National Grid Electricity Distribution Holdings Limited (NG) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the National Grid investor call. My name is Bethany, and I'll be coordinating this call for you today. [Operator Instructions] I will now hand the call over to your host, Nick Ashworth, Director of Investor Relations at National Grid to begin. Nick, over to you.

Thanks, Bethany, and good morning, everyone, and welcome to our call to discuss our announcement of the proposed acquisition of Western Power Distribution and the strategic portfolio repositioning. As Bethany said, I am Nick Ashworth and I head up Investor Relations here at National Grid. Thank you for joining us remotely, and I hope everyone is safe and well. As always, I'd like to draw your attention to the cautionary statement you'll find at the front of our presentation. And after the presentation, as usual, the IR team will be available by phone to help if you have any further questions. And so with that, I'd like to hand over to our CEO, John Pettigrew. John?

Thank you, Nick, and good morning, everyone, and thanks for joining this call at such short notice. As usual, I'm joined by our CFO, Andy Agg, and as you will have seen from our press release, there's a lot to talk about this morning. We've announced 3 significant and connected transactions: the proposed acquisition of Western Power Distribution, or WPD, here in the U.K.; the sale of Rhode Island business in the U.S.; and the intention to initiate a sale of a majority stake in our U.K. Gas Transmission business later this year. As I've said on many occasions, our vision at National Grid is to be at the heart of a clean, fair and affordable energy future. We'll do this through the execution of our strategic priorities, which are: to deliver for our customers efficiently; to grow our organizational capabilities; to empower our people for great performance; and to enable the energy transition for all. It's with this vision in mind that I'm hugely excited about what the combination of these transactions will bring. They will significantly improve National Grid's strategic positioning, whilst enhancing our long-term growth prospects. They will put National Grid at the heart of delivering net zero across the U.K. electricity sector and they will deliver attractive financial returns for our shareholders. Over the next 20 minutes or so, we'll discuss the strategic and financial rationale for these transactions and how they strengthen our future growth outlook. Andy and I will be happy to take your questions at the end of this. Starting with the detail. We've agreed to acquire WPD, the U.K.'s largest electricity distribution business from the U.S. utility PPL for an equity value of GBP 7.8 billion. At the same time, as part of this transaction, we've agreed to sell to PPL, our Rhode Island business for an equity value of $3.8 billion or GBP 2.7 billion. In addition, we're announcing our intention to initiate the sale of a majority stake in our U.K. gas transmission business. We'll be ready to launch a sales process sometime in the second half of this year, and we'd expect the process to completion to take about a year. We intend to fund the equity element of the WPD consideration with bridge financing, with proceeds from the sale of Rhode Island as well as proceeds from the sale of U.K. gas transmission being used to pay this down in time. We currently expect that we'll complete the acquisition of WPD within the next 4 months, with Rhode Island completing in Q1 2022. As I mentioned at the outset, I'm very excited for how these transactions will transform National Grid's shape, increasing our exposure to electricity and enhancing the long-term growth profile of the group. Furthermore, they strengthen our core ambition, which is to enable the energy transition for all. For those of you who've followed our story over the years, you'll know that we have a great track record of delivering shareholder value through portfolio repositioning, both large and small. This has taken the form of large-scale acquisitions with our purchase of the KeySpan business in 2006 and also crystallizing shareholder value from existing assets, with a more recent sale of our U.K. gas distribution business. The transactions we're announcing today represent the next stage of our journey. The WPD acquisition allows National Grid to bring together 2 complementary businesses. WPD offers low-cost and local operational strengths, which in combination with our engineering excellence and significant experience of owning and modernizing electricity distribution networks in the U.S. offers a compelling combination. It will also allow a greater focus on the customer, given WPD's leading industry performance with a great opportunity to drive improvements across our existing U.K. and U.S. businesses. The pivot from gas to high-growth electricity in the U.K. will underpin the long-term growth outlook for the group and enhance our role in the U.K.'s energy transition. And despite our agreement to sell our Rhode Island business, we'll continue to benefit from regulatory diversification, with around 40% of group assets continuing to be in the U.S. These transactions will also deliver attractive financial returns for our shareholders. We believe the fair price that we paid for WPD reflects the exciting growth opportunity and potential for continued outperformance in the future, WPD's strong cash flow and returns that will be above our cost of capital, our conservative assumptions around future regulatory returns and the benefits we can derive and share with our customers. In addition, we've achieved an attractive valuation for our Rhode Island business, and are confident of being able to generate a premium valuation for the U.K. gas transmission, given its attractive cash flow profile and growth optionality. On completion of these 3 transactions, the growth expectations for our electricity distribution will enable us to grow at our 5% to 7% range for longer, which, in turn, translates to superior earnings growth and stronger dividend cover, which will further underpin the recently announced updated dividend policy. The transactions are expected to be significantly earnings accretive from year 1 and continue to be earnings accretive post the U.K. gas transmission sale in the longer term. We expect to deliver all 3 transactions whilst retaining our current credit rating. I'd now like to spend a few minutes focusing on the main transaction we've announced, our acquisition of WPD. This is a one-off opportunity to gain a scale position in U.K. electricity distribution, which is expected to see a high level of asset growth as a result of the ongoing energy transition. WPD is the U.K.'s largest electricity distribution network operator, or DNO, with a forecast March 2022 regulated asset base of GBP 8.8 billion, having grown by around 5% per annum over the past 6 years. It's responsible for 4 networks across the East and West Midlands, South Wales and South West England. Altogether, it has more than 6,500 employees and serves nearly 8 million customers. And in addition to its size, WPD is also one of the best-performing operators in the U.K. with a fantastic track record of delivery. Firstly, it's demonstrated a great track record of stakeholder engagement and was the only DNO to be fast-tracked by Ofgem in the RIIO-ED1 price control. Secondly, it's delivered very strong operational performance, with customer engagement ranked towards the top of its peers throughout the current regulatory period. Thirdly, its financial performance is strong, consistently delivering best-in-class returns. And finally, it's led by a strong and highly experienced management team. I've known Phil Swift, WPD's CEO for many years and look forward to working closely with him and his team to continue to deliver the great performance WPD's employees and customers have come to expect. The integration of WPD international grid will bring complementary strengths to the group as we move along the energy transition pathway. There are 4 strategic benefits of the transaction for us that I particularly want to highlight: firstly, the increasing growth of electricity and our key role as the U.K.'s largest transmission and distribution owner; secondly, the improved growth outlook for the group; thirdly, our enhanced role in the energy transition. 'and then finally, the continued benefit of geographic and regulatory diversity. Starting with our increased electricity footprint. On completion of the transactions, nearly 70% of group assets will be focused on electricity, up from around 60% today. It's very significant at the time when electricity demand is expected to rise substantially in the years ahead. Across both our U.K. and U.S. footprints, the coming decades, we'll see the acceleration of renewable generation, in particular, offshore wind, greater levels of decentralized generation and battery storage. We'll see enormous growth in electric vehicle penetration and a significant change in the way we heat our homes with electric heating solutions growing to complement the acceleration of clean gas alternatives. The core scenarios set out by the committee on climate change sees a 70% increase in U.K. demand by 2050 and sees demand potentially doubling under the further ambition scenario. These are in line with the scenario set out by the National Infrastructure Commission and the Future Energy Scenarios work published by the electricity system operator. The outlook, therefore, for both electricity transmission and distribution is extremely exciting. As the largest electricity transmission and distribution owner in the U.K. will play a pivotal role in enabling growing levels of electrification, with investment levels and growth set to remain elevated across our networks as we look ahead through this decade and beyond. Which brings me to the growth outlook. Overall, we see these transactions materially improving the group's long-term growth outlook, given the multi-decade changes we see ahead for the electricity sector. Simply put, we're transitioning from GBP 8 billion of regulated asset base in U.K. gas transmission in Rhode Island to a similar-sized WPD business, but with a much stronger growth outlook. WPD's regulated asset base has grown by around 5% per annum over the past 6 years, and its draft ED2 business plan expects investment levels to rise 20% from ED1 to facilitate the smarter electricity networks that will be required. With the transactions retaining our current strong investment-grade credit rating, there is sufficient headroom to take advantage of these growth opportunities as they emerge, delivering a cleaner energy solution and attractive returns for our shareholders. So as we transition our U.K. business to higher-growth electricity distribution with the WPD acquisition, we expect group asset growth to be in our 5% to 7% range for longer. This transaction also enhances the pivotal role we'll play in the delivery of net zero, and places National Grid at the heart of the energy transition. It will enable us to deliver a more holistic approach across the entire U.K. electricity sector, helping the U.K.'s wider net zero ambitions. An area where combining WPD within National Grid can help deliver customer and shareholder value, whilst delivering the energy transition is around renewable connections and the development of smarter networks. There have been around 50 gigawatts of renewable generation connected to the U.K. electricity network to date with over 6 gigawatts of renewable connections to our transmission network in RIIO-T1, and WPD already having connected 10 gigawatts of distributed generation and storage. Together, our high- and low-voltage engineers will be able to share their knowledge and experience to efficiently deliver increasing levels of renewable connections, both large and small. Another example is across EV charging infrastructure. In our transmission business, we've worked with the U.K. government on the GBP 950 million Rapid Charging Fund, which will help to deliver ultrafast charging infrastructure at a national level across motorway service stations. At the local level, WPD is looking to deliver over 200,000 charging points across its territory by 2023, as part of its roadmap to deliver enough connections by 2030 to allow up to 3 million EVs. This is a great example of where we'll be able to share best practice across engineering and customer solutions to help drive a more effective EV rollout. Finally, these transactions keep the attractive geographic and regulatory diversity of the group intact and allow the group to capture growth opportunities as they arise across our businesses. Whilst our sale of Rhode Island at a very attractive valuation for shareholders was a key differentiator in helping us to secure the WPD acquisition, it hasn't altered our U.S. business or our strategic aims materially. For context, we still plan to invest CapEx of more than $4 billion per year in the U.S. Following closing of the Rhode Island's sale and assuming the sale of a majority stake in our U.K. gas transmission business, we still expect to have around 40% of our assets in U.S. networks versus 50% in U.K. networks. This diversity brings value to our customers and to our shareholders as work alongside different regulators enables us to share best practice between rate plans. By increasing our U.K. regulatory footprint, these transactions show that we continue to believe the U.K. will remain an attractive place to invest, with the right support to innovate as the U.K. moves forward with its ambitious net zero goals. Whilst we're making a technical appeal to the CMA around the cost of equity and outperformance wedge for RIIO-ED2, we believe the independence of the CMA shows the resilience of the U.K. regulatory framework. We'll continue to work with government, Ofgem and all stakeholders to promote and evolve the regulatory framework, which supports innovation, drives fair returns for our shareholders whilst delivering an energy transition for all our customers. Although the group will have a larger electricity exposure in the future, our U.S. gas distribution business leaves us well positioned to continue to deliver strong growth. This will be driven by the need to maintain system safety and reliability as well as optionality around clean gas investments. As a core part of the group portfolio, it continues to underpin the delivery of our investor proposition. And staying with the U.S., I just want to spend a couple of moments talking about Rhode Island. Today's announcement sadly signals the end of the group's involvement in Rhode Island. It's a great business, and we'll be handing it over to a great new owner. I'd like to take this opportunity to put on record a heartfelt thank you from me and the team to all our fantastic colleagues who have worked so hard over the years to deliver the engine needs for our customers across the state. We wish them continued success for the future when the time comes for them to transition across to PPL. So with that, I will now hand over to Andy to talk through the financial details of the transactions before coming back for your questions.

