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National Grid PLC (NG.)

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Thursday 20 May, 2021

National Grid PLC

National Grid 2020/21 Full Year Results Statement

RNS Number : 2143Z
National Grid PLC
20 May 2021
 

 

Building a platform to lead the energy transition

London | 20 May 2021: National Grid, a leading energy transmission and distribution company, today announces its Full Year results for the period ending 31 March 2021.

John Pettigrew, Chief Executive, said:

"In the past year we have successfully navigated the challenges of COVID-19, delivered over £5 billion of capital investment and achieved a solid underlying financial performance. This is testament to the strength and resilience of our business model and the unwavering commitment of our employees.

 

We also announced the transformational acquisition of WPD which will ensure National Grid is at the heart of the energy transition in the UK and enhance the future growth profile of the Group. National Grid has an exciting future, with numerous opportunities in the UK and US to provide energy security and support the delivery of net zero. Our critical role in the energy sector, alongside our position as a principal partner at COP26, provides us with a unique opportunity to call for more ambitious action towards a clean energy future and a strong platform from which to generate value for all our stakeholders.

 

Our confidence in the Group's prospects is reflected in the ambitious five-year outlook for capital investment, asset growth and earnings, which we are announcing today."

Financial Summary

Year ended 31 March - continuing operations

 

 

Statutory results

 

Underlying[1]

 

 

 

2021

2020

% change

 

2021

 

2020

% change

 

Operating profit (£m)

 

2,895 

 

2,780 

 

%

 

3,283 

 

 

3,454 

 

(5)

%

 

Profit before tax (£m)

 

2,083 

 

1,754 

 

19 

%

 

2,407 

 

 

2,493 

 

(3)

%

 

Earnings per share (p)

 

46.6 

 

36.8 

 

27 

%

 

54.2 

 

 

58.2 

 

(7)

%

 

Dividend per share (p)

 

49.16 

 

48.57 

 

%

 

49.16 

 

 

48.57 

 

%

 

Capital investment (£m)

 

5,047 

 

5,405 

 

(7)

%

 

5,047 

 

 

5,405 

 

(7)

%

 

3,523 million weighted average shares for 2020/21 (2019/20: 3,461 million).

Highlights

Transactions progressing, WPD acquisition approved by shareholders - we expect WPD completion by July.

Regulatory milestones reached with the RIIO-2 Final Determination and Joint Proposal for KEDNY-KEDLI.

COP26 principal partner and new Scope 3 targets set for the Group.

Statutory operating profit up 4% to £2.9 billion principally driven by environmental exceptional charges made in the prior year, partly offset by increased under-recoveries and higher storm costs.

Solid financial performance with underlying operating profit down 5% to £3.3 billion primarily driven by the impact of COVID-19.

£5.0 billion of capex across the Group, including continued investment in UK and US critical infrastructure and the commissioning of IFA2 between the UK and France.

Recommended final dividend to bring full year dividend to 49.16p, up 1.2%, in line with policy.

Financial Outlook and Guidance

Financial outlook over the 5 year period 2020/21 to 2025/26:

Total cumulative capex of £30-£35 billion;

Asset growth CAGR[2] of 6-8% backed by strong balance sheet;

Driving underlying EPS CAGR of 5-7%;

Credit metrics to remain within current rating thresholds.

This guidance is based on the inclusion of WPD, the sale of NECO (Rhode Island) completing in Q1 of CY2022 and the sale of a majority stake of Gas Transmission being completed during FY2022/23.

Contacts

 

Investor Relations

Nick Ashworth

 +44 (0) 7814 355 590

Angela Broad

 +44 (0) 7825 351 918

Jon Clay

 +44 (0) 7899 928 247

James Flanagan

 +44 (0) 7970 778 952

Caroline Dawson

 +44 (0) 7789 273 241

Peter Kennedy

 +44 (0) 7966 200 094

Media

Molly Neal

 +44 (0) 7583 102 727

Surinder Sian

 +44 (0) 7812 485 153

Teneo

Charles Armitstead

+44 (0) 7703 330 269

Webcast details

 

Management will host a live webcast and Q&A at 09:15 (BST) today. The webcast link is https://streamstudio.world-television.com/786-1014-28364/en (registration required). Please use this link to join via a laptop, smartphone or tablet. Participants can register to ask a question via the webcast screen. A replay of the webcast will be available soon after the event at nationalgrid.com/investors

For participants unable to join the webcast the presentation is available in audio-only using the following details:

UK dial-in numbers

 +44 (0) 203 936 2999 (Local)

US dial-in numbers

 +1 646 664 1960 (Local)

All other locations

 +44 20 3936 2999

Access Code

 131 833

The 2021 Annual Report and Accounts (ARA) is expected to be publicly available on 8 June 2021. You can view or download the ARA from National Grid's website at nationalgrid.com/investors or request a free printed copy by contacting [email protected]

 

 

 

 

 

Use of Alternative Performance Measures

Throughout this release we use a number of alternative (or non-IFRS) and regulatory performance measures to provide users with a clearer picture of the regulated performance of the business. This is in line with how management monitor and manage the business day-to-day. Further detail and definitions for all alternative performance measures are provided on pages 69 to 80.

 

 

 

 

 

 

2020/21 OVERVIEW

A good performance despite the challenge of COVID-19

In 2020/21, National Grid delivered good operational progress with high levels of network reliability across all our service territories - this despite the significant challenges throughout the year from COVID-19.

 

During the year, we achieved a Lost Time Injury Frequency Rate (LTIFR)[3] of 0.1, in line with our Group target of 0.1, and an improvement on prior year. In the US, we achieved an LTIFR of 0.12 compared to 0.16 in the prior year. Tragically, one of our US contractors lost his life in November at our Investment Recovery Center in Syracuse, New York. We immediately initiated an investigation into the cause, as did the contractors, and we have reviewed procedures to ensure that lessons learned are shared extensively across the Group. National Grid Ventures (NGV) saw LTIFR rise to 0.15, compared to 0.05 in the prior year, through three minor site accidents. In the UK, we delivered our best ever year of safety with a LTIFR of 0.04 compared to 0.07 in the prior year.

 

Across the Group, capital investment decreased by £210 million at constant currency to £5,047 million, a decrease of 4% (or 7% at actual exchanges rates). This decrease was principally driven by lower UK Gas Transmission spend (completion of the River Humber Gas Pipeline Replacement Project); lower interconnector capex and non-recurrence of the National Grid Renewables (formerly Geronimo) acquisition for NGV; partially offset by higher US spend on network repairs following increased storm activity, increased US transmission project spend, and higher capital spend on UK Electricity Transmission projects (Hinkley-Seabank and London Power Tunnels 2). When combined with RPI inflation, capital expenditure drove Group asset growth of 5.6%.

A strong operational response to COVID-19

Across the year, COVID-19 has had a significant impact on the way we work. As the crisis unfolded, we successfully implemented business continuity plans in the UK and US to keep our employees safe, to ensure the safety and well-being of our customers, and to maintain network reliability across the communities we serve.

 

In the UK, the March 2020 lockdown meant there was an initial suspension of our capital programmes allowing us to put appropriate arrangements in place such as PPE and social distancing. Across the year, our capex programme was largely unaffected by COVID-19 as we worked closely with contractors and suppliers across all our projects to minimise delays, including major projects such as the London Power Tunnels 2, the IFA2 and North Sea Link interconnectors, and the Hinkley-Seabank connection. During the summer, electricity demand fell on occasions to 20% below expected levels with zero carbon sources making up their largest ever share of the power mix. For our Electricity System Operator (ESO) business, this meant our control room engineers taking more actions, on more days, increasing and decreasing sources of power to maintain system stability and security.

 

In the US, our COVID-19 Health and Safety Plan served as a guideline for all employees and contractors throughout the year. We have ensured that safety expectations have been made clear for new ways of working, allowing us to deliver our critical investment whilst limiting the impact of the pandemic on our capital delivery programme. Updated working guidance has continued for our field force including limits on team sizes and single occupancy in vehicles. Our teams have continued to reconnect customers speedily during a year of significantly increased storm activity, working successfully through lockdown and social distancing requirements. We also conducted more than 32,000 virtual home energy assessments in New England when in-person home energy assessments were suspended due to COVID-19.

Supporting our communities

Throughout the year, our employees have continued to support our communities through volunteering and providing time to support charities and the most vulnerable. As part of this, we set up Grid for Good to help address the effects of the economic downturn in the UK and US which has seen youth unemployment double during the pandemic.

 

In the UK, the Company made donations to the National Emergency Fund and Trussell Trust, and we donated 400 tablet devices to University Hospitals Birmingham. National Grid was also one of 200 signatories to an open letter from UK business leaders to Government calling for the alignment of economic recovery plans with the UK's wider environmental and climate goals, and for 100,000 jobs to be created in the energy sector as we work towards net zero.

 

In the US, the Company has provided economic development grants to seven Western New York initiatives to grow the regional economy following COVID-19. Financial donations were made to support hunger relief and services for people in need and struggling due to the impact of the pandemic. We also donated to Feeding America's hunger action month, a partnership with Feeding America who support over 45 food banks across Massachusetts, New York and Rhode Island. This is an example of the Company's ongoing efforts to support local communities with charitable donations in the US since the beginning of the pandemic.

Supporting our customers

Throughout the year the Company has continued to provide ways to help customers manage their bills. In the US, we suspended our debt collection and customer terminations resulting in lower customer collections and additional provisioning for doubtful debts. As part of our upstate New York rate plan filing, we proposed up to $50 million in COVID-19 relief to support our most economically vulnerable customers as well as businesses struggling from the financial impact of the pandemic. We also decided to postpone by three months our Niagara Mohawk filing for new rates in upstate New York. Our response to the COVID-19 pandemic has also led to improvements in customer satisfaction. In Q4 2020, the Cogent Energy Report, a national survey of 140 US utilities, ranked our response to the pandemic as fifth out of twenty five large Eastern US electric utilities.

 

In the UK, we took a leading role in the industry, actively supporting Ofgem's measures to protect customers by relaxing network charge payment terms for suppliers and shippers facing cash flow challenges as a result of COVID-19. The procurement team also kept in regular contact with our critical suppliers to ensure early identification of potential supply chain issues and to ensure the necessary support was available where required.

Financial impact on our business

We previously guided that the impact of COVID-19 on 2020/21 underlying operating profit was expected to be around £400 million. Our teams have worked hard to mitigate COVID-19 related costs throughout the year, and we are pleased that the estimated out-turn is £355 million (before cost recoveries), below the expected impact we previously guided to.

 

In addition, we have recognised £59 million as revenue recovery for the commodity portion of some of our COVID-19 bad debts. Therefore, our year end underlying operating profit impact from COVID-19 is £296 million, with the broad areas driving this remaining unchanged. Our estimated impact for each is as follows: 

 

a residual bad debt cost of £120 million;

a shortfall of revenue under existing rate plans of £78 million, principally through the suspension of late payment fees in the US, fewer US customers requesting 'protected status' due to the moratoriums on disconnections, and lower customer income in the UK;

•   a £70 million impact from delays to agreeing a settlement for our filing for new rates in KEDNY and KEDLI, downstate New York; and 

net direct costs of £28 million relating to enabling safe working (PPE, cleaning, sequestering staff, IT for remote access) and costs associated with delays to a number of planned capex works.

 

We also guided to a cash flow impact from COVID-19 of up to £1 billion. The estimated cash impact for the full year is around £600 million. As our regions emerge from COVID-19 during FY2021/22, we continue to expect an impact to be felt from weaker demand, some lower revenues and lower cash collection from our US customers. As we have guided previously, we remain confident that we will be able to recover a majority of these COVID-19 related costs either through existing regulatory mechanisms or through separate filings.

 

Operational and regulatory progress in 2020/21

Across the Group, we achieved an RoE of 10.6% in 2020/21, down 140 basis points against prior year (2019/20: 12.0%[4]). This was principally driven by a year-on-year fall in the US Regulated RoE through additional impacts associated with COVID-19 and a significant increase in non-deferrable storm activity. UK Transmission RoE was broadly similar to prior year.

 

We have continued to make good progress in our US regulatory strategy as we align our rate filings and agreements with the environmental goals of the states where we operate. We have filed a Joint Proposal for new rates for our downstate New York businesses KEDNY-KEDLI, and during the year filed for new rates for Niagara Mohawk in upstate New York and for our Massachusetts Gas business. In the UK, we have accepted the majority of the RIIO-2 Final Determination and we have continued to make good progress on our interconnector and renewable portfolios.

A year of continued growth in the US regulated business

We achieved good operational performance across our US regulated business during 2020/21 with an electric distribution network reliability of 99.92%, despite the significant challenges of COVID-19 and increased storms. In addition, investment in the safety and reliability of our US networks has continued, with capex increasing year-on-year.

 

During the year, the financial performance of the US regulated business was impacted by additional costs of COVID-19, and a greater number of storms, with our achieved RoE decreasing by 210 basis points to 7.2% (excluding COVID-19 related bad debts). Adjusting for these headwinds, and the impact of rate case delays, the RoE would have been 8.6% or 92% of the allowed return.

 

The level of major and minor storm activity increased significantly across our service territories during the year, with the number of major storms more than doubling to 36, up from 15 in the prior year. In the face of this challenge, we delivered an excellent record in reconnecting customers across our service territories affected by storms. In October, we saw our service territories experience the third most impactful storm in the last 15 years. Over 550,000 customers lost power in New York during this storm, but we managed to reconnect 95% in less than 72 hours and avoided incurring any penalties or fines. Our operational response to increased storms has continued to be strong, particularly with the need to manage our Incident Command Structure remotely through COVID-19 restrictions.

 

As a result of this increased activity we saw deferrable storm costs of $201 million, up from $98 million in the prior year, and non-deferrable storm costs of $168 million, up from $74 million incurred in the prior year. The increase in non-deferrable storm costs is related to the higher number of minor storms driven by both increased activity and the fact that our restoration performance meant fewer storms met the classification of 'major storm'. To address this, we are taking a proactive approach that includes proposing new minor storm thresholds and funding levels in current and future rate cases, continued investment in network resiliency, enhancing our strategic planning, and adopting new technology to optimise our performance.

 

The severe weather conditions in 2020 caused extensive tree damage and impacted our electric infrastructure and reliability performance in comparison to other years, particularly in Massachusetts. Across the north-east region, the state was the most severely impacted and as a result we missed our electric service reliability targets for the year. We estimate that we will incur a service quality penalty of approximately $14 million in CY 2022. We are committed to providing a safe and reliable service and meeting our customers' expectations and we will continue to work to improve our reliability performance. Initiatives include expanding and enhancing our vegetation management programs, adopting new technology to optimise our operational performance, and engaging with outside experts to perform a study of weather impacts on our system. We expect these initiatives to improve performance and better manage the impact of severe weather events going forward.

 

Our US Regulated business invested $4.3 billion in the year, up 4% on prior year (at constant currency), helping to drive strong rate base growth of 8% for the regulated business. This increase and delivery of our capital investment programme was despite the impact of COVID-19 and the requirement to reschedule our capex programme at the beginning of lockdown in the spring of 2020. Around half of this capex, $2.1 billion, was across our gas distribution networks, of which 85% was mandated for safety and reliability purposes. This includes our Leak-Prone Pipe Replacement programme which this year saw a further 350 miles of pipeline replaced, above our target of 300 miles. This programme has a further 15-20 years to run across our service territories and is critical not only to replace ageing infrastructure but also to ensure continued reductions in methane leakages and emissions.  

 

We have also made good progress in our US electricity transmission business. In April, the New York Power Authority selected National Grid as a partner in the Northern New York Priority Transmission Project (NNYPTP). This project will rebuild a 100 mile transmission line which will harden the resiliency of the power grid and support the state in meeting its clean energy goals by bringing renewable generation from upstate to demand centres in downstate New York. Our capex commitment is estimated to be $500 million over a period of four years, and when complete the line is expected to help avoid 1.2 million tonnes of CO2 emissions each year.

