NGGTF - National Grid plc (NGG) Q4 2024 Earnings Call Transcript

2024-05-24 17:37:08 ET

National Grid plc (NGG)

Q4 2024 Earnings Conference Call

May 23, 2024 4:15 AM ET

Company Participants

Nicholas Ashworth - Director, IR

John Pettigrew - CEO

Andy Agg - CFO

Conference Call Participants

Dominic Nash - Barclays

Pavan Mahbubani - JPMorgan

Deepa Venkateswaran - Bernstein

Harry Wyburd - BNP Paribas Exane

Ahmed Farman - Jefferies

Alexander Wheeler - RBC Capital Markets

Rob Pulleyn - Morgan Stanley

Mark Freshney - UBS

Charles Swabey - HSBC

Marcin Wojtal - Bank of America

Ajay Patel - Goldman Sachs

Presentation

John Pettigrew

Well. Thank you, Nick and good morning, everyone. It's great to see so many of you here this morning with others joining virtually. Today, we've made several important announcements which launched a new phase of growth for National Grid. Alongside strong full-year results, we are also setting out a significant step-up in growth for the new five year financial framework. Around GBP60 billion of capital investment between now and 2029, that's nearly double over the past five years and driving annual group asset growth of around 10%. And a 6% to 8% EPS CAGR from an FY '25 baseline. All of which will be supported by a comprehensive financing plan that puts on a range of levers, including a GBP7 billion equity raise.

And as we enter this new phase of growth, we are updating our strategy to make National Grid the preeminent pure-play networks business. So there is quite a bit for Andy and I to cover this morning. And as soon as we've done that, of course, we'll be happy to take your questions. So personally, this is the most exciting period I've seen not just in our industry but for National Grid since I started over 33 years ago. Let me just set the context. The energy transition is accelerating at pace. On the supply side, coal's annual contribution of generation in the UK has reduced from 40% to 1% over the last 10 years with significant reductions also seen in the U.S. Nearly half the electricity used last year in the UK and the US Northeast was from zero carbon sources.

And on the demand side, we're starting to see increased load due to the acceleration of artificial intelligence and the data centers needed to support it. These mega trends are at the forefront of every politician, regulator and consumers' mind. They are driving this incredible journey of change that we are only just starting. Governments on both sides of the Atlantic recognize a need to accelerate the transition, and they are acting with greater urgency to incentivize increased levels of renewable generation, evolve regulatory frameworks to unlock the investment needed to transform networks, increase energy security and ultimately reduce consumer bills.

Our pivot towards electricity over the last three years has cemented our position as a major player in the energy transition, and we are ready to take advantage of the significant growth opportunities ahead. Now you will recall, last November, Andy and I talked about three areas where we wanted to see progress and increased clarity before setting out a new functional frame; the scale and the investment ahead of us, the profile of its delivery and the regulatory frameworks that sit around it. And I'm pleased to say, we've seen significant progress in each of these areas giving us the confidence today to set out our plans for the next five years.

So starting with the scale of investment. In the UK, as you know, we've been awarded 17 major projects as part of Ofgem's Accelerated Strategic Transmission Investment program, or ASTI with the time scales and delivery now embedded within our license obligations. At half year, we said that this required investment and is expected to be in the mid-to-high teens billions. Last month, the system operator published its Beyond 2030 report, which starts to provide more clarity on projects that will be largely delivered in the 2030s, giving us sufficient confidence on the scope of large-scale transmission investments for the rest of this decade.

Since November, we've continued to develop our business plan for RIIO-T3, which has given us further clarity on the levels of investment needed. We're due to submit the store Ofgem later this year. We also have much better visibility in New York, where we agreed a joint proposal and our new three year rate plan for our KEDLI and KEDNY gas businesses, and will soon be filing for new rates in our Niagara Mohawk business. And in New England, we filed new rates in our electric business in November. And in January, we filed for a further $2 billion of clean energy investment through our Electric Sector Monetization Plan, or ESMP.

So there's been substantial development since our last update, strengthening our confidence in the levels of CapEx required as we look to the next five years. Turning now to the profile of that investment, where we've seen improved transparency both in supply chain capacity and planning. In the UK, we now have better clarity around the time lines on our large projects. We signed GBP1.8 billion in contracts for cable and converter stations for Eastern Green Link 1 in December, as well as the contracts on the GBP4.4 billion Eastern Green Link 2 project in February....

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