Performance for the year ended 31 March
Financial summary for
continuing operations
(£ million)
|
2022/23
|
2021/22
|
change %
|
Accounting profit:
|
|
|
|
Gross revenue
|
21,659
|
18,449
|
17%
|
Other operating income
|
989
|
228
|
334%
|
Operating costs
|
(17,769)
|
(14,306)
|
24%
|
Statutory operating profit
|
4,879
|
4,371
|
12%
|
Net finance costs
|
(1,460)
|
(1,022)
|
43%
|
Share of joint ventures and associates
|
171
|
92
|
86%
|
Tax
|
(876)
|
(1,258)
|
(30%)
|
Non-controlling interest
|
—
|
(1)
|
(100%)
|
Statutory
IFRS earnings (note 7)
|
2,714
|
2,182
|
24%
|
Less:
exceptional items and remeasurements (after tax)
|
(379)
|
28
|
n/m
|
Less:
timing and major storm costs (after tax)
|
214
|
140
|
n/m
|
Underlying
earnings1
|
2,549
|
2,350
|
8%
|
EPS
– statutory IFRS (pence) (note 7)
|
74.2p
|
60.6p
|
22%
|
EPS – underlying (pence)
|
69.7p
|
65.3p
|
7%
|
Dividend per share (pence)
|
55.4p
|
51.0p
|
9%
|
Dividend cover – underlying
|
1.3
|
1.3
|
— %
|
|
|
|
|
Economic profit:
|
|
|
|
Value
Added1
|
4,807
|
3,833
|
25%
|
Group
RoE1
|
11.0%
|
11.4%
|
-40bps
|
|
|
|
|
Capital investment and asset growth:
|
|
|
|
Capital expenditure (including NECO additions within held for
sale)
|
7,484
|
6,185
|
21%
|
Add:
investments in JVs and associates (excluding St
William)
|
197
|
461
|
(57%)
|
Add:
investments in financial assets (National Grid
Partners)
|
59
|
93
|
(37%)
|
Capital
investment1
|
7,740
|
6,739
|
15%
|
Asset
growth1
|
11.4%
|
8.7%
|
270bps
|
|
|
|
|
Balance sheet strength:
|
|
|
|
RCF/adjusted
net debt (Moody’s)1
|
9.3%
|
8.9%
|
40bps
|
Net debt (note 29)
|
40,973
|
42,809
|
(4%)
|
Add:
held for sale net debt
|
—
|
5,234
|
n/m
|
Net
debt (including held for sale)1
|
40,973
|
48,043
|
(15%)
|
Group
regulatory gearing1
|
71%
|
81%
|
-10% pts
|
1.
Non-GAAP
alternative performance measures (APMs) and/or regulatory
performance measures (RPMs). For further details and, where
practicable, reconciliation to GAAP measures, see
‘Alternative performance measures/non-IFRS
reconciliations’ on pages 78 – 95.
Statutory IFRS earnings from continuing operations
of £2,714 million were up £532 million from 2021/22, significantly
impacted by a £511 million gain on disposal of NECO
in May 2022 and a £335 million gain on disposal of
our Millennium Pipeline investment in October 2022. We had a
full-year contribution from our UK Electricity Distribution
business (offset by a shorter period of ownership of NECO
in the US) and a further £457 million increase in
NGV’s contribution (including exceptional insurance
recoveries). Statutory results were adversely impacted by
£438 million higher interest charges (mainly
from inflation on index-linked debt and growth in new
long-term senior debt), £742 million adverse year-on-year
movements from commodity remeasurements, £252 million
lower property contribution (2021/22 included £417 million
exceptional gains related to the St William property
disposals) and a £95 million increase in major storm
costs; but had no repeat of the £458 million deferred
tax charge recognised in 2021/22 from the change in the
UK tax rate. Statutory EPS for continuing operations of 74.2p was
13.6p higher than the prior year. The net exceptional gains of
£619 million (2022: £320 million net charge) and
remeasurement losses of £240 million (2022:
£292 million net gains) are explained in further detail in the
notes to the financial statements.
Our ‘adjusted’ results exclude the impacts from
exceptional items and remeasurements, but include the impact from
revenue timing and major (deferrable) storm costs, as
explained on page 18. Our
‘underlying’ results exclude the total impact of
exceptional items, remeasurements, timing and major storm costs. A
reconciliation between these alternative performance measures and
our statutory performance is detailed on page
80.
Underlying operating profit for continuing operations was up 15%
(10% at constant currency), driven by a full year’s
contribution and improved performance from UK Electricity
Distribution; higher revenues and IFA insurance claim recoveries in
NGV; increased underlying revenues, pension gains and a lower
COVID-19 impact in New York; and higher property profits
(excluding 2021/22’s exceptional gains). UK Electricity
Transmission performance was lower as a result of the return
of revenues related to Western Link liquidated damages. New England
profits were lower from the sale of NECO two months into
the current year, partly offset by increased revenues
(Massachusetts Electric, Massachusetts Gas and FERC). Our joint
ventures and associates’ contribution increased (mainly UK
interconnector revenues). These factors were partly offset by
higher net financing costs principally from inflation on
index-linked debt. Other interest was favourable year on year.
Underlying profit after tax increased by 8% and resulted in a 7%
increase in underlying EPS to 69.7p.
Capital investment of £7,740 million was £1,001
million (15%) higher than 2021/22, or £552 million (8%)
higher at constant exchange rates, driven by a
full-year ownership of UK Electricity Distribution, increased
capital expenditure in New York, UK Electricity Transmission
and NGV, partly offset by lower investment in New England
(following the sale of NECO). Higher capital investment along with
higher RAV indexation from higher inflation increased our asset
growth to 11.4% (2022: 8.7%).
Reconciliation of different measures of profitability and
earnings
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 reconciles our statutory profit measures for continuing
operations, at actual exchange rates, to adjusted and underlying
versions. Further information on exceptional items and
remeasurements is provided in notes 2, 4 and 5.
Reconciliation of profit and earnings from continuing
operations
|
Operating profit
|
|
Profit after tax
|
|
Earnings per share (pence)
|
(£ million)
|
2023
|
2022
|
|
2023
|
2022
|
|
2023
|
2022
|
Statutory results
|
4,879
|
4,371
|
|
2,714
|
2,183
|
|
74.2
|
60.6
|
Exceptional items
|
(935)
|
(166)
|
|
(619)
|
320
|
|
(16.9)
|
8.9
|
Remeasurements
|
350
|
(392)
|
|
240
|
(292)
|
|
6.5
|
(8.1)
|
Adjusted results
|
4,294
|
3,813
|
|
2,335
|
2,211
|
|
63.8
|
61.4
|
Timing
|
30
|
16
|
|
26
|
19
|
|
0.7
|
0.5
|
Major storm costs
|
258
|
163
|
|
188
|
121
|
|
5.2
|
3.4
|
Underlying results
|
4,582
|
3,992
|
|
2,549
|
2,351
|
|
69.7
|
65.3
|
Discontinued operations
On 31 January 2023, we sold 60% of our interest in the UK Gas
Transmission and Metering business in exchange for
£4.0 billion cash consideration and a 40% retained
interest in that business (now called National Gas Transmission).
The 60% interest in National Gas Transmission is owned by
a consortium of Macquarie Infrastructure and Real Assets
and British Columbia Investment Management Corporation. The
consortium holds an option to acquire our remaining 40% interest.
Further details are provided in the ‘assets held for
sale’ note to the financial statements. The results
of our 100% share of this business (including metering)
are presented
as ‘discontinued operations’ in 2021/22 and
for the 10 months fully owned to 31 January 2023.
On 31 August 2021, the 100% share of the business
met the IFRS 5 criteria to be classified as held for sale and
depreciation was stopped from that date. The retained 40% has also
been classified as a business held for sale with no further profits
recognised in 2022/23.
Reconciliation of profit and earnings from discontinued
operations
Statutory operating profit from discontinued operations of
£715 million (2022: £637 million) includes a £1
million credit in respect of exceptional items (2022: £17
million debit) and timing over-recovery of £12 million
(2022: £80 million under-recovery). Tax on exceptional
items for discontinued operations comprises a £6 million
credit (2022: £1 million credit). The tax charge in 2021/22
also included a deferred tax exceptional charge related to the
change in the UK corporation tax rate of £145 million. The
after-tax gain on disposal of our 60% share in UK Gas Transmission
of £4,803 million is included in our statutory results
for discontinued operations. Tax on timing was £2 million
(2022: £15 million). Statutory earnings per share
from discontinued operations was 138.9p (2022: 4.8p) and
adjusted earnings per share from discontinued operations (but
excluding the impact of timing) was 8.5p (2022:
11.4p).
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 2023 for continuing and
discontinued operations. 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 and are translated at the
2022/23 average exchange rate of $1.22:£1.
Timing over/(under)-recoveries
|
(£ million)
|
2023
|
20221
|
Balance at start of year (restated)
|
(49)
|
65
|
In-year (under)/over-recovery – continuing
operations
|
(30)
|
(5)
|
In-year (under)/over-recovery – discontinued
operations
|
12
|
(80)
|
Disposal of UK Gas Transmission/NECO
|
131
|
—
|
Balance at end of year
|
64
|
(20)
|
1.
March
2022 balances restated to correspond with 2021/22 regulatory
filings and calculations.
In 2022/23, we experienced timing under-recoveries of £112
million in UK Electricity Transmission, under-recoveries of
£139 million in UK Electricity Distribution, over-recoveries
of £207 million in UK Electricity System Operator,
under-recoveries of £39 million in New England and
over-recoveries of £53 million in New York. 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 and allowances) are
recoverable under our rate plans but are expensed as incurred under
IFRS. Accordingly, where the net total cost incurred exceeds
$100 million in any given year, we exclude the net costs
from underlying earnings. In 2022/23, we incurred deferrable storm costs, which
are eligible for future recovery of $314 million (2022: $220
million).
Segmental income statement
The
tables below set out operating profit on adjusted and
underlying bases, both of which exclude the gain of £4.8
billion on the disposal of our UK Gas Transmission
business.
|
Adjusted operating profit
|
|
Underlying operating profit
|
(£ million)
|
2023
|
2022
|
change %
|
|
2023
|
2022
|
change %
|
UK Electricity Transmission
|
995
|
1,067
|
(7)
|
|
1,107
|
1,152
|
(4)
|
UK Electricity Distribution
|
1,091
|
909
|
20
|
|
1,230
|
887
|
39
|
UK Electricity System Operator
|
238
|
7
|
3,306
|
|
31
|
54
|
(43)
|
New England (including NECO)
|
708
|
743
|
(5)
|
|
819
|
886
|
(8)
|
New York
|
741
|
780
|
(5)
|
|
874
|
706
|
24
|
NGV
|
490
|
286
|
71
|
|
490
|
286
|
71
|
Other activities
|
31
|
21
|
48
|
|
31
|
21
|
48
|
Total operating profit
– continuing
|
4,294
|
3,813
|
13
|
|
4,582
|
3,992
|
15
|
Net finance costs
|
(1,514)
|
(1,081)
|
40
|
|
(1,514)
|
(1,081)
|
40
|
Share of post-tax results of joint ventures and
associates
|
190
|
148
|
28
|
|
190
|
148
|
28
|
Profit before tax – continuing
|
2,970
|
2,880
|
3
|
|
3,258
|
3,059
|
7
|
Tax – continuing
|
(635)
|
(669)
|
(5)
|
|
(709)
|
(708)
|
—
|
Profit after tax – continuing
|
2,335
|
2,211
|
6
|
|
2,549
|
2,351
|
8
|
Earnings per share (pence)
– continuing
|
63.8
|
61.4
|
4
|
|
69.7
|
65.3
|
7
|
|
|
|
|
|
|
|
|
|
Adjusted operating profit
|
|
Adjusted operating profit
(excluding the impact of timing
and major storm costs)
|
(£ million)
|
2023
|
2022
|
change %
|
|
2023
|
2022
|
change %
|
Profit after tax – discontinued
|
320
|
344
|
(7)
|
|
310
|
409
|
(24)
|
Earnings per share (pence)
– discontinued
|
8.7
|
9.6
|
(9)
|
|
8.5
|
11.4
|
(25)
|
Profit after tax – total Group
|
2,655
|
2,555
|
4
|
|
2,859
|
2,760
|
4
|
Earnings per share (pence)
– total Group
|
72.5
|
71.0
|
2
|
|
78.2
|
76.7
|
2
|
Statutory operating profit increased in the year, primarily as
a result of the exceptional gains on disposal of businesses,
improved NGV performance, a full-year contribution from NGED,
change in discount rate applied to environmental provisions partly
offset by year-on-year swings in commodity derivative
remeasurements and lower profits in our commercial property
business, which benefitted from exceptional gains related to
disposal of a joint venture in 2021/22. Excluding
exceptional items and remeasurements, adjusted operating profit
increased by £481 million (13%) or 8% on a constant currency
basis. Major storm costs were £95 million higher than the
prior year. The reasons for the movements in underlying operating
profit are described in the Business Review.
Financing
costs, share of post-tax joint ventures and associates and taxation
– continuing
Net finance costs
Net finance costs (excluding remeasurements) for the year
were 40% higher than last year at £1,514 million,
with the £433 million increase driven by higher net
debt-related financing costs, from growth in new long-term senior
debt and a £244 million impact from higher inflation
on our index-linked debt, along with the impact of foreign
exchange movements. These higher costs were partly offset by
favourable year on year other interest income, with benefits
from interest on pension and other post-employment benefit
(OPEB) liabilities and increased capitalised interest. The
effective interest rate for continuing operations of 4.4% is 120bps
higher than the prior year rate.
Joint ventures and associates
The Group’s share of net profits from joint ventures and
associates on a statutory basis increased by £79 million,
benefitting from £37 million favourable year-on-year
derivative remeasurements. On an adjusted basis, the share of net
profits from joint ventures and associates increased by £42
million compared with 2021/22, mainly as a result of BritNed, with
higher revenues driven by higher auction prices plus the impact
of a two-month outage in the prior year, partly
offset by Nemo Link as a result of interconnector cap
adjustments and an adverse year-on-year contribution from our
joint venture investments in NG Partners as a result of downward
market fair value movements.
Tax
The underlying effective tax rate (excluding joint ventures and
associates) of 23.1% was 120bps lower than last year (2022:
24.3%). This reflects the lower tax charge in 2022/23 for the
remeasurement of state deferred taxes following the sale of our
Rhode Island business.
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 11. ‘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 86. 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)
|
2023
|
2022
|
change %
|
Cash generated from continuing operations
|
6,432
|
5,788
|
11
|
Cash capital investment (net of disposals and exceptional
insurance recoveries)
|
(7,167)
|
(5,781)
|
(24)
|
Disposal of Millennium/St William
|
497
|
413
|
20
|
Dividends from JVs and associates
|
190
|
166
|
14
|
Business net cash (outflow)/inflow from continuing
operations
|
(48)
|
586
|
n/m
|
Net interest paid
|
(1,365)
|
(1,013)
|
(35)
|
Net tax paid
|
(89)
|
(298)
|
70
|
Cash dividends paid
|
(1,607)
|
(922)
|
(74)
|
Other cash movements
|
17
|
30
|
(43)
|
Net cash outflow (continuing)
|
(3,092)
|
(1,617)
|
(91)
|
Disposal
of UK Gas Transmission and Metering and NECO1
|
6,995
|
—
|
n/m
|
Acquisition
of National Grid Electricity Distribution2
|
—
|
(7,837)
|
100
|
Discontinued operations
|
(9)
|
657
|
n/m
|
(Repayment of)/proceeds from bridge loan to acquire
National Grid Electricity Distribution
|
(8,200)
|
8,200
|
n/m
|
Other, including net financing raised in year
|
4,271
|
628
|
n/m
|
(Decrease)/increase in cash
and cash equivalents
|
(35)
|
31
|
n/m
|
|
|
|
|
Reconciliation to movement in net debt
|
|
|
|
(Decrease)/increase in cash
and cash equivalents
|
(35)
|
31
|
n/m
|
Bridge loan to acquire National Grid Electricity
Distribution
|
8,200
|
(8,200)
|
n/m
|
Less: other net cash flows from investing and financing
transactions
|
(4,271)
|
(628)
|
n/m
|
Net debt reclassified to held for sale
|
—
|
4,063
|
(100)
|
Fair value of National Grid Electricity Distribution net debt
acquired
|
—
|
(8,147)
|
100
|
Impact of foreign exchange movements on opening net
debt
|
(1,293)
|
(828)
|
(56)
|
Other non-cash movements
|
(765)
|
(554)
|
(38)
|
Decrease/(increase) in net debt
|
1,836
|
(14,263)
|
n/m
|
Net debt at start of year
|
(42,809)
|
(28,546)
|
(50)
|
Net debt at end of year
|
(40,973)
|
(42,809)
|
4
|
1.
Cash
proceeds of £3,081 million for NECO and £4,032 million
for UK Gas Transmission, less balance of cash and cash equivalents
disposed with these businesses.
2.
Includes
£44 million cash and cash equivalents acquired with National
Grid Electricity Distribution.
Cash flow generated from continuing operations was £6.4
billion, £0.6 billion higher than last year, mainly due to a
full-year contribution from UK Electricity Distribution,
higher revenues compared with 2021/22, lower spend on
provisions and higher net exceptional income, offset by favourable
working capital inflows on payables. Cash expended on investment
activities increased as a result of continued organic growth
in our regulated and non-regulated businesses, partly offset
by the disposal of financial investments.
Our strategic pivot is complete with the sale of NECO in
May 2022 generating £3,081 million of proceeds (less
£40 million financing costs) and the sale of 60% of UK
Gas Transmission and Metering in January 2023 generating
£4,032 million of proceeds. The disposal of our
Millennium Pipeline investment in October 2022 also generated
£497 million of proceeds in 2022/23. In the prior
year, the sale of the St William joint venture generated
£413 million of proceeds. Net interest
paid increased as a result of a higher average level
of net debt and increased base rates on borrowings. The Group
made net tax payments of £89 million for continuing
operations during 2022/23. This reflected utilising tax
losses primarily against the gains on sale of NECO and Millennium
alongside refunds received in respect of US tax settlements for
historical years. The higher cash
dividend of £1,607 million reflected a lower scrip
uptake of 15% (2022: 48%). In the prior year, the cash
acquisition of WPD in June 2021 for
£7.9 billion increased net debt, along with
a further £8.1 billion increase from the fair value
of net debt acquired.
Discontinued operations represents UK Gas Transmission and Metering
which generated lower cash inflows in 2022/23, principally as
a result of a shorter period of ownership, higher capital
expenditure and adverse working capital movements, partly
offset by favourable timing movements, lower tax payments and other
investing activities compared with 2021/22. Non-cash movements
primarily reflect changes in the sterling–dollar exchange
rate, accretions on index-linked debt, lease additions and
other derivative fair value movements, offset by the amortisation
of fair value adjustments on the debt acquired with
WPD.
The Board has considered the Group’s ability to finance
normal operations as well as funding a significant capital
programme, taking account of the disruption caused by the energy
crisis. This includes stress testing of the Group’s finances
under a ‘reasonable worst-case’ scenario, assessing the
timing of the sale of businesses held for sale 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.
FINANCIAL STRENGTH
Our overall Group credit rating remains at a strong investment
grade level, BBB+/Baa1 with stable outlook
During the year we raised over £7 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. The
£8.2 billion bridge financing facility to fund the purchase of
the UK Electricity Distribution business was fully repaid in
2022/23 following receipt of proceeds from the sales of NECO and a
60% stake in our UK Gas Transmission and Metering
business.
As at 18 May 2023, we have £8.0 billion of undrawn committed
facilities available for general corporate purposes, all of which
have expiry dates beyond May 2024. National Grid’s
balance sheet remains robust, with strong overall investment
grade ratings from Moody’s, Standard
& Poor’s (S&P) and Fitch.
Regulatory
gearing, measured as net debt as a proportion of total regulatory
asset value and other business invested capital reduced
significantly in the year to 71% as at 31
March 2023. This was lower than the previous year end level
of 81% principally as a result
of the sale of a 60% stake in our UK Gas Transmission business for
£4.0 billion in January
2023 along with £3.1 billion proceeds from the sale of NECO in
May 2022. Taking into account the benefit of our hybrid debt,
adjusted gearing as at 31 March 2023 was 69%, with the current overall Group credit rating of
BBB+/Baa1 (S&P/Moody’s).
Retained
cash flow as a proportion of adjusted net debt was 9.3%. Taking into account the benefit of
our hybrid debt, we expect gearing levels, and the other standard
metrics we monitor, to sit within ranges that are appropriate for
the current, strong investment grade, overall Group credit rating.
This includes the long-term average Retained cash flow
(RCF)/adjusted net debt level of above 7% indicated by
Moody’s as consistent with maintaining our current Group
credit rating, and the Funds
From Operations (FFO)/adjusted net debt metric level of above 10%
as indicated by S&P.
Dividend increase of 8.77% recommended for 2022/23
The Board has recommended an increase in the final dividend to
37.60p per ordinary share ($2.3459 per American Depository
Share), which will be paid on 9 August 2023 to shareholders on the
register of members as at 2 June 2023. If approved, this will
bring the full-year dividend to 55.44p per ordinary share, an
increase of 8.77% over the 50.97p per ordinary share in respect of
the financial year ended 31 March 2022. This is in line with the
increase in average UK CPIH inflation for the year ended 31 March
2023 as set out in our dividend policy. Our aim is to grow the
annual dividend per share in line with CPIH, thus maintaining
it in real terms. The Board will review this policy regularly,
taking into account a range of factors including expected business
performance and regulatory developments.
At 31 March 2023, National Grid plc had £14 billion of
distributable reserves, which is sufficient to cover more than five
years of forecast Group dividends. If approved, the final
dividend will absorb approximately £1,383 million of
shareholders’ funds. This year’s dividend
is covered approximately 1.3x by underlying
earnings.
The Directors consider the Group’s capital structure
at least twice a year when proposing an interim
and final dividend and aim to maintain distributable reserves
that provide adequate cover for
dividend payments.
A scrip
dividend alternative will again be offered in respect of the
2022/23 final
dividend.
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
Asset
growth excludes the impact of the £9,608 million reduction in RAV, rate
base and other assets as a result of the disposal of our NECO and
60% of our UK Gas Transmission and Metering business during the
year.
In
2022/23, the Group achieved asset growth of 11.4% driven by our
capital investment programme alongside RAV indexation. 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.
In
2023/24, we expect Group
capital investment to be above £8 billion for continuing
operations.
We are
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.
£7.7 billion of capital investment for continuing operations
in 2022/23, 8% higher at constant currency
We
continued to make significant investments in critical energy
infrastructure during 2022/23.
Total capital investment for continuing operations across the Group
was £7,740 million, an
increase of £1,001 million 15% (or 8% at constant currency) compared to the
prior year.
Capital investment
|
|
|
|
|
|
|
|
|
Year ended 31 March (£ million)
|
|
At actual exchange rates
|
|
At constant currency
|
|
2023
|
2022
|
% change
|
|
2023
|
2022
|
% change
|
UK Electricity Transmission
|
|
1,303
|
1,195
|
9 %
|
|
1,303
|
1,195
|
9 %
|
UK Electricity Distribution
|
|
1,220
|
899
|
36 %
|
|
1,220
|
899
|
36 %
|
UK Electricity System Operator
|
|
108
|
108
|
— %
|
|
108
|
108
|
— %
|
New England (including NECO)
|
|
1,677
|
1,561
|
7 %
|
|
1,677
|
1,731
|
(3) %
|
New York
|
|
2,454
|
1,960
|
25 %
|
|
2,454
|
2,174
|
13 %
|
NGV
|
|
906
|
913
|
(1) %
|
|
906
|
968
|
(6) %
|
Other¹
|
|
72
|
103
|
(30) %
|
|
72
|
113
|
(36) %
|
Total capital investment – continuing
|
|
7,740
|
6,739
|
15 %
|
|
7,740
|
7,188
|
8 %
|
UK Gas Transmission
|
|
301
|
261
|
15 %
|
|
301
|
261
|
15 %
|
Total capital investment – continuing
and discontinued
|
|
8,041
|
7,000
|
15 %
|
|
8,041
|
7,449
|
8 %
|
1.
Excludes £nil
(2022: £25 million) equity
contribution to the St William Homes LLP joint venture. Includes
£59 million National Grid Partners investment (2022: £93 million, at actual
exchange rates).
Capital investment in UK Electricity Transmission increased by
£108 million compared with 2021/22, primarily due to LPT2,
overhead line projects including Cottam to Wymondley, East Cost
onshore projects and capitalised interest, partly offset by lower
Hinkley Seabank spend. UK Electricity Distribution increased by
£321 million primarily due to a full year of ownership
alongside increased customer-driven connection activities.
In New England, capital investment
increased by £116 million (£54 million
reduction on a constant currency basis) primarily
due to the disposal of our Rhode Island business during 2022/23
resulting in a £280 million reduction (at constant
currency), partially offset by higher spend on gas assets,
including the gas system enhancement plan, and increased
reinforcement of electricity networks. In New York, capital
investment was
£280 million higher (on a constant currency
basis, £494 million higher at actual currency), primarily due
to increased electricity network reinforcement, right of use asset additions (non-cash leases
entered into in 2022/23), including renewing the Volney–Marcy
transmission line lease, increased digital and increased security
investment, partially offset by lower leak-prone pipe replacement
work in our gas businesses, following the acceleration in
2021/22. Capital investment
in NGV decreased by £7 million (£62 million lower at
constant currency), with higher expenditure in IFA following the
fire in September 2021 and also in Grain LNG being more than offset
by lower North Sea Link (NSL) interconnector investment
(commissioned in 2021/22) and
no recurrence of last year’s investment in an over 3 GW
potential offshore wind seabed lease in New York. Other activities
capital investment reduced primarily
as a result of lower investments in National Grid
Partners.
In UK Gas Transmission, capital investment increased by £40
million from continued investment at Peterborough and Huntingdon
compressor stations, higher capitalised interest and higher cyber
spend compared with 2021/22.
Achieved asset growth of 11.4% compared to 8.7% last
year
During
2022/23, our combined regulated
asset base and NGV and Other business assets decreased by
£2,732 million, of which £9,608 million related to the decrease
from the disposals of NECO and our UK Gas Transmission and Metering
business. Asset growth is calculated excluding the impact of these
disposals. UK RAV increased 11.5% including the impact of higher CPI
and RPI inflation on RAV indexation, partly offset by RAV
depreciation. The US rate base grew strongly by 8.0% during the year. NGV and Other
businesses increased as a result of ongoing capital
investment.
Excluding
the decrease as a result of the disposal of NECO and our UK Gas
Transmission business, our combined regulated asset base and NGV
and Other business assets grew by £6,876 million or 11.4%. For detailed calculations of asset
growth see pages 93 to 94.
Assets
|
|
|
|
|
|
Year ended 31 March (£ million at constant
currency)
|
|
2023
|
Disposal of NECO and UK Gas Transmission1
|
2022
|
% change
|
UK
RAV¹
|
|
28,205
|
(6,989)
|
31,577
|
11.5%
|
US rate base¹
|
|
23,038
|
(2,476)
|
23,628
|
8.0%
|
Total RAV and rate base
|
|
51,243
|
(9,465)
|
55,205
|
10.0%
|
NGV and
Other businesses2
|
|
6,604
|
(143)
|
5,374
|
25.5%
|
Total
|
|
57,847
|
(9,608)
|
60,579
|
11.4%
|
1.
UK RAV Includes UK
Gas Transmission of £6,651 million and US rate base includes
NECO of $2,989 million at 31 March 2022.
2.
The £143
million disposal adjustment relates to our non-regulated UK
metering business within UK Gas Transmission.
Value Added of £4,807 million driven by improved
performance and higher RAV indexation
Value
Added excludes the reduction in assets and reduction in net debt as
a consequence of the sale of NECO and the sale of 60% of our UK Gas
Transmission business during 2022/23. 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 £4.8 billion in
2022/23. This was higher than last year’s £3.8 billion,
driven by higher RAV indexation in UK Electricity Transmission and
UK Electricity Distribution, stronger NGV and Other
performance, higher US returns and a smaller adverse impact
from COVID-19 compared with 2021/22, offset by higher interest.
Of the £4.8 billion Value Added, £1.6 billion was
paid to shareholders as cash dividends and £3.2 billion
was retained in the business. Value Added per share was
131.4p compared with 106.5p in 2021/22. Value Growth is normalised
for long-run inflation assumptions by adjusting value added for the
difference between actual experienced inflation on UK RAV
indexation and index-linked debt and the equivalent movements at a
long-run assumed inflation rate of 2% CPIH or 3% RPI, and dividing
this result by the equity base used to calculate Group RoE (at
closing exchange rates). Value growth was 12.4% compared with 12.8%
in 2021/22. For detailed calculations of Value Added see
pages 93 to 94.