 

In March, we announced the sale of NECO, our Rhode Island gas and electric distribution and transmission business, to PPL as part of the proposed WPD transaction. We expect to receive regulatory clearances for the sale by the end of our financial year.

Regulatory Progress

We continued to make good regulatory progress during the year and we are pleased to have reached agreement on a Joint Proposal with New York Public Service Commission (PSC) Staff for new rates in KEDNY and KEDLI, our downstate New York gas businesses. The proposal, filed in May, is for a three-year settlement for 2020/21 through to 2022/23 and includes an RoE of 8.8%, and capital expenditures of $2.0 billion for KEDNY and $1.3 billion for KEDLI over the term of the rate plan. There is an option to extend the plan for a fourth rate year with a net plant capital tracker if we decide not to file for new rates towards the end of the proposed three-year rate plan. In addition, the proposal provides funding for hydrogen blending research in New York, provision for geothermal projects as a long-term non-pipe alternative, and funding for Renewable Natural Gas (RNG) projects. This investment will help further our ambitions to provide cleaner gas in the long-term, helping the state reach its environmental and emissions goals whilst continuing to provide customers with affordable heating.

 

One of the key reasons for extended discussions with the New York PSC has been the shaping of the impact on bills and the mitigation of costs to the customer, particularly in light of the current economic backdrop in New York and the impact of COVID-19 across the state. The Company, the New York PSC and interested parties have made this a key priority during discussions and, as such, the proposal includes a zero per cent increase in bills in the first rate year (2020/21), and then 2% p.a. for the following two years for KEDNY, and 1.8% p.a. for KEDLI. We are therefore pleased that the proposal will ensure safety and reliability investment continues across the gas networks, provides for investment in clean gas pilot projects, but also mitigates the impact on customer and end-user bills. We expect a final decision from the New York PSC later this summer.

 

In July, we filed for new rates for Niagara Mohawk (NIMO), our electric and gas business in upstate New York. We originally planned to file for new rates in April but decided to delay the filing following the initial impact of COVID-19. It represents a one-year filing, with revenue data submitted for two additional years to help facilitate a multi-year settlement. In addition, it includes investment to support affordable decarbonised heating, including the expansion of RNG to help the state's environmental goals, and maintains a focus on managing customer affordability. Settlement discussions for the filing are underway with new rates expected to become effective in July 2021.

 

In November, we filed a request with the Massachusetts Department of Public Utilities (DPU) to update gas distribution rates for our Massachusetts Gas business. The rate filing requested a $139 million increase in revenue to cover increased operating costs and core investments, and a Return on Equity of 10.5%. The Company also proposed a new Performance Based Rate Mechanism (PBRM) that will link annual revenue increases to inflation similar to that agreed for our Massachusetts Electric business in 2019. The filing also proposed funding for projects to decarbonise the gas network, including hydrogen, geothermal, RNG, and demand side measures. Ultimately, our regulator determined that these proposals should be considered as part of separate proceedings. Our geothermal demonstration project is currently before the DPU and our demand response measures are under consideration as part of our energy efficiency programmes. The ongoing future of gas proceeding, opened in October 2020, will inform our future proposals for hydrogen and RNG. We expect new rates in our gas distribution filing to become effective from October 2021.

The Future of Gas - New York

In March, National Grid, Con Edison and New York City published a comprehensive analysis looking at scenarios to reduce emissions and reach the City's net zero target by 2050. The landmark study, "Pathways to Carbon-Neutral NYC: Modernize, Reimagine, Reach", is the first of its kind to bring utilities and the New York Mayor's Office together to demonstrate the coordination required to reach carbon neutrality at scale. Its findings will inform future City policies and programmes, and will inform priorities for National Grid and Con Edison in the communities we serve. The study makes key findings across a range of sectors, including building electrification, transport, industrial efficiency and heating. One of the findings concerned the future of gas in New York City and the existing gas distribution network. The study supports low carbon gas (including RNG and hydrogen) as an important emission reduction strategy for end users that do not electrify their heating. It finds that low carbon gas is necessary in all scenarios, and though the study estimates falling gas demand across all sectors by 2050 there remains a continued reliance on the gas network through 2050 and the need to continue investing to keep the gas system safe and reliable.

 

In downstate New York, we continue to widen our energy efficiency and demand side response measures to ensure gas supply meets demand, as agreed with the PSC last year. We have also made good progress on our efforts to expand existing on-system Compressed Natural Gas (CNG) and Liquefied Natural Gas (LNG) facilities. As a result, we are confident in our ability to serve new customer connections over the next several winters. We continue to consider other potential alternatives and contingencies for meeting customers' long-term energy needs, including regular updates of demand projections, identifying new supply capacity and on-system projects, and further expansion of energy efficiency and demand response programs. 

The Future of Gas - Massachusetts

In October 2020, the Massachusetts DPU issued an order directing state local gas distribution companies (LDCs) to jointly hire one or more independent consultants to review the Executive Office of Energy and Environmental Affairs "Massachusetts 2050 Decarbonization Roadmap" (published in December 2020). The consultants were required to identify any pathways not examined in the Roadmap, and the feasibility of all pathways for each LDC. Massachusetts has committed to achieving net zero greenhouse gas emissions by 2050, and the Roadmap was designed to support that commitment by modelling eight potential pathways: (1) all options; (2) limited offshore wind; (3) limited efficiency; (4) pipeline gas (including low-carbon fuels); (5) 100% renewable primary energy; (6) no thermal; (7) regional coordination; and (8) distributed energy resources breakthrough. The five Massachusetts LDCs include National Grid, Eversource, Berkshire Gas Company, Unitil, and Liberty Utilities.

 

The DPU order set deadlines for LDCs, including (1) progress to date as of 1 March 2021; (2) a second status update due 1 September 2021; and (3) a proposal by each LDC to be filed with the DPU by 1 March 2022 which includes the LDC's recommendation and plans for helping Massachusetts achieve its 2050 climate goals. LDC plans will be supported by the consultants' report analysing pathways and incorporating feedback from a stakeholder process. National Grid's first status report was filed with the DPU in March. The consultants have begun the process of analysing the Roadmap, and stakeholder meetings began in May. 

A strong end to RIIO-1 in the UK

The UK has delivered another year of strong operational performance reflected in an excellent network reliability of 99.9999% for Electricity Transmission, and 100% for Gas Transmission. We also achieved an RoE of 12.6% for the UK business, meaning that the weighted average outperformance for the UK, in the final year of RIIO-1, is within our forecast range of 200 to 300 basis points.

 

In 2020/21, we invested £1.2 billion in our UK Electricity and Gas Transmission networks, broadly in line with prior year. Electricity Transmission capex increased principally through higher spend on the Hinkley-Seabank connection, the London Power Tunnels 2 project, and SmartWires, a project that aims to increase power transfer capability to enable greater volumes of renewable generation across the existing network, reducing the need for us to build new lines. Gas Transmission capex decreased on prior year as expected, driven primarily by lower spend on programmes including Peterborough and Huntingdon gas compressor upgrades, and on the Feeder-9 gas pipeline under the Humber Estuary where tunnelling was completed during the year. This means that our total investment across the 8 years of RIIO-1 reached £12.5 billion, generating over £850 million savings for customers across the same period[5].

 

The UK cost efficiency programme that we announced in 2018 continues to deliver a more efficient and agile business as we move into RIIO-2. In 2020/21, the programme enabled us to deliver a further £34 million reduction in controllable costs for Electricity Transmission compared to the prior year, and £15 million for Gas Transmission. Together with the £72 million of efficiency savings in 2019/20, we have now exceeded the £100 million savings target we set for the UK business two years ago.

 

We have also announced our intention to sell a majority stake in our UK Gas Transmission business. We are making good progress in preparing the business for the sale process which we expect to launch in the second half of CY2021.

RIIO-2 progress

This year has seen the conclusion of the RIIO-2 process in which we have accepted the majority of Ofgem's Final Determination (FD). Throughout the process, we have engaged extensively with a record number of stakeholders to deliver Business Plans for Electricity Transmission, Gas Transmission and the Electricity System Operator (ESO). The key foundations for these plans have been to ensure continued investment in safety and network reliability, help the UK reach its net zero and emissions targets, and minimise costs to the consumer. Whilst we have accepted the majority of the FD outcome, we have continued our technical appeal to the Competition and Markets Authority (CMA) on the cost of equity and outperformance wedge.

 

Following the September consultation deadline on the Draft Determination (DD), we continued to engage constructively with Ofgem at all levels. This included CEO and Chair meetings, and October's open meetings, to create the right incentives to drive the investment and innovation needed to allow the UK to meet its clean energy ambitions at an acceptable cost to consumers. In addition, as part of our response to the DD, we provided over 22,000 pages of extra engineering evidence to justify a higher baseline totex, and the work proposed in our Business Plans, to ensure asset health and system reliability is maintained across RIIO-2.

 

In March, we accepted the overall FD package for the Electricity System Operator, and accepted most of the package for the Electricity and Gas Transmission businesses. Whilst we welcomed the significant movement in totex allowances and greater flexibility around future net zero investment for Electricity and Gas Transmission, we believed that the methodology Ofgem used to set the cost of equity is wrong. For example, it ignored evidence for higher total market return and risk-free rate levels, and the higher risk of the energy transmission business compared, for example, with water utilities. We also maintained the view that the outperformance wedge, a downward adjustment to allowed returns in expectation of future outperformance, is conceptually and practically flawed. Consequently, we submitted a technical appeal on these two points to the CMA, which has since confirmed the appeal will proceed. We anticipate provisional CMA findings in August with Final Determinations in October. 

 

We expect to invest around £10 billion of capex through the course of the RIIO-2 five-year price control across our electricity and gas transmission networks. Of this, around £8 billion will be investment in Electricity Transmission asset health, system reinforcement to facilitate offshore renewable generation and other new onshore system connections. At nearly £2 billion per annum on average for our transmission networks, investment will be substantially higher than the RIIO-1 price control. 

Electricity System Operator (ESO)

During the year, national lockdowns caused unprecedented, record low levels of electricity demand. This, coupled with periods of high renewable generation output, made keeping supply and demand in balance more difficult. To overcome these challenges, the ESO developed a series of new electricity market services to help balance the system. In May 2020, the ESO launched Operational Downward Flexibility Management - a temporary marketplace to reduce output from renewable generation - and in September 2020, Dynamic Containment went live - a new fast frequency response service. In collaboration with industry, the ESO made progress on our Pathfinder projects, identifying how we can replace the voltage, stability and constraint management services provided by fossil fuel generation with new, greener approaches.

 

We are pleased that Ofgem agreed to fund the ESO RIIO-2 business plan for the activities we will deliver, approving £504m (98%) of the costs we set out for the first two years. Ofgem has listened to our feedback and our stakeholders' feedback and made changes to the regulatory framework that will set us up to transform our role, deliver our ambitious plans and facilitate the transition to a zero-carbon electricity system. Over the five-year RIIO-2 period, the activities set out in our business plan will generate net benefits of around £2 billion for consumers, lowering average annual consumer bills by around £3.

 

In January, Ofgem published its review of the Great Britain Energy System Operation which recommended an independent system operator, fully separate from National Grid. We are working closely with the government, regulator and industry to explore what changes will be needed to achieve net zero, to ensure system reliability, and to ensure fair recompense for shareholders should the decision be made to pursue this recommendation.

Further progress in National Grid Ventures

National Grid Ventures (NGV) delivered another good performance in 2020/21, with no significant impact to operations and construction as a result of COVID-19.

 

Capital investment decreased by £306 million compared to prior year, to £509 million[6]. This was primarily driven by (a) capex in 2019/20 including the acquisition cost for National Grid Renewables (formerly Geronimo Energy), and (b) lower interconnector investment on IFA2 (as the project has now been commissioned) and on North Sea Link as the majority of construction is now complete. This was partially offset by increased investment in the Viking Link interconnector to Denmark.

 

Our interconnectors delivered another good performance across the year. Nemo Link achieved 99% availability, up 3% on prior year, with IFA achieving 95% availability, up 4% on prior year. Availability on BritNed fell to 75%, impacted by an offshore cable fault resulting in the link being offline between December and February. 

 

In January, we commissioned IFA2, our second interconnector to France. The 149 mile, 1,000MW sub-sea link will provide low-carbon electricity to one million homes and help the UK on its journey to net zero. We estimate that electricity imported through the link will help the UK avoid 1.2 million tonnes CO2 in IFA2's first full year of operation. Progress on North Sea Link (NSL) continues and the link remains on track to become operational in Q4 2021, providing low-carbon electricity from hydro power generation in Norway. Activity on Viking Link to Denmark increased during the year with civil works and cable manufacturing progressing, with the link remaining on track to become operational in 2023/24.

 

In 2020, NGV's Grain LNG and Qatar Terminal Limited (QTL), a subsidiary of Qatar Petroleum, signed a 25-year agreement that will provide the Qatari company with storage and redelivery capacity at Grain LNG from 2025. The contract secures the long-term future of Europe's largest LNG terminal. Grain LNG will expand its storage capacity from 1 million m3 to 1.2 million m3 by 2025, further strengthening UK security of supply. Our Grain LNG business contributed another good year to the business, with 20% utilisation throughout 2020/21.

 

In the US, NGV completed the launch of its new US large-scale renewables brand, National Grid Renewables, which includes the renewables development company formerly known as Geronimo Energy. During the year, we began construction of the 200 MW Prairie Wolf Solar Project in Illinois, which has a Virtual Power Purchase Agreement in place with Cargill, as well as the construction of two portfolios of smaller solar projects including the 40 MW MiSolar Portfolio in Michigan and the 15MW Nordic III Portfolio in Minnesota, bringing the Nordic solar portfolio to approximately 70 MW in total. In addition, we expect to begin operations at our 275MW solar/125MWh battery storage Noble project in Texas in the first half of 2022.

 

In the US, New York Transco, of which NGV is a part-owner, continued to progress its New York Energy Solution (NYES) project which was selected by the New York Independent System Operator to provide transmission upgrades to New York's power system, while enhancing reliability and facilitating upstate clean energy resources to the downstate demand centers. The upgrades will primarily take place along 55 miles on utility-owned land. In March 2021, New York Transco began construction on the NYES project, which remains on track to complete in 2023.

 

Finally, NGV and RWE Renewables, one of the world's leading renewable energy companies, have signed a joint venture partnership agreement[7] to jointly develop offshore wind projects in the coastal region of the Northeast US. Under the agreement, NGV and RWE will work together to explore opportunities in the US offshore wind market with an intention to jointly bid in a future federal seabed lease auction.

St William profit growth drives another good year for property

Our Property business delivered another solid year in a challenging environment. Our joint venture with the Berkeley Group plc, St William Homes, contributed a net profit to the Group, selling approximately 230 new homes across London. However, profit from site sales was down year-on-year, although the business sold another two sites into the joint venture, Ascot and Hertford. We also exchanged contracts on a further four sites in Mitcham, Stratford, Romford and Bracknell, further strengthening the development pipeline. Our newly formed Joint Venture with Places for People, National Places, exchanged on its first site in Stony Stratford, Buckinghamshire. Across the wider Property business, we sold a further 41 sites in cities across the UK including sites in Glasgow, Birmingham and London.

 

A landmark year in strengthening our ESG commitments

National Grid is fully committed to its role in tackling climate change and as a responsible company for the communities we serve.

Responsible Business Charter

In October, we launched our Responsible Business Charter which lays out our long-term goals across five pillars: the environment, our people, our communities, the economy and our governance. In June, we will publish our first Responsible Business Report (alongside our Annual Report) which will set out the progress we have made against our goals, bringing all our responsible business reporting into one place.

