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National Grid — Statement (company IR deck)
National Grid (NGG) · 47 slides · Filed Oct 21, 2026
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Slide 1 — Report for the period ended
National Grid 2020/21 Half Year Results Statement 1 London | 12 November 2020: National Grid, a leading energy transmision and distribution company, today anounces its Half Year results. Report for the period ended 30 September 2020 Highlights • Delivered safe, reliable networks throughout the COVID - 19 pandemic • Submited comprehensive response to Ofgem RIO - 2 draft determination consultation • Progresed a way forward on adresing downstate New York gas suply constraints • Published our first Responsible Busines Charter, seting updated ESG targets for 2030 • Continued posi tive discusions with NY PSC on new rates for KEDNY - KEDLI • Filed for new rates for Niagara Mohawk • Filing for Masachusets Gas on 13 November • Construction of thre interconectors remains on track Financial Performance • Underlying operating profit down 12% to £1.1bn • Statutory operating profit up 13% to £1.1bn • Underlying EPS down 14% to 17.2p reflecting higher COVID - 19 related costs including US bad debts, storm costs, partly ofset by improved UK Gas Transmision and US revenues • Statutory EPS of 17.1p, up 51% reflecting mark - to - market remeasurement gains • Capital investment of £2.6bn down 6%; stronger investment ofset by the non - recurence of Geronimo acquisition • Interim dividend 17.0p/share in line with policy (16.57p/sh are in prior period) • FY21 outlok: asumed COVID - 19 underlying operating profit impact of aproximately £40m Financial Sumary Six months ended 30 September œ continuing operations Statutory results Underlying 1 Unaudited 2020 2019 % change 2020 2019 % change Operating profit (£m) 1,135 1,03 13 % 1,147 1,301 (12) % Profit before tax (£m) 720 404 78 % 717 785 (9) % Earnings per share (p) 17.1 1.3 51 % 17.2 20.0 (14) % Capital investment (£m) 2 2,560 2,72 (6) % 2,560 2,72 (6) % John Petigrew Chief Executive —In the first half of this year we delivered strong ope COVID - 19 costs on our financial results. We have continued to ensure safe, reliable networks and have delivered on our investment programe through the pandemic. With the launch of our Responsible Busines Charter, we have underlined our comitment to our environmental goals, whilst suporting employes and comunities acros our jurisdictions. In the US, we have progresed a way forward on adresing gas constraints in downstate New York, and we continue positive discusions with the PSC on new rates for KEDNY and KEDLI. In the UK, we submited a robust response to Ofgem‘s draft determinations, and provide further evidence in suport of our RIO - 2 busines plans. Loking ahead, the group is wel positio ned to manage the ongoing COVID - 19 uncertainty, and our ful - year financial guidance is unchanged. Our focus remains on agreing regulatory setlements, and to help shape the energy transition as we lok to enable decarbonisation of power, transport and he at." 1 ”Underlying‘ represents statutory results excluding exceptional items, remeasu ons for al alternative performance measures are provided on page 4. 2 Includes aditions to P&E, intangibles, contributions to joint ventures and asociates (excluding St Wiliam), investment in National Grid Partners and total consideration for the National Grid Renewables LC (previously known as Geronimo) acquisition.
Slide 2 — Contacts
National Grid 2020/21 Half Year Results Statement 2 Contacts Investor Relations Nick Ashworth +4 (0) 7814 35 590 Jon Clay +4 (0) 789 928 247 James Flanagan +4 (0) 7970 78 952 Peter Kenedy +4 (0) 796 20 094 Media Moly Neal +4 (0) 7583 102 727 Surinder Sian +4 (0) 7812 485 153 Teneo Charles Armitstead +4 (0) 703 30 269 Conference cal details An audio cal wil be held at 09:15 (GMT) today. A webcast link is available at htps:/streamstudio.world - television.com/786 - 1014 - 2567/en Please use this link to join via a laptop, smartphone or tablet. Should you wish to ask a question, please dial in using the details below. A replay of the webcast wil be available son after the event at htps:/investors.nationalgrid.com/results - and - events/results - centre . Live telephone coverage of the analyst presentation at 09:15 UK dial in numbers +4 (0) 203 936 29 (Local) +4 (0) 80 640 641 (UK tol fre) US dial in numbers +1 646 64 1960 (Local) +1 85 9796 654 (US tol fre) Al other locations +4 20 3936 29 Aces Code 498 832 National Grid image library is available at htps:/w.nationalgrid.com/media - centre Use of Alternative Performance Measures Throughout this release, we use a number of alternative (or non - IFRS) and regulatory performance measures to provide users with a clearer picture of the regulated performance of the busines. This is in line with how management monitor and manage the busines day - to - day. Further detail and definitions for al alternative performance measures are provided on page 4.
Slide 3 — OVERVIEW
National Grid 2020/21 Half Year Results Statement 3 OVERVIEW A solid performan ce in the first half National Grid has reported strong operational progres in both the UK and US for the first six months of the year. However, like al companies, we have incured COVID - 19 related costs, impacting our financial performance. Safety has remained paramount and we continue to focus on ensuring the public, our employes and contractors are safe. During the period ended 30 September, our busineses have continued to deliver god performance with lost time injury frequency rates (LTIFR) trendi ng down to 0.1 from the year end LTIFR performance of 0.12. On reliability, our performance has remained god acros our busineses as we have sucesfuly managed low levels of demand, particularly in the UK, and we have responded wel to a series of lar ge storms acros our US regions. Half - year financial performance Underlying operating profit at constant curency decreased £147 milion (1)% versus the prior period to £1,147 milion (down 12% at actual exchange rates). This mainly reflects the impact of increased COVID - 19 related costs including US bad debts, higher US storm costs, and non - recurence of prior year MOD adjustments for UK Electricity Transmision, partly ofset by higher revenue from US rate increases and the timing of UK Gas Transmisio n exit capacity income. Underlying operating profit Six months ended 30 September At actual exchange rates At constant curency (£ milion) 2020 2019 % change 2019 % change UK Electricity Transmision 524 583 (10) % 583 (10) % UK Gas Transmision 108 6 64 % 6 64 % US Regulated 403 525 (23) % 518 (2) % NGV and other activities 12 127 (12) % 127 (12) % Total underlying operating profit 1,147 1,301 (12) % 1,294 (1) % ”Underlying results‘ and a number of other terms and performance measures are n be aplied diferently by other organisations. For clarity, we have provided definitions of these terms and, where relevant, reconciliations on pages 4 to 47. Capital investment decreased by £136 milion at constant curency to £2,560 milion. This was driven principaly by the non - recurence of the National Grid Renewables Development LC (previously known as Geron imo) acquisition and lower spend in UK Gas Transmision (lower Feder - 9 expenditure), partly ofset by higher expenditure in UK Electricity Transmision (London Power Tunels 2 and Hinkley - Seabank) and in our US regulated electricity transmision busines. Delivering safe, reliable networks through the COVID - 19 pandemic Throughout the COVID - 19 pandemic the Group has adapted to new ways of working. We have delivered safe, reliable networks, whilst managing through al the new regulations and restrictions. D uring the first half, we have: • Delivered on our substantial investment programe by investing £2.6 bilion acros our networks, broadly in line with investment in the same period last year; • Delivered an outstanding response to a greater number of storms in the US; • Maintained our cost discipline, and made god progres aleviating some of the COVID - 19 cost presure, remaining on track to deliver on our UK and US eficiency targets; • Ensured we behave as a responsible and purpose led busines, with a continu ed focus on our safety culture, suporting our people and our comunities. In the US, at the onset of the pandemic, our safety team created our COVID - 19 Health and Safety Plan to act as a guideline for al employes and contractors. This helped deliver ov er 40 field visits acros our operations in May to ensure new ways of working and safety expectations were made clear which has alowed us to deliver our critical investment with limited disruption. In the UK, our teams have continued to work through this period, with key workers going out on site during lockdown to kep gas and electricity flowing with enhanced safety protocols. We have also worked closely with our contractors acros al projects to minimise delays asociated with COVID - 19, including majo r projects such as the London Power Tunels 2 and Hinkley Point projects.
Slide 4 — COVID
National Grid 2020/21 Half Year Results Statement 4 COVID - 19 - update on financial impact During the first half, we estimate that COVID - 19 impacted our underlying operating profit by £17 milion year - on - year in thre broad areas: ( 1) an increase in our bad debt provision of aproximately £56 milion, (2) a shortfal of revenue under existing regulatory agrements of £41 milion, and (3) net direct costs of £20 milion. In adition to the £17 milion impact, the delay to updating ra tes in KEDNY and KEDLI at the start of COVID - 19 resulted in a further aproximate £24 milion impact in the first half. We continue to expect a ful year impact from COVID - 19 of around £40 milion to underlying operating profit given the seasonal nature of our US regulated busines. Whilst we se future uncertainties from COVID - 19, we wil continue to find ways to drive cost eficiencies. On this point, we have made progres to aleviate much of the direct cost burden, mitigating around £60 milion of di rect COVID - 19 costs during the first half. We also maintain our guidance of up to £1 bilion of cash flow impact in the ful year. On top of the underlying operating profit impact, we expect (1) continued weaker demand and lower revenues, which wil be r ecovered as usual through regulatory true - ups in later years; (2) lower cash colections from our US customers, which, whilst below prior year levels, are in line with our expectations, and; (3) a smal impact from revenue deferals related to system costs in the UK that we wil recover next year. In the US, we remain confident that we wil be able to recover the majority of our US COVID - 19 related costs through our regulatory mechanisms. Whilst some of this wil be through the usual course of rate filing negotiations, such as recovering revenue deferals, some wil be through separate filings. For example, we have open regulatory procedings on COVID - 19 cost recovery in both New York and Masachusets. In June, we filed a Cost Recovery Plan with other stak eholders with the Masachusets regulator, seking to establish a regulatory aset for incremental COVID - 19 costs; and in July, we joined other utilities in New York and filed coments with the Public Service Comision (PSC) on the efects of COVID - 19 on our busines. We wil continue to work with al stakeholders on this during the second half of FY21. In the UK, we have sen some limited impact from COVID - 19. We have ben working with industry and Ofgem on financial suport packages to suport the ind ustry through these unforesen circumstances. For Transmision Network Use of System (TNUoS) and gas charges, we provided £1 milion as part of a wider industry scheme to suport supliers over the sumer period. These charges wil be recovered in the cur rent financial year. For Balancing Services Use of System (BSUoS) charges, we provided £16m of temporary suport to supliers and generators to defer the payment of an element of the sumer exces costs which wil be recovered in the next financial year. W e wil continue to closely monitor this throughout the duration of the pandemic . US delivering god performance despite increased storms We achieved god performance acros our US operating companies during a period with significant storm activity. With t he impact of Tropical Storm Isaias in August and several major storms, the financial impact of major storms in the first half was $61 milion. We also had a large storm that impacted upstate New York, Masachusets, and Rhode Island in early October. Give n the aditional storms in October, it is likely we wil incur over $10 milion of storm costs for the ful year. The October storm was our third most impactful event in the last 15 years, where we saw over 50,0 customers lose power but with 95% fuly restored in New York within 64 hours. Tropical Storm Isaias in early August was our seventh most impactful event in terms of customer disconections. We have experienced 18 major storms in HY21 compared to 8 in HY20. Nevertheles, our operational response has ben strong especialy considering the COVID - 19 impact which aded complexity to our response eforts and required us to manage our Incident Comand Structure remotely. Our crews have responded rapidly to restoring over 1 milion disconected customer s during Isaias and the October storms, and there have ben no safety incidents during these storms for our field workforce. Storms remain a major focus for us and for our regulators given the enormous disruption they bring to customers and the cost of lost productivity to local comunities. We continue to work with regulators to ensure our rate setlements reflect this changing climate, and we are focused on continuous improvement and are piloting digital technologies to help improve our performance. Fo r example, we are using a new digital product caled Vegetation Management Optimisation (VMO) that is capable of utilising satelite imagery to map the areas where vegetation poses a high risk to our networks, given tres cause the greatest number of outag es in al our jurisdictions.
