2013/14. Full Year Results. London Thursday 15 May 2014

Transcription

1 2013/14 Full Year Results London Thursday 15 May 2014

2 Cautionary statement This presentation 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 financial condition, its results of operations and businesses, strategy, plans and objectives. Words such as 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 forwardlooking statements. 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. Many of these assumptions, risks and uncertainties relate to factors that are beyond National Grid s ability to control or estimate precisely, such as changes in laws or regulations, presentations from and decisions by governmental bodies or regulators (including the timeliness of consents for construction projects); 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, the inability to carry out critical non network operations and damage to infrastructure, due to adverse weather conditions including the impact of Superstorm Sandy and other major storms as well as the results of climate change or due to unauthorised access to or deliberate breaches of National Grid s IT systems and supporting technology; performance against regulatory targets and standards and against National Grid s peers with the aim of delivering stakeholder expectations regarding costs and efficiency savings, including those related to investment programmes and internal transformation projects (including the US financial system and controls); 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 presentation include fluctuations in exchange rates, interest rates and commodity price indices; 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; inflation; 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, train or retain employees with the necessary competencies, including leadership skills and any significant disputes arising with the National Grid s employees or the breach of laws or regulations by its employees; and the failure to respond to market developments and grow the Company s business to deliver its strategy, as well as incorrect or unforeseen assumptions or conclusions (including unanticipated effects) relating to business development activity, including assumptions in connection with joint ventures. For further details regarding these and other assumptions, risks and uncertainties that may impact National Grid, please read the Strategic Review section and the Risk factors on pages 176 to 178 of National Grid s most recent Annual Report on Form 20-F, as updated by National Grid s unaudited half-year financial information for the six months ended 30 September 2013 published on 21 November 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 presentation. 2

3 Agenda Highlights Financial review Growth & strategy 3

4 2013/14 Full Year Results Highlights Steve Holliday Chief Executive

5 Highlights Solid financial performance 3.4bn investment Investment & efficiencies generating regulated asset growth of 5% 5

6 Highlights Solid financial performance 3.4bn investment Consumer benefits Around 70m savings to benefit consumers 6

7 Highlights Solid financial performance 3.4bn investment Consumer benefits Return on Equity 7

8 Highlights Solid financial performance 3.4bn investment Consumer benefits 9.0% US returns 9% or better for second year running Includes lower allowed returns in KEDNY & Long Island Generation 8

9 Highlights Solid financial performance 3.4bn investment Consumer benefits 9% US returns 12.7% UK returns 260 basis points above the base returns Totex incentives contribute almost half 9

10 Returns and value added Group Return on Equity 11.4% Good measure of the progress this year Value Added 2.1bn Clear, long term measure of value creation 10

11 Profit, EPS, dividend and scrip 3.7bn 2.6bn 2.0bn profit 3.7bn 54.0p 42p operating profit before tax earnings 54.0p earnings per share 42.03p dividend per share Interim Proactive scrip suspended approach reflecting to managing high scrip take dilution up in August Note: Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations All numbers include impacts of timing 11

12 Resilience Over 10bn* invested in security & resilience US Large increase in minor storms Investments made in vulnerable areas UK Exceptionally wet & windy winter Flood defence investment met customer requirements * Amount invested in security & resilience over the past 3 years 12

13 Safety Safest year ever UK safety world class in many areas Continues to be a priority Mirror UK progress in US 13

14 RIIO Preparations began well in advance of RIIO period Significant transformation RENEGOTIATING REORGANISING REENGINEERING 14

15 RENEGOTIATING New gas distribution contracts delivered Genuine step improvement New gas distribution contracts delivered well Transmission focused partnership arrangements Transmission competitive contracting & focused partnerships Potential for further benefits in transmission 15

16 REORGANISING New pay deal & pension arrangements New Gas Distribution field force arrangements Leaner Transmission organisation 16

17 REENGINEERING Delivering outputs at the lowest cost Savings across hundreds of small projects New gas distribution contracts delivered well Transmission competitive contracting & focused partnerships Potential for further benefits in transmission 17

