Business Context and Reporting Period
Company: National Grid plc
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Date: December 18, 2024
Subject: Publication of the RIIO-T3 Business Plan for National Grid Electricity Transmission (NGET).
Reporting Period Covered: The plan covers the regulatory period from April 2026 to March 2031.
Key Financial Metrics and Investment Plan
The filing details a proposed investment framework rather than historical financial results. Key metrics include:
- Total Proposed Investment (RIIO-T3): Up to £35 billion over five years (2026–2031), quoted on a 2023/24 price base.
- Baseline Investment: Over £11 billion for network maintenance, upgrades, and initial Accelerated Strategic Transmission Investment (ASTI) projects.
- Pipeline Investment: Approximately £24 billion, including £15 billion for capacity increases via 14 confirmed ASTI projects.
- Group Investment Context: Consistent with an expected £60 billion group investment across five years to March 2029.
- Allowed Cost of Equity: Proposed at 6.3% real (CPIH stripped) at 60% gearing.
- Consumer Savings: Plan aims to avoid approximately £12 billion in system constraint costs.
Material Changes and Strategic Initiatives
The RIIO-T3 plan represents a significant shift in scale and scope compared to prior periods:
- Capacity Expansion: Aims to nearly double the amount of power transferable around the UK by upgrading c.3,500km of overhead lines.
- Connection Targets: Plans to connect 35GW of new generation and storage, plus 19GVA of large demand customers (e.g., data centers, gigafactories).
- Future Options: Creation of an additional 26GW of future connection options.
- Reliability: Commitment to maintain world-leading 99.9999% reliability levels.
- Sustainability: Target of a 50% reduction in own emissions versus a 2018/19 baseline and biodiversity net gain equivalent to over 8,000 acres of land.
Guidance, Outlook, and Risks
Management Commentary: CEO John Pettigrew described the plan as the "most significant step forward in the electricity network that we've seen in a generation," emphasizing the need for an investable framework to meet the UK's climate goals.
Regulatory Timeline:
- Draft determinations from Ofgem expected in Summer 2025.
- Final determinations expected in late 2025.
Risks and Contingencies:
- Regulatory Approval: Success depends on Ofgem agreeing to the proposed financial framework and cost of equity.
- Forward-Looking Uncertainty: Actual results may differ due to changes in laws, government priorities, third-party project delivery, and climate-related risks.
- Market Factors: Exposure to exchange rate fluctuations, interest rates, and commodity price indices.
- Operational Risks: Network failure, adverse weather, and IT system reliability.
Investor Verification Checklist
- Verify Ofgem's draft and final determinations in 2025 regarding the approved cost of equity and total expenditure allowance.
- Monitor the progress of the 17 ASTI projects and the timeline for the National Energy System Operator's (NESO) connection reform process in 2025.
- Assess the impact of the proposed £35 billion investment on the company's debt levels and cash generation capabilities.
- Track the alignment of the plan with the UK government's evolving clean power plan and potential changes in regulatory priorities.
- Review the company's ability to secure the supply chain and funding required for the unprecedented scale of investment.