 

The report will include work we have done with the Science Based Targets initiative (SBTi) to increase our ambition around our Scope 3 emissions reduction target. Whilst our existing Scope 1 and 2 targets are already aligned to a below two degrees pathway, we have worked closely with the SBTi to increase the ambition of our Scope 3 target which now covers emissions across National Grid's entire value chain and a commitment to reduce carbon emissions 37.5% by 2033/34 from a 2018/19 baseline. This has allowed us to become a signatory of the Business Ambition for 1.5°C, and the Race to Zero, both of which are United Nations campaigns to bring about greater support and leadership to the climate debate. We plan to go further and are working internally, with our partners and with the SBTi, to understand how best to stretch our ambition and explore what a 1.5°C pathway would mean to the business and our supply chain.

Commitment to our communities - Grid for Good

To support the delivery of our commitment as a responsible business in relation to our communities, we also launched Grid for Good. This is our flagship community investment programme, designed to deliver social mobility in the hardest to reach corners of our communities for disadvantaged youth aged between 16 and 24. Through the Grid for Good pathway, and with the help of our employee volunteers, young people have a unique opportunity to learn about the energy industry, network with one another, gain valuable skills, receive a mentor, have a chance to gain valuable work experience, and ultimately achieve meaningful careers with us and our partners now, or in the future. We believe that fresh talent and diverse perspectives in our own organisation and our industry will be a key contributor in achieving a diverse workforce who will help us to deliver against our net zero ambitions.

Changes to our operating model

With our vision to be at the heart of a clean, fair and affordable energy future, we must ensure we can effectively and efficiently deliver the financial, customer and regulatory outcomes that will help on the journey towards net zero. To this end, we are changing our structure to an operating model with six business units. These units will be UK Electricity Transmission, the UK Electricity System Operator (ESO), UK Gas Transmission, New England, New York and NGV and Other. Each unit will be run as end-to-end enterprises within the Group portfolio, and will provide the flexibility needed to deliver both the company's growth programme but also to align more effectively with the environmental aims of the jurisdictions that we serve.

Board changes

In September 2020, we announced the appointment of Paula Rosput Reynolds to succeed Sir Peter Gershon as Chair, and in March 2021 we announced that Sir Peter will step down from the Board with effect from 31 May 2021.

 

Paula joined the Board on 1 January 2021 as Non-executive Director and Chair Designate and will take over as Chair of the Board from 31 May 2021. Paula is currently the Senior Independent Director of BP plc where she also chairs the Remuneration Committee and a Non-executive Director at General Electric Company.

 

Mark Williamson stepped down as Chair and a member of the Audit Committee, with effect from 10 November 2020. Liz Hewitt, Independent Non-executive Director of the Company, stepped into the role on the same date.

 

Paul Golby stepped down as Chair of the Safety, Environment and Health Committee with effect from 1 April 2021 at which point Earl Shipp took over as Chair of the Committee. Paul remains a member of the Safety, Environment and Health Committee and will remain so until he retires from the Board at the conclusion of the 2021 AGM.

 

GROWTH AND VALUE ADDED

A balanced portfolio to deliver asset and dividend growth

National Grid seeks to create value for shareholders through developing a balanced portfolio of businesses that offer an attractive combination of asset growth and cash returns.

Strong organic growth driven by critical investment

In 2020/21, the Group achieved asset growth of 5.6% driven by a £5.0 billion capital investment programme. This investment continued our focus on building and maintaining world-class networks that are safe, reliable, resilient and ready for the future. It is specifically focused on:

our regulated businesses: with the objective of upgrading and modernising ageing infrastructure, especially in the US, to meet the changing needs of customers and to drive the decarbonisation of energy supply; and

interconnector projects: with the objective of bringing a range of lower cost and renewable energy sources into the UK.

 

Looking forward, we expect capital investment to be around £6 billion for the Group in 2021/22.

 

National Grid is confident that this high-quality growth will continue to generate attractive returns for shareholders and add to our long-term investment proposition of sustainable asset and income growth.

Funding of organic growth

National Grid has a strong balance sheet and an efficient capital structure which supports the effective financing of our investment programme. This programme will continue to be financed through a combination of:

additional debt financing;

internally generated equity capital, delivered through strong financial performance in both the UK and US, including from operating efficiencies and from faster recovery of regulatory assets through rate filings and re-openers; and

additional equity capital generated through the take-up of the shareholder scrip dividend option, which we expect to continue to utilise whilst asset growth remains high.

£5 billion of Capital Investment in 2020/21, 4% lower at constant currency

We continued to make significant investments in critical energy infrastructure during 2020/21. Total capital investment across the Group was £5,047 million, a decrease of £210 million ((4)% at constant currency) compared to the prior year.

Year ended 31 March

 

 

 

 

 

 

 

 

Capital investment (£ million)

 

At actual exchange rates

 

At constant currency

 

 

2021

2020

% change

 

2021

2020

% change

UK Electricity Transmission

 

1,072 

 

1,043 

 

%

 

1,072 

 

1,043 

 

%

UK Gas Transmission

 

176 

 

249 

 

(29)

%

 

176 

 

249 

 

(29)

%

US Regulated

 

3,223 

 

3,228 

 

%

 

3,223 

 

3,098 

 

%

NGV and other activities ¹

 

576 

 

885 

 

(35)

%

 

576 

 

867 

 

(34)

%

Group capital investment

 

5,047 

 

5,405 

 

(7)

%

 

5,047 

 

5,257 

 

(4)

%

1. Excludes £nil (2020: £15 million) equity contribution to the St William Homes LLP joint venture. Includes £38 million National Grid Partners investment (2020: £61 million).

 

This decrease was principally driven by lower UK Gas Transmission spend (River Humber Gas Pipeline Replacement Project), lower interconnector capex and non-recurrence of the Geronimo acquisition for NGV, partially offset by higher US spend on network repairs following storm activity, increased US transmission project spend, and higher capital spend on UK Electricity Transmission projects (Hinkley-Seabank and London Power Tunnels 2).

Achieved asset growth of 5.6% compared to 9.0% last year

During 2020/21, our combined regulated asset base and NGV and Other business assets grew by £2,400 million, or 5.6% on a constant currency basis. This compared to an increase of 9.0% in the prior year. UK RAV growth was 2.2% (including RPI indexation of 1.5%) while the US rate base grew strongly by 7.8%.

Year ended 31 March

 

 

 

 

Assets (£ million at constant currency)

 

 

 

 

 

 

2021

2020

% change

UK RAV ¹

 

20,872 

 

20,431 

 

%

US rate base

 

20,041 

 

18,598 

 

%

Total RAV and rate base

 

40,913 

 

39,029 

 

%

NGV and Other businesses

 

4,458 

 

3,942 

 

13 

%

Total

 

45,371 

 

42,971 

 

%

1. UK RAV excludes Cadent investment.

 

Value Added of £1.8 billion, driven by asset growth

Value Added

As at 31 March

 

change

(£m constant currency)

2021

2020¹

 

2021

2020

UK RAV

20,872 

 

20,431 

 

 

441 

 

739 

 

US rate base

20,041 

 

18,598 

 

 

1,443 

 

2,237 

 

NGV and Other businesses

4,458 

 

3,942 

 

 

516 

 

754 

 

Total

45,371 

 

42,971 

 

 

2,400 

 

3,730 

 

UK other regulated balances

(160)

 

(368)

 

 

208 

 

(55)

 

US other regulated balances

1,974 

 

1,613 

 

 

361 

 

(196)

 

Other balances

(336)

 

(514)

 

 

178 

 

165 

 

Total group assets and other balances

46,849 

 

43,702 

 

 

3,147 

 

3,644 

 

 

 

 

 

 

 

Increase in goodwill

 

 

 

 

81 

 

Cash dividend

 

 

 

1,413 

 

892 

 

Adjusted net debt movement

 

 

 

(2,752)

 

(2,577)

 

Value Added

 

 

 

1,808 

 

2,040 

 

Value Added per Share ²

 

 

 

51.3p

58.9p

1. Figures relating to prior periods have, where appropriate, been re-presented at constant currency and for opening balance adjustments following the completion of the UK regulatory reporting pack process in 2020.

2. Based on 3,523 million weighted average shares for 2020/21 (2019/20: 3,461 million).

 

Value Added, which reflects the key components of value delivery to shareholders (i.e. dividend and growth in the economic value of the Group's assets, net of growth in net debt) was £1,808 million in 2020/21. This was lower than last year's £2,040 million, as a result of lower rate base and RAV growth (lower indexation from closing RPI), higher adjusted net debt movement driven by higher storms and adverse timing movements, offset by a higher cash dividend. Of the £1.8 billion value added, £1.4 billion was paid to shareholders as cash dividends, and £0.4 billion was retained in the business. Value added per share was 51.3p compared with 58.9p in 2019/20.

FINANCIAL STRENGTH

Credit metrics remain strong, BBB+/Baa1 rating

During the year we raised over £5.6 billion of new long-term senior debt to refinance maturing debt and to fund a portion of our significant capital programme. The new bonds issued include further borrowings under our Green Financing Framework. We also used this framework to agree £539 million of ECA financing for our Viking interconnector.

 

We have £6.0 billion of undrawn committed facilities available for general corporate purposes, all of which have expiry dates beyond June 2023.

 

In March 2021, Moody's, S&P and Fitch all downgraded the senior unsecured credit ratings of National Grid plc and the majority of our rated operating subsidiaries by one notch. This action reflected the agencies' assessment that Group cash flow metrics would, for several years, no longer meet the thresholds previously expected. This reflected the combined impacts of the COVID-19 pandemic, increased levels of capital investment, delays to rate increases in our US operations and the cash flow impacts of the new RIIO-2 price control in the UK.

 

Retained cash flow as a proportion of adjusted net debt was 6.6%. This is slightly below the long-term average level of 7% indicated by Moody's as consistent with maintaining our current Group rating, although the metric this year has been impacted by a below average level of uptake of the scrip dividend option, alongside increased costs related to the COVID-19 pandemic, timing outflows and high levels of storm costs. The funds from operations to debt metric was 11.7%, in the middle of the target range for the current rating as indicated by S&P.

 

Regulatory gearing, measured as net debt as a proportion of total regulatory asset value and other business invested capital, was 65% as at 31 March 2021. This was up from 63% at the previous year-end. Taking into account the benefit of our hybrid debt, adjusted gearing as at 31 March 2021 was 63% and remains appropriate for the current overall Group credit rating of BBB+/Baa1 (S&P/Moody's). 

Dividend increase of 1.2% recommended for 2020/21

The Board decided in March that, to reflect the move from RPI to CPIH in our UK regulated businesses, the aim from 2021/22 will be to grow the annual dividend per share in line with UK CPIH, thus maintaining the dividend per share in real terms. The Board will review this policy regularly, taking into account a range of factors including expected business performance and regulatory developments.

 

Our previous dividend policy, set out in 2013, was to grow the ordinary dividend per share at least in line with RPI inflation each year. The final year this policy applies to is 2020/21 and, as usual, the Board has taken into account a range of factors including expected business performance and regulatory developments.

 

For 2020/21, the Board has recommended an increase in the final dividend to 32.16 pence per ordinary share ($2.2812 per American Depositary Share) which will be paid to shareholders on the register as at 4 June 2021. If approved, this will bring the full year dividend to 49.16 pence per ordinary share, an increase of 1.2% over the 48.57 pence per ordinary share in respect of the financial year ending 31 March 2021. This rise is in line with the increase in UK RPI for the twelve months to 31 March 2021 as set out in the policy announcement of 28 March 2013.

 

A scrip dividend alternative will again be offered in respect of the 2020/21 final dividend.

OUTLOOK

Our five-year financial framework assumes the inclusion of WPD, the sale of NECO (Rhode Island) completing in Q1 of CY2022 and the sale of a majority stake of Gas Transmission being completed during FY2022/23.

Capital investment and Group asset growth

We expect to invest £30-£35 billion across our energy networks and adjacent businesses, in the UK and US, over the five-year period to 2025/26.

 

In the UK, we expect around £8 billion of investment in electricity transmission for asset health, anticipatory system reinforcement to facilitate offshore generation and other new onshore system connections.

 

In our US businesses, we expect investment of around £17 billion over the next five years. Over half of this will be safety related projects in our gas networks with the remainder in our electric networks such as for storm hardening, other net zero investments as well as further electric transmission investment.

 

We expect the WPD networks to invest £4-£5 billion over the next 5 years in asset maintenance, facilitating the infrastructure for electric vehicles and directly connected generation.

 

We expect NGV to invest £2-£3 billion over 5 years in completing the interconnector programme and US renewable generation. 

 

As we work through our proposed transactions, coupled with the sum of these investments, and the broad economic protection our businesses have against rising macroeconomic variables such as inflation, group asset growth is expected to be 6-8% CAGR through to 2025/26.

Group gearing

We expect regulatory gearing to increase and to settle above 70% once all three transactions are completed. Combined with the benefit of our hybrid debt, we expect gearing levels, and the other standard metrics we monitor, to sit comfortably within our current BBB+/Baa1 corporate rating band from S&P and Moody's. As a result, we do not expect any further rating action at a Group level.

Group earnings growth and dividend growth

From 2020/21 through to 2025/26, we expect our compound annual growth rate in earnings per share to be in the 5 - 7 percent range, including our long run average scrip take up of 25% per annum, which will underpin our sustainable, progressive dividend policy into the future. As we complete our proposed transactions and work through COVID-19 recovery mechanisms, we expect to deliver earnings growth at or above the top end of this range in the early years of this period.

 

2021/22 FORWARD GUIDANCE

 

The forward guidance below assumes a scenario of continued gradual easing of lockdowns across our territories, together with cost recovery mechanisms that continue to be based on regulatory precedent. If other scenarios play out through the course of the year, then this could have a range of impacts on cashflows and earnings, which could be different from our current assessment.

 

This forward guidance is also based on our current businesses, with the sales of Rhode Island and a majority stake in National Grid Gas not assumed to finalise within this financial year. We do not provide guidance for WPD as we await deal closure, nor do we assume that the acquisition completes during this financial year for the purposes of our guidance on net debt. Once we start the sale process for Gas Transmission, we expect the business to be accounted for as a discontinued operation.

 

The outlook and forward guidance contained in this statement should be reviewed, together with the forward-looking statements set out in this release, in the context of the cautionary statement.

UK Electricity Transmission

Net Revenue (excluding timing) is expected to increase compared to 2020/21 by around £140 million, principally driven by higher totex workload, however this is expected to be more than offset by a combination of higher costs (including increased spend on cyber security and new roles for NGESO under RIIO-2) and depreciation, which is expected to increase by around £80 million reflecting the ongoing investment programme.

 

We will provide an update on Return on Equity at the Half-Year results in November.

UK Gas Transmission

Net Revenue (excluding timing) is expected to increase by approximately £40 million compared to 2020/21, but will be offset by cost increases and higher depreciation compared to 2020/21.

 

We will provide an update on Return on Equity at the Half-Year results in November.

UK Timing

Revenues are likely to be impacted by timing of recoveries including impacts from prior years. This should drive a small under-recovery of revenues in Electricity Transmission in 2021/22, but a larger over-recovery in Gas Transmission as we expect to recover the 2020/21 under-collections associated with the new capacity charging regime implemented last year.

US Regulated operations

Net Revenue (excluding timing) is expected to be around £200 million higher on a constant currency basis, reflecting rate increases under existing rate plans and the benefit of increased rates in 2021/22 for the KEDNY-KEDLI settlement, which was deferred from 2020/21. Costs are expected to be around £100 million lower, with inflationary pressures, additional workload and customer funded projects more than offset by lower bad debts, lower storm costs, a smaller impact from COVID-19 disruption and cost efficiencies. We expect depreciation to be higher in 2021/22 by over £50 million reflecting the higher level of asset growth.