Thanks, John, and good morning, everyone. So moving to the transaction details. In relation to WPD, the cash consideration will be GBP 7.8 billion and with net debt, as of 28th of February, being GBP 6.4 billion. WPD generated profit before tax of GBP 750 million in the full year to March 2020 and has invested around GBP 1 billion of CapEx per annum on average throughout RIIO-ED1. The cash contribution we'll pay for WPD will be partly funded through the sale of our Rhode Island business. PPL will pay $3.8 billion for the acquisition of this business, which generated operating profit of $206 million and net income of $122 million to March 2020 under U.S. GAAP. The sale of our Rhode Island business is conditional on the completion of the WPD acquisition with the purchase of WPD expected to complete ahead of the sale of Rhode Island. The third transaction is the announcement of our intention to initiate a sale of a majority stake in our U.K. gas transmission business, including our metering business later this year. U.K. gas transmission delivered profit before tax of GBP 356 million in the full year to March 2020. We expect to launch this process in the second half this of year. Confirmed debt funding is in place today to fully cover the WPD purchase price. We intend to use the proceeds from Rhode Island and the eventual sale of the majority stake in U.K. gas transmission to repay the bridge facility, with any remainder being refinanced through new debt issued in the capital markets. Post these transactions and assuming a sale of a majority stake of our U.K. gas transmission business, we expect our credit metrics to be little changed well within the 7% to 9% RCF to net debt band for our current Moody's Baa2 2 rating and the 10% to 13% FFO to net debt band for our BBB flat S&P rating. Overall, we expect to retain a strong balance sheet with sufficient headroom at the current rating to support the higher level of growth John has already described. The transactions are expected to be significantly earnings accretive from year 1. and taken together with the U.K. gas transmission sale are expected to continue to be earnings accretive in the longer term. This will improve dividend cover, further supporting our recently announced updated dividend policy to grow the dividend in line with CPIH from our next financial year. As John has mentioned, whilst this was a competitive process, we believe we've paid a fair price for WPD. Our valuation of the business focused on the cash flow generation we believe the assets can generate, taking into account conservative assumptions around baseline returns as well as our view on the financial benefits the transactions will bring, which will be shared with our customers. And also considering the opportunities we see to drive our performance on totex, in particular, given the strong track record of delivery that we bring and the opportunities around incentives where WPD has a strong track record of performance. In addition, the transaction presents a great opportunity to share best practice and drive performance improvement across our businesses, delivering benefits for our customers. As an example, in the U.K., both National Grid and WPD are developing new digital platforms that will help customers connect new forms of generation to our networks more efficiently, by giving them access to the right data, standardizing connection design and providing a smoother, easier customer journey. And across National Grids U.S. electricity distribution business and WPD's U.K. business, we're utilizing satellite imagery, data science and artificial intelligence to improve reliability and also improve customer satisfaction. There are many examples like these of ways the businesses continue to deliver best-in-class customer satisfaction levels as WPD, in particular, has shown through ED1 as well as strong operational performance and financial returns as both companies have delivered through RIIO-1. And this will benefit all our stakeholders. We're comfortable that all this will drive returns above our cost of capital leaving us well placed to capture the growth opportunities that John has outlined across electricity distribution in the years ahead. This next slide sets out the time line for the transactions. We'll shortly be sending out the circular with the shareholder votes to be scheduled by the end of April alongside a required shareholder approval vote for the WPD acquisition. There are technical filings required with the FCA and it's Guernsey equivalent. The WPD transaction is not conditional on CMA approval. However, we will submit a voluntary merger notification to the CMA as soon as possible. We do not anticipate competition issues and are aiming to achieve clearance at the end of Phase 1, most likely before the end of September. We'd expect the process to take a little longer for completion of the sale of our Rhode Island business as it will require approvals from relevant U.S. regulators. We, therefore, expect completion of Rhode Island by Q1 2022. We'll look to launch the process for the sale of a majority stake in our U.K. Gas Transmission business in the second half of this year, and, as with the sale of our U.K. gas distribution business, we'd expect the process to completion to take about a year. With that, I'll hand you back to John.

