Business Context and Reporting Period
Company: National Grid plc
Filing Type: Form 6-K (Half-Year Results)
Reporting Period: Six months ended 30 September 2024
Announcement Date: 7 November 2024
National Grid, a leading energy transmission and distribution company, reported strong momentum in its capital investment program, delivering a record £4.6 billion in the first half of the year. The company successfully completed a £7 billion Rights Issue in June 2024 to fund a five-year, £60 billion investment plan. Strategic shifts include the sale of the UK Electricity System Operator (ESO) to the government and the classification of National Grid Renewables and Grain LNG as held for sale to focus on core network businesses.
Key Financial Metrics
| Metric (£m unless stated) | 2024 (Actual) | 2023 (Actual) | % Change |
|---|---|---|---|
| Statutory Operating Profit (Continuing) | 1,309 | 1,985 | (34%) |
| Underlying Operating Profit (Continuing) | 2,046 | 1,796 | 14% |
| Profit Before Tax (Underlying) | 1,436 | 1,144 | 26% |
| Statutory EPS (pence) | 12.6 | 26.7 | (53%) |
| Underlying EPS (pence) | 28.1 | 25.9 | 8% |
| Capital Investment | 4,603 | 3,946 | 17% |
| Net Debt (as at 30 Sep 2024) | (38,540) | (43,607) | Reduced by £5.1bn |
| Interim Dividend (pence) | 15.84 | 19.40 | (18%) |
Note: Statutory results were significantly impacted by adverse timing movements, particularly in the ESO. Underlying results exclude exceptional items, timing differences, and deferred tax impacts in UK regulated businesses.
Material Changes vs. Prior Period
- Profitability Divergence: Statutory operating profit fell 34% due to a £942 million adverse swing in regulatory timing (primarily the return of ESO over-collections). Conversely, underlying operating profit rose 14% (15% at constant currency), driven by higher rates in New York, increased UK Electricity Transmission revenues, and lower environmental charges in New York.
- Capital Investment Surge: Investment reached a record £4.6 billion, up 17% year-on-year. This was driven by UK Accelerated Strategic Transmission Investment (ASTI) projects, New York's Smart Path Connect and CLCPA projects, and gas network replacements.
- Portfolio Restructuring: The ESO was sold to the UK government for an enterprise value of £630 million (completed 1 October 2024). The final 20% stake in National Gas Transmission was sold for £686 million. National Grid Renewables and Grain LNG are now classified as held for sale.
- Balance Sheet: Net debt decreased by £5.1 billion to £38.5 billion, largely due to the £6.8 billion net proceeds from the Rights Issue and asset disposals.
Guidance, Outlook, and Risks
Five-Year Financial Framework (2024/25 – 2028/29)
- Capital Investment: Approximately £60 billion cumulative investment.
- Asset Growth: Group asset CAGR of around 10%.
- Earnings Growth: Underlying EPS CAGR of 6-8% from a 2024/25 baseline.
- Gearing: Regulatory gearing expected to fall to the low-60% range by March 2025, trending towards the high-60% range by the end of the RIIO-T3 period.
2024/25 Forward Guidance
- Operating Profit: Expected to grow around 10% year-on-year.
- EPS: Underlying EPS expected to be offset by the increased share count from the Rights Issue, despite improved operational performance.
- Net Debt: Expected to decrease by around £1.5 billion for the full year.
Risks and Contingencies
- Regulatory & Policy: Outcomes of upcoming price controls (RIIO-T3 in UK, rate cases in US) and planning reforms.
- Operational: Cyber-attacks, severe weather events (storms), and supply chain constraints for major capital projects.
- Financial: Fluctuations in exchange rates (USD/GBP), interest rates, and access to capital markets.
- Climate: Risks associated with meeting net-zero targets and the transition to clean energy.
Investor Verification Checklist
- Timing Reversals: Verify the impact of the £888 million adverse timing swing in the ESO on statutory results versus the underlying performance.
- Dividend Policy: Confirm the "rebased" dividend per share of 45.26p for 2023/24 and the commitment to grow this in line with UK CPIH.
- Capital Delivery: Monitor progress on the 17 UK ASTI projects and the $4 billion Upstate Upgrade in New York to ensure the £60 billion five-year investment plan remains on track.
- Disposal Proceeds: Track the finalization of the ESO sale and the pending sales of National Grid Renewables and Grain LNG to assess cash flow impacts.
- Regulatory Outcomes: Watch for final determinations on the UK RIIO-T3 price control and US rate cases (specifically Niagara Mohawk) which could alter revenue allowances.