18 Examples New gas distribution contracts delivered well Transmission competitive contracting & focused partnerships Potential for further benefits in transmission New approach to delivering outputs allows outperformance via totex incentive mechanism Must continue to respond to the challenge North West wind farm connection, saving c.40% through new technology & designs Reduce major boundary constraint across the Scottish border whilst saving 10m through innovations 18

19 Niagara Mohawk Niagara Mohawk Gas 6.4% RoE (Calendar year) Niagara Mohawk Electric 6.5% 5.6% Rate base (31 March 2012) Visual representation only not to scale 19

20 Niagara Mohawk NiMo Gas Improvement 270bps NiMo Electric 6.4% RoE (Calendar year) 10.3% 8.0% Rate base (31 March 2014) Visual representation only not to scale 20

21 Rhode Island Narragansett Electric 7.6% 6.4% Narragansett Gas 6.4% RoE (Calendar year) Rate base (31 March 2012) Visual representation only not to scale 21

22 Rhode Island Narragansett Electric 10.1% Narragansett Gas 9.9% Improvement 280bps 6.4% RoE (Calendar year) Rate base (31 March 2014) Visual representation only not to scale 22

23 US foundations Similar progress in US Meaningful improvements from Niagara Mohawk rate case Returns in Rhode Island above allowed Completion of LIPA handover US financial systems implementation & Elevate 2015 Overall year of consolidation 23

24 Nick Winser Nick Winser to step down from Board in July Remains chairman of National Grid Gas & National Grid Electricity Transmission President of ENTSO-E 24

25 Summary On course Building on progress of recent years Delivered priority goals for 2013/14 25

26 2013/14 Full Year Results Business Review Andrew Bonfield Finance Director

27 Introduction Introduced new metrics New reporting reflects stewardship of our businesses: Regulatory Financial Performance & Position Return on Equity Value Added 27

28 Regulated Financial Performance & Position Regulated Financial Performance Takes operating profit and aligns with regulatory treatment of expenditure and how we are rewarded Regulated Financial Position Includes other regulatory assets and liabilities held outside of our RAV 28

29 UK Electricity Transmission scorecard Return on Equity 12.4% Base Return 10.2% Other incentives 70bps Addl. Allowances 70bps Totex Incentive 80bps 30 1 Operating profit 2 Adjustments Reg. Financial Performance 1.1bn (21)m 1.1bn Regulated Asset Value 10bn 10.9bn Other Regulated Assets and Liabilities 0.2bn Reg. Financial Position 11.1bn 1 Percentage of group operating profit generated by UK electricity transmission 2 Business performance, excluding exceptional items, remeasurements and stranded cost recoveries 29

30 UK Gas Transmission scorecard Return on Equity 12.8% Base Return 10.0% Other incentives 110bps Addl. Allowances 210bps Totex Incentive (40)bps 11 1 Operating profit Adjustments Reg. Financial Performance 0.4bn 135m 0.6bn Regulated Asset Value 10bn 5.5bn Other Regulated Assets and Liabilities 0.2bn Reg. Financial Position 5.7bn 1 Percentage of group operating profit generated by UK electricity transmission 2 Business performance, excluding exceptional items, remeasurements and stranded cost recoveries 30

31 UK Gas Distribution scorecard Return on Equity 13.0% Base Return 9.9% Other incentives 20bps Addl. Allowances 10bps Totex Incentive 280bps 25 1 Operating profit Adjustments Reg. Financial Performance 0.9bn (49)m 0.9bn Regulated Asset Value 10bn 8.5bn Other Regulated Assets and Liabilities (51)m Reg. Financial Position 8.5bn 1 Percentage of group operating profit generated by UK electricity transmission 2 Business performance, excluding exceptional items, remeasurements and stranded cost recoveries 31

