European Presentation June 09 - National Grid plcinvestors.nationalgrid.com/~/media/Files/N/National-Grid...2 Cautionary statement Unless otherwise stated, all financial data of National

European Roadshow

June 2009

2

Cautionary statement

Unless otherwise stated, all financial data of National Grid contained in this presentation is as reported under IFRS.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, National Grid’s results of operations and businesses, strategy, plans and objectives. Words such as “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “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 delays in obtaining, or adverse conditions contained in, regulatory approvals and contractual consents, unseasonable weather affecting the demand for electricity and gas, competition and industry restructuring, changes in economic conditions, currency fluctuations, changes in interest and tax rates, changes in energy market prices, changes in historical weather patterns, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, the impact of changes to accounting standards, technological developments and the ability to access capital markets and other sources of credit in a timely manner on acceptable terms, especially considering the recent deterioration of market conditions in the global economy and financial markets. Other factors that could cause actual results to differ materially from those described in this presentation include the ability to integrate the businesses relating to announced or recently completed acquisitions with National Grid’s existing business to realise the expected synergies from such integration, the availability of new acquisition opportunities and the timing and success of future acquisition opportunities, the timing and success or other impact of the sales of National Grid’s non-core businesses, the failure for any reason to achieve reductions in costs or to achieve operational efficiencies, the failure to retain key management, the behaviour of UK electricity market participants on system balancing, the timing of amendments in prices to shippers in the UK gas market, the performance of National Grid’s pension schemes and the regulatory treatment of pension costs, and any adverse consequences arising from outages on or otherwise affecting energy networks, including gas pipelines owned or operated by National Grid. 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). Except as may be required by law or regulation, National Grid undertakes no obligation to update any of its forward-looking statements. 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. The contents of any website referenced herein do not form part of this document.

3

Financial headlines

Strong results

� Operating profit and EPS up

� Dividend cover improved* at 1.43 times

Strong financial position

� Funding programme well advanced

Well positioned for 2009/10

� Investment driving growth

� RPI indexation benefits UK revenues

� Lower effective interest rates

* On a pro forma basis.

� Business performance, excluding exceptional items, remeasurements, and stranded cost recoveries for continuing operations.

� 2008 constant currency figures calculated by applying the average 2009 rate ($1.54 to £1.00) to 2008 results (when the average rate was $2.01 to £1.00).

4

Delivering our plans

� Invested £3.2bn – in line with Plan

� Asset base growth – UK 3%, US 4%

� KeySpan savings run rate $129m

� Procurement savings ahead of plan –

run rate exceeds £100m

� Good incentive performance

5

Transmission Gas Distribution

Elec. Dist. & Gen. Non-reg.

2008/09 capital investment in line with

Business Plan:

� 98% supported by regulatory arrangements /

long-term contracts

Growing our asset base:

� 3% growth in UK regulatory asset value (RAV)

� 4% growth in US rate base

Capital investment

£3.2bn2008/09 capital investment

� Capital investment for continuing operations, excluding Joint Ventures.

£427m

£355m

£1,019m

£1,441m

6

Planned further long-term issuance

activity:

� ~£0.6m long term debt required for

2009/10

� Pre-funding for 2010/11

� £1.5bn to £2bn further total long term

issuance expected in 2009/10

� £3bn per annum ongoing

Funding 2009/10

~75%2009/10 funding

funding requirement Issued to date

Refinancing New funding Issued / agreed

~£1.1bn

~£1.4bn£1.9bn

complete

2009/10 long term funding requirement

~£0.6bn to go

� 2009/10 funding requirements are based on current exchange rates, and assume no commercial paper or short term debt issuance.

7

Credit ratings and potential funding plans of main issuing entities

A3/P2

A3/P2

A3/P2

Baa1/P2

Moody’s

BBB+/A2

A-/A2

A-/A2

BBB+/A2

S & P

Not

Rated

A/F2

A/F2

BBB+/F2

Fitch

� Total issuance from US operating companies expected to be $1bn - $2bn

� Most likely in 144A format

NGUSA

� Only a small amount of issuance, most likely in the form of taps

� Selective repurchases probable

NGG

� Only a small amount of issuance, most likely in the form of taps

� Selective repurchases probable

NGET

� Likely maximum of one syndicated issue with any currency possible

� Possible that all requirement satisfied by small EMTNs / taps of existing issues

