Full Year Results Introduction

Transcription

1 Full Year Results Introduction Sir John Parker Chairman 20 May 2010

2 Cautionary Statement This presentation contains certain statements that are neither reported financial results nor other historical information. These statements are forwardlooking 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, intends, plans, believes, seeks, estimates, targets, may, will, continue, project and similar expressions, as well as statements in the future tense, identify forward-looking 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 such as changes in laws or regulations and decisions by governmental bodies or regulators; breaches of, or changes in, environmental, climate change and health and safety laws or regulations; network failure or interruption, the inability to carry out critical non-network operations and damage to infrastructure; performance against regulatory targets and standards, including delivery of costs and efficiency savings; customers and counterparties failing to perform their obligations to National Grid; and unseasonable weather affecting energy demands. Other factors that could cause actual results to differ materially from those described in this presentation include fluctuations in exchange rates, interest rates, commodity price indices and settlement of hedging arrangements; restrictions in National Grid s borrowing and debt arrangements; changes to credit ratings of National Grid and its subsidiaries; adverse changes and volatility in the global credit markets; National Grid s ability to access capital markets and other sources of credit in a timely manner and other sources of credit on acceptable terms; deflation or inflation; the seasonality of National Grid s businesses; the future funding requirements of National Grid s pension schemes and other post-retirement benefit schemes, and the regulatory treatment of pension costs; the loss of key personnel or the inability to attract, train or retain qualified personnel; new or revised accounting standards, rules and interpretations, including changes of law and accounting standards that may affect National Grid s effective rate of tax; incorrect assumptions or conclusions underpinning business development activity, and any unforeseen significant liabilities or other unanticipated or unintended effects of such activities and the performance of National Grid s subsidiaries. In addition National Grid s reputation may be harmed if consumers of energy suffer a disruption to their supply. For a more detailed description of some of these assumptions, risks and uncertainties, together with any other risk factors, please see National Grid s filings with and submissions to the US Securities and Exchange Commission (the SEC) (and in particular the Risk Factors and Operating and Financial Review sections in its most recent Annual Report on Form 20-F). The effects of these factors are difficult to predict. 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 its results to differ materially from those contained in any forward-looking statement. Except as may be required by law or regulation, National Grid undertakes no obligation to update any of its forward-looking statements, which speak only as of the date of this presentation.

3 Full Year Results Headlines Steve Holliday Chief Executive

4 Financial performance Operating profit Up 7% Profit before tax Up 12% Earnings per share Up 14% Dividend per share * Up 8% * Recommended by the Board All business performance figures exclude exceptional items, remeasurements and stranded cost recoveries and are for continuing operations

5 Operational performance Safety 40% improvement in Injury Frequency Rate Reliability All UK & US regulatory targets met for the first time Customer satisfaction Some work to do to improve against peers

6 Delivered priorities for 2009/10 Regulation 65% of US rate base updated (a) Driving efficiency 7.6% 2009/10 efficiency metric (b) Disciplined investment 3.3bn delivered in 2009/10, 99% remunerated (c) (a) 35% of US rate base is currently pending decisions on new rate plans (b) Regulated controllable costs divided by asset base (c) Capital investment for continuing operations, excluding Joint Ventures

7 Funding UK growth strategy Group capital expenditure c. 22 billion in next 5 years Fully underwritten rights issue 3.2 billion gross proceeds 3.3bn Maintain single A credit ratings Proven delivery track record

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9 Full Year Results Steve Lucas Finance Director

10 Financial results Strong results Operating profit up 7% Effective interest down to 4.6%* EPS up 14% Dividend up 8% Well positioned for 2010/11 * Interest rate on treasury managed debt Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations

11 Transmission Operating profit 13% up at constant currency Transmission operating profit 47% share of group 142m 35m 23m (33)m 1,464m 1,297m 2009 Net regulated income Operating profit at constant currency UK incentive schemes Controllable costs Other, mainly French Interconnector 2010 Visual representation only not to scale Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations Constant currency figures calculated by applying the average 2010 rate ($1.58 to 1.00) to 2009 results (when the average rate was $1.54 to 1.00)

12 Gas Distribution Operating profit 10% down at constant currency Gas Distribution operating profit 36% share of group 65m 1,268m (177)m (19)m 1,137m 2009 UK net regulated income Operating profit at constant currency US net regulated income of which 115m is timing Other 2010 Visual representation only not to scale Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations Constant currency figures calculated by applying the average 2010 rate ($1.58 to 1.00) to 2009 results (when the average rate was $1.54 to 1.00)