Many thanks, Andy. Taken together, these transactions give us the foundation from which to continue delivering shareholder value through both dividend and asset growth. Together, they transform National Grid's shape and positioning, increasing our focus on electricity at a time of significant change across the sector. They give us a one-off opportunity to establish a scaled position in U.K. electricity distribution and offer compelling opportunities for future growth thereby enhancing our ability to deliver in our 5% to 7% asset growth range for longer. This will further underpin the dividend for the long term. Our vision is for National Grid to be at the heart of a clean, fair and affordable energy future. Following these transactions, National Grid will be the U.K.'s largest electricity transmission and distribution owner, having an even greater role to play in helping the country meet its net zero target. Thank you for listening. With that, Andy and I will be happy to take any questions you have.

[Operator Instructions] The first question comes from Dominic Nash of Barclays.

Congratulations on this deal, which I know congratulations on keeping it under the radar so well as well. A couple of questions for me, please. So first of all, the size of the premium to RAV for WPD, I think it's around about 60%, if you could just confirm that? And to justify that, we're going to need to have returns probably significantly above the cost of capital, as you have already said. Have you got a view of what scale of outperformance is needed or you assume to justify this valuation? And then sort of second half or the first question is that what do you think the response of Ofgem will be to this acquisition on their sort of final determination? And secondly, on the gas transmission sale, could you give us a clue as to what the range of the definition of majority sale is? Is this similar to the narrative that we had around the sale of gas distribution, which I think also started off as a majority sale and then ended up being a complete sale? And do you think you're going to achieve a similar multiple to that as you have seen for WPD?

Thanks, Dominic. Why don't I just start by talking about how we thought about the valuation. So I don't -- we don't think about it in terms of premium to RAV. I think that's overly simplistic. It doesn't really take into account things like growth and outperformance. So the way that we've thought about it really is in -- on the way is in 4 sort of different areas. So firstly, we've -- as Andy said in his remarks, we looked at the fundamentals of the cash flow. So we've taken a sensible and conservative view around base returns. Given the track record that both National Grid and WPD has around outperformance, we remain confident that there will be opportunities to outperform through innovation. There will be benefits, of course, through the complementary capabilities that both National Grid and WPD will bring together. And then most importantly as well is that we believe that electricity distribution and in my remarks, I talked about the growth in demand we expect to see out to 2050 is going to drive sustainable, strong growth for many years to come. So all of that's fed into our sort of fundamentals of the cash flow, Dominic. And then the second area, of course, is just the strategic opportunity. So as I said in my remarks, it's going to allow us to strategically pivot to better align things with the energy transition. So we'll ultimately be 70% electricity, 30% gas. It is a unique opportunity to enter in the market at scale. And it also maintains the balance that we like both geographic and regulatory between the U.K. and the U.S. So the U.S. will be 40% networks, the U.K. 50% and then the remaining 10% National Grid ventures. So those 2 things are important, I think, in considering valuation. The third area I would just emphasize is that WPD has a fantastic management team, and a great track record of operational performance, and that's an important element to consider. And then finally, what we've announced today is 3 transactions. And I think you need to think about them together. So we've also announced a significant premium and value for our shareholders in the sale of Rhode Island, and we'd expect to crystallize significant value through the sale of gas transmission, which remains an attractive business. So when we put all of that together, we felt that what we paid is a very fair price for the opportunity that it presents going forward. In terms of the level of outperformance, I wasn't going to get into the specifics today, Dominic. As I said, given the track record of WPD and National Grid, in both outperforming on short-term incentives as well as totex, we would be confident that we will continue to be able to find ways to deliver for our customers efficiently. And with that, be able to deliver outperformance. The second part of your question, I think, was around the response from Ofgem. So we're not anticipating any concerns from Ofgem with regards to this acquisition. Ofgem, as you know, have always been very supportive in the industry of businesses adapting to the changing environment. They've also been very consistent in their views that utilities should be thinking about whole system solutions. And of course, what we're proposing today is going to help massively as we bring those complementary capabilities together. And then finally, in terms of gas transmission, so what we are announcing today is the sale of a majority stake. So at least 51% is what we mean by that, Dominic. And you'll be very familiar with the process that we ran for gas distribution. And our intention will be to run a very similar stake. 51% allow -- will be -- the minimum that allows us to deconsolidate off the balance sheet. But specifically what that number would be, time will tell as we run the process. Okay. I can see that John from Royal Bank of Canada has got his hand up. So John, ask your question.