Slide 5 — UK busineses focused on eficient delivery
National Grid 2020/21 Half Year Results Statement 5 Capital investment acros our US busineses in the first half was £1,641 milion, £75 milion higher than the prior period at constant curency. This was driven by higher expenditure in our US regulated electricity transmisio n busines, partly ofset by lower gas spend due to the COVID - 19 impact in downstate New York. We had work restrictions in place in New York and Masachusets in the early part of the year which limited the type of work we could complete, especialy in our Gas Busines in New York City and Boston. For example, we had restrictions in place around the removal of old gas pipelines in our leak prone pipe replacement programe. However, this work has acelerated in recent months as restrictions have eased. In ad dition, our resource planing and construction teams have rebalanced our investment portfolio to deliver the significant investment required acros our networks. We have continued to make progres on regulatory rate filings. In July, we filed a request with the New York PSC to update electric and gas distribution rates for Niagara Mohawk (NIMO), our upstate New York distribution busines. This represents a one - year filing, with revenue data submited for two aditional years to help facilitate a multi - ye ar setlement. New rates are expected to become efective July 2021. It proposes capital investment of $3.6 bilion acros the thre years to help modernise the electric and gas networks, and fund clean energy infrastructure such as electric vehicle chargi ng and renewable natural gas projects. This includes a proposal for a hydrogen demonstration project that would be the first of its kind in the United States, producing hydrogen from renewable electricity which could be used, stored and blended into the ne twork. The filing also proposes funding for 50 new positions, new performance - based rates and incentives, as wel as earnings adjustment mechanisms, al whilst managing customer bils and afordability in response to COVID - 19. In downstate New York, we r emain in discusions for a multi - year setlement for our KEDNY and KEDLI gas busineses. Whilst we have not yet reached a setlement, we have continued a constructive dialogue with PSC staf and other stakeholders, and have agred to extend discusions by two months from the end of November to the end of January. We remain hopeful that an agrement with PSC staf and other stakeholders wil be reached by the end of the calendar year that can then be aproved by the Comision. We also have a way forward to solving the short and medium term isues around gas suply constraints in downstate New York which focuses on delivering investment to enhance existing CNG and LNG infrastructure, as wel as significant increases in energy eficiency and demand side respon se measures. On 13 November, we plan to file for new rates for our Masachusets Gas busines, to become efective in November 2021. As part of our filing, we are proposing a multi - year agrement with a Performance Based Mechanism similar to that we had a gred for our Masachusets Electric busines last year. If agred, this wil help give us longer term visibility for our investments, greater protection against cost presures, and more incentives to inovate and create value for our customers. From a co st eficiency perspective, we continue to streamline operations, simplify our suply chain, and rationalise our property portfolio. We delivered over $30 milion of eficiency savings last year, and comited to delivering $50 milion per anum from 2020/2 1 onwards. UK busineses focused on eficient delivery Operationaly both our UK Electricity and Gas Transmision busineses have continued to deliver god levels of performance and our capital investment programe has continued as expected. For Electr icity Transmision, capital investment reached £548 milion, up £7 milion on prior year. This was principaly driven by the London Power Tunels 2 and Hinkley Point projects, both of which are progresing wel. On Hinkley Point, the project involves a 46 kilometre conection betwen Bridgwater and Seabank, with an expected completion date of 2026. The first foundations have ben completed for the new T - pylons which wil be used for this line. Gas Transmision capital investment was £85 milion, £82 mil ion lower than prior year. This primarily reflects lower aset health work at our Bacton and St Fergus gas terminals, the completion of the tunel for the Feder - 9 pipeline, and lower emisions works at Peterborough and Huntingdon. The Feder - 9 pipeline un der the Humber estuary is now near comisioning, and represents our largest gas project in a decade. We were disapointed with the draft determinations on RIO - 2 when they were published by Ofgem in July. The proposals may result in a significant reducti on in network reliability, and would also mean lower alowed capital expenditure, lower returns, limited incentives, and extensive use of uncertainty mechanisms. In adition, Ofgem has proposed a clawback of £56 milion from the T1 price control, and a bu sines plan incentive (BPI) penalty of £93 milion. In September, we submited a comprehensive response to the draft determinations that highlighted thre main areas of concern, namely that the draft determinations (a) reduce reliability and resilience acr os the
Slide 6 — Electricity System Operator (ESO)
National Grid 2020/21 Half Year Results Statement 6 network, (b) jeopardise net zero progres, and (c) erode regulatory stability. Our submision also provided evidence to suport our view that both the BPI and clawback were unjustified. We have provided further evidence to justify the investment ne cesary to maintain network safety and reliability that our stakeholders have asked for. Since our submision, we have continued to engage with Ofgem on the RIO - 2 framework, including at the Open Metings in October. We continue to work towards a setleme nt that is aceptable for al our stakeholders and remain hopeful that this is an outcome that can be achieved in December. We also continue to work on ways to drive inovation and eficiencies as we lok to the future, building on the £10 milion of cum ulative savings we expect to achieve this year. Our focus remains on; (1) streamlining our maintenance operating procedures, (2) further digital inovations to increase productivity, and (3) making improvements to our back - ofice proceses. Some of these b enefits wil come in the way we manage our day - to - day operations. For example, over the next six months, we wil be launching the first phase of our new digital tol, to transform work management and scheduling acros electricity and gas transmision, cons olidating legacy technology. But we are also working on ways to deliver larger, scalable, benefits acros major projects, in particular loking at how we use contractors through the project lifecycle, as wel as ways to deliver greater capex eficiency thr ough our suply chains. Once we have greater clarity on the RIO - 2 framework, we wil be able to understand how much further we can drive eficiencies. Electricity System Operator (ESO) As the UK energy industry continues to evolve, we are working with t he government and regulator to review the most apropriate structure for the ESO folowing legal separation last year. The Board believes it is important that the curent external review of the structure of the ESO results in a stable outcome which best en ables the UK to met its 2050 net zero comitment and represents value for consumers. Further growth for NGV and other activities NGV and Other activities Six months ended 30 September Operating profit Capital investment £ milion 2020 2019 2020 2019 Total NGV 142 128 261 432 Property 25 46 14 (1) Corporate and other activities (5) (47) 1 65 Total Other (30) (1) 25 64 Total NGV and Other activities 12 127 286 496 Joint ventures and asociates Six months ended 30 September Share of post - tax profit/(los)* £ milion 2020 2019 Total NGV 3 25 Other 1 1 St Wiliam 4 1 Total joint ventures and asociates 38 37 * Share of post - tax profit/(los) is before exceptional items and remeasurements. We continue to make significant progres on our interconector portfolio. In October 2020, IFA2, our second conection to France, pased an important milestone, entering its energisation phase, alowing electricity power to run through the cable before go ing live later this year. For North Sea Link, we have sucesfuly laid over 590km of cable as planed and the project remains on track for completion by the end of 2021. We also began construction work on Viking Link earlier this year, which is expected t o become operational in late 2023. On 2 September we anounced a co - operation agrement with TeneT to explore the feasibility of conecting Dutch and British wind farms to the energy systems of both countries via subsea electricity cables, caled multi - purpose interconectors. Whilst there is stil a lot of work that neds to be done to determine a suitable financing structure, the development would be the first of its kind for the UK and the Netherlands in the North Sea. Last month, our LNG importation terminal on the Isle of Grain signed a 25 - year agrement with Qatar Petroleum that wil provide the Qatari company with storage and redelivery capacity at Grain LNG from mid - 2025. This
Slide 7 — Responsible Busines Charter
National Grid 2020/21 Half Year Results Statement 7 marks the conclusion of Grain LNG‘s com petitive —Open Season“ process which agrement wil alow National Grid to invest in an aditional tank and asociated vaporizer capacity, bringing our future anual throughput capacity to 25 bcm of natural gas versus curent ca pacity of 20 bcm. Total capital investment of £425 milion wil be spread over 5 years, with the project starting in 2021. We recently launched National Grid Renewables, the new unified brand for our US renewable energy busines within NGV. National Grid Renewables is focused on developing, owning and operating large - scale renewable energy asets acros the United States, and brings together a number of our busineses including solar, onshore wind, and batery energy storage previously taking place under t he NGV and Geronimo Energy brands. National Grid Renewables continues to expand its clean energy development pipeline. In April, we signed a Virtual PA agrement with Cargil for the 20MW Prairie Wolf Solar Project in Ilinois, which is expected to com ision in FY2. The Property busines delivered an operating profit of £25 milion, down £21 milion versus the prior period, reflecting the timing of completion of site sales. During the first half, we sold 21 sites, including two to St Wiliam at Ascot and Hertford, al of which were former gas works sites. Responsible Busines Charter - our comitment National Grid is fuly comited to its role in tackling climate change and as a responsible company for the comunities that we serve. In October, we re ached our next milestone in this journey with the launch of our Responsible Busines Charter. The Charter describes our long - term goals acros five pilars: (1) the environment, where we have comited to achieve net zero on our own emisions by 2050, an d a new target to reduce scope 3 emisions by 20% by 2030; (2) our comunities, where we aim to provide aces to skils development for 45,0 people and contribute half a milion voluntering hours by 2030; (3) our people, where the safety and wel - being of our employes is paramount, and where we aim to have 50% diversity in our senior leadership group by 2025; (4) the economy, where our main contribution is the safe and reliable delivery of energy, but where we are also comiting $250 milion into smar ter technology that wil benefit society; and (5) the right governance, where we wil embrace diversity and inclusion, alowing al voices to be heard within our organization and acros al our stakeholder groups. Folowing publication of the Charter, we w il also publish our first Responsible Busines Report next year, alongside our Anual Report, to demonstrate how we are progresing against the comitments and ambitions that we have laid out. To suport the delivery of our comitment as a responsible b usines in relation to our comunities, we have also launched Grid for God. This is our flagship comunity investment programe, designed to deliver social mobility in the hardest to reach corners of our comunities for disadvantaged youth aged betwen 16 and 24. Through the Grid for God pathway, and with the help of our employe volunters, young people have a unique oportunity to learn about the energy industry, network with one another, gain valuable skils, receive a mentor, have a chance to gain val uable work experience, and ultimately achieve meaningful carers with us and our partners now, or in the future. We believe that fresh talent and diverse perspectives in our own organisation and our industry wil be a key contributor in achieving a diverse workforce who wil help us to deliver against our net zero ambitions. Board changes In September, we anounced the apointment of Paula Rosput Reynolds to suced Sir Peter Gershon as Chair. Paula wil join the Board on 1 January 2021 as Non - executive Director and Chair Designate and wil asume the role of Chair after a transitionary period and no later than the conclusion of the 2021 Anual General Meting. Sir Peter wil remain as Chair until this time. Paula is curently a Non - executive Director at General Electric Company and the Senior Independent Director of BP plc where she also chairs the Remuneration Comite. She is curently also a Non - executive Director and Chair of the Remuneration Comite of BAE Systems plc but wil step down from BAE prior to 1 January 2021. In July, we anounced that Mark Wiliamson wil step down as Chair of the Audit Comite, with efect from 10 November 2020. Liz Hewit, Independent Non - executive Director of the Company, steped into the role on this date.