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 86 to 93.
Year ended 31 March
|
Regulatory Debt:
Equity assumption
|
|
Achieved
Return on Equity
|
|
Base or Allowed
Return on Equity
|
%
|
|
2023
|
2022
|
|
2023
|
2022
|
UK Electricity Transmission
|
55/45
|
|
7.5
|
7.7
|
|
6.3
|
6.3
|
UK Electricity Distribution
|
65/35
|
|
13.2
|
13.6
|
|
9.6
|
9.6
|
UK Gas Transmission
|
60/40
|
|
7.8
|
7.8
|
|
6.6
|
6.6
|
New
England1
|
Avg. 45/55
|
|
8.3
|
8.3
|
|
9.9
|
9.8
|
New York
|
Avg. 52/48
|
|
8.6
|
8.8
|
|
8.9
|
8.9
|
Group Return on Equity
|
|
|
11.0
|
11.4
|
|
n/a
|
n/a
|
1.
Figure for 2023
excludes NECO, figure for 2022 includes NECO.
As at 31 March
|
RAV, Rate Base or other business assets
|
|
Total regulated and other balances1
|
(£ million, at constant currency)
|
2023
|
2022
|
|
2023
|
2022
|
UK Electricity Transmission
|
17,072
|
15,471
|
|
16,912
|
15,242
|
UK Electricity Distribution
|
10,773
|
9,248
|
|
10,756
|
9,299
|
UK Electricity System Operator
|
360
|
297
|
|
282
|
442
|
UK Gas Transmission
|
—
|
6,561
|
|
—
|
6,669
|
New
England2
|
7,907
|
9,860
|
|
10,080
|
11,774
|
New York
|
15,131
|
13,768
|
|
16,184
|
14,646
|
Total regulated
|
51,243
|
55,205
|
|
54,214
|
58,072
|
NGV and Other balances
|
6,604
|
5,374
|
|
6,712
|
4,566
|
Group regulated and other balances
|
57,847
|
60,579
|
|
60,926
|
62,638
|
1.
March 2022 balances restated for opening balance
adjustments to correspond with 2021/22 regulatory filings and
calculations.
2.
Figure for 2023
excludes NECO, figure for 2022 includes NECO.
UK ELECTRICITY TRANSMISSION
Operational Performance
UK
Electricity Transmission delivered another year of strong
operational performance reflected in an excellent network
reliability of 99.999997%. Over the winter, a taskforce was
established to coordinate and deliver enhanced levels of winter
preparedness, looking across network availability, crisis
management, and communications, whilst working closely with the
ESO, Ofgem, government and wider stakeholders. Overall, the network
performed well and, working alongside the ESO, we were able to
provide the required network availability and resilience in the
short term.
Capital investment and projects
In
2022/23, we invested £1,303 million in our UK Electricity
Transmission network, up 9%
from the prior year as part of our RIIO-T2 promise to deliver
£9 billion capex across 2022-2026 in our Electricity
Transmission business. This increase was principally through higher
spend on LPT2, overhead line projects including Cottam-Wymondley,
and East Coast Onshore projects, partly offset by lower spend on
the Hinkley-Seabank connection project as it moves nearer to
completion, and lower IT capex.
This
year saw the installation of our new T-pylon design, the first new
design in nearly a century. At one third shorter, they have a
smaller footprint than lattice pylons, use less land and have less
visual impact. Out of a total of 116 as part of the Hinkley
programme, 93 have been installed. The Hinkley programme is now
more than 80% complete and remains on track to complete all works
by December 2024. We also made good progress on our LPT2 project,
where we have now completed the first of five drives for the tunnel
boring machines, marking a significant milestone for the
project which will future proof the energy infrastructure of
London.
Whilst
we continue to deploy record levels of investment across the
transmission network, we are continuing to enhance the natural
environment. Across the Peak District National Park, Somerset and
the Mendip Hills, we have now moved over 70km of overhead lines
underground to reduce visual impact of infrastructure in these
areas of outstanding natural beauty. In addition, we have achieved
biodiversity net gains through our Peak District project through
careful management of the environment around the project’s
very sensitive and constrained construction site. This included the
creation of an additional habitat for wildlife, the rehabilitation
of a bird community, and the level of permitted tree removal
greatly reduced.
Regulatory progress
Our
Electricity Transmission business continues to perform well against
RIIO-T2 Output Delivery Incentive (ODI) targets, delivering
incentive performance of £89 million in the second year of the
price control period. This shows our continued focus on operating a
safe and reliable network that meets the needs of our customers and
network users against a background of unprecedented rises in energy
costs and energy supply challenges.
In
December, Ofgem published its decision on accelerated onshore
electricity transmission investment, confirming that National Grid
Electricity Transmission (NGET) will be responsible for the
delivery of 17 major electricity transmission projects, of which
four are in joint venture with Scottish transmission operators. We
welcomed the clarity and commitment this decision gives NGET, and
the wider industry, as the next step towards a more affordable,
resilient and clean energy system. Whilst this investment is
fundamental to the successful delivery of the decarbonisation of
our electricity system, it will also bring greater security of
supply, as well as improved affordability for customers in the long
run. We expect these projects to be delivered largely after the end
of RIIO-T2, with most expenditure in the next price control period.
We are working with Ofgem to develop the details of the regulatory
process around the ASTI projects which will determine the project
specifics to approve funding and incentivisation.
As
Ofgem has highlighted, urgent reform is still required across a
number of areas. The planning system needs streamlining to allow
for the delivery of this critical national infrastructure in a
timely fashion; the setting of allowances needs to enable a
programmatic approach; and communities must see clear long-term
economic benefit to hosting infrastructure for the UK to achieve
its net zero ambition. We will continue to work alongside
government and Ofgem to progress these critical projects, as we
look towards agreeing a regulatory and financial framework that can
enable the delivery of this infrastructure in future
years.
This
year, UK Electricity Transmission has worked collaboratively with
the ESO to implement a number of measures to address the connection
pipeline. With the agreement of Ofgem, these include a two stage
offer process which will allow us to optimise projects in the
pipeline and accelerate connection dates. We will actively engage
with the upcoming consultations on wider connection
reform.
Revenue and Costs in 2022/23 on an IFRS basis
UK Electricity Transmission statutory operating profit was
£62 million lower in the year. In 2022/23, there were
£8 million of exceptional costs related to the
cost-efficiency programme (2022: £12 million) offset by a
£6 million (2022: £nil) credit in respect of change
in discount rate applied to environmental provisions. Timing
under-recoveries of £112 million in 2022/23 compared with
£85 million in 2021/22 mainly due to under-collection of
Transmission Network Use of System (TNUoS) revenues from lower
volumes and the impact of higher inflation, partly offset by
the recovery of prior
period recoveries.
Adjusted operating profit reduced by £72 million (7%), but
this included £27 million adverse year-on-year timing
movements. Underlying operating profit reduced by 4%. Net revenues
(adjusted for timing) were lower from the return of £147
million for Western Link liquidated damages received in prior
years, the impact of tax allowances (super-deductions) and lower
customer-funded works (mainly HS2), partly offset by higher
revenues from RAV indexation.
Regulated controllable costs were £14 million higher from the
impact of higher energy costs (own-use utilities and fuel costs).
Other inflationary and workload increases were offset by efficiency
savings. Other costs were lower, mainly relating to a one-off
settlement in the prior year and higher profit from sale of assets
in the current year.
The decrease in depreciation and amortisation reflects prior year
asset write-offs partly offset by higher depreciation of a higher
asset base.
UK Electricity Transmission
|
|
(£ million)
|
2023
|
2022
|
% change
|
Revenue
|
1,987
|
2,035
|
(2)
|
Operating costs
|
(994)
|
(980)
|
1
|
Statutory operating profit
|
993
|
1,055
|
(6)
|
Exceptional items
|
2
|
12
|
(85)
|
Adjusted operating profit
|
995
|
1,067
|
(7)
|
Timing
|
112
|
85
|
32
|
Underlying operating profit
|
1,107
|
1,152
|
(4)
|
|
|
|
|
Net revenue (adjusted for timing)
|
1,882
|
1,968
|
(4)
|
Regulated controllable costs
|
(241)
|
(227)
|
6
|
Post-retirement benefits
|
(31)
|
(26)
|
19
|
Other operating costs
|
(19)
|
(55)
|
(65)
|
Depreciation and amortisation
|
(484)
|
(508)
|
(5)
|
Underlying operating profit
|
1,107
|
1,152
|
(4)
|
Timing
|
(112)
|
(85)
|
32
|
Adjusted operating profit
|
995
|
1,067
|
(7)
|
Return on Equity
RoE for
the year, normalised for a long-run CPIH inflation rate of 2%, was
7.5%. This includes 120bps
outperformance, largely reflecting delivery of projects spanning
across RIIO-1 and RIIO-2. The principal components of RoE are shown
in the table below:
Year ended 31 March
|
2023
|
2022
|
Base
return (including avg. 2% long-run inflation)1
|
6.3
|
6.3
|
Totex
incentive mechanism2
|
1.1
|
1.4
|
Other revenue incentives
|
0.1
|
0.1
|
Return including in year incentive performance
|
7.5
|
7.8
|
Pre-determined additional allowances and other income
|
—
|
(0.1)
|
Return on Equity
|
7.5
|
7.7
|
1.
Assuming regulatory
gearing at 55%.
2.
Excludes impact of
exceptional restructuring costs (post sharing)
For
Regulated Financial Performance, please refer to page
87.
Regulated Financial Position up 11%
In the
year, RAV grew by 10% driven by ongoing investment coupled with RAV
indexation (8.9% 2022/23 versus
6.2% 2021/22).
|
2023
|
2022
|
Opening
Regulated Asset Value (RAV)
|
15,471
|
14,328
|
Asset additions (slow money) – actual
|
1,180
|
1,130
|
Performance RAV or assets created
|
68
|
75
|
Inflation adjustment (actual CPIH)
|
1,373
|
894
|
Depreciation and amortisation
|
(1,020)
|
(941)
|
Closing RAV
|
17,072
|
15,486
|
|
|
|
Opening balance of other regulated assets and
(liabilities)
|
(268)
|
(278)
|
Movement
|
108
|
66
|
Closing balance
|
(160)
|
(212)
|
|
|
|
Closing Regulated Financial Position
|
16,912
|
15,274
|
UK ELECTRICITY DISTRIBUTION
Operational Performance
UK
Electricity Distribution delivered another year of strong
operational performance with an excellent network reliability of
99.99469%. This despite winter periods with winds around 60 mph,
freezing temperatures and heavy snow across the network footprint.
We completed the RIIO-ED1 price control period in a position of
strength, outperforming the majority of the 76 business plan
commitments we made at the start of the period across our key
output areas including customer satisfaction, reliability and
environment. In the current year, we beat our targets for customer
minutes lost and customer interruptions by around 30%. Our Business
Carbon Footprint (BCF) has reduced by 42% since 2014/15, and UK
Electricity Distribution has also been listed as one of
Europe’s Climate Leaders for 2022 in the Financial
Times-Statista list.
Capital investment and projects
In
2022/23, we invested £1,220 million in our UK Electricity
Distribution network, up 36%
from the prior year. This increase was driven principally by a
full year of UK Electricity Distribution ownership; a 10% step up
in new customer connections year on year, mainly driven by growth
in low carbon technologies such as EV and heat pump connections;
and digital investments required to set up our Distribution System
Operator (DSO) function which will enable greater flexibility
services and network reinforcement investment for our customers.
During the year, we have processed over 30,400 domestic EV charger
and heat pump applications in 2022/23. Of those, over 29,900 (or
98%) were approved within two working days.
Customer focus
UK
Electricity Distribution has an excellent track record of customer
service which is reflected in our performance against the Broad
Measure of Customer Satisfaction (BMCS) results, scoring 8.99 out
of 10 overall. With our fuel poverty schemes, we have
supported over 24,000 fuel poor customers, leading to estimated
annual savings for them of £20.6 million. Our Community
Matters Fund has awarded over £3.8 million to 759 grassroots
organisations in 2022/23, including £2.5 million to tackle
fuel poverty in the communities we serve.
In
2022/23, we experienced no categorised storm events across the UK
Electricity Distribution service territory, and the network has
performed to its normal industry leading levels.
We have
streamlined our connections process making it quicker and easier
for customers to connect EV chargers and heat pumps, allowing
18,829 customers to obtain connections approval within 24-48 hours.
We have received and processed over 30,000 domestic EV charger and
heat pump applications in the current year. To deal with increasing
volumes of low carbon technology connections, a new digital tool
has been launched that allows customers to apply online to connect
domestic electric vehicle chargers. This tool will be extended to
heat pumps and domestic solar installations as well.
Over
the past few years we have been addressing the provision of EV
charging at Motorway Services and on trunk roads. This came
together in our Take Charge innovation project which will deliver
the electrical capacity to power 80 rapid EV charges at a single
service station site. It is an innovative solution that brings the
‘electrical capacity of a small town’ to each motorway
service station. The project won the Utility Week Disruptor of the
Year award for 2022.
RIIO-ED2 progress
In
March, we announced our acceptance of all of the RIIO-ED2 price
control arrangements proposed by Ofgem in its Final Determinations,
covering UK Electricity Distribution for the period April 2023 to
March 2028. The price controls, developed with 25,000 stakeholders
over the course of two years, will further accelerate our delivery
of smart, decarbonised electricity distribution networks in the UK,
at the lowest cost to customers.
The key
components of the price control arrangements include:
●
£5.9 billion
(2021/22 prices) of totex funding;
●
an allowed real
equity return of 5.23% average;
●
introduction of 37
uncertainty mechanisms which flex funding through
the period dependent on outputs delivered and
justification case made;
●
RIIO-ED2 incentive
targets have tightened across most areas. There are some new
incentives, particularly around the Distribution System Operator
(DSO) incentive, and UK Electricity Distribution is looking at what
and how we deliver to ensure we continue to be a frontier
performing DSO delivering for our stakeholders. In addition, we
continue to focus on our totex targets to ensure we can deliver all
other price control commitments in the most efficient way;
and
●
there are a number
of uncertainty mechanism windows which Ofgem has proposed in ED2 to
provide additional funding. We will look to ensure we provide the
necessary evidence to secure the additional necessary funding under
these schemes.
We have
also made good progress in integrating UK Electricity Distribution
into the rest of the Group including progressing synergy benefits.
We have made changes to align functions under common leadership,
integrated IT systems in a number of areas such as treasury and
procurement, and are beginning to harness our increased scale in
joint procurement activities.
Revenue and Costs in 2022/23 on an IFRS basis
Statutory operating profit was £160 million higher in the
year, reflecting a full year of ownership, compared to a
9.5-month period for the year ended 31 March
2022.
In 2022/23, there were £22 million of exceptional costs
related to the integration of the business into the wider Group.
Adjusted operating profit increased by 20%, including the extra
period of ownership and the impact of £161 million adverse
year-on-year timing movements. Timing under-recoveries of £139
million in 2022/23 are mainly due to the under collection of earned
incentives and inflation true-ups, partly offset by over-recovery
of pass-through costs, as well as the return of prior period
over-recovered balances primarily as a result of the impact of tax
allowances (super-deductions).
Underlying operating profit increased by 39%. Net revenues
(adjusted for timing) were higher than the prior year due to
the extra period of ownership and higher revenues due to RAV
indexation, partly offset by the impact of tax allowances and lower
engineering recharge revenues due to lower workload.
Regulated controllable costs were higher than the prior year as a
result of the different period of ownership. Other costs were
lower, mainly due to £13 million profit from the sale of the
Smart Metering business and lower engineering recharge costs due to
lower work volumes offset by the longer period of
ownership.
The increase in depreciation and amortisation reflects the full
year of ownership and a higher asset base.
UK Electricity Distribution
|
|
|
|
(£ million)
|
2023
|
9.5 months to 31 March
2022
|
% change
|
Revenue
|
2,045
|
1,482
|
38
|
Operating costs
|
(976)
|
(573)
|
70
|
Statutory operating profit
|
1,069
|
909
|
18
|
Exceptional items
|
22
|
—
|
n/a
|
Adjusted operating profit
|
1,091
|
909
|
20
|
Timing
|
139
|
(22)
|
(732)
|
Underlying operating profit
|
1,230
|
887
|
39
|
|
|
|
|
Net revenue (adjusted for timing)
|
1,766
|
1,335
|
32
|
Regulated controllable costs
|
(235)
|
(180)
|
31
|
Post-retirement benefits
|
(24)
|
(24)
|
—
|
Other operating costs
|
(54)
|
(86)
|
(37)
|
Depreciation and amortisation
|
(223)
|
(158)
|
41
|
Underlying operating profit
|
1,230
|
887
|
39
|
Timing
|
(139)
|
22
|
(732)
|
Adjusted operating profit
|
1,091
|
909
|
20
|
Return on Equity above base levels
RoE,
normalised for a long-run RPI inflation rate of 3%, was
13.2% in 2022/23. This includes
360bps outperformance, mainly due to strong incentive performance
including interruptions quality, reliability and customer service.
This was slightly lower on the prior year due to increased customer
service targets. The principal components of the difference are
shown in the table below:
For the year ended 31 March
|
2023
|
9.5 months to 31 March
2022
|
Base return (including avg. 3% long-run inflation)
|
9.6
|
9.6
|
Totex incentive mechanism
|
0.9
|
1.0
|
Other revenue incentives
|
2.7
|
3.0
|
Return on Equity
|
13.2
|
13.6
|
For
Regulated Financial Performance, please refer to page
87.
Regulated Financial Position up 16%
In the
year, RAV grew by 16% driven by ongoing investment coupled with RAV
indexation of 13.6% (2022: 9.0%).
|
2023
|
9.5 months to 31 March
2022
|
Regulated
Asset Value (RAV) at acquisition date (estimated)
|
9,248
|
8,476
|
Asset additions (slow money) – actual
|
971
|
684
|
Performance RAV or assets created
|
22
|
9
|
Inflation adjustment (actual RPI)
|
1,261
|
593
|
Depreciation and amortisation
|
(729)
|
(512)
|
Closing RAV
|
10,773
|
9,250
|
|
|
|
Opening balance of other regulated assets and (liabilities) (2022:
balance at acquisition date)
|
51
|
230
|
Movement
|
(68)
|
(173)
|
Closing balance
|
(17)
|
57
|
|
|
|
Closing Regulated Financial Position
|
10,756
|
9,307
|
UK ELECTRICITY SYSTEM OPERATOR (ESO)
Overview
The UK
Electricity System Operator (ESO) has performed well during the
year. Underlying net revenue was £44 million higher than
the prior year; capital investment reached £108 million in the year, in line with the
prior period, primarily driven by transformational IT projects to
deliver the RIIO-2 Business Plan.
In
April 2022, the Department for Energy Security and Net Zero (DESNZ)
and Ofgem announced their joint decision to create a new
Future System Operator (FSO) that builds on the track record and
skills of the ESO whilst creating an impartial body with
responsibilities across both the electricity and gas systems. We
will continue to work closely with all parties involved in the
coming months to enable a smooth and successful transition. We have
continued to advance our plans during the year to ensure an orderly
transition in 2024. We are working with DESNZ and Ofgem to
agree appropriate mechanisms for compensation relating to this
activity.
At the
end of August, the ESO submitted its updated RIIO-2 Business Plan
covering the two year regulatory period from April 2023 to March
2025. Ofgem issued their Final Determinations on the plan in March
2023. The plan will deliver excellence in system operation,
continue the drive towards net zero, build efficient and effective
markets, and includes £651 million8 of totex over this period.
In
October, the ESO developed the most comprehensive Winter
Preparedness plans to date to maximise asset availability and
performance. These proved very effective over the winter period.
The ESO deployed its usual range of tools to manage the system as
well as the new Demand Flexibility Service and winter contingency
coal contracts. Winter operations within the control room were
carried out as normal supported by new services.
During
the year, the ESO continued to invest significantly in the new
Balancing Programme. This is a key technology programme designed to
develop the balancing capabilities that the Electricity National
Control Centre needs to deliver reliable and secure system
operation, facilitate competition and meet our ambition for net
zero carbon operability. The Balancing Programme will modernise and
transform our balancing capabilities, together with associated
platforms, and is a key enabler to the £2.8 billion of
benefits expected to be delivered by the completion of our work in
2023/24 and 2024/25.
Customer connections
Looking
forward, over 60% of the projects in the (generation) connection
pipeline have connection dates within 12 months of their requested
date. However, we are progressing the following options in order to
address and better manage the connection request
pipeline:
●
ESO Connection Reform process –
working towards an industry consultation in summer 2023 on proposed
options for changes to the connections process and how they will be
implemented.
●
Transmission Entry Capacity (TEC)
Amnesty – this provides developers an opportunity to
leave the connections pipeline without incurring termination
liabilities. The amnesty is the first of its kind in nearly
a decade, and over 8 GW of generation applied before the
end of the amnesty window in April 2023.
●
Pipeline Management – these are
changes to the industry’s commercial framework to formally
introduce better tools to manage the pipeline. To remain in the
pipeline, customers will need to demonstrate their project is
progressing by meeting key milestones. These proposals have now
finished the ‘development and assessment’ phase,
and we expect it to be submitted to Ofgem for a decision in early
summer 2023.
Revenue and Costs in 2022/23 on an IFRS basis
UK Electricity System Operator statutory operating profit increased
£232 million in the year, mostly driven by
year-on-year timing movements. Timing over-recoveries of
£207 million in 2022/23 were driven by collection of
prior period balances (legacy TNUoS, Balancing Services Use of
System (BSUoS) deferrals, licence fee and other pass-through
costs), a £22 million totex over-recovery (reflecting lower
totex spend compared with allowances) and the net impact of other
pass-through cost true-ups from inflation, incentives and
post-vesting connections. In 2022/23 £1 million (2022:
£2 million) of exceptional costs were incurred as part of
our broader cost efficiency programme.
Adjusted operating profit increased by £231 million driven
by the £254 million year-on-year timing movement,
partly offset by asset write offs. Excluding the impact of
timing, underlying operating profit decreased by
£23 million. Net revenue (adjusted for timing) was
£44 million higher, but broadly offset by increased
regulated controllable costs and pensions as a result of
the expected higher volume of work under RIIO-2, plus
£10 million additional FSO costs ahead of separation of
this business. Depreciation and amortisation was
£18 million higher, mostly from accelerated depreciation
of the Electricity Balancing System.
UK Electricity System Operator
|
|
(£ million)
|
2023
|
2022
|
% change
|
Revenue
|
4,690
|
3,455
|
36
|
Operating costs
|
(4,453)
|
(3,450)
|
29
|
Statutory operating profit
|
237
|
5
|
4,640
|
Exceptional items
|
1
|
2
|
(50)
|
Adjusted operating profit
|
238
|
7
|
3,300
|
Timing
|
(207)
|
47
|
(540)
|
Underlying operating profit
|
31
|
54
|
(43)
|
|
|
|
|
Net revenue (adjusted for timing)
|
331
|
287
|
15
|
Controllable costs
|
(175)
|
(129)
|
36
|
Post-retirement benefits
|
(17)
|
(16)
|
6
|
Other operating costs
|
(7)
|
(5)
|
40
|
Depreciation and amortisation
|
(101)
|
(83)
|
22
|
Underlying operating profit
|
31
|
54
|
(43)
|
Timing
|
207
|
(47)
|
(540)
|
Adjusted operating profit
|
238
|
7
|
3,300
|
NEW ENGLAND
Operational Performance
We
achieved an excellent operational performance across our New
England regulated business during 2022/23 with an electric
distribution network reliability of 99.95212% and an electric
transmission reliability of 99.96824%. Investment in the safety and
reliability of our networks has continued, with capex lower
year-on-year by £54 million to £1,677 million at constant currency. This
decrease was principally driven by the sale of NECO during the
financial year, partly offset by higher electric transmission work
due to accelerated investment programmes. In our Massachusetts Gas
business, we continued with gas safety and reliability investments
including the replacement of a further 142 miles of leak prone
pipe9.
Storm response
During
the year, National Grid prepared for and responded to 18 weather
events across our New England service territory. Of these 18
events, 11 were considered Major Storms, with approximately 600,000
customers affected. Our average time to restore 95% of affected
customers in each weather event was 17.1 hours. We delivered
strong operational performance during the year including 10 events
in 11 weeks from December to March.
COVID-19 cost recovery
Massachusetts
Electric and Massachusetts Gas will get recovery of all COVID-19
related commodity bad debt which represents the bulk of the
outstanding balance. For Massachusetts Electric and Massachusetts
Gas, we are required to track delivery related bad-debt write-offs
for the two-year period from 1 July 2022 through 30 June 2024. A
report will be filed with the DPU in August 2024 to commence
recovery of any outstanding delivery related COVID-19 bad debt
expense in excess of base rate recovery levels.
Regulatory progress
We
continued to make good regulatory progress in Massachusetts during
the year.
In
September, the DPU approved our annual Performance Based Rate
adjustments for both Massachusetts Electric ($44 million) and
Massachusetts Gas ($64 million). These rates became effective 1
October 2022.
During
the second half of the year, we received funding approval that
supports our aim to enable the energy transition in Massachusetts.
In October, we received approval for $301 million of funding for
Grid Modernisation across the state, followed by an additional $35
million in November. The funding will be focused on the
implementation of a Distributed Energy Resource Management System
(DERMS) and advanced short-term load forecasting. DERMS is a
digital solution and platform that allows the Company to actively
track, manage, and optimise Distributed Energy Resources (DERs)
that are connected to the network through direct monitoring,
control and coordination or via an aggregator. The DERMS platform
will improve the reliability, resiliency, efficiency and overall
performance of the electric distribution system.
In
November, we received approval for $391 million of funding for
Advanced Metering Infrastructure (AMI). AMI’s are smart
meters that will be deployed in customer households and premises
across our service territory. The funding covers the period through
2027. In addition, the DPU approved a further five-year budget of
$96 million that largely covers system integration and customer
help to support this AMI investment.
At the
end of December, we received a further approval from the DPU for
$206 million for EV infrastructure in Massachusetts. This funding
– separate to capital investment through our rate agreements
– is for a four-year programme and will enable more than
30,000 residential charging points, and 11,000 public and workplace
charging ports, across our service territory.
Lastly,
in this period as compared to the prior year, we received a full
contribution from new rates for Massachusetts Gas that became
effective in October 2021.
Electric Sector Modernization Plan
In
December, the DPU requested all Electric utilities file an Electric
Sector Modernization Plan (ESMP) with the new Grid Modernization
Advisory Council (GMAC) by September 2023. Each Electric
Distribution Company, including Massachusetts Electric, must file
its final ESMP with the DPU no later than January 29, 2024. The
ESMP will outline what is required to upgrade the distribution and,
where applicable, transmission systems to meet the
Commonwealth’s Clean Energy and Climate Plan 2050 policy
objectives and help the state realise its statewide GHG emissions
goals. The ESMP will help quantify the total investment required
for the state to meet its policy goals.
Customer and communities
In
September, we launched our Winter Customer Savings Initiative to
help Massachusetts customers reduce their energy use, manage their
bills, and secure available energy assistance. The initiative
includes payment assistance programmes for income-eligible
customers, extensive residential and business energy efficiency
programmes and incentives, and flexible payment programmes. We have
reached out to all customers through a number of events around
Massachusetts to raise awareness of the options open to them to
reduce and manage their energy costs.
Our
commitment to our customers and local communities has continued to
strengthen with the growth of our Grid for Good social
responsibility and impact programme which launched in June 2022. It
provided more than $4 million to support non-profit organisations
and community programmes focused on workforce development and
education, economic opportunity, equity and social justice, as well
as clean energy and climate change. This is underpinned by a robust
volunteering programme that delivered more than 13,000 hours, and
leverages the strong brand of the Company’s flagship
workforce development programme. This complements an ongoing,
steady stream of volunteer activities aligned to the Group
community investment strategy. Additionally, the team has been
exploring new strategic partnerships aligned to the Grid for Good
pillars.