� Repurchases possible

NG plc

Possible 2009/10 Funding

Continued commitment to A range ratings at UK OpCos

8

National Grid structure with Group borrowing facilities

National Grid plcBaa1 / BBB+ / BBB+

National Grid Holdings One plc

NR / BBB+ / NRNational Grid USA

A3 / BBB+ / NR

Niagara Mohawk Power Corp A3 / A- / NR

National Grid Gas plcA3 / A- / A

National Grid Electricity

Transmission plcA3 / A- / A

Massachusetts

Electric A3 / A- / NR

New England Power A3 / A- / NR

Granite State Electric

Nantucket Electric

Narragansett Electric

A3 / A- / NR

KeySpan Corp

Baa1 / A- / A-

KeySpan Gas East Corp A3 / A / A

The Brooklyn Union Gas Company

NR / A / A+

Colonial Gas Co A3 / A- / NRBoston Gas Co. Baa1 / A- / NREssex Gas Co.EnergyNorth Natural Gas Inc

National Grid Generation LLC Baa1/ A- /NR

National Grid plc

� Short-term funding programmes:

� USCP $3bn: Nil outstanding

� ECP $1.5bn: c. $600m outstanding

� €15bn EMTN programme (joint with NGET):

� National Grid in issue € 6.0bn; NGET € 3.2bn

� €5.7bn un-issued

National Grid Electricity

Transmission plc

� Short-term funding

programmes:

� USCP $1bn: Nil outstanding

� ECP $1bn: c. $16m outstanding

� €15bn EMTN programme

(joint with NGET)

National Grid USA Group

� $2bn NGUSA commercial paper programme: Nil outstanding

� €4bn NGUSA EMTN programme: €0.1bn issued

National Grid Gas plc

� Short-term funding programmes:

� USCP $2.5bn: Nil outstanding

� ECP $1.25bn: Nil outstanding

� €10bn EMTN programme: €6bn issued

Possible new funding programmes in 2009/10

Note: Figures are correct as at May 27th 2009

9

Recent funding – loans and bonds

0

200

400

600

800

1,000

1,200

1,400

Ja

n-0

8

Fe

b-0

8

Ma

r-0

8

Ap

r-0

8

Ma

y-0

8

Ju

n-0

8

Ju

l-0

8

Au

g-0

8

Se

p-0

8

Oc

t-0

8

No

v-0

8

De

c-0

8

Ja

n-0

9

Fe

b-0

9

Ma

r-0

9

Ap

r-0

9

Ma

y-0

9

NGUSA

NG

NGET

NGGas

$/£=1.45

Total funding for January 2008 to May 2009 was £5,996m

£m

10

Liquidity support – committed bank lines and cash

Group Committed Facilities

0

500

1000

1500

2000

2500

3000

3500

4000

Oct-08

Nov-0

8

Dec-0

8

Jan-0

9

Feb-0

9

Mar-

09

Apr-

09

May-0

9

Jun-0

9

Jul-09

Aug-0

9

Sep-0

9

Oct-09

Nov-0

9

Dec-0

9

Jan-1

0

Feb-1

0

Mar-

10

Apr-

10

May-1

0

Jun-1

0

Jul-10

Aug-1

0

Sep-1

0

Oct-10

Nov-1

0

Dec-1

0

Maturity

Total Amount (£m)*

KeySpan Corp

New EnglandPower

NG Gas

NG ElectrcityTransmission

National Grid plc

*USD/GBP = 1.5

� c. £1.6bn of available cash at 31st March 2009 � c. £3.0bn of available, undrawn committed

bank lines

� all expire over next 18 months

� renewal process already well under wayRatio between cash and lines is likely to be maintained in 2009/10

Potential to hold more cash or increase bank lines

11

Net debt

Closing net debt

£(22.7)bn

2008 2009FX movements

£(17.6)bn

£(18.7)bn

(a) Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations.

(b) Includes cash flows relating to exceptional items, stranded cost recoveries, and other non cash items.