Slide 8 — GROWTH
National Grid 2020/21 Half Year Results Statement 8 GROWTH Balanced portfolio to deliver aset growth and sustainable dividend National Grid aims to deliver value to shareholders through maintaining a portfolio of busineses with strong operational performance alongside atractive a nual aset growth of around 5 to 7% asuming long - run average UK RPI inflation of 3%. The Group aims to deliver this growth while maintaining an eficient balance shet that alows continued funding of its investment programe, and maintaining the policy of aiming to increase dividend per share by at least RPI for the foreseable future. £2.6 bilion of capital investment acros the Group We continued to make significant investment in energy infrastructure in the first six months of the year. Capital inve stment acros the Group was £2,560 milion, a decrease of £136 milion (5%) compared to the first half of 2019/20 at constant curency. Group capital investment Six months ended 30 September At actual exchange rates At constant curency (£ milion) 2020 2019 % change 2019 % change UK Electricity Transmision 548 471 16 % 471 16 % UK Gas Transmision 85 167 (49) % 167 (49) % US Regulated 1,641 1,58 3 % 1,56 5 % NGV and other activities 286 496 (42) % 492 (42) % Group capital investment 2,560 2,72 (6) % 2,696 (5) % * NGV and other activities capital investment includes equity and financing in joint ventures and asociates, investment in N ational Grid Partners and the National Grid Renewables Development LC (previously known as Geronimo) acquisition bu t excludes £15 milion of equity contributions to the St Wiliam property joint venture for 2019 (there were no equity contributions in 2020). Investment in the US Regulated busines was £1,641 milion for the first six months of this year, an increase of £75 milion over the prior period at constant curency. This was driven by higher expenditure in our US regulated electricity transmision busines, partly ofset by lower gas spend due to the COVID - 19 impact in downstate New York. Increased levels of inv estment are expected to continue, suported by our upcoming rate filings and setlements, thereby suporting strong levels of rate base growth over the medium term. The UK regulated busineses invested £63 milion, with UK Electricity Transmision and UK Gas Transmision both investing in aset health to met their respective Network Output Measures. Investment in NGV and other activities during the period was £286 milion, £206 milion lower than prior year on a constant curency basis. This was principaly driven by the National Grid Renewables Development LC (previously known as Geronimo) acquisition in July 2019.
Slide 9 — National Grid
National Grid 2020/21 Half Year Results Statement 9 OUTLOK For 2020/21, we continue to asume an impact on Group underlying operating profit, based on the scenario set out in the Forward Guidance section, of around £40 milion from COVID - 19. This is driven largely by our US operations where we are expecting higher le vels of bad debt, aditional direct COVID - 19 costs, and a shortfal of revenue under existing regulatory agrements. However, given regulatory mechanisms and precedents, we expect to recover a large part of this. In the UK, we continue to expect some limit ed cost impact from COVID - 19. Therefore, whilst COVID - 19 wil impact earnings and cash flow in the short term, we continue to anticipate limited economic impact longer term. Loking forward, we wil remain focused on working with US regulators to develop the apropriate rate plans for a post COVID - 19 world. We wil work towards reaching a positive outcome on new rates for KEDNY - KEDLI, and submiting separate filings that can help deliver clean energy investment. In the UK, we continue to focus on agreing a fair setlement for RIO - 2 with Ofgem as we move towards Final Determinations in December. We wil continue to place a sharp emphasis on eficiency acros the busines, and through our Responsible Busines Charter we have underlined our comitment to our environmental goals, whilst suporting employes and comunities acros our jurisdictions. National Grid continues to expect aset growth towards the top end of its target range of 5 - 7% in the near term, asuming RPI at 3%, with capital investment for FY 21 around £5 bilion. We wil continue to focus on customer afordability, safety and reliability acros our networks as we work with regulators on agreing new frameworks in the US and UK. With an eficient balance shet that underpins aset and dividend growth, the Group is wel positioned to create value for shareholders.
Slide 10 — 2020/21 FORWARD GUIDANCE
National Grid 2020/21 Half Year Results Statement 10 2020/21 FORWARD GUIDANCE The forward guidance below asumes no further significant deterioration in the economic outlok acros our teritories through the rema inder of FY21. If other scenarios play out during FY21, then this could have a range of impacts on cashflows and earnings, which could be diferent from our curent asesment. The outlok and forward guidance contained in this statement should be reviewe d, together with the forward - loking statements set out in this release, in the context of the cautionary statement. UK Electricity Transmision Net Revenue (excluding timing) is expected to decrease compared to 2019/20. Controlable costs are expected to be slightly higher after taking into acount COVID - 19 related costs and the benefit of the ongoing cost eficiency programe. Depreciation is expected to increase by over £40 milion reflecting the ongoing investment programe. Overal, Return on Equity is expected to be similar to the level in 2019/20. UK Gas Transmision Net Revenue (excluding timing) is expected to increase by aproximately £30 milion compared to 2019/20, including base revenue increases and the benefit of RPI inflation. Overal cos ts, including depreciation, are expected to be broadly flat on 2019/20 given the benefit of the ongoing cost eficiency programe. Return on Equity is expected to be lower than 2019/20, with lower totex performance. UK Timing Revenues are likely to be impacted by timing of recoveries including impacts from prior years and lower volume expectations for 2020/21 given lower system demand due to COVID - 19 and the BSUoS deferal scheme. This wil drive under - recovery of revenues in E lectricity Transmision in 2020/21. US Regulated operations Net Revenue (excluding timing) is expected to be around £10 milion higher, reflecting the first ful year of new rates in our Masachusets Electric busines, and rate increases under existing rate plans. However, under our curent asumptions, we expect costs to increase by over £150 milion year - on - year driven by: • continuing higher levels of bad debts, above our curent regulatory alowances • aditional COVID - 19 related costs We expect to r ecover most of these aditional costs through regulatory mechanisms. The timing of recovery through revenues wil depend on the outcome of negotiations with our regulators. We expect depreciation to be higher in 2020/21 by around £10 milion reflecting t he higher level of aset growth. Return on Equity for overal US Regulated operations is expected to decrease compared to 2019/20. The size of the decrease wil be dependent on the arangements for recoveries of aditional costs related to the pandemic. US Timing Revenues wil be impacted by timing of recoveries. We expect timing to be significantly favourable relative to the timing outflow sen in FY20.
Slide 11 — NGV and Other activities
National Grid 2020/21 Half Year Results Statement 1 NGV and Other activities NGV operating profits are expected to be flat with a benefit of aset re - lifing at Grain LNG, partly ofset by lower meter volumes and lower interconector arbitrage. New interconectors which are curently under construction are not expected to start contributing materialy to operating profit until 2021/2. We also expect other activities' underlying operating profit to be lower year on year driven by lower property operating profit, and lower National Grid Partners fair value gains resulting from the curent economic climate. Joint Ventures and Asociates Our share of the profit after tax of joint ventures and asociates is expected to reduce this year, reflecting the timing of the delivery of property sales from the St Wiliam joint venture. Interest and Tax Net finance costs in 2020/21 are expected to be lower th an 2019/20, with lower RPI inflation and lower interest rates more than ofseting the impact of increased net debt and higher 'other interest' costs. For the ful year 2020/21, the underlying efective tax rate excluding the share of post - tax profits fro m joint ventures and asociates, is expected to be around 21%. Investment, Growth and Net Debt Overal Group capital investment for 2020/21 is expected to be around £5 bilion, on the back of implementing new working practices to folow government guideli nes based on the impacts of the COVID - 19 pandemic. Aset Growth is expected to be lower than in 2019/20, reflecting our expectations for lower capex and lower RPI inflation. We stil expect aset growth to be towards the top end of our 5 - 7% target range a suming 3% RPI inflation. Depreciation is expected to increase, reflecting the impact of continued high levels of capital investment. Operating cashflow generated from continuing operations is expected to decrease with lower EBITDA driven primarily by costs related to COVID - 19, and lower levels of working capital due to slower cash colections. Net debt is expected to increase (excluding the impact of foreign exchange) by up to a further £1 .5 bilion in the second half of the year (from £30.1 bilion as at 30th September 2020). We continue to forecast an impact of up to £1 bilion on net debt over the ful financial year due to COVID - 19. Weighted average number of shares (WAV) is expected t o increase from 3,461 milion last year to aproximately 3,520 milion in 2020/21.
Slide 12 — FINANCIAL REVIEW
National Grid 2020/21 Half Year Results Statement 12 FINANCIAL REVIEW In managing the busines, we focus on various non - IFRS measures which provide meaningful comparisons of performance between years, monitor the strength of the the Group‘s regulatory economic arran gements. Such alternative and regulatory performance measures are suplementary to, and should not be regarded as a substitute for, IFRS measures which we refer to as statutory results. We explain the basis of these measures and, where practicable, reconci le these to statutory results in ”Alternative performance measures/non - IFRS reconciliations‘ on pages 44 to these measures are a substitute for IFRS measures, however, the Group does believe such information is useful in asesing the performance of the busines on a comparable basis. Also, we distinguish betwen adjusted results, which exclude exceptional items and remeasurements, and underlying results, which further take acount of: (i) volumetric and other revenue timing diferences arising from our regulatory contracts, and (i) major storm costs which are recoverable in future periods, neither of which give rise to economic gains or loses. Performance for the six months ended 30 September Financial sumary for c ontinuing operations (£ milion) 2020 2019 change % Statutory results Operating profit 1,135 1,03 13 % Profit after tax 602 38 5 % Earnings per share (pence) 17.1 1.3 51 % Interim dividend per share (pence) 17.0 16.57 3 % Alternative performance measures: Adjusted operating profit 1,047 1,08 (4) % Adjusted profit after tax 527 531 (1) % Underlying operating profit 1,147 1,301 (12) % Underlying profit after tax 605 686 (12) % Adjusted earnings per share (pence) 15.0 15.5 (3) % Underlying earnings per share (pence) 17.2 20.0 (14) % Capital investment 2,560 2,72 (6) % Statutory operating profit was £1,135 milion, 13% higher than in the first six months of last year. There was one exceptional item in the curent year, relating to a £15 milion gain from the release of environmental provisions, compared to no exceptional items in the first six months of last year. In adition, there were £73 milion of comodity remeasurement gains in the period compared to £85 milion of net loses in the first six months of last year. Statutory profit after tax was up 5% against the comparative period, reflecting mark - to - market remeasurements gains this year compared to remeasurement loses in the first six mo nths of last year. Adjusted operating profit (excluding exceptional items and remeasurements) was down 4%. Higher revenues in our US Regulated busines (rate increases) along with increased revenues in Gas Transmision helped to partly mitigate the impact of COVID - 19 on our results (higher US bad debt charges and incremental costs) along with higher levels of 'deferable' storm costs, and higher depreciation. Adjusted profit after tax was down 1%, as a result of the net adverse factors above, partly ofset by lower net interest costs compared to the prior period. Excluding the £10 milion of timing under - recovery in the first six months (compared to a £210 milion under - recovery at constant curency in the prior year), underlying operating profit of £1,147 milion was down 12% against the comparative period.