Return on Equity
Excluding
NECO, underlying RoE increased 30bps from prior year to 8.3%. This
reflects (a) a full year of new rates at Massachusetts
Gas following the rate order received in October 2021, partly
offset by higher costs including increased property taxes, and
(b) a decrease in Massachusetts Electric as a result of increased
IT spend, increased vegetation management, and a number of one-off
costs that are not expected to repeat.
|
|
Return on Equity
|
|
Rate Base ($m) as at 31 March
|
Regulated Entity
|
|
FY23
|
FY22
|
FY21
|
Allowed most recent
(%)
|
|
2023
|
2022
|
% change
|
Massachusetts Gas
|
|
8.6
|
6.9
|
5.7
|
9.7
|
|
4,170
|
3,820
|
9
|
Massachusetts Electric
|
|
5.9
|
7.1
|
5.3
|
9.6
|
|
3,106
|
3,049
|
2
|
Total Massachusetts
|
|
7.4
|
7.0
|
5.5
|
9.6
|
|
7,276
|
6,869
|
6
|
|
|
|
|
|
|
|
|
|
|
Narragansett Gas
|
|
n/a
|
8.4
|
6.9
|
n/a
|
|
—
|
1,218
|
(100)
|
Narragansett Electric
|
|
n/a
|
8.4
|
10.0
|
n/a
|
|
—
|
983
|
(100)
|
Narragansett Electric
– Transmission
|
|
n/a
|
12.5
|
11.1
|
n/a
|
|
—
|
788
|
(100)
|
Total Rhode Island
|
|
n/a
|
9.4
|
8.4
|
n/a
|
|
—
|
2,989
|
(100)
|
|
|
|
|
|
|
|
|
|
|
New England Power
|
|
11.1
|
10.9
|
11.0
|
10.6
|
|
2,420
|
2,260
|
7
|
Canadian Interconnector & Other
|
|
11.1
|
11.1
|
13.0
|
11.1
|
|
59
|
46
|
28
|
Total FERC
|
|
11.1
|
10.9
|
11.0
|
10.6
|
|
2,479
|
2,306
|
8
|
|
|
|
|
|
|
|
|
|
|
Total New England
|
|
8.3
|
8.3
|
7.5
|
9.9
|
|
9,755
|
12,164
|
(20)
|
Regulated Financial Position
Overall,
the New England rate base (excluding the estimated $3.0 billion
decrease from the disposal of Rhode Island) increased by $0.6
billion (6%) to $9.8 billion
driven by increased capital expenditure partially offset by
depreciation and deferred tax movements.
New England Regulated Assets
|
|
|
|
($
billion as at 31 March)
|
2023
|
2022
|
% change
|
Rate Base excl. working capital (w/c)
|
9.6
|
11.9
|
(19)
|
Working capital in Rate Base
|
0.2
|
0.3
|
(33)
|
Total Rate Base
|
9.8
|
12.2
|
(20)
|
Reg. assets outside Rate Base excl. w/c
|
2.5
|
2.5
|
—
|
Working capital outside Rate Base
|
0.1
|
(0.2)
|
(150)
|
Total regulated assets outside Rate Base
|
2.6
|
2.3
|
13
|
Total New England Regulated Assets
|
12.4
|
14.5
|
(14)
|
|
|
|
|
£ billion as at 31 March
|
2023
|
2022
|
% change
|
Total New England Regulated Assets at actual currency
|
10.1
|
11.1
|
(9)
|
Total New England Regulated Assets at constant
currency
|
10.1
|
11.8
|
(14)
|
Financial performance
New England
|
|
|
|
|
(£
million)
|
2023
|
2022
|
2022 at constant currency
|
% change at actual currency
|
Revenue
|
4,427
|
4,550
|
5,047
|
(3)
|
Operating costs
|
(3,295)
|
(3,786)
|
(4,200)
|
(13)
|
Statutory operating profit
|
1,132
|
764
|
847
|
48
|
Exceptional items
|
(456)
|
80
|
89
|
n/m
|
Remeasurements
|
32
|
(101)
|
(112)
|
n/m
|
Adjusted operating profit
|
708
|
743
|
824
|
(5)
|
Timing
|
39
|
32
|
35
|
n/m
|
Major storm costs
|
72
|
111
|
123
|
n/m
|
Underlying operating profit
|
819
|
886
|
982
|
(8)
|
|
|
|
|
|
Net revenue (adjusted for timing)
|
2,371
|
2,532
|
2,808
|
(6)
|
Regulated controllable costs
|
(755)
|
(813)
|
(902)
|
(7)
|
Post-retirement benefits
|
(27)
|
(40)
|
(44)
|
(33)
|
Bad debt expense
|
(58)
|
(45)
|
(50)
|
29
|
Other operating costs
|
(319)
|
(383)
|
(425)
|
(17)
|
Depreciation and amortisation
|
(393)
|
(365)
|
(405)
|
8
|
Underlying operating profit
|
819
|
886
|
982
|
(8)
|
Timing
|
(39)
|
(32)
|
(35)
|
n/m
|
Major storm costs
|
(72)
|
(111)
|
(123)
|
n/m
|
Adjusted operating profit
|
708
|
743
|
824
|
(5)
|
New England’s results were impacted by the disposal of our
Rhode Island business, NECO, which was sold in May 2022. This
business was classified as held for sale on 31 March 2021
and has not been depreciated since that date.
New England’s statutory operating profit increased by
£368 million, predominantly a result of the
£511 million exceptional net gain on disposal of NECO,
lower year-on-year exceptional costs associated
with transaction and separation, and lower major storm
costs, offset by £133 million year-on-year
unfavourable movements in commodity contract remeasurements and
higher exceptional costs associated with the cost efficiency
programme. Excluding the above items, the impacts of a partial
year ownership of NECO in 2022/23 and year-on-year foreign
exchange movements were partly offset by improved underlying
performance in the remaining New England businesses.
Adjusted operating profit decreased by £35 million (5%) at
actual exchange rates. Adjusted operating profit includes the
impact of major storm costs which were £39 million
lower than 2021/22 and also includes the impact of timing
which was broadly flat year on year.
Excluding the impact of major storm costs and timing, underlying
operating profit decreased by £67 million (8%). The impact
of owning our Rhode Island business for 10 months less in
2022/23 reduced underlying operating profit by £267 million
(30%). Unless stated otherwise, the following commentary is
presented excluding the impact of the disposal of NECO in May 2022
and also excluding the impact of foreign currency movements. Net
revenues (adjusted for timing and exchange rate movements)
increased by £140 million from the benefits of rate
case increments in Massachusetts Gas and Massachusetts
Electric and higher wholesale network revenues partially offset by
the non-recurrence of a property sale in 2021/22. New England
controllable costs increased by £22 million (at constant
currency) as a result of inflation and workload increases exceeding
efficiency savings made in the year. Bad debt expenses were
£26 million higher (at constant currency) than 2021/22
due to higher write-offs of aged receivables and the impact
of provision rates applied in the current year.
Depreciation and amortisation increased due to increased
investment, but was offset by non-recurrence of charges in 2021/22.
Other costs were lower due to decreases in environmental
reserves and favourable pension plan performance, offset by
increased operating taxes driven by increased network investment.
The weaker pound in 2022/23 increased underlying operating profit
by £96 million.
NEW YORK
Operational Performance
We
achieved very good operational performance across our New York
regulated business during 2022/23 with an electric distribution
network availability of 99.92384% and an electric transmission
network availability of 99.97189%. We have received four Edison
Electric Institute (EEI) Emergency Recovery/Response Awards in
2022/23: one Response (assisting others) and three Recovery
(restoring our customers). We have received 39 Response and
Recovery Awards since 2010.
Investment
in the safety and reliability of our networks continued during the
year with capital spend increasing £280 million at constant
currency to £2,454
million, principally driven by Volney Marcy, Gowanus and other IFRS
leases10, higher electricity investment, and
higher other investment including cyber security. This was
partially offset by lower gas investment driven by lower mains
replacement.
Storm response
During
the year, National Grid prepared for and responded to 58 weather
events across our New York service territories. Of these 58 events,
16 were considered Major Storms, with around 1.5 million customers
affected. Our average time to restore 95% of affected customers in
each weather event was 13 hours, further demonstrating strong storm
performance.
In
August, three major storms affected the Central and Western New
York regions, impacting 90,000 of our electric customers. Our teams
responded quickly and restored connection to all customers within
25 hours.
In
December, Winter Storm Elliott hit our service territories across
New York State. The ‘bomb cyclone’ occurred during the
holiday season with over 200,000 of our customers affected by the
impact. More than 50 inches of snow fell during the storm with
fierce blizzard conditions across the region. As such, the level of
coordination required across our field force of 3,800 people to
reconnect customers was significant, and the speed of the response
was swift. Within 48 hours, over 99% of all customers affected had
their electricity supplies restored. During the storm, we were also
able to maintain a reliable supply of gas to our customers. Our gas
distribution system performed well as did our LNG peaking assets.
In addition, National Grid remained in regular communication with
customers and community leaders to provide restoration updates,
reinforce vital safety information, and provide locations of
‘warming centers’ to those customers most in
need.
COVID-19 cost recovery
In
June, we reached an agreement with the New York Public Service
Commission (NYPSC) to provide around $160 million relief for
low‑income customers’ arrears accumulated during the
COVID-19 pandemic. As part of this agreement, $51 million of
government funding was used to provide a one-time bill credit to
eligible customers. In January 2023, the NYPSC approved the second
phase of the COVID-19 arrears relief programme, which provided
around $170 million of arrears relief to residential and small
commercial customers who did not receive an initial credit but were
significantly impacted by the COVID-19 economic downturn.
Collectively, the bill relief programmes will drive around $135
million of revenue over the next three years and resolves our
arrears balances due to the pandemic.
Regulatory progress
On 28
April 2023, National Grid submitted a rate filing for KEDNY-KEDLI,
our downstate New York gas distribution businesses, for new rates
commencing April 2024. Our filing is based on three objectives:
first, continue to meet our core obligation to deliver a safe,
reliable service to customers; second, to enhance our
customers’ ability to affordably meet their energy needs,
especially for our financially vulnerable customers, while also
improving the customer experience; third, to support the energy
transition in New York State and advance the goals in the CLCPA. As
part of our filing, we have requested an RoE of 9.8% and capital
investment of $1,013 million for KEDNY and $671 million for KEDLI
in 2024/25 (which represents a 36% increase on 2022/23 capital
investment). We also provided cost data for four years to
facilitate a potential multi-year settlement.
In
2020, the NYPSC ordered all utilities to file proposals for
distribution and transmission infrastructure projects required to
meet CLCPA 2030 objectives for a green superhighway to unlock
renewable generation from upstate to downstate New York. Utilities,
including National Grid, grouped these projects into two
categories, Phase 1 and Phase 2, based on project readiness and
availability of supporting regulatory frameworks. In July 2022, we
received approval to proceed on Phase 1 transmission investment
projects, at $691 million, In February, we received approval for
$2.1 billion of Phase 2 funding in New York for new/upgraded
transmission lines in our service territory also before
2030.
New York State Climate Action Council – Scoping
Plan
In
December, New York State’s Climate Action Council (CAC)
announced the approval of a Scoping Plan which outlines recommended
policies and actions to meet the goals of the CLCPA. The Plan is a
meaningful first step in achieving the goals set out in the CLCPA,
including the reduction in New York’s GHG emissions by 40% by
2030, and 85% by 2050.
National
Grid welcomed the CAC’s Scoping Plan, in particular the
importance of upgrading gas infrastructure to reduce system
emissions, and the role that alternative fuels such as Renewable
Natural Gas (RNG) and green hydrogen can play in decarbonising
energy networks. This supports National Grid’s Fossil-Free
Vision which was published in April 2022. The New York
Department of Environmental Conservation (DEC) will draft
regulations by January 2024 that ensure the state meets its GHG
emission limits and achieves them in line with the Scoping
Plan.
Return on Equity
During
the year, we achieved an RoE of 8.6%, 20bps below the 8.8% delivered in the
prior year. This was principally driven by higher costs and
non-recurrence of a property tax settlement in KEDLI, partly
offset by recovery of 2020/21 suspended late payment
fees.
|
|
Return on Equity
|
|
Rate Base ($m) as at 31 March
|
Regulated Entity
|
|
FY23
|
FY22
|
FY21
|
Allowed most recent
(%)
|
|
2023
|
2022
|
% change
|
KEDNY
|
|
9.2
|
8.1
|
6.1
|
8.8
|
|
6,048
|
5,429
|
11
|
KEDLI
|
|
9.2
|
11.0
|
8.2
|
8.8
|
|
3,774
|
3,369
|
12
|
NMPC Gas
|
|
7.1
|
8.1
|
7.2
|
9.0
|
|
1,800
|
1,584
|
14
|
NMPC Electric
|
|
8.1
|
8.5
|
6.3
|
9.0
|
|
7,045
|
6,603
|
7
|
Total New York
|
|
8.6
|
8.8
|
6.7
|
8.9
|
|
18,667
|
16,985
|
10
|
Regulated Financial Position
Overall,
the New York rate base increased by $1.7 billion (10%) to $18.7
billion driven by increased capital expenditure partially
offset by depreciation and deferred tax movements.
New York Regulated Assets
|
|
|
|
($
billion as at 31 March)
|
2023
|
2022
|
% change
|
Rate Base excl. working capital (w/c)
|
18.2
|
16.6
|
10
|
Working capital in Rate Base
|
0.5
|
0.4
|
25
|
Total Rate Base
|
18.7
|
17.0
|
10
|
Reg. assets outside Rate Base excl. w/c
|
1.2
|
1.1
|
9
|
Working capital outside Rate Base
|
0.1
|
(0.2)
|
(150)
|
Total regulated assets outside Rate Base
|
1.3
|
0.9
|
44
|
Total New York Regulated Assets
|
20.0
|
17.9
|
12
|
|
|
|
|
£ billion as at 31 March
|
2023
|
2022
|
% change
|
Total New York Regulated Assets at actual currency
|
16.2
|
13.6
|
19
|
Total New York Regulated Assets at constant currency
|
16.2
|
14.5
|
12
|
Financial performance
New York
|
|
|
|
|
(£
million)
|
2023
|
2022
|
2022 at constant currency
|
% change at actual currency
|
Revenue
|
6,994
|
5,561
|
6,168
|
26
|
Operating costs
|
(6,453)
|
(4,466)
|
(4,953)
|
44
|
Statutory operating profit
|
541
|
1,095
|
1,215
|
(51)
|
Exceptional items
|
(118)
|
(24)
|
(27)
|
n/m
|
Remeasurements
|
318
|
(291)
|
(323)
|
n/m
|
Adjusted operating profit
|
741
|
780
|
865
|
(5)
|
Timing
|
(53)
|
(126)
|
(140)
|
n/m
|
Major storm costs
|
186
|
52
|
58
|
n/m
|
Underlying operating profit
|
874
|
706
|
783
|
24
|
|
|
|
|
|
Net revenue (adjusted for timing)
|
3,984
|
3,274
|
3,631
|
22
|
Regulated controllable costs
|
(1,151)
|
(963)
|
(1,068)
|
20
|
Post-retirement benefits
|
(2)
|
(44)
|
(49)
|
(95)
|
Bad debt expense
|
(157)
|
(87)
|
(96)
|
80
|
Other operating costs
|
(1,180)
|
(937)
|
(1,039)
|
26
|
Depreciation and amortisation
|
(620)
|
(537)
|
(596)
|
15
|
Underlying operating profit
|
874
|
706
|
783
|
24
|
Timing
|
53
|
126
|
140
|
n/m
|
Major storm costs
|
(186)
|
(52)
|
(58)
|
n/m
|
Adjusted operating profit
|
741
|
780
|
865
|
(5)
|
New York statutory operating profit decreased by £554 million,
principally as a result of the £609 million
year-on-year unfavourable movements in commodity contract
remeasurements and net exceptional gains which included £156
million for increasing
the discount rate on environmental
provisions offset by £38 million of exceptional costs related
to our cost efficiency programme. Timing over-recoveries
of £53 million in 2022/23 compared with timing
over-recoveries of £126 million in 2021/22, driven
by commodity price fluctuations and high auction sale prices
on transmission wheeling. Major storm costs of
£186 million were £134 million higher year on
year, driven by Storm Elliott, but as in 2021/22, the total
costs passed our threshold ($100 million in aggregate with New
England) and so are excluded from our underlying results.
These factors, offset by increased underlying operating
profit, driven primarily by rate increases and a weaker pound,
reduced statutory operating profit to
£541 million.
Adjusted operating profit decreased by £39 million (5%),
impacted by £73 million year-on-year unfavourable timing
movements and higher year-on-year major storm costs of £134
million, but partly offset by the underlying operating profit
increasing by 24%, including a
£77 million increase as a result of foreign exchange
movements. Adjusted for the impact of foreign currency,
underlying operating profit increased by £91 million
(12%) compared with 2021/22. Net revenues (adjusted for timing
and exchange rate movements) increased by £353 million
from the benefits of rate case increases in KEDNY, KEDLI
and Niagara Mohawk and income received under the funded
COVID-19 arrears management programme alongside resumed collection
activities. Regulated controllable costs were £83 million
higher (at constant currency) year on year, with increased workload
and the impact of inflation being partially offset by cost
efficiency savings. Provisions for bad and doubtful debts increased
by £61 million (at constant currency) driven by write
offs related to the COVID-19 arrears management programme.
Depreciation and amortisation increased due to the
growth in assets. Other costs were higher due to increased
property taxes and higher costs on funded programmes (offset by
rate increases), offset by the benefit of a gain on a pension
buyout in our Niagara Mohawk business.
NATIONAL GRID VENTURES (NGV)
Operating profit, share of joint ventures and associates and
capital investment
|
Adjusted operating profit
|
|
Capital expenditure
|
(£ million)
|
2023
|
2022
|
2022 at constant currency
|
change % at actual currency
|
|
2023
|
2022
|
2022 at constant currency
|
change % at actual currency
|
NG Generation
|
33
|
33
|
37
|
—
|
|
94
|
36
|
40
|
161
|
Interconnectors
|
355
|
135
|
135
|
163
|
|
434
|
325
|
325
|
34
|
Grain LNG
|
131
|
113
|
113
|
16
|
|
162
|
94
|
94
|
72
|
NG Renewables
|
—
|
11
|
12
|
(100)
|
|
—
|
2
|
2
|
(100)
|
Other
|
(29)
|
(6)
|
(6)
|
383
|
|
19
|
(5)
|
(5)
|
(480)
|
Total
|
490
|
286
|
291
|
71
|
|
709
|
452
|
456
|
57
|
|
Adjusted share of post-tax results
of joint ventures and associates
|
|
Capital investment in joint ventures and associates
|
Interconnectors
|
164
|
91
|
91
|
80
|
|
—
|
—
|
—
|
—
|
Millennium
|
14
|
22
|
24
|
(36)
|
|
—
|
—
|
—
|
—
|
NG Renewables
|
16
|
3
|
3
|
433
|
|
147
|
199
|
221
|
(26)
|
Bight Wind
|
—
|
—
|
—
|
—
|
|
7
|
223
|
247
|
(97)
|
Other
|
9
|
6
|
6
|
50
|
|
43
|
39
|
44
|
10
|
Total
|
203
|
122
|
124
|
66
|
|
197
|
461
|
512
|
(57)
|
|
|
|
|
|
|
|
|
|
|
Total NGV
|
693
|
408
|
415
|
70
|
|
906
|
913
|
968
|
(1)
|
NGV’s statutory operating profit includes an exceptional gain
of £467 million, comprising a £335 million gain from
the sale of NGV’s stake in Millennium Pipeline and £130
million credit for property damage insurance claim recoveries
related to the fire at our French interconnector (IFA) in September
2021 and a £3 million credit for increasing
the discount rate on environmental
provisions, offset by £1 million of exceptional
costs incurred as part of the broader cost efficiency
programme. Our underlying and adjusted results exclude the
impact of these exceptional items.
Underlying and adjusted operating profit was £204 million
higher than 2021/22. Interconnector profit increased versus prior
year reflecting a full year of contribution from NSL,
higher auction revenues in IFA and upside in our second French
interconnector (IFA2) which benefitted from an increase in the
revenue cap following an Ofgem review. There was additional
upside in IFA relating to insurance recoveries following
the September 2021 fire. Revenues in our Grain
LNG business also increased year on year due to increased
utilisation.
Adjusted share of post-tax results from NGV’s joint ventures
and associates were £81 million higher than 2021/22, resulting
in a year-on-year increase to total NGV contribution of £285
million, driven primarily by interconnectors. This includes IFA
insurance recoveries; improved interconnector performance,
including capacity, raised cap levels and optimised auction
strategies; and increased revenues resulting from higher prices on
the energy markets.
Capital Investment
NGV
capital expenditure was above the prior year by £253 million (at constant currency).
This was driven by the Sellindge converter station rebuild at IFA,
further expenditure on the Grain LNG expansion project, and
increased investment in Long Island Generation. This was partially
offset by lower investment within NSL following the completion of
construction in the prior year, with spend on the Viking Link
broadly flat.
NGV capital investment, which includes investment in joint ventures
and associates, was £7
million lower than the prior
year (£62 million
lower at
constant currency) due to last year’s investment in a
potential offshore wind seabed lease in New
York.
Interconnectors
Overall,
our interconnector links have performed well during the year. They
have responded to high levels of volatility within European power
markets to deliver flows of electricity both to and from the UK
network as required to meet demand. This includes a strong
performance supporting security of supply in the UK and Europe over
winter.
Following
the fire at the Sellindge converter station in September 2021, the
full capacity of the IFA interconnector has now returned to
service. We were able to return 1 GW to service after one
month (October 2021), and since returned the interconnector to its
full 2 GW capacity on 27 January 2023. This follows a complete
restoration of the converter station, and we are now focused on
optimising the operating regime post-return to service to maximise
availability at 2 GW.
IFA2
has performed strongly in its second full year of operation.
Availability across the year reached 95.7%, which included the
first annual planned maintenance outage in June. Our BritNed
interconnector has performed well during the year with availability
above 99%, whilst Nemo Link’s availability reached 98.1%.
During the year, BritNed continued as one of the best performing
interconnectors in the world in terms of safety with over 4,200
days without a lost time injury (LTI). Finally, in its first full
year of operation, NSL has performed well reaching its full
operational capacity in July 2022. Availability averaged 86.8%
across the year, affected by an operational reduction in the first
quarter of the financial year whilst capacitors were replaced due
to a manufacturing defect. Across the year, NSL imported 4.7 TWh of
100% green energy, increasing renewable supply into the
UK.
We
remain on track to commission the 1,400 MW Viking Link to Denmark
by the end of calendar year 2023. Five of seven cable laying
programmes have now been completed, with the final two campaigns
completing by the end of summer 2023. When commissioned, Viking
Link will be the world’s longest subsea interconnector
stretching 760 km across the North Sea.
US Renewables
In
January, the joint venture partnership between National Grid and
RWE (Community Offshore Wind) submitted proposals to the New York
State Energy Research and Development Authority (NYSERDA) to
deliver 1.3 GW of electricity from the project. This was part of
New York’s competitive solicitation for offtake bids from
offshore wind developers. If selected, the proposals for the joint
venture would generate around $3 billion in direct economic
benefits to New York, provide over 4,600 new jobs, and help reduce
New York State’s power sector emissions by up to 5%. We
expect a decision by NYSERDA in the second half of calendar year
2023. This follows the joint venture’s success in winning a
seabed
lease in the New York Bight auction in February 2022. We expect
the project to be over 3 GW when fully commissioned early
next decade, enough power to supply 1.1 million
US homes.
At the
half year, National Grid Renewables reported progressing 674 MW of
additional solar capacity through its joint venture with Washington
State Investment Board (WSIB). These projects include Noble, a 275
MW solar/ 125 MWh Battery Energy Storage System (BESS) project
in Texas, which was completed in October 2022 and Yellowbud, a 274
MW solar project in Ohio, which is set to commission in mid-2023.
In the second half of 2022/23, the team commenced constructing
three additional projects: Copperhead, a 150 MW solar/100 MWh BESS
project in Texas, set to commission in early-2024; Wild Springs, a
128 MW solar project in South Dakota, set to commission in
early-2024; and Ross & Fayette, a 168 MW solar project in Ohio,
set to commission in mid-2024. When completed, National Grid
Renewables’ operating portfolio of onshore wind and solar
plants will increase from 1,025 MW today (including Noble) to 1,845
MW.
NGV Transmission Projects
In
October 2021, New York Transco – a partnership of New
York’s major utilities, including NGV – submitted a bid
(NY Propel) to install increased transmission capacity to Long
Island. The bid was in response to a solicitation by the New York
Independent System Operator (NYISO) in August 2021 which called for
transmission solutions to transfer at least 3 GW and
potentially up to 6 GW of offshore wind generation that is
expected to be connected to Long Island over the next decade. We
expect NYISO to make a final selection in summer 2023.
New
York Transco 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
centres. The upgrades are being
made along 55 miles of utility-owned land and are one of the
largest transmission projects in New York in 40 years. The project
remains on track to be energised by the end of calendar
2023.
Grain LNG
During
the year, Grain LNG delivered £131 million of operating profit, up from
£113 million in the prior
year. The asset delivered 94 TWh of energy into the UK gas network,
receiving a record 102 ships versus 64 in the prior year. Grain
played a critical role supporting Great Britain security of supply
over winter. Our 5 year expansion programme to deliver additional
LNG storage on site remains on target to be ready for commercial
operations in summer 2025 (Capacity 25). This expansion will see
storage capacity increase to 1.2 million m3.
Long Island Generation (NG Generation)
NG
Generation safely and efficiently operates conventional generation
plants that are vital to security of supply in New York state, and
supply two million people on Long Island. The fleet generated 4,966
GWh of electricity in 2022/23.
Over
the next several years, we expect the fleet to generate less
electricity as alternative sources of energy supply are developed
and connected to the Long Island grid. In particular, new offshore
wind generation will reduce the need for NG Generation to
produce power, which will lead to lower emissions. Longer term,
NG Generation will proactively manage the size and composition
of the fleet to ensure security of the system through the energy
transition, whilst exploring new technologies like hydrogen-fueled
power generation.
OTHER ACTIVITIES
Operating profit, share of joint ventures and associates and
capital investment
|
Adjusted operating profit
|
|
Capital expenditure
|
(£ million)
|
2023
|
2022
|
2022 at constant currency
|
change % at actual currency
|
|
2023
|
2022
|
2022 at constant currency
|
change % at actual currency
|
Property
|
216
|
40
|
40
|
440
|
|
7
|
3
|
3
|
133
|
NG Partners
|
(25)
|
66
|
66
|
(138)
|
|
—
|
—
|
—
|
—
|
Corporate
and other activities
|
(160)
|
(85)
|
(84)
|
88
|
|
6
|
7
|
7
|
(14)
|
Total
|
31
|
21
|
22
|
48
|
|
13
|
10
|
10
|
30
|
|
Adjusted share of post-tax results
of joint ventures and associates
|
|
Capital investment in financial assets
|
NG Partners
|
(13)
|
15
|
17
|
(187)
|
|
59
|
93
|
103
|
(37)
|
St William
|
—
|
11
|
11
|
(100)
|
|
—
|
—
|
—
|
—
|
Total
|
(13)
|
26
|
28
|
(150)
|
|
59
|
93
|
103
|
(37)
|
|
|
|
|
|
|
|
|
|
|
Total other
|
18
|
47
|
50
|
(62)
|
|
72
|
103
|
113
|
(30)
|
Other activities statutory operating loss includes an exceptional
charge of £25 million related to the cost efficiency
programme (2022: £22 million), £31 million of costs
for the separation of UK Gas Transmission and Metering
(2022: £61 million, which also included NECO separation costs)
and £16 million of integration costs for UK Electricity
Distribution (2022: £95 million of transaction costs for
the acquisition of National Grid Electricity Distribution).
In 2021/22, we recognised an exceptional gain of
£417 million related to the St William
disposal.
Excluding exceptional items, underlying operating profit was
£31 million (including corporate costs) in 2022/23
compared with £21 million in 2021/22. This increase
mainly relates to property site sales which were
£176 million higher, primarily related to the sale of 15
sites to St William following the disposal of that joint
venture last year, mostly offset by NG Partners
investments’ fair value losses (mainly driven by Copperleaf)
plus no repeat of the high level of fair value gains experienced in
2021/22, and higher corporate costs which included support payments
to charitable causes and employees in respect of the energy
crisis.
National Grid Partners (NGP)
NGP,
our corporate investment and innovation arm, has continued to
invest in emerging technologies with a portfolio comprising 36
companies and 4 fund investments, at a fair value of $487
million.
Capital
investment at £59 million was 43%
lower at constant currency compared with prior year. Of the
£59 million invested in 2022/23, £39 million in
new companies, £13 million in follow-on investments in
existing portfolio companies, and £7 million in external
funds.
UK GAS TRANSMISSION AND METERING (discontinued
operations)
Operational Performance
UK Gas Transmission delivered another year of strong
operational performance. For the 10 months of 2022/23 that we fully
owned UK Gas Transmission we invested £301 million in the network, up 15% on prior year, driven principally by
increased investments in cyber security and asset
health.
Revenue and costs in 2022/23 on an IFRS basis
UK Gas Transmission statutory operating profit increased £78
million in the year. In 2022/23, there was a
£1 million credit (2022: £14 million) of costs
incurred in separating the business from the Group and
transaction-related costs in preparation of the sales process;
and the prior year also included £3 million
of exceptional costs related to the reorganisation and cost
efficiency programme. Timing net over-recoveries of
£12 million arose in 2022/23, mainly related to higher
volumes offset by an under-recovery of shrinkage costs from higher
gas prices and under-collection of pass-through cost true-ups
including inflation. This compared with under-recoveries
of £80 million in the prior year also mainly related
to recovery of shrinkage costs from higher gas
prices.