13 Electricity Distribution and Generation Operating profit 45% up at constant currency E, D & G operating profit 12% share of group 35m 80m 1m 374m 258m 2009 Net regulated income Lower storm costs Other 2010 Operating profit at constant currency Visual representation only not to scale Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations Constant currency figures calculated by applying the average 2010 rate ($1.58 to 1.00) to 2009 results (when the average rate was $1.54 to 1.00)

14 Non-regulated and other Operating profit 125% up at constant currency Non-reg. & other operating profit 5% share of group 30m 5m 17m 29m 146m 65m 2009 Metering Grain LNG Property Other 2010 Operating profit at constant currency Visual representation only not to scale Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations Constant currency figures calculated by applying the average 2010 rate ($1.58 to 1.00) to 2009 results (when the average rate was $1.54 to 1.00)

15 Cost savings and efficiency metric 2009/10 efficiency metric (b) 7.6% 40bps improvement* Real controllable costs (a) reduced by 2% KeySpan synergy savings on track at $159 million 181m 143m Annualised procurement savings in excess of 160 million 2,110m 2,070m 2008/ /10 Real controllable costs Bad debts * 2008/09 restated from 8.1% for currency impact, cost reclassifications and Massachusetts gas goodwill adjustment (a) Regulated controllable costs excluding bad debts on a constant currency basis and adjusted for RPI. Constant currency figures calculated by applying the average 2010 rate ($1.58 to 1.00) to 2009 results (when the average rate was $1.54 to 1.00) (b) Adjusted controllable costs (a) divided by asset base. Asset base: mid-year UK regulatory asset value plus US rate base at constant currency.

16 Earnings, return on equity and dividend Earnings per share 14% up on prior year Strong underlying growth Effective interest rate* 4.6% Group return on equity 11.3% 3-year average Dividend per share 8% up in line with policy 15% annual return on equity Full year dividend of 38.49p Dividend cover up, at 1.5 times *Treasury managed effective interest rate Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations

17 Capital investment 2009/10 capital investment 3.3 billion 2009/10 capital investment: Gas Distribution 1,079m 99% supported by regulatory agreements/long-term customer contracts Transmission 1,494m 307m 372m Non-regulated & other Electricity Distribution & Generation Capital investment for continuing operations, excluding Joint Ventures

18 Operating cash flow Net operating cash flow 24% up at actual FX For the year ended 31 March 2010 m 3,336m 4,146m Operating profit 3,121 Depreciation & amortisation 1,188 Pensions (521) Working capital & other 358 Net operating cash flow 4, Visual representation only not to scale Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations Further details on pensions including IAS19 data and regulatory recovery principles available in the Appendix

19 Net Debt Closing net debt (22.1)bn m Net debt at 1 April 2009 (22,673) Operating cash flow (a) 4,146 Interest & tax (871) Investment (3,176) (22.7)bn (22.1)bn Dividends (688) Other (b) 383 Net debt before FX (22,879) FX movements Net debt at 31 March 2010 (22,139) (a) Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations (b) Includes cash flows relating to exceptional operating items, stranded cost recoveries and other non cash items

20 Improvement in US outlook US return (nominal return on equity) Delivering Agreed or under review - too early to contribute to US returns Allowed 10.2% 11.3% 10.2% Achieved 40% US rate base 25% US rate base Decisions pending* 4.5% 35% US rate base Returns calculated on a weighted rate base US rate base as at 31 December 2009 *Nimo electric returns exclude stranded costs

21 Good UK operational returns Allowed real vanilla return Achieved real vanilla return Achieved nominal RoE normalised for RPI* Electricity Transmission 5.05% 6.6% 14.2% Gas Transmission 5.05% 7.6% 16.8% Gas Distribution 4.94% 6.3% 14.2% * Normalised for 3.0% p.a. long run UK RPI UK rate base as at 31 March 2010

22 Summary Strong results Well positioned for 2010/11

23 Strategic Priorities Steve Holliday Chief Executive

24 US priorities NMPC Electric $369m Massachusetts Gas $106m requested revenue increases * Rhode Island Electricity Filed awaiting decision Appropriate structural changes to remuneration framework proposed Effective in second half of 2010/11 Appeal launched Filing new rate case in second half of 2010/11 New Hampshire Evaluating options for exit * Figures stated are increases requested in first year

