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

Financial Data and Key Metrics Changes - The company reported a 13% increase in underlying operating profit to GBP 2.3 billion, driven by higher regulatory revenues in both U.K. and U.S. electricity transmission businesses [13][27] - Underlying earnings per share rose by 6% to GBP 29.8, reflecting strong operational performance despite higher finance costs [14][28] - Capital investment reached a record GBP 5.1 billion, up 12% year-on-year at constant currency [14][28] Business Line Data and Key Metrics Changes - U.K. electricity distribution saw underlying operating profit decrease by GBP 22 million to GBP 551 million due to lower revenues from Ofgem's real price effects mechanism [29] - U.K. electricity transmission reported an underlying operating profit increase of GBP 122 million to GBP 846 million, supported by higher allowed revenues [30] - In the U.S., New York's underlying operating profit increased by GBP 167 million to GBP 443 million, driven by higher net revenue from network upgrades [31] Market Data and Key Metrics Changes - The company is experiencing strong visibility in its investment program, with a projected investment growth of around 10% per annum and underlying earnings per share growth of 6%-8% [7][8] - The U.S. regulatory environment remains supportive, with approximately 75% of the five-year investment plan approved within rate cases [10] - In New England, capital investment increased by 23% to GBP 1 billion, reflecting increased spending on asset condition and system capacity [24] Company Strategy and Development Direction - The company is focused on a GBP 60 billion capital investment plan aimed at future-proofing networks to meet rising energy demand [4][5] - There is a commitment to operational excellence and capital discipline, with an emphasis on delivering cleaner energy and supporting economic growth [5][7] - The company is actively engaging with regulators and stakeholders to ensure the delivery of infrastructure projects and to adapt to evolving energy policies [11][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver a compelling investment proposition, citing strong progress in securing supply chains for major projects [8][9] - The company is well-prepared for winter, with electricity margins forecasted at around 10%, the highest since 2019 [15] - Management highlighted the importance of regulatory support and policy developments in facilitating future investments [10][11] Other Important Information - The company has achieved over GBP 100 million in synergy savings six months ahead of target following the U.K. electricity distribution acquisition in 2021 [16] - The Lost-Time Injury Frequency Rate was reported at 0.09, indicating a strong focus on safety across operations [15] - The company is working on developing AI infrastructure in the U.K., which is expected to drive significant investment in energy infrastructure [12] Q&A Session Summary Question: T3 expectations and dialogue with Ofgem - Management indicated ongoing discussions with Ofgem regarding the overall investable framework and the workability of the regulatory framework, emphasizing the need for a higher base return [44][46][47] Question: Net debt guidance and working capital effects - Management clarified that the net debt guidance has improved due to transaction proceeds and working capital effects, with a modest increase expected [44][49][50] Question: U.K. electricity distribution operational performance - Management confirmed that operational performance is on track to meet the 50 basis points guide for the year, with expectations to approach 100 basis points by the end of the price control period [52][53][54] Question: Sufficiency of Ofgem allowances for maintenance - Management affirmed that past allowances have been sufficient to maintain a reliable network, with ongoing discussions for future price controls [57][58][59] Question: U.K. infrastructure investment needs - Management emphasized the importance of stable fiscal and regulatory frameworks and streamlined planning processes to facilitate infrastructure investment across the U.K. [59][60]