Despite UK Gas Transmission being fully owned for only 10 months of
the current year, adjusted operating profit increased by £60
million (9%), as this included a year-on-year £92 million
favourable timing movement. Excluding the impact of timing,
underlying operating profit decreased by 4%. The prior year also
included £91 million of depreciation to 31 August
2021 when the business was classified as held for sale. Net revenue
(excluding timing) was £123 million lower, reflecting the
shorter period of ownership partly offset by the impact of
higher inflation and an increase in revenues for customer-funded
works. Regulated controllable costs (including pensions)
and other costs were £14 million lower as
a result of two months’ less ownership in 2022/23 offset
by increased customer-funded works, cyber and decommissioning
costs.
Within UK Gas Transmission, our non-regulated metering
business’s operating profit of £129 million was lower
than the prior year mainly impacted by a shorter period of
ownership in 2022/23.
For
further details on UK Gas Transmission, including the gain on
disposal of this business, see note 9 ‘Assets held for sale
and discontinued operations’.
PROVISIONAL 2022/23 FINANCIAL TIMETABLE
Date
|
Event
|
18 May
2023
|
2022/23 Preliminary Results
|
1 June
2023
|
Ordinary
shares go ex-dividend for 2022/23 final dividend
|
1 June
2023
|
ADRs go
ex-dividend for 2022/23 final
dividend
|
2 June
2023
|
Record
date for 2022/23 final
dividend
|
8 June
2023
|
Scrip
reference price announced for 2022/23 final dividend
|
10 July
2023
|
2023 Annual General Meeting
|
12 July
2023 (5pm London
time)
|
Scrip
election date for 2022/23 final
dividend
|
9
August 2023
|
2022/23 final dividend paid to qualifying
shareholders
|
9
November 2023
|
2023/24 half year results
|
22
November 2023
|
ADRs go
ex-dividend for 2023/24 interim
dividend
|
23
November 2023
|
Ordinary
shares go ex-dividend for 2023/24 interim dividend
|
24
November 2023
|
Record
date for 2023/24 interim
dividend
|
30
November 2023
|
Scrip
reference price announced for 2023/24 interim dividend
|
11
December 2023 (5pm London
time)
|
Scrip
election date for 2023/24
interim dividend
|
11
January 2024
|
2023/24 interim dividend paid to qualifying
shareholders
|
American Depositary Receipt (ADR) Deposit Agreement
The
Company’s Deposit agreement under which the ADRs are issued
allows 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 2022/23 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. This document also references
climate-related targets and climate-related risks which differ from
conventional financial risks in that they are complex, novel and
tend to involve projection over long term scenarios which are
subject to significant uncertainty and change. 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 or targets. 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 changes in laws or regulations, including any arising as a
result of the current energy crisis, announcements from and
decisions by governmental bodies or regulators, including those
relating to the RIIO-T2 and RIIO-ED2 price controls and the
creation of a future system operator; 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
(including any that result in safety and/or environmental events),
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 other supplies, 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, as well as
against targets and standards designed to deliver net zero; 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; inflation;
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 and business
capabilities, 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 sale of a stake in its UK Gas Transmission and Metering
business, and joint ventures. 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 253 to 256 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 2022 published on 10 November
2022. 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
2023
|
Notes
|
|
Before
exceptional
items and remeasurements
£m
|
Exceptional
items and remeasurements
(see note 4)
£m
|
Total
£m
|
|
Continuing operations
|
|
|
|
|
|
Revenue
|
2(a),3
|
|
21,659
|
—
|
21,659
|
Provision for bad and doubtful debts
|
|
|
(220)
|
—
|
(220)
|
Other operating costs
|
4
|
|
(17,158)
|
(391)
|
(17,549)
|
Other operating income
|
4
|
|
13
|
976
|
989
|
Operating profit
|
2(b)
|
|
4,294
|
585
|
4,879
|
Finance income
|
4,5
|
|
166
|
(28)
|
138
|
Finance costs
|
4,5
|
|
(1,680)
|
82
|
(1,598)
|
Share of post-tax results of joint ventures and
associates
|
|
|
190
|
(19)
|
171
|
Profit before tax
|
2(b)
|
|
2,970
|
620
|
3,590
|
Tax
|
4,6
|
|
(635)
|
(241)
|
(876)
|
Profit after tax from continuing operations
|
|
|
2,335
|
379
|
2,714
|
Profit after tax from discontinued operations
|
9
|
|
320
|
4,763
|
5,083
|
Total profit for the year (continuing and
discontinued)
|
|
|
2,655
|
5,142
|
7,797
|
Attributable to:
|
|
|
|
|
|
Equity shareholders of the parent
|
|
|
2,655
|
5,142
|
7,797
|
Non-controlling
interests from continuing operations
|
|
|
—
|
—
|
—
|
Earnings per share (pence)
|
|
|
|
|
|
Basic earnings per share (continuing)
|
7
|
|
|
|
74.2
|
Diluted earnings per share (continuing)
|
7
|
|
|
|
73.8
|
Basic earnings per share (continuing and discontinued)
|
7
|
|
|
|
213.1
|
Diluted earnings per share (continuing and
discontinued)
|
7
|
|
|
|
212.1
|
2022
|
Notes
|
|
Before
exceptional
items and remeasurements
£m
|
Exceptional
items
and remeasurements
(see
note 4)
£m
|
Total
£m
|
|
Continuing operations
|
|
|
|
|
|
Revenue
|
2(a),3
|
|
18,260
|
189
|
18,449
|
Provision for bad and doubtful debts
|
|
|
(167)
|
—
|
(167)
|
Other operating costs¹
|
4
|
|
(14,280)
|
141
|
(14,139)
|
Other operating income¹
|
4
|
|
—
|
228
|
228
|
Operating profit
|
2(b)
|
|
3,813
|
558
|
4,371
|
Finance income
|
4,5
|
|
65
|
(15)
|
50
|
Finance costs
|
4,5
|
|
(1,146)
|
74
|
(1,072)
|
Share of post-tax results of joint ventures and
associates
|
|
|
148
|
(56)
|
92
|
Profit before tax
|
2(b)
|
|
2,880
|
561
|
3,441
|
Tax
|
4,6
|
|
(669)
|
(589)
|
(1,258)
|
Profit after tax from continuing operations
|
|
|
2,211
|
(28)
|
2,183
|
Profit after tax from discontinued operations
|
9
|
|
344
|
(173)
|
171
|
Total profit for the year (continuing and
discontinued)
|
|
|
2,555
|
(201)
|
2,354
|
Attributable to:
|
|
|
|
|
|
Equity shareholders of the parent
|
|
|
2,554
|
(201)
|
2,353
|
Non-controlling interests from continuing operations
|
|
|
1
|
—
|
1
|
Earnings per share (pence)
|
|
|
|
|
|
Basic earnings per share (continuing)
|
7
|
|
|
|
60.6
|
Diluted earnings per share (continuing)
|
7
|
|
|
|
60.3
|
Basic earnings per share (continuing and discontinued)
|
7
|
|
|
|
65.4
|
Diluted earnings per share (continuing and
discontinued)
|
7
|
|
|
|
65.0
|
1.
Comparatives
have been re-presented to disclose other operating income
separately from other operating costs.
Consolidated statement of comprehensive income
for the years ended 31 March
|
|
|
2023
|
2022
|
|
Notes
|
|
£m
|
£m
|
Profit after tax from continuing operations
|
|
|
2,714
|
2,183
|
Profit after tax from discontinued operations
|
|
|
5,083
|
171
|
Other comprehensive income from continuing operations
|
|
|
|
|
Items from continuing operations that will never be reclassified to
profit or loss:
|
|
|
|
|
Remeasurement
(losses)/gains on pension assets and post-retirement benefit
obligations
|
|
|
(1,362)
|
2,172
|
Net
gains on equity instruments designated at fair value through other
comprehensive income
|
|
|
—
|
12
|
Net
gains/(losses) in respect of cash flow hedging of capital
expenditure
|
|
|
10
|
(1)
|
Tax
on items that will never be reclassified to profit or
loss
|
|
|
341
|
(496)
|
Total items from continuing operations that will never be
reclassified to profit or loss
|
|
|
(1,011)
|
1,687
|
Items from continuing operations that may be reclassified
subsequently to profit or loss:
|
|
|
|
|
Retranslation
of net assets offset by net investment hedge
|
|
|
883
|
630
|
Exchange
differences reclassified to the consolidated income statement on
disposal
|
9
|
|
(170)
|
—
|
Net
(losses)/gains in respect of cash flow hedges
|
|
|
—
|
(57)
|
Net
(losses)/gains in respect of cost of hedging
|
|
|
(16)
|
1
|
Net
(losses)/gains on investment in debt instruments measured at fair
value
through
other comprehensive income
|
|
|
(25)
|
(11)
|
Share
of other comprehensive income of associates, net of
tax
|
|
|
1
|
1
|
Tax
on items that may be reclassified subsequently to profit or
loss
|
|
|
11
|
15
|
Total items from continuing operations that may be reclassified
subsequently to profit or loss
|
|
|
684
|
579
|
Other comprehensive (loss)/income for the year, net of tax from
continuing operations
|
|
|
(327)
|
2,266
|
Other comprehensive (loss)/income for the year, net of tax from
discontinued operations
|
9
|
|
(227)
|
211
|
Other comprehensive loss for the year, net of tax
|
|
|
(554)
|
2,477
|
Total comprehensive income for the year from continuing
operations
|
|
|
2,387
|
4,449
|
Total comprehensive income for the year from discontinued
operations
|
9
|
|
4,856
|
382
|
Total comprehensive income for the year
|
|
|
7,243
|
4,831
|
Attributable to:
|
|
|
|
|
Equity shareholders of the parent
|
|
|
|
|
From
continuing operations
|
|
|
2,386
|
4,447
|
From
discontinued operations
|
|
|
4,856
|
382
|
|
|
|
7,242
|
4,829
|
Non-controlling interests
|
|
|
|
|
From
continuing operations
|
|
|
1
|
2
|
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 2021
|
474
|
1,296
|
23,163
|
(5,094)
|
|
19,839
|
21
|
|
19,860
|
Profit for the year
|
—
|
—
|
2,353
|
—
|
|
2,353
|
1
|
|
2,354
|
Other comprehensive income for the year
|
—
|
—
|
1,871
|
605
|
|
2,476
|
1
|
|
2,477
|
Total comprehensive income for the year
|
—
|
—
|
4,224
|
605
|
|
4,829
|
2
|
|
4,831
|
Equity dividends
|
—
|
—
|
(922)
|
—
|
|
(922)
|
—
|
|
(922)
|
Scrip
dividend-related share issue1
|
11
|
(12)
|
—
|
—
|
|
(1)
|
—
|
|
(1)
|
Issue of treasury shares
|
—
|
—
|
17
|
—
|
|
17
|
—
|
|
17
|
Transactions in own shares
|
—
|
16
|
(3)
|
—
|
|
13
|
—
|
|
13
|
Share-based payments
|
—
|
—
|
43
|
—
|
|
43
|
—
|
|
43
|
Tax on share-based payments
|
—
|
—
|
7
|
—
|
|
7
|
—
|
|
7
|
Transfer
of accumulated gains and losses on sale
of equity investments2
|
—
|
—
|
82
|
(82)
|
|
—
|
—
|
|
—
|
Cash flow hedges transferred to the statement
of financial position, net of tax
|
—
|
—
|
—
|
8
|
|
8
|
—
|
|
8
|
1 April 2022
|
485
|
1,300
|
26,611
|
(4,563)
|
|
23,833
|
23
|
|
23,856
|
Profit for the year
|
—
|
—
|
7,797
|
—
|
|
7,797
|
—
|
|
7,797
|
Other comprehensive (loss)/income for the year
|
—
|
—
|
(1,253)
|
698
|
|
(555)
|
1
|
|
(554)
|
Total comprehensive income for the year
|
—
|
—
|
6,544
|
698
|
|
7,242
|
1
|
|
7,243
|
Equity dividends
|
—
|
—
|
(1,607)
|
—
|
|
(1,607)
|
—
|
|
(1,607)
|
Scrip
dividend-related share issue1
|
3
|
(3)
|
—
|
—
|
|
—
|
—
|
|
—
|
Issue of treasury shares
|
—
|
—
|
16
|
—
|
|
16
|
—
|
|
16
|
Transactions in own shares
|
—
|
5
|
(4)
|
—
|
|
1
|
—
|
|
1
|
Share-based payments
|
—
|
—
|
48
|
—
|
|
48
|
—
|
|
48
|
Cash flow hedges transferred to the statement
of financial position, net of tax
|
—
|
—
|
—
|
5
|
|
5
|
—
|
|
5
|
At 31 March 2023
|
488
|
1,302
|
31,608
|
(3,860)
|
|
29,538
|
24
|
|
29,562
|
1.
Included
within the share premium account are costs associated with scrip
dividends.
2.
In
the year ended 31 March 2022, the Group disposed of its equity
instruments related to shares held as part of a portfolio of
financial instruments which back some long‑term employee
liabilities. The equity instruments were previously measured at
FVOCI and prior to the disposal the Group recognised a gain of
£12 million. The accumulated gain and losses of
£82 million recognised in other comprehensive income were
transferred to retained earnings on disposal.
Consolidated statement of financial position
as at 31 March
|
|
|
2023
|
2022
|
|
Notes
|
|
£m
|
£m
|
Non-current assets
|
|
|
|
|
Goodwill
|
|
|
9,847
|
9,532
|
Other intangible assets
|
|
|
3,604
|
3,272
|
Property, plant and equipment
|
|
|
64,433
|
57,532
|
Other non-current assets
|
|
|
567
|
303
|
Pension assets
|
10
|
|
2,645
|
3,885
|
Financial and other investments
|
|
|
859
|
830
|
Investments in joint ventures and associates
|
|
|
1,300
|
1,238
|
Derivative financial assets
|
|
|
276
|
305
|
Total non-current assets
|
|
|
83,531
|
76,897
|
Current assets
|
|
|
|
|
Inventories and current intangible assets
|
|
|
876
|
511
|
Trade and other receivables
|
|
|
3,883
|
3,715
|
Current tax assets
|
|
|
43
|
106
|
Financial and other investments
|
|
|
2,605
|
3,145
|
Derivative financial assets
|
|
|
153
|
282
|
Cash and cash equivalents
|
|
|
163
|
204
|
Assets held for sale
|
9
|
|
1,443
|
10,000
|
Total current assets
|
|
|
9,166
|
17,963
|
Total assets
|
|
|
92,697
|
94,860
|
Current liabilities
|
|
|
|
|
Borrowings
|
|
|
(2,955)
|
(12,121)
|
Derivative financial liabilities
|
|
|
(222)
|
(144)
|
Trade and other payables
|
|
|
(5,068)
|
(4,915)
|
Contract liabilities
|
|
|
(252)
|
(130)
|
Current tax liabilities
|
|
|
(236)
|
(32)
|
Provisions
|
|
|
(288)
|
(240)
|
Liabilities held for sale
|
9
|
|
(109)
|
(7,188)
|
Total current liabilities
|
|
|
(9,130)
|
(24,770)
|
Non-current liabilities
|
|
|
|
|
Borrowings
|
|
|
(40,030)
|
(33,344)
|
Derivative financial liabilities
|
|
|
(1,071)
|
(869)
|
Other non-current liabilities
|
|
|
(921)
|
(805)
|
Contract liabilities
|
|
|
(1,754)
|
(1,342)
|
Deferred tax liabilities
|
|
|
(7,181)
|
(6,765)
|
Pensions and other post-retirement benefit obligations
|
10
|
|
(694)
|
(810)
|
Provisions
|
|
|
(2,354)
|
(2,299)
|
Total non-current liabilities
|
|
|
(54,005)
|
(46,234)
|
Total liabilities
|
|
|
(63,135)
|
(71,004)
|
Net assets
|
|
|
29,562
|
23,856
|
Equity
|
|
|
|
|
Share capital
|
|
|
488
|
485
|
Share premium account
|
|
|
1,302
|
1,300
|
Retained earnings
|
|
|
31,608
|
26,611
|
Other equity reserves
|
|
|
(3,860)
|
(4,563)
|
Total shareholders’ equity
|
|
|
29,538
|
23,833
|
Non-controlling interests
|
|
|
24
|
23
|
Total equity
|
|
|
29,562
|
23,856
|
Consolidated cash flow statement
for the years ended 31 March
|
|
|
2023
|
2022
|
|
Notes
|
|
£m
|
£m
|
Cash flows from operating activities
|
|
|
|
|
Total operating profit from continuing operations
|
2(b)
|
|
4,879
|
4,371
|
Adjustments for:
|
|
|
|
|
Exceptional
items and remeasurements
|
4
|
|
(585)
|
(558)
|
Other
fair value movements
|
|
|
21
|
(65)
|
Depreciation,
amortisation and impairment
|
|
|
1,984
|
1,830
|
Share-based
payments
|
|
|
48
|
38
|
Changes
in working capital
|
|
|
286
|
361
|
Changes
in provisions
|
|
|
23
|
140
|
Changes
in pensions and other post-retirement benefit
obligations
|
|
|
(46)
|
(76)
|
Cash flows relating to exceptional items
|
|
|
(178)
|
(253)
|
Cash generated from operations – continuing
operations
|
|
|
6,432
|
5,788
|
Tax paid
|
|
|
(89)
|
(298)
|
Net cash inflow from operating activities – continuing
operations
|
|
|
6,343
|
5,490
|
Net cash inflow from operating activities – discontinued
operations
|
|
|
555
|
782
|
Cash flows from investing activities
|
|
|
|
|
Purchases of intangible assets
|
|
|
(567)
|
(446)
|
Purchases of property, plant and equipment
|
|
|
(6,325)
|
(5,098)
|
Disposals of property, plant and equipment
|
|
|
87
|
26
|
Investments in joint ventures and associates
|
|
|
(443)
|
(265)
|
Dividends received from joint ventures, associates and other
investments
|
|
|
190
|
166
|
Acquisition
of National Grid Electricity Distribution¹
|
|
|
—
|
(7,837)
|
Disposal
of interest in the UK Gas Transmission business2
|
9
|
|
4,027
|
—
|
Disposal
of interest in The Narragansett Electric Company2
|
9
|
|
2,968
|
—
|
Disposal of interest in Millennium Pipeline Company
LLC
|
|
|
497
|
—
|
Disposal of interest in St William Homes LLP
|
|
|
—
|
413
|
Disposal of financial and other investments
|
|
|
116
|
215
|
Acquisition of financial investments
|
|
|
(95)
|
(197)
|
Contributions to National Grid Renewables and Emerald Energy
Venture LLC
|
|
|
(19)
|
(16)
|
Net movements in short-term financial investments
|
|
|
586
|
(781)
|
Interest received
|
|
|
65
|
40
|
Cash inflows on derivatives
|
|
|
—
|
17
|
Cash outflows on derivatives
|
|
|
(362)
|
(122)
|
Cash flows relating to exceptional items
|
|
|
79
|
—
|
Net cash flow used in investing activities – continuing
operations
|
|
|
804
|
(13,885)
|
Net cash flow used in investing activities – discontinued
operations
|
|
|
(564)
|
(125)
|
Cash flows from financing activities
|
|
|
|
|
Proceeds from issue of treasury shares
|
|
|
16
|
33
|
Transactions in own shares
|
|
|
1
|
(3)
|
Proceeds received from loans
|
|
|
11,908
|
12,347
|
Repayment of loans
|
|
|
(15,260)
|
(1,261)
|
Payments of lease liabilities
|
|
|
(155)
|
(117)
|
Net movements in short-term borrowings
|
|
|
(511)
|
(11)
|
Cash inflows on derivatives
|
|
|
190
|
20
|
Cash outflows on derivatives
|
|
|
(118)
|
(114)
|
Interest paid
|
|
|
(1,430)
|
(1,053)
|
Dividends paid to shareholders
|
|
|
(1,607)
|
(922)
|
Net cash flow (used in)/from financing activities –
continuing operations
|
|
|
(6,966)
|
8,919
|
Net cash flow (used in)/from financing activities –
discontinued operations
|
|
|
(207)
|
(1,150)
|
Net (decrease)/increase in cash and cash equivalents
|
|
|
(35)
|
31
|
Reclassification to held for sale
|
|
|
9
|
(11)
|
Exchange movements
|
|
|
7
|
5
|
Cash and cash equivalents at start of year
|
|
|
182
|
157
|
Cash and cash equivalents at end of year3
|
|
|
163
|
182
|
1.
Balance
consists of cash consideration paid and cash acquired from National
Grid Electricity Distribution (NGED, formerly known as Western
Power Distribution).
2.
The
balance for the year ended 31 March 2023 consists of cash proceeds
received, net of cash disposed.
3.
Cash
and cash equivalents at end of year are shown net of the
Group’s bank overdraft as at 31 March 2023 of £nil
(2022: £22 million).
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
2023, which will be filed with the Registrar of Companies in
due course. Statutory accounts for the year ended 31 March 2022 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 2023 which are
consistent with those applied in the preparation of our Annual
Report and Accounts for the year ended 31 March 2022, 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 it is appropriate to classify our 40% equity
investment in GasT TopCo Limited, together with the FAA derivative,
as held for sale with effect from 31 January 2023, as detailed
in note 9;
●
in
performing the NGED goodwill and indefinite-lived licence
intangible assets impairment assessment, judgement has been applied
over the forecast cash flow duration used in the
value‑in-use calculations; and
●
the judgement that, notwithstanding legislation
enacted and targets committing the states of New York
and Massachusetts to achieving net zero greenhouse gas
emissions by 2050, these do not trigger a reassessment of the
remaining useful economic lives (UELs) of our US gas network
assets (see key sources of estimation uncertainty
below).
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
value attributable to GasT TopCo Limited following disposal of
our controlling stake in the UK Gas Transmission business
and in determining the fair value of the written option over the
Group’s 40% equity interest (see note 9);
●
the
valuation of liabilities for pensions and other post-retirement
benefits (see note 10);
●
the
cash flows and real discount rates applied in determining the
environmental provisions, in particular relating to three
US Superfund sites (see note 4); and
●
the estimates made regarding the UELs 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.
1.
Basis of preparation and new
accounting standards, interpretations and
amendments continued
Disposal of The Narragansett 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), to PPL
Rhode Island Holdings, LLC. On 25 May 2022, the Group
completed the disposal for cash consideration of
£3.1 billion, recognising a post-tax gain on disposal of
£280 million which has been classified as exceptional
(see note 9). NECO did not meet the criteria for
classification as a discontinued operation and therefore
its results have not been separately disclosed on the face of
the income statement, and are instead included within the
results from continuing operations.
Disposal of the UK Gas Transmission business
As described further in note 9, on 27 March 2022, the Group entered
into a sale and purchase agreement to dispose of a 100%
controlling stake in the UK Gas Transmission business. The
disposal completed on 31 January 2023 for cash
consideration of £4.0 billion and a 40% interest in a
newly incorporated UK limited company, GasT TopCo Limited, as
further described below. Proceeds received have been classified in
the consolidated cash flow statement within continuing operations.
As a result, the Group derecognised all of the assets and
liabilities of the UK Gas Transmission business and recognised
the 40% interest acquired in GasT TopCo Limited. The 40% interest
is classified as an investment in an associate on the basis
that the Group has a significant influence over the
business. The Group has the ability to appoint two out
of the five Directors to the Board of GasT Topco
Limited.
On 27 March 2022, the Group also entered into a Further Acquisition
Agreement (FAA) over its 40% interest in GasT TopCo Limited. The
FAA became binding following the settlement of the Acquisition
Agreement and is exercisable in the period between 1 May and 31
July 2023. The window can further be deferred at the
Group’s discretion by three months. Taking into consideration
the timing of the FAA exercise window, the Group has classified its
interest in GasT TopCo Limited as held for sale with effect
from 31 January 2023 and has not equity accounted for its
share of the associate’s results. The disposal group
comprises our equity investment in GasT TopCo Limited and the
FAA derivative. Refer to note 9
for further details.
The results of the UK Gas Transmission business were treated as
a discontinued operation during the year ended 31 March 2022,
with comparatives restated accordingly. Remeasurements in relation
to the FAA derivative were also recorded within discontinued
operations for the year ended 31 March 2023.
The classification impacts the consolidated income statement,
the consolidated statement of comprehensive income and consolidated
cash flow statement, as well as earnings per share (EPS) split
between continuing and discontinued operations.
New
accounting standards and interpretations effective for the year
ended 31 March
2023
The Group adopted the following amendments to standards which
have had no material impact on the Group’s results or
financial statement disclosures:
●
amendments
to IFRS 3 ‘Business Combinations’;
●
amendments
to IAS 16 ‘Property, Plant and Equipment’;
●
amendments
to IAS 37 ‘Provisions, Contingent Liabilities and Contingent
Assets’; and
●
annual
improvements to IFRS standards 2018–2020.
1.
Basis of preparation and new
accounting standards, interpretations and
amendments continued
New
accounting standards not yet adopted
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 UK:
●
IFRS
17 ‘Insurance Contracts’;
●
amendments
to IAS 12 ‘Deferred Tax Related to Assets and Liabilities
Arising from a Single Transaction’;
●
amendments
to IAS 1 ‘Presentation of Financial Statements’
on classification of liabilities as current or
non-current;
●
amendments
to IAS 8 ‘Accounting Policies, Changes in Accounting
Estimates and Errors’; and
●
amendments
to IAS 1 and IFRS Practice Statement 2 – making materiality
judgements.
Effective
dates will be subject to the UK 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 17 May
2023.
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 a profit measure that excludes certain income and expenses. We
call that measure ‘adjusted profit’. Adjusted profit
excludes exceptional items and remeasurements (as defined in note
4) and is used by management to
monitor financial performance as it is considered that it aids the
comparability of our reported financial performance from year to
year. 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 these
financial statements.
In the
year ended 31 March 2023, the National Grid Ventures (NGV)
operating segment met the quantitative thresholds set out in IFRS 8
to be identified as the Group’s sixth separate
reportable segment. Accordingly, the Group’s operating
segments have been modified and the data relating to previous
periods has been restated to reflect this change. The results of
our six principal businesses are reported to the Board of Directors
and are accordingly 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.
|
UK Electricity Distribution
|
The electricity distribution networks of NGED in the East Midlands,
West Midlands and South West of England and South
Wales.
|
UK Electricity System Operator
|
The Great Britain system operator. As announced in April 2022, the
entirety of ESO is expected to transfer out of the Group to become
part an independent system operator public body, following the
Future System Operator (FSO) consultation. The FSO is subject to
legislative approval and accordingly the held for sale criteria
have not been met as at 31 March 2023.
|
New England
|
Gas distribution networks, electricity distribution networks and
high-voltage electricity transmission networks
in New England.
|
New York
|
Gas distribution networks, electricity distribution networks and
high-voltage electricity transmission networks in New
York.
|
National Grid Ventures
|
Comprises all commercial operations in LNG at the Isle of Grain in
the UK, our electricity generation business in the US,
our electricity interconnectors in the UK and our investment
in National Grid Renewables Development LLC, our renewables
business in the US. NGV operates outside our regulated core
business.
|
Other activities that do not form part of any of the segments in
the above table 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.
2.
Segmental
analysis continued
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.
|
2023
|
|
20221
|
|
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
|
1,987
|
(41)
|
1,946
|
|
2,035
|
(7)
|
2,028
|
UK
Electricity Distribution
|
2,045
|
(12)
|
2,033
|
|
1,482
|
(14)
|
1,468
|
UK
Electricity System Operator
|
4,690
|
(31)
|
4,659
|
|
3,455
|
(18)
|
3,437
|
New
England
|
4,427
|
—
|
4,427
|
|
4,550
|
—
|
4,550
|
New
York
|
6,994
|
—
|
6,994
|
|
5,561
|
—
|
5,561
|
National
Grid Ventures
|
1,341
|
(58)
|
1,283
|
|
1,024
|
—
|
1,024
|
Other
|
317
|
—
|
317
|
|
192
|
—
|
192
|
Total revenue before exceptional
items and remeasurements
|
21,801
|
(142)
|
21,659
|
|
18,299
|
(39)
|
18,260
|
Exceptional
items and remeasurements2
|
—
|
—
|
—
|
|
189
|
—
|
189
|
Total revenue from continuing operations
|
21,801
|
(142)
|
21,659
|
|
18,488
|
(39)
|
18,449
|
|
|
|
|
|
|
|
|
Split by geographical areas – continuing
operations:
|
|
|
|
|
|
|
|
UK
|
|
|
9,611
|
|
|
|
7,803
|
US
|
|
|
12,048
|
|
|
|
10,646
|
Total revenue from continuing operations
|
|
|
21,659
|
|
|
|
18,449
|
1.