32 US regulated scorecard Return on Equity 9.0% New York 8.8% Massachusetts 7.4% FERC 11.8% Rhode Island 10.0% 31 1 Operating profit 1.1bn New rate plans in New York and Rhode Island Loss of deferrals Higher controllable costs Regulated Rate Base 10bn $16.3bn Other Regulated Assets and Liabilities $2.4bn Reg. Financial Position $18.7bn 1 Percentage of group operating profit generated by UK electricity transmission 2 Business performance, excluding exceptional items, remeasurements and stranded cost recoveries 32

33 m 3 Other activities Operating profit 131m French interconnector reclassified to other Non recurrence of last year s storm costs US system costs of 149m, in line with expectations operating profit at constant currency major storms Metering Grain LNG French Interconnector Property Corp centre US corporate & fin systems 2014 operating profit Visual representation only not to scale Business performance, excluding exceptional items, remeasurements and stranded cost recoveries Constant currency figures calculated by applying the average 2014 rate ($1.62 to 1.00) to 2013 results (when the average rate was $1.57 to 1.00) 33

34 m Operating profit Operating profit profit excluding timing & storms 3.7bn Operating profit flat 2% higher Year on year timing under-recovery of 59m Higher UK revenues & lower US storm costs Increasing controllable costs & loss of US deferral income 134 (59) 133 (125) 9 (42) (59) (36) 3,605 3, operating profit at constant currency timing major storms net regulated income controllable operating costs post retirement costs regulated depreciation & amortisation bad debts other operating costs US system costs other activities 2014 operating profit Visual representation only not to scale Business performance, excluding exceptional items, remeasurements and stranded cost recoveries. Prior period numbers adjusted for the implementation of IAS 19 (revised) Employee benefits Constant currency figures calculated by applying the average 2014 rate ($1.62 to 1.00) to 2013 results (when the average rate was $1.57 to 1.00) Post retirement costs represent pensions and other post employment benefits 34

35 Timing Ended the year 60m over-recovered RIIO means most UK timing balances will now have two year lag 35

36 Interest Finance costs 1,108m in line with 2013* Effective interest rate of 4.9% Refinancing debt at lower interest rates Business performance, excluding exceptional items, remeasurements and stranded cost recoveries * Constant currency figures calculated by applying the average 2014 rate ($1.62 to 1.00) to 2013 results (when the average rate was $1.57 to 1.00) 36

37 Interest, tax and earnings Finance costs 1,108m in line with 2013* Effective tax rate 22.5% at (581)m Earnings per share 54.0p Effective interest rate of 4.9% Refinancing debt at lower interest rates Tax rate 190bp lower than 2013 Reflects lower proportion of US profits and lower UK corporation tax rate 2,015m earnings 3,729m weighted avg. shares Business performance, excluding exceptional items, remeasurements and stranded cost recoveries * Constant currency figures calculated by applying the average 2014 rate ($1.62 to 1.00) to 2013 results (when the average rate was $1.57 to 1.00) 37

38 Cash flows and net debt Period ended 31 March 2014 m Operating profit 3,664 Depreciation & amortisation 1,417 Pensions (323) Working capital & other (189) Net operating cash flow 4,569 Net debt 21,190 Net operating cash flow 4.6bn Operating cash flow after capex Net debt 85m 21.2bn Operating cash flows from continuing operations before exceptional items, remeasurements, stranded cost recoveries and taxation 38

39 Technical guidance Continued totex outperformance in UK regulated businesses 12 months of NiMo revenues should improve US returns; cost pressures in Massachusetts Finance costs should remain consistent Expected capex investment similar to 2013/14 39

40 Dividend & scrip Dividend increasing 2.9%, at average UK RPI Reinstating scrip option for final dividend Proactive approach to managing scrip dilution Total scrip uptake to maintain target credit metrics 40

41 Strategy & returns Group Return on Equity 11.4% Providing a healthy, growing dividend alongside sustained asset growth Strong performance from UK business Stable US returns Strong treasury management * 41