Slide 13 — National Grid
National Grid 2020/21 Half Year Results Statement 13 Re conciliation of diferent measures of profitability and earnings The table below reconciles our statutory profit measures for continuing operations, at actual exchange rates, to adjusted and underlying versions. Reconciliation of profit and earnings from continuing operations Operating profit Profit after tax Earnings per share (pence) (£ milion) 2020 2019 2020 2019 2020 2019 Statutory results 1,135 1,03 602 38 17.1 1.3 Exceptional items and remeasurements (8) 85 (75) 143 (2.1) 4.2 Adjusted results 1,047 1,08 527 531 15.0 15.5 Timing 10 213 78 15 2.2 4.5 Major storm costs – – – – – – Underlying results 1,147 1,301 605 686 17.2 20.0 Segmental income statement The folowing tables set out the income statement on adjusted and underlying bases. Segmental analysis for continuing operations Adjusted Underlying £ milion 2020 2019 change % 2020 2019 change % UK Electricity Transmision 47 625 (24) % 524 583 (10) % UK Gas Transmision 95 62 53 % 108 6 64 % US Regulated 363 274 32 % 403 525 (23) % NGV and Other 12 127 (12) % 12 127 (12) % Total operating profit 1,047 1,08 (4) % 1,147 1,301 (12) % Net finance costs (468) (53) (15) % (468) (53) (15) % Share of post - tax results of joint ventures and asociates 38 37 3 % 38 37 3 % Profit before tax 617 572 8 % 717 785 (9) % Tax (90) (41) 120 % (12) (9) 13 % Profit after tax 527 531 (1) % 605 686 (12) % EPS (pence) 15.0 15.5 (3) % 17.2 20.0 (14) % UK Electricity Transmision adjusted operating profit decreased compared to the same period in 2019/20 primarily driven by an £89 milion swing in timing recoveries (lower volumes), but also the benefit of higher alowan ces (data centres and cyber security; and legal separation costs) received in the prior period. Higher depreciation and other costs were partly ofset by an increase of £16 milion on earned incentives. UK Gas Transmision adjusted operating profit increa sed, primarily as a result of higher exit capacity income driven partly from revenue phasing (due to pricing) in the prior period, lower staf and compliance costs and lower depreciation. Timing under - recoveries of £13 milion were £9 milion higher than t he prior period. US Regulated adjusted operating profit was higher than the same period last year, primarily as a result of a net £40 milion under - recovery compared to a £251 milion under - recovery for the same period in 2019/20 (generating a £21 milio n period on period swing). Increased underlying revenues from rate increases were more than ofset by higher depreciation due to aset growth, increased bad debt provisions and incremental costs related to COVID - 19 along with higher storm costs. Operating profit in NGV and Other activities reduced by £15 milion compared to the same period in 2019/20, due to lower Property sales, partly ofset by a depreciation benefit in Grain LNG folowing a review of aset lives.
Slide 14 — National Grid
National Grid 2020/21 Half Year Results Statement 14 Financing costs and tax Net finance costs Adjusted net finance costs were £85 milion lower than the prior period. This was primarily due to lower inflation on RPI - linked debt, refinancing of maturing debt at lower rates and buy - back costs on the early redemption of a ⁄1.25 billion hybrid bo nd in the prior year. These were partly ofset by higher interest on net pension liabilities and increases in other non - cash interest. The efective interest rate on treasury managed debt was 3.3%, compared to 4.4% for the first six months of 2019/20. Joint ventures and asociates The Group‘s share of net profits from joint ventures a basis. On a statutory basis, it decreased by £8 milion to £30 milion, primarily as a result of fair value loses rela ting to the Emerald joint venture. Tax The adjusted efective tax rate (excluding profits from joint ventures and asociates) of 15.5% (prior year 7.7%) at the half year is afected by both seasonality in our US busines and the impact of timing under/ove r - recoveries. The underlying efective tax rate (excluding profits from joint ventures and asociates) was 16.5% (prior year 13.2%). The efective tax rates for this year are higher than in the prior period due to the lower value of tax setlements in the curent period. Net debt National Grid‘s balance sheet remains robust, with stro Standard & Poor‘s (S&P) and Fitch. In August, Moody‘s a negative outlok reflecting the Group‘s exposure to the RIIO - 2 regulatory determinations and delays to US rate increases in the context of limited headroom. We expect RIO - 2 price control arangements are agred. During the period, National Grid plc increased its equity investment in National Grid North America Inc by $2 bilion. During the first six months of the year, net debt increased to £30.1 bilion, £1.5 bilion higher than at 31 March 2020. This increase was dri ven by £1.8 bilion of operating cash inflows, ofset by nearly £2.4 bilion of cash outflows for capital investment, £1.5 bilion paid in dividends, interest and tax and £0.6 bilion of favourable exchange movements on opening net debt. National Grid rai sed over £3.5 bilion of new long - term financing in the first half of the year. This includes a $60 milion bond isued by Naranganset Electric, $1.1 bilion isued in Niagara Mohawk Power Company (including a $60 milion 'gren' bond), £1.6 bilion is sued in National Grid Electricity Transmision Plc and £460 milion isued by National Grid plc. Interim Dividend The Board has aproved an interim dividend of 17.0p per ordinary share ($1.1285 per American Depositary Share). This represents 35% of the t otal dividend per share of 48.57p in respect of the last financial year to 31 March 2020 and is in line with the Group‘s dividend p 13 January 2021 to shareholders on the register as at 27 November 2020. Our dividend policy, set out in 2013, aims to grow the ordinary dividend per share at least in line with RPI inflation each year for the foreseable future. As is its usual practice, the Board reviews this policy regularly, taking into acount a range of factors including expected busines performance and regulatory developments. The scrip dividend alternative wil again be ofered in respect of the 2020/21 interim dividend. As previously anounced, we do not expect to buy back the scrip shares isued du ring 2020/21.
Slide 15 — National Grid
National Grid 2020/21 Half Year Results Statement 15 APENDIX Unles otherwise stated, al financial comentaries in this results statement are given on an underlying basis at actual exchange rates for continuing operations. Underlying represents statutory results excluding exceptional items, remeasurements, timing a nd major storm costs. The underlying basis is further defined on page 4. Alternative Performance Measures derived from IFRS The folowing are terms or metrics that are reconciled to IFRS measures and are defined on pages 4 to 47: Net revenue Adjusted p rofit measures Underlying results Constant curency Timing impacts Capital investment Net debt œ defined in note 1 on page 36.
Slide 16 — PROVISIONAL FINANCIAL TIMETABLE
National Grid 2020/21 Half Year Results Statement 16 PROVISIONAL FINANCIAL TIMETABLE Date Event 12 November 2020 2020/21 half year results 25 November 2020 ADRs go ex - dividend 26 November 2020 Ordinary shares go ex - dividend 27 November 2020 Record date for 2020/21 interim dividend 3 December 2020 Scrip reference price anounced 14 December 2020 (5pm London time) Scrip election date for 2020/21 interim dividend 13 January 2021 2020/21 interim dividend paid to qualifying shareholders 20 May 2021 2020/21 Preliminary Results 3 June 2021 ADRs and Ordinary shares go ex - dividend 4 June 2021 Record date for 2020/21 final dividend 10 June 2021 Scrip reference price anounced 21 July 2021 Scrip election date 26 July 2021 2021 AGM 18 August 2021 2020/21 final dividend paid to qualifying shareholders
Slide 17 — CAUTIONARY STATEMENT
National Grid 2020/21 Half Year Results Statement 17 CAUTIONARY STATEMENT This anouncement contains certain statements that are neither reported financial results nor other historical information. These statements are forward - loking statements within the meaning of Section 27A of the Securities Act of 193, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These state ments include information with respect to National of operations and businesses, strategy, plans and obje ”should‘, ”intends‘, ”plans‘, ”believes‘, ”outlook‘, ”seeks‘, ”estimates‘, ”targ similar expresions, as wel as statements in the future tense, identify forward - loking statements. These forward - looking statements are not guarantees of National s future performance and are subject to asumptions, risks and uncertainties that could cause actual future results to difer materialy from those expresed in or implied by such forward - loking statements. Many of these asumptions, risks and uncertainti es relate to factors that are beyond National Grid‘s abili of COVID - 19 on its operations, employes, counterparties, funding and legal and regulatory obligations, but also more widely in terms of changes in laws or regulations, including any arising as a result of the United Kingdom's exit from the European Union; anouncements from and decisions by governmental bodies or regulators, including proposals relating to the RIO - 2 price control, as wel as increased political and economic uncertainty resulting from COVID - 19; the timing of construction and delivery by third parties of new generation projects requiring conection; breaches of, or changes in, environmental, climate change and health and safety laws or regulations, including breaches or other incidents arising from the potentialy harmful nature of its activities; network failure or interuption, the inability to cary out critical non - network operations and damage to infrastructure, due to adverse weather conditions including the impact of major storms as wel as the results of climate change, due to counterparties being unable to deliver physical comodities, or due to the failure of or unauthorised aces to or deliberate breaches of Na tional Grid‘s IT systems and sup adequately forecast and respond to disruptions in energy suply; performance against regulatory targets and standards and against National Grid‘s peers with the a pectations regarding costs and eficiency savings; and customers and counterparties (including financial institutions) failing to perform their obligations to the Company. Other factors that could cause actual results to difer materialy from those descri bed in this anouncement include fluctuations in exchange rates, interest rates and comodity price indices; restrictions and conditions (including filing requirem funding costs and aces to financi ng; regulatory requirements for the Company to maintain financial resources in certain parts of its business and restrictions on s lending or levying charges; the delayed timing of recoveries and paym ents in National Gr busineses and whether aspects of its activities are contestable; the funding requirements and performance of National Grid‘s pension schemes and other post - retirement benefit schemes; the failure to atract, develop and r etain employes with the necesary competencies, including leadership and busines capabilities, and any significant disputes arising with National Grid‘s emplo the failure to respond to market dev elopments, including competition for onshore transmision, the threats and oportunities presented by emerging technology; the failure by the Company to respond to or met its own comitments as a leader in relation to climate change development activities relating to energy transition, including the integration of distributed energy resourc its strategy, as wel as incorect or unforesen asumptions or conclusions (including unanticipated costs and liabilities) relating to busines development activity. For further details regarding these and other asumptions, risks and uncertainties that may impact National Grid, factors‘ on pages 227 to 230 o f National Grid‘s most recent Annual Repo emerge from time to time and National Grid canot ases the potential impact of any such factor on its activities or the extent to which any factor, or combination of facto rs, may cause actual future results to difer materialy from those contained in any forward - loking statement. Except as may be required by law or regulation, the Company undertakes no obligation to update any of its forward - loking statements, which spea k only as of the date of this anouncement.