 

We expect to recover most of the increased bad debts and additional COVID-19 related costs through regulatory mechanisms. The timing of recovery through revenues will depend on the outcome of negotiations with our regulators.

 

Return on Equity for overall US Regulated operations is expected to increase by over 100bps compared to 2020/21, as a result of the high level of non-deferrable storms incurred in 2020/21, increased revenues in 2021/22, along with effective cost control measures.

US Timing

Revenues will be impacted by timing of recoveries. We expect timing to be adverse relative to the timing outflow seen in 2020/21, as we continue to return net over-recovered balances.

NGV and Other activities

NGV operating profit is expected to increase by around 10% year-on-year due to the IFA2 interconnector becoming operational in January 2021, North Sea Link on track to become operational in Q4 2021, and higher profits in our NG Renewables business. Higher property sales, including delays to completions from 2020/21, should improve our results in Other activities.

Joint Ventures and Associates

Our share of the profit after tax of joint ventures and associates is expected to increase year-on-year by around 20%.

Interest and Tax

Net finance costs in 2021/22 are expected to increase by around £100 million compared to 2020/21, as a result of higher RPI inflation and increased net debt (through continued investment), partly offset by higher levels of capitalised interest.

 

For the full year 2021/22, the underlying effective tax rate relating to profit generated in the year, excluding the share of joint venture and associate post-tax profits, is expected to increase to around 22%.

Investment, Growth and Net Debt

Overall Group capital investment for 2021/22 is expected to increase significantly to around £6 billion, with increased spend across all our businesses. UK Transmission investment is expected to increase by nearly 25% year-over-year as large projects such as London Power Tunnels 2 and the Hinkley-Seabank connection progress. US Regulated investment should increase by around 10% as we deliver delayed investment in leak prone pipe due to the impact of COVID-19. Investment in NGV will also increase, driven by increased spend on onshore renewables.

 

Asset Growth is expected to be higher than 2020/21, reflecting our expectations for higher capex and increased inflation.

 

Depreciation is expected to increase, reflecting the impact of continued high levels of capital investment.

 

Operating cashflow generated from continuing operations is expected to increase with higher underlying operating profits and a favourable impact from year-on-year timing and storm costs. Increased capital investment spend is expected to mostly offset this.

 

Net debt is expected to increase by around £3 billion (excluding the impact of foreign exchange) from £28.6 billion at 31 March 2021 to help fund continued growth in the business. This figure excludes NECO net debt that has been reclassified to 'held for sale'.

 

Weighted average number of shares (WAV) is expected to increase from 3,523 million last year to approximately 3,575 million in 2021/22 reflecting the impact of scrip shares, assuming a 25% scrip uptake.

 

 

FINANCIAL REVIEW

 

In managing the business, we focus on various non-IFRS measures which provide meaningful comparisons of performance between years, monitor the strength of the Group's balance sheet as well as profitability and reflect the Group's regulatory economic arrangements. Such alternative and regulatory performance measures are supplementary to, and should not be regarded as a substitute for, IFRS measures, which we refer to as statutory results. We explain the basis of these measures and, where practicable, reconcile these to statutory results in 'Alternative performance measures/non-IFRS reconciliations' on pages 69 to 80.

 

Also, we distinguish between adjusted results, which exclude exceptional items and remeasurements, and underlying results, which further take account of: (i) volumetric and other revenue timing differences arising from our regulatory contracts, and (ii) major storm costs which are recoverable in future periods, where these are in excess of $100 million in the year, neither of which give rise to economic gains or losses.

 

Performance for the year ended 31 March

Financial summary for continuing operations

 

 

(£ million)

2021

2020

change %

Statutory results

 

 

 

Operating profit

2,895 

 

2,780 

 

 

Profit after tax

1,641 

 

1,274 

 

29 

 

Earnings per share (pence)

46.6 

 

36.8 

 

27 

 

Dividend per share (pence), including proposed final dividend

49.16 

 

48.57 

 

1.2 

 

 

 

 

 

 

 

 

 

Alternative performance measures:

 

 

 

Underlying operating profit

3,283 

 

3,454 

 

(5)

 

Underlying profit after tax

1,911 

 

2,015 

 

(5)

 

Adjusted earnings per share (pence)

46.4 

 

55.2 

 

(16)

 

Underlying earnings per share (pence)

54.2 

 

58.2 

 

(7)

 

Underlying dividend cover

1.1 

 

1.2 

 

(8)

 

Capital investment

5,047 

 

5,405 

 

(7)

 

Retained cash flow/adjusted net debt

6.6 

%

9.2 

%

(260)bps

Regulatory performance measures:

 

 

 

Asset growth

5.6 

%

9.0 

%

-340bps

Group return on equity1

10.6 

%

12.0 

%

-140bps

Value added

1,808 

 

2,040 

 

(11)

 

Regulatory gearing

65 

%

63 

%

200bps

1.Revised from 11.7% in 2020.

 

The Group's statutory results for the year were impacted by exceptional charges. The impact on statutory EPS as a result of these charges is presented after each item. These included costs associated with the implementation of our new operating model (1.3p) and transaction costs associated with the acquisition of Western Power Distribution (WPD) and the sale of NECO expected to take place in 2021/22 (0.7p). Last year's statutory results were adversely impacted by additional environmental provisions, a reduction in the discount rate applied to certain provisions across the Group (8.6p) and a deferred tax charge due to the reversal of the expected reduction in the UK corporation tax rate originally enacted by the Finance Act 2016 (5.6p). The 2020/21 statutory results include an exceptional credit of (0.3p) for the £14 million release of environmental provisions relating to one of our US Superfund sites, where this was originally treated as an exceptional item. 

 

Statutory operating profit was favourably impacted by commodity remeasurement gains of £34 million in 2020/21 (2019/20: £125 million losses) from mark-to-market movements on derivatives which are used to hedge the cost of buying wholesale gas and electricity on behalf of our US customers.

 

Underlying operating profit was down 5% (down 3% at constant currency) as higher rate case revenues in US Regulated and increased net revenues in UK Gas Transmission and NGV were more than offset by increased costs, including £103 million increase in US bad debt costs (with an estimated £67 million of this increase being COVID-19-related), and higher depreciation and amortisation, along with and lower levels of sales in our property business. The combination of these factors was partly offset by lower net financing costs, driven by lower inflation on RPI-linked debt and new borrowings issued at lower interest rates, partly offset by higher non-debt interest charges. A lower contribution was made by our joint ventures and associates and the tax charge was higher primarily due to reduction in tax credits relating to prior years. Underlying profit after tax decreased by 5% and, combined with a higher share count, resulted in a 7% decrease in underlying EPS to 54.2p.

 

Capital investment of £5.0 billion helped increase our asset growth to 6%. We delivered Value Added (our measure of economic profit) of £1.8 billion in 2020/21, lower than in 2019/20. Group RoE of 10.6% was lower than 12.0% for 2019/20, reflecting the impact of COVID-19 (excluding bad debts), higher level of non-deferrable storms in the US and lower level of property sales in the UK. RCF/net debt at 6.6% was lower than 9.2% in 2019/20. The recommended full-year dividend per share of 49.16 is in line with the policy of increasing in line with RPI inflation and is covered 1.1 times by underlying EPS. In March 2021, we announced that from 2021/22 onwards, the dividend policy will aim to deliver annual dividend per share growth in line with UK CPIH inflation.

 

Reconciliation of different measures of profitability and earnings

The table below reconciles our statutory profit measures for continuing operations, at actual exchange rates, to adjusted and underlying versions.

Reconciliation of profit and earnings from continuing operations

 

Operating profit

 

Profit after tax

 

Earnings per share (pence)

(£ million)

2021

2020

 

2021

2020

 

2021

2020

Statutory results

2,895 

 

2,780 

 

 

1,641 

 

1,274 

 

 

46.6 

 

36.8 

 

Exceptional items

65 

 

402 

 

 

57 

 

491 

 

 

1.6 

 

14.2 

 

Remeasurements

(34)

 

125 

 

 

(64)

 

148 

 

 

(1.8)

 

4.2 

 

Adjusted results

2,926 

 

3,307 

 

 

1,634 

 

1,913 

 

 

46.4 

 

55.2 

 

Timing

207 

 

147 

 

 

166 

 

102 

 

 

4.7 

 

3.0 

 

Major storm costs

150 

 

 

 

111 

 

 

 

3.1 

 

 

Underlying results

3,283 

 

3,454 

 

 

1,911 

 

2,015 

 

 

54.2 

 

58.2 

 

 

In calculating adjusted profit measures, where we consider it is in the interests of users of the financial statements to do so we exclude certain discrete items of income or expense that we consider to be exceptional in nature. The table below summarises such items; full details are contained in note 4 to the financial statements together with an explanation of the process used to make this determination.

Exceptional expense for continuing operations

 

Impact on

operating profit

 

Impact on

profit after tax

 

Impact on

EPS (pence)

(£ million)

2021

2020

 

2021

2020

 

2021

2020

Changes in environmental provision

14 

 

(402)

 

 

11 

 

(299)

 

 

0.3

(8.6)

 

Transaction costs

(24)

 

 

 

(24)

 

 

 

(0.7)

 

 

New operating model implementation costs

(55)

 

 

 

(44)

 

 

 

(1.2)

 

 

Deferred tax arising on the reversal of the reduction in UK corporation tax rate

 

 

 

 

(192)

 

 

 

(5.6)

 

Total

(65)

 

(402)

 

 

(57)

 

(491)

 

 

(1.6)

(14.2)

 

 

This year we have classified the following items as exceptional:

Changes in environmental provisions:  a £14 million credit in relation to a reduction in the environmental provision booked in 2019/20 as exceptional;

Transaction costs: £24 million of transaction costs associated with the acquisition of Western Power Distribution (WPD) and the sale of NECO expected to take place during 2021/22; and

New operating model implementation costs:  55 million of costs in relation to the design and implementation of our new operating model that is designed to transform our operating framework and will be built on a foundation of six business units.

 

In the prior year we classified the £402 million of environmental costs (comprising a £326 million increase in the provision for clean-up related to former manufacturing gas plant facilities, formerly owned or operated by the Group or its predecessor companies and £76 million for the impact of a reduction of 0.5% in the real discount rate applied to the environmental provisions across the Group); and a £192 million impact on deferred tax as a result of the reversal of the provisions of The Finance Act 2016 which reduced the UK corporation tax rate to 17% with effect from April 2020. 

 

We also exclude certain unrealised gains and losses on mark-to-market financial instruments from adjusted profit; see notes 4 and 5 to the financial statements for further information. Net remeasurement gains of £34 million on commodity contract derivatives were incurred in addition to net remeasurement gains of 72 million on financing-related instruments and a further £8 million of remeasurement losses related to our share of post-tax results of joint ventures.

 

Timing over/(under)-recoveries

In calculating underlying profit, we exclude regulatory revenue timing over- and under-recoveries and major storm costs (as defined below). Under the Group's regulatory frameworks, most of the revenues we are allowed to collect each year are governed by regulatory price controls in the UK and rate plans in the US. If more than this allowed level of revenue is collected, an adjustment will be made to future prices to reflect this over-recovery; likewise, if less than this level of revenue is collected, an adjustment will be made to future prices in respect of the under-recovery. We also collect revenues from customers and pass these on to third parties (e.g. NYSERDA). These variances between allowed and collected revenues and timing of revenue collections for pass-through costs give rise to over- and under-recoveries. 

 

The following table summarises management's estimates of such amounts for the two years ended 31 March 2021. All amounts are shown on a pre-tax basis and, where appropriate, opening balances are restated for exchange adjustments and to correspond with subsequent regulatory filings and calculations. All amounts are translated at the current year average exchange rate of $1.34:£1.

Timing over/(under)-recoveries

(£ million)

2021

2020

Balance at start of year (restated)¹

261 

 

384 

 

In-year over/(under)-recovery

(207)

 

(137)

 

Balance at end of year

54 

 

247 

 

1. March 2019 opening balances adjusted to correspond with 2018/19 regulatory filings and calculations.

 

In 2020/21, we experienced timing under-recoveries of £88 million in UK Electricity Transmission, £96 million in UK Gas Transmission and £23 million in US Regulated. In calculating the post-tax effect of these timing recoveries, we impute a tax rate, based on the regional marginal tax rates, consistent with the relative mix of UK and US balances.

Major storm costs

We also take account of the impact of major storm costs in the US where the aggregate amount is sufficiently material in any given year. Such costs (net of certain deductibles) are recoverable under our rate plans but are expensed as incurred under IFRS. Accordingly, where the total incurred cost (after deductibles) exceeds $100 million in any given year, we exclude the net costs from underlying earnings. In 2020/21, we experienced around double the number of storms events compared to the prior year, resulting in $201 million of deferrable storm costs, which are eligible for future recovery. In 2019/20 we experienced $98 million of deferrable storm costs. This value fell just below the $100 million threshold and as such was not excluded from our underlying results, even though these costs are also eligible for future recovery

 

Segmental income statement

The tables below set out operating profit on adjusted and underlying bases.

 

Adjusted operating profit

 

Underlying operating profit

£ million

2021

2020

change %

 

2021

2020

change %

UK Electricity Transmission

1,034 

 

1,320 

 

(22)

 

 

1,122 

 

1,174 

 

(4)

 

UK Gas Transmission

342 

 

348 

 

(2)

 

 

438 

 

402 

 

 

US Regulated

1,313 

 

1,397 

 

(6)

 

 

1,486 

 

1,636 

 

(9)

 

NGV and Other activities

237 

 

242 

 

(2)

 

 

237 

 

242 

 

(2)

 

Total operating profit

2,926 

 

3,307 

 

(12)

 

 

3,283 

 

3,454 

 

(5)

 

Net finance costs

(942)

 

(1,049)

 

(10)

 

 

(942)

 

(1,049)

 

(10)

 

Share of post-tax results of joint ventures and associates

66 

 

88 

 

(25)

 

 

66 

 

88 

 

(25)

 

Profit before tax

2,050 

 

2,346 

 

(13)

 

 

2,407 

 

2,493 

 

(3)

 

Tax

(416)

 

(433)

 

(4)

 

 

(496)

 

(478)

 

 

Profit after tax

1,634 

 

1,913 

 

(15)

 

 

1,911 

 

2,015 

 

(5)

 

Earnings per share (pence)

46.4 

 

55.2 

 

(16)

 

 

54.2 

 

58.2 

 

(7)

 

 

 

The statutory operating profit increased in the year primarily as a result of the £402 million exceptional charges made in 2019/20, partly offset by adverse movements on timing under-recoveries and higher storm costs. The reasons for the movements in underlying operating profit are described in the Business Review.

Financing costs and tax

Net finance costs

Net finance costs (excluding remeasurements) for the year were 10% lower than last year at £942 million, with the £107 million decrease driven by the impact of lower inflation on our RPI-linked debt, new debt issued at lower rates, a higher net debt as a result of asset growth, termination fees incurred in the prior year and favourable foreign exchange movements, partly offset by higher interest on pension and OPEB liabilities and a higher benefit from interest on tax settlements in 2019/20. The effective interest rate of 3.2% on net debt was 90bps lower than the prior year rate of 4.1%.

 

Joint ventures and associates

The Group's share of net profits from joint ventures and associates reduced by £22 million compared to 2019/20 mainly as a result of lower contributions from BritNed (due to an unplanned outage caused by a cable fault) and lower sales in our St William property joint venture. Our Nemo Link interconnector and National Grid Renewables both showed improved performances.

 

Tax

The underlying effective tax rate of 21.2% was 130bps higher than last year. The tax charge for 2019/20 benefited from a higher release of reserves following settlement of tax audits relating to earlier years.

 

Discontinued operations

Last year, we completed the sale of a 39% interest in Quadgas HoldCo Limited (Quadgas), the holding company for Cadent and treated all items of income and expense relating to the disposal of Quadgas within discontinued operations.