42 Value added How we drive our shareholder return + Net asset growth 1,973m + Dividend paid 1,059m - Growth in net debt (917)m + Goodwill 18m = Value Added 2,133m Constant currency figures calculated by applying the closing 2014 rate ($1.67 to 1.00) to March 2013 balances (when the closing rate was $1.52 to 1.00) 42

43 Summary Earnings per share 54.0p Group return on equity of 11.4% Value added of 2.1bn Strong financial position Well positioned for the future 43

44 2013/14 Full Year Results Growth & strategy Steve Holliday Chief Executive

45 Driving returns & value added Return on Equity Value Added 2014/15 Strategic objectives Business development 45

46 Connections reminder Contracted generation connections Feb-2012 Aug-2013 Feb-2014 Group baseline level of growth of c.5% More clarity as EMR comes into effect Expect an increase in load related capex

47 US growth $2bn invested in US regulated businesses Strong demand led growth in Gas Distribution Connections up 5% Increased support for mains replacement 47

48 US growth New York accelerate the development of gas networks.. Massachusetts.. focus on network modernisation.. Keep pace with changing demands 48

49 US growth $2bn invested in US regulated businesses Strong demand led growth in Gas Distribution Further growth opportunities in Long Island Potential to increase US growth by 1-2% pa 49

50 Interconnection Increased interconnection could save UK consumers 1bn per annum Involved in a number of interconnection projects Good opportunities for growth with real advantages to customers Ofgem putting together financial framework 50

51 Positive growth outlook Positive growth in each scenario Secure growth outlook Deliver further value through outperformance 51

52 Focus on performance excellence UK Electricity Transmission UK Gas Transmission UK Gas Distribution US US Regulated Significant investment program Several important upgrades required Challenge to improve customer Deliver good service returns and growth whilst maintaining efficiency Sustain returns and growth 52

53 In summary Strong balance sheet Opportunities to improve returns Delivering attractive returns for shareholders 53

54 2013/14 Full Year Results Appendices

55 Electricity Transmission Operating Profit For the year ended 31 March ( m) Revenue 3,387 3,110 Pass through costs (1,655) (1,459) Net Revenue * 1,732 1,651 Depreciation & Amortisation (343) (323) Regulated Controllable costs (269) (242) Pensions (32) (34) Other costs (1) (3) Total UK Electricity Transmission operating profit ** 1,087 1,049 * Net revenue includes BSIS performance of 27m in 2014 (2013: loss 30m) ** Operating profit includes a contribution from other electricity services of 9m (2013: 6m) At actual currency Business performance, excluding exceptional items, remeasurements and stranded cost recoveries Prior year numbers restated for impact of changes to financial accounting standard IAS 19 ( Employee Benefits ) 55

56 Gas Transmission Operating Profit For the year ended 31 March ( m) Revenue 941 1,118 Pass through costs (206) (265) Net Revenue Depreciation & Amortisation (172) (162) Regulated Controllable costs (117) (122) Pensions (18) (19) Other costs (11) (19) Total UK Gas Transmission operating profit * * Operating profit includes a contribution from LNG Storage of 6m in 2014 (2013: 8m) At actual currency Business performance, excluding exceptional items, remeasurements and stranded cost recoveries Prior year numbers restated for impact of changes to financial accounting standard IAS 19 ( Employee Benefits ) 56

57 Electricity & Gas Transmission Depreciation & Amortisation For the year ended 31 March ( m) Electricity Transmission Owner Electricity System Operator Total UK Electricity Transmission Gas Transmission Owner Gas System Operator LNG Storage 2 1 Total UK Gas Transmission At actual currency Business performance, excluding exceptional items, remeasurements and stranded cost recoveries 57

58 UK Gas Distribution Operating Profit For the year ended 31 March ( m) Revenue 1,898 1,714 Pass through costs (367) (318) Net Revenue 1,531 1,396 Depreciation & Amortisation (271) (261) Regulated Controllable costs (331) (317) Pensions (40) (41) Other costs / contributions released Total Gas Distribution operating profit At actual currency Business performance, excluding exceptional items, remeasurements and stranded cost recoveries Prior year numbers restated for impact of changes to financial accounting standard IAS 19 ( Employee Benefits ) 58