Yes, 2 questions for me as well. I guess with the gas transmission sale, just coming back to that, you're obviously having to sell that partly to fund WPD, obviously, partly for strategic reasons. But do you see yourselves as a forced seller on that asset? And do you think that could impact the price you may be able to achieve? And then secondly, in the U.S., again, I know it's part of the asset swap in terms of getting out of Rhode Island, but you've achieved a 2x rate base multiple on that sale. We could argue about where your current businesses are valued in the share price, but does that not signal that perhaps you should be selling more of your U.S. activities to create value for shareholders?

John, we -- you've broken up a little bit. I think I've got the gist of the questions, which I'm going to ask Andy just to pick up on.

Yes. Thanks, John. So I think your first one was around the gas transmission. And I think you used the phrase forced seller. So no, that's not at all how we see it. Is the -- while it's a clear part of the intent that we've announced this morning, we believe it remains a very attractive asset, a well-performing business and with strong growth optionality that we've talked about previous times around some of the hydrogen opportunities and other things that absolutely will bring attractive options for that business going forward. So no, we'll be very disciplined as we go through that process. We're confident, though, that it will attract a number of potential owners, and we will run through that process, as you'd expect us to. In terms of the Rhode Island question, a couple of things there. Obviously, the numbers that we've reported today, as you know, with our guidance for the full year, they do represent numbers that have got sort of some COVID impacts going through them. But the rate base multiple that you mentioned is -- that's what the numbers demonstrate. We're very pleased with the valuation on our Rhode Island business as well, as you said, but no, absolutely, we remain fully committed to the U.S. business remaining a core part of our group, as John said earlier. The networks in the U.S. remain around 40% today. We will be continuing to invest over $4 million -- $4 billion as we go forward in the remaining business. So absolutely remains a core part of driving growth and performance for national grid.

Thanks, John. I can see Chris from Morgan Stanley has got a question, Chris?

My questions would be just in terms of the net debt. The figures that you've stated, are they book value figures? Or have they been mark-to-market for the transaction just to give an understanding of how those figures should be treated by us? And then I guess the real question for us is one of the arguments that the CMA has put forward for the 25 basis points of aiming up additional return relates to attracting investment. Paying such a premium today, does this put that 25 basis points at risk, do you think?

Okay. Thanks, Chris. Why don't I ask Andy to do the first question, and I'll take the second?

Yes. Again, I think you were asking about the WPD debt value, the $6.4 billion. That's booked, absolutely. And as you can imagine, as we go through, there will be some fair value adjustments flowing through because some of the rates on those -- the number of those bonds. So that's the book value, yes.

Chris, in terms of the CMA, so obviously, everybody is aware that a couple of weeks ago, we accepted the vast majority of the final determination RIIO-ED2 that we did refer to the CMA ourselves as did the other networks, on a technical basis, the return on the cost of equity and the outperformance wedge. One of the strengths, I think, of U.K. regulation is that we do have an independent regulator who can look at these technical matters. And obviously, you would have seen the decision for PR19 yesterday in the water companies. I think I take confidence in the fact that the CMA will look at the fundamentals and will look at it in terms of long-term need for investment across these networks. We have set out our views where there is evidence that demonstrates that the cost of equity should be higher if Ofgem would consider that evidence. Based on what I've read yesterday, I remain confident that it was right to make that technical appeal and that the CMA will come to the right answer as they look at RIIO-T2. And of course, that will influence the returns that we will see in ED2 and going forward as well.

Okay. Could I just ask one follow-up just in relation to that process that you just mentioned? Was today's transaction timed to be announced today this week after the CMA deliberately? Or is that just a coincidence?

It's pure coincidence, Chris. I mean you're probably aware that the CMA have changed their decision date a couple of times over the last few months, actually. So we weren't actually very clear about exactly when it was going to be launched, so it is pure coincidence. Okay. I can see there's a question from Deepa from Bernstein. So why don't we take Deepa's question?

John, I have several questions actually. So firstly, for Andy, just running through some math, if you -- I mean, firstly, do you have any expectations for the valuation of the gas transmission assets? Obviously, it will be lower premium because it's gas, lower growth, et cetera. So one question is I wanted to try and understand how much new debt do you need to finally raise after you're done...

So Deepa, I think the question was do we -- expectations around gas transmission values? Is that right?

And therefore the net -- new net debt that you need to raise? And do you need to raise any equity hybrids? Like could you be a bit specific on that? And then the second question was, I read that there was a lockbox situation for the WPD asset. Is it similar also for the Rhode Island? And therefore, should we really be looking at the RAV as of today because you've effectively just already concluded the appeal now?

Okay. So let me try and pick those up. I think on the gas transmission, I think, as I said -- in answer to an earlier question, Deepa, we're -- obviously, today, we're announcing the intent to sell. It's -- obviously, we believe the gas transmission business is an attractive asset, and we're confident it will attract a good valuation. But I'm not going to try and speculate on what that might be. We'll obviously update on that as we go through the process. Obviously, just to be clear, though, while we're intent on going through that process, I think your question then said, is there any remaining debt or other issuance? And just to be clear, as I said this morning, by the time we've succeeded in completing on the Rhode Island transaction and the majority stake in gas transmission, there may be a small portion of bridge that will then be -- any remainder will be refinanced through either senior debt or hybrid activity in the debt markets, as I mentioned. So absolutely no need or intent to issue equity irrespective of the outcome of the gas transmission transaction. And then final point, I think, on the locked box mechanism. Yes. So I'm sure you're aware. So locked boxes in the U.K. are very consistent sort of well-trodden route. The locked box mechanism is in place, and that runs from 1st of January. But you'll see in the detail in the RNS that we -- there's a ticket fee to allow for the time through to completion. In terms of the Rhode Island transaction, that again, because it's -- in the U.S., it's slightly different, but there's a standard working capital mechanism in place to ensure there's a true-up for any working capital movements between now and completion as well.

Thanks, Andy. Thanks, Deepa. I can see we got a question from Jenny from Citi. So should we take Jenny's question?

Couple of things. Can I just press you on trying to quantify a little bit in terms of the earnings accretion. From the wording you used, it sounds like there's a single digit, maybe even a low double-digit step-up initially. But then, obviously, we've got the disposal coming through from NGG. So we may be back to where we are now. And then earnings accretion thereafter. Is that sort of the right profile to think about? Secondly, just going back to Dominic's question initially. Not asking for a forecast in terms of the RoRE outperformance expectation. But what has WPD actually delivered in terms of RoRE outperformance? You talk about excellent management, et cetera. What has been the run rate in terms of RoRE outperformance? And then lastly, just on your other gas assets. Clearly, you've said that you're very committed to U.S. as a geographic area. But obviously, there are still other gas assets out there. Can you just give us a bit of a feeling in terms of the direction of travel on those?

