Record investment, delivering for our customers and communities
London | 18 May 2023: National Grid, a leading energy transmission and distribution company, today announces its Full Year results for the period ended 31 March 2023.
John Pettigrew, Chief Executive, said:
“This has been another year of significant progress and strategic change for National Grid with good results demonstrating excellent execution against our key priorities. A record £7.7 billion has been invested in building clean, smart energy infrastructure and maintaining world class reliability across our networks. We’ve supported our communities, announcing the early return of £100 million of interconnector revenues today on top of £200 million we’ve already committed to return, whilst giving a further £65 million to our most vulnerable customers. A further £236 million of operating cost efficiencies during the year has helped to mitigate the impact of high energy prices.
As we look to the future, there has never been a more exciting time to be at the heart of the energy industry. The strategic pivot we announced in 2021 is now complete, enhancing our critical role at the heart of the energy transition. The visibility of growth has been strengthened by the new five-year RIIO-ED2 price control, $3.8 billion of additional longer-term investment for our US business to drive greater connection and delivery of clean power, and Ofgem’s recent decision to award us 17 major transmission projects to enable greater levels of offshore wind connection in the UK.
The opportunities for future growth are considerable, and we will continue to work closely with governments and regulators to drive the energy transition forward, achieving positive change for our communities and consumers, and a clean, fair and affordable energy future for all.”
| Financial Summary – Year ended 31 MarchContinuing operations only (not including UK Gas Transmission) | ||||||||||
| Statutory results | Underlying1 | Underlying at constant currency2 | ||||||||
| 2023 | 2022 | % change | 2023 | 2022 | % change | 2022 | % change | |||
| Operating profit (£m) | 4,879 | 4,371 | 12% | 4,582 | 3,992 | 15% | 4,171 | 10% | ||
| Profit before tax (£m) | 3,590 | 3,441 | 4% | 3,258 | 3,059 | 7% | 3,187 | 2% | ||
| Earnings per share (p) | 74.2 | 60.6 | 22% | 69.7 | 65.3 | 7% | 67.9 | 3% | ||
| Dividend per share (p) | 55.44 | 50.97 | 8.77% | |||||||
| Capital investment (£m) | 7,740 | 6,739 | 15% | |||||||
3,659 million weighted average shares for 2022/23 (2021/22: 3,599 million).
1. ‘Underlying’ represents statutory results from continuing operations, but excluding exceptional items, remeasurements, major storm costs (when greater than $100 million) and timing. These and a number of other terms and performance measures used in this document are not defined within accounting standards and may be applied differently by other organisations. We have provided definitions of these terms on page 79 and reconciliations of these measures on pages 80 to 83. These measures are not a substitute for IFRS measures, however the Group believes such information is useful in assessing the performance of the business on a comparable basis.
2. Constant currency calculated using current year average exchange rate of $1.216 (2022: actual average exchange rate was $1.348).
Highlights
Successful completion of our strategic pivot
Last year, National Grid completed the strategic repositioning of its portfolio:
â– Completed the £3.1 billion sale of the Narragansett Electric Company (NECO) to PPL Corporation in May 2022.
â– Completed the sale of a 60% stake in UK Gas Transmission and Metering (UK Gas Transmission) to a consortium led by Macquarie Asset Management and British Columbia Investment Management Corporation in January 2023.
Financial delivery
â– Underlying operating profit of £4.6 billion was up 15% at actual exchange rates (10% at constant currency). This reflects a full year contribution from UK Electricity Distribution; good operational performance across our US regulated businesses; higher contribution from National Grid Ventures (NGV); and increased property sales; partly offset by a shorter period of NECO ownership (two months), and our community support package.
â– Statutory operating profit for continuing operations was up 12% to £4.9 billion, benefiting from the gain on sale of NECO and our Millennium investment, insurance recoveries following the IFA fire, partly offset by adverse commodity remeasurements. Consequently, statutory EPS for continuing operations was up by 22% compared to the prior year.
â– Underlying earnings per share (EPS) was up by 7% compared to the prior year at actual exchange rates (3% at constant currency), driven by the above reasons impacting underlying operating profit, offset by higher interest costs.
â– Recommended final dividend of 37.60p to bring full year dividend to 55.44p, up 8.77% and in line with policy.