59 US Regulated Operating Profit For the year ended 31 March ( m) Revenue 8,040 7,677 Pass through costs (4,165) (3,779) Net Revenue 3,875 3,898 Depreciation & Amortisation (419) (417) Regulated Controllable costs (1,371) (1,282) Pensions (72) (77) Bad debt (56) (59) Major Storms - (82) Other costs (832) (765) Total US Regulated operating profit 1,125 1,216 At constant currency Business performance, excluding exceptional items, remeasurements and stranded cost recoveries Prior year numbers restated for impact of changes to financial accounting standard IAS 19 ( Employee Benefits ) 59

60 Metering, Grain LNG, French Interconnector and Property Operating Profit For the year ended 31 March ( m) Revenue Depreciation & amortisation (85) (88) Operating costs (excluding depreciation & amortisation) (74) (81) Metering operating profit Revenue Depreciation & amortisation (55) (54) Operating costs (excluding depreciation & amortisation) (69) (69) Grain LNG operating profit Revenue Depreciation & amortisation (4) (4) Operating costs (excluding depreciation & amortisation) (14) (10) Interconnector operating profit Revenue Depreciation & amortisation (2) (1) Operating costs (excluding depreciation & amortisation) (15) (25) Property operating profit At actual currency Business performance, excluding exceptional items, remeasurements and stranded cost recoveries Prior year numbers restated for impact of changes to financial accounting standard IAS 19 ( Employee Benefits ) 60

61 Exchange rates For the year ended 31 March Closing $ / rate Average $ / rate for the period For the year ended 31 March ( m) 2014 Impact on operating profit * (34) Impact on interest * 17 Impact on tax, JVs and minority interests * 5 Net impact on earnings * (12) Impact on net debt ** 1,156 Impact on book value of assets ** (1,314) * Currency impact calculated by applying the average March 2014 rate to 2013 results ** Currency impact calculated by applying the March 2014 rate to March 2013 balances Business performance, excluding exceptional items, remeasurements and stranded cost recoveries Prior year numbers restated for impact of changes to financial accounting standard IAS 19 ( Employee Benefits ) 61

62 Pensions & other post-retirement benefit obligations (IAS 19 data) At 31 March 2014 ( m) ESPS NGUK PS Pensions OPEBs NG total Market value of assets 1,957 15,452 4,229 1,620 23,258 Present value of liabilities (2,467) (15,695) (4,752) (2,755) (25,669) Net liability (510) (243) (523) (1,135) (2,411) Taxation Liability net of taxation (408) (194) (313) (679) (1,594) Discount rates UK US OPEBs = other post employment benefits 62

63 Timing Impacts m UK Electricity Transmission UK Gas Transmission UK Gas Distribution US Regulated 2013/14 Opening balance 5 19 (8) /14 Opening balance restatement adjustment (12) (9) - - (21) 2013/14 over/(under) recovery (60) (21) (42) 2013/14 Closing balance to recover (67) (11) Total 2012/13 Opening balance (24) /13 over/(under) recovery (10) (19) /13 Closing balance to recover 5 19 (8) Year on year timing variance (89) (38) (59) 2013/14 opening balance restatement reflects finalisation of UK timing balances All USD balances stated using the average 2014 rate ($1.62 to 1.00) 63

64 UK Transmission and UK Distribution Regulated asset values ( RAV ) and returns UK Electricity Transmission UK Gas Transmission UK Gas Distribution Regulator Ofgem Ofgem Ofgem Rate base / RAV 10,871m 5,547m 8,515m Base allowed return (assumed CoD 2.92%) 4.55% 4.38% 4.24% ( vanilla WACC) ( vanilla WACC) ( vanilla WACC) Allowed RoE (nominal) 10.2% 10.0% 9.9% Achieved RoE (nominal) 12.4% 12.8% 13.0% Equity / debt (assumed) 40 / / / 65 Sharing factors (shareholder retention at RoE) 46.9% 44.4% 63.0% plus incentive schemes plus incentive schemes plus incentive schemes from April 2014 from April 2014 from April 2014 Base allowed return (assumed CoD 2.72%) 4.43% 4.25% 4.11% CoD = Cost of Debt 64