Yes. Thanks, Jenny. Why don't I take the last one and then I'll ask Andy to pick up on the earnings on the RoRE. So as I said in my remarks, Jenny, so the U.S. business remains absolutely central to our strategy. And within that, our gas distribution business. So we continue to see strong organic growth in both Massachusetts and Rhode Island, which is contributing to our investor proposition. And if you look below the sort of headline, we're continuing to invest significantly in gas distribution in the U.S., both for leaked pump and pipe, which of course, is helping to reduce leakage for oil to gas conversions as well as we're starting, as part of our rate filings, to look at opportunities around hydrogen, hydrogen blending and renewable natural gas as well. So we see gas as an important -- as having an important role as part of the energy transition, and we remain committed to it. Within the U.K., the announcement today is to sell a majority stake. So we will continue to be investing in U.K. gas as well. And of course, we also have other gas assets, as you said. So our Grain asset is an important asset to us. And we announced recently Phase IV to expand the capacity of that, and we see that as having an important role. And we're also involved, as you know, in the net zero cluster up in the Humber site, where we're looking to see the role that Carbon Capture and Storage can have to deliver hydrogen up there as well. So that remains a core part of our strategy going forward. Andy?

Yes. Thanks. And so I go back to the first 2. On earnings accretion. So yes, as we said, significantly earnings accretion, I'm not going to give a sort of specific range on that. There's a lot of detail to work through, as you can imagine. But as you said, well, we've got the remaining years of ED1, combined with, as you say -- through the transaction on the National Grid Gas sale, significantly earnings accretion upfront. And then as you say, we continue to deliver earnings accretion over the long term as that higher growth that we've talked about on -- many times this morning starts to drive improved earnings as we look forward as well. So you've got the short-term benefit and then the longer-term drive coming through from growth. In terms of outperformance to date, as we said, I think WPD over the life of ED1 has delivered around 9.9% RoRE. So significant outperformance, predominantly coming from its really strong incentive performance in terms of customer satisfaction, outage response and so forth. So that's its track record.

Mark Freshney. I see you've got your hand up, Mark.

Firstly, just a question for Andy. Are there any debt buyback costs? I mean, presumably, there's a bit of cleaning up the WPD debt portfolio that might need to be done. So can we expect any additional costs there? Just secondly, picking up some of the earlier points on RoRE in WPD. I mean, if I remember correctly, this was the standout outperformer 2010 to 2015. When they bought the E.ON grids, they did a fantastic job turning them around. But then when I look to the RIIO-2 annual report, I mean, they're underperforming finance and tax. And I think U.K. Power Networks has pooled ahead. So what do you see -- and of course, the cost of debt index that they're stuck on is a big problem for the next couple of years. So how do you view all of that? And thirdly, a question for you, John. I mean, 8 years ago, after RIIO-1, you personally hosted some big events where you spoke about the opportunity to outperform and you did. Can we expect another day once CMA is over, once WPD deal has completed, where you can stand it up and lay out some sort of RoRE targets and practically show us what you think you can do across the U.K. businesses or a combination [indiscernible], I guess?

Okay. Thanks, Mark. Why don't I let Andy take up the first question, and I'll take up the other 2.

Yes. So Mark, thanks. The -- sort of on your first question, I think, around are there any associated debt buyback costs or other things? Short answer to that is no. We don't expect anything significant. Clearly, WPD, as you'd expect, has a varied debt book associated with it with a variety of maturity dates, and we'll look to run that through, as you'd expect. And that, I'm sure, linking to your second point, I think, around the go-forward cost of debt index that we might expect in ED2. But remember, that's still is an early stage, but obviously, the sector-specific guidance has come out. Clearly, we would hope that as we go forward, bringing our balance sheet and sort of issuance experience together with WPD's that we can continue to drive some improved performance there, too. So yes, we're obviously aware of where the cost of debt index is today, but I think we'll continue to look for opportunities going forward. But no specific one-off costs that we're expecting upfront.

In terms of your other comments, Mark. One of the things I'd quite like to emphasize is that when you look at National Grid and WPD, you'd -- what you'll see is a really nice set of complementary capabilities. So if you look at our track record in terms of delivery, then National Grid's got a world-class reputation for engineering and asset management. And we've been able to deliver outperformance through innovation, both in our U.K. price controls and in our U.S. rate filings. Similarly, when you look to WPD, you'll see that their customer satisfaction and customer service has been of frontier performance in the U.K. and also their operational performance in terms of reliability and lost minutes has been first class. When you put those things together and you look at the challenges that we have in the energy transition going forward, where there's going to be some fundamental investment needed in both the transmission and distribution networks, I think we're very confident that bringing those capabilities together will enable us to find innovative ways to driving performance for the benefit of customers and for our shareholders. In terms of your request, Mark, you're quite right. I think it was 2013 that we did that event. It is our intention actually to provide some more detail to yourselves and to the market around how we see RIIO-T2 and indeed how we'll see RIIO-ED2 as well as we go forward. We haven't exactly decided exactly what that format will be, but it would be our intention to share some of the plans and ideas that we've got as we look forward over the next 5 years. Okay. I'm going to -- Thanks, Mark. I'm going to move to Martin, who's got his hand up.

Yes. Hopefully, 3 very quick questions. On the gas sale, when do you anticipate reclassifying the accounting treatment of this being an asset held for sale? And then also on the gas sale, given your comments around effectively swapping out the [indiscernible] rate basis for what you're purchasing with WPD does not actually suggest that over time, you will fully exit the gas business in the U.K., and that the majority stake here is mainly the first step? And then getting back rather to the beginning of the questions which Dominic around the premium to the RAV. I liked the way that you explained that with all those sort of building blocks. But what would be very helpful if you could give some sort of indication of how you see the step-up from RAV to 60% splitting out in value terms across the building blocks that you outlined today?

Okay. Thanks, Martin. Let me take the second one first, and then I'll ask Andy to pick up on the first and the third. So as I said in my remarks, actually, the only decision that we've taken today is to sell a majority stake in our gas transmission business. We take no other decisions to -- as I said, we've got an important gas business in Grain, and we're considering to explore opportunities in other areas. And we intend to hold a minority stake in gas transmission. We do very strongly feel that gas has got an important role to play in the energy transition over many decades to come, both supporting electricity generation as well as supporting heat both domestically and business-wise. And we are continuing to explore optionality for gas transmission in areas like hydrogen and renewable natural gas. You would have seen in The Times this morning quite a big article about our thoughts about the repurposing of gas transmission for hydrogen, which we think is an interesting optionality opportunity for us. So decision today is to sell a majority stake. As I said, it allows us to shift the overall portfolio to one that I think better aligns with the overall energy transition, with 70% being electric and 30% gas. And at the same time, it maintains the geographic and regulatory diversity that we enjoy with 40% of our network assets being in the U.S. and 50% of our network assets being in the U.K. So with that, Andy, why don't you pick up the first and third?