Record capital investment across our energy networks
â– Capital investment of £7.7 billion for continuing operations up £1.0 billion at actual exchange rates (8% at constant currency) including £266 million of non-cash lease additions in the US. This investment was principally driven by a full year of UK Electricity Distribution ownership, as well as higher levels of investment to drive forward the energy transition and deliver energy security. This includes: New York where we have started our upstate New York transmission project Smart Path Connect; UK Electricity Transmission for our London Power Tunnels 2 (LPT2) project; higher investment for our Sellindge (IFA) converter station rebuild; investment in our Viking interconnector to Denmark; and our Isle of Grain expansion project. This was partly offset by a shorter period of NECO ownership (two months).
â– In April 2023, established a new business unit, Strategic Infrastructure, to deliver 17 major electricity transmission projects to help meet the UK government’s 50 GW offshore wind target.
Crystallised value in assets
â– Completed the sale of our 26.25% non-operated stake in the Millennium gas pipeline, for cash proceeds of $552 million.
Supporting our customers and communities through the energy crisis
â– Reliability of over 99.9% across our electricity and gas networks.
â– Provided winter funding support for communities and customers in October 2022, with $17 million committed in the US and £50 million in the UK for individuals and families who require most help.
â– Today announced the early return of a further £100 million of interconnector revenues to UK customers where we have collected above our cap (subject to Ofgem consent). This is in addition to the £200 million of revenues that we previously announced.
â– Strong response in New York and Massachusetts to reconnect over 350,000 customers impacted by Winter Storm Elliott in December.
Strong progress on our Group efficiency programme
â– Delivered a further £236 million of Group efficiency savings during the year. This now takes cumulative efficiency savings to £373 million at actual exchange rates, within close reach of our target of £400 million savings by 2023/24.
Good regulatory progress
â– Last week, published a detailed Policy Statement, setting out five priorities that require action by government and regulators to support the delivery of net zero infrastructure.
â– Accepted Ofgem’s Final Determinations for the RIIO-ED2 price control.
â– Completed second year of RIIO-T2 price regulation in our UK Electricity Transmission business delivering outperformance in line with expectations.
â– Received approval for $691 million in Phase 1 transmission investment projects, and $2.1 billion in Phase 2, in support of New York’s Climate Leadership and Community Protection Act (CLCPA), with all projects planned to be in service by 2030.
â– Received $336 million approval from the Massachusetts regulator for our electric Grid Modernization Plan (GMP); $487 million for Advanced Metering Infrastructure (AMI) investment and system integration; and $206 million for our Phase 3 electric vehicle programme in the state.
â– Filed for new rates for our KEDNY-KEDLI businesses (April 2023).
Delivering on our responsible business and net zero commitments
â– Delivered £5.6 billion of green capital expenditure aligned to EU Taxonomy principles, representing 75% of capital expenditure for the year.
â– Published our second Responsible Business Report, demonstrating the progress we have made across our five pillars and the journey to net zero.
â– Senior level delegation hosted and participated in 65 events at COP27 as a global leader in the energy transition.
â– Progressed our Clean Energy Vision for our US networks through continued engagement with our regulators and elected officials on our legislative and policy agenda.
â– Group Scope 1 and 2 emissions reduced by 7.5% compared to the prior year; Scope 3 emissions up slightly (1.4%) compared to the prior year, driven mainly by higher customer energy usage in the North East US.
â– Connected 686 MW of renewable energy capacity to our transmission and distribution networks across our UK and US businesses.
â– Submitted a bid solicitation in New York for 1.3 GW offtake from our offshore wind venture with RWE which, if successful, will provide over 4,600 jobs and reduce New York State’s power sector emissions by up to 5%.
Financial Outlook and Guidance
â– Guidance is based on our continuing businesses, as defined by IFRS excluding the minority stake of National Gas Transmission which is classified as held for sale.
â– Financial outlook over the five year period 2020/21 to 2025/26 remains unchanged:
â– Total cumulative capital investment of up to £40 billion;
â– Asset Growth CAGR1 of 8-10% backed by our strong balance sheet;
â– Driving underlying EPS CAGR1 of 6-8% from the 2020/21 EPS baseline of 54.2 pence per share2;
â– Credit metrics consistent with current Group rating;
â– Regulatory gearing to remain in the low 70% range following completion of all three transactions.
â– For 2023/24, we expect underlying EPS to be modestly below 2022/23 levels following the UK Government’s change to the capital allowance regime from 1 April 2023. We expect this change to have a 6-7p per share impact on EPS, albeit no economic impact over the long-term. Without this change, underlying EPS was forecast to grow within our 6-8% CAGR range between 2022/23 and 2023/24, assuming an exchange rate of £1:$1.20.
1. Compound Annual Growth Rate.
2. Full-year underlying EPS (2020/21) as reported on 20 May 2021.