65 New York Jurisdiction Regulated asset base ( Rate base ) and returns Rate bases are reported by regulatory entity as at 31 March Returns are those for the calendar year ended 31 December 2013 Long Island Downstate New York Upstate New York Upstate New York (KEDLI) (KEDNY) (NMPC Gas) (NMPC Electric) Regulator New York PSC New York PSC New York PSC New York PSC Rate base / RAV $2,094m $2,390m $1,013m $4,248m Base allowed return 9.80% 9.40% 9.30% 9.30% (RoE) (RoE) (RoE) (RoE) Achieved return 8.8% 9.5% 10.3% 8.0%* Equity / debt (assumed) 45 / / / / 52 Sharing factors (shareholder retention at RoE) Last / next rate case filing 100% to 10.5% 50% to 10.3% 50% to 10.3% 50% to 12.5% 25% to 11.3% 25% to 11.3% 20% above 9.4% 35% to 13.5% 10% above 11.3% 10% above 11.3% 0% above 13.5% Effective from Effective from Effective from Effective from January 2008 January 2013 April 2013 April 2013 * Partial year rate increase impact; full year equivalent approximately 9% 65

66 Massachusetts and Rhode Island Jurisdiction Regulated asset base ( Rate base ) and returns Rate bases are reported by regulatory entity as at 31 March Returns are those for the calendar year ended 31 December 2013 Massachusetts Electric * Massachusetts Gas ** Narragansett Electric (Distribution) Narragansett Gas Regulator Massachusetts DPU Massachusetts DPU Rhode Island PUC Rhode Island PUC Rate base / RAV $1,812m $1,515m $567m $466m Base allowed return 10.35% 9.75% 9.50% 9.50% RoE RoE RoE RoE Achieved return 6.4% 8.5% 10.1% 9.9% Equity / debt (assumed) 50 / / / / 51 Sharing factors (shareholder retention at RoE) Last / next rate case filing 100% to 10.35% 100% to 9.5% 100% to 9.5% 50% above10.35% 100% 50% to 10.5% 50% to 10.5% 25% above 10.5% 25% above 10.5% Effective from Effective from Effective from Effective from January 2010 November 2010 February 2013 February 2013 * Includes Nantucket Electric. The rate bases includes transmission assets ** Massachusetts Gas currently comprises two separate entities: Boston Gas and Colonial Gas. Bases allowed and achieved RoEs are weighted averages (using rate base) 66

67 FERC Jurisdiction Regulated asset base ( Rate base ) and returns Rate bases are reported by regulatory entity as at 31 March Returns are those for the calendar year ended 31 December 2013 New England Power Narragansett Electric (Transmission) Canadian Interconnector * Long Island Generation ** Regulator FERC FERC FERC FERC Rate base / RAV $1,277m $499m $27m $433m Base allowed return 11.14% 11.14% 13.00% 10.00% RoE RoE RoE RoE Achieved return 11.7% 12.0% 13.0% 11.9% Equity / debt (assumed) 65 / / / / 54 Sharing factors (shareholder retention at RoE) 100% 100% 100% 100% Last / next rate case filing Monthly formula rates Monthly formula rates Monthly formula rates Effective from May 2013 National Grid retains 100% of the return it earns on its stake of ~54% in the Canadian Interconnector ** Long Island Generation rate base includes peaking plant 67