 

Cash flow, net debt and funding

Net debt is the aggregate of cash and cash equivalents, borrowings, current financial and other investments and derivatives (excluding commodity contract derivatives) as disclosed in note 12. 'Adjusted net debt' used for the RCF/adjusted net debt calculation is principally adjusted for pension deficits and hybrid debt instruments. For a full reconciliation see page 74.

 

The following table summarises the Group's cash flow for the year, reconciling this to the change in net debt.

Summary cash flow statement

£ million

2021

2020

change %

Cash generated from continuing operations

4,618 

 

4,914 

 

(6)

 

Cash capital expenditure and acquisition of investments

(4,920)

 

(5,098)

 

(3)

 

Dividends from joint ventures and associates

80 

 

75 

 

 

Business net cash flow from continuing operations

(222)

 

(109)

 

104 

 

Net interest paid

(819)

 

(884)

 

(7)

 

Net tax (paid)/received

(157)

 

(199)

 

(21)

 

Ordinary dividends

(1,413)

 

(892)

 

58 

 

Other cash movements

14 

 

10 

 

40 

 

Net cash flow from continuing operations

(2,597)

 

(2,074)

 

25 

 

Quadgas sale proceeds

 

1,965 

 

n/a

Discontinued operations

 

(91)

 

(100)

 

Net cash flows from other investing and financing transactions

2,692 

 

17 

 

n/a

Increase/(decrease) in cash and cash equivalents

95 

 

(183)

 

(152)

 

 

 

 

 

Reconciliation to movement in net debt

 

 

 

Increase/(decrease) in cash and cash equivalents

95 

 

(183)

 

(152)

 

Less: net cash flows from other investing and financing transactions

(2,692)

 

(17)

 

n/a

Cash and borrowings reclassified to held for sale

1,119 

 

 

n/a

Other non-cash movements in net debt

1,522 

 

(1,387)

 

(210)

 

Increase in net debt

44 

 

(1,587)

 

(103)

 

Net debt at start of year

(28,590)

 

(26,529)

 

 

Impact of adoption of IFRS 16

 

(474)

 

n/a

Net debt at end of year

(28,546)

 

(28,590)

 

 

 

Cash flow generated from continuing operations was £4.6 billion, £0.3 billion lower than last year, mainly due to adverse timing and increased storm costs, lower cash collections, lower revenues and incremental costs as a result of COVID-19, higher spend on provisions, the impact of year-on-year exchange rate movements, offset by favourable working capital inflows on payables. Cash expended on investment activities decreased as a result of lower investment in UK Gas Transmission and NGV (including last year's acquisition of Geronimo) and movements in capex prepayments and accruals. Net interest paid decreased in spite of the growth in net debt as a result of lower rates and hybrid termination fees incurred in 2019/20. The Group made net tax payments of £157 million during 2020/21. A 17% scrip take-up in the year reduced the cash dividend to £1,413 million, but this was £521 million higher than in 2019/20, when the scrip take-up was 46%. In 2019/20, proceeds of £1,965 million (plus £6 million of interest) from the Quadgas HoldCo Limited disposal, were partly offset by outflows for residual provisions and accruals classified within discontinued operations. Non-cash movements primarily reflect changes in the sterling-dollar exchange rate, accretions on index-linked debt, finance lease additions and other derivative fair value movements. Closing net debt of £28.5 billion excludes £1.1 billion of net debt in NECO which was reclassified as held for sale on 31 March 2021.

During the year we raised over £5.6 billion of new long-term senior debt to refinance maturing debt and to fund a portion of our significant capital programme. The new bonds issued include further borrowings under our Green Financing Framework. We also used this framework to agree £539 million of ECA financing for our Viking interconnector. As at 30 April 2021, we have £6.0 billion of undrawn committed facilities available for general corporate purposes, all of which have expiry dates beyond June 2023.

In March 2021, Moody's, S&P and Fitch all downgraded the senior unsecured credit ratings of National Grid plc and the majority of our rated operating subsidiaries by one notch. This action reflected the agencies' assessment that Group cash flow metrics would, for several years, no longer meet the thresholds previously expected. This reflected the combined impacts of the COVID-19 pandemic, increased levels of capital investment, delays to rate increases in our US operations and the cash flow impacts of the new RIIO-2 price control in the UK.

The Board has considered the Group's ability to finance normal operations as well as funding a significant capital programme, in light of the disruption caused by COVID-19. This includes stress-testing of the Group's finances under a 'reasonable worst case' scenario, assessing the impact of the acquisition of WPD (and any penalties if the transaction did not proceed), the timing of the NECO and National Grid Gas plc transactions, and the further levers at the Board's discretion to ensure our businesses are adequately financed. As a result, the Board has concluded that the Group will have adequate resources to do so.

BUSINESS REVIEW

In addition to IFRS based profit measures, National Grid calculates a number of additional regulatory performance metrics to aid understanding of the performance of the regulated businesses. These metrics aim to reflect the impact of performance in the current year on future regulatory revenue allowances. This includes the creation of future regulatory revenue adjustment balances and the impact of current year performance on the regulated asset base. These metrics also seek to remove the impacts on current year revenues relating to "catch up" or "sharing" of elements of prior year performance, for example the sharing of prior year efficiencies with customers.

 

These metrics include Return on Equity, Regulated Financial Performance and Regulated Asset Value or Regulated Rate Base. Further detail on these is provided on pages 69 to 80.

Year ended 31 March

Regulatory Debt:Equity assumption

 

Achieved

Return on Equity

 

Base or Allowed Return on Equity

%

 

2021

2020

 

2021

2020

UK Electricity Transmission

60/40

 

13.9 

 

13.5 

 

 

10.2 

 

10.2 

 

UK Gas Transmission

62.5/37.5

 

9.6 

 

9.8 

 

 

10.0 

 

10.0 

 

UK Weighted Average

 

 

12.6 

 

12.4 

 

 

10.1 

 

10.1 

 

US Regulated

Avg. 50/50

 

7.2 

 

9.3 

 

 

9.4 

 

9.4 

 

Group¹

 

 

10.6 

 

12.0 

 

 

 

 

1. Group ROE in 2019/20 has been recalculated as 12.0% (previously 11.7%), reflecting the revision to decrease the comparative goodwill balance (see note 1 for details).

As at 31 March

RAV, Rate Base or other business assets

 

Total Regulated and other balances1

(£ million, at constant currency)

2021

2020

 

2021

2020

UK Electricity Transmission

14,565 

 

14,133 

 

 

14,379 

 

13,772 

 

UK Gas Transmission

6,307 

 

6,298 

 

 

6,333 

 

6,291 

 

US Regulated

20,041 

 

18,598 

 

 

22,015 

 

20,211 

 

Total regulated

40,913 

 

39,029 

 

 

42,727 

 

40,274 

 

NGV and Other balances

4,458 

 

3,942 

 

 

4,122 

 

3,428 

 

Group regulated and other balances

45,371 

 

42,971 

 

 

46,849 

 

43,702 

 

1. March 2020 opening balances adjusted to correspond with 2019/20 regulatory filings and calculations.

UK ELECTRICITY TRANSMISSION

Regulated Returns and Financial Performance reflect efficiency and incentive delivery

Return on Equity above base levels

RoE for the year, normalised for a long-run inflation rate of 3%, was 13.9% compared with a regulatory assumption, used in calculating the original revenue allowance, of 10.2%. The principal components of the difference are shown in the table below:

Year ended 31 March

2021

2020

Base return (including avg. 3% long-run inflation)

10.2 

 

10.2 

 

Totex incentive mechanism

2.4 

 

2.5 

 

Other revenue incentives

0.3 

 

0.1 

 

Return including in year incentive performance

12.9 

 

12.8 

 

Pre-determined additional allowances

1.0 

 

0.7 

 

Return on Equity

13.9

13.5 

 

 

Totex incentives contributed 240 basis points from efficiency savings across our asset health programmes and high-performing load-related schemes. We continued to deliver strong performance under the stakeholder engagement, customer satisfaction and environmental discretionary reward incentive schemes.

Regulated Financial Performance up 2% year-on-year

The regulated financial performance calculation adjusts reported operating profit to reflect the impact of the business' regulatory arrangements when presenting financial performance.

 

Regulated financial performance for UK Electricity Transmission increased to £1,352 million from £1,324 million. The year-on-year increase principally reflects higher achieved RoE underpinned by strong incentive performance.

Reconciliation of regulated financial performance to operating profit

(£ million)

2021

2020

% change

Operating profit

1,034 

 

1,320 

 

(22)

 

Movement in other regulated assets and liabilities

188 

 

(99)

 

(290)

 

Deferred tax adjustment

60 

 

63 

 

(5)

 

RAV indexation (avg. 3% long-run inflation)

424 

 

406 

 

 

Regulatory v IFRS depreciation difference

(439)

 

(459)

 

(4)

 

Fast money/other

28 

 

26 

 

 

Pensions

(54)

 

(52)

 

 

Performance RAV created

111 

 

119 

 

(7)

 

Regulated Financial Performance

1,352 

 

1,324 

 

 

 

Regulated Financial Position up 4.4%

In the year, RAV grew by 3.1%, down on last year's growth rate driven primarily by lower inflation linked growth in the RAV (1.5% 2020/21 versus 2.6% 2019/20).

 

2021

2020

Opening Regulated Asset Value (RAV)

14,133 

 

13,537 

 

Asset additions (slow money) - actual

1,057 

 

1,048 

 

Performance RAV or assets created

111 

 

119 

 

Inflation adjustment (actual RPI)

210 

 

357 

 

Depreciation and amortisation

(946)

 

(928)

 

Closing RAV

14,565 

 

14,133 

 

 

 

 

Opening balance of other regulated assets and (liabilities)

(374)

 

(265)

 

Movement

188 

 

(99)

 

Closing balance

(186)

 

(364)

 

 

 

 

Closing Regulated Financial Position

14,379 

 

13,769 

 

APPENDIX to UK ELECTRICITY TRANSMISSION

Revenue and Costs in 2020/21 on an IFRS basis

UK Electricity Transmission statutory operating profit was £289 million lower in the year, mainly due to timing movements. In 2020/21, there were £7 million of exceptional costs related to establishing our new operating model, compared to £4 million of environmental charges in the prior year. Timing under-recoveries of £88 million in 2020/21 compared to over-recoveries of £146 million in 2019/20 are primarily due to lower half-hourly volumes, lower collection of prior year balances and under-recovery of balancing services costs in NGESO due to the Balancing Services Use of System (BSUoS) COVID-19 support scheme.

Adjusted operating profit reduced by £286 million (22%), predominantly driven by £234 million adverse year-on-year timing movements. Underlying operating profit decreased by 4% . Net revenues (adjusted for timing) were relatively flat, with higher incentives income, legal settlements, diversion income and the RPI uplift, being offset by the lower re-opener allowances for cyber and data centres and funding for ESO legal separation in 2019/20. Regulated controllable costs were lower, with efficiency savings and the absence of prior period one-off costs partly offset by higher IT costs and COVID-19-related costs. Other costs were higher, mainly relating to customer diversion costs which are offset by higher revenue.

The increase in depreciation and amortisation charges reflects continued investment including a full year charge for Western Link and a benefit from the release of provisions in 2019/20. 

UK Electricity Transmission

 

(£ million)

2021

2020

% change

Revenue

3,992 

 

3,702 

 

 

Operating costs

(2,965)

 

(2,386)

 

24 

 

Statutory operating profit

1,027 

 

1,316 

 

(22)

 

Exceptional items

 

 

75 

 

Adjusted operating profit

1,034 

 

1,320 

 

(22)

 

Timing

88 

 

(146)

 

n/a

Underlying operating profit

1,122 

 

1,174 

 

(4)

 

 

 

 

 

Net revenue (adjusted for timing)

2,018 

 

2,028 

 

 

Regulated controllable costs

(291)

 

(306)

 

(5)

 

Post-retirement benefits

(45)

 

(48)

 

(6)

 

Other operating costs

(53)

 

(31)

 

71 

 

Depreciation and amortisation

(507)

 

(469)

 

 

Underlying operating profit

1,122 

 

1,174 

 

(4)

 

Timing

(88)

 

146 

 

n/a

Adjusted operating profit

1,034 

 

1,320 

 

(22)

 

UK GAS TRANSMISSION

Return on Equity lower than base levels

RoE for the year, using a long-run inflation rate of 3%, was 9.6%. The principal components of the performance are shown in the table below.

Year ended 31 March

2021

2020

Base return (including avg. 3% long-run inflation)

10.0 

 

10.0 

 

Totex incentive mechanism

(0.9)

 

(0.7)

 

Other revenue incentives

0.9 

 

1.1 

 

Return including in year incentive performance

10.0 

 

10.4 

 

Pre-determined additional allowances

(0.4)

 

(0.6)

 

Return on Equity

9.6 

 

9.8 

 

 

The RoE was 20 bps lower than 2019/20 and slightly lower than the allowed level. This slight underperformance reflects the higher costs of delivering key compressor projects and our new data centres. 

 

Regulated Financial Performance down 3% year-on-year

The regulated financial performance calculation adjusts reported operating profit to reflect the impact of the business' regulatory arrangements when presenting financial performance. Regulated financial performance for UK Gas Transmission was lower than prior year at £457 million principally reflects lower RoE performance driven by higher cost to deliver key capital projects and lower incentive performance as a result of higher gas prices.

Reconciliation of regulated financial performance to operating profit

(£ million)

2021

2020

% change

Operating profit

342 

 

348 

 

(2)

 

Movement in other regulated assets and liabilities

34 

 

67 

 

(49)

 

Deferred tax adjustment

12 

 

25 

 

(52)

 

RAV indexation (3% long-run avg.)

189 

 

185 

 

 

Regulatory v IFRS depreciation difference

(88)

 

(77)

 

14 

 

Fast money/other

25 

 

(17)

 

(247)

 

Pensions

(34)

 

(34)

 

 

Performance RAV created

(23)

 

(24)

 

(4)

 

Regulated Financial Performance

457 

 

473 

 

(3)

 

Regulated Financial Position increased 0.4%

In the year, RAV growth was broadly flat compared to 2.3% in 2019/20. The reduction in growth reflects lower capital expenditure and lower inflation linked growth in the RAV.

£ million

2021

2020

Opening Regulated Asset Value (RAV)

6,298 

 

6,155 

 

Asset additions (slow money) actual

193 

 

253

Performance RAV or assets created

(23)

 

(24)

 

Inflation adjustment (actual RPI)

92 

 

162

Depreciation and amortisation

(253)

 

(248)

 

Closing RAV

6,307 

 

6,298 

 

 

 

 

Opening balance of other regulated assets and (liabilities)

(8)

 

(60)

 

Movement

34

67 

 

Closing balance

26 

 

 

 

 

 

Closing Regulated Financial Position

6,333 

 

6,305 

 

APPENDIX to UK GAS TRANSMISSION

Revenue and costs in 2020/21 on an IFRS basis

UK Gas Transmission statutory operating profit decreased £10 million in the year. In 2020/21 there were £5 million of exceptional costs related to establishing our new operating model, compared to £1 million of environmental charges in the prior year. Timing under-recoveries of £96 million in 2020/21 compared to £54 million in the prior year primarily as a result of under-collections relating to the new gas capacity charging regime and lower demand, partly offset by a lower return of prior period over-recoveries.

Adjusted operating profit reduced by £6 million (2%), including £42 million year-on-year adverse timing under-recoveries. Underlying operating profit increased by 9%. Net revenue (adjusted for timing) was higher, reflecting the impact of prior year return of Fleetwood allowances and the RPI uplift, partly offset by re-opener allowances (in 2019/20) for cyber and data centres and lower incentives income. Regulated controllable costs were £5 million lower, mainly driven by efficiency savings. Other costs were higher principally due to increased asset decommissioning costs.