Comparative
amounts have been re-presented to reflect NGV as a separate
operating segment.
2.
In connection with the disposal of St William
Homes LLP in the year ended 31 March 2022 the Group released
deferred income within Other of £189 million related to deferred profits from previous
property sales (see note 4).
2.
Segmental
analysis continued
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
|
|
Exceptional items and remeasurements
|
|
After exceptional items and remeasurements
|
|
2023
|
20221
|
|
2023
|
20221
|
|
2023
|
20221
|
|
£m
|
£m
|
|
£m
|
£m
|
|
£m
|
£m
|
Operating segments – continuing operations:
|
|
|
|
|
|
|
|
|
UK
Electricity Transmission
|
995
|
1,067
|
|
(2)
|
(12)
|
|
993
|
1,055
|
UK
Electricity Distribution
|
1,091
|
909
|
|
(22)
|
—
|
|
1,069
|
909
|
UK
Electricity System Operator
|
238
|
7
|
|
(1)
|
(2)
|
|
237
|
5
|
New
England
|
708
|
743
|
|
424
|
21
|
|
1,132
|
764
|
New
York
|
741
|
780
|
|
(200)
|
315
|
|
541
|
1,095
|
National
Grid Ventures
|
490
|
286
|
|
467
|
(3)
|
|
957
|
283
|
Other
|
31
|
21
|
|
(81)
|
239
|
|
(50)
|
260
|
Total operating profit from continuing operations
|
4,294
|
3,813
|
|
585
|
558
|
|
4,879
|
4,371
|
|
|
|
|
|
|
|
|
|
Split by geographical area – continuing
operations:
|
|
|
|
|
|
|
|
|
UK
|
2,825
|
2,234
|
|
26
|
224
|
|
2,851
|
2,458
|
US
|
1,469
|
1,579
|
|
559
|
334
|
|
2,028
|
1,913
|
Total operating profit from continuing operations
|
4,294
|
3,813
|
|
585
|
558
|
|
4,879
|
4,371
|
1.
Comparative
amounts have been re-presented to reflect NGV as a separate
operating segment.
|
Before exceptional items and remeasurements
|
|
Exceptional items and remeasurements
|
|
After exceptional items and remeasurements
|
|
2023
|
2022
|
|
2023
|
2022
|
|
2023
|
2022
|
|
£m
|
£m
|
|
£m
|
£m
|
|
£m
|
£m
|
Reconciliation to profit before tax:
|
|
|
|
|
|
|
|
|
Operating
profit from continuing operations
|
4,294
|
3,813
|
|
585
|
558
|
|
4,879
|
4,371
|
Share
of post-tax results of joint ventures
and associates
|
190
|
148
|
|
(19)
|
(56)
|
|
171
|
92
|
Finance
income
|
166
|
65
|
|
(28)
|
(15)
|
|
138
|
50
|
Finance
costs
|
(1,680)
|
(1,146)
|
|
82
|
74
|
|
(1,598)
|
(1,072)
|
Profit before tax from continuing operations
|
2,970
|
2,880
|
|
620
|
561
|
|
3,590
|
3,441
|
2.
Segmental
analysis continued
Capital expenditure represents additions to property, plant and
equipment and non-current intangibles but excludes additional
investments in and loans to joint ventures and
associates.
|
Net book value of property, plant and equipment and other
intangible assets
|
|
Capital expenditure
|
|
Depreciation, amortisation and impairment
|
|
2023
|
20221
|
|
2023
|
20221
|
|
2023
|
20221
|
|
£m
|
£m
|
|
£m
|
£m
|
|
£m
|
£m
|
Operating segments:
|
|
|
|
|
|
|
|
|
UK
Electricity Transmission
|
15,483
|
14,678
|
|
1,303
|
1,195
|
|
(484)
|
(508)
|
UK
Electricity Distribution
|
13,462
|
12,522
|
|
1,220
|
899
|
|
(223)
|
(158)
|
UK
Electricity System Operator
|
411
|
404
|
|
108
|
108
|
|
(101)
|
(83)
|
New
England
|
13,406
|
11,485
|
|
1,624
|
1,561
|
|
(393)
|
(364)
|
New
York
|
21,730
|
18,676
|
|
2,454
|
1,960
|
|
(620)
|
(537)
|
National
Grid Ventures
|
3,507
|
3,009
|
|
709
|
452
|
|
(149)
|
(156)
|
Other
|
38
|
30
|
|
13
|
10
|
|
(14)
|
(24)
|
Total
|
68,037
|
60,804
|
|
7,431
|
6,185
|
|
(1,984)
|
(1,830)
|
|
|
|
|
|
|
|
|
|
Split by geographical area – continuing
operations:
|
|
|
|
|
|
|
|
|
UK
|
32,343
|
30,131
|
|
3,259
|
2,546
|
|
(921)
|
(879)
|
US
|
35,694
|
30,673
|
|
4,172
|
3,639
|
|
(1,063)
|
(951)
|
Total
|
68,037
|
60,804
|
|
7,431
|
6,185
|
|
(1,984)
|
(1,830)
|
Asset type:
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
64,433
|
57,532
|
|
6,853
|
5,714
|
|
(1,700)
|
(1,544)
|
Non-current intangible assets
|
3,604
|
3,272
|
|
578
|
471
|
|
(284)
|
(286)
|
Total
|
68,037
|
60,804
|
|
7,431
|
6,185
|
|
(1,984)
|
(1,830)
|
1.
Comparative
amounts have been re-presented to reflect NGV as a separate
operating segment.
Revenue
arises in the course of ordinary activities and principally
comprises:
●
distribution
services; and
Transmission
services, distribution services and certain other services
(excluding rental income) fall within the scope of IFRS 15
‘Revenue from Contracts with Customers’, whereas
generation services (which solely relate to the contract with the
Long Island Power Authority (LIPA) in the US) are accounted for
under IFRS 16 ‘Leases’ as rental income, also presented
within revenue. Revenue is recognised to reflect the transfer of
goods or services to customers at an amount that reflects the
consideration to which the Group expects to be entitled to in
exchange for those goods or services and excludes amounts collected
on behalf of third parties and value added tax. The Group
recognises revenue when it transfers control over a product or
service to a customer.
Revenue
in respect of regulated activities is determined by regulatory
agreements that set the price to be charged for services in a given
period based on pre-determined allowed revenues. Variances in
service usage can result in actual revenue collected exceeding
(over-recoveries) or falling short (under-recoveries) of allowed
revenues. Where regulatory agreements allow the recovery of
under-recoveries or require the return of over-recoveries, the
allowed revenue for future periods is typically adjusted. In these
instances, no assets or liabilities are recognised for under- or
over-recoveries respectively, because the adjustment relates to
future customers and services that have not yet been
delivered.
Revenue
in respect of non-regulated activities primarily relates to the
sale of capacity on our interconnectors, which is determined at
auctions. Capacity is sold in either day, month, quarter or year
ahead tranches. The price charged is determined by market
fundamentals rather than regulatory agreement. The interconnectors
are subject to indirect regulation with regards to the levels of
returns they are allowed to earn. Where amounts fall below this
range they receive top-up revenues; where amounts exceed this
range, they must pass-back the excess. In these instances, assets
or liabilities are recognised for the top-up or pass-back
respectively.
The
following is a description of principal activities, by reportable
segment, from which the Group generates its revenue. For more
detailed information about our segments, see note 2.
(a)
UK
Electricity Transmission
The UK Electricity Transmission segment principally generates
revenue by providing electricity transmission services in England
and Wales. Our business operates as a monopoly regulated by Ofgem,
which has established price control mechanisms that set the amount
of annual allowed returns our business can earn (along with the
Scottish and Offshore transmission operators amongst
others).
The transmission of electricity encompasses the following principal
services:
●
the
supply of high-voltage electricity – revenue is recognised
based on usage. Our performance obligation is satisfied over time
as our customers make use of our network. We bill monthly in
arrears and our payment terms are up to 60 days. Price is
determined prior to our financial year end with reference to the
regulated allowed returns and estimated annual volumes;
and
●
construction
work (principally for connections) – revenue is recognised
over time, as we provide access to our network. Customers can
either pay over the useful life of the connection or upfront. Where
the customer pays upfront, revenues are deferred as a contract
liability and released over the life of the asset.
For other construction where there is no consideration for any
future services, for example diversions, revenues are recognised as
the construction work is completed.
(b)
UK
Electricity Distribution
The UK Electricity Distribution segment principally generates
revenue by providing electricity distribution services in the
Midlands and South West of England and South Wales. Similar to
UK Electricity Transmission, UK Electricity Distribution operates
as a monopoly in the jurisdictions that it operates in and is
regulated by Ofgem.
The distribution of electricity encompasses the following principal
services:
●
electricity
distribution – revenue is recognised based on usage by
customers (over time), based upon volumes and price. The price
control mechanism in place that determines our annual
allowances is similar to UK Electricity Transmission. Revenues are
billed monthly and payment terms are typically within 14 days;
and
●
construction
work (principally for connections) – revenue is recognised
over time as we provide access to our network. Where the customer
pays upfront, revenues are deferred as a contract liability and
released over the life of the asset.
For other construction where there is no consideration for any
future services, revenues are recognised as the construction is
completed.
(c)
UK
Electricity System Operator
The UK System Operator earns revenue for balancing supply and
demand of electricity on Great Britain’s electricity
transmission system, where it acts as principal. Balancing
services are regulated by Ofgem and revenue, which is payable by
generators and suppliers of electricity, is recognised as the
service is provided.
The System Operator also collects revenues on behalf of
transmission operators, principally National Grid Electricity
Transmission plc and the Scottish and Offshore transmission
operators, from users (electricity suppliers) who connect to or use
the transmission system. As the System Operator acts as
an agent in this capacity, it therefore records transmission
network revenues net of payments to transmission
operators.
The New England segment principally generates revenue by providing
electricity and gas supply and distribution services and
high-voltage electricity transmission services in New England.
Supply and distribution services are regulated by the Massachusetts
Department of Public Utilities (MADPU) and transmission services
are regulated by the Federal Energy Regulatory Commission
(FERC), both of whom regulate the rates that can be charged
to customers.
The supply and distribution of electricity and gas and the
provision of electricity transmission facilities encompasses the
following principal services:
●
electricity
and gas supply and distribution and electricity transmission
– revenue is recognised based on usage by customers (over
time). Revenues are billed monthly and payment terms are 30
days; and
●
construction
work (principally for connections) – revenue is recognised
over time as we provide access to our network. Where the customer
pays upfront, revenues are deferred as a contract liability or
customer contributions (where they relate to government entities)
and released over the life
of the connection.
The New York segment principally generates revenue by providing
electricity and gas supply and distribution services and
high-voltage electricity transmission services in New York.
Supply and distribution services are regulated by the New York
Public Service Commission (NYPSC) and transmission services are
regulated by the FERC, both of whom regulate the rates that
can be charged to customers.
The supply and distribution of electricity and gas and the
provision of electricity transmission facilities encompasses the
following principal services:
●
electricity
and gas supply and distribution and electricity transmission
– revenue is recognised based on usage by customers (over
time). Revenues are billed monthly and payment terms are 30 days;
and
●
construction
work (principally for connections) – revenue is recognised
over time as we provide access to our network. Where the
customer pays upfront, revenues are deferred as a contract
liability or customer contributions (where they relate to
government entities) and released over the life
of the connection.
(f)
National
Grid Ventures
National Grid Ventures generates revenue from electricity
interconnectors, LNG at the Isle of Grain, National Grid Renewables
and rental income.
The Group recognises revenue from transmission services through
interconnectors and LNG importation at the Isle of Grain by means
of customers’ use of capacity and volumes. Revenue is
recognised over time and is billed monthly. Payment terms are up to
60 days.
Electricity generation revenue is earned from the provision of
energy services and supply capacity to produce energy for the use
of customers of LIPA through a power supply agreement where LIPA
receives all of the energy and capacity from the asset until at
least 2028. The arrangement is treated as an operating lease within
the scope of the leasing standard where we act as lessor; with
rental income being recorded as other revenue, which forms part of
total revenue. Lease payments (capacity payments) are recognised on
a straight-line basis and variable lease payments are recognised as
the energy is generated.
Other revenue in the scope of IFRS 15 principally includes sales of
renewables projects from National Grid Renewables to Emerald Energy
Venture LLC (Emerald), which is jointly controlled by National Grid
and Washington State Investment Board (WSIB). National Grid
Renewables develops wind and solar generation assets in the US,
whilst Emerald has a right of first refusal to buy, build and
operate those assets. Revenue is recognised as it
is earned.
Other revenue, recognised in accordance with standards other than
IFRS 15, primarily comprises adjustments in respect of the
interconnector cap and floor regime constructed by Ofgem for
certain wholly owned interconnector subsidiaries. Where an
interconnector expects to exceed its total five-year cap, a
provision and reduction in revenue is recognised in the current
reporting period. Where an interconnector does not expect to reach
its five-year floor, either an asset will be recognised where a
future inflow of economic benefits is considered virtually certain,
or a contingent asset will be disclosed where the future inflow is
concluded to be probable.
Revenue in Other relates to our UK commercial property business and
insurance. Revenue is predominantly recognised in accordance with
standards other than IFRS 15 and comprises property sales by our UK
commercial property business (including sales to our 50%
share in the St William joint venture which was
disposed of in the prior year). Property sales are recorded when
the sale is legally completed.
(h)
Disaggregation
of revenue
In the following tables, revenue is disaggregated by primary
geographical market and major service lines. The table below
reconciles disaggregated revenue with the Group’s
reportable segments (see note 2).
Revenue for the year ended
31 March 2023
|
UK Electricity Transmission
£m
|
UK Electricity Distribution
£m
|
UK Electricity System Operator
£m
|
New
England
£m
|
New
York
£m
|
NGV
£m
|
Other
£m
|
Total
£m
|
Revenue under IFRS 15
|
|
|
|
|
|
|
|
|
Transmission
|
1,868
|
—
|
126
|
52
|
567
|
791
|
—
|
3,404
|
Distribution
|
—
|
1,951
|
—
|
4,314
|
6,373
|
—
|
—
|
12,638
|
System Operator
|
—
|
—
|
4,533
|
—
|
—
|
—
|
—
|
4,533
|
Other1
|
31
|
77
|
—
|
8
|
13
|
131
|
—
|
260
|
Total IFRS 15 revenue
|
1,899
|
2,028
|
4,659
|
4,374
|
6,953
|
922
|
—
|
20,835
|
Other revenue
|
|
|
|
|
|
|
|
|
Generation
|
—
|
—
|
—
|
—
|
—
|
394
|
—
|
394
|
Other2
|
47
|
5
|
—
|
53
|
41
|
(33)
|
317
|
430
|
Total other revenue
|
47
|
5
|
—
|
53
|
41
|
361
|
317
|
824
|
Total revenue from continuing operations
|
1,946
|
2,033
|
4,659
|
4,427
|
6,994
|
1,283
|
317
|
21,659
|
1.
The
UK Electricity Transmission and UK Electricity Distribution other
IFRS 15 revenue principally relates to engineering recharges, which
are the recovery of costs incurred for construction work
requested by customers, such as the rerouting of existing network
assets. Within NGV, the other IFRS 15 revenue principally relates
to revenue generated from our NG Renewables
business.
2.
Other
revenue, recognised in accordance with accounting standards other
than IFRS 15, includes property sales by our UK commercial property
business, rental income, income arising in connection with the
Transition Services Agreements following the sales of NECO and the
UK Gas Transmission business in the year, and a provision and
adjustment to NGV revenue in respect of the interconnector cap and
floor regime constructed by Ofgem. In the year
ended 31 March 2023 the Group also recognised other
income relating to an insurance claim.
Geographical split for the year ended 31 March 2023
|
UK Electricity Transmission
£m
|
UK Electricity Distribution
£m
|
UK Electricity System Operator
£m
|
New
England
£m
|
New
York
£m
|
NGV
£m
|
Other
£m
|
Total
£m
|
Revenue under IFRS 15
|
|
|
|
|
|
|
|
|
UK
|
1,899
|
2,028
|
4,659
|
—
|
—
|
799
|
—
|
9,385
|
US
|
—
|
—
|
—
|
4,374
|
6,953
|
123
|
—
|
11,450
|
Total IFRS 15 revenue
|
1,899
|
2,028
|
4,659
|
4,374
|
6,953
|
922
|
—
|
20,835
|
Other revenue
|
|
|
|
|
|
|
|
|
UK
|
47
|
5
|
—
|
—
|
—
|
(31)
|
205
|
226
|
US
|
—
|
—
|
—
|
53
|
41
|
392
|
112
|
598
|
Total other revenue
|
47
|
5
|
—
|
53
|
41
|
361
|
317
|
824
|
Total revenue from continuing operations
|
1,946
|
2,033
|
4,659
|
4,427
|
6,994
|
1,283
|
317
|
21,659
|
Revenue
for the year ended
31 March 2022
|
UK Electricity Transmission
£m
|
UK Electricity Distribution
£m
|
UK Electricity System Operator
£m
|
New
England
£m
|
New
York
£m
|
NGV1
£m
|
Other1
£m
|
Total
£m
|
Revenue under IFRS 15
|
|
|
|
|
|
|
|
|
Transmission
|
1,983
|
—
|
—
|
52
|
405
|
627
|
—
|
3,067
|
Distribution
|
—
|
1,375
|
—
|
4,434
|
5,110
|
—
|
—
|
10,919
|
System Operator
|
—
|
—
|
3,418
|
—
|
—
|
—
|
—
|
3,418
|
Other2
|
35
|
89
|
19
|
10
|
10
|
147
|
—
|
310
|
Total IFRS 15 revenue
|
2,018
|
1,464
|
3,437
|
4,496
|
5,525
|
774
|
—
|
17,714
|
Other revenue
|
|
|
|
|
|
|
|
|
Generation
|
—
|
—
|
—
|
—
|
—
|
373
|
—
|
373
|
Other3
|
10
|
4
|
—
|
54
|
36
|
(123)
|
192
|
173
|
Total other revenue
|
10
|
4
|
—
|
54
|
36
|
250
|
192
|
546
|
Total revenue before exceptional items
and remeasurements
|
2,028
|
1,468
|
3,437
|
4,550
|
5,561
|
1,024
|
192
|
18,260
|
Exceptional items and remeasurements
|
—
|
—
|
—
|
—
|
—
|
|
189
|
189
|
Total revenue from continuing operations
|
2,028
|
1,468
|
3,437
|
4,550
|
5,561
|
1,024
|
381
|
18,449
|
Geographical
split for the year ended 31 March
2022
|
UK Electricity Transmission
£m
|
UK Electricity Distribution
£m
|
UK Electricity System Operator
£m
|
New
England
£m
|
New
York
£m
|
NGV1
£m
|
Other1
£m
|
Total
£m
|
Revenue under IFRS 15
|
|
|
|
|
|
|
|
|
UK
|
2,018
|
1,464
|
3,437
|
—
|
—
|
646
|
—
|
7,565
|
US
|
—
|
—
|
—
|
4,496
|
5,525
|
128
|
—
|
10,149
|
Total IFRS 15 revenue
|
2,018
|
1,464
|
3,437
|
4,496
|
5,525
|
774
|
—
|
17,714
|
Other revenue
|
|
|
|
|
|
|
|
|
UK
|
10
|
4
|
—
|
—
|
—
|
(132)
|
167
|
49
|
US
|
—
|
—
|
—
|
54
|
36
|
382
|
25
|
497
|
Total other revenue
|
10
|
4
|
—
|
54
|
36
|
250
|
192
|
546
|
Total revenue before exceptional items and
remeasurements
|
2,028
|
1,468
|
3,437
|
4,550
|
5,561
|
1,024
|
192
|
18,260
|
Exceptional items and remeasurements
|
—
|
—
|
—
|
—
|
—
|
|
189
|
189
|
Total revenue from continuing operations
|
2,028
|
1,468
|
3,437
|
4,550
|
5,561
|
1,024
|
381
|
18,449
|
1.
Comparative
amounts have been re-presented to reflect NGV as a separate
operating segment.
2.
The
UK Electricity Transmission and UK Electricity Distribution other
IFRS 15 revenue principally relates to engineering recharges, which
are the recovery of costs incurred for construction work
requested by customers, such as the rerouting of existing network
assets. UK Electricity System Operator other IFRS 15 revenue
reflects the net income from its role as agent in
respect of transmission network revenues. Within NGV, the other
IFRS 15 revenue principally relates to revenue generated
from our NG Renewables business.
3.
Other
revenue, recognised in accordance with accounting standards other
than IFRS 15, includes property sales by our UK commercial property
business and rental income. Included within NGV is a provision
and adjustment to NGV revenue in respect of the interconnector cap
and floor regime constructed by Ofgem.
Contract liabilities represent revenue to be recognised in future
periods relating to contributions in aid of construction of
£2,006 million (2022: £1,472 million). Revenue is recognised over
the life of the asset. The asset lives for connections
in UK Electricity Transmission, UK Electricity
Distribution, New England and New York are 40 years, 69 years, 51
years and up to 51 years respectively. The weighted average
amortisation period is 27 years.
Future revenues in relation to unfulfilled performance obligations
not yet received in cash amount to £5.0 billion (2022:
£5.2 billion). £1.8 billion (2022: £1.7 billion)
relates to connection contracts in UK Electricity Transmission
which will be recognised as revenue over 24 years and
£2.7 billion (2022: £3.0 billion) relates to revenues
to be earned under Grain LNG contracts until 2045. The
remaining amount will be recognised as revenue over two
years.
The amount of revenue recognised for the year ended 31 March 2023
from performance obligations satisfied (or partially
satisfied) in previous periods, mainly due to changes in the
estimate of the stage of completion, is £nil (2022:
£nil).
4.
Exceptional items and remeasurements
To
monitor our financial performance, we use an adjusted consolidated
profit measure that excludes certain income and expenses. We
exclude items from adjusted profit because, if included, these
items could distort understanding of our performance for the year
and the comparability between periods. This note analyses these
items, which are included in our results for the year but are
excluded from adjusted profit.
|
2023
|
2022
|
|
£m
|
£m
|
Included within operating profit
|
|
|
Exceptional items:
|
|
|
Net
gain on disposal of NECO
|
511
|
—
|
Net
gain on disposal of Millennium Pipeline Company LLC
|
335
|
—
|
IFA
fire
|
130
|
—
|
Transaction,
separation and integration costs¹
|
(117)
|
(223)
|
Changes
in environmental provisions
|
176
|
—
|
Cost
efficiency programme
|
(100)
|
(42)
|
New
operating model implementation costs
|
—
|
(24)
|
Release
of St William Homes LLP deferred income
|
—
|
189
|
Net
gain on disposal of St William Homes LLP
|
—
|
228
|
Environmental
insurance recovery
|
—
|
38
|
|
935
|
166
|
Remeasurements – commodity contract derivatives
|
(350)
|
392
|
|
585
|
558
|
Included within finance income and costs
|
|
|
Remeasurements:
|
|
|
Net
gains on financing derivatives
|
82
|
74
|
Net
(losses)/gains on financial assets at fair value through profit and
loss
|
(28)
|
(15)
|
|
54
|
59
|
Included within share of post-tax results of joint ventures and
associates
|
|
|
Remeasurements – net losses on financial
instruments
|
(19)
|
(56)
|
Total included within profit before tax
|
620
|
561
|
Included within tax
|
|
|
Exceptional items – movements arising on items not included
in profit before tax:
|
|
|
Deferred
tax charge arising as a result of UK tax rate change
|
—
|
(458)
|
Tax on exceptional items
|
(316)
|
(28)
|
Tax on remeasurements
|
75
|
(103)
|
|
(241)
|
(589)
|
Total exceptional items and remeasurements after tax
|
379
|
(28)
|
Analysis of total exceptional items and remeasurements after
tax
|
|
|
Exceptional items after tax
|
619
|
(320)
|
Remeasurements after tax
|
(240)
|
292
|
Total exceptional items and remeasurements after tax
|
379
|
(28)
|
1.
Transaction,
separation and integration costs represent the aggregate of
distinct activities undertaken by the Group in the years
presented.
Exceptional items
Management uses an exceptional items framework that has been
discussed and approved by the Audit & Risk Committee. This
follows a three-step process which considers the nature of the
event, the financial materiality involved and any particular facts
and circumstances. In considering the nature of the
event, management focuses on whether the event is within the
Group’s control and how frequently such an event typically
occurs. With respect to restructuring costs, these represent
additional expenses incurred that are not related to the normal
business and day-to-day activities. In determining the facts
and circumstances, management considers factors such as ensuring
consistent treatment between favourable and unfavourable
transactions, the precedent for similar items, the number of
periods over which costs will be spread or gains earned, and the
commercial context for the particular transaction. The
exceptional items framework was last updated in March
2022.
Items of income or expense that are considered by management for
designation as exceptional items include significant
restructurings, write-downs or impairments of non-current
assets, significant changes in environmental or decommissioning
provisions, integration of acquired businesses, gains or losses
on disposals of businesses or investments and significant debt
redemption costs as a consequence of transactions such as
significant disposals or issues of equity, and the
related tax, as well as deferred tax arising on changes to
corporation tax rates.
4.
Exceptional items and
remeasurements continued
Costs arising from efficiency and transformation programmes include
redundancy costs. Redundancy costs are charged to the consolidated
income statement in the year in which a commitment
is made to incur the costs and the main features of the
restructuring plan have been announced to affected
employees.
Set out below are details of the transactions against which we have
considered the application of our exceptional items framework in
each of the years for which results are presented. No
COVID-19-related costs incurred have been recognised as exceptional
in any of the years presented.
2023
Net gain on disposal of NECO
During the year, the Group recognised a gain of
£511 million on the disposal of 100%
of the share capital of NECO to
PPL Rhode Island Holdings, LLC for cash consideration of
£3.1 billion ($3.9 billion) (see note 9). The
receipt of cash has been recognised within net cash used in
investing activities within the consolidated cash flow
statement.
Net gain on disposal of Millennium Pipeline Company
LLC
During the year, the Group recognised a gain of
£335 million on the disposal of its entire 26.25% equity
interest in the Millennium Pipeline Company LLC associate to
DT Midstream for cash consideration of £497 million.
The receipt of cash has been recognised within net cash used
in investing activities within the consolidated cash
flow statement.
Fire at IFA converter station
In September 2021, a fire at the IFA converter station in
Sellindge, Kent caused significant damage to infrastructure on
site. In the year, the Group recognised
£130 million of
insurance claims (net of asset write-offs) which have been
recognised as exceptional in line with our exceptional items
policy. The total cash inflow for the period was
£79 million.
Transaction, separation and integration costs
During the year, separation costs of £39 million were
incurred in relation to the disposal of NECO, £38 million
in relation to the disposal of a majority stake in our UK Gas
Transmission business (see note 9) and £40 million in
connection with the integration of NGED. The costs incurred
primarily relate to legal fees, bankers’ fees, professional
fees and employee costs. The costs have been classified as
exceptional, consistent with similar costs for the years ended
31 March 2022 and 2021 and in line with the exceptional items
policy. The total cash outflow for the period in relation to these
costs was £84 million.
Changes in environmental provisions
The real discount rate applied to the Group’s environmental
provisions was revised to 1.5% in the year (2022: 0.5%) to reflect
the substantial and sustained change in United States government
bond yield curves. The principal impact of this rate increase was a
£165 million decrease in our US environmental provisions
and a £11 million decrease in our UK environmental
provision. The weighted average remaining duration of our cash
flows is now around 10.5 years.
Cost efficiency programme
During the year, the Group incurred a further
£100 million of costs in relation to the major cost
efficiency programme announced in November 2021, that is targeting
at least £400 million savings per annum across the Group
by the end of three years. The costs recognised in the period
primarily relate to property costs, employee costs and professional
fees incurred in delivering the programme. Whilst the costs
incurred during the period do not meet the quantitative
threshold to be classified as exceptional on a standalone basis,
when taken in aggregate with the £42 million of costs
incurred in the year ended 31 March 2022, the costs qualify
for exceptional treatment in line with our exceptional items
policy. The total cash outflow for the period in relation to these
costs was £85 million.
4.
Exceptional items and
remeasurements continued
2022
Net gain on disposal of St William Homes LLP and release of
deferred income
The Group recognised a gain of £228 million on the
disposal of its entire 50% equity interest in the
St William Homes LLP joint venture to The Berkeley Group plc
for cash consideration of £413 million.
In connection with the disposal, the Group also released
deferred income of £189 million which related to deferred
profits from previous property sales to St William Homes LLP. We
concluded that the release of the deferred income should be
classified as exceptional given the crystallisation event for the
release is the sale of the Group’s equity interest in
St William Homes LLP.