68 Return on Capital Employed Year ended 31 March 2014 Year ended 31 March 2013 m UK US UK US (Sto rm adjusted) US Statutory Operating Profit 2,213 1,388 2,300 1,523 1,438 Exceptional items, remeasurements and stranded cost recoveries 195 (263) 74 (184) (184) Business Performance Operating Profit 2,408 1,125 2,374 1,339 1,254 Depreciation and amortisation IFRS EBITDA 3,194 1,544 3,120 1,769 1,684 Regulatory adjustments Movement in timing / IOU's (106) (10) (36) Performance RAV created Regulatory depreciation (1,274) (419) (1,085) (430) (430) RPI indexation (post tax) Pension adjustment (102) (120) (83) (181) (181) Fast/slow money adjustment (155) - (228) - - UK regulatory deferred taxation Adjusted profit before tax 2, ,518 1,178 1,093 Tax rate 23% 40% 24% 40% 40% Tax (569) (398) (604) (471) (437) Adjusted profit after tax 1, , Opening capital employed 23,841 9,287 22,207 9,217 9,217 Post tax RoCE 8.0% 6.4% 8.6% 7.7% 7.1% At actual currency Prior year numbers restated for impact of changes to financial accounting standard IAS 19 ( Employee Benefits ) 68

69 Group Return on Equity For the year ended 31 March ( m) (storm adjusted) (storm adjusted) Regulatory operating profit per ROCE IFRS operating profit for non-regulated companies Share of post tax results of JV s Minority Interest Treasury managed interest deduction Group tax charge Tax adjustment for ROCE adjustments and non treasury interest Adjusted profit for RoE 3,468 3,696 3,611 3,472 3, (1) (1) (2) (2) (1,055) (1,057) (1,057) (1,042) (1,042) (581) (665) (619) (744) (697) ,076 2,097 2,007 1,902 1,833 Opening capital employed Non-regulated companies opening net book value Joint ventures Opening Goodwill Group enterprise value Opening net debt Group equity value 33,128 31,424 31,424 29,272 29,272 1, ,205 1, ,028 4,776 4,776 4,776 4,776 39,712 37,520 37,520 35,609 35,609 (21,429) (19,597) (19,597) (18,731) (18,731) 18,283 17,923 17,923 16,878 16,878 Group RoE nominal (adjusted group profit after tax / group equity value) 11.4% 11.7% 11.2% 11.3% 10.9% Business performance, excluding exceptional items, remeasurements and stranded cost recoveries Prior year numbers restated for impact of changes to financial accounting standard IAS 19 ( Employee Benefits ) 69

70 Interest Cover For the year ended 31 March ( m) Interest expense (P&L) Hybrid interest reclassified as dividend Capitalised interest Interest on pensions debt adjustment Interest on decommissioning liabilities adjustment Interest on lease rentals adjustment Net pensions interest on net scheme liabilities Unwinding of discounts on provisions Adjusted interest expense ,144 1,154 1,118 (52) (2) (128) (135) (103) (73) (75) (72) 1,114 1,161 1,171 Net cash inflow from operating activities Interest income on financial instruments Interest paid on financial instruments Dividends received Working capital adjustment add back excess employer pension contributions add back Hybrid interest reclassified as dividend add back lease rentals Difference in net interest expense in income statement to cash flow Difference in current tax in income statement to cash flow add back current tax related to prior years 4,019 3,750 4, (901) (792) (749) (146) (189) (273) (314) (97) (239) (149) Adjusted funds from operations 3,400 3,399 3,365 Interest cover (adjusted funds from operations + adjusted interest expense / adjusted interest expense) 4.1x 3.9x 3.9x Business performance, excluding exceptional items, remeasurements and stranded cost recoveries Prior year numbers restated for impact of changes to financial accounting standard IAS 19 ( Employee Benefits ) 70

71 Weighted average number of shares For year ended 31 March Number of shares (millions): Prior period as reported (weighted average) Current period opening shares 3,665 August 2013 dividend scrip shares Other share issuances (weighted from issuance) 4 - Weighted average number of shares (restated) 3,729 3,724 Business performance earnings restated ( m) 2,015 1,913 Business performance EPS (restated) 54.0p 51.4p Business performance, excluding exceptional items, remeasurements and stranded cost recoveries Prior year numbers restated for impact of changes to financial accounting standard IAS 19 ( Employee Benefits ) and scrip dividend shares 71