Slide 18 — National Grid
National Grid 2020/21 Half Year Results Statement 18 UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS Consolidated income statement for the six months ended 30 September 2020 Notes Before exceptional items and remeasurements Exceptional items and remeasurements Total £m Continuing operations Revenue 2(a),3 6,535 – 6,535 Provision for bad and doubtful debts 14 (120) – (120) Other operating costs 4 (5,368) 8 (5,280) Operating profit 2(b),4 1,047 8 1,135 Finance income 4,5 14 14 28 Finance costs 4,5 (482) 9 (473) Share of post - tax results of joint ventures and asociates 2(b) 38 (8) 30 Profit before tax 2(b),4 617 103 720 Tax 4,6 (90) (28) (18) Profit after tax from continuing operations 4 527 75 602 Atributable to: Equity shareholders of the parent 526 75 601 Non - controling interests from continuing operations 1 – 1 Earnings per share (pence) Basic earnings per share (continuing) 7 17.1 Diluted earnings per share (continuing) 7 17.0 Basic earnings per share (continuing and discontinued) 7 17.1 Diluted earnings per share (continuing and discontinued) 7 17.0 2019 Notes Before exceptional items and remeasurements Exceptional items and remeasurements Total £m Continuing operations Revenue 2(a),3 6,289 – 6,289 Provision for bad and doubtful debts (5) – (5) Other operating costs 4 (5,146) (85) (5,231) Operating profit/(los) 2(b),4 1,08 (85) 1,03 Finance income 4,5 31 7 38 Finance costs 4,5 (584) (90) (674) Share of post - tax results of joint ventures and asociates 2(b) 37 – 37 Profit/(los) before tax 2(b),4 572 (168) 404 Tax 4,6 (41) 25 (16) Profit/(los) after tax from continuing operations 4 531 (143) 38 Profit after tax from discontinued operations 5 1 6 Total profit/(los) for the period (continuing and discontinued) 536 (142) 394 Atributable to: Equity shareholders of the parent 535 (142) 393 Non - controling interests from continuing operations 1 – 1 Earnings per share (pence) Basic earnings per share (continuing) 7 1.3 Diluted earnings per share (continuing) 7 1.2 Basic earnings per share (continuing and discontinued) 7 1.5 Diluted earnings per share (continuing and discontinued) 7 1.4
Slide 19 — National Grid
National Grid 2020/21 Half Year Results Statement 19 Consolidated statement of comprehensive income for the six months ended 30 September 2020 2019 Notes £m £m Profit after tax from continuing operations 602 38 Other comprehensive income/(los) from continuing operations Items from continuing operations that wil never be reclasified to profit or los: Remeasurement loses on pension asets and post - retirement benefit obligations 15 (467) (95) Net gains on equity instruments designated at fair value through other comprehensive income 28 6 Net loses on financial liability designated at fair value through profit and los atributable to changes in own credit risk (8) (1) Net gains in respect of cash flow hedging of capital expenditure 2 5 Tax on items that wil never be reclasified to profit or los 54 235 Total loses from continuing operations that wil never be reclasified to profit or los (371) (750) Items from continuing operations that may be reclasified subsequently to profit or los: Exchange adjustments (482) 579 Net gains/(loses) in respect of cash flow hedges 1 13 (65) Net (loses)/gains in respect of cost of hedging (7) 2 Net gains on investments in debt instruments measured at fair value through other comprehensive income 53 7 Share of other comprehensive income/(loses) of asociates, net of tax – (5) Tax on items that may be reclasified subsequently to profit or los (1) 20 Total (loses)/gains from continuing operations that may be reclasified subsequently to profit or los (424) 538 Other comprehensive los for the period, net of tax, from continuing operations (795) (212) Other comprehensive income for the period, net of tax, from discontinued operations 2 – 6 Other comprehensive los for the period, net of tax (795) (206) Total comprehensive (los)/income for the period from continuing operations (193) 176 Total comprehensive income for the period from discontinued operations – 12 Total comprehensive (los)/income for the period (193) 18 Atributable to: Equity shareholders of the parent (193) 186 Non - controling interests from continuing operations – 2 1. Within the line item net gains/(loses) in respect of cash flow hedges, there is an equal and oposite impact of £141 milion (2019: £1 milion) relating to spot foreign exchange movements on derivatives designated in cash flow hedges of foreign curency risk and interest rates. This has no net impact on the consolidated statement of comprehensive income. This is consistent with the Anual Report and Acounts for the year ended 31 March 2020. 2. For the period ended 30 September 2019, the other comprehensiv e income for the period, net of tax, from discontinued operations relates to items of other comprehensive income of Cadent (investment held through Quadgas Holdco Limited).
Slide 20 — National Grid
National Grid 2020/21 Half Year Results Statement 20 Consolidated statement of changes in equity for the six months ended 30 September Share capital Share premium acount Retained earnings Other equity reserves Total share - hold equity Non - controling interests Total equity Notes £m £m £m £m £m £m £m At 1 April 2020 470 1,301 21,710 (3,919) 19,562 2 19,584 Profit for the period – – 601 – 601 1 602 Other comprehensive los for the period – – (401) (393) (794) (1) (795) Total comprehensive income/(los) for the period – – 20 (393) (193) – (193) Equity dividends 8 – – (1,065) – (1,065) – (1,065) Scrip dividend - related share isue 1 (1) – – – – – Isue of treasury shares – – 16 – 16 – 16 Purchase of own shares – – (2) – (2) – (2) Share - based payments – – 10 – 10 – 10 Cash flow hedges transfered to the statement of financial position, net of tax – – – (7) (7) – (7) At 30 September 2020 471 1,30 20,869 (4,319) 18,321 2 18,343 Share capital Share premium acount Retained earnings Other equity reserves Total share - hold equity Non - controling interests Total equity Notes £m £m £m £m £m £m £m At 1 April 2019 458 1,314 21,814 (4,237) 19,349 20 19,369 Profit for the period – – 393 – 393 1 394 Other comprehensive (los)/income for the period – – (752) 545 (207) 1 (206) Total comprehensive (los)/income for the period – – (359) 545 186 2 18 Equity dividends 8 – – (57) – (57) – (57) Scrip dividend - related share isue 8 (8) – – – – – Isue of treasury shares – – 15 – 15 – 15 Purchase of own shares – – (2) – (2) – (2) Share - based payments – – 15 – 15 – 15 Cash flow hedges transfered to the statement of financial position, net of tax – – – (12) (12) – (12) At 30 September 2019 46 1,306 20,926 (3,704) 18,94 2 19,016
Slide 21 — National Grid
National Grid 2020/21 Half Year Results Statement 21 Consolidated statement of financial position 30 September 2020 31 March 2020 Notes £m £m Non - curent asets Godwil 6,02 6,23 Other intangible asets 2(c) 1,425 1,295 Property, plant and equipment 2(c),9 49,153 48,70 Other non - curent asets 32 354 Pension asets 15 1,28 1,849 Financial and other investments 625 543 Investments in joint ventures and asociates 1,012 95 Derivative financial asets 10 1,163 1,249 Total non - curent asets 60,930 61,28 Curent asets Inventories and curent intangible asets 501 549 Trade and other receivables 2,702 2,986 Curent tax asets 109 102 Financial and other investments 1,12 1,315 1,98 Derivative financial asets 10 54 93 Cash and cash equivalents 1,12 164 73 Total curent asets 4,845 5,801 Total asets 65,75 67,089 Curent liabilities Borowings 1,12 (2,141) (4,072) Derivative financial liabilities 10 (178) (380) Trade and other payables (3,32) (3,602) Contract liabilities (68) (76) Curent tax liabilities (5) (86) Provisions (367) (348) Total curent liabilities (6,131) (8,564) Non - curent liabilities Borowings 1,12 (29,81) (26,72) Derivative financial liabilities 10 (63) (954) Other non - curent liabilities (85) (891) Contract liabilities (1,15) (1,082) Defered tax liabilities (4,106) (4,184) Pensions and other post - retirement benefit obligations 15 (2,498) (2,802) Provisions (2,143) (2,306) Total non - curent liabilities (41,301) (38,941) Total liabilities (47,432) (47,505) Net asets 18,343 19,584 Equity Share capital 471 470 Share premium acount 1,30 1,301 Retained earnings 20,869 21,710 Other equity reserves (4,319) (3,919) Total shareholders‘ equity 18,321 19,562 Non - controling interests 2 2 Total equity 18,343 19,584
Slide 22 — National Grid
National Grid 2020/21 Half Year Results Statement 2 Consolidated cash flow statement for the six months ended 30 September 2020 2019 Notes £m £m Cash flows from operating activities Operating profit from continuing operations 2(b) 1,135 1,03 Adjustments for: Exceptional items, remeasurements and other fair value movements 4 (94) 85 Depreciation and amortisation 2(c) 853 83 Share - based payment charge 10 15 Changes in working capital 106 370 Changes in provisions (81) (60) Changes in pensions and other post - retirement benefit obligations (83) (13) Cash flows relating to exceptional items (10) (28) Cash generated from continuing operations 1,836 2,105 Tax paid (42) (123) Net cash flow from operating activities œ continuing operations 1,794 1,982 Net cash flow used in operating activities œ discontinued operations – (32) Cash flows from investing activities Acquisition of investments (59) (27) Disposal of investments 43 – Acquisition of National Grid Renewables Development LC (formerly Geronimo) and Emerald (13) (137) Disposal of interests in Quadgas HoldCo Limited – 1,965 Investments in joint ventures and asociates (63) (49) Purchases of intangible asets (21) (18) Purchases of property, plant and equipment (2,13) (2,13) Disposals of property, plant and equipment 1 19 Dividends received from joint ventures and asociates 48 27 Interest received 13 19 Net movements in short - term financial investments 674 (1,37) Net movements in derivatives 1 (40) (83) Net cash flow used in investing activities œ continuing operations (1,710) (1,894) Net cash flow from investing activities œ discontinued operations – 6 Cash flows from financing activities Purchase of own shares (2) (2) Proceds from isue of treasury shares 16 15 Proceds received from loans 3,506 2,460 Repayments of loans (91) (1,674) Payments of lease liabilities (6) (60) Net movements in short - term borowings (1,046) 210 Net movements in derivatives 1 2 (14) Interest paid (45) (487) Dividends paid to shareholders 8 (1,065) (57) Net cash flow from/(used in) financing activities œ continuing operations 9 (109) Net increase/(decrease) in cash and cash equivalents 12 93 (47) Exchange movements (2) 8 Net cash and cash equivalents at start of period 12 73 252 Net cash and cash equivalents at end of period 12 164 213 1. Certain derivative balances have ben represented for the prior year to reflect a reclasification from financing activities to investing activities folowing an acounting policy change detailed in the Anual Report and Acounts for the year ended 31 March 2020.
Slide 23 — National Grid
National Grid 2020/21 Half Year Results Statement 23 Notes to the financial statements 1. Basis of preparation and new ac ounting standards, interpretations and amendments The half year financial information covers the six month period ended 30 September 2020 and has ben prepared in accordance with IAS 34 ”Interim Financial R ng Standards Board (IASB) and as adopted by the European Union (EU); and the Disclosure and Transparency Rules of the Financial Conduct Authority. This condensed set of financial statements comprises the unaudited financial information for the half years e nded 30 September 2020 and 2019, together with the audited consolidated statement of financial position as at 31 March 2020. The financial information for the year ended 31 March 2020 does not constitute statutory acounts as defined in Section 434 of the Companies Act 206. It should be read in conjunction with the statutory acounts for the year ended 31 March 2020, which were prepared in acordance with International Financial Reporting Standards (IFRS) as isued by the IASB and as adopted by the EU, an d have ben filed with the Registrar of Companies. The Deloite LP audit report on those statutory acounts was unqualified, did not contain an emphasis of mater and did not contain a statement under Section 498 of the Companies Act 206. The half year financial information has ben prepared in acordance with the acounting policies expected to be aplicable for the year ending 31 March 2021. The notes to the financial statements have ben prepared on a continuing basis unles otherwise stated. The half year financial statements have ben prepared on a basis consistent with that aplied in the preparation of the financial statements for the year ended 31 March 2020. Our consolidated income statement and segmental analysis (se note 2) separately identify financial results before and after exceptional items and remeasurements. The Directors believe that presentation of the results in this way is relevant to an understanding of the Group‘s e xceptional items and remeasurements is consistent with the way that financial performance is measured by management and reported to the Board and Executive Comite and improves the comparability of reported financial performance from year to year. The pr ofit for the period from continuing operations before exceptional items and remeasurements forms part of the incentive target set anualy for remunerating certain Executive Directors and acordingly we believe it is important for users of the financial st atements to understand how this compares to our results on a statutory basis and period on period. Items which are clasified as exceptional items or remeasurements are defined in the Anual Report and Acounts for the year ended 31 March 2020. Areas of j udgement and key sources of estimation uncertainty In preparing this half year financial information, we have considered the areas where judgement has ben exercised by management in applying the Group‘s account on uncertainty as compared to those aplied in the preparation of the Anual Report and Acounts for the year ended 31 March 2020. Areas of judgement that have the most significant efect on the amounts recognised in the financial information: • Categorisation of certain items as exceptional items or remeasurements: We have continued to aply the Group's Exceptional Items Framework and have recognised an exceptional item in relation to environmental provisions within continuing operations (se not e 4 for details). We continue to treat certain items as remeasurements as disclosed in note 4. • Other areas of judgement aplied are consistent with those for the year ended 31 March 2020: ƕ the useful economic lives of our gas networks remaining apropriate ; and ƕ the Electricity System Operator acting as an agent in respect of certain Transmision Network Use of Service revenues, principaly those colected on behalf of the Scotish and Ofshore transmision operators. The key sources of estimation uncertai nty are consistent with those for the year ended 31 March 2020: • the valuation of liabilities for pensions and other post - retirement benefits; and • the cash flows aplied in determining environmental provisions. The COVID - 19 pandemic continues to make the valuation of certain asets and liabilities more subjective, and as described in our Anual Report and Acounts for the year ended 31 March 2020, we have paid close atention to the estimation uncertainty in respect of the valuation of certain pension as ets and the recoverability of customer receivables. Folowing the stabilisation of markets, the level of uncertainty on pension aset valuations has decreased since 31 March 2020. Details on the recoverability of customer receivables are provided in note 1 4.