New operating model implementation costs and cost efficiency
programme
The Group incurred a further £24 million of costs in
relation to the design and implementation of our new operating
model and £42 million in relation to the major cost
efficiency programme announced in November 2021. The costs
recognised primarily related to professional fees incurred and
redundancy provisions.
Whilst the costs incurred did not meet the quantitative threshold
to be classified as exceptional on a standalone basis, when taken
in aggregate with the costs expected to be incurred over the
duration of the cost efficiency programme, we concluded that the
costs should be classified as exceptional in line with our
exceptional items policy. The total cash outflow for the period was
£48 million.
Transaction and separation costs
£223 million of transaction and separation costs were
incurred in relation to the acquisition of NGED, the planned
disposal of NECO and the planned disposal of our UK Gas
Transmission business (see note 9). The costs related to legal
fees, bankers’ fees and other professional fees. The costs
were classified as exceptional, consistent with similar costs for
the year ended 31 March 2021. The total cash outflow
for the year was £196 million.
Environmental insurance recovery
In the US, the most significant component of our £1.9
billion environmental provision
relates to several Superfund sites, and arose from former
manufacturing gas plant facilities, previously owned or operated by
the Group or its predecessor companies. Under Federal and State
Superfund laws, potential liability for the historical
contamination may be imposed on responsible parties jointly and
severally, without regard to fault, even if the activities
were lawful when they occurred. In the year ended 31 March 2022, we
recognised an exceptional gain of £38 million relating to
an insurance receivable for site remediation costs included in our
Superfund sites environmental provision. The insurance receipts
were recorded as an exceptional item in line with the
treatment of the related costs.
4.
Exceptional items and
remeasurements continued
Remeasurements
Remeasurements comprise unrealised gains or losses recorded in the
consolidated income statement arising from changes in the fair
value of certain of our financial assets and liabilities
accounted for at fair value through profit and loss (FVTPL). Once
the fair value movements are realised (for example when the
derivative matures), the previously recognised fair value movements
are then reversed through remeasurements and recognised within
earnings before exceptional items and remeasurements. These assets
and liabilities include commodity contract derivatives and
financing derivatives to the extent that hedge accounting is not
available or is not fully effective.
The unrealised gains or losses reported in profit and loss on
certain additional assets and liabilities treated at FVTPL are also
classified within remeasurements. These relate to financial assets
(which fail the ‘solely payments of principal and interest
test’ under IFRS 9), the money market fund investments used
by Group Treasury for cash management purposes and the net foreign
exchange gains and losses on borrowing activities. These are offset
by foreign exchange gains and losses on financing derivatives
measured at fair value. In all cases, these fair values increase or
decrease because of changes in foreign exchange, commodity or
other financial indices over which we have no control.
We report unrealised gains or losses relating to certain discrete
classes of financial assets accounted for at FVTPL within adjusted
profit. These comprise our portfolio of investments made by
National Grid Partners, our investment in Sunrun Neptune 2016 LLC
and the contingent consideration arising on the acquisition of
National Grid Renewables (all within NGV). The performance
of these assets (including changes in fair value) is included
in our assessment of adjusted profit for the relevant business
units.
Remeasurements excluded from adjusted profit are made up of the
following categories:
i.
Net
gains/(losses) on commodity contract derivatives represent
mark-to-market movements on certain physical and financial
commodity contract obligations in the US. These contracts primarily
relate to the forward purchase of energy for supply to customers,
or to the economic hedging thereof, that are required to be
measured at fair value and that do not qualify for hedge
accounting. Under the existing rate plans in the US, commodity
costs are recoverable from customers although the timing of
recovery may differ from the pattern of costs
incurred;
ii.
Net
gains/(losses) on financing derivatives comprise gains and losses
arising on derivative financial instruments used for the risk
management of interest rate and foreign exchange exposures and
the offsetting foreign exchange losses and gains on the associated
borrowing activities. These exclude gains and losses for which
hedge accounting has been effective and have been recognised
directly in the consolidated statement of other comprehensive
income or are offset by adjustments to the carrying value of debt.
Net foreign exchange gains and losses on financing derivatives
used for the risk management of foreign exchange exposures are
offset by foreign exchange losses and gains on borrowing
activities;
iii.
Net gains/(losses) on financial assets measured at
FVTPL comprise gains and losses on the investment funds held by our
insurance captives which are categorised as FVTPL;
and
iv.
Unrealised
net gains/(losses) on derivatives and other financial instruments
within our joint ventures and associates.
Items
included within tax
2022
Change in UK corporation tax rate
In the Spring Budget 2021, the UK government announced that from 1
April 2023 the UK corporation tax rate will increase to 25%, and
this was substantively enacted on 24 May 2021. Deferred tax
balances at 31 March 2022 were remeasured at the enacted rate, with
£458 million recognised as exceptional, in line with
previous periods.
5.
Finance income and costs
|
|
2023
|
2022
|
|
|
£m
|
£m
|
Finance income
|
|
|
|
Net interest income on pensions and other post-retirement benefit
obligations
|
|
85
|
—
|
Interest income on financial instruments:
|
|
|
|
Bank
deposits and other financial assets
|
|
80
|
32
|
Dividends
received on equities held at fair value through other comprehensive
income (FVOCI)
|
|
1
|
3
|
Other income
|
|
—
|
30
|
|
|
166
|
65
|
Finance costs
|
|
|
|
Net interest expense on pensions and other post-retirement benefit
obligations
|
|
—
|
—
|
Interest expense on financial liabilities held at amortised
cost:
|
|
|
|
Bank
loans and overdrafts
|
|
(328)
|
(216)
|
Other
borrowings1
|
|
(1,330)
|
(961)
|
Interest on derivatives
|
|
(170)
|
(59)
|
Unwinding of discount on provisions
|
|
(88)
|
(73)
|
Other interest
|
|
(13)
|
11
|
Less:
interest capitalised2
|
|
249
|
152
|
|
|
(1,680)
|
(1,146)
|
Remeasurements – Finance income
|
|
|
|
Net (losses)/gains on FVTPL financial assets
|
|
(28)
|
(15)
|
|
|
(28)
|
(15)
|
Remeasurements – Finance costs
|
|
|
|
Net gains on financing derivatives³:
|
|
|
|
Derivatives
designated as hedges for hedge accounting
|
|
22
|
45
|
Derivatives
not designated as hedges for hedge accounting
|
|
60
|
29
|
|
|
82
|
74
|
Total remeasurements – Finance income and costs
|
|
54
|
59
|
|
|
|
|
Finance income
|
|
138
|
50
|
Finance costs4
|
|
(1,598)
|
(1,072)
|
|
|
|
|
Net finance costs from continuing operations
|
|
(1,460)
|
(1,022)
|
1.
Includes
interest expense on lease liabilities.
2.
Interest
on funding attributable to assets in the course of construction in
the current year was capitalised at a rate of 4.7% (2022: 3.2%). In
the UK, capitalised interest qualifies for a current year
tax deduction with tax relief claimed of £30 million (2022:
£16 million). In the US, capitalised interest is added to the
cost of property, plant and equipment and qualifies for tax
depreciation allowances.
3.
Includes
a net foreign exchange loss on borrowing activities of £86
million (2022: £110 million gain) offset by foreign exchange
losses and gains on financing derivatives measured at
fair value.
4.
Finance
costs include principal accretion on inflation linked liabilities
of £483 million (2022: £241 million).
6. Tax
Tax charged to the consolidated income statement – continuing
operations
|
2023
|
2022
|
|
£m
|
£m
|
Tax before exceptional items and remeasurements
|
635
|
669
|
Exceptional
tax on items not included in profit before tax (see note
4)
|
—
|
458
|
Tax on other exceptional items and remeasurements
|
241
|
131
|
Total tax reported within exceptional items and
remeasurements
|
241
|
589
|
Total tax charge from continuing operations
|
876
|
1,258
|
Tax as a percentage of profit before tax
|
2023
|
2022
|
|
%
|
%
|
Before exceptional items and remeasurements – continuing
operations
|
21.4
|
23.2
|
After exceptional items and remeasurements – continuing
operations
|
24.4
|
36.6
|
|
2023
|
2022
|
|
£m
|
£m
|
Current tax:
|
|
|
UK
corporation tax at 19%
(2022: 19%)
|
161
|
255
|
UK
corporation tax adjustment in respect of prior years
|
—
|
(9)
|
|
161
|
246
|
Overseas
corporation tax
|
225
|
6
|
Overseas
corporation tax adjustment in respect of prior years
|
(16)
|
(26)
|
|
209
|
(20)
|
Total current tax from continuing operations
|
370
|
226
|
Deferred tax:
|
|
|
UK
deferred tax
|
255
|
605
|
UK
deferred tax adjustment in respect of prior years
|
13
|
(5)
|
|
268
|
600
|
Overseas
deferred tax
|
233
|
425
|
Overseas
deferred tax adjustment in respect of prior years
|
5
|
7
|
|
238
|
432
|
Total deferred tax from continuing operations
|
506
|
1,032
|
|
|
|
Total tax charge from continuing operations
|
876
|
1,258
|
Factors
that may affect future tax charges
In the Spring Budget 2021, the UK government announced an increase
in the main corporation tax rate from 19% to 25% with effect from 1
April 2023. This was substantively enacted on 24 May 2021. Deferred
tax balances as at 31 March 2023 have been calculated at
25%.
The US government continues to consider changes to federal tax
legislation, but as no changes have been substantively enacted at
the balance sheet date, deferred tax balances as at 31 March 2023
have been calculated at the prevailing tax rates based on the
current tax laws.
We will continue to monitor the developments driven by Brexit, the
OECD’s Base Erosion and Profit Shifting (BEPS) project and
European Commission initiatives including fiscal aid
investigations. At this time, we do not expect this to have any
material impact on our future tax charges. Governments across the
world including the UK and the US have introduced various
stimulus/reliefs for businesses to cope with the impact of the
COVID-19 pandemic, from which we do not currently expect there to
be a material impact on our future tax charges.
7. Earnings per share
(EPS)
Adjusted earnings and EPS, which exclude exceptional items and
remeasurements, are provided to reflect the adjusted profit
subtotals used by the Company. For further details of
exceptional items and remeasurements, see note 4. We have
included reconciliations from this additional EPS measure to
earnings for both basic and diluted EPS to provide additional
detail for these items. The EPS calculations are based
on profit after tax attributable to equity shareholders of the
parent company which excludes non-controlling
interests.
|
Earnings
|
EPS
|
Earnings
|
EPS
|
|
2023
|
2023
|
2022
|
2022
|
|
£m
|
pence
|
£m
|
pence
|
Adjusted earnings from continuing operations
|
2,335
|
63.8
|
2,210
|
61.4
|
Exceptional
items and remeasurements after tax from
continuing operations
(see
note 4)
|
379
|
10.4
|
(28)
|
(0.8)
|
Earnings from continuing operations
|
2,714
|
74.2
|
2,182
|
60.6
|
Adjusted
earnings from discontinued operations (see note 9)
|
320
|
8.7
|
344
|
9.6
|
Exceptional items and remeasurements after tax from
discontinued operations
|
4,763
|
130.2
|
(173)
|
(4.8)
|
Earnings from discontinued operations
|
5,083
|
138.9
|
171
|
4.8
|
Total adjusted earnings
|
2,655
|
72.5
|
2,554
|
71.0
|
Total exceptional items and remeasurements after tax
(including discontinued operations)
|
5,142
|
140.6
|
(201)
|
(5.6)
|
Total earnings
|
7,797
|
213.1
|
2,353
|
65.4
|
|
|
|
|
|
|
|
2023
|
|
2022
|
|
|
millions
|
|
millions
|
Weighted average number of ordinary shares –
basic
|
|
3,659
|
|
3,599
|
|
Earnings
|
EPS
|
Earnings
|
EPS
|
|
2023
|
2023
|
2022
|
2022
|
|
£m
|
pence
|
£m
|
pence
|
Adjusted earnings from continuing operations
|
2,335
|
63.5
|
2,210
|
61.1
|
Exceptional
items and remeasurements after tax from
continuing operations
(see
note 4)
|
379
|
10.3
|
(28)
|
(0.8)
|
Earnings from continuing operations
|
2,714
|
73.8
|
2,182
|
60.3
|
Adjusted earnings from discontinued operations
|
320
|
8.7
|
344
|
9.5
|
Exceptional
items and remeasurements after tax from
discontinued operations
(see
note 9)
|
4,763
|
129.6
|
(173)
|
(4.8)
|
Earnings from discontinued operations
|
5,083
|
138.3
|
171
|
4.7
|
Total adjusted earnings
|
2,655
|
72.2
|
2,554
|
70.6
|
Total exceptional items and remeasurements after tax
(including discontinued operations)
|
5,142
|
139.9
|
(201)
|
(5.6)
|
Total earnings
|
7,797
|
212.1
|
2,353
|
65.0
|
|
|
|
|
|
|
|
2023
|
|
2022
|
|
|
millions
|
|
millions
|
Weighted average number of ordinary shares –
diluted
|
|
3,676
|
|
3,616
|
8. Dividends
|
2023
|
|
2022
|
|
Pence
per share
|
Cash
dividend
paid
£m
|
Scrip dividend
£m
|
|
Pence
per share
|
Cash
dividend
paid
£m
|
Scrip
dividend
£m
|
Interim dividend in respect of the current year
|
17.84
|
488
|
163
|
|
17.21
|
339
|
282
|
Final dividend in respect of the prior year
|
33.76
|
1,119
|
114
|
|
32.16
|
583
|
562
|
|
51.60
|
1,607
|
277
|
|
49.37
|
922
|
844
|
The Directors are proposing a final dividend for the year ended 31
March 2023 of 37.60p per share that would absorb approximately
£1,383 million of shareholders’ equity (assuming all
amounts are settled in cash). It will be paid on 18 August 2023 to
shareholders who are on the register of members
at 4 June 2023 (subject to shareholders’
approval at the AGM). A scrip dividend will be offered as an
alternative.
9. Assets held for sale
and discontinued operations
The
following assets and liabilities were classified as held for sale
as at 31 March 2023:
|
2023
|
|
2022
|
|
Total
assets
held for sale
£m
|
Total liabilities held for sale
£m
|
Net assets held for sale
£m
|
|
Total
assets
held for
sale
£m
|
Total liabilities held for
sale
£m
|
Net assets held for
sale
£m
|
Investment in GasT TopCo Limited
|
1,443
|
—
|
1,443
|
|
—
|
—
|
—
|
FAA derivative
|
—
|
(109)
|
(109)
|
|
—
|
—
|
—
|
The Narragansett Electric Company
|
—
|
—
|
—
|
|
4,129
|
(1,658)
|
2,471
|
UK Gas Transmission
|
—
|
—
|
—
|
|
5,871
|
(5,530)
|
341
|
Net assets held for sale
|
1,443
|
(109)
|
1,334
|
|
10,000
|
(7,188)
|
2,812
|
Gain on disposal of The Narragansett Electric Company
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 Group subsequently completed the NECO
Sale to PPL Rhode Island Holdings, LLC on 25 May 2022 for cash
consideration of £3.1 billion ($3.9 billion). NECO
was part of our New England operating segment and is a retail
distribution company providing electricity and gas to customers in
Rhode Island. The associated assets and liabilities were presented
as held for sale in the consolidated financial statements with
effect from the year ended 31 March 2021.
As NECO did not represent a separate major line of business or
geographical area of operation, it did not meet the criteria for
classification as a discontinued operation and therefore its
results are not separately disclosed on the face of the income
statement. Financial information relating to the gain arising
on the disposal of NECO is set out below:
|
|
£m
|
Goodwill
|
|
616
|
Intangible assets
|
|
4
|
Property, plant and equipment
|
|
3,363
|
Trade and other receivables
|
|
215
|
Cash and cash equivalents
|
|
113
|
Other assets
|
|
165
|
Total assets on disposal
|
|
4,476
|
Borrowings
|
|
(1,230)
|
Pension liabilities
|
|
(19)
|
Other liabilities
|
|
(552)
|
Total liabilities on disposal
|
|
(1,801)
|
Net assets on disposal
|
|
2,675
|
|
|
|
Satisfied by:
|
|
|
Cash
proceeds
|
|
3,081
|
Total consideration received
|
|
3,081
|
Less:
|
|
|
Financing
costs1
|
|
(40)
|
Gain on sale before tax and reclassification of foreign currency
translation reserve
|
|
366
|
Reclassification
of foreign currency translation reserve2
|
|
145
|
Tax3
|
|
(231)
|
Post-tax gain on disposal
|
|
280
|
1.
Relates
to the transfer of hedge losses previously deferred within equity
in respect of foreign exchange forward contracts which the Group
entered into in order to manage its exposure to the foreign
currency cash proceeds due from PPL Rhode Island Holdings,
LLC.
2.
The
reclassification of the foreign currency translation reserve
attributable to NECO comprises a gain of £496 million
relating to the retranslation of NECO’s operations offset by
a loss of £351 million relating to borrowings,
cross-currency swaps and foreign exchange forward contracts used to
hedge the Group’s net investment in NECO.
3.
The
high effective tax rate arising on the gain on sale is primarily a
result of the tax base of the assets being significantly lower than
the accounting base which includes non-deductible
goodwill.
9. Assets held for sale and
discontinued operations continued
No impairment losses were recognised upon remeasurement of the
assets and liabilities prior to classification as held for
sale. NECO generated profit after tax of £84 million
for the period until 25 May 2022 (2022: £237 million) which was recognised within continuing
operations.
Gain on disposal of the UK Gas Transmission business
On 27 March 2022, the Group entered into an Acquisition Agreement
to sell 100% of the UK Gas Transmission business in
exchange for £4.0 billion of cash consideration and
a 40% interest in a newly incorporated company, GasT TopCo Limited.
The Group subsequently completed the sale on 31 January 2023.
The other 60% interest in GasT TopCo Limited is owned by Macquarie
Infrastructure and Real Assets (MIRA) and British Columbia
Investment Management Corporation (BCI) (together, the
‘Consortium’).
The Group classified the associated assets and liabilities of the
business as held for sale in the consolidated statement
of financial position as at 31 August 2021, when the sale
was considered to be highly probable following management approval
of the sale timetable and communication thereof to potential
buyers. Accordingly, the UK Gas Transmission business was also
reported as held for sale in the consolidated statement of
financial position as at 31 March 2022.
Financial information relating to the gain arising on the disposal
of the UK Gas Transmission business is set
out below:
|
|
2023
|
|
|
£m
|
Intangible assets
|
|
180
|
Property, plant and equipment
|
|
4,981
|
Trade and other receivables
|
|
458
|
Pension assets
|
|
341
|
Cash and cash equivalents
|
|
5
|
Financing derivatives
|
|
96
|
Other assets
|
|
338
|
Total assets
|
|
6,399
|
Borrowings
|
|
(4,276)
|
Deferred tax liabilities
|
|
(800)
|
Other liabilities
|
|
(711)
|
Total liabilities
|
|
(5,787)
|
Net assets on disposal
|
|
612
|
|
|
|
Satisfied by:
|
|
|
Cash
proceeds
|
|
4,032
|
Associate
at fair value
|
|
1,443
|
Total consideration received
|
|
5,475
|
Less:
|
|
|
Transaction
costs
|
|
(60)
|
Gain on disposal
|
|
4,803
|
No impairment losses were recognised upon remeasurement of the
assets and liabilities prior to classification as held for sale.
The portion of the gain on disposal related to the
remeasurement of the Group’s retained non-controlling
investment to fair value is £1,198 million.
GasT TopCo Limited is an unlisted entity, and so no quoted price
exists. The fair value has been determined with reference to the
equity value of GasT TopCo Limited, derived through a
valuation exercise performed under the discount dividend model
(DDM) methodology. The DDM methodology involves estimating the
future cash flows expected to be generated by the associate and
discounting those back to their present value using an
appropriate discount rate. Management has determined that the DDM
methodology provides a reasonable estimate of the fair
value of the associate interest at the date of
acquisition.
9. Assets held for sale and
discontinued operations continued
On 27 March 2022, the Group also entered into an FAA with the
Consortium. The FAA gives the Consortium the option to purchase
the Group’s 40% equity interest in GasT TopCo Limited
for £1.4 billion plus an annualised escalation factor.
The FAA became binding following the settlement of the
Acquisition Agreement and is exercisable in the period between 1
May and 31 July 2023. The window can further be deferred at the
Group’s discretion by three months.
The FAA is a Level 3 derivative, which is accounted for at fair
value, and the assumptions which are used to determine fair value
are specific to the contract and not readily observable in active
markets. Significant unobservable inputs include the valuation and
volatility of GasT TopCo Limited’s unlisted equity. These
inputs are used as part of a Black-Scholes option pricing model to
produce the reported valuation. The fair value of the option as at
31 March 2023 is £109 million (31 March 2022: £nil). The
FAA derivative will be extinguished when the option is either
exercised or lapses. The option cannot be cash
settled.
The Group’s interest in GasT TopCo Limited was immediately
classified as held for sale with effect from 31 January 2023
together with the FAA derivative. The Group has not applied
equity accounting in relation to its investment in GasT TopCo
Limited.
(b)
Discontinued
operations
UK Gas Transmission
As UK Gas Transmission represented a major separate line of
business, the business was also classified as a discontinued
operation in the prior year. The results of the business are shown
separately from the continuing business for all periods presented
on the face of the income statement as a discontinued operation.
This is also reflected in the statement of comprehensive income, as
well as earnings per share (EPS) being shown split between
continuing and discontinued operations.
The summary income statement for the UK Gas Transmission business
for the period until 31 January 2023 and the year ended 31 March
2022 is as follows:
|
Before exceptional items
and remeasurements
|
|
Exceptional items
and remeasurements
|
|
Total
|
|
2023
|
2022
|
|
2023
|
2022
|
|
2023
|
2022
|
|
£m
|
£m
|
|
£m
|
£m
|
|
£m
|
£m
|
Discontinued operations
|
|
|
|
|
|
|
|
|
Revenue
|
1,604
|
1,362
|
|
—
|
—
|
|
1,604
|
1,362
|
Other operating costs
|
(890)
|
(708)
|
|
1
|
(17)
|
|
(889)
|
(725)
|
Operating profit
|
714
|
654
|
|
1
|
(17)
|
|
715
|
637
|
Finance income
|
15
|
—
|
|
6
|
—
|
|
21
|
—
|
Finance
costs1
|
(310)
|
(218)
|
|
(53)
|
(12)
|
|
(363)
|
(230)
|
Profit before tax
|
419
|
436
|
|
(46)
|
(29)
|
|
373
|
407
|
Tax2
|
(99)
|
(92)
|
|
6
|
(144)
|
|
(93)
|
(236)
|
Profit after tax from
discontinued operations
|
320
|
344
|
|
(40)
|
(173)
|
|
280
|
171
|
Gain on disposal
|
—
|
—
|
|
4,803
|
—
|
|
4,803
|
—
|
Total profit after tax from
discontinued operations
|
320
|
344
|
|
4,763
|
(173)
|
|
5,083
|
171
|
1.
Finance
costs from discontinued operations include principal accretion of
inflation-linked liabilities in the UK Gas Transmission business of
£268 million (2022: £158 million). Exceptional
finance costs in the current year relate to the remeasurement of
the FAA derivative.
2.
Of
the £144 million exceptional tax charge in the year ended
31 March 2022, £145 million relates to an increase in
deferred tax liability due to the change in the UK corporation tax
rate.
9. Assets held for sale and
discontinued operations continued
The summary statement of comprehensive income for discontinued
operations for the period until 31 January 2023 and the year ended
31 March 2022 is as follows:
|
2023
|
2022
|
|
£m
|
£m
|
Profit after tax from discontinued operations
|
5,083
|
171
|
Other comprehensive (loss)/income from discontinued
operations
|
|
|
Items from discontinued operations that will never be reclassified
to profit or loss:
|
|
|
Remeasurement
(losses)/gains on pension assets and post-retirement benefit
obligations
|
(313)
|
309
|
Net
losses on financial liability designated at fair value through
profit and loss attributable
to changes in own credit risk
|
—
|
(1)
|
Tax
on items that will never be reclassified to profit or
loss
|
78
|
(94)
|
Total (losses)/gains from discontinued operations that will never
be reclassified to profit or loss
|
(235)
|
214
|
Items from discontinued operations that may be reclassified
subsequently to profit or loss:
|
|
|
Net
gains in respect of cash flow hedges
|
6
|
1
|
Net
gains/(losses) in respect of cost of hedging
|
4
|
(4)
|
Tax
on items that may be reclassified subsequently to profit or
loss
|
(2)
|
—
|
Total gains/(losses) from discontinued operations that may be
reclassified subsequently
to profit or loss
|
8
|
(3)
|
Other comprehensive (loss)/income for the year, net of tax from
discontinued operations
|
(227)
|
211
|
Total comprehensive income for the year from discontinued
operations
|
4,856
|
382
|
Details of the cash flows relating to discontinued operations are
set within the consolidated cash flow statement.
10. Pensions and other post-retirement benefit
obligations
|
2023
|
2022
|
|
£m
|
£m
|
Present
value of funded obligations
|
(18,934)
|
(23,541)
|
Fair
value of plan assets
|
21,246
|
27,013
|
|
2,312
|
3,472
|
Present value of unfunded obligations
|
(292)
|
(326)
|
Other post-employment liabilities
|
(69)
|
(71)
|
Net defined benefit asset
|
1,951
|
3,075
|
Represented by:
|
|
|
Liabilities
|
(694)
|
(810)
|
Assets
|
2,645
|
3,885
|
|
1,951
|
3,075
|
The net
pensions and other post-retirement benefit obligations position, as
recorded under IAS 19, at 31 March
2023 was a net asset of
£1,951 million
compared to a net asset of
£3,075 million at
31 March 2022. The movement of
£1,124 million
reflects falls in asset values, partially offset by changes in UK
and US financial assumptions that resulted in a decrease in
liabilities.
Actuarial Assumptions:
|
UK pensions
|
|
US pensions
|
|
US other
post-retirement benefits
|
|
2023
|
2022
|
|
2023
|
2022
|
|
2023
|
2022
|
|
%
|
%
|
|
%
|
%
|
|
%
|
%
|
Discount rate – past service
|
4.80
|
2.78
|
|
4.85
|
3.65
|
|
4.85
|
3.65
|
Discount rate – future service
|
4.80
|
2.85
|
|
4.85
|
3.65
|
|
4.85
|
3.65
|
Rate of increase in RPI – past service
|
3.17
|
3.60
|
|
n/a
|
n/a
|
|
n/a
|
n/a
|
Rate of increase in RPI – future service
|
3.07
|
3.33
|
|
n/a
|
n/a
|
|
n/a
|
n/a
|
Salary increases
|
3.11
|
3.47
|
|
4.50
|
4.60
|
|
4.50
|
4.60
|
Initial healthcare cost trend rate
|
n/a
|
n/a
|
|
n/a
|
n/a
|
|
6.80
|
6.80
|
Ultimate healthcare cost trend rate
|
n/a
|
n/a
|
|
n/a
|
n/a
|
|
4.50
|
4.50
|
11. Net
debt
Net
debt is comprised as follows:
|
2023
|
2022
|
|
£m
|
£m
|
Cash and cash equivalents
|
163
|
204
|
Current financial investments
|
2,605
|
3,145
|
Borrowings
|
(42,985)
|
(45,465)
|
Financing derivatives¹
|
(756)
|
(693)
|
|
(40,973)
|
(42,809)
|
1.
The derivatives
balance included in net debt excludes the commodity derivative
liabilities of £108
million (2022: assets of
£267
million).
12. Reconciliation of net
cash flow to movement in net debt
|
2023
|
2022
|
|
£m
|
£m
|
(Decrease)/increase in cash and cash equivalents
|
(48)
|
9
|
(Decrease)/increase
in financial investments1
|
(651)
|
752
|
Decrease/(increase) in borrowings
|
5,268
|
(9,993)
|
Increase
in related derivatives2
|
455
|
262
|
Change in debt resulting from cash flows
|
5,024
|
(8,970)
|
Changes in fair value of financial assets and liabilities and
exchange movements
|
(1,242)
|
(924)
|
Net interest charge on the components of net debt
|
(1,755)
|
(1,193)
|
Other non-cash movements
|
(283)
|
19
|
Movement in net debt (net of related derivative financial
instruments) in the year
|
1,744
|
(11,068)
|
Net debt (net of related derivative financial instruments) at start
of year
|
(42,809)
|
(28,546)
|
Reclassification to held for sale
|
92
|
4,952
|
Acquisition of NGED
|
—
|
(8,147)
|
Net debt (net of related derivative financial instruments) at end
of year
|
(40,973)
|
(42,809)
|
1.
Cash
flows on current financial investments comprise
£65 million (2022: £29 million) of interest
received and £586 million of cash inflows (2022:
£781 million outflows) of net cash flow movements in
short-term financial investments, as presented in the consolidated
cash flow statement.