£(4.0)bn

(22,673)Net debt at 31 March 2009

(3,951)FX movements

(1,081)Net change in net debt

345Other (b)

(1,465)Dividends & share repurchase

1,617Disposals

(3,231)Investment

(1,683)Interest & tax

3,336Operating cash flow (a)

(17,641)Net debt at 1 April 2008

£m

12

Debt in the Group

25.6

4.3

21.3

0.3

7.3

4.6

9.1

Gross Debt

* Measured as the contribution to the consolidated Group accounts

** Gross debt defined as total borrowings, net of derivative financial assets and liabilities. Net debt defined as gross debt,

less cash and cash equivalents and financial investments

22.7Total IFRS debt**

4.0Total US debt (at $1.4368 = £1.00)

18.7Total UK debt

0.3National Grid Grain LNG

6.3National Grid Gas plc*

3.9National Grid Electricity Transmission plc

8.2National Grid plc, NGG Finance plc and other

Net DebtGross and net debt as at 31 March 2009 (IFRS, £bn)

13

Funding policies

Counterparty risk

� Controlled through credit limits, approvals and monitoring procedures

� For multiple transactions with a single counterparty we usually use a

master netting agreement to reduce exposure to credit risk

Debt maturity profile as at 27th May 09 at £1=$1.597

Refinancing risk

� Controlled through limits on the amount of financing obligations

arising in any given year

� Limits the amount of debt falling due for refinancing in any given

time frame

Foreign exchange risk management

� Principle foreign exchange risk is $US

� ‘Natural hedge’: manage $US financial liabilities to match $US

cash flows

� Hedge certain contractually committed foreign exchange

transactions

Interest rate risk management

� We minimise total financing costs to manage interest cost and

total financing cost below pre-set limits

� Exposure managed using fixed-rate and floating rate debt,

interest rate swaps, swap options & forward rate agreements

National Grid long term debt maturity profile 27th May 2009

0

500

1000

1500

2000

2500

08/09

09/10

10/11

11/12

12/13

13/14

14/15

15/16

16/17

17/18

18/19

19/20

20/21

21/22

22/23

23/24

24/25

25/26

26/27

27/28

28/29

29/30

30/31

31/32

32/33

33/34

34/35

35/36

36/37

37/38

38/39

39/40

40/41

41/42

43/44

46/47

48/49

52/53

56/57

Maturity

£ equiv (m

)

Grain LNG

National Grid USA Group

National Grid/NGGF

National Grid Electricity Transmission

National Grid Gas Group

14

Strong financial position

Interest cover

� Aim to manage within a 3.0 – 3.5x range

� Consistent with single ‘A’ range credit rating

commitment at UK OpCo level

Credit rating metrics strengthen in 2009/10

� 2009/10 revenues ‘locked in’

� Interest costs fall with lower RPI

� Share buy-back suspended

3.1 timesInterest cover

2.50x

2.75x

3.00x

3.25x

3.50x

3.75x

4.00x

2007 2008 2009

Target range Interest cover

15

Outlook for 2009/10 strong

… and finally, our focus for 2009/10

� Regulation

� Disciplined investment

� Deliver opex savings and drive efficiency

Appendix

17

We are a very low risk business…

NOTES(a) Measured on a business performance basis. Business performance results are the primary financial performance measure used by National Grid,

being the results for continuing operations before exceptional items, remeasurements and stranded cost recoveries. Remeasurements comprise gains or losses recorded in the income statement arising from changes in the fair value of commodity contracts and derivative financial instruments to the extent that hedge accounting is not achieved or is not fully effective. Stranded cost recoveries are costs associated with historic generation investment and related contractual commitments that were not recovered through the sale of those investments – these recoveries end in 2011.

� $ earnings exposure minimised by our natural debt hedge� +/-10 cent move ≈ +/-£10m on earnings(a)Very lowCurrency

� No commodity exposure under UK agreements� US rate-plans pass through commodity costs

Very lowCommodity (energy)

� No UK demand exposure� Residual exposure under some US rate plans – diminishing risk as new rate case

filings include demand decoupling

Low��

ZeroDemand

� UK revenues RPI indexed, nominal US revenues (variety of protections against high inflation under US regulation)

� Over 50% of net debt index linked / floating rateLowInflation / deflation

� ~95% of our activities(a) are regulated� Portfolio of ~20 regulatory agreements� Predictable revenues and cash flows

LowRegulation

NotesExposureRisk factor

18

Regulatory process……many common elements to rate agreements

US specific

� Some residual volume drivers

� Protection from uncontrollable costs

� Varied approaches to capex

UK specific

� No volume exposure

� Indexation

� Capex revenue drivers

Common elements

Return on asset base

Opex allowance

Pensions and tax allowance

No commodity exposure

Incentive mechanisms

19

Current US regulatory position

Regulatory entity Base allowed return Achieved return

New England Power

Narragansett (electricity transmission)

Canadian interconnector

KEDNY

KEDLI

11.14% 11.7%

11.14% 11.6%

13.0% 13.5%

9.8% 11.9%

9.8% 11.1%

Previously agreed

33%

(a) Includes Long Island generation rate base of $574m.