Slide 24 — National Grid
National Grid 2020/21 Half Year Results Statement 24 1. Basis of preparation and new acounting standards, interpretations and amendments (continued) Going concern As part of the Directors‘ consideration of the appropri the half year financial information, the Directors have again considered the impact of COVID - 19 on the Grou operations. The Directors reviewed analysis performed by management which asesed the principal risks discused on page 41 by modeling both a base case and a reasonabl e worst case scenario. The analysis also included aditional stres testing considering further items not included in the reasonable worst case. The base case is consistent with the latest forecast information The reasonable worst case scenario covers the cash flow impact asociated with a second extended lockdown period in both the UK and US over a six month period starting in November 2020, with a phased return to normal operations over the next thre months. The length of any lockdown period and the consequential impact on cash colections and capital programes is the key judgement aplied in the analysis. The main cash flow impacts identified in the reasonable worst case scenario are: • A reduction in cash col lections driven by lower customer demand and increased bad debt in our US busineses; • Aditional working capital required to fund payment term extensions and charge deferals in the UK electricity market, intended to help customers and end - user consumers; • Further increases in other costs such as cleaning, safety equipment and IT; ofset by a continued reduction in discretionary spend acros al areas (e.g. recruitment, travel and consultancy spend). As part of its asesment the Board considered aditiona l stres testing performed by management of items not included in the reasonable worst case alongside potential levers at the Board's discretion to improve the position identified by the analysis if the debt capital markets were not acesible. The stres testing performed specificaly analysed the impact of more severe customer colection isues in our US busines, the impact of significant customers defaulting in the UK, and further storm costs in our US busines. The further levers the Board considered i ncluded: • The payment of dividends to shareholders; • Significant changes in the phasing of the Group‘s ca - esential works and programes delayed; and • A number of further reductions in operating expenditure acros the Group primarily related to workforce cost reductions in both the UK and the US. Having considered the reasonable worst case scenario, the stres testing performed and further levers at the Board‘s discretion, the Group contin ues to have headrom against it s co mited facilities identified in note 13 to the half year financial information. In adition to the above, the ability to raise new financing was separately included in the analysis and the Directors noted the £3.5 bilion of isuances completed in the p eriod from 1 April to 30 September 2020 as evidence of the Group‘s ability to continue to have acc considered by the Board as part of their Going Concern asesment included the potential impact of Br exit trade talks, the potential final determinations of the UK RIO - 2 price control proces, ongoing rate case determinations in the US alongside inherent uncertainties in cash flow forecasts (such as the impact of storms on our US busines). Based on th e above, the Directors have concluded the Group is wel placed to manage its financing and other busines risks satisfactorily, and have a reasonable expectation that the Group wil have adequate resources to continue in operation for at least twelve month s from the signing date of these consolidated interim financial statements. They therefore consider it apropriate to adopt the going concern basis of acounting in preparing the half year financial information. New IFRS acounting standards, interpretati ons and amendments adopted in the period There are no new standards, interpretations and amendments, isued by the IASB or by the IFRS Interpretations Comite (IFRIC), that are aplicable for the period comencing on 1 April 2020 that have had a material impact on the Group‘s results.
Slide 25 — National Grid
National Grid 2020/21 Half Year Results Statement 25 1. Basi s of preparation and new acounting standards, interpretations and amendments (continued) New IFRS acounting standards, interpretations and amendments not yet adopted The folowing new acounting standards, interpretations and amendments to existing sta ndards have ben isued, since the publication our Anual Report and Acounts, but are not yet efective or have not yet ben endorsed by the EU: • Amendments to IFRS 16: COVID - 19 rent concesions; • Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: IBOR reform phase 2; • Narow scope amendments to IAS 16, IAS 37 and IFRS 3; and • Anual improvements 2018 - 20. The Group is curently asesing the impact of the amendments but they are not expected to have a material impact. The Group has not early adopted any standard, amendment or interpretation that has ben isued but is not yet efective. 2. Segmental analy sis Revenue and the results of the busines are analysed by operating segment, based on the information the Board of Directors uses internaly for the purposes of evaluating the performance of each operating segment and determining resource alocation bet ween them. The Board is National Grid‘s defined by IFRS 8 ”Operating Segments‘) and assesses th operating profit before exceptional items and remeasurements (se no te 4). As a mater of course, the Board also considers profitability by segment, excluding the efect of timing. However, the measure of profit disclosed in this note is operating profit before exceptional items and remeasurements as this is the measure th at is most consistent with the IFRS results reported within these financial statements. The results of our thre principal busineses are reported to the Board of Directors and are acordingly treated as reportable operating segments. Al other operating segments are reported to the Board of Directors on an agregated basis. The folowing table describes the main activities for each reportable operating segment: UK Electricity Transmision The high - voltage electricity transmision networks in England and W ales and independent Great Britain system operator. UK Gas Transmision The high - presure gas transmision networks in Great Britain and system operator in Great Britain. US Regulated Gas distribution networks, electricity distribution networks and high - voltage electricity transmision networks in New York and New England and electricity generation facilities in New York. The UK Electricity Transmision segment also includes the independent Electricity System Operator (ESO). Although there is a separate governance structure including a separate Executive Comite, the Board receives financial information on an agregated UK Electricity Transmision basis, which includes the results of the ESO, and acordingly the ESO is included within the UK Electricity Transmision reportable segment. The US Regulated segment typicaly experiences seasonal fluctuations in revenue and operating profit due to higher delivery volumes during the second half of the financial year, for example as a result of extreme weather over the winter. These seasonal fluctuations have a consequential impact on the working capital balances (primarily trade debtors and acrued income) in the consolidated statement of financial position at 30 September 2020 when compared to 31 March 2020. T he majority of UK revenues are governed by the arangements under RIO, through which revenue is primarily based on availability of transmision capacity rather than usage, and therefore are not subject to the same seasonal fluctuations as in the US. The National Grid Ventures (NGV) operating segment represents our key strategic growth area outside our regulated core busines in competitive markets acros the UK and the US. The busines comprises al comercial operations in metering, LNG at the Isle of G rain in the UK, electricity interconectors and our investment in National Grid Renewables Development LC (formerly Geronimo), with a focus on investment and future activities in emerging growth areas. NGV does not curently met the thresholds set out in IFRS 8 to be identified as a separate reportable segment and therefore its results are not required to be separately presented. However, certain aditional disclosure is included in the fotnotes below. Other activities that do not form part of any of t he segments in the above table or NGV primarily relate to our UK property business together with insurance and corporate investments in technology and inovation companies through National Grid Partners.
Slide 26 — National Grid
National Grid 2020/21 Half Year Results Statement 26 2. Segm ental analysis (continued) (a) Revenue Six months ended 30 September 2020 2019 Total sales Sales betwen segments 1 Sales to third parties Total sales Sales betwen segments 1 Sales to third parties £m £m £m £m £m £m Operating segments œ continuing operations: UK Electricity Transmision 1,8 (5) 1,83 1,708 (7) 1,701 UK Gas Transmision 365 (8) 357 345 (6) 39 US Regulated 3,940 – 3,940 3,876 – 3,876 NGV and Other 2 356 (1) 35 376 (3) 373 Total revenue from continuing operations 6,549 (14) 6,535 6,305 (16) 6,289 Geographical areas: UK 2,542 2,395 US 3,93 3,894 Total revenue from continuing operations 6,535 6,289 1. Sales betwen operating segments are priced having regard to the regulatory and legal requirements to which the busineses ar e subject. The analysis of revenue by geographical area is on the basis of destination. 2. Included within NGV and Other is £312 mil ion (2019: £291 milion) of revenue relating to NGV. (b) Operating profit Before exceptional items and remeasurements After exceptional items and remeasurements Six months ended 30 September 2020 2019 2020 2019 £m £m £m £m Operating segments œ continuing operations: UK Electricity Transmision 47 625 47 625 UK Gas Transmision 95 62 95 62 US Regulated 363 274 451 189 NGV and Other 1 12 127 12 127 Total operating profit from continuing operations 1,047 1,08 1,135 1,03 Geographical areas UK 685 829 685 829 US 362 259 450 174 Total operating profit from continuing operations 1,047 1,08 1,135 1,03 1. Includes £142 milion (2019: £128 milion) of operating profit (both before and after exceptional items and remeasurements) r elating to NGV. Below we reconcile total operating profit from continuing operations to profit before tax from continuing operati ons. The operating exceptional items and remeasurements income of £8 milion (2019: £85 milion expense) relates to US Regulated operations. Before exceptional items and remeasurements After exceptional items and remeasurements Six months ended 30 September 2020 2019 2020 2019 £m £m £m £m Reconciliation to profit before tax: Operating profit from continuing operations 1,047 1,08 1,135 1,03 Share of post - tax results of joint ventures and asociates 38 37 30 37 Finance income 14 31 28 38 Finance costs (482) (584) (473) (674) Profit before tax from continuing operations 617 572 720 404
Slide 27 — National Grid
National Grid 2020/21 Half Year Results Statement 27 2. Segmental analysis (continued) (c) Capital expenditure Capital expenditure represents aditions to property, plant and equipment and other intangible asets but excludes aditional investments in and loans to joint ventures and asociates. Net bok value of property, plant and equipment and other intangible asets Capital expenditure Depreciation and amortisation 30 September 2020 31 March 2020 30 September 2020 30 September 2019 30 September 2020 30 September 2019 £m £m £m £m £m £m Operating segments: UK Electricity Transmision 14,067 13,78 548 471 (258) (245) UK Gas Transmision 4,518 4,513 85 167 (81) (85) US Regulated 29,670 29,623 1,641 1,58 (459) (383) NGV and Other 1,2 2,323 2,141 24 235 (5) (120) Total from continuing operations 50,578 50,065 2,498 2,461 (853) (83) Geographical areas: UK 20,874 20,427 857 832 (393) (402) US 29,704 29,638 1,641 1,629 (460) (431) Total from continuing operations 50,578 50,065 2,498 2,461 (853) (83) By aset type: Property, plant and equipment 49,153 48,70 2,282 2,29 (761) (746) Other intangible asets 1,425 1,295 216 162 (92) (87) Total from continuing operations 50,578 50,065 2,498 2,461 (853) (83) 1. Included within NGV and Other are asets with a net bok value of £2,259 milion (31 March 2020: £2,080 milion), capital expenditure of £210 milion (2019: £193 milion) and depreciation and amortisation of £45 milion (2019: £62 milion) relating to NGV. 2. In the second half of the year ended 31 March 2020, we transfered certain software asets and properties in the US which are outside the US rate base and operate for the benefit of our US regulated busineses, that were previously included in the NGV an d Other segment into the US Regulated segment. These asets were included within NGV and Other for the period ended 30 September 2019, and in that period, the costs asociated wi th owning and operating these asets (principaly depreciation and amortisatio n) of £47 milion and an income of £25 milion were charged to the US regulated busines.
