Business Context and Reporting Period
Company: National Grid plc
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Full year ended 31 March 2024
Filing Date: 23 May 2024
National Grid, a leading energy transmission and distribution company operating in the UK and US, reported full-year results alongside a strategic pivot to a "pureplay networks" business. The company announced a new five-year financial framework (2024/25 to 2028/29) targeting £60 billion in capital investment, nearly double the previous five-year period. To fund this, National Grid announced a fully underwritten £7 billion Rights Issue. The company also confirmed intentions to sell its UK LNG asset (Grain LNG) and US onshore renewables business (National Grid Renewables).
Key Financial Metrics
| Metric | 2024 (Actual) | 2023 (Actual) | Change |
|---|---|---|---|
| Statutory Operating Profit (£m) | 4,475 | 4,879 | (8%) |
| Underlying Operating Profit (£m) | 4,773 | 4,582 | 4% |
| Underlying Operating Profit (Constant Currency) (£m) | 4,773 | 4,518 | 6% |
| Statutory EPS (pence) | 60.0 | 74.2 | (19%) |
| Underlying EPS (pence) | 78.0 | 74.5 | 5% |
| Capital Investment (£m) | 8,235 | 7,593 | 8% |
| Net Debt (£m) | (43,607) | (40,973) | 6% increase |
| Regulatory Gearing | 69% | 71% | -200bps |
| Dividend per Share (pence) | 58.52 | 55.44 | 6% |
Material Changes vs. Prior Period
- Profitability: Statutory operating profit declined 8% primarily due to £1.0 billion in exceptional net charges (including a £496 million environmental provision in New York and a £498 million provision for UK Electricity System Operator timing over-recoveries). Conversely, underlying operating profit grew 4% (6% at constant currency), driven by higher revenues in UK Electricity Transmission and US rate increases, offset by lower incentives in UK Electricity Distribution.
- Capital Investment: Reached a record £8.2 billion, an 8% increase year-on-year. Growth was driven by early investment in UK Accelerated Strategic Transmission Investment (ASTI) projects and US transmission upgrades (Smart Path Connect), partially offset by lower spend in National Grid Ventures as major projects neared completion.
- Asset Growth: Group asset growth was 9.7%, within the 8-10% target range, driven by capital investment and RAV indexation.
- Dividends: The Board recommended a final dividend of 39.12p, bringing the full-year dividend to 58.52p, a 5.55% increase aligned with UK CPIH inflation.
Guidance, Outlook, and Risks
Five-Year Financial Framework (2024/25 – 2028/29)
- Investment: £60 billion total capital investment, with ~£51 billion aligned to EU Taxonomy principles.
- Asset Growth: Expected Compound Annual Growth Rate (CAGR) of ~10%, with group assets trending toward £100 billion by 2029.
- Earnings Growth: Underlying EPS CAGR of 6-8% from a 2024/25 baseline (adjusted for the Rights Issue).
- Gearing: Regulatory gearing expected to fall to the low 60% range by March 2025 post-Rights Issue, trending back to the high 60% range by the end of RIIO-T3.
2024/25 Forward Guidance
- Underlying EPS expected to be broadly in line with 2023/24 (adjusted for bonus shares from the Rights Issue).
- Capital investment expected to be around £10 billion.
- Net debt expected to decrease by ~£0.5 billion due to Rights Issue proceeds.
Risks and Contingencies
- Regulatory: Outcomes of upcoming price controls (RIIO-T3 in UK) and rate cases (New York, Massachusetts) are critical to revenue allowances.
- Environmental: Significant uncertainty regarding remediation costs for legacy sites in the US (e.g., Gowanus Canal), leading to a £496 million provision increase in 2024.
- Operational: Risks related to supply chain constraints, inflation, and major storm events impacting network reliability and costs.
- Disposals: Timing and proceeds from the sale of Grain LNG, National Grid Renewables, and the remaining stake in UK Gas Transmission.
Key Facts for Investor Verification
- Rights Issue Execution: Verify the completion of the £7 billion fully underwritten Rights Issue and the resulting impact on share count and diluted EPS.
- Disposal Timelines: Monitor the progress and final terms of the sales of Grain LNG, National Grid Renewables, and the remaining 20% stake in UK Gas Transmission.
- Regulatory Approvals: Track the final decisions on the UK RIIO-T3 price control methodology and US rate cases (specifically New York KEDNY/KEDLI and Massachusetts MECO) which underpin future revenue growth.
- Environmental Provisions: Review updates on the scope and cost of US environmental remediation, particularly the Gowanus Canal and Manufacturing Gas Plant sites, which drove a significant exceptional charge in 2024.
- ASTI Project Delivery: Assess the progress of the 17 UK Accelerated Strategic Transmission Investment projects, which are central to the new £60 billion investment plan.