(b) Includes Granite State and Nantucket electric rate bases, totalling $131m.

Settlement reached / pending (a)

Rhode Island (gas)Double digit basereturns expected

7.6%

NiMo (gas) 4.8%

New Hampshire (gas) 4.4%

14%47%

To be filed in the next 15 months (b)

Massachusetts Electric Company 7.0%

Rhode Island (electric) 2.3%

NiMo (electric) 6.7%

Boston gas

Colonial gas 8.3%

Essex gas

Massachusetts gas

53%

100%

% of US rate base

20

Our US regulatory agenda

� Timely recovery of costs

� Pension & benefit true ups

� Bad debt recovery

� Decoupling

� Investment

� Competitive returns

Jan 2010 Mass Electric Company

Jan 2010 Narragansett (electric)

Nov 2010 Boston gas

Nov 2010 Colonial gas

Nov 2010 Essex gas

Jan 2011 NiMo (electric)

What we are asking for Anticipated new rates effective

21

Transmission – our activities

Transmission UK – electricity and gas

Transmission US – electricity

Electricity transmission owner

Gas

transmission owner

Electricity system operator

Gassystem operator

French interconnector

LNG storage

Electricity transmission owner/operator

Canadian interconnector

We own the electricity transmission system in England and Wales.Our assets comprise ~7,200km of overhead line; ~675km of underground cable; and 337 substations at 244 sites.

We are the Great Britain System Operator, responsible for managing the operations of both the England and Wales transmission system that we own, and also the two independently owned high-voltage electricity transmission networks in Scotland.

We are the gas national transmission system operator, responsible for managing the operations of the Great Britain transmission system that we own.

We own the gas national transmission system in Great Britain.Our assets comprise ~7,400km of high pressure gas pipe and 26 compressor stations, connecting to 8 regional distribution networks and to third party independent systems.

We own and operate the UK assets, and a portion of the sub sea cables, that comprise the electricity interconnector between England and France as part of a joint agreement with the French transmission operator.

We own and operate four liquefied natural gas (LNG) storage facilities in Great Britain.

We own and operate the electricity transmission network spanningupstate New York, Massachusetts, Rhode Island, New Hampshire, and Vermont. Our assets comprise ~13,700km of overhead line; ~160km of underground cable; and 501 substations.

We own and operate a 224km direct current transmission line rated at 450kV that is a key section of an electricity interconnector between new England and Canada.

22

Transmission – results

Operating profit

10% upat constant currency

2008 2009FX adjustment

Operating profit mainly driven by

increases in regulated revenue

� UK regulated net revenues +£111m

� US regulated net revenues +£29m

� Other items net £(27)m

Returns

� Overall UK vanilla return above base allowance

� New England RoEs above base allowance

Transmissionoperating profit

Rest of National Grid

£1,149m£1,301m

£39m


� Constant currency figures calculated by applying the average 2009 rate ($1.54 to £1.00) to 2008 results (when the average rate was $2.01 to £1.00).

45%

23

Transmission – asset bases and returns

Base allowed return

Rate base / RAV

Achieved return

Sharing factors(shareholder retention at RoE)

Last / next rate case filing

UK electricity transmission (a)

New England Power (c)

Equity / debt(assumed)

UK gas transmission (b)

Narragansett electric (d)

(Transmission)

CanadianInterconnector (e)

Regulator Ofgem

£6,720m

5.05%(‘vanilla’ return)

4.7%

40 / 60

100%plus incentive

schemes

New price control from April 2012

FERC

$790m

11.14%(RoE)

11.7%

65 / 35

100%

Monthly formula rates

FERC

$73m

13.0%(RoE)

13.5%

40 / 60

100%

-

Ofgem

£4,281m


6.9%

40 / 60

100%plus incentive

schemes


FERC

$169m

11.14%(RoE)

11.6%

50 / 50

100%

Monthly formula rates

(a) Includes electricity system operator regulatory asset base of £55m. The system operator is subject to annual price controls.