Slide 28 — National Grid
National Grid 2020/21 Half Year Results Statement 28 3. Revenue Under IFRS 15 ”Revenue from Contracts with Customers‘, performance obligation by transfering a promised god or service to a customer. A god or service is transfered when the customer obtains control of that god or service. The transfer of control of our distribution or transmision services coincides with the use of our network, as electricity and gas pas through our network and reach our customers. The Group principaly satisfies its performance obligations over time and the amount of revenue recorded coresponds to the amounts biled and acrued for volumes of gas and electricity delivered/transfered to/from our customers. Revenue for the six months ended 30 September 2020 UK Electricity Transmision £m UK Gas Transmision £m US Regulated £m NGV and Other £m Total £m Revenue under IFRS 15: Transmision 895 247 216 142 1,50 Distribution – – 3,480 – 3,480 System Operator 945 82 – – 1,027 Other 1 31 10 7 165 213 Total IFRS 15 revenue 1,871 39 3,703 307 6,20 Other revenue: Generation – – 197 – 197 Other 2 12 18 40 48 18 Total other revenue 12 18 237 48 315 Total revenue from continuing operations 1,83 357 3,940 35 6,535 Geographic split of revenue for the six months ended 30 September 2020 UK Electricity Transmision £m UK Gas Transmision £m US Regulated £m NGV and Other £m Total £m Revenue under IFRS 15: UK 1,871 39 – 261 2,471 US – – 3,703 46 3,749 Total IFRS 15 revenue 1,871 39 3,703 307 6,20 Other revenue: UK 12 18 – 41 71 US – – 237 7 24 Total other revenue 12 18 237 48 315 Total revenue from continuing operations 1,83 357 3,940 35 6,535 1. Within NGV and Other, the other IFRS 15 revenue principaly relates to revenue generated from our metering busineses. 2. Other revenue, recognised in acordance with acounting standards other than IFRS 15, includes property sales by our UK come rcial property busines and rental income.
Slide 29 — National Grid
National Grid 2020/21 Half Year Results Statement 29 3. Revenue (continued) Revenue for the six months ended 30 September 2019 UK Electricity Transmision £m UK Gas Transmision £m US Regulated £m NGV and Other £m Total £m Revenue under IFRS 15: Transmision 976 27 19 151 1,53 Distribution – – 3,430 2 3,432 System Operator 67 86 – – 763 Other 1 42 10 6 140 198 Total IFRS 15 revenue 1,695 323 3,635 293 5,946 Other revenue: Generation – – 196 – 196 Other 2 6 16 45 80 147 Total other revenue 6 16 241 80 343 Geographic split of revenue for the six months ended 30 September 2019 UK Electricity Transmision £m UK Gas Transmision £m US Regulated £m NGV and Other £m Total £m Revenue under IFRS 15: UK 1,695 323 – 284 2,302 US – – 3,635 9 3,64 Total IFRS 15 revenue 1,695 323 3,635 293 5,946 Other revenue: UK 6 16 – 70 92 US – – 241 10 251 Total other revenue 6 16 241 80 343 Total revenue from continuing operations 1,701 39 3,876 373 6,289 1. Within NGV and Other, the other IFRS 15 revenue principaly relates to revenue generated from our metering busineses. 2. Other revenue, recognised in acordance with acounting standards other than IFRS 15, includes property sales by our UK come rcial property busi nes and rental income. 4. Exceptional items and remeasurements Exceptional items and remeasurements are items of income and expenditure that, in the judgement of the Directors, should be disclosed separately on the basis that they are important to an understanding of our financial performance and may significantly dis tort the comparability of financial performance betwen periods. Remeasurements comprise unrealised gains or loses recorded in the consolidated income statement arising from changes in the fair value of certain financial asets and liabilities categoris ed as held at fair value through profit and los (FVTPL). Once the fair value movements are realised (for example, when the derivative matures), the previously recognised fair value movements are then reversed through remeasurements and recognised within e arnings before exceptional items and remeasurements. These asets and liabilities include comodity contracts and derivative financial instruments to the extent that hedge acounting is either not achieved or is not efective. We have also clasified the u nrealised gains or loses reported in profit and los on certain aditional asets and liabilities treated at FVTPL within remeasurements. These relate to the financial asets which fail the ”solely payments of principal and interest test‘ under e money market fund investments used by Group Treasury for cash management purposes and certain financial liabilities which we elected to designate at FVTPL. In al cases, these fair values increase or decrease because of changes in foreign exchange, como dity or other financial indices over which we have no control.
Slide 30 — National Grid
National Grid 2020/21 Half Year Results Statement 30 4. Exceptional items and remeasurements (continued) Six months ended 30 September 2020 Exceptional items Remeasurements Total £m £m £m Included within operating profit from continuing operations: Environmental charges 15 – 15 Net gains on comodity contract derivatives – 73 73 15 73 8 Included within net finance costs (note 5): Net loses on derivative financial instruments – (26) (26) Net gains on FVTPL financial asets – 14 14 Net gains on FVTPL financial liabilities – 35 35 – 23 23 Included within share of post - tax results of joint ventures and asociates Net loses on financial instruments – (8) (8) – (8) (8) Total included within profit before tax from continuing operations 15 8 103 Tax (4) (24) (28) Total exceptional items and remeasurements after tax from continuing operations 1 64 75 Six months ended 30 September 2019 Exceptional items Remeasurements Total £m £m £m Included within operating profit from continuing operations Net loses on comodity contract derivatives – (85) (85) – (85) (85) Included within net finance costs (note 5) Net loses on derivative financial instruments – (41) (41) Net gains on FVTPL financial asets – 7 7 Net loses on FVTPL financial liabilities – (49) (49) – (83) (83) Total included within profit before tax from continuing operations – (168) (168) Tax – 25 25 Total exceptional items and remeasurements after tax from continuing operations – (143) (143) We have recognised an exceptional gain relating to the release of £15 milion ($19 milion) of environmental provisions relating to one of our US Superfund sites, for which the original provision was treated as an exceptional item. The reduction in the pro vision arose as a result of the re - evaluation of the Grou estimated costs folowing the finalisation of discusions on the scope of the remediation with government authorities. The release has ben recorded as an exceptional item in line with t he treatment of the original provision.
Slide 31 — National Grid
National Grid 2020/21 Half Year Results Statement 31 5. Finance income and costs Six months ended 30 September 2020 2019 Notes £m £m Finance income before exceptional items and remeasurements Interest income on financial instruments 14 31 14 31 Finance costs before exceptional items and remeasurements Net interest payable on pensions and other post - retirement benefit obligations (21) (13) Interest expense on financial instruments (47) (59) Unwinding of discount on provisions (42) (40) Other interest (1) 6 Les: Interest capitalised 59 62 (482) (584) Net finance costs before exceptional items and remeasurements (468) (53) Total exceptional items and remeasurements 4 23 (83) Net finance costs including exceptional items and remeasurements from continuing operations (45) (636) 6. Tax from continuing operations The tax charge for the six month period is £18 milion (2019: £16 milion), and before tax on exceptional items and remeasurements, is £90 million (2019: £41 million). average efective tax rate by juri sdiction expected for the ful year. The efective tax rate excluding tax on exceptional items and remeasurements is 14.6% (2019: 7.2%), which includes the impact of our share of post - tax results of joint ventures and asociates. The half year efective tax rates (before and after exceptional items and remeasurements) reflects the seasonality of earnings in the US Group and the closure of an audit in the curent period. For the ful year, we expect the Group's efective tax rate to be around 21% excludin g tax on exceptional items and remeasurements. The efective tax rate for the year ended 31 March 2020 was 18.5% before exceptional items and remeasurements and 27.4% after exceptional items and remeasurements. On 17 March 2020, the UK government utilised the Provisional Colection of Taxes Act 1968 to substantively enact a reversal of the reduction in the main UK corporation tax rate to 17% with efect from 1 April 2020. The main UK corporation tax rate therefore remains at 19%. Defered tax balances were remeasured at 31 March 2020 and continue to be calculated at the enacted rate of 19%.
Slide 32 — National Grid
National Grid 2020/21 Half Year Results Statement 32 7. Earnings per share Earnings per share (EPS), excluding exceptional items and remeasurements, are provided to reflect the busines performance subtotals used by the Group, as set out in note 1. The earnings per share calculations are based on profit after tax atributable to equity shareholders of the parent company which excludes non - controling interests. (a) Basic earnings per share Six months ended 30 September 2020 2020 2019 2019 Earnings EPS Earnings EPS £m Pence £m Pence Profit after tax before exceptional items and remeasurements œ continuing 526 15.0 530 15.5 Exceptional items and remeasurements after tax œ continuing 75 2.1 (143) (4.2) Profit after tax from continuing operations atributable to the parent 601 17.1 387 1.3 Profit after tax before exceptional items and remeasurements œ discontinued – – 5 0.2 Exceptional items and remeasurements after tax œ discontinued – – 1 – Profit after tax from discontinued operations atributable to the parent – – 6 0.2 Total profit after tax before exceptional items and remeasurements 526 15.0 535 15.7 Total exceptional items and remeasurements after tax 75 2.1 (142) (4.2) Total profit after tax atributable to the parent 601 17.1 393 1.5 Milions Milions Weighted average number of shares œ basic 3,513 3,430 (b) Diluted earnings per share Six months ended 30 September 2020 2020 2019 2019 Earnings EPS Earnings EPS £m Pence £m Pence Profit after tax before exceptional items and remeasurements œ continuing 526 14.9 530 15.4 Exceptional items and remeasurements after tax œ continuing 75 2.1 (143) (4.2) Profit after tax from continuing operations atributable to the parent 601 17.0 387 1.2 Profit after tax before exceptional items and remeasurements œ discontinued – – 5 0.2 Exceptional items and remeasurements after tax œ discontinued – – 1 – Profit after tax from discontinued operations atributable to the parent – – 6 0.2 Total profit after tax before exceptional items and remeasurements 526 14.9 535 15.6 Total exceptional items and remeasurements after tax 75 2.1 (142) (4.2) Total profit after tax atributable to the parent 601 17.0 393 1.4 Milions Milions Weighted average number of shares œ diluted 3,530 3,46 8. Dividends Pence per share Cash dividend paid £m Scrip dividend £m Ordinary dividends Final dividend in respect of the year ended 31 March 2020 32.0 1,065 54 Final dividend in respect of the year ended 31 March 2019 31.26 57 517 The Directors are proposing an interim dividend of 17.0 pence per share to be paid in respect of the year ending 31 March 2021. This would absorb approximately £598 m An interim dividend for the year ended 31 March 2020 of 16.57 pence per share was paid in January 2020. The cash dividend paid was £35 milion with an aditional £241 milion setled via a scrip isue.