2.
The derivatives
balance included in net debt excludes the commodity derivative
liabilities of £108
million (2022: assets of
£267
million).
|
2023
|
|
2022
|
|
Borrowings
and other
£m
|
Financing
derivatives
£m
|
|
Borrowings
and other
£m
|
Financing
derivatives
£m
|
Cash flows per financing activities section of cash flow
statement:
|
|
|
|
|
|
Proceeds
received from loans
|
11,908
|
—
|
|
12,347
|
—
|
Repayment
of loans
|
(15,260)
|
—
|
|
(1,261)
|
—
|
Payments
of lease liabilities
|
(155)
|
—
|
|
(117)
|
—
|
Net
movements in short-term borrowings
|
(511)
|
—
|
|
(11)
|
—
|
Cash
inflows on derivatives
|
—
|
190
|
|
—
|
20
|
Cash
outflows on derivatives
|
—
|
(118)
|
|
—
|
(114)
|
Interest
paid
|
(1,277)
|
(153)
|
|
(998)
|
(55)
|
Cash flows per financing activities section of cash flow
statement
|
(5,295)
|
(81)
|
|
9,960
|
(149)
|
Adjustments:
|
|
|
|
|
|
Non-net
debt-related items
|
27
|
—
|
|
33
|
—
|
Derivative
cash (outflow)/inflow in relation to capital
expenditure
|
—
|
(12)
|
|
—
|
(8)
|
Derivative
cash inflows per investing section of cash flow
statement
|
—
|
—
|
|
—
|
17
|
Derivative cash
outflows per investing section of cash flow statement
|
—
|
(362)
|
|
—
|
(122)
|
Cash flows relating to financing liabilities within net
debt
|
(5,268)
|
(455)
|
|
9,993
|
(262)
|
|
|
|
|
|
|
Analysis of changes in net debt:
|
|
|
|
|
|
Borrowings
|
(5,268)
|
—
|
|
9,993
|
—
|
Financing
derivatives
|
—
|
(455)
|
|
—
|
(262)
|
Cash flow movements relating to financing liabilities within net
debt
|
(5,268)
|
(455)
|
|
9,993
|
(262)
|
Alternative performance measures/non-IFRS
reconciliations
Within the Annual Report, a number of financial measures are
presented. These measures have been categorised as alternative
performance measures (APMs), as per the European Securities and
Markets Authority (ESMA) guidelines and the Securities and Exchange
Commission (SEC) conditions for use of non-GAAP financial
measures.
An APM is a financial measure of historical or future financial
performance, financial position, or cash flows, other than a
financial measure defined under IFRS. The Group uses a range of
these measures to provide a better understanding of its underlying
performance. APMs are reconciled to the most directly
comparable IFRS financial measure where
practicable.
The Group has defined the following financial measures as APMs
derived from IFRS: net revenue, the various adjusted operating
profit, earnings and earnings per share metrics detailed in the
‘adjusted profit measures’ section below, net debt,
capital investment, funds from operations (FFO), FFO
interest cover and retained cash flow (RCF)/adjusted net debt.
For each of these we present a reconciliation to the most directly
comparable IFRS measure. We present ‘constant currency’
comparative period performance and capital investment by applying
the current year average exchange rate to the relevant US
dollar amounts in the comparative periods presented, to remove the
year-on-year impact of foreign exchange translation.
We also have a number of APMs derived from regulatory measures
which have no basis under IFRS; we call these Regulatory
Performance Measures (RPMs). They comprise: Group RoE, operating
company RoE, regulated asset base, regulated financial performance,
regulatory gearing, Asset Growth, Value Added, including Value
Added per share and Value Growth. These measures include the inputs
used by utility regulators to set the allowed revenues
for many of our businesses.
We use RPMs to monitor progress against our regulatory agreements
and certain aspects of our strategic objectives. Further, targets
for certain of these performance measures are included in the
Company’s Annual Performance Plan (APP) and Long-Term
Performance Plan (LTPP) and contribute to how we reward our
employees. As such, we believe that they provide close correlation
to the economic value we generate for our shareholders and are
therefore important supplemental measures for our shareholders to
understand the performance of the business and to ensure a
complete understanding of Group performance.
As the starting point for our RPMs is not IFRS, and these measures
are not governed by IFRS, we are unable to provide meaningful
reconciliations to any directly comparable IFRS measures, as
differences between IFRS and the regulatory recognition rules
applied have built up over many years. Instead, for each of these
we present an explanation of how the measure has been determined
and why it is important, and an overview as to why it would
not be meaningful to provide a reconciliation to
IFRS.
Alternative performance measures
Net revenue
Net revenue is revenue less pass-through costs, such as UK system
balancing costs and gas and electricity commodity costs in the US.
Pass-through costs are fully recoverable from our customers and are
recovered through separate charges that are designed to recover
those costs with no profit. Where revenue received or
receivable exceeds the maximum amount permitted by our regulatory
agreement, adjustments will be made to future prices to reflect
this over-recovery. No liability is recognised as such an
adjustment to future prices relates to the provision of future
services. Similarly, no asset is recognised where a regulatory
agreement permits adjustments to be made to future prices in
respect of an under-recovery.
|
2023
|
|
2022
|
Year ended 31 March
|
Gross revenue1
|
Pass-
through
costs
|
Net revenue
|
|
Gross revenue
|
Pass-
through
costs
|
Net revenue
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
UK Electricity Transmission
|
1,987
|
(217)
|
1,770
|
|
2,035
|
(152)
|
1,883
|
UK Electricity Distribution
|
2,045
|
(418)
|
1,627
|
|
1,482
|
(125)
|
1,357
|
UK Electricity System Operator
|
4,690
|
(4,152)
|
538
|
|
3,455
|
(3,215)
|
240
|
New England
|
4,427
|
(2,095)
|
2,332
|
|
4,550
|
(2,050)
|
2,500
|
New York
|
6,994
|
(2,957)
|
4,037
|
|
5,561
|
(2,161)
|
3,400
|
National Grid Ventures
|
1,341
|
—
|
1,341
|
|
1,024
|
—
|
1,024
|
Other
|
317
|
—
|
317
|
|
192
|
—
|
192
|
Sales between segments
|
(142)
|
—
|
(142)
|
|
(39)
|
—
|
(39)
|
Total – continuing operations
|
21,659
|
(9,839)
|
11,820
|
|
18,260
|
(7,703)
|
10,557
|
Discontinued operations
|
1,604
|
(658)
|
946
|
|
1,362
|
(397)
|
965
|
Total
|
23,263
|
(10,497)
|
12,766
|
|
19,622
|
(8,100)
|
11,522
|
1.
Excluding
exceptional income.
Adjusted profit measures
In considering the financial performance of our business and
segments, we use various adjusted profit measures in order to aid
comparability of results year on year. The various measures are presented on pages
16 to 22 and reconciled
below.
Adjusted results:
These exclude the impact of
exceptional items and remeasurements that are treated as discrete
transactions under IFRS and can accordingly be classified as
such. This is a measure used by management that is used to derive
part of the incentive target set annually for remunerating certain
Executive Directors, and further details of these items are
included in note 4.
Underlying results:
Further adapts our adjusted results
for continuing operations to take account of volumetric and other
revenue timing differences arising due to the in-year
difference between allowed and collected revenues, including
revenue incentives, as governed by our rate plans in the US or
regulatory price controls in the UK (but
excluding totex-related allowances and adjustments or
allowances for pension deficit contributions). For
2022/23, as highlighted
below, our underlying results exclude
£30 million (2021/22: £16 million) of timing
differences as well as £258 million (2021/22:
£163 million) of major storm costs (as costs exceeded our
$100 million threshold in both 2022/23 and 2021/22). We expect
to recover major storm costs incurred through regulatory
mechanisms in the US.
Constant currency: ‘Constant
Currency Basis’ refers to the reporting of the actual results
against the results for the same period last year which, in respect
of any US dollar currency denominated activity, have been
translated using the average US dollar exchange rate for the year
ended 31 March 2023, which was
$1.22 to £1.00. The average rate for the year ended
31 March 2022, was $1.35 to
£1.00. Assets and liabilities as at 31 March 2023 have been retranslated at the
closing rate at 31 March 2023 of $1.23 to £1.00. The closing
rate for the reporting date 31 March
2022 was $1.31 to £1.00.
Reconciliation of statutory, adjusted and underlying profits from
continuing operations
at actual exchange rates
Year ended 31 March 2023
|
Statutory
£m
|
Exceptionals and remeasurements
£m
|
Adjusted
£m
|
Timing
£m
|
Major storm costs
£m
|
Underlying
£m
|
UK Electricity Transmission
|
993
|
2
|
995
|
112
|
—
|
1,107
|
UK Electricity Distribution
|
1,069
|
22
|
1,091
|
139
|
—
|
1,230
|
UK Electricity System Operator
|
237
|
1
|
238
|
(207)
|
—
|
31
|
New England
|
1,132
|
(424)
|
708
|
39
|
72
|
819
|
New York
|
541
|
200
|
741
|
(53)
|
186
|
874
|
National Grid Ventures
|
957
|
(467)
|
490
|
—
|
—
|
490
|
Other
|
(50)
|
81
|
31
|
—
|
—
|
31
|
Total operating profit
|
4,879
|
(585)
|
4,294
|
30
|
258
|
4,582
|
Net finance costs
|
(1,460)
|
(54)
|
(1,514)
|
—
|
—
|
(1,514)
|
Share of post-tax results of joint ventures
and associates
|
171
|
19
|
190
|
—
|
—
|
190
|
Profit before tax
|
3,590
|
(620)
|
2,970
|
30
|
258
|
3,258
|
Tax
|
(876)
|
241
|
(635)
|
(4)
|
(70)
|
(709)
|
Profit after tax
|
2,714
|
(379)
|
2,335
|
26
|
188
|
2,549
|
Year ended 31 March 2022
|
Statutory
£m
|
Exceptionals and remeasurements
£m
|
Adjusted
£m
|
Timing
£m
|
Major storm costs
£m
|
Underlying
£m
|
UK Electricity Transmission
|
1,055
|
12
|
1,067
|
85
|
—
|
1,152
|
UK Electricity Distribution
|
909
|
—
|
909
|
(22)
|
—
|
887
|
UK Electricity System Operator
|
5
|
2
|
7
|
47
|
—
|
54
|
New England
|
764
|
(21)
|
743
|
32
|
111
|
886
|
New York
|
1,095
|
(315)
|
780
|
(126)
|
52
|
706
|
National Grid Ventures
|
283
|
3
|
286
|
—
|
—
|
286
|
Other
|
260
|
(239)
|
21
|
—
|
—
|
21
|
Total operating profit
|
4,371
|
(558)
|
3,813
|
16
|
163
|
3,992
|
Net finance costs
|
(1,022)
|
(59)
|
(1,081)
|
—
|
—
|
(1,081)
|
Share of post-tax results of joint ventures
and associates
|
92
|
56
|
148
|
—
|
—
|
148
|
Profit before tax
|
3,441
|
(561)
|
2,880
|
16
|
163
|
3,059
|
Tax
|
(1,258)
|
589
|
(669)
|
3
|
(42)
|
(708)
|
Profit after tax
|
2,183
|
28
|
2,211
|
19
|
121
|
2,351
|
Reconciliation of adjusted and underlying earnings from continuing
operations at constant currency
|
|
|
At constant currency
|
Year ended 31 March 2022
|
Adjusted
at actual exchange rate
|
|
Constant currency adjustment
|
Adjusted
|
Timing
|
Major storm costs
|
Underlying
|
£m
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
UK Electricity Transmission
|
1,067
|
|
—
|
1,067
|
85
|
—
|
1,152
|
UK Electricity Distribution
|
909
|
|
—
|
909
|
(22)
|
—
|
887
|
UK Electricity System Operator
|
7
|
|
—
|
7
|
47
|
—
|
54
|
New England
|
743
|
|
81
|
824
|
35
|
123
|
982
|
New York
|
780
|
|
85
|
865
|
(140)
|
58
|
783
|
National Grid Ventures
|
286
|
|
5
|
291
|
—
|
—
|
291
|
Other
|
21
|
|
1
|
22
|
—
|
—
|
22
|
Total operating profit
|
3,813
|
|
172
|
3,985
|
5
|
181
|
4,171
|
Net finance costs
|
(1,081)
|
|
(55)
|
(1,136)
|
—
|
—
|
(1,136)
|
Share of post-tax results of joint ventures
and associates
|
148
|
|
4
|
152
|
—
|
—
|
152
|
Profit before tax
|
2,880
|
|
121
|
3,001
|
5
|
181
|
3,187
|
Tax
|
(669)
|
|
(32)
|
(701)
|
6
|
(47)
|
(742)
|
Profit after tax
|
2,211
|
|
89
|
2,300
|
11
|
134
|
2,445
|
Attributable to non-controlling interests
|
(1)
|
|
—
|
(1)
|
—
|
—
|
(1)
|
Earnings
|
2,210
|
|
89
|
2,299
|
11
|
134
|
2,444
|
Earnings per share (pence)
|
61.4
|
|
2.5
|
63.9
|
0.3
|
3.7
|
67.9
|
Earnings per share calculations from continuing operations –
at actual exchange rates
The table below reconciles the profit after tax from continuing
operations as per the previous tables back to the earnings per
share from continuing operations for each of the adjusted profit
measures. Earnings per share is only presented for those adjusted
profit measures that are at actual exchange rates, and not for
those at constant currency.
Year ended 31 March 2023
|
Profit after tax
£m
|
Non-controlling interest
£m
|
Profit after tax attributable to the parent
£m
|
Weighted
average
number of
shares
Millions
|
Earnings
per share
pence
|
Statutory
|
2,714
|
—
|
2,714
|
3,659
|
74.2
|
Adjusted
|
2,335
|
—
|
2,335
|
3,659
|
63.8
|
Underlying
|
2,549
|
—
|
2,549
|
3,659
|
69.7
|
Year ended 31 March 2022
|
Profit after tax
£m
|
Non-controlling interest
£m
|
Profit after tax attributable to the parent
£m
|
Weighted
average
number of
shares
Millions
|
Earnings
per share
pence
|
Statutory
|
2,183
|
(1)
|
2,182
|
3,599
|
60.6
|
Adjusted
|
2,211
|
(1)
|
2,210
|
3,599
|
61.4
|
Underlying
|
2,351
|
(1)
|
2,350
|
3,599
|
65.3
|
Reconciliation of total Group statutory operating profit to
‘adjusted earnings excluding timing
and major storm costs’
|
Adjusted
|
|
Underlying
|
|
2023
|
2022
|
|
2023
|
2022
|
|
£m
|
£m
|
|
£m
|
£m
|
Continuing operations
|
|
|
|
|
|
Adjusted operating profit
|
4,294
|
3,813
|
|
4,582
|
3,992
|
Adjusted net finance costs
|
(1,514)
|
(1,081)
|
|
(1,514)
|
(1,081)
|
Share of post-tax results of joint ventures and
associates
|
190
|
148
|
|
190
|
148
|
Adjusted profit before tax
|
2,970
|
2,880
|
|
3,258
|
3,059
|
Adjusted tax
|
(635)
|
(669)
|
|
(709)
|
(708)
|
Adjusted profit after tax
|
2,335
|
2,211
|
|
2,549
|
2,351
|
Attributable to non-controlling interests
|
—
|
(1)
|
|
—
|
(1)
|
Adjusted earnings from continuing operations
|
2,335
|
2,210
|
|
2,549
|
2,350
|
Exceptional items after tax
|
619
|
(320)
|
|
619
|
(320)
|
Remeasurements after tax
|
(240)
|
292
|
|
(240)
|
292
|
Earnings from continuing operations
|
2,714
|
2,182
|
|
2,928
|
2,322
|
|
|
|
|
|
|
|
Including timing and
major storm costs
|
|
Excluding timing and
major storm costs
|
|
2023
|
2022
|
|
2023
|
2022
|
|
£m
|
£m
|
|
£m
|
£m
|
Discontinued operations
|
|
|
|
|
|
Adjusted operating profit
|
714
|
654
|
|
702
|
734
|
Adjusted net finance costs
|
(295)
|
(218)
|
|
(295)
|
(218)
|
Share of post-tax results of joint ventures and
associates
|
—
|
—
|
|
—
|
—
|
Adjusted profit before tax
|
419
|
436
|
|
407
|
516
|
Adjusted tax
|
(99)
|
(92)
|
|
(97)
|
(107)
|
Adjusted profit after tax
|
320
|
344
|
|
310
|
409
|
Attributable to non-controlling interests
|
—
|
—
|
|
—
|
—
|
Adjusted earnings from discontinued operations
|
320
|
344
|
|
310
|
409
|
Exceptional items and gain on disposal after tax
|
4,811
|
(163)
|
|
4,811
|
(163)
|
Remeasurements after tax
|
(48)
|
(10)
|
|
(48)
|
(10)
|
Earnings from discontinued operations
|
5,083
|
171
|
|
5,073
|
236
|
|
|
|
|
|
|
Total Group (continuing and discontinued operations)
|
|
|
|
|
|
Adjusted operating profit
|
5,008
|
4,467
|
|
5,284
|
4,726
|
Adjusted net finance costs
|
(1,809)
|
(1,299)
|
|
(1,809)
|
(1,299)
|
Share of post-tax results of joint ventures and
associates
|
190
|
148
|
|
190
|
148
|
Adjusted profit before tax
|
3,389
|
3,316
|
|
3,665
|
3,575
|
Adjusted tax
|
(734)
|
(761)
|
|
(806)
|
(815)
|
Adjusted profit after tax
|
2,655
|
2,555
|
|
2,859
|
2,760
|
Attributable to non-controlling interests
|
—
|
(1)
|
|
—
|
(1)
|
Adjusted earnings from continuing and discontinued
operations
|
2,655
|
2,554
|
|
2,859
|
2,759
|
Exceptional items after tax
|
5,430
|
(483)
|
|
5,430
|
(483)
|
Remeasurements after tax
|
(288)
|
282
|
|
(288)
|
282
|
Total Group earnings from continuing and discontinued
operations
|
7,797
|
2,353
|
|
8,001
|
2,558
|
Reconciliation of adjusted EPS to statutory earnings (including and
excluding the impact of timing and major storm
costs)
|
Including timing
and major storm costs
|
|
Excluding timing
and major storm costs
|
|
2023
|
2022
|
|
2023
|
2022
|
Year ended 31 March
|
pence
|
pence
|
|
pence
|
pence
|
Adjusted EPS from continuing operations
|
63.8
|
61.4
|
|
69.7
|
65.3
|
Exceptional items and remeasurements after tax from continuing
operations
|
10.4
|
(0.8)
|
|
10.4
|
(0.8)
|
EPS from continuing operations
|
74.2
|
60.6
|
|
80.1
|
64.5
|
Adjusted EPS from discontinued operations
|
8.7
|
9.6
|
|
8.5
|
11.4
|
Exceptional items and remeasurements after tax from discontinued
operations
|
130.2
|
(4.8)
|
|
130.2
|
(4.8)
|
EPS from discontinued operations
|
138.9
|
4.8
|
|
138.7
|
6.6
|
Total adjusted EPS from continuing and discontinued
operations
|
72.5
|
71.0
|
|
78.2
|
76.7
|
Total exceptional items and remeasurements after tax from
continuing and discontinued operations
|
140.6
|
(5.6)
|
|
140.6
|
(5.6)
|
Total Group EPS from continuing and discontinued
operations
|
213.1
|
65.4
|
|
218.8
|
71.1
|
Timing impacts
Under
the Group’s regulatory frameworks, the majority of the
revenues that National Grid is allowed to collect each year are
governed by a regulatory price control or rate plan. If we collect
more than the allowed revenue, adjustments will be made to future
prices to reflect this over-recovery, and if we collect less than
the allowed level of revenue, adjustments will be made to future
prices to reflect the under-recovery. A number of costs in
the UK and the US are pass-through costs (including commodity
and energy efficiency costs in the US) and are fully
recoverable from customers. Timing differences between costs of
this type being incurred and their recovery through revenues
are also included in over and under-recoveries. In the UK, timing
differences include an estimation of the difference
between revenues earned under revenue incentive mechanisms and
associated revenues collected. UK timing balances and movements
exclude adjustments associated with changes to controllable cost
(totex) allowances or adjustments under the totex incentive
mechanism. Opening balances of over and under-recoveries have been
restated where appropriate to correspond with regulatory filings
and calculations. New England and New York in-year
over/(under)-recovery and all New England and New York balances
have been translated using the average exchange rate of
$1.22 for the year ended 31 March 2023.
|
UK
Electricity Transmission
£m
|
UK
Electricity Distribution
£m
|
UK
Electricity System Operator
£m
|
New
England
£m
|
New
York
£m
|
Continuing
£m
|
Discontinued
£m
|
Total
£m
|
1 April
2022 opening balance1
|
(95)
|
22
|
(129)
|
(343)
|
656
|
111
|
(160)
|
(49)
|
(Under)/over-recovery
|
(112)
|
(139)
|
207
|
(39)
|
53
|
(30)
|
12
|
(18)
|
Disposals
|
—
|
—
|
—
|
(17)
|
—
|
(17)
|
148
|
131
|
31 March 2023 closing balance
to (recover)/return2
|
(207)
|
(117)
|
78
|
(399)
|
709
|
64
|
—
|
64
|
|
UK
Electricity Transmission
£m
|
UK
Electricity Distribution
£m
|
UK
Electricity System Operator
£m
|
New
England
£m
|
New
York
£m
|
Continuing
£m
|
Discontinued
£m
|
Total
£m
|
1 April
2021 opening balance1
|
—
|
—
|
(80)
|
(295)
|
516
|
141
|
(76)
|
65
|
(Under)/over-recovery
|
(85)
|
22
|
(47)
|
(35)
|
140
|
(5)
|
(80)
|
(85)
|
31 March 2022 closing balance
to (recover)/return2,3
|
(85)
|
22
|
(127)
|
(330)
|
656
|
136
|
(156)
|
(20)
|
1.
Opening
balances have been restated to reflect the finalisation of
calculated over/(under)-recoveries in the UK and the
US.
2.
The
closing balance (including discontinued operations) at 31
March 2023 was £59 million over-recovered (translated at the
closing rate of $1.23:£1).
31 March 2022 was £45 million under-recovered (translated
at the closing rate of $1.31:£1).
Capital investment
‘Capital investment’ or ‘investment’ refer
to additions to property, plant and equipment and intangible
assets, and contributions to joint ventures and associates
during the period. We also include the Group’s
investments by National Grid Partners during the period, which
are classified for IFRS purposes as non-current financial assets in
the Group’s consolidated statement of
financial position.
Investments made in previous years to our St William Homes LLP
arrangement were excluded based on the nature of that joint venture
arrangement. We typically contributed property assets to the joint
venture in exchange for cash and accordingly did not consider these
transactions to be in the nature of
capital investment.
|
At actual exchange rates
|
|
At constant currency
|
Year ended 31 March
|
2023
|
2022
|
%
|
|
2023
|
2022
|
%
|
£m
|
£m
|
change
|
|
£m
|
£m
|
change
|
UK Electricity Transmission
|
1,303
|
1,195
|
9
|
|
1,303
|
1,195
|
9
|
UK Electricity Distribution
|
1,220
|
899
|
36
|
|
1,220
|
899
|
36
|
UK Electricity System Operator
|
108
|
108
|
—
|
|
108
|
108
|
—
|
New
England1
|
1,677
|
1,561
|
7
|
|
1,677
|
1,731
|
(3)
|
New York
|
2,454
|
1,960
|
25
|
|
2,454
|
2,174
|
13
|
National Grid Ventures
|
709
|
452
|
57
|
|
709
|
456
|
55
|
Other
|
13
|
10
|
30
|
|
13
|
10
|
30
|
Group capital expenditure – continuing1
|
7,484
|
6,185
|
21
|
|
7,484
|
6,573
|
14
|
Equity
investment, funding contributions and loans to joint ventures
and associates2
|
197
|
461
|
(57)
|
|
197
|
512
|
(62)
|
Investments in financial assets (National Grid
Partners)
|
59
|
93
|
(37)
|
|
59
|
103
|
(43)
|
Group capital investment – continuing1
|
7,740
|
6,739
|
15
|
|
7,740
|
7,188
|
8
|
Discontinued operations
|
301
|
261
|
15
|
|
301
|
261
|
15
|
Group capital investment – total
|
8,041
|
7,000
|
15
|
|
8,041
|
7,449
|
8
|
1.
New England capital investment for 2022/23
includes £54 million of additions for NECO, which, although
part of continuing operations, is also classified
as an ‘asset held for sale’ under IFRS. As
such it is not included within additions to PP&E and
intangibles in note 2. Group
capital expenditure for continuing operations excluding NECO
additions for 2022/23 was £7,431 million (2022: £6,185
million).
2.
Excludes
£— million (2022: £25 million) equity
contribution to the St William Homes LLP joint
venture.
Net debt
See
notes 11 and 12 for reconciliation of net
debt.
Funds from operations and interest cover
FFO are the cash flows generated by the operations of the Group.
Credit rating metrics, including FFO, are used as indicators of
balance sheet strength.
Year ended 31 March
|
2023
|
2022¹
|
£m
|
£m
|
Interest expense (income statement)
|
1,680
|
1,146
|
Hybrid interest reclassified as dividend
|
(39)
|
(38)
|
Capitalised interest
|
249
|
152
|
Pensions interest adjustment
|
11
|
11
|
Unwinding of discount on provisions
|
(88)
|
(73)
|
Pension interest
|
85
|
—
|
Interest charge (discontinued operations)
|
—
|
218
|
Adjusted interest expense
|
1,898
|
1,416
|
Net cash inflow from operating activities
|
6,343
|
5,490
|
Interest received on financial instruments
|
65
|
40
|
Interest paid on financial instruments
|
(1,430)
|
(1,053)
|
Dividends received
|
190
|
166
|
Working capital adjustment
|
(286)
|
(361)
|
Excess employer pension contributions
|
116
|
99
|
Hybrid interest reclassified as dividend
|
39
|
38
|
Add back accretions
|
483
|
241
|
Difference in net interest expense in income statement to cash
flow
|
(395)
|
(177)
|
Difference in current tax in income statement to cash
flow
|
(281)
|
72
|
Current tax related to prior periods
|
—
|
(35)
|
Cash flow from discontinued operations
|
555
|
668
|
Other fair value adjustments
|
—
|
—
|
Funds from operations (FFO)
|
5,399
|
5,188
|
FFO interest cover ((FFO + adjusted interest expense)/adjusted
interest expense)
|
3.8x
|
4.7x
|
1.
Numbers for
2022 reflect the calculations
for the total Group as based on the published accounts for that
year.
Retained cash flow/adjusted net debt
RCF/adjusted net debt is one of two credit metrics that we monitor
in order to ensure the Group is generating sufficient cash to
service its debts, consistent with maintaining a strong
investment-grade credit rating. We calculate RCF/adjusted net debt
applying the methodology used by Moody’s, as this is one
of the most constrained calculations of credit worthiness. The
net debt denominator includes adjustments to take account
of the equity component of hybrid debt.
Year ended 31 March
|
2023
|
20221
|
£m
|
£m
|
Funds from operations (FFO)
|
5,399
|
5,188
|
Hybrid interest reclassified as dividend
|
(39)
|
(38)
|
Ordinary dividends paid to shareholders
|
(1,607)
|
(922)
|
RCF
|
3,753
|
4,228
|
Borrowings
|
42,985
|
45,465
|
Less:
|
|
|
50%
hybrid debt
|
(1,049)
|
(1,027)
|
Cash
and cash equivalents
|
(126)
|
(190)
|
Financial
and other investments
|
(1,764)
|
(2,292)
|
Underfunded pension obligations
|
292
|
326
|
Borrowings in held for sale
|
—
|
5,234
|
Adjusted net debt (includes pension deficit)
|
40,338
|
47,516
|
RCF/adjusted net debt
|
9.3%
|
8.9%
|
1.
Numbers for 2022
reflect the calculations for the total Group as based on the
published accounts for that year.
Regulatory performance measures
Regulated financial performance – UK
Regulatory financial performance is a pre-interest and tax measure,
starting at segmental operating profit and making adjustments (such
as the elimination of all pass-through items included in
revenue allowances and timing) to approximate regulatory profit for
the UK regulated activities. This measure provides a bridge
for investors between a well-understood and comparable IFRS
starting point and through the key adjustments required to
approximate regulatory profit. This measure also provides the
foundation to calculate Group RoE.
Under the UK RIIO regulatory arrangements the Company is
incentivised to deliver efficiencies against cost targets set by
the regulator. In total, these targets are set in terms of a
regulatory definition of combined total operating and capital
expenditure, also termed ‘totex’. The definition of
totex differs from the total combined regulated controllable
operating costs and regulated capital expenditure as reported in
this statement according to IFRS accounting principles. Key
differences are capitalised interest, capital contributions,
exceptional costs, costs covered by other regulatory arrangements
and unregulated costs.