(b) Includes gas system operator regulatory asset base of £42m. The system operator is subject to annual price controls.

(c) New England Power rate base as at 31 March 2009. Excludes $13m of US stranded assets rate base.

(d) Narragansett electric (Transmission) rate base was reported within the distribution rate base in 2007/08.

(e) National Grid retains 100% of the return it earns on its stake of ~54% in the Canadian Interconnector.

Asset base and returns reported by regulatory entity as at 31 March 2009 and 31 December 2008 for UK and US entities respectively.

24

UK electricity transmission load related investment

future potential investment to connect Scottish renewables

existing network

potential wind farm sites

future potential onshore load related investment

potential nuclear sites

Total potential investment~£5bn to ~£9bn

Future Scenario

� Further offshore wind leasing targeted to deliver 25GW by 2020

� Political will for nuclear replanting

� EU directive for greater interconnection

� Target of 30 – 40% generation from renewable (i.e. wind) sources could require a plant margin of 40 – 60%

� 2 Nuclear stations (3.5GW) by 2020

� 7 Nuclear stations (10GW) by 2030

25

Gas Distribution – our activities

Gas Distribution US

Gas Distribution UK

UK Networks

Gas Distribution US

US Networks

UK Customers

US Customers

UK additional services

US additional services

Comprises four of the eight regional gas distribution networks in Great Britain

Comprises gas distribution networks across the northeastern US, located in service territories in upstate New York, New York City, Long Island, Massachusetts, New Hampshire and Rhode Island.

Our network of approximately 58,000 kilometres of gas pipelines covers an area of approximately 28,800 square kilometres.

Comprise approximately 132,000 kilometres of gas distribution pipelines.

We transport gas on behalf of approximately 33 active shippers from the gas national transmission system to 10.8 million consumers.

Provide services to 3.5 million consumers.

In addition we also manage the national emergency number for allthe gas distribution networks and for other transporters in the UK.

Our core services are the operation and emergency responses for each of our gas distribution networks, in addition to billing, customer service and supply services.

Gas Distribution UK

26

Gas Distribution – results

Operating profit

16% upat constant currency


Operating profit mainly driven by

increases in regulated revenue

� UK regulated net revenues +£63m

� US regulated net revenues +£140m


Returns

� UK vanilla return above allowed return

� Downstate New York & Long Island RoEs

above base allowances

� Remaining gas RoEs below base allowances –

addressed by new rate cases

£987m

£1,284m

£120m



Gas Distributionoperating profit

Rest of National Grid44%

27

Gas Distribution – asset bases and returns

Base allowed return

Rate base / RAV

Achieved return



UK gas distribution

Down-state New York(KEDNY)


Long Island(KEDLI)

Up-stateNew York (a)

(NiMo gas)

Massachusetts gas (b)

Narragansett gas (c) Energy North (d)

Regulator Ofgem

£6,550m


5.8%

37.5 / 62.5

100%plus incentive

schemes


New York PSC

$1,795m

9.8%(RoE)

11.1%

45 / 55

100% to 10.5%50% to 12.5%35% to 13.5%

Effective from January 2008

New York PSC

$2,294m

9.8%(RoE)

11.9%

45 / 55

100% to 10.5%50% to 12.5%35% to 13.5%

Effective from January 2008

New York PSC

$1,067m

10.2%(RoE)

4.8%

44 / 56

100% to 11.35%50% to 13.6%25% to 15.6%

10% above 15.6%

New rate agreement

pending

Massachusetts DPU

$2,425m

10.6%(RoE)

8.2%

~50 / ~50

100% to 14.2%75% above 14.2%

New rate filing planned for 2010

Rhode Island PUC

$337m

10.5%(RoE)

7.6%

48 / 52

100% to 10.5%50% to 11.5%

25% above 11.5%

Effective from December 2008

New Hampshire PUC

$191m

TBC

4.4%

50 / 50

TBC

New rate agreement

pending

(a) Settlement agreement reached on new rate plan, decision pending. Previously part of the 2001 combined NiMo electric & gas rate plan.

(b) Massachusetts gas currently comprises three separate entities: Boston gas, Colonial gas and Essex gas. A combined gas rate plan will be filed in 2010. Base allowed and achieved RoEs are weighted averages (using rate base). Rate base includes $937m of embedded goodwill that will be reflected in the 2010 rate case filing. Earnings sharing factors apply to Boston gas only.