Slide 33 — National Grid
National Grid 2020/21 Half Year Results Statement 3 9. Property, plant and equipment Land and buildings Plant and machinery Asets in the course of construction Motor vehicles and ofice equipment Total £m £m £m £m £m Cost Cost at 1 April 2020 3,897 60,242 4,065 1,036 69,240 Exchange adjustments (82) (1,287) (46) (28) (1,43) Aditions 72 183 2,01 29 2,285 Disposals – (15) (7) (12) (134) Reclasifications 65 1,121 (1,28) 2 (20) Cost at 30 September 2020 3,952 60,14 4,785 1,047 69,928 Acumulated depreciation Acumulated depreciation at 1 April 2020 (847) (18,961) – (62) (20,470) Exchange adjustments 13 308 – 17 38 Depreciation charge for the period (46) (657) – (58) (761) Disposals (1) 108 – 1 18 Reclasifications (1) (3) – 4 – Acumulated depreciation at 30 September 2020 (82) (19,205) – (68) (20,75) Net bok value at 30 September 2020 3,070 40,939 4,785 359 49,153 Land and buildings Plant and machinery Asets in the course of construction Motor vehicles and ofice equipment Total £m £m £m £m £m Cost Cost at 1 April 2019 3,38 54,383 4,425 930 63,076 Impact of transition to IFRS 16 381 67 – 20 468 Cost at 1 April 2019 3,719 54,450 4,425 950 63,54 Exchange adjustments 18 1,75 76 40 1,989 Aditions 9 142 2,108 39 2,298 Disposals (28) (323) – (15) (36) Reclasifications 46 1,64 (1,701) 13 2 Cost at 30 September 2019 3,864 57,68 4,908 1,027 67,467 Acumulated depreciation Acumulated depreciation at 1 April 2019 (78) (17,794) – (591) (19,163) Exchange adjustments (18) (436) – (24) (478) Depreciation charge for the period (48) (639) – (56) (743) Disposals 15 314 – 14 343 Reclasifications 1 (1) – 1 1 Acumulated depreciation at 30 September 2019 (828) (18,56) – (656) (20,040) Net bok value at 30 September 2019 3,036 39,12 4,908 371 47,427
Slide 34 — National Grid
National Grid 2020/21 Half Year Results Statement 34 10. Fair value measurement Asets and liabilities measured at fair value Included in the statement of financial position are certain financial asets and liabilities which are measured at fair value. The folowing table categorises these asets and liabilities by the valuation methodology apl ied in determining their fair value using the fair value hierarchy described on page 192 of the Anual Report and Acounts for the year ended 31 March 2020. 30 September 2020 31 March 2020 Level 1 £m Level 2 £m Level 3 £m Total £m Level 1 £m Level 2 £m Level 3 £m Total £m Asets Investments held at FVTPL 819 50 18 987 1,278 – 108 1,386 Investments held at FVOCI 103 353 – 456 83 352 – 435 Investments in asociates 1 – – 106 106 – – 103 103 Financing derivatives – 1,147 – 1,147 – 1,257 10 1,267 Comodity contract derivatives – 25 45 70 – 9 6 75 92 1,575 269 2,76 1,361 1,618 287 3,26 Liabilities Financing derivatives – (491) (28) (719) – (89) (245) (1,134) Comodity contract derivatives – (90) (32) (12) – (136) (64) (20) Liabilities held at fair value (725) – – (725) (741) – – (741) Contingent consideration 2 – – (65) (65) – – (74) (74) (725) (581) (325) (1,631) (741) (1,025) (383) (2,149) Total 197 94 (56) 1,135 620 593 (96) 1,17 1. Our level 3 investments in asociates include investments relating to Sunrun Neptune 2016 LC acounted for at FVTPL. 2. Contingent consideration relates to the acquisition of National Grid Renewables Development LC. The estimated fair value of total borowings using market values at 30 September 2020 is £37,652 milion (31 March 2020: £34,174 milion). Our level 1 financial investments and liabilities held at fair value are valued using quoted prices from liquid markets. Our level 2 financial investments held at fair value are valued using quoted prices for similar instruments in active markets, or quoted prices for identical or similar instruments in inactive markets. Alternatively, they are valued using models where al significant inputs are based directly or indirectly on observable market data. Our level 2 financing derivatives include cros - curency, interest rate and foreign exchange derivatives. We value these derivatives by discounting al future cash flows by externaly sourced market yield curves at the reporting date, taking into acount t he credit quality of both parties. These derivatives can be priced using liquidly traded interest rate curves and foreign exchange rates, and therefore we clasify our vanila trades as level 2 under the IFRS 13 framework. Our level 2 comodity derivativ es include over - the - counter gas swaps and power swaps as wel as forward physical gas deals. We value our contracts based on market data obtained from the New York Mercantile Exchange (NYMEX) and the Intercontinental Exchange (ICE) where monthly prices are available. We discount based on externaly sourced market yield curves at the reporting date, taking into acount the credit quality of both parties and liquidity in the market. Our comodity contracts can be priced using liquidly traded swaps. Therefore we clasify our vanila trades as level 2 under the IFRS 13 framework. Our level 3 investments include equity instruments acounted for at fair value through profit and los. These equity holdings are part of our corporate venture capital portfolio held b y National Grid Partners and comprise a series of smal, early stage unquoted investments where prices or valuation inputs are unobservable. The majority of these investments are valued based on the latest transaction price (a price within the last 12 mont hs), either being the price we paid for the investments or marked to the latest round of funding and adjusted for our preferential rights. We have six investments valued with reference to market multiples, using a combination of techniques such as market m ultiples and cost to replace technology.
Slide 35 — National Grid
National Grid 2020/21 Half Year Results Statement 35 10. Fair value measurement (continued) Our level 3 investments in asociates include our investment in Sunrun Neptune 2016 LC, which is acounted for at fair value. The investment is fair valued by discounting expected cash flows using a weighted average cost of capital specific to Sunrun Neptune 2016 LC. Our level 3 financing derivatives include cros - curency swaps, inflation - linked swaps and equity options, where the market is iliquid. In valuing these ins truments we use in - house valuation models and obtain external valuations to suport each reported fair value. Our level 3 comodity contract derivatives primarily consist of our forward purchases of electricity and gas that we value using proprietary mod els. Derivatives are clasified as Level 3 where significant inputs into the valuation technique are neither directly nor indirectly observable (including our own data, which are adjusted, if necesary, to reflect the asumptions market participants would use in the circumstances). The impacts on a post - tax basis of reasonably posible changes in significant asumptions used in valuing asets and liabilities clasified within level 3 of the fair value hierarchy are as folows: Financing derivatives within net debt (se note 1) Six months ended 30 September 2020 2019 £m £m +20 basis point increase in Limited Price Index (LPI) market curve (98) (105) - 20 basis point decrease in LPI market curve 93 9 The impacts disclosed above were considered on a contract by contract basis with the most significant unobservable inputs identified. A reasonably posible change in asumptions for other level 3 asets and liabilities would not result in a material change in fair values. The changes in fair value of our level 3 financial asets and liabilities in the six months to 30 September are presented below: Financing derivatives within net debt (se note 1) Comodity contract derivatives Other 1 Total 2020 2019 2020 2019 2020 2019 2020 2019 £m £m £m £m £m £m £m £m At 1 April (235) (214) 2 1 137 152 (96) (61) Net gains/(loses) through the consolidated income statement for the period 2, 3, 4 6 (45) (9) (4) – 15 (3) (34) Purchases 5 – – – (5) 9 16 9 1 Acquisition of National Grid Renewables Development LC – – – – – (70) – (70) Setlements 1 1 20 17 13 (3) 34 15 At 30 September 6 (28) (258) 13 9 159 10 (56) (139) 1. Other comprises our investments in Sunrun Neptune 2016 LC, Enbala and the investments made by National Grid Partners, which are acounted for at fair value through pr ofit and los and the contingent consideration arising from the acquisition of National Grid Renewables Development LC. 2. Gains of £6 milion (2019: loses of £45 milion) are atributable to derivative financial instruments held at the end of the reporting period. 3. Gains of £10 milion (2019: loses of £10 milion) are atributable to comodity contract derivative financial instruments he ld at the end of the reporting period. 4. Other includes £2 milion (2019: £4 milion) of fair value movements for National G rid Partners. 5. Purchases includes £9 milion (2019: £14 milion) of aditional investments made by National Grid Partners. 6. There were no reclasifications in or out of level 3 (2019: none).
Slide 36 — National Grid
National Grid 2020/21 Half Year Results Statement 36 1. Net debt Net debt is comprised as fol ows: 30 September 2020 31 March 2020 £m £m Cash and cash equivalents 164 73 Curent financial investments 1,315 1,98 Borowings and bank overdrafts (32,02) (30,794) Financing derivatives 1 428 13 Net debt (net of related derivative financial instruments) (30,15) (28,590) 1. Includes £14 milion aset (31 March 2020: £3 milion liability) in relation to the hedging of capital expenditure. The cash flows related to these derivatives are included within investing activities and not financing activities in the consolidated cash flow statement. The folowing table splits out the total derivative balances on the face of the consolidated statement of financial position by category: 30 September 2020 31 March 2020 Asets Liabilities Total Asets Liabilities Total £m £m £m £m £m £m Financing derivatives 1,147 (719) 428 1,267 (1,134) 13 Comodity contract derivatives 70 (12) (52) 75 (20) (125) Total derivative financial instruments 1,217 (841) 376 1,342 (1,34) 8 12. Changes in net debt (a). Analysis of changes in net debt Cash and cash equivalents Financial investments Borowings 1 Financing derivatives Total £m £m £m £m £m At 1 April 2020 73 1,98 (30,794) 13 (28,590) Cash flows 93 (681) (1,05) 23 (1,620) Fair value gains and loses and exchange movements (2) (9) 397 267 653 Interest income/(charge) – 7 (482) 5 (470) Other non - cash movements – – (8) – (8) At 30 September 2020 164 1,315 (32,02) 428 (30,15) Cash and cash equivalents Financial investments Borowings 1 Financing derivatives Total £m £m £m £m £m At 31 March 2019 252 1,981 (28,730) (32) (26,529) Impact of transition to IFRS 16 – – (474) – (474) At 1 April 2019 252 1,981 (29,204) (32) (27,03) Cash flows (47) 1,358 (462) 109 958 Fair value gains and loses and exchange movements 8 46 (979) (26) (1,151) Interest income/(charge) – 21 (56) (3) (578) Acquisition of National Grid Renewables Development LC – – (13) – (13) Other non - cash movements – – (46) – (46) At 30 September 2019 213 3,406 (31,270) (182) (27,83) 1. Included within borowings are lease liabilities amounting to £735 milion (30 September 2019: £742 milion).
Slide 37 — National Grid
National Grid 2020/21 Half Year Results Statement 37 12. Changes in net debt (continued) (b). Reconciliation of cash flows from financing liabilities to cash flow statement 30 September 2020 30 September 2019 £m £m Cash flows per financing activities section of cash flow statement: Proceds received from loans 3,506 2,460 Repayment of loans (91) (1,674) Payments of lease liabilities (6) (60) Net movements in short - term borowings (1,046) 210 Net movements in derivatives 2 (14) Interest paid (45) (487) Cash flows per financing activities section of cash flow statement 1,060 435 Adjustments: Non - net debt - related items 13 (1) Derivative cash flows in relation to capital expenditure (1) 2 Derivative cash flows per investing activities section of cash flow statement (40) (83) Cash flows relating to financing liabilities within net debt 1,032 353 Analysis of changes in net debt: Borowings 1,05 462 Financing derivatives (23) (109) Cash flow movements relating to financing liabilities within net debt 1,032 353 (c). Reconciliation of changes in liabilities arising from financing activities