UK Gas Transmission

 

(£ million)

2021

2020

% change

Revenue

904 

 

927 

 

(2)

 

Operating costs

(567)

 

(580)

 

(2)

 

Statutory operating profit

337 

 

347 

 

(3)

 

Exceptional items

 

 

400 

 

Adjusted operating profit

342 

 

348 

 

(2)

 

Timing

96 

 

54 

 

78 

 

Underlying operating profit

438 

 

402 

 

 

 

 

 

 

Net revenue (adjusted for timing)

767 

 

739 

 

 

Regulated controllable costs

(122)

 

(127)

 

(4)

 

Post-retirement benefits

(18)

 

(19)

 

(5)

 

Other operating costs

(24)

 

(20)

 

20 

 

Depreciation and amortisation

(165)

 

(171)

 

(4)

 

Underlying operating profit

438 

 

402 

 

 

Timing

(96)

 

(54)

 

78 

 

Adjusted operating profit

342 

 

348 

 

(2)

 

 

 

 

 

US REGULATED OPERATIONS

Return on Equity

During the year, the financial performance of the US regulated business was impacted by additional costs of COVID-19, and a greater number of storms, with our achieved RoE decreasing by 210 basis points to 7.2% (excluding COVID-19 related bad debts). Adjusting for these headwinds, and the impact of rate case delays, the RoE would have been 8.6% or 92% of the allowed return.

Regulated Financial Position

Overall, the US rate base increased by $2.0 billion (8%) to $27.6 billion[8] driven by increased capital expenditure partially offset by depreciation and deferred tax movements.

US Regulated Assets

($ billion as at 31 March)

2021

2020¹

% change

Rate Base excl. working capital (w/c)

26.8 

 

24.9 

 

 

Working capital in Rate Base

0.8 

 

0.7 

 

14 

 

Total Rate Base

27.6 

 

25.6 

 

 

Reg. assets outside Rate Base excl. w/c

3.2 

 

2.7 

 

18 

 

Working capital outside Rate Base

(0.6)

 

(0.4)

 

62 

 

Total regulated assets outside Rate Base

2.5 

 

2.3 

 

10 

 

Total US Regulated Assets

30.2 

 

27.9 

 

 

 

 

 

 

£ billion as at 31 March

2021

2020

% change

Total US Regulated Assets at actual currency

21.9 

 

22.4 

 

(2)

 

Total US Regulated Assets at constant currency

21.9 

 

20.2 

 

 

1. 2020 restated for movements between categories.

 

Financial performance

US Regulated

(£ million)

2021

2020

2020 at constant currency

% change at actual currency

Revenue

9,195 

 

9,205 

 

8,833 

 

 

Operating costs

(7,851)

 

(8,325)

 

(7,989)

 

(6)

 

Statutory operating profit

1,344 

 

880 

 

844 

 

53 

 

Exceptional items

 

392 

 

376 

 

(99)

 

Remeasurements

(34)

 

125 

 

121 

 

(127)

 

Adjusted operating profit

1,313 

 

1,397 

 

1,341 

 

(6)

 

Timing

23 

 

239 

 

229 

 

(90)

 

Major storm costs

150 

 

 

 

 

Underlying operating profit

1,486 

 

1,636 

 

1,570 

 

(9)

 

 

 

 

 

 

Net revenue (adjusted for timing)

5,965 

 

5,984 

 

5,742 

 

 

Regulated controllable costs

(1,905)

 

(1,871)

 

(1,795)

 

 

Post-retirement benefits

(97)

 

(95)

 

(91)

 

 

Bad debt expense

(325)

 

(231)

 

(222)

 

41 

 

Other operating costs

(1,264)

 

(1,296)

 

(1,244)

 

(2)

 

Depreciation and amortisation

(888)

 

(855)

 

(820)

 

 

Underlying operating profit

1,486 

 

1,636 

 

1,570 

 

(9)

 

Timing

(23)

 

(239)

 

(229)

 

(90)

 

Major storm costs

(150)

 

 

 

 

Adjusted operating profit

1,313 

 

1,397 

 

1,341 

 

(6)

 

 

US Regulated statutory operating profit increased by £464 million, partly as a result of the £159 million year-on-year favourable movements in commodity contract remeasurements and adverse exchange rate movements, but mainly from the non-recurrence of exceptional charges booked in the prior year. In 2020/21, exceptional charges were lower comprising £17 million of costs related to establishing our new operating model and transaction costs, mostly offset by a £14 million environmental credit (reversal of cost previously booked as exceptional). In 2019/20, £392 million of exceptional charges were incurred for environmental costs related to the clean up of former manufacturing gas plant facilities. Timing under-recoveries of £23 million in 2020/21 compared to timing under-recoveries of £239 million in 2019/20, driven by revenue decoupling, commodity recoveries, partly offset by a higher return of NYSERDA and transmission wheeling prior period balances. Storm costs (deferrable and non-deferrable) were £142 million higher year on year. These factors, along with an adverse impact from COVID-19 disruption and a weaker US dollar, resulted in an overall increase in statutory operating profit, but a decrease in adjusted operating profit.

 

Adjusted operating profit decreased by £84 million (6%), despite £216 million year-on-year favourable timing under-recoveries. in 2020/21, we experienced higher total storm costs compared to 2019/20. In 2020/21, we incurred £150 million of deferrable storm costs, which exceeded our $100 million threshold to qualified as major and be excluded from our underlying results. In 2019/20 we incurred £76 million of deferrable storm costs, which fell below this threshold. Underlying operating profit decreased by 9%. Net revenues (adjusted for timing) increased by £223 million (at constant currency) from the benefits of rate case increments (including Niagara Mohawk and Mass Electric), capital trackers and higher revenues in wholesale networks, but were offset by a £242 million adverse impact from foreign exchange movements. A weaker US dollar decreased underlying operating profit by £66 million in the year. US Regulated controllable costs increased as a result of higher IT costs, inflation, incremental COVID-19 costs, partly offset by cost mitigations and efficiencies. Provisions for bad  and doubtful debts increased by £94 million, driven by a further £179 million (2019/20: £117 million) additional provision for receivables related to the impact of COVID-19. Depreciation and amortisation increased due to the growth in assets. Other costs were higher due to increased property taxes and higher non-deferrable storm costs partly offset by lower cost of removal.

 

 

 

 

Return on Equity

 

Rate Base ($m) as at 31 March

Regulated Entity

 

FY21

FY20

FY19

Allowed most recent

(%)

 

2021

2020

% change

KEDNY

 

6.1 

 

7.7 

 

6.2 

 

9.0 

 

 

4,958 

 

4,555 

 

 

KEDLI

 

8.2 

 

9.7 

 

9.9 

 

9.0 

 

 

3,158 

 

2,932 

 

 

NMPC Gas

 

7.2 

 

8.7 

 

9.8 

 

9.0 

 

 

1,467 

 

1,328 

 

10 

 

NMPC Electric

 

6.3 

 

8.9 

 

9.4 

 

9.0 

 

 

6,206 

 

5,881 

 

 

Total New York

 

6.7 

 

8.7 

 

8.6 

 

9.0 

 

 

15,789 

 

14,696 

 

 

 

 

 

 

 

 

 

 

 

 

Massachusetts Gas

 

5.7 

 

7.8 

 

7.4 

 

9.5 

 

 

3,521 

 

3,108 

 

13 

 

Massachusetts Electric

 

5.3 

 

10.3 

 

7.8 

 

9.6 

 

 

3,033 

 

2,858 

 

 

Total Massachusetts

 

5.5 

 

9.0 

 

7.6 

 

9.5 

 

 

6,554 

 

5,966 

 

10 

 

 

 

 

 

 

 

 

 

 

 

Narragansett Gas

 

6.9 

 

8.8 

 

4.7 

 

9.3 

 

 

1,082 

 

944 

 

15 

 

Narragansett Electric

 

10.0 

 

11.9 

 

10.7 

 

9.3 

 

 

950 

 

895 

 

 

Total Rhode Island

 

8.4 

 

10.3 

 

7.7 

 

9.3 

 

 

2,032 

 

1,839 

 

10 

 

 

 

 

 

 

 

 

 

 

 

Long Island Generation

 

12.2 

 

14.1 

 

14.2 

 

9.9 

 

 

440 

 

456 

 

(4)

 

New England Power

 

11.0 

 

11.0 

 

11.0 

 

10.6 

 

 

1,970 

 

1,844 

 

 

Narragansett Electric Transmission

 

11.1 

 

11.1 

 

11.3 

 

10.6 

 

 

787 

 

788 

 

 

Canadian Interconnector & Other

 

13.0 

 

13.0 

 

13.0 

 

13.0 

 

 

58 

 

52 

 

12 

 

Total FERC

 

11.2 

 

11.4 

 

11.5 

 

10.6 

 

 

3,255 

 

3,140 

 

 

 

 

 

 

 

 

 

 

 

 

Total US Regulated

 

7.2 

 

9.3 

 

8.8 

 

9.4 

 

 

27,630 

 

25,641 

 

 

 

NGV AND OTHER ACTIVITIES

 

Operating profit

 

Capital investment1

(£ million)

2021

2020

2020 at constant currency

change % at constant currency

 

2021

2020

2020 at constant currency

change % at constant currency

Metering

154 

 

158 

 

158 

 

(3)

 

 

27 

 

41 

 

41 

 

(34)

 

Interconnectors

60 

 

61 

 

61 

 

(2)

 

 

378 

 

498 

 

498 

 

(24)

 

Grain LNG

104 

 

78 

 

78 

 

33 

 

 

20 

 

 

 

186 

 

NG Renewables

(18)

 

(9)

 

(9)

 

n/a

 

 

123 

 

115 

 

n/a

Other

(2)

 

(19)

 

(18)

 

(89)

 

 

 

 

 

 

Total NGV

298 

 

269 

 

270 

 

10 

 

 

431 

 

669 

 

661 

 

(35)

 

Property

22 

 

63 

 

63 

 

(65)

 

 

19 

 

 

 

375 

 

NG Partners

 

(11)

 

(11)

 

(109)

 

 

35 

 

50 

 

48 

 

(27)

 

Corporate and other activities

(84)

 

(79)

 

(79)

 

 

 

10 

 

 

 

100 

 

Total Other

(61)

 

(27)

 

(27)

 

126 

 

 

64 

 

59 

 

57 

 

12 

 

Total NGV and Other

237 

 

242 

 

243 

 

(2)

 

 

495 

 

728 

 

718 

 

(31)

 

1. Excluding investment in joint ventures and associates.

Joint ventures and associates

 

Share of post-tax results

 

Capital investment

(£ million)

2021

2020

2020 at constant currency

change % at constant currency

 

2021

2020

2020 at constant currency

change % at constant currency

Interconnectors

26 

 

29 

 

29 

 

(10)

 

 

 

 

 

 

Millennium

22 

 

22 

 

21 

 

 

 

 

 

 

 

Sunrun

 

13 

 

13 

 

(100)

 

 

 

 

 

n/a

NG Renewables

 

 

 

n/a

 

72 

 

127 

 

120 

 

n/a

Other

 

 

 

50 

 

 

 

19 

 

18 

 

(67)

 

Total NGV

56 

 

67 

 

66 

 

(15)

 

 

78 

 

146 

 

138 

 

(43)

 

NG Partners

 

 

 

67 

 

 

 

11 

 

11 

 

(73)

 

Other (including St William)

 

18 

 

18 

 

(72)

 

 

 

 

 

n/a

Total Other

10 

 

21 

 

21 

 

(52)

 

 

 

11 

 

11 

 

(73)

 

Joint Ventures and Associates

66 

 

88 

 

87 

 

(24)

 

 

81 

 

157 

 

149 

 

(46)

 

 

NATIONAL GRID VENTURES

National Grid Ventures' statutory operating profits were £29 million higher than 2019/20, with lower depreciation driven by the extension of asset lives at our LNG import terminal at Grain, commencement of operations at our second interconnector (IFA2) between England and France and fair value gains in our US Ventures business. These were partly offset by lower prior year one-off benefits in our legacy French interconnector (IFA1), lower revenues from our declining meter population and a £2 million exceptional charge in relation to establishing our new operating model, compared to a £1 million charge for environmental costs in 2019/20.

OTHER ACTIVITIES

In 'other' activities, we incurred an exceptional charge of £25 million related to establishing our new operating model and £24 million of transaction costs for the acquisition of WPD and the sale of NECO, both expected to take place during 2021/22, compared to a £3 million charge for environmental costs in the prior year. In 2020/21, underlying operating profit included net costs of £61 million (including corporate costs), compared to £27 million in 2019/20. The underlying performance of the Property business was £41 million lower than prior year reflecting a lower volume of sales compared to 2019/20. 

National Grid Partners (NGP)

NGP, our corporate investment and innovation arm, continued delivering for the Group during the year. As of 31 March 2021, NGP's portfolio comprised investments in 23 companies and four funds at a fair value of £178 million. It invests in emerging technologies such as Artificial Intelligence (AI), Data Security and Cybersecurity, and embeds those innovations across our US and UK core operations, helping to improve National Grid's performance.

 

In collaboration with NGP portfolio company Urbint, for example, National Grid is using AI to focus our damage prevention resources with the potential to save millions of dollars annually in avoided damage and to minimise disruption to critical networks. Additionally, NGP launched the NextGrid Alliance (NGA), a consortium of over 65 utilities where best practices and technology innovations are shared across areas including modernising utility infrastructure and keeping power grids safe from cyber threats. Later this year, NGP will host its first NGA Summit in the UK as part of COP26.

 

NGP will continue to deliver strategic and financial value to our core businesses and investing in valuable start-up technologies, tackling innovation and business development projects that can improve our company performance and acting as a catalyst for change across the broader Group.

PROVISIONAL 2020/21 FINANCIAL TIMETABLE

Date

Event

20 May 2021

2020/21 Preliminary Results

3 June 2021

ADRs and Ordinary shares go ex-dividend

4 June 2021

Record date for 2020/21 final dividend

10 June 2021

Scrip reference price announced

21 July 2021 (5pm London time)

Scrip election date

26 July 2021

2021 Annual General Meeting

18 August 2021

2020/21 final dividend paid to qualifying shareholders

18 November 2021

2021/22 half year results

2 December 2021

ADRs and Ordinary shares go ex-dividend

3 December 2021

Record date for 2021/22 interim dividend

9 December 2021

Scrip reference price announced

20 December 2021 (5pm London time)

Scrip election date for 2021/22 interim dividend

19 January 2022

2021/22 interim dividend paid to qualifying shareholders

 

American Depositary Receipt (ADR) Deposit Agreement

National Grid amended the deposit agreement under which the ADRs representing its ordinary shares are issued to allow a fee of up to $0.05 per ADR to be charged for any cash distribution made to ADR holders, including cash dividends. ADR holders who receive cash in relation to the 2020/21 final dividend will be charged a fee of $0.02 per ADR, by the Depositary prior to distribution of the cash dividend.