Yes. Thanks. So on the first one, Martin, I mean, it's probably behind your question, but you're probably aware the accounting rules around what exactly the point at which you trigger a held for sale or discontinued ops are quite complex. It's not just intent that you have to look at ability, readiness, et cetera. So we'd expect that point to be reached sometime in -- through the back half of 2021 calendar year. But obviously -- we'll, obviously, confirm that precisely when we get there. In terms of the third one, just coming back to your point around the RAV multiple. Again, it's -- I don't want to repeat everything John said in terms of how we're thinking about this. But again, I'm not going to try and get granular around how much we attribute to different elements. But I think you do come back to the importance of growth here. And one of the reasons we wanted to show the RAV multiples or the RAV numbers as you look forward to the years ahead is you would expect absolutely that growth -- value-accretive growth to effectively erode that multiple over time and relatively quickly because of the size of that growth. Obviously, the outperformance, again, that we will look to target across these businesses. But I think it's also -- it's important that you think about those multiples in the context of the other transactions that we've announced. And the very sort of attractive crystallization of value that we've been able to achieve on Rhode Island and that we'll be looking to achieve on gas transmission. And our ability to, therefore, redeploy that into the new business, which will allow us to continue to grow for many years ahead. So that's how we're thinking about it.

James, from Deutsche. I think you've got a question.

Yes. Congratulations from me on the deal. I have 3, hopefully, quick questions. The first is just on synergies. You've highlighted kind of strategic synergies. You haven't talked about financial synergies. I'm assuming because there probably aren't really any. But just to confirm that you're only keeping the overall size of the business, the same, whether there are any financial synergies or not from putting 2 electricity businesses together in the U.K.? Second question, could you tell us the cost of debt for WPD's grand portfolio? And then thirdly, just on D&A, when you say that you're expecting the deal to be in accretive when you're doing your calculations, how are you taking into account PPA? Because I'd imagine that there might be significant PPA kind of D&A associated with this deal? Are your calculations kind of including anything for that? And then the second part of that question, so I guess this one isn't a short one, but there have been views in the past that some of the accounting at WPD is quite aggressive in terms of very long depreciation lives. Maybe that's a misperception, but I was wondering whether you could comment on whether you're anticipating kind of aligning the accounting policies there that [indiscernible] the existing business or not.

Okay. Thanks, James. Let me just pick up on synergies, and then I'll ask Andy to pick up on the cost of debt and the accretion question. I mean, in terms of synergies, we weren't today planning on going through sort of detailed breakdown of the elements that we believe make up why the announcement today, we believe, is fair value. As I set out earlier, we do believe that there are complementary capabilities between National Grid and WPD that will help us drive outperformance. And over time, we will continue to work through that. But today, what we're really announcing is that the acquisition of WPD will not only be only earnings accretive in year 1 but going forward, but also will drive stronger, longer and more certain growth for many, many decades to come. So with that, Andy, why don't you pick up on the...

Yes. And James, apologies that you broke a bit. I think your question was around the cost of debt performance for WPD in the period?

Just the cost of debt -- just the actual cost -- current cost of debt for WPD the debt you've assumed?

Okay. So I think if you look at where they are at the moment, I think they're consistent with where they've been throughout the ED1, which is a slight underperformance on their sort of financing and tax against their regulatory allowances. I think if I go back to the previous question or one of the earlier questions, I think given where the index is coming out, we wouldn't anticipate sort of that changing significantly overnight. But as I say, as we look forward and are bringing the 2 businesses together, I think we'll continue to seek opportunities to look for opportunity in that space. But I wouldn't -- I would expect that their level of debt performance will continue pretty much in line with what we've seen previously. In terms of the PPAs and accounting, so obviously, as you'd imagine, at this stage of a big public deal with the diligence that's normal. Of course, we've done -- we've looked at a high level impact of purchase price accounting. And also as you -- the other part of your question around their existing accounting policies, and we've taken that into account in our comments this morning around expectations around accretion. As you can imagine, as we go through the actual completion of the acquisition, a huge amount of more work will take place. But I think where we are today, we're comfortable that we've taken those impacts into account, but obviously, much more detail to come down the track.

Thanks, James. Sam from UBS. I think you've got your hand up.

Yes, I have. I'm kind of down to the end of the line, I think. But I've got a lot of small questions, if you don't mind me running through a few. They are probably very quick answers. On your Page 16 in the slides, which is very helpful, I just wondered, first, if you could give us EBITDA for the 3 pieces as well? Shall I go one at a time, and let you answer?

Why don't you run through your questions, Sam, and then we'll pick them up?

Okay. That's the first one. Secondly, on the credit rating, I just wanted to check I understood what you said on this because just a couple of weeks ago, you're talking about sort of warning on a downgrade. And I think I'm hearing you saying that you're sort of withdrawing that warning now. But I just want to make sure I probably understood what you said on the group credit rating? And I guess, also just to check out, is that based on your view or have the rating agencies been pressed over in some way and been able to see this already and give you any reassurance? And that's the second one. Third one is, can you just, again -- sorry if you said this, somehow, but I think I missed it. Have you said what is the allowed ROE that you're assuming in the central case on WPD? And it would also be helpful if you could just remind us what's the latest [indiscernible] of the ROE and the latest Rhode Island rate case as well? And then last one is on the growth -- you talked a little about the growth. And I guess that I understand why the electric side is kind of interesting and exciting for growth. I think you're also not changing your 5% to 7% outlook. So then you said you might be able to do 5% to 7% for longer than before. But can you just help us understand so when would that have run out without this transaction? And so when does the benefit of this transaction start to be felt on the growth rate? I think that's the end of my list.