(c) Narragansett gas rate plan agreed February 2008, rates effective from December 2008.

(d) Energy North temporary rate increase effective August 2008, settlement agreed January 2009, NH PUC decision pending.

Asset base and returns reported by regulatory entity as at 31 March 2009 and 31 December 2008 for UK and US entities respectively.

28

Electricity Distribution & Generation – our activities

Electricity Distribution & Generation operations

Electricity distribution

Long Island generation

We own and manage electricity distribution networks in New York, Massachusetts, Rhode Island and New Hampshire.Our assets comprise ~116,000km of electricity circuits, serving ~3.4m electricity customers.

We own 57 electricity generation plants on Long Island that together provide 4.1GW of power under regulated contract to the Long Island Power Authority (LIPA). We manage fuel supplies for LIPA to fuel our plants and purchase energy, capacity and ancillary services in the open market on LIPA’s behalf.

LIPA T&D services

On Long Island, we are responsible for managing the electricity transmission and distribution system on behalf of LIPA. LIPA owns approximately 2,100km of transmission lines, ~170 substations, and ~21,000km of distribution circuits, serving ~1.1m electricity customers.

29

Electricity Distribution & Generation – results

Operating profit

39% downat constant currency


Operating profit significantly impacted by

storms and one-offs

� Storm recovery costs £(74)m

� One-off items £(45)m


Returns

� New England RoEs below base allowances –

new rate case filings in May and June

� New York RoE below base allowance – new

rate case filing in early 2010

£330m£265m

£101m



Electricity Distribution & Generation operating profit


9%

30

Electricity Distribution & Generation – asset bases and returns

Base allowed return

Rate base / RAV

Achieved return



Up-stateNew York (a)

(NiMo elec.)

Narragansett electric

(Distribution)


Massachusetts electric (b)

Granite State Electric

Nantucket electric (c)

Long Island Generation (d)

RegulatorMassachusetts

DPU

$1,495m

11.0%(RoE)

7.0%

50 / 50

100% of first $70m

50% ofnext $75m

Agreed May 2000Filing May 2009

$62m

%(RoE)

6.3%

- / -

-

-

Massachusetts DPU

$69m

%(RoE)

11.0%

- / -

-

-

FERC

$574m

9.5%(RoE)

7.1%

40 / 60

Incentives

Rate case in progress

New York PSC

$3,550m

10.6%(RoE)

6.7%

47 / 53

100% to 11.75%50% to 14%25% to 16%

10% above 16%

Agreed July 2000Filing early 2010

Rhode Island PUC

$564m

10.5%(RoE)

2.3%

50 / 50

100% to 10.5%50% to 11.5%

25% above 11.5%

Agreed May 2000Filing June 2009

New Hampshire PUC

Asset base and returns reported by regulatory entity as at 31 December 2008.

(a) NiMo electric rate base excludes $1,059m of US stranded assets rate base.

(b) Massachusetts electric rate base includes $29m relating to transmission assets.

(c) Nantucket electric rate base includes $52m relating to sub-sea cables.

(d) Long Island generation rate base includes peaking plant rate base of $149m, also reflected in the achieved RoE.

31

Non-regulated businesses – results



Operating profit

50% downat constant currency

2008 2009

Property Metering, Grain & Other

Operating profit significantly impacted by

planned suspension of property sales

� Property £(92)m

� Suspension of sales in current property market

� Site clean-up work continuing

� Other items net +£28m:

� Metering: mainly price increases and lower

controllable costs

� Grain LNG: Phase 2 operations commissioned

December 2008

£129m

£65m

£(92)m

+£28m

Non-regulated & otheroperating profit


2%

32

Business performance results and statutory results

122.3p38.5pEarnings per share

3,190944Statutory earnings attributable to equity shareholders

(3)(3)Minority interests

3,193947Statutory profit

1,61825Statutory profit (discontinued operations)

1,575922Statutory profit (continuing businesses)

(607)(472)Tax

2,1821,394Statutory profit before tax (continuing businesses)

45Share of post tax results of joint ventures

(786)(1,234)Net finance costs (including exceptional items and remeasurements)

369(292)Exceptional operating items, remeasurements and stranded cost recoveries

2,5952,915Operating profit*

20082009For the year ended 31 March (£m)

� At actual currency.

* Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations..

33

Revenue

11,42315,624Total revenue

(210)(226)(Sales eliminations)

382435Stranded cost recoveries

642719Non-regulated businesses and other

3,1264,537Electricity distribution (excluding stranded cost recoveries)

2,8454,786Gas distribution - US

1,3831,466Gas distribution - UK

299420Transmission - US

2,9563,487Transmission - UK



� Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations.

34

TransmissionDepreciation & Amortisation

412409Total Transmission depreciation & amortisation

1214Sub total – Other

77LNG (storage)

57Interconnectors (UK)

4156Sub total – Electricity Transmission (US)

810Interconnectors

2027New York Transmission

1319New England Transmission

115115Sub total – Gas Transmission (UK)

1614Gas System Operator

99101Gas Transmission Owner

244224Sub total – Electricity Transmission (UK)

1-Other electricity

1816Electricity System Operator

225208Electricity Transmission Owner



� Business performance, excluding exceptional items, remeasurements and stranded cost recoveries for continuing operations..

35

TransmissionOperating costs (excluding depreciation & amortisation)

1,6942,227Total Transmission operating costs (excluding depreciation & amortisation)


--Internal eliminations

2925LNG (storage)

3(1)Interconnectors (UK)


1013Interconnectors




88Other gas



1,2301,644Sub total – Electricity Transmission (UK)

3141Other electricity

9011,255Electricity System Operator





36

TransmissionOperating profit

1,1491,301Total Transmission operating profit


12-LNG (storage)

3372Interconnectors (UK)


78Interconnectors




--Other gas



671733Sub total – Electricity Transmission (UK)

71Other electricity

419Electricity System Operator





37

Gas Distribution

9871,284Total Gas Distribution operating profit

392612Operating profit (US)

595672Operating profit (UK)

(2,977)(4,621)Total operating costs (excluding depreciation & amortisation)

(2,362)(4,002)Operating costs (US)

(615)(619)Operating costs (UK)

(272)(349)Total depreciation & amortisation

(91)(172)Depreciation & amortisation (US)

(181)(177)Depreciation & amortisation (UK)




38

Electricity Distribution & Generation

330265Total Electricity Distribution & Generation operating profit

(2,650)(4,054)Operating costs (excluding depreciation & amortisation)

(146)(223)Depreciation & amortisation




39

Metering, Grain LNG and Property

931Sub total – Property operating profit

(20)(64)Operating costs (excluding depreciation & amortisation)

(1)-Depreciation & amortisation

6624Other operating income

4841Revenue

1221Sub total – Grain LNG operating profit



--Other operating income

4174Revenue

104133Sub total – Metering operating profit



--Other operating income

388406Revenue




40

Pensions & other post retirement benefit obligations: regulatory recovery principles

AnnuallyAnnually20102010Next actuarial valuation expected

(no obligation to fund deficits –

standard practice adopted)

100%100%N/AN/AOPEB costs & deficits recoverable

(true-up mechanisms / filings lead to

timing variances only)

(legacy non-regulated and some

ERDC excluded)

100%100%63%98%Deficits recoverable

100%100%90%98%On-going pension costs recoverable

OPEBsPensionsNGUK PSESPSRegulatory recovery principles

USUK

� 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.

41

US pensions & other post retirement benefit obligations: regulatory treatment by rate plan

PUC Staff generally oppose reconciliationNew Hampshire

Propose reconciliation mechanism in rate case filing in 2009Rhode Island (electric)

Propose reconciliation mechanism in rate case filing in 2009 (MECO) and next gas filings (TBD)Massachusetts(MECO, Colonial gas, Essex gas)

MechanismJurisdiction

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.

Base rates with no true up at FERC but true-up at end of LIPA contractLIPA Generation

Formula Rate – monthly reconciliation of actual expensesFERC

Annual reconciliation agreed in recent rate caseRhode Island (gas)

Reconciliation with deferred amounts collected/ credited over 3 yearsMassachusetts (Boston gas)

Reconciliation with deferred amounts collected / credited in CTC (deferral account) resetNew York

MechanismJurisdiction

Approach 1:Periodic reconciliation of revenues to reconcile to actual pension / OPEB costs.

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.