25 UK energy landscape is changing Group capital investment 14 billion in last 5 years Greater clarity on size and timing of new growth investments Scenario planning ENSG report * New investment regardless of generation mix Capital investment increase 5.6 billion over next 5 years Existing powerstation closures ~25% of total capacity by 2020 Gas from UK sources ~25% of total supplies by 2020 * Electricity Networks Strategy Group: Our Electricity Transmission Network: A Vision for 2020 (Full Report)

26 Good visibility of returns Investment 99% remunerated Transmission price controls Increased allowances up to 2012 Scope for enhanced returns Core investments into RAV Unregulated investments case-by-case

27 Fully underwritten rights issue Key terms 3.2bn net proceeds 3.3bn gross proceeds (23% of market capitalisation*) Price Closing price 6.20 Terms Basis 2 for 5 Ex. Dividend price 5.95 New shares 990m Issue price for new shares 3.35 Theoretical ex. rights price 5.21 Theoretical nil paid price 1.86 Discount to TERP 35.7% Discount to ex. div closing price 43.7% Bonus element of rights * Market capitalisation ex - dividend

28 Core growth investment Onshore transmission infrastructure 3.6bn major asset replacement 1.0bn Core license area Specific projects include: ENSG identified electricity transmission infrastructure Upgrades to the gas transmission system New deep tunnel, cable networks in London & Midlands Minimal regulatory lag

29 Additional UK investment opportunities Investment opportunities c. 1.0bn Pipeline of opportunities New electricity Interconnectors Grain phase IV expansion Offshore electricity transmission networks New CO 2 transportation networks Contingent on securing attractive returns

30 Unchanged dividend policy Dividend policy to % increase per annum Dividend policy post 2012 Target real growth reflecting the growth prospects of the business

31 Summary & outlook Strong performance Strategy delivering Disciplined capital investment Confidence in UK growth opportunities Rights issue provides flexibility

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33 Appendix 2009/10

34 Business performance results For the year ended 31 March ( m) change Operating profit (actual FX) 3,121 2,915 7% Operating profit (constant FX) 3,121 2,888 8% Profit before tax (actual FX) 1,974 1,770 12% Earnings per share 57.4p 50.2p * 14% Dividend per share 38.49p 35.64p 8% * 2008/09 comparative has been restated to reflect the uptake of the 2009/10 scrip dividend (August % and January %) Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations 2009 constant currency figures calculated by applying the average 2010 rate ($1.58 to 1.00) to the 2009 results (when the average rate was $1.54 to 1.00)

35 Business performance results and statutory results For the year ended 31 March ( m) Operating profit* Exceptional operating items, remeasurements and stranded cost recoveries Net finance costs (including exceptional items and remeasurements) Share of post-tax results of joint ventures and associates Statutory profit before taxation (continuing operations) Taxation Statutory profit (continuing operations) Statutory profit (discontinued operations) Statutory profit Minority interests Statutory earnings attributable to equity shareholders Statutory earnings per share , (1,108) 8 2,193 (804) 1,389-1,389 (3) 1, p ,915 (292) (1,234) 5 1,394 (472) (3) p * Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations At actual currency

36 Revenue For the year ended 31 March ( m) Transmission - UK Transmission - US Gas distribution - UK Gas distribution - US Electricity distribution (excluding stranded cost recoveries) Non-regulated businesses and other Stranded cost recoveries (Sales eliminations) Total revenue , ,517 3,708 3, (179) 13, , ,466 4,786 4, (226) 15,624 At actual currency

37 Transmission Depreciation & Amortisation For the year ended 31 March ( m) Electricity Transmission Owner Electricity System Operator Sub total Electricity Transmission (UK) Gas Transmission Owner Gas System Operator Sub total Gas Transmission (UK) New England Transmission New York Transmission Interconnectors Sub total Electricity Transmission (US) Interconnectors (UK) LNG (storage) Sub total Other Total Transmission depreciation & amortisation At actual currency Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations

38 Transmission Operating costs (excluding depreciation & amortisation) For the year ended 31 March ( m) Electricity Transmission Owner Electricity System Operator Other electricity Sub total Electricity Transmission (UK) Gas Transmission Owner Gas System Operator Other gas Sub total Gas Transmission (UK) New England Transmission New York Transmission Interconnectors Sub total Electricity Transmission (US) Interconnectors (UK) LNG (storage) Internal eliminations Sub total Other Total Transmission operating costs (excluding depreciation & amortisation) , , (25) 8 1, , , (20) 14 2,227 At actual currency Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations

39 Transmission Operating profit For the year ended 31 March ( m) Electricity Transmission Owner Electricity System Operator Other electricity Sub total Electricity Transmission (UK) Gas Transmission Owner Gas System Operator Sub total Gas Transmission (UK) New England Transmission New York Transmission Interconnectors Sub total Electricity Transmission (US) Interconnectors (UK) LNG (storage) Sub total Other Total Transmission operating profit (1) 45 1, ,301 At actual currency Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations

40 Gas Distribution For the year ended 31 March ( m) Depreciation & amortisation (UK) Depreciation & amortisation (US) Total depreciation & amortisation Operating costs (UK) Operating costs (US) Total operating costs (excluding depreciation & amortisation) Operating profit (UK) Operating profit (US) Total Gas Distribution operating profit 2010 (201) (173) (374) (594) (3,121) (3,715) , (177) (172) (349) (619) (4,002) (4,621) ,284 At actual currency Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations

41 Electricity Distribution & Generation For the year ended 31 March ( m) Depreciation & amortisation Operating costs (excluding depreciation & amortisation) Total Electricity Distribution & Generation operating profit 2010 (209) (3,380) (218) (4,054) 265 At actual currency Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations

42 Metering, Grain LNG and Property For the year ended 31 March ( m) Revenue Depreciation & amortisation Operating costs (excluding depreciation & amortisation) Metering and Onstream operating profit (125) (122) (140) (133) 133 Revenue Depreciation & amortisation Operating costs (excluding depreciation & amortisation) Grain LNG operating profit 137 (30) (56) (13) (40) 21 Revenue Other operating income Depreciation & amortisation Operating costs (excluding depreciation & amortisation) Property operating profit (28) (64) 1 At actual currency Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations

43 Exchange rates For the year ended 31 March ( m) Closing $ / rate Average $ / rate for the period For the year ended 31 March ( m) Impact on operating profit Impact on interest Impact on tax, JVs and minority interests Net impact on earnings 2010 (27) 16 4 (7) Impact on net debt 740 Impact on book value of assets (784) Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations Currency impact calculated by applying the average 2010 rates to 2009 results

44 Pensions & other post-retirement benefit obligations: regulatory recovery principles UK US Regulatory recovery principles ESPS NGUK PS Pensions OPEBs On-going pension costs recoverable 98% 90% 100% 100% Deficits recoverable 98% 63% 100% 100% (legacy non-regulated and some ERDC excluded) (true-up mechanisms / filings lead to timing variances only) OPEB costs & deficits recoverable N/A N/A 100% 100% (no obligation to fund deficits standard practice adopted) Next actuarial valuation expected Annually Annually US pensions and OPEBs on-going and deficit costs are typically 100% recoverable for regulated activities. Actual pension costs for this purpose are as measured on a US GAAP basis, which includes the amortisation of deficits or surpluses OPEBs = other post-retirement benefits ERDC = Early Retirement Deficit Contributions

45 US pensions & other post-retirement benefit obligations: regulatory treatment by rate plan Each of our five US regulatory commissions regulate the level of costs related to pensions and other post-retirement employee benefits (OPEBs) that are charged to customers. Approach 1: Periodic reconciliation of revenues to reconcile to actual pension / OPEB costs. Jurisdiction Mechanism New York Reconciliation with deferred amounts collected / credited in CTC (deferral account) reset Massachusetts (Boston gas, MECO) Reconciliation with deferred amounts collected/ credited over 3 years Rhode Island (gas) Annual reconciliation agreed in recent rate case FERC Formula Rate monthly reconciliation of actual expenses LIPA Generation Base rates with no true up at FERC but true-up at end of LIPA contract Approach 2: Pension / OPEBs are a component of cost of service used to set rates. Level remains in effect until next rate case with no true-up. Jurisdiction Massachusetts (Colonial gas, Essex gas) Rhode Island (electric) New Hampshire Mechanism Propose reconciliation mechanism in rate case filing in 2010 Propose reconciliation mechanism in rate case filing in 2010, PUC opposed reconciliation in last case (2009) Propose reconciliation mechanism in rate case filing in 2010, PUC Staff generally oppose reconciliation