 

CAUTIONARY STATEMENT

This announcement contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include information with respect to National Grid's (the Company) financial condition, its results of operations and businesses, strategy, plans and objectives. Words such as 'aims', 'anticipates', 'expects', 'should', 'intends', 'plans', 'believes', 'outlook', 'seeks', 'estimates', 'targets', 'may', 'will', 'continue', 'project' and similar expressions, as well as statements in the future tense, identify forward-looking statements. These forward-looking statements are not guarantees of National Grid's future performance and are subject to assumptions, risks and uncertainties that could cause actual future results to differ materially from those expressed in or implied by such forward-looking statements. Many of these assumptions, risks and uncertainties relate to factors that are beyond National Grid's ability to control, predict or estimate precisely, such as the impact of COVID-19 on our operations, our employees, our counterparties, our funding and our regulatory and legal obligations, but also, more widely, changes in laws or regulations, including any arising as a result of the United Kingdom's exit from the European Union, announcements from and decisions by governmental bodies or regulators, including the implementation of the RIIO-2 price controls as well as increased economic uncertainty following the COVID-19 pandemic; the timing of construction and delivery by third parties of new generation projects requiring connection; breaches of, or changes in, environmental, climate change and health and safety laws or regulations, including breaches or other incidents arising from the potentially harmful nature of its activities; network failure or interruption, the inability to carry out critical non network operations and damage to infrastructure, due to adverse weather conditions including the impact of major storms as well as the results of climate change, due to counterparties being unable to deliver physical commodities, or due to the failure of or unauthorised access to or deliberate breaches of National Grid's IT systems and supporting technology; failure to adequately forecast and respond to disruptions in energy supply; performance against regulatory targets and standards and against National Grid's peers with the aim of delivering stakeholder expectations regarding costs and efficiency savings; and customers and counterparties (including financial institutions) failing to perform their obligations to the Company. Other factors that could cause actual results to differ materially from those described in this announcement include fluctuations in exchange rates, interest rates and commodity price indices; restrictions and conditions (including filing requirements) in National Grid's borrowing and debt arrangements, funding costs and access to financing; regulatory requirements for the Company to maintain financial resources in certain parts of its business and restrictions on some subsidiaries' transactions such as paying dividends, lending or levying charges; the delayed timing of recoveries and payments in National Grid's regulated businesses and whether aspects of its activities are contestable; the funding requirements and performance of National Grid's pension schemes and other post-retirement benefit schemes; the failure to attract, develop and retain employees with the necessary competencies, including leadership skills, and any significant disputes arising with National Grid's employees or the breach of laws or regulations by its employees; the failure to respond to market developments, including competition for onshore transmission; the threats and opportunities presented by emerging technology; the failure by the Company to respond to, or meet its own commitments as a leader in relation to, climate change development activities relating to energy transition, including the integration of distributed energy resources; and the need to grow the Company's business to deliver its strategy, as well as incorrect or unforeseen assumptions or conclusions (including unanticipated costs and liabilities) relating to business development activity, including the acquisition of WPD, the sale of the Company's Rhode Island gas and electricity business and the proposed sale of a majority stake in its UK gas transmission business. For further details regarding these and other assumptions, risks and uncertainties that may impact National Grid, please read the Strategic Report section and the 'Risk factors' on pages 227 to 230 of National Grid's most recent Annual Report and Accounts as updated by National Grid's unaudited half-year financial information for the six months ended 30 September 2020 published on 12 November 2020. In addition, new factors emerge from time to time and National Grid cannot assess the potential impact of any such factor on its activities or the extent to which any factor, or combination of factors, may cause actual future results to differ materially from those contained in any forward-looking statement. Except as may be required by law or regulation, the Company undertakes no obligation to update any of its forward-looking statements, which speak only as of the date of this announcement.

Consolidated income statement

for the years ended 31 March

 

2021

Notes

 

Before

exceptional

items and remeasurements

£m

Exceptional

items and remeasurements

(see note 4)

£m

Total

£m

 
 

Continuing operations

 

 

 

 

 

 

Revenue

2(a),3

 

14,779 

 

 

14,779 

 

 

Provision for bad and doubtful debts

 

 

(326)

 

 

(326)

 

 

Other operating costs

4

 

(11,527)

 

(31)

 

(11,558)

 

 

Operating profit/(loss)

2(b)

 

2,926 

 

(31)

 

2,895 

 

 

Finance income

4,5

 

35 

 

23 

 

58 

 

 

Finance costs

4,5

 

(977)

 

49 

 

(928)

 

 

Share of post-tax results of joint ventures and associates

 

 

66 

 

(8)

 

58 

 

 

Profit before tax

2(b)

 

2,050 

 

33 

 

2,083 

 

 

Tax

4,6

 

(416)

 

(26)

 

(442)

 

 

Total profit for the year

 

 

1,634 

 

 

1,641 

 

 

Attributable to:

 

 

 

 

 

 

Equity shareholders of the parent

 

 

1,633 

 

 

1,640 

 

 

Non-controlling interests from continuing operations

 

 

 

 

 

 

Earnings per share (pence)

 

 

 

 

 

 

Basic earnings per share (continuing)

7

 

 

 

46.6 

 

 

Diluted earnings per share (continuing)

7

 

 

 

46.3 

 

 

Basic earnings per share (continuing and discontinued)

7

 

 

 

46.6 

 

 

Diluted earnings per share (continuing and discontinued)

7

 

 

 

46.3 

 

 

 

 

2020

Notes

 

Before

exceptional

items and remeasurements

£m

Exceptional

items and remeasurements

(see note 4)

£m

Total

£m

 
 

Continuing operations

 

 

 

 

 

 

Revenue

2(a),3

 

14,540 

 

 

14,540 

 

 

Provision for bad and doubtful debts

 

 

(234)

 

 

(234)

 

 

Other operating costs

4

 

(10,999)

 

(527)

 

(11,526)

 

 

Operating profit/(loss)

2(b)

 

3,307 

 

(527)

 

2,780 

 

 

Finance income

4,5

 

70 

 

(16)

 

54 

 

 

Finance costs

4,5

 

(1,119)

 

(48)

 

(1,167)

 

 

Share of post-tax results of joint ventures and associates

 

 

88 

 

(1)

 

87 

 

 

Profit/(loss) before tax

2(b)

 

2,346 

 

(592)

 

1,754 

 

 

Tax

4,6

 

(433)

 

(47)

 

(480)

 

 

Profit/(loss) after tax from continuing operations

 

 

1,913 

 

(639)

 

1,274 

 

 

Profit/(loss) after tax from discontinued operations

 

 

 

(14)

 

(9)

 

 

Total profit/(loss) for the year (continuing and discontinued)

 

 

1,918 

 

(653)

 

1,265 

 

 

Attributable to:

 

 

 

 

 

 

Equity shareholders of the parent

 

 

1,917 

 

(653)

 

1,264 

 

 

Non-controlling interests from continuing operations

 

 

 

 

 

 

Earnings per share (pence)

 

 

 

 

 

 

Basic earnings per share (continuing)

7

 

 

 

36.8 

 

 

Diluted earnings per share (continuing)

7

 

 

 

36.6 

 

 

Basic earnings per share (continuing and discontinued)

7

 

 

 

36.5 

 

 

Diluted earnings per share (continuing and discontinued)

7

 

 

 

36.3 

 

 

Consolidated statement of comprehensive income

for the years ended 31 March

 

 

 

2021

2020

 

Notes

 

£m

£m

Profit after tax from continuing operations

 

 

1,641 

 

1,274 

 

Other comprehensive income from continuing operations

 

 

 

 

Items from continuing operations that will never be reclassified to profit or loss:

 

 

 

 

Remeasurement gains/(losses) on pension assets and post-retirement benefit obligations

 

 

1,408 

 

(724)

 

Net gains/(losses) on equity instruments designated at fair value through other comprehensive income

 

 

46 

 

(9)

 

Net (losses)/gains on financial liability designated at fair value through profit and loss attributable to changes in own credit risk

 

 

(11)

 

(3)

 

Net losses in respect of cash flow hedging of capital expenditure

 

 

(14)

 

(17)

 

Tax on items that will never be reclassified to profit or loss

 

 

(422)

 

212 

 

Total items from continuing operations that will never be reclassified to profit or loss

 

 

1,007 

 

(541)

 

Items from continuing operations that may be reclassified subsequently to profit or loss:

 

 

 

 

Exchange adjustments1

 

 

(1,347)

 

561 

 

Net gains/(losses) in respect of cash flow hedges

 

 

70 

 

(128)

 

Net gains/(losses) in respect of cost of hedging

 

 

14 

 

(78)

 

Net gains/(losses) on investment in debt instruments measured at fair value

through other comprehensive income

 

 

80 

 

(15)

 

Share of other comprehensive income/(losses) of associates, net of tax

 

 

 

(5)

 

Tax on items that may be reclassified subsequently to profit or loss

 

 

(8)

 

35 

 

Total items from continuing operations that may be reclassified subsequently to profit or loss

 

 

(1,190)

 

370 

 

Other comprehensive loss for the year, net of tax from continuing operations

 

 

(183)

 

(171)

 

Other comprehensive income for the year, net of tax from discontinued operations²

 

 

 

 

Other comprehensive loss for the year, net of tax

 

 

(183)

 

(165)

 

Total comprehensive income for the year from continuing operations

 

 

1,458 

 

1,103 

 

Total comprehensive loss for the year from discontinued operations

 

 

 

(3)

 

Total comprehensive income for the year

 

 

1,458 

 

1,100 

 

Attributable to:

 

 

 

 

Equity shareholders of the parent

 

 

 

 

From continuing operations

 

 

1,459 

 

1,101 

 

From discontinued operations

 

 

 

(3)

 

 

 

 

1,459 

 

1,098 

 

Non-controlling interests

 

 

 

 

From continuing operations

 

 

(1)

 

 

1. Comparative amounts have been revised as described in note 1.

2. The other comprehensive income from discontinued operations relates to the items of other comprehensive income of Cadent (investment through Quadgas HoldCo Limited).

Consolidated statement of changes in equity

for the years ended 31 March

 

Share

capital

£m

Share

premium account

£m

Retained

earnings

£m

Other equity  reserves £m

 

Total

share-holders'

equity

£m

Non-

controlling interests

£m

 

Total

equity

£m

At 1 April 2019¹

458 

 

1,314 

 

21,999 

 

(4,223)

 

 

19,548 

 

20 

 

 

19,568 

 

Profit for the year

 

 

1,264 

 

 

 

1,264 

 

 

 

1,265 

 

Other comprehensive (loss)/income for the year¹

 

 

(509)

 

343 

 

 

(166)

 

 

 

(165)

 

Total comprehensive income for the year

 

 

755 

 

343 

 

 

1,098 

 

 

 

1,100 

 

Equity dividends

 

 

(892)

 

 

 

(892)

 

 

 

(892)

 

Scrip dividend-related share issue²

12 

 

(13)

 

 

 

 

(1)

 

 

 

(1)

 

Issue of treasury shares

 

 

17 

 

 

 

17 

 

 

 

17 

 

Purchase of own shares

 

 

(6)

 

 

 

(6)

 

 

 

(6)

 

Share-based payments

 

 

19 

 

 

 

19 

 

 

 

19 

 

Tax on share-based payments

 

 

 

 

 

 

 

 

 

Cash flow hedges transferred to the statement of financial position, net of tax

 

 

 

(15)

 

 

(15)

 

 

 

(15)

 

1 April 2020

470 

 

1,301 

 

21,895 

 

(3,895)

 

 

19,771 

 

22 

 

 

19,793 

 

Profit for the year

 

 

1,640 

 

 

 

1,640 

 

 

 

1,641 

 

Other comprehensive income/(loss) for the year

 

 

1,001 

 

(1,182)

 

 

(181)

 

(2)

 

 

(183)

 

Total comprehensive income/(loss) for the year

 

 

2,641 

 

(1,182)

 

 

1,459 

 

(1)

 

 

1,458 

 

Equity dividends

 

 

(1,413)

 

 

 

(1,413)

 

 

 

(1,413)

 

Scrip dividend-related share issue²

 

(5)

 

 

 

 

(1)

 

 

 

(1)

 

Issue of treasury shares

 

 

17 

 

 

 

17 

 

 

 

17 

 

Purchase of own shares

 

 

(2)

 

 

 

(2)

 

 

 

(2)

 

Share-based payments

 

 

27 

 

 

 

27 

 

 

 

27 

 

Tax on share-based payments

 

 

(2)

 

 

 

(2)

 

 

 

(2)

 

Cash flow hedges transferred to the statement of financial position, net of tax

 

 

 

(17)

 

 

(17)

 

 

 

(17)

 

At 31 March 2021

474 

 

1,296 

 

23,163 

 

(5,094)

 

 

19,839 

 

21 

 

 

19,860 

 

1. Comparative amounts have been revised as described in note 1.

2. Included within the share premium account are costs associated with scrip dividends.

Consolidated statement of financial position

as at 31 March

 

 

 

2021

2020

 

Notes

 

£m

£m

Non-current assets

 

 

 

 

Goodwill¹

 

 

4,588 

 

5,712 

 

Other intangible assets

 

 

1,443 

 

1,295 

 

Property, plant and equipment¹

10

 

47,043 

 

49,762 

 

Other non-current assets

 

 

293 

 

354 

 

Pension assets

11

 

1,747 

 

1,849 

 

Financial and other investments

 

 

755 

 

543 

 

Investments in joint ventures and associates

 

 

867 

 

995 

 

Derivative financial assets

 

 

542 

 

1,249 

 

Total non-current assets

 

 

57,278 

 

61,759 

 

Current assets

 

 

 

 

Inventories and current intangible assets

 

 

439 

 

549 

 

Trade and other receivables

 

 

2,919 

 

2,986 

 

Current tax assets

 

 

67 

 

102 

 

Financial and other investments

 

 

2,342 

 

1,998 

 

Derivative financial assets

 

 

457 

 

93 

 

Cash and cash equivalents

 

 

157 

 

73 

 

Assets held for sale

9

 

3,557 

 

 

Total current assets

 

 

9,938 

 

5,801 

 

Total assets

 

 

67,216 

 

67,560 

 

Current liabilities

 

 

 

 

Borrowings

 

 

(3,737)

 

(4,072)

 

Derivative financial liabilities

 

 

(145)

 

(380)

 

Trade and other payables

 

 

(3,517)

 

(3,602)

 

Contract liabilities

 

 

(66)

 

(76)

 

Current tax liabilities

 

 

(75)

 

(86)

 

Provisions

 

 

(260)

 

(348)

 

Liabilities held for sale

9

 

(1,568)

 

 

Total current liabilities

 

 

(9,368)

 

(8,564)

 

Non-current liabilities

 

 

 

 

Borrowings

 

 

(27,483)

 

(26,722)

 

Derivative financial liabilities

 

 

(754)

 

(954)

 

Other non-current liabilities

 

 

(843)

 

(891)

 

Contract liabilities

 

 

(1,094)

 

(1,082)

 

Deferred tax liabilities¹

 

 

(4,815)

 

(4,446)

 

Pensions and other post-retirement benefit obligations

11

 

(1,032)

 

(2,802)

 

Provisions

 

 

(1,967)

 

(2,306)

 

Total non-current liabilities

 

 

(37,988)

 

(39,203)

 

Total liabilities

 

 

(47,356)

 

(47,767)

 

Net assets

 

 

19,860 

 

19,793 

 

Equity

 

 

 

 

Share capital

 

 

474 

 

470 

 

Share premium account

 

 

1,296 

 

1,301 

 

Retained earnings¹

 

 

23,163 

 

21,895 

 

Other equity reserves¹

 

 

(5,094)

 

(3,895)

 

Total shareholders' equity

 

 

19,839 

 

19,771 

 

Non-controlling interests

 

 

21 

 

22 

 

Total equity

 

 

19,860 

 

19,793 

 

1. Comparative amounts have been revised as described in note 1.

Consolidated cash flow statement

for the years ended 31 March

 

 

 

2021

2020

 

Notes

 

£m

£m

Cash flows from operating activities

 

 

 

 

Total operating profit from continuing operations

2(b)

 

2,895 

 

2,780 

 

Adjustments for:

 

 

 

 

Exceptional items and remeasurements

 

 

31 

 

527 

 

Other fair value movements

 

 

(22)

 

 

Depreciation, amortisation and impairment

 

 

1,672 

 

1,640 

 

Share-based payments

 

 

27 

 

19 

 

Changes in working capital

 

 

312 

 

269 

 

Changes in provisions

 

 

(195)

 

(169)

 

Changes in pensions and other post-retirement benefit obligations

 

 

(55)

 

(92)

 

Cash flows relating to exceptional items

 

