National Grid(NGG) - 2026 H1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The underlying operating profit increased by 13% to GBP 2.3 billion, driven by higher regulatory revenues in both the U.K. and U.S. electricity transmission businesses [13][25][26] - Underlying earnings per share rose by 6% to GBP 29.8, reflecting strong operational performance despite higher finance costs [26][32] - The company achieved a record capital investment of GBP 5.1 billion, up 12% year-on-year at constant currency [13][26] Business Line Data and Key Metrics Changes - In U.K. electricity distribution, underlying operating profit decreased by GBP 22 million to GBP 551 million due to lower revenues from Ofgem's real price effects mechanism [26][27] - U.K. electricity transmission saw an increase in underlying operating profit by GBP 122 million to GBP 846 million, supported by higher allowed revenues [26][28] - In the U.S., New York's underlying operating profit increased by GBP 167 million to GBP 443 million, driven by higher net revenue and recovery of previously unremunerated costs [28][29] Market Data and Key Metrics Changes - Capital investment in the U.S. reached GBP 1.6 billion, up 5%, reflecting increased maintenance replacement expenditure [21][29] - In New England, capital investment increased by 23% to GBP 1 billion, driven by asset condition and system capacity investments [23] Company Strategy and Development Direction - The company is focused on a GBP 60 billion capital investment plan aimed at future-proofing networks and meeting growing energy demand [4][6] - There is a commitment to operational excellence and capital discipline while delivering for customers and creating shareholder value [5][6] - The company is actively engaging with government and industry to support the development of AI infrastructure and data centers in the U.K. [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to deliver a compelling investment proposition with expected investment growth around 10% per annum and underlying earnings per share growth of 6%-8% [6][13] - The company is well-prepared for winter with plans in place to ensure reliability and safety across networks [14] - Management highlighted the importance of regulatory support and policy developments in facilitating future investments [10][11] Other Important Information - The board declared an interim dividend of GBP 16.35 per share, representing 35% of last year's full-year dividend [26] - The company achieved over GBP 100 million of synergy savings six months ahead of target following the U.K. electricity distribution acquisition in 2021 [15][27] Q&A Session Summary Question: T3 expectations and dialogue with Ofgem - Management indicated that they are focused on the overall investable framework and the workability of the regulatory framework, advocating for a higher base return [40][41][42] Question: Net debt guidance - The net debt guidance improved, with a projected increase of around GBP 1 billion for the full year, accounting for disposals and working capital effects [43][44] Question: U.K. electricity distribution operational performance - Management confirmed that performance is on track for the year, guiding towards 50 basis points and aiming for closer to 100 basis points by the end of ED2 [45][46][47] Question: Ofgem price controls and maintenance allowances - Management expressed satisfaction with past allowances, noting continued delivery of world-class reliability and a resilient network [49][50] Question: Infrastructure investment in the U.K. - Management emphasized the need for stable fiscal and regulatory frameworks and improvements in the planning regime to facilitate efficient infrastructure development [51][52] Question: Select committee focus on network windfalls - Management clarified that they have not received windfall profits and that Ofgem has already addressed this issue [53][54] Question: RIIO-T3 TOTEX expectations - Management indicated that the GBP 35 billion TOTEX is contingent on the speed of connections and that clarity will improve as new connection offers are made [56][57]