46 Pensions & other post-retirement benefit obligations: (IAS19 data) UK US At 31 March 2010 ( m) ESPS NGUK PS Pensions OPEBs NG total Market value of assets 1,531 13,352 3, ,136 Present value of liabilities (2,023) (13,506) (4,069) (2,636) (22,234) Net liability (492) (154) (766) (1,686) (3,098) Taxation* ,145 Liability net of taxation (355) (111) (462) (1,025) (1,953) Discount rates 5.6% 5.6% 6.1% 6.1% * Taxation is calculated using the UK statutory tax rate and the US tax rate attributable to the combined pension and OPEBs balance at 31 March OPEBs = other post employment benefits

47 Timing impacts m UK Transmission US Gas Distribution UK US Elec. Dist. & Gen US Total Opening balance (35) 4 (1) 22 1 (9) 2009/10 over/(under) recovery (18) (8) (19) (77) (41) (163) Recovery of new licence allowances granted in year (27) (27) Closing balance to recover (80) (4) (20) (55) (40) (199) 2008/09* over/(under) recovery (38) (3) /10 over/(under) recovery (18) (8) (19) (77) (41) (163) Year on year timing variance 20 (15) (28) (115) (38) (176) * Restated for finalisation of K and change in reporting methodology Currency impact calculated by applying the average 2010 rates to 2009 results

48 Regulated asset base and returns Transmission Rate base* and returns reported by regulatory entity as at 31 March 2010 and 31 December 2009 for UK and US entities respectively. UK electricity transmission (a) UK gas transmission (b) New England Power Narragansett electric (Transmission) Canadian Interconnector (c) Regulator Ofgem Ofgem FERC FERC FERC Rate base / RAV 7,500m 4,533m $861m $189m $67m Base allowed return 5.05% ( vanilla return) 5.05% ( vanilla return) 11.1% (RoE) 11.1% (RoE) 13.0% (RoE) Achieved return 6.6% 7.6% 11.8% 11.5% 13.0% Equity / debt (assumed) 40 / / / / / 60 Sharing factors (shareholder retention at RoE) 100% plus incentive schemes 100% plus incentive schemes 100% 100% 100% Last / next rate case filing 1 year rollover from April year rollover from April 2012 Monthly formula rates Monthly formula rates - (a) (b) (c) Includes electricity system operator regulatory asset base of 57m. The system operator is subject to annual price controls. Includes gas system operator regulatory asset base of 35m. The system operator is subject to annual price controls. National Grid retains 100% of the return it earns on its stake of ~54% in the Canadian Interconnector. *Details of returns and rate base for all rate plans can be found at National Grid s estimate of US rate base: regulatory filings or an alternative USGAAP invested capital measure where either recent rate base filings are not available or where the actual filed rate base currently excludes certain regulatory asset balances.

49 Regulated asset base and returns Gas Distribution Rate base* and returns reported by regulatory entity as at 31 March 2010 and 31 December 2009 for UK and US entities respectively. UK gas distribution Long Island (KEDLI) Down-state New York (KEDNY) Up-state New York (NMPC gas) Massachusetts gas** (a) Narragansett gas Energy North (b) Regulator Ofgem New York PSC New York PSC New York PSC Massachusetts DPU Rhode Island PUC New Hampshire PUC Rate base / RAV 7,001m $1,899m $2,350m $1,103m $1,536m $337m $193m Base allowed return 4.94% ( vanilla return) 9.8% (RoE) 9.8% (RoE) 10.2% (RoE) 10.6% (RoE) 10.5% (RoE) 9.5% (RoE) Achieved return 6.3% 10.5% 11.2% 3.8% 2.9% 6.7% (c) 3.8% Equity / debt (assumed) 37.5 / / / / 56 ~50 / ~50 48 / / 50 Sharing factors (shareholder retention at RoE) 100% plus incentive schemes 100% to 10.5% 50% to 12.5% 35% to 13.5% 100% to 10.5% 50% to 12.5% 35% to 13.5% 100% to 11.35% 50% to 13.6% 25% to 15.6% 10% above 15.6% 100% to 14.2% 75% above 14.2% 100% to 10.5% 50% to 11.5% 25% above 11.5% - Last / next rate case filing New price control from April 2013 Effective from January 2008 Effective from January 2008 Effective from May 2009 Filing for new rates April 2010 Effective from December 2008 Filing for new rates Feb 2010 (a) Massachusetts gas currently comprises three separate entities: Boston gas, Colonial gas and Essex gas: Base allowed and achieved RoEs are weighed averages (using rate base.) Earnings sharing factors apply to Boston gas only. (b) Energy North temporary rate increase effective June (c) Stated after normalising for one-time bad debt adjustments *Details of returns and rate base for all rate plans can be found at National Grid s estimate of US rate base: regulatory filings or an alternative US GAAP invested capital measure where either recent rate base filings are not available or where the actual filed rate base currently excludes certain regulatory asset balances. **Rate base now excludes goodwill.