42

Pensions & other post retirement benefit obligations: (IAS19 data)

USUK

NG totalOPEBsPensionsNGUK PSESPSAt 31 March 2009 (£m)

7.3%7.3%6.8%6.8%Discount rates

(1,423)(794)(518)183(294)(Deficit) / surplus net of deferred tax

1,388814531(71)114Deferred tax*

(2,811)(1,608)(1,049)254(408)(Deficit) / surplus

(18,330)(2,330)(3,661)(10,786)(1,553)Present value of liabilities

15,5197222,61211,0401,145Market value of assets

* Deferred tax is calculated using the UK statutory tax rate and the US tax rate attributable to the combined pension and OPEBsbalance at 31 March 2009.

� OPEBs = other post retirement benefits.

43

Interest cover – calculation

1,7362,0452,465Interest expense (P&L)

70119133Capitalised interest

41078Interest on pensions debt adjustment

447Interest on decommissioning liabilities adjustment

3.7x3.2x3.1xInterest cover (adjusted funds from operations / adjusted interest expense)

3,4743,6184,268Adjusted funds from operations

310110143add back cash tax paid (for continuing operations)

000Ofgem assumed interest

(177)(125)(16)Prior year adjustment (if negative)

4

2

4

(298)

7

(126)

add back decommissioning liabilities adjustment

Corporation tax

846381add back lease rentals

41078add back interest on pensions debt adjustment

276465799add back employer pension contributions

(115)(127)(136)Current pension service cost

(127)150(54)Working capital adjustment

000Dividends received

21821179Interest income on financial instruments

2,9583,1653,413Net cash inflow from operating activities

9441,1431,392Adjusted interest expense

(45)00Exceptional debt redemption costs

(21)(45)(68)Unwinding of discounts on provisions

(869)(1,001)(1,250)Pensions interest on scheme liabilities

282127Interest on lease rentals adjustment


44

Predictability of regulated cash flows is a key factor in our ratings – Group credit ratings

A/---A/---A3/---KeySpan Gas East Corporation

A+/---A/---Not ratedThe Brooklyn Union Gas Company

A-/---A-/A2Baa1/P2KeySpan Corporation

Not ratedA-/--Baa1/--Boston Gas Company

Not ratedA-4/---A3/---Colonial Gas Company

Not ratedA-4A2A33/---The Narragansett Electric Co.

Not ratedA-/A2A3/--Niagara Mohawk Power Corporation

Not ratedBBB+/A2A3/P2National Grid USA

Not ratedA-/A2A3/P2New England Power Co.

Not ratedA-/A2A33/P2Massachusetts Electric Co.

1Moody’s ratings placed on Negative Outlook 31-Jan-08 2NGG is also rated “A/Stable” by JCR 3Issuer rating 4Corporate credit rating

Not ratedA-4/---Baa13/---National Grid Generation LLC

A/---A-4/---A3/---National Grid Gas Holdings Limited

A/F2A-/A2A3/P2National Grid Gas plc2

Not ratedBBB+/A2Not ratedNational Grid Holdings One plc

A/F2A-/A2A3/P2National Grid Electricity Transmission plc

BBB+/F2BBB+/A2Baa1/P2National Grid plc

FitchS&PMoody’s1Senior Unsecured / Short-Term ratings

The ratings set forth above are not a recommendation to purchase, hold or sell National Grid’s notes, that may be issued from time to time, inasmuch as the ratings do not comment as to market price or suitability for a particular investor. The ratings are based on current information we have furnished to the rating agencies and information obtained by the rating agencies from other sources. The ratings are only accurate as of the date hereof and may be changed, superseded or withdrawn as a result of changes in, or unavailability of, such information and, therefore, a prospective purchaser should check the current ratings before purchasing National Grid’s notes.

45

Treasury contacts

Malcolm Cooper (Group Tax and Treasury Director):

D: +44 (0)20 7004 3340 [email protected]

Andrew Kluth (Assistant Treasurer, Funding):


Andy Mead (Senior Corporate Banking Manager):


David Morgan (Corporate Banking Manager):


Group website: www.nationalgrid.com

Detailed debt investor information: www.nationalgrid.com/corporate/Investor+Relations/Debt

46

European Presentation June 09 - National Grid plcinvestors.nationalgrid.com/~/media/Files/N/National-Grid...2 Cautionary statement Unless otherwise stated, all financial data of National

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