For the reasons noted above, the table below shows the principal
differences between the IFRS operating profit and the regulated
financial performance, but is not a formal reconciliation to an
equivalent IFRS measure.
UK Electricity Transmission
Year ended 31 March
|
2023
|
2022
|
£m
|
£m
|
Adjusted operating profit
|
995
|
1,067
|
Movement in regulatory ‘IOUs’
|
107
|
82
|
Deferred taxation adjustment
|
73
|
26
|
RAV indexation – 2% CPIH long-run inflation
|
309
|
287
|
Regulatory vs IFRS depreciation difference
|
(536)
|
(433)
|
Fast money/other
|
37
|
(44)
|
Pensions
|
(44)
|
(42)
|
Performance RAV created
|
68
|
75
|
Regulated financial performance
|
1,009
|
1,018
|
UK Electricity Distribution
Year ended 31 March
|
2023
|
2022
|
£m
|
£m
|
Adjusted operating profit
|
1,091
|
909
|
Less non-regulated profits
|
(46)
|
(51)
|
Movement in regulatory ‘IOUs’
|
88
|
(42)
|
Deferred taxation adjustment
|
65
|
28
|
RAV indexation – 3% RPI long-run inflation
|
277
|
198
|
Regulatory vs IFRS depreciation difference
|
(506)
|
(358)
|
Fast money/other
|
11
|
17
|
Pensions
|
(157)
|
(111)
|
Performance RAV created
|
22
|
9
|
Regulated financial performance
|
845
|
599
|
UK Electricity System Operator
Year ended 31 March
|
2023
|
2022
|
£m
|
£m
|
Adjusted operating profit
|
238
|
7
|
Movement in regulatory ‘IOUs’
|
(223)
|
31
|
Deferred taxation adjustment
|
(4)
|
(4)
|
RAV indexation – 2% CPIH long-run inflation
|
7
|
5
|
Regulatory vs IFRS depreciation difference
|
32
|
27
|
Fast money/other
|
(2)
|
(24)
|
Pensions
|
(11)
|
(10)
|
Performance RAV created
|
—
|
—
|
Regulated financial performance
|
37
|
32
|
UK Gas Transmission
Year ended 31 March
|
2023
|
2022
|
£m
|
£m
|
Adjusted operating profit
|
714
|
654
|
Less non-regulated profits
|
(129)
|
(150)
|
Movement in regulatory ‘IOUs’
|
(24)
|
72
|
Deferred taxation adjustment
|
28
|
13
|
RAV indexation – 2% CPIH long-run inflation
|
109
|
126
|
Regulatory vs IFRS depreciation difference
|
(331)
|
(281)
|
Fast money/other
|
(1)
|
(4)
|
Pensions
|
(9)
|
—
|
Performance RAV created
|
5
|
3
|
Regulated financial performance
|
362
|
433
|
Regulated financial performance – US
New England
Year ended 31 March
|
2023
|
2022
|
£m
|
£m
|
Adjusted operating profit
|
708
|
743
|
Major storm costs
|
72
|
111
|
Timing
|
39
|
32
|
Depreciation
adjustment1
|
(18)
|
(67)
|
US GAAP pension adjustment
|
34
|
11
|
Regulated financial performance
|
835
|
830
|
1.
The
depreciation adjustment relates to the impact of the cessation of
depreciation for NECO under IFRS following reclassification as held
for sale.
New York
Year ended 31 March
|
2023
|
2022
|
£m
|
£m
|
Adjusted operating profit
|
741
|
780
|
Provision for bad and doubtful debts (COVID-19), net of
recoveries¹
|
(21)
|
—
|
Major storm costs
|
186
|
52
|
Timing
|
(53)
|
(126)
|
US GAAP pension adjustment
|
11
|
66
|
Regulated financial performance
|
864
|
772
|
1.
New York financial
performance includes an adjustment reflecting the impact of our
in-year recovery in respect of COVID-19-related provision for bad
and doubtful debts.
Total regulated financial performance
Year ended 31 March
|
2023
|
2022
|
£m
|
£m
|
UK Electricity Transmission
|
1,009
|
1,018
|
UK Electricity Distribution
|
845
|
599
|
UK Electricity System Operator
|
37
|
32
|
UK Gas Transmission
|
362
|
433
|
New England
|
835
|
830
|
New York
|
864
|
772
|
Total regulated financial performance
|
3,952
|
3,684
|
New England and New York timing, major storms costs and movement in
UK regulatory ‘IOUs’ – Revenue related to performance in one
year may be recovered in later years. Where revenue
received or receivable exceeds the maximum amount permitted by our
regulatory agreement, adjustments will be made to future prices to
reflect this over-recovery. No liability is recognised under IFRS,
as such an adjustment to future prices relates to the
provision of future services. Similarly, no asset is recognised
under IFRS where a regulatory agreement permits adjustments to be
made to future prices in respect of an under-recovery. In
the UK, this is calculated as the movement in other regulated
assets and liabilities.
Performance RAV – UK
performance efficiencies are in part remunerated by the creation of
additional RAV which is expected to result in future earnings under
regulatory arrangements. This is calculated as in-year totex
outperformance multiplied by the appropriate regulatory
capitalisation ratio and multiplied by the retained company
incentive sharing ratio.
Pension adjustment – Cash
payments against pension deficits in the UK are recoverable under
regulatory contracts. In US regulated operations, US GAAP
pension charges are generally recoverable through rates. Revenue
recoveries are recognised under IFRS but payments are not charged
against IFRS operating profits in the year. In the UK this is
calculated as cash payments against the regulatory proportion of
pension deficits in the UK regulated business,
whereas in the US it is the difference between IFRS and US GAAP
pension charges.
2% CPIH and 3% RPI RAV indexation – Future UK revenues are expected to be set
using an asset base adjusted for inflation. This is calculated
as UK RAV multiplied by 2% long-run CPIH inflation
assumption under RIIO-2 and a 3% long-run RPI inflation assumption
under RIIO-1.
UK deferred taxation adjustment – Future UK revenues are expected to recover
cash taxation cost including the unwinding of deferred taxation
balances created in the current year. This is the difference
between: (1) IFRS underlying EBITDA less other regulatory
adjustments; and (2) IFRS underlying EBITDA less other regulatory
adjustments less current taxation (adjusted for interest tax
shield) then grossed up at full UK statutory
tax rate.
Regulatory depreciation –
US and UK regulated revenues include allowance for a return of
regulatory capital in accordance with regulatory assumed asset
lives. This return does not form part of regulatory
profit.
Fast/slow money adjustment – The regulatory remuneration of costs
incurred is split between in-year revenue allowances and the
creation of additional RAV. This does not align with the
classification of costs as operating costs and fixed asset
additions under IFRS accounting principles. This is calculated
as the difference between IFRS classification of costs as operating
costs or fixed asset additions and the regulatory
classification.
Regulated asset base
The regulated asset base is a regulatory construct, based on
predetermined principles not based on IFRS. It effectively
represents the invested capital on which we are authorised to
earn a cash return. By investing efficiently in our networks, we
add to our regulated asset base over the long term, and
this in turn contributes to delivering shareholder value.
Our regulated asset base comprises our regulatory asset value in
the UK plus our rate base in the US.
Maintaining efficient investment in our regulated asset base
ensures we are well positioned to provide consistently high levels
of service to our customers and increases our revenue allowances in
future years. While we have no specific target, our overall
aim is to achieve between 6% and 8% growth in regulated asset
base each year through continued investment in our networks in both
the UK and US.
In the UK, the way in which our transactions impact RAV is driven
by principles set out by Ofgem. In a number of key areas these
principles differ from the requirements of IFRS, including
areas such as additions and the basis for depreciation. Further,
our UK RAV is adjusted annually for inflation. RAV in each of
our retained UK businesses has evolved over the period since
privatisation in 1990 and, as a result, historical differences
between the initial determination of RAV and balances reported
under UK GAAP at that time still persist. In the case of WPD,
differences arise as the result of acquisition fair value
adjustments (where PP&E at acquisition has been valued above
RAV). Due to the above, substantial differences exist in
the measurement bases between RAV and an IFRS balance
metric, and therefore it is not possible to provide a meaningful
reconciliation between the two.
In the US, rate base is a regulatory measure determined for each of
our main US operating companies. It represents the value of
property and other assets or liabilities on which we are permitted
to earn a rate of return, as set out by the regulatory authorities
for each jurisdiction. The calculations are based on the
applicable regulatory agreements for each jurisdiction and include
the allowable elements of assets and liabilities from our US
companies. For this reason, it is not practical to provide a
meaningful reconciliation from the US rate base to an
equivalent IFRS measure. However, we include the calculation
below.
‘Total regulated and other balances’ for our UK
regulated businesses include the under- or over-recovery of
allowances that those businesses target to collect in
any year, which are based on the regulator’s
forecasts for that year. Under the UK price control arrangements,
revenues will be adjusted in future years to take account of
actual levels of collected revenue, costs and outputs delivered
when they differ from those regulatory forecasts. In the US,
other regulatory assets and liabilities include regulatory assets
and liabilities which are not included in the definition of rate
base, including working capital
where appropriate.
‘Total regulated and other balances’ for NGV and other
businesses includes assets and liabilities as measured under IFRS,
but excludes certain assets and liabilities such as pensions,
tax, net debt and goodwill. This included a £101 million
deferred balance for separation and transaction costs incurred in
2021/22 related to the sale of NECO and UK Gas
Transmission, which has been released to offset against the
proceeds received on disposal of these businesses in
2022/23.
|
RAV, rate base or other business balances
|
|
Total regulated
and other balances
|
As at 31 March
(£m at constant currency)
|
2023
|
2022¹
|
|
20232,3
|
20221,2,3
|
UK Electricity Transmission
|
17,072
|
15,471
|
|
16,912
|
15,242
|
UK Electricity Distribution
|
10,773
|
9,248
|
|
10,756
|
9,299
|
UK Electricity System Operator
|
360
|
297
|
|
282
|
442
|
UK Gas Transmission (excluding metering)
|
—
|
6,561
|
|
—
|
6,669
|
New England
|
7,907
|
9,860
|
|
10,080
|
11,774
|
New York
|
15,131
|
13,768
|
|
16,184
|
14,646
|
Total regulated
|
51,243
|
55,205
|
|
54,214
|
58,072
|
National Grid Ventures and other businesses (including discontinued
metering business in 2022)
|
6,604
|
5,374
|
|
6,712
|
4,566
|
Total Group regulated and other balances
|
57,847
|
60,579
|
|
60,926
|
62,638
|
1.
Figures relating to prior periods have, where
appropriate, been re-presented at constant currency, for segmental
reorganisation, opening balance adjustments following
the completion of the UK regulatory reporting pack
process and finalisation of US balances.
2.
Includes
totex-related regulatory IOUs of £502 million (2022: £271
million), over-recovered timing balances of £246 million
(2022: £346 million under-recovered) and under-recovered
legacy balances related to previous price controls of £0
million (2022: £9 million).
3.
Includes
assets for construction work-in-progress of £2,319 million
(2022: £2,279 million), other regulatory assets related to
timing and other cost deferrals of £771 million
(2022: £809 million) and net working capital liabilities of
£136 million (2022: £295 million).
New England and New York rate base and other total regulated and
other balances for 31 March 2022 have been re-presented in the
table above at constant currency. At actual currency
the values were £11.1 billion and
£13.7 billion respectively.
Group return on equity (RoE)
Group RoE provides investors with a view of the performance of the
Group as a whole compared with the amounts invested by the Group in
assets attributable to equity shareholders. It is the ratio of
our regulatory financial performance to our measure of equity
investment in assets. It therefore reflects the regulated
activities as well as the contribution from our non-regulated
businesses together with joint ventures and non-controlling
interests.
We use Group RoE to measure our performance in generating value for
our shareholders, and targets for Group RoE are included in
the incentive mechanisms for executive remuneration within both the
APP and LTPP schemes.
Group RoE is underpinned by our regulated asset base. For the
reasons noted above, no reconciliation to IFRS has been presented,
as we do not believe it would be practical. However, we do include
the calculations below.
Calculation: Regulatory
financial performance including a long-run inflation assumption (3%
RPI for RIIO-1; 2% CPIH for RIIO-2), less adjusted interest
and adjusted taxation divided by equity investment in
assets:
●
adjusted interest removes accretions above
long-run inflation rates, interest on pensions, capitalised
interest in regulated operations and unwind of discount rate
on provisions;
●
adjusted taxation adjusts the Group taxation
charge for differences between IFRS profit before tax and regulated
financial performance less adjusted interest;
and
●
equity
investment in assets is calculated as the total opening UK
regulatory asset value, the total opening US rate base plus
goodwill plus opening net book value of National Grid Ventures and
other activities (excluding certain amounts such as pensions, tax
and commodities) and our share of joint ventures and associates,
minus opening net debt as reported under IFRS restated to the
weighted average sterling–dollar exchange rate for the
year.
Group RoE
Year ended 31 March
|
2023
|
2022
|
£m
|
£m
|
Regulated financial performance
|
3,952
|
3,684
|
Operating profit of other activities – continuing
operations
|
595
|
330
|
Operating profit of other activities – discontinued
operations
|
113
|
150
|
Group financial performance
|
4,660
|
4,164
|
Share
of post-tax results of joint ventures and associates1
|
202
|
148
|
Non-controlling interests
|
—
|
(1)
|
Adjusted total Group interest charge (including
discontinued)
|
(1,546)
|
(1,191)
|
Total Group tax charge (including discontinued)
|
(734)
|
(761)
|
Tax on adjustments
|
7
|
43
|
Total Group financial performance after interest and
tax
|
2,589
|
2,402
|
Opening rate base/RAV
|
55,558
|
41,043
|
Opening other balances
|
5,410
|
4,864
|
Opening goodwill
|
12,253
|
5,266
|
Opening capital employed
|
73,221
|
51,173
|
Opening net debt
|
(49,691)
|
(30,072)
|
Opening equity
|
23,530
|
21,101
|
Group RoE
|
11.0%
|
11.4%
|
1.
2023
Includes £12 million in respect of the Group’s 40%
retained minority interest in National Gas
Transmission.
UK and US regulated RoE
Year ended 31 March
|
Regulatory Debt:
Equity assumption
|
|
Achieved Return
on Equity
|
|
Base or Allowed
Return on Equity
|
|
2023
%
|
2022
%
|
|
2023
%
|
2022
%
|
UK Electricity Transmission
|
55/45
|
|
7.5
|
7.7
|
|
6.3
|
6.3
|
UK Electricity Distribution
|
65/35
|
|
13.2
|
13.6
|
|
9.6
|
9.6
|
UK Gas Transmission
|
60/40
|
|
7.8
|
7.8
|
|
6.6
|
6.6
|
New England
|
Avg. 45/55
|
|
8.3
|
8.3
|
|
9.9
|
9.8
|
New York
|
Avg. 52/48
|
|
8.6
|
8.8
|
|
8.9
|
8.9
|
UK businesses’ regulated RoEs
UK regulated businesses’ RoEs are a measure of how the
businesses are performing against the assumptions used by our UK
regulator. These returns are calculated using the assumption that
the businesses are financed in line with the regulatory adjudicated
capital structure, at the cost of debt assumed by the regulator,
and that inflation is equal to a long-run assumption of 3% RPI
under RIIO-1 and 2% CPIH under RIIO-2. They are calculated by
dividing elements of out/under-performance versus the regulatory
contract (i.e. regulated financial performance disclosed above) by
the average equity RAV in line with the regulatory assumed
capital structure and adding to the base allowed
RoE.
These are important measures of UK regulated businesses’
performance, and our operational strategy continues to focus on
these metrics. These measures can be used to determine how we
are performing under the RIIO framework and also helps investors to
compare our performance with similarly regulated
UK entities. Reflecting the importance of these metrics, they
are also key components of the APP scheme.
The respective businesses’ UK RoEs are underpinned by their
RAVs. For the reasons noted above, no reconciliation to IFRS has
been presented, as we do not believe it would
be practical.
US businesses’ regulated RoEs
US regulated businesses’ RoEs are a measure of how the
businesses are performing against the assumptions used by the US
regulators. This US operational return measure is
calculated using the assumption that the businesses are financed in
line with the regulatory adjudicated capital structure
and allowed cost of debt. The returns are divided by the
average rate base (or where a reported rate base is not available,
an estimate based on rate base calculations used in previous
rate filings) multiplied by the adjudicated equity portion in the
regulatory adjudicated capital structure.
These are important measures of our New England and New York
regulated businesses’ performance, and our operational
strategy continues to focus on these metrics. This measure can
be used to determine how we are performing and also helps investors
compare our performance with similarly regulated US entities.
Reflecting the importance of these metrics, they are also key
components of the APP scheme.
The New England and New York businesses’ returns are based on
a calculation which gives proportionately more weighting to those
businesses which have a greater rate base. For the reasons noted
above, no reconciliations to IFRS for the RoE measures have been
presented, as we do not believe it would be practical to reconcile
our IFRS balance sheet to the equity base.
The table below shows the principal differences between the IFRS
result of the New England and New York segments, and the
‘returns’ used to derive their respective
US jurisdictional RoEs. In outlining these differences, we
also include the aggregated business results under US GAAP for
New England and New York jurisdictions.
In respect of 2021/22, this measure is the aggregate operating
profit of our US OpCo entities’ publicly available
financial statements prepared under US GAAP for the New England and
New York jurisdictions respectively. For 2022/23, this measure
represents our current estimate, since local financial
statements have yet to be prepared.
|
2023
|
2022
|
|
£m
|
£m
|
Underlying IFRS operating profit for New England
segment
|
819
|
886
|
Underlying IFRS operating profit for New York segment
|
874
|
706
|
Weighted average £/$ exchange rate
|
$1.216
|
$1.348
|
|
New England
|
|
New York
|
|
2023
|
2022
|
|
2023
|
2022
|
|
$m
|
$m
|
|
$m
|
$m
|
Underlying IFRS operating profit for US segments
|
995
|
1,194
|
|
1,060
|
951
|
Adjustments to convert to US GAAP as applied in our
US OpCo entities
|
|
|
|
|
|
Adjustment in respect of customer contributions
|
(26)
|
(35)
|
|
(34)
|
(30)
|
Pension
accounting differences1
|
39
|
14
|
|
12
|
88
|
Environmental charges recorded under US GAAP
|
(3)
|
3
|
|
58
|
42
|
Storm costs and recoveries recorded under US GAAP
|
(54)
|
(75)
|
|
(39)
|
(8)
|
Removal of partial year Rhode Island in year of
disposal
|
(65)
|
—
|
|
—
|
—
|
Other regulatory deferrals, amortisation and other
items
|
(217)
|
(253)
|
|
86
|
46
|
Results for US regulated OpCo entities, aggregated under
US GAAP2
|
669
|
848
|
|
1,143
|
1,089
|
Adjustments to determine regulatory operating profit used in
US RoE
|
|
|
|
|
|
Adjustment
for COVID-19-related provision for bad and doubtful
debts3
|
—
|
—
|
|
(171)
|
—
|
Net other
|
113
|
71
|
|
171
|
85
|
Regulatory operating profit
|
782
|
919
|
|
1,143
|
1,174
|
Pensions1
|
(17)
|
7
|
|
219
|
107
|
Regulatory interest charge
|
(176)
|
(227)
|
|
(339)
|
(316)
|
Regulatory tax charge
|
(159)
|
(179)
|
|
(279)
|
(263)
|
Regulatory earnings used to determine US RoE
|
430
|
520
|
|
744
|
702
|
1.
Following
a change in US GAAP accounting rules, an element of the pensions
charge is reported outside operating profit with effect from
2019.
2.
Based
on US GAAP accounting policies as applied by our US regulated OpCo
entities.
3.
US
RoE included an adjustment reflecting our expectation for future
recovery of COVID-19-related bad and doubtful debt costs in
2020/21. The adjustment is being unwound as regulated assets are
recognised in respect of the same debts in our US GAAP
accounts.
|
New England
|
|
New York
|
|
2023
|
2022
|
|
2023
|
2022
|
|
$m
|
$m
|
|
$m
|
$m
|
US equity base (average for the year)
|
5,155
|
6,253
|
|
8,670
|
7,946
|
US jurisdiction RoE
|
8.3%
|
8.3%
|
|
8.6%
|
8.8%
|
Asset growth, Value Added, Value Added per share and Value
Growth
To help readers’ assessment of the financial position of the
Group, the table below shows an aggregated position for the
Group, as viewed from a regulatory perspective. The asset
growth and Value Added measures included in the table below
are calculated in part from financial information used to derive
measures sent to and used by our regulators in the UK and US,
and accordingly inform certain of the Group’s regulatory
performance measures, but are not derived from, and cannot be
reconciled to, IFRS. These alternative performance measures include
regulatory assets and liabilities and certain IFRS assets
and liabilities of businesses that were classified as held for
sale under IFRS 5.
Asset growth is the annual percentage increase in our RAV and rate
base and other business balances (including the assets of NGV and
NG Partners) calculated at constant currency.
Value Added is a measure that reflects the value to shareholders of
our cash dividend and the growth in National Grid’s regulated
and non-regulated assets (as measured in our regulated asset base,
for regulated entities), and corresponding growth in net debt. It
is a key metric used to measure our performance and underpins our
approach to sustainable decision making and long-term management
incentive arrangements.
Value Added is derived using our regulated asset base and, as such,
it is not practical to provide a meaningful reconciliation from
this measure to an equivalent IFRS measure due to the reasons set
out for our regulated asset base. The calculation is set out
on page 94.
Value Added per share is calculated by dividing Value Added by
the weighted average number of shares (3,659 million) set out
in note 7.
Value Growth of 12.4% (2022: 12.8%) is derived from Value Added by
adjusting Value Added to normalise for our estimate of the
long-run inflation rate (3% RPI for RIIO-1 and our RPI-linked
net debt; 2% CPIH for RIIO-2). In 2023, the numerator for Value
Growth was £2,902 million (2022: £2,730 million).
The denominator is Group equity as used in the Group RoE
calculation, adjusted for foreign exchange movements.
The tables below include related balances and net debt up to the
dates of disposal for NECO and UK Gas Transmission and Metering,
despite being reclassified as held for sale
under IFRS.
|
2022/23
|
£m constant currency
|
31 March 2023
|
Disposal
of NECO
and UK Gas Transmission1
|
31 March 2022
|
Value Added
|
Change
|
UK RAV
|
28,205
|
(6,989)
|
31,577
|
3,617
|
11%
|
US rate base
|
23,038
|
(2,476)
|
23,628
|
1,886
|
8%
|
Total RAV and rate base
|
51,243
|
(9,465)
|
55,205
|
5,503
|
10%
|
National Grid Ventures and other
|
6,604
|
(143)
|
5,374
|
1,373
|
26%
|
Total assets (used to calculate asset growth)
|
57,847
|
(9,608)
|
60,579
|
6,876
|
11%
|
UK
other regulated balances2
|
(255)
|
(141)
|
75
|
(189)
|
|
US
other regulated balances3
|
3,226
|
(250)
|
2,792
|
684
|
|
Other balances
|
108
|
1,239
|
(808)
|
(323)
|
|
Total assets and other balances
|
60,926
|
(8,760)
|
62,638
|
7,048
|
|
|
|
|
|
|
|
Cash dividends
|
|
|
|
1,607
|
|
Adjusted
net debt movement1
|
|
|
|
(3,848)
|
|
Value Added
|
|
|
|
4,807
|
|
1.
The disposal of NECO on 25 May 2022 and UK Gas
Transmission on 31 January 2023 resulted in an increase in assets
which has been excluded from the total change in the
year used to calculate asset growth and Value Added for
2022/23. The decrease in RAV and rate base and other regulated
balances relating to the businesses disposed along
with the net debt disposed and cash proceeds
received (plus associated transaction costs) are excluded from
the total adjusted net debt movement in the year used to
calculate asset growth and Value Added.
2.
Includes
totex-related regulatory IOUs of £502 million, under-recovered
timing balances of £246 million and under‑recovered
legacy balances related to previous price controls
of £— million.
3.
Includes assets for construction work-in-progress
of £2,319 million, other regulatory assets related to timing
and other cost deferrals of £771 million
and net working capital
liabilities of £136 million.
|
2021/22
|
£m constant currency
|
31 March 2022
|
Acquisition
of
WPD1
|
31 March 2021
|
Value Added
|
Change
|
UK RAV
|
31,593
|
8,476
|
20,876
|
2,241
|
11%
|
US rate base
|
22,178
|
—
|
20,687
|
1,491
|
7%
|
Total RAV and rate base
|
53,771
|
8,476
|
41,563
|
3,732
|
9%
|
National Grid Ventures and other
|
5,226
|
—
|
4,920
|
306
|
6%
|
Total assets (used to calculate asset growth)
|
58,997
|
8,476
|
46,483
|
4,038
|
9%
|
UK
other regulated balances2
|
84
|
230
|
(140)
|
(6)
|
|
US
other regulated balances3
|
2,621
|
—
|
1,995
|
626
|
|
Other balances
|
(878)
|
(168)
|
(336)
|
(374)
|
|
Total assets and other balances
|
60,824
|
8,538
|
48,002
|
4,284
|
|
|
|
|
|
|
|
Cash dividends
|
|
|
|
922
|
|
Adjusted
net debt movement1
|
|
|
|
(1,373)
|
|
Value Added
|
|
|
|
3,833
|
|
1.
The
acquisition of WPD on 14 June 2021 resulted in an increase in
assets which has been excluded from the total change in the year
used to calculate asset growth and Value Added for 2021/22.
The increase in goodwill and intangible licence recognised on the
acquisition of WPD and the associated fair value of net debt
acquired and cash proceeds (along with associated transaction
costs) are excluded from the total adjusted net debt movement in
the year used to calculate asset growth and Value
Added.
2.
Includes
totex-related regulatory IOUs of £271 million, under-recovered
timing balances of £346 million and under‑recovered
legacy balances related to previous price controls
of £9 million.
3.
Includes
assets for construction work-in-progress of £2,139 million,
other regulatory assets related to timing and other cost deferrals
of £759 million and net working capital liabilities
of £277 million.
Figures relating to prior periods have, where appropriate, been
re-presented at constant currency, for opening balance adjustments
following the completion of the UK regulatory reporting pack
process and finalisation of US balances.
Regulatory gearing
Regulatory gearing is a measure of how much of our investment in
RAV and rate base and other elements of our invested capital
(including our investments in NGV, UK property and other assets and
US other assets) is funded through debt. Comparative amounts as at
31 March 2022 are presented at historical exchange rates and have
not been restated for opening balance
adjustments.
As at 31 March
|
2023
|
2022
|
|
£m
|
£m
|
UK RAV
|
28,205
|
31,593
|
|
US rate base
|
23,038
|
22,178
|
|
Other invested capital included in gearing calculation
|
6,604
|
5,226
|
|
Total assets included in gearing calculation
|
57,847
|
58,997
|
|
Net debt (including 100% of hybrid debt and held for
sale)
|
(40,973)
|
(48,043)
|
change
|
Group gearing (based on 100% of net debt including held for
sale)
|
71%
|
81%
|
-10% pts
|
Group gearing (excluding 50% of hybrid debt from net debt)
including held for sale
|
69%
|
80%
|
-10% pts
|
[1] Employee
and contractor lost time injury frequency rate per 100,000 hours
worked.
[2] UK
Transmission RAV indexed at CPIH in RIIO-T2; UK Electricity
Distribution RAV indexed at RPI during
RIIO-ED1.
[3] Prior to
completion, the Group received a £225 million dividend from UK
Gas Transmission.
[4] Our full
Policy Statement can be found here:
https://www.nationalgrid.com/document/149496/download
[5] Diverse
employees are defined as females or those that identify themselves
as being LGBTQ+, having a disability or being part of an ethnic
minority group.
[6] Full-year
underlying EPS (2020/21) as reported on 20 May
2021.
[7] With our 40%
stake in National Gas Transmission accounted for as held for sale,
it is not included in our underlying EPS guidance for
2023/24.
[8] In 2018/19
prices.
[9] For calendar
year 2022.
[10] In
accordance with IFRS 16 'Leases' when we sign a lease we are
required to recognise a lease liability on our balance sheet that
represents the net present value of future cash flows related to
the lease. On day 1 we also recognise a corresponding 'right of
use' asset which is recorded within our capital expenditure and is
depreciated over the life of the lease.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly
authorized.
|
NATIONAL GRID
plc
|
|
|
|
|
By:
|
/s/Ceri Jamond
_______________________
|
|
|
Ceri Jamond
Senior Assistant Company Secretary
|
Date:
18 May
2023
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