50 Regulated asset base and returns Electricity Distribution & Generation Rate base* and returns reported by regulatory entity as at 31 December Up-state New York (a) (NMPC elec.) Massachusetts electric (b) Narragansett electric (Distribution) Granite State Electric Nantucket electric (c) Long Island Generation (d) Regulator New York PSC Massachusetts DPU Rhode Island PUC New Hampshire PUC Massachusetts DPU FERC Rate base / RAV $3,724m $1,494m $548m $58m $16m $503m Base allowed return 10.6% (RoE) 10.4% (RoE) 9.8% (RoE) 9.7% (RoE) 10.4% (RoE) 10.8% (RoE) Achieved return 5.1% 4.7% (2.9)% (1.3)% 11.0% 13.5% (e) Equity / debt (assumed) Varied annually 50 / / / / / 50 Sharing factors (shareholder retention at RoE) 100% to 11.75% 50% to 14% 25% to 16% 10% above 16% 100% to 10.35% 50% above 10.35% 100% to 9.8% 50% to 10.8% 25% above 10.8% 100% to 11% 50% above 11% Over/ under earning contributed to Mass. electric Incentives Last / next rate case filing Agreed July 2002 Filing Jan 2010 Effective from Jan 2010 Effective from Jan 2010 Effective from Jan 2008 Effective from Jan 2010 Effective from Feb 2009 (a) (b) (c) (d) (e) NiMo electric rate base excludes $651m of US stranded assets rate base. Massachusetts electric rate base includes $20m relating to transmission assets. Nantucket electric rate base excludes $46m relating to sub-sea cables. Long Island generation rate base includes peaking plant rate base of $129m, also reflected in the achieved RoE. Stated after normalising for one-time Genco settlement adjustments. *Details of returns and rate base for all rate plans can be found at National Grid s estimate of US rate base: regulatory filings or an alternative US GAAP invested capital measure where either recent rate base filings are not available or where the actual filed rate base currently excludes certain regulatory asset balances.

51 Group return on equity Three-year average RoE 11.3% Nominal return on equity for whole group 11.8% 10.8% 11.3% Adjusted net income divided by equity base UK RAV indexation adjustment to net income causes annual RoE to track inflation 15.0% annualised RoE in Net income also principally adjusted for regulatory and accounting treatments of depreciation and capex, and stranded cost recoveries. Equity base: opening UK regulatory asset value, opening US invested capital, UK non-regulated business net asset value, less adjusted opening net debt.

52 Group RoE (nominal) calculation For the year ended 31 March ( m) IFRS statutory net income Exceptional items - discontinued Exceptional items - continuing Minority interests IFRS US stranded costs (after tax) KeySpan pro forma 5 months IFRS income excluding US stranded costs Regulatory and accounting depreciation adjustment Regulatory and accounting capitalisation Sold operations Indexation of UK regulatory asset value Pension revenue adjustment Adjusted group profit after tax , (3) (221) - 1,418 (232) (179) (62) 1, (16) 587 (3) (256) - 1,259 (237) (147) (9) (63) (63) ,199 (1,590) (96) (3) (229) (55) 1,226 (186) (118) (10) 572 (60) 1,424 UK regulatory asset value Other UK transmission US invested capital (excluding stranded costs) Unregulated businesses (net assets) Joint ventures Group enterprise value Adjusted opening net debt Group equity value 17, , ,095 (22,673) 11,422 16, , ,915 (16,651) 11,264 15, , ,144 (16,461) 11,683 Group RoE nominal (adjusted group profit after tax / group equity value) 15.0% 6.6% 12.2% UK inflation rate 4.4% (0.4%) 3.8%