Okay. Thanks, Sam. Let me pick up on the second 2, and then I'll ask Andy to pick up on the first. So in terms of the assumption of allowed returns, so we -- so as I said earlier, what we've done is taken, I think, a conservative and sensible view about what the allowed returns will be. Clearly, that's been informed by our experiences in RIIO-T1, the thoughts that we have as part of the CMA referral and the decision that came out yesterday as well as our understanding of the relative risk between distribution and transmission. So we've taken a long-term and sensible and prudent view of that base return and similarly on outperformance. In terms of Rhode Island, the allowed returns are around about 9.3%. So that's the number for that. In terms of growth, it's probably worth just sort of reiterating the point that I made earlier. So one of the reasons that we do see this as a strategic pivot is that as we look at the energy transition and in particular, electricity, whichever scenario or study you see, the expectation is we're going to see significant growth in demand. So I referenced a few in my remarks, in terms of the Climate Change Committee, which potentially between 70% and 100%. I think the National Infrastructure Commission has talked about doubling of demand by 2050. And at the same time, that's going to require significant investment in electricity distribution both to support distributed generation, the rollout of EVs as well as potentially a role -- an increased role for electric in heating as well. So we see it as a very much not just the next few years for a multi-decade need for investment to support the energy transition that's going on. In terms of our current guidance, we talk about 5% to 7%. And my key message today is we expect that growth to be stronger, more certain and more sustainable going forward as we move forward to this transaction. Andy?

Yes. Thanks. So if I pick up, I think, the first 2, so on the EBITDA question, Sam. So the WPD EBITDA was actually shown on slide 7 of the deck, so it was around GBP 1.2 billion for FY '20. Well -- I'll get the team to come back to you off-line on the other EBITDA numbers for the other businesses involved. In terms of the credit rating, just to be clear, so as you say, so just over 2 weeks ago, when we announced RIO decision and the associated financing strategy that we were adopting. I think we said back then we were anticipating action and we did see that action from all 3 agencies effectively moving us down a notch to, as we said this morning, so the Baa2 and the BBB flat to the holdco. So what we've said this morning is effectively this series of transactions and planned transactions ensure that the metrics will remain in line with those new thresholds. So we're not expecting any further change. But just to be clear, the agencies have moved since our announcement just a couple of weeks ago.

[ Lora, ] I can see you've got your hand up.

Just on -- with regards to the gas transmission assets sale. Can you give any clarity on whether the debt there will travel to the new owner? Or how will that be treated?

Thanks, [ Lora. ] I'll let Andy pick that one up.

Yes. Thanks. So yes, so the -- as we said this morning, the intent would be that we would look to sell our majority stake in the National Grid Gas plc business and which -- and the debt is, therefore, the operating company debt is held within that entity. So absolutely, we'd anticipate that the opco debt would be included in that transaction.

Ahmed from Jefferies, I think you've got your hand up.

Yes. A few ones from my side. I just wanted to ask, if you could talk a little bit about the impact of the transaction on the cash and the free cash flow? Do you see the accretion there to be similar to how you sort of highlighted the accretion on the EPS side? And then if that -- if you could just take that a little bit further and talk a little bit more specific on what does it mean for the key credit metrics? Any granularity on how accretive or not they are on at this transaction is would be very helpful? And secondly, just to check, I mean, is there -- you haven't talked about any sort of CapEx and cost synergies within the U.K. as a result of this transaction? How do you see that? I just also wanted to confirm, I think you made a comment earlier in response to one of the questions that EV to RAV ratio for the U.S. disposal is 2x. Those are my questions.

Okay. Thanks, Ahmed. Let me just pick up on the CapEx question, and then I'll let Andy pick up on the accretion and credit metrics. So in terms of CapEx, if you look at over ED1 then WPD has had significant investment what we're expecting to see based on their draft business plan. Obviously, that will evolve a bit over the next 12 months as they go through the process with Ofgem is in the draft business, probably, we're talking about a 20% increase. So that's around about GBP 1 billion per annum of CapEx. So from a group perspective, currently, we're spending around about GBP 5 billion a year. So that would increase to -- somewhat higher to about GBP 6 billion a year depending on where they get to with their business plan and the process with Ofgem. So quite a significant step-up. Andy?

Yes. So thanks. So I mean, on cash flows, in terms of underlying operating cash flow, we would anticipate that, that would reflect the earnings accretion that we've talked about. But as we said, a company with that is potentially high levels of CapEx. And therefore, as we said this morning, we would expect our overall credit metrics, the RCF on the Moody's side and the FFO metrics on S&P, which are 2 key ones, to continue to track in line with the new bands. So not a significant movement from where we were expecting to be but stay comfortably within the 7% to 9% and the 10% to 13%, which are the new bands that we're at. In terms of the Rhode Island figures, yes, just to be clear, and it's in the statement we put out this morning. So the rate base is $2.6 billion combined T&D. The $3.8 billion of equity value plus there are around $1.4 billion of associated debt gives you the $5.2 billion of total EV.

Thank you, Ahmed. Javier from JPMorgan. I think you've got your hand up.

Yes, I have one question is on the debt of WPD. Do you expect to keep leverage in terms of net debt to RAV at around 75%? Or do you plan to inject some equity in order to bring the business in line with the notional gearing of Ofgem?

Yes. So again, I think I heard most of it, Javier. I think you were saying that WPD today is slightly -- is geared slightly higher than the notional gearing. I think, as I said earlier, over time, obviously, we will bring that overall debt book into our own. As you know, our approach is to run our operating companies, broadly in line with notional regulated gearing, both U.K. and U.S. But obviously then have additional holdco debt. So the exact mix of the book going forward we'll work through. But that philosophy, we're not expecting that to change. But as I said in answer to one of the earlier questions, equally, we're not planning sort of any immediate debt management or liability management to bring debt levels down. So that will flow through into our overall leverage on the completion of the acquisition.

Thanks, Javier. John, Royal Bank Canada. I think you've got your hand up.

Yes. Just one quick follow-up very quick. The bridge financing, can you give some indication on the likely cost of that versus your existing debt?

Yes. So as you can imagine, John, bridge financing is always slightly higher than normal sort of existing debt. But as you -- given the nature of these transactions, there need to be funds for that and effectively ahead of completion, that's why we've taken that route. And effectively, the pricing will also take into account the takeout route, which, in this case, as we said this morning, is intended to be predominantly through the proceeds from Rhode Island and then from gas transmission. So you would expect it to be slightly higher, but obviously, it's the short-term instrument, which will be repaid within sort of 12 to 15 months.

Thanks, John. Deepa, I think you've got your hand up as well, again.

John, I had 2 follow-up questions for you. One is just looking at the valuation, so even if I take into account that you have got a fantastic valuation on the U.S., it still leaves a rather chunky premium depending on whether you take this year or next year's wrap, but somewhere between 60% to -- 50% to 60% net . And then when I put that in the context of your current valuation where barely you're getting any premium at all to your UK assets, that seems like a very big disconnect. So is the market undervaluing your U.K. assets? Or are the WPD assets so attractive? I mean, that was my question one. And I suppose the other pivot you could have done is go more towards the U.S. I mean, certainly, the U.S. 9% ROE looks very attractive in the context of the U.K.'s returns, I mean, even if the CMA pushes it up. So it was a bit surprising that you've pivoted back a little bit more towards the U.K. So perhaps that U.K., U.S. political risk and return balance, maybe you could explain your logic.

