to look to offset that. You've seen in our guidance that we're we're guiding towards 50 basis points of outperformance next year and and growing towards 100 by the end of ED two. In terms of your question around is there a read across, to transmission? No. Everything we're seeing, the way the indices are set up in transmission is is they much better relate to the types of spends that that we we have, and the indices there demonstrating that the RP mechanism is doing its job, and making sure there is there is sort of protection in in the way allowances shift, within the transmission business.

[John Pettigrew, CEO & Executive Director at National Grid]

And in terms of, RIIO T3, Deepa, I mean, I'd say that, you know, I think I said in my speech that, you know, of the 60,000,000,000, 20 3 billion is ET, and we still believe that is, you know, our best view of what it's gonna look like between now and 2029. Beyond that, we're still comfortable with the 35 that we set out in our in our in the Rio t three business plan. I think one of the key things over the next twelve months that will give us a little bit more solidity at the back end of Rio t three is the connections reform process. So as you know, Ofgem have now made the decision on connections reform moving from a first come, first served to a first ready and needed for CP 2030. Over the course of this year, NISO and the electricity transmission company, companies, including National Grid, have to now reorder the queue, and it will be done in sort of chronological order starting with '27, '20 '8, '20 '9, '30, and that needs to be done by December of this year.

[John Pettigrew, CEO & Executive Director at National Grid]

So I think that will help to give us a better indication of the makeup of the RIIO two three plan. As you recall, the way it was submitted to Ofgem was in twos two parts. There was 11,000,000,000 that was absolutely certain and then 24,000,000,000 that, you know, required some work to be done on it. So, at the moment, we're so comfortable with that, but I think the connections reform process will give us a bit more solidity at the back end. We'll be able to update once we've done that.

[John Pettigrew, CEO & Executive Director at National Grid]

So with that, I'm gonna move to Martin, which I think is the last question that we have. So, Martin, over to you.

[Marcin Wojtal, Director - Global Equity Research at Bank of America Merrill Lynch]

Yes. Thank you for taking my questions, and congratulations on a very distinguished career, with National Grid. So my first question is related to the risk of, of higher tariffs. In The US, you mentioned that 95% of the supply chain is domestic. But could you give us some examples what is included in that 5% that is not domestic?

[Marcin Wojtal, Director - Global Equity Research at Bank of America Merrill Lynch]

And what actions have you taken or you could be taking to mitigate any potential risks that could occur? And my second question is actually related to the guidance you have provided for the current financial year. So you're guiding for net financial expenses to be only increasing by 40,000,000 I believe, whereas you expect net debt to increase by as much as 6,000,000,000. So why such a limited increase in financial expenses despite significantly higher net debt? Thank you.

[John Pettigrew, CEO & Executive Director at National Grid]

Okay. Thanks, Marcin. I'll take the first, and then I'll let Andy take the guidance question. Mean, terms of high tariffs, just to reiterate, so we don't see it having a significant impact, partly because more than 90% of, the products and services that we source in The US are domestic. And maybe just go down a level.

[John Pettigrew, CEO & Executive Director at National Grid]

We do, we do have a supply chain for things like pull top transformers in Mexico, and, we do import some steel from other countries including India and Canada. But we have the opportunity, as I said, even at the aggregate level, it's not particularly material. And then there are mitigations both through regulation, but also for looking alternative sources as well. There are plenty of supply chain opportunities for things like pull top transformers, in The US should we need to do that. So, yeah, so those are the those are sort of some of the examples.

[John Pettigrew, CEO & Executive Director at National Grid]

Andy?

[Andy Agg, CFO & Executive Director at National Grid]

Yes. And, again, thanks for the question. Yeah. So I think there's there's two things to to factor into thinking about the guidance we've given on on overall, financing costs. One is, of course, as as we continue to invest heavily in our capital program, there will that means that although there will be increased funding costs, there will be a degree of increase in capitalized interest as well, which offsets the sort of the gross impact, from a funding perspective.

[Andy Agg, CFO & Executive Director at National Grid]

And then secondly, and you'll have seen that we were very explicit that our net debt increase, excludes the potential proceeds from our disposals, both the completion of the NG renewables business, but also the the planned sale of the of LNG grain. And therefore, you know, effectively our guidance on the interest line does make a a net assumption for the impact of those.

[John Pettigrew, CEO & Executive Director at National Grid]

Thanks, Andy. There doesn't seem to be any more questions, so let me just say, first of all, thank you, everybody, for your kind words and comments. I guess our key message today is there's been strong strong performance in the first year of our five year plan. We're certainly seeing the benefits of the resilient, business model we have here at Nash Grid, which delivers stable and predictable outcomes. We're very well positioned with all the work that we've done in the first year to deliver on the five year sixty billion pound capital investment plan.

[John Pettigrew, CEO & Executive Director at National Grid]

So with that, I'm gonna thank everybody for joining us, and I hope for those who are based in London, we'll see some of you this afternoon for our discussion in more detail on the capital investments both in The UK and in The US. Thanks very much, everybody.

Participants

Executives

• Angela Broad, Director of Investor Relations
• John Pettigrew, CEO & Executive Director
• Andy Agg, CFO & Executive Director

Analysts

• Dominic Nash, Head of European Utilities Research at Barclays
• Analyst
• Pavan Mahbubani, Vice President - Equity Research at JP Morgan
• Mark Freshney, Executive Director at UBS Group
• Ahmed Farman, Head of European Utilities & Clean Energy Research at Jefferies Financial Group
• Deepa Venkateswaran, Senior Analyst at Bernstein
• Marcin Wojtal, Director - Global Equity Research at Bank of America Merrill Lynch