53 Interest, tax, and exchange rates Effective interest rate* 4.6% 12 months ended 31 March Net finance cost, actual FX ( m) 2010 (1,155) 2009 (1,150) down 110bps on prior year Effective tax rate 28.0% 12 months ended 31 March Tax ( m) 2010 (553) 2009 (517) down 120bps on prior year Net currency impact (0.6)% 12 months ended 31 March Average $/ rate for the period Closing $/ rate on earnings *Interest on treasury managed debt Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations

54 Interest cover calculation For the year ended 31 March ( m) Interest expense (P&L) Capitalised interest Interest on pensions debt adjustment Interest on decommissioning liabilities adjustment Interest on lease rentals adjustment Pensions interest on scheme liabilities Unwinding of discounts on provisions Adjusted interest expense , (1,193) (70) 1, , (1,250) (68) 1, , (1,001) (45) 1,143 Net cash inflow from operating activities Interest income on financial instruments Dividends received Working capital adjustment Current pension service cost add back employer pension contributions add back interest on pensions debt adjustment add back lease rentals add back decommissioning liabilities adjustment Corporation tax Prior year adjustment (if negative) add back cash tax paid (for continuing operations) Adjusted funds from operations 4, (431) (112) (395) (144) 4,357 3, (54) (136) (126) (16) 143 4,268 3, (127) (298) (125) 110 3,618 Interest cover (adjusted funds from operations / adjusted interest expense) 3.9x 3.1x 3.2x

55 Efficiency metric calculation For the year ended 31 March ( m) Adjusted regulated controllable costs (at constant currency, excluding bad debt expense) (a) , ,109 Regulated asset base UK regulatory asset value (b) 17,581 16,816 UK capital additions adjustment (c) Depreciation adjustment (d) (435) (419) 18,108 17,326 US rate base (at constant currency) (e) 9,452 9,195 US capital additions adjustment (at constant currency) (f) (255) (234) Depreciation adjustment (g) ,309 9,071 Total adjusted regulated asset base 27,417 26,397 Efficiency: adjusted regulated controllable costs / adjusted regulated asset base (a) 2009 constant currency figures calculated by applying the average 2010 rate ($1.58 to 1.00) to 2009 results (when the average rate was $1.54 to 1.00). Note: 2009 figure has been restated for cost reclassifications to present items on a consistent basis with the current year. (b) Opening RAV inflated to mid year prices. (c) Adjustment to reflect mid-year growth in the asset base adds 50% of the full year UK regulated capital investment. (d) Adjustment to reflect mid-year depreciation deducts 50% of the full year UK regulated depreciation. (e) Closing rate base as at 31 December constant currency figures calculated by applying the average 2010 rate ($1.58 to 1.00) to 2009 results (when the average rate was $1.54 to 1.00). Note: 2009 figure has been restated for a Massachusetts gas goodwill adjustment to present items on a consistent basis with the current year. (f) Adjustment to reflect mid-year growth in the asset base deduct 25% of full year US regulated capital investment. (g) Adjustment to reflect mid-year depreciation adds 25% of the full year US depreciation 7.6% 8.0%

56 Rights issue rebasing for future dividends 2009/10 full dividend p/share 2009/10 final dividend recommendation of 24.84p/share +8% +8% target 35.64p 38.49p 36.37p 33.68p 39.28p Plus interim dividend of 13.65p/share gives full 2009/10 dividend of 38.49p/share 8% increase Our 2010/11 full dividend is targeted to grow by 8% following re-basing for the bonus element of the rights issue Bonus element adjustment: 38.49p = 33.68p 2008/ /10 Rebased 2009/10 DPS Pre Rights Issue 2010/ /12 DPS Post Rights Issue 33.68p x 108% = 36.37p/share Targeted 2010/11 full dividend of 36.37p/share

57 Rights issue transaction Proposed timetable Announcement 20 May 2010 Publication of prospectus 25 May 2010 Nil paid trading period 26 May June 2010 Final date for acceptances and payment in full 11:00 a.m. on 11 June 2010 Dealings in new ordinary shares, fully paid commences 14 June 2010

58 5 year capital investment plan c. 22bn Almost 75% of our investments will be in the UK Over 60% of our investments will be in the Transmission business 73% 73% 27% 61% 39% UK US Transmission Other

59