 

(47)

 

(60)

 

Cash generated from operations - continuing operations

 

 

4,618 

 

4,914 

 

Tax paid

 

 

(157)

 

(199)

 

Net cash inflow from operating activities - continuing operations

 

 

4,461 

 

4,715 

 

Net cash used in operating activities - discontinued operations

 

 

 

(97)

 

Cash flows from investing activities

 

 

 

 

Acquisition of financial investments

 

 

(99)

 

(108)

 

Acquisition of National Grid Renewables (formerly Geronimo) and Emerald

 

 

(26)

 

(139)

 

Investments in joint ventures and associates

 

 

(81)

 

(82)

 

Disposal of financial investments

 

 

66 

 

63 

 

Disposal of interests in Quadgas HoldCo Limited

 

 

 

1,965 

 

Purchases of intangible assets

 

 

(426)

 

(317)

 

Purchases of property, plant and equipment

 

 

(4,362)

 

(4,583)

 

Disposals of property, plant and equipment

 

 

 

68 

 

Dividends received from joint ventures and associates

 

 

80 

 

75 

 

Interest received

 

 

16 

 

73 

 

Net movements in short-term financial investments

 

 

(436)

 

 

Cash inflows on derivatives

 

 

225 

 

58 

 

Cash outflows on derivatives

 

 

(81)

 

(281)

 

Net cash flow used in investing activities - continuing operations

 

 

(5,116)

 

(3,201)

 

Net cash flow used in investing activities - discontinued operations

 

 

 

 

Cash flows from financing activities

 

 

 

 

Proceeds from issue of treasury shares

 

 

16 

 

16 

 

Purchase of own shares

 

 

(2)

 

(6)

 

Proceeds received from loans

 

 

5,645 

 

4,218 

 

Repayment of loans

 

 

(1,663)

 

(3,253)

 

Payments of lease liabilities

 

 

(112)

 

(121)

 

Net movements in short-term borrowings

 

 

(759)

 

(424)

 

Cash inflows on derivatives

 

 

58 

 

62 

 

Cash outflows on derivatives

 

 

(185)

 

(249)

 

Interest paid

 

 

(835)

 

(957)

 

Dividends paid to shareholders

 

 

(1,413)

 

(892)

 

Net cash flow from/(used in) financing activities - continuing operations

 

 

750 

 

(1,606)

 

Net increase/(decrease) in cash and cash equivalents

 

 

95 

 

(183)

 

Reclassification to held for sale

 

 

(4)

 

 

Exchange movements

 

 

(7)

 

 

Cash and cash equivalents at start of year

 

 

73 

 

252 

 

Cash and cash equivalents at end of year

 

 

157 

 

73 

 

               

Notes

1.  Basis of preparation and new accounting standards, interpretations and amendments

 

The full year financial information contained in this announcement, which does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006, has been derived from the statutory accounts for the year ended 31 March 2021, which will be filed with the Registrar of Companies in due course. Statutory accounts for the year ended 31 March 2020 have been filed with the Registrar of Companies. The auditors' report on each of these statutory accounts was unqualified and did not contain a statement under Section 498 of the Companies Act 2006.

 

The full year financial information has been prepared in accordance with the accounting policies applicable for the year ended 31 March 2021 which are consistent with those applied in the preparation of our Annual Report and Accounts for the year ended 31 March 2020, with the exception of any new standards or interpretations adopted during the year.

 

Our income statement and segmental analysis separately identify financial results before and after exceptional items and remeasurements. We continue to use a columnar presentation as we consider it improves the clarity of the presentation, and assists users of the financial statements to understand the results. The Directors believe that presentation of the results in this way is relevant to an understanding of the Group's financial performance. The inclusion of total profit for the period from continuing operations before exceptional items and remeasurements forms part of the incentive target set annually for remunerating certain Executive Directors and accordingly we believe it is important for users of the financial statements to understand how this compares to our results on a statutory basis and period on period.

 

Areas of judgement and key sources of estimation uncertainty

 

Areas of judgement that have the most significant effect on the amounts recognised in the financial statements are as follows:

categorisation of certain items as exceptional items or remeasurements and the definition of adjusted earnings (see notes 4 and 7). In applying the Group's exceptional items framework, we have considered a number of key matters, as detailed in note 4;

the judgement that notwithstanding legislation enacted and targets committing the UK, New York State and Massachusetts to achieving Net Zero greenhouse gas emissions by 2050, these do not trigger a reassessment of the remaining useful economic lives of our gas network assets (see estimate below); and

following the legal separation of the Electricity System Operator on 1 April 2019, we concluded that the Electricity System Operator acts as an agent in respect of certain Transmission Network Use of Service revenues, principally those collected on behalf of the Scottish and Offshore transmission operators.

 

Key sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows:

the valuation of liabilities for pensions and other post-retirement benefits (see note 11); and

the cash flows applied in determining the environmental provisions, in particular relating to three US Superfund sites (see note 4).

 

In light of the current ongoing impact of the COVID-19 pandemic, valuations of certain assets and liabilities are necessarily more subjective. The main impact at 31 March 2021 is the consideration of the recoverability of customer receivables, particularly in relation to US retail customers, in light of the suspension of debt collection activities and customer termination activities, which is an area of estimation uncertainty impacting the Group's position as at 31 March 2021.

 

In addition, we also highlight the estimates made regarding the useful economic lives of our gas network assets due to the length over which they are being depreciated, the potential for new and evolving technologies over that period, and the range of potential pathways for meeting Net Zero targets (see note 10 for details and sensitivity analysis).

 

 

1.  Basis of preparation and new accounting standards, interpretations and amendments continued

 

Disposal of The Naragansett Electric Company

 

As described further in note 9, on 17 March 2021, the Group signed an agreement to sell 100% of the share capital of a wholly owned subsidiary, The Narragansett Electric Company (NECO). The sale is expected to complete in early 2022 once all regulatory approvals are obtained.

 

As the sale is considered highly probable and is expected to complete within a year, the associated assets and liabilities have been presented as held for sale in the consolidated statement of financial position. However, the transaction has not met the criteria for classification as a discontinued operation and therefore its results for the period are not separately disclosed on the face of the income statement.

 

Comparative period revisions

 

During the year, we have revised the comparative balances primarily to reflect adjustments between property, plant and equipment and goodwill related to the accounting performed for acquisitions made by our US business between 2000 and 2007. The adjustments related to the treatment of certain regulatory liabilities recognised under US GAAP on the acquisition balance sheets under UK GAAP and IFRS. This resulted in an overstatement of goodwill and an understatement of property, plant and equipment. The adjustments had a resulting impact on the deferred tax balances that were recognised at the time of the acquisitions and therefore, these have also been updated for all periods presented, also taking into account any subsequent changes in tax rates. The translation reserve on consolidation of these subsidiaries was also updated.

 

There have been no income statement impacts (and therefore no impact on the previously reported earnings per share) for any of the periods presented. Opening retained earnings have increased to correct the income statement impact of amortising the overstated goodwill from the period after acquisition until the adoption of IFRS in 2005 and for the impact on deferred tax of the tax rate changes noted above. Any foreign exchange impacts are recorded within the translation reserve within other equity reserves.

 

Below we set out the impacted line items and the adjustments to our opening statement of financial position as at 1 April 2019. In addition, we set out the adjustments to previously presented balances as at 31 March 2020 (with the only movement each period being as a result of foreign exchange movements):

 

 

1 April 2019

31 March 2020

 

£m

£m

Goodwill

(497)

 

(521)

 

Property, plant and equipment

946 

 

992 

 

Deferred tax liability

250 

 

262 

 

Retained earnings

185 

 

185 

 

Translation reserve

14 

 

24 

 

 

 

1.  Basis of preparation and new accounting standards, interpretations and amendments continued

 

New accounting standards and interpretations effective for the year ended 31 March 2021

 

There are no new accounting standards effective for the year ended 31 March 2021.

 

The UK's Financial Conduct Authority announced that the London Inter-bank Offered Rate (LIBOR) will cease to exist by the end of 2021, and will be replaced by alternative reference rates. In September 2019, the IASB amended IFRS 9 and IFRS 7 by issuing Phase I of Interest Rate Benchmark Reform, which modified certain hedge accounting requirements to allow hedge accounting to continue for affected hedges during the period of uncertainty before the hedged items or hedging instruments were amended as a result of the change in the reference rate. The amendments were endorsed in January 2020 for adoption in the EU. The Group early-adopted these changes to IFRS 9 and IFRS 7 with effect from 1 April 2019. Phase II was issued in August 2020 and endorsed in January 2021 for adoption in the EU, resulting in amendments to IFRS 9, IFRS 7 and IFRS 16. The Group has early adopted these amendments with effect from 1 April 2020 as they enable the Company and its subsidiaries to reflect the effects of transitioning from LIBOR to alternative benchmark interest rates without giving rise to accounting impacts that would not provide useful information to users of the financial statements. There were no transition adjustments on adoption of either phase and the Group has not restated the prior period, but instead has applied the amendments prospectively.

 

The Group has also adopted the following amendments to standards, which have had no material impact on the Group's results or financial statement disclosure:

Amendments to IFRS 16 'Leases - COVID-19 Related Rent Concessions';

Amendments to IFRS 3 'Business Combinations';

Amendments to IAS 1 and IAS 8 'Definition of Material'; and

Amendments to the References to the Conceptual Framework.

 

New accounting standards not yet adopted

 

With effect from the period commencing 1 April 2021, the consolidated financial statements will be prepared in accordance with IAS and IFRS and related interpretations as adopted by the UK, instead of those adopted by the EU. As both sets of accounting standards are currently aligned, there will be no transitional adjustments required and comparative amounts will not be required to be restated. The following new accounting standards and amendments to existing standards have been issued but are not yet effective or have not yet been endorsed by the EU:

IFRS 17 'Insurance Contracts';

Amendments to IFRS 3 'Business Combinations';

Amendments to IAS 16 'Property, Plant and Equipment';

Amendments to IAS 37 'Provisions, Contingent Liabilities and Contingent Assets';

Amendments to IAS 1 'Presentation of Financial Statements';

Amendments to IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors'; and

Annual improvements to IFRS standards 2018-2020.

 

Effective dates remain subject to the EU endorsement process.

 

The Group is currently assessing the impact of the above standards, but they are not expected to have a material impact. The Group has not adopted any other standard, amendment or interpretation that has been issued but is not yet effective.

 

Date of approval

 

This announcement was approved by the Board of Directors on 19 May 2021.

2.  Segmental analysis

 

Revenue and the results of the business are analysed by operating segment, based on the information the Board of Directors uses internally for the purposes of evaluating the performance of each operating segment and determining resource allocation between them. The Board is National Grid's chief operating decision maker (as defined by IFRS 8 'Operating Segments') and assesses the profitability of operations principally on the basis of operating profit before exceptional items and remeasurements (see note 4). As a matter of course, the Board also considers profitability by segment, excluding the effect of timing. However, the measure of profit disclosed in this note is operating profit before exceptional items and remeasurements as this is the measure that is most consistent with the IFRS results reported within our financial statements.

 

The results of our three principal businesses are reported to the Board of Directors and are treated as reportable operating segments. All other operating segments are reported to the Board of Directors on an aggregated basis. The following table describes the main activities for each reportable operating segment:

UK Electricity Transmission

The high-voltage electricity transmission networks in England and Wales and Great Britain system operator.

UK Gas Transmission

The high-pressure gas transmission networks in Great Britain and system operator in Great Britain.

US Regulated

Gas distribution networks, electricity distribution networks and high-voltage electricity transmission networks in New York and New England and electricity generation facilities in New York.

 

The UK Electricity Transmission segment also includes the independent Electricity System Operator (ESO). Although there is a separate governance structure (including a separate Executive Committee), the Board receives financial information on an aggregated UK Electricity Transmission basis, which includes the results of the ESO, and accordingly the ESO is included within the reportable segment.

 

National Grid Ventures (NGV) is our only other operating segment. It does not currently meet the thresholds set out in IFRS 8 to be identified as a separate reportable segment and therefore its results are not required to be separately presented. Instead, NGV's results are reported alongside the results of all other operating businesses on an aggregated basis as 'NGV and Other', with certain additional disclosure included in footnotes.

 

NGV represents our key strategic growth area outside our regulated core business in competitive markets across the US and the UK. The business comprises all commercial operations in metering, LNG at the Isle of Grain in the UK, electricity interconnectors and our investments in National Grid Renewables (formerly Geronimo) and Emerald Energy Venture LLC (Emerald).

 

Other activities that do not form part of any of the segments in the above table or NGV primarily relate to our UK property business together with insurance and corporate activities in the UK and US and the Group's investments in technology and innovation companies through National Grid Partners.

 

The segmental information is presented in relation to continuing operations only.

 

2.  Segmental analysis   continued

 

(a)  Revenue

 

Revenue primarily represents the sales value derived from the generation, transmission and distribution of energy, together with the sales value derived from the provision of other services to customers. Refer to note 3 for further details.

 

Sales between operating segments are priced considering the regulatory and legal requirements to which the businesses are subject. The analysis of revenue by geographical area is on the basis of destination. There are no material sales between the UK and US geographical areas.

 

2021

 

2020

 

Total

sales

Sales

between

segments

Sales

to third

parties

 

Total

sales

Sales

between

segments

Sales

to third

parties

 

£m

£m

£m

 

£m

£m

£m

Operating segments - continuing operations:

 

 

 

 

 

 

 

UK Electricity Transmission

3,992 

 

(10)

 

3,982 

 

 

3,702 

 

(8)

 

3,694 

 

UK Gas Transmission

904 

 

(16)

 

888 

 

 

927 

 

(16)

 

911 

 

US Regulated

9,195 

 

 

9,195 

 

 

9,205 

 

 

9,205 

 

NGV and Other1

715 

 

(1)

 

714 

 

 

736 

 

(6)

 

730 

 

Total revenue from continuing operations

14,806 

 

(27)

 

14,779 

 

 

14,570 

 

(30)

 

14,540 

 

 

 

 

 

 

 

 

 

Split by geographical areas - continuing operations:

 

 

 

 

 

 

 

UK

 

 

5,482 

 

 

5,282 

 

US

 

 

9,297 

 

 

 

 

9,258 

 

 

 

 

14,779 

 

 

 

 

14,540 

 

1. Included within NGV and Other is £636 million (2020: £608 million) of revenue relating to NGV.

 

(b)  Operating profit

 

A reconciliation of the operating segments' measure of profit to profit before tax from continuing operations is provided below. Further details of the exceptional items and remeasurements are provided in note 4.

 

Before exceptional items and remeasurements

 

After exceptional items and remeasurements

 

2021

2020

 

2021

2020

 

£m

£m

 

£m

£m

Operating segments - continuing operations:

 

 

 

 

 

UK Electricity Transmission

1,034 

 

1,320 

 

 

1,027 

 

1,316 

 

UK Gas Transmission

342 

 

348 

 

 

337 

 

347 

 

US Regulated

1,313 

 

1,397 

 

 

1,344 

 

880 

 

NGV and Other1

237 

 

242 

 

 

187 

 

237 

 

Total operating profit from continuing operations

2,926 

 

3,307 

 

 

2,895 

 

2,780 

 

 

 

 

 

 

 

Split by geographical area - continuing operations:

 

 

 

 

 

UK

1,612 

 

1,925 

 

 

1,550 

 

1,915 

 

US

1,314 

 

1,382 

 

 

1,345 

 

865 

 

 

2,926 

 

3,307 

 

 

2,895 

 

2,780 

 

1. Included within NGV and Other is £298 million (2020: £269 million) of operating profit before exceptional items and remeasurements and £296 million of operating profit after exceptional items and remeasurements (2020: £268 million), relating to NGV.

 

 

2.  Segmental analysis continued

 

Below we reconcile total operating profit from continuing operations to profit