Yes. Thanks, Deepa. Let me -- I'm going to pick up on the second question, and I'll ask Andy pick up on the first. So in terms of the announcements that made we've today, the strategic pivot that we're making is to increase our exposure to electricity to moving from 60% to 70%. We did see a unique opportunity with WPD to be able to enter electricity distribution at scale. And in doing that, we believe it will deliver stronger growth, more certain growth for longer going forward, given, as I said, we see very strong demand growth in electricity. In terms of the overall shape of the group, it leaves us, I think, in a very nice position in that we are 70% electricity, 30% gas, which I think aligns with how we see the energy transition playing out. And at the same time, it also leaves us very nicely balanced in terms of geographic and regulatory diversity, which, as you know, we think creates real value. So we are able to share best practice and learn from regulatory agreements in the U.K. and in the U.S. and as a result of these transactions, that leaves us in a position where we're 40% networks, U.S., 50% U.K. So overall, I think a strategic pivot that increases our exposure to electricity strengthens our growth underlying, which underpins the dividend at a time when there is a unique opportunity to enter electricity distribution at scale, which doesn't happen very often, is why we've made the announcement on the transactions today. Andy, do you want to pick up on the...

Yes. So Deepa, again, I think it sort of links back to some of the comments we've made already this morning, which is unfortunately, our businesses do get looked at through a RAV multiple lens. But I think sometimes those don't represent the fundamentals of the businesses that we're running. And in this case, we think that's very true of WPD in terms of the fair value that we believe we're paying for it. Your point about that being reflected in the share price. You probably heard us say before, maybe frustrated that the market isn't recognizing those fundamental values at the moment. And I think you're in consensus in terms of the sell-side would recognize that a slightly higher multiple on U.K. assets may be appropriate. So I think -- I acknowledge the point, but we believe that the fundamental values, particularly with the 3 transactions taken together, mean that we're confident that the value we're paying is an appropriate one.

Thanks, Deepa.

One kind of follow-up. Can I ask a follow-up just on the percentages that you give, 50%, 40%, et cetera. Is that a rate based? Is that earnings growth? And what percentage are you assuming that gas transmission is sold out?

Yes. So it's on an asset base, regulated asset base, and it's an assumption of 51% sale of gas transmission. So just at the minimum of the majority stake, Deepa. I think there's -- Dominic, I think you've got your hand up again. So do you want to ask any question?

Yes. 2 quite quick ones. Firstly, in the GBP 6.4 billion of debt that's coming with WPD. Are there any derivative funnies in that, like interest rate out the money that you've included? Or is that a sort of like a sort of underlying debt number? And secondly, you piqued my interest a bit about the restructuring of the RAV businesses when you combine transmission with distribution. Do you think that you could end up with a reorganization of, say, your high-voltage electric distribution and put that into, say, your transmission RAV by the 130-kilovolt lines and have a look at the world in quite a different way? Or do you think there has to be regulatory ring fence as is -- as we see today in perpetuity?

Do you want to take the debt one?

Yes. Dominic, on the debt point, yes, they will -- they have, as you imagine, sort of index-linked debt within their portfolio as well as they do take other sort of derivative items involved. And obviously, we're working through that in terms of the fair value exercise when we work through that. But as I said, we're -- there's nothing that we're significantly aware of. But looking back to the earlier questions as well around their performance against cost of debt allowance. And I think that we do see more opportunity in the long-term as we work through that debt book.

Okay. So the GBP 6.4 billion, there is like GBP 400 million of derivative that you've added to that. That's what I'm just trying to get clarity on.

So the GBP 6.4 billion, no, that's effectively their existing book before we've -- that's before any action or involvement that we might have.

Dominic, the line is not great. I think I picked up the sort of core of your question, which is around sort of restructuring. My expectation is very much like gas distribution and gas transmission, which is the -- certainly current in the current regulatory framework. And as I said, going forward, certainly over the next few years, then the WPD business will be operated as a distribution business distinct from transmission. However, as I've said, as we think increasingly as an industry about whole system solutions, we do think there are opportunities to actually bring the complementary skills together to develop propositions for customers, which are going to be more effective. So for example, the opportunity to look at where to connect generation whether it's large or small, things like EVs, for example. So as you know, National Grid has been spending a lot of time looking at how to build an ultrafast charging network at the sort of macro transmission level. But at the same time, distribution companies are looking to increase the number of charging points to support the rollout of EVs. Being able to look at those things more holistically, I think, will create opportunities. Whether there'll be more structural changes in the industry as we move forward over the -- as part of the energy transition, time will tell, but we've not built any of that into our assessment of fair value today. So this is, I think -- Mark, I think this is the last question. So do you want to ask your question?

Yes. So I guess a couple of things. Firstly, Andy, on gas transmission, can we expect you to look into putting a midco structure and potentially doing an opportunistic refinancing in the next year or so to try and maximize the proceeds from any sale? And secondly, sort of holistically, if I think about statements you made a couple of weeks ago on laying out a new dividend policy linked to CPIH. Is it fair to say that you firmly believe that everything you've announced today works towards making that dividend more sustainable and being able to grow it for a much, much longer period of time?

Thanks, Mark. On the first, the debt restructuring point, I guess you're referring back to what we did with the gas distribution sale a few years ago, where effectively, as part of that process, we identified the -- a number of the bidders were interested in that type of structure, and it worked for them, and we were able to put it in place for the buyers. It's very early days, as we've said this morning. Clearly, those options are available. But again, it will emerge as we go through the process, and we understand what's the process looking like, what the buyer or potential buyers are interested in. But certainly, those options are available to us if we go down that route. In terms of the dividend, I mean, you're absolutely right. So we announced the new policy 2 to 3 weeks ago in line with the existing business and the sequence of transactions that we've announced this morning, contribute further underpin to that both today in terms of the accretion. But also, as John said a number of times, the more transparent and increasing certainty of the growth that we now see going forward, we believe, further underpins the confidence around that dividend policy and for longer as well, as you say. So absolutely.

Okay. Thank you, Mark. So thank you for the questions. Let me just finish by just summarizing. So today, we strongly believe that we've announced a significant strategic pivot, which not only is going to allow us to play a much larger role in the U.K. energy transition, but as you just heard from Andy, it's going to support our investor proposition going forward with more sustainable and longer-term growth, which, of course, will underpin the dividend. So again, thank you for your questions, and look forward to seeing you all soon.

Ladies and gentlemen, this concludes today's conference call. Thank you for joining. You may now disconnect your lines.