RIIO-T1 business plan submission
London | Tuesday 6 September 2011
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’, ‘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 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, including breaches 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, owing to adverse
weather conditions or otherwise; 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 restructuring and internal transformation
projects; and customers and counterparties failing to perform their obligations to the Company and its arrangements with the Long Island Power
Cautionary statement
2
projects; and customers and counterparties failing to perform their obligations to the Company and its arrangements with the Long Island Power
Authority not being renewed. 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 in National Grid’s borrowing and debt arrangements,
funding costs and access to financing; National Grid’s status as a holding company with no revenue generating operations of its own; inflation;
seasonal fluctuations; the funding requirements of its pension schemes and other post-retirement benefit schemes; the loss of key personnel or
the ability to attract, train or retain qualified personnel and any disputes arising with its employees or the breach of laws or regulations by its
employees; accounting standards, rules and interpretations, including changes of law and accounting standards and other factors that may
affect National Grid’s effective rate of tax; and incorrect or unforeseen assumptions or conclusions relating to business development activity.
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 our 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 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. The content of any website references herein do not form part of this presentation.
Hurricane Irene – Sunday 28th August
� Nearly one third of our
customers affected
(approximately 1.5 million)
� Wednesday 31st - 66% of
customers restored
� 100% restored by Monday 5th
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� Costs still being
assessed
� Recovery
mechanism varies
by jurisdiction
Recap of headlines
�Total investment of £30.7bn� £25.4bn in Capex and £5.4bn in Opex
� £22bn in Electricity and £9bn in Gas
�Notional equity injections totaling £4.1bn over 8 yrs
�Range of measures to deliver ‘just financeable’
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�Range of measures to deliver ‘just financeable’
package� Cost of equity of 7.5%
� 55% gearing
� Two period transition to 45 years (electricity)
� 72% capitalisation ratio (gas)
Transitional arrangements and
financeability measures
Electricity
� Asset lives increase from 20 to
45 years over two price control
periods
- Increase by 1/16th of 25 years
each year for 16 years
- eg spend in 2013/14 has asset
Asset life for new investment in the year
0
10
20
30
40
50
2011/12 2015/16 2019/20 2023/24 2027/28 2031/32 2035/36
RIIO – T1 RIIO – T2
- eg spend in 2013/14 has asset
life of 21.5625 years
Gas
� Capitalisation rate of 72% of
totex
- e.g. for every £1 of spend, 72p
goes into RAV, 28p recovered in
year through opex
5
NG Published
Electricity RAV
Mar 2010 (Annual report and accounts) Mar 2010 (Transmission annual report)
Base RAV £7.1bn
Spend not yet in the RAV £0.4bn
SO £0.1bn
Total £7.5bnTotal £7.5bn
NG Published
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Mar 2013 (RIIO submission forecast) Mar 2013 (Rollover initial proposals)
Base RAV £9.0bn
Spend not yet in the RAV £0.1bn
SO* £0.1bn
Total (09/10 prices) £9.1bn
Total (nominal prices) £10.5bn
Total £9.0bn
Total (nominal prices) £10.4bn
Forecast and historic RAV closely aligned with Ofgem publications
RAV additions 10/11 – 12/13 c. £3bn
*National Grid estimate
NG PublishedNG Published
Gas RAV
Mar 2010 (Annual report and accounts) Mar 2010 (Transmission annual report)
Base RAV £4.1bn
Spend not yet in the RAV £0.4bn
SO £0.0bn
Total £4.5bnTotal £4.5bn
RAV additions 10/11 – 12/13 c.£0.7bn
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Mar 2013 (RIIO submission forecast) Mar 2013 (Rollover initial proposals)
Base RAV £4.0bn
Spend not yet in the RAV £0.6bn
SO* £0.1bn
Total (09/10 prices) £4.6bn
Total (nominal prices) £5.3bn
Total (09/10 prices) £4.9bn
Total (nominal prices) £5.6bn
Reported historic RAV closely aligned with Ofgem publications Difference in forecasts not yet reconciled: expected to be primarily due forecast
revenue driver / shadow RAV spend
RAV additions 10/11 – 12/13 c.£0.7bn
*National Grid estimate
Transmission Process update
14th OctoberOfgem feedback on July submission
2nd MarchUpdated submission to Ofgem
JulyInitial Proposals published
DecemberFinal Proposals published
RIIO-T1
fast track consultation
Non-fast track process
March/AprilQ&A and cost visits
fast track decision
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2011 2012
Sep Oct MarFebJanDecNov Apr May Jun Jul Aug Sep Oct Nov Dec
12th SeptemberResponse to Initial Proposals
21st NovemberFinal Proposals published
1st AprilControl period starts
Rollover
consultation cost visitsdecision
Group context
5.0
6.0
7.0
(no
min
al)
Group Capital ExpenditureModelling uncertainties to the baseline plan
� Rights issue in 2010 raised
£3.2bn
Funding increased expenditureModelled notional company equity injections not equivalent to National Grid plc equity injections
0.0
1.0
2.0
3.0
4.0
10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21
£b
n(n
om
ina
l)
� Ratios and capital structure
different at Group level
� Portfolio and performance
benefit of other activities
Position unchanged : well funded through to at least 2015
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RIIO-T1 business plan submission
Q&A