National Grid plc (NG) Earnings Call Transcript & Summary

Good afternoon, and thank you for joining us. Due to COVID-19 and the restrictions in place on large gatherings, this year's Annual General Meeting took place prior to this webcast as a closed meeting. It was attended by myself as Chair; John Pettigrew, Chief Executive Officer; and Alison Kay, Group General Counsel and Company Secretary. Although shareholders were unable to attend in person, they were, of course, still able to exercise their right to vote by voting online or submitting a proxy voting card ahead of the meeting. Whilst we are disappointed not to be able to offer you, as shareholders, the usual Annual General Meeting this year, the Board recognizes the ongoing importance of communication with shareholders, and we are pleased to be able to hold this webcast for shareholders. It's great to see so many people registered to view this webcast today, and I hope that it will be insightful and also provide an opportunity to participate for those shareholders who are not usually able to attend the Annual General Meeting in person. So today, I'm joined in person by John Pettigrew, Chief Executive Officer; and Alison Kay, Group General Counsel and Company Secretary. All other Board members have joined the meeting remotely. I would particularly like to welcome Liz Hewitt, who joined the Board on the 1st of January 2020 to her first shareholder event, and I'm pleased to report that the resolution to appoint Liz as a Director was passed at the Annual General Meeting. Following business reviews from myself and John, there will be a live question-and-answer session where we will endeavor to answer as many questions as possible that have already been submitted through National Grid's website. And for anyone who still wishes to ask a question, you are able to do so until 3:00 p.m. by submitting your question on the AGM section of our website. We will make answers to all questions available on the company website following the close of this webcast. First, let me highlight the outcome of the voting on the AGM resolutions. I'm pleased to report that on the basis of the proxy votes cast before the AGM and the votes cast at the meeting on behalf of shareholders, all resolutions as set out in the Notice of Meeting have been passed. Details of the total votes on each resolution will be announced to the London Stock Exchange and posted on our website later today. So let me start my business review with COVID-19. As we all continue to face the unprecedented challenge of the pandemic around the world, National Grid remains committed to doing the right thing for our employees, our customers, our communities and our suppliers. Our priority throughout this period has been to keep our key workers safe. We have well-developed procedures in place to manage the effect of a pandemic, and we swiftly and successfully implemented our business continuity plans, which allowed us to maintain safe working environments for our workforce. John will talk about this in more detail, but I would like to take a moment to thank all our employees for their dedication and resilience, which has enabled us to keep our networks running and the energy flowing to hospitals, care homes, businesses and homes throughout this challenging period. I'm particularly grateful to the 9,500 or so employees across the U.K. and the U.S. who were working on the frontline during lockdown, carrying out critical maintenance, repair, construction and control center activities. In addition, in mid-April, the extraordinary resilience of our U.S. employees enable power to be quickly restored to over 200,000 customers across New York, Rhode Island and Massachusetts following extensive storm damage, despite the additional constraints arising from COVID-19. I will now talk about some of the issues considered by the Board over the last year. We spent a lot of time considering our response to the labor party's proposal to nationalize most of National Grid's U.K. asset and implemented some measures to strengthen our ability to secure a fair price for these assets should the labor party have won the general election. Although the conservative party secured a majority of this election, we note that the new labor leader pledged to support for common ownership in a range of sectors, including energy, in his leadership campaign, so it is a topic we will continue to monitor. A key area of focus for the Board has, of course, been delivering a clean energy transition. National Grid committed to reduce its own emissions to net zero by 2050, and we also saw significant legislative action towards a net zero ambition. The U.K. and states of New York and Massachusetts each established legally binding targets to achieve net zero emissions by 2050, while Rhode Island maintained its legally binding target of 80% emission reductions by 2050. We welcome this progress as it is clear that decarbonization and the pathway to reach net zero will remain one of the major long-term issues facing our economies. While the pathway to decarbonization of electricity has been identified, there is no obvious solution for the decarbonization of heat. We continue to work with governments and others in the industry to identify solutions, but it is clear that the right regulatory and policy frameworks will be critical to enable a fair and affordable transition to a clean energy future. Two other significant events happened within the year, which triggered a number of external reviews. Following the power outage in the U.K. on the 9th of August 2019, the Board was pleased that the subsequent internal and external reviews confirmed our systems operated correctly and identified the failure of certain generators as the cause. The external reviews highlighted a number of recommendations, which are in the process of being implemented to improve the resilience of the overall electricity infrastructure for the future. The Board also believes it is important that the current external review of the structure of the electricity systems operator results in a stable outcome, which best enables the U.K. to meet its 2050 net zero commitment. In our U.S. business, I was deeply concerned that the actions taken to implement a moratorium on new gas connections in Downstate New York resulted in strong public criticism of the company by Governor Cuomo, significant reputational damage and difficulties for customers. Ultimately, we entered into a settlement with the New York Public Services Commission. The Board commissioned 2 external reviews, which have provided valuable insights into how our U.S. business got into this situation, and a number of recommendations, which are being implemented at pace by our new President of the U.S. business. As we continue working with the Public Services Commission to find a long-term solution, we will ensure our approach to meeting increasing demand for energy in New York state takes account of all key stakeholders. We will ensure our approach to meeting increasing demand for energy in New York State, takes account of all key stakeholders. Moving on to regulatory issues, we continue to have an open dialogue with our regulators. In the U.K., we submitted our final business plans for RIIO-T2 in December, following extensive stakeholder engagement. We were extremely disappointed with the draft determinations published by Ofgem earlier this month, which we believe undermines the process that Ofgem itself established. Ofgem's proposal jeopardizes the delivery of the energy transition and green recovery as well as putting the resilience and reliability of networks at risk. It also proposes significant reductions to our current levels of spend on health and safety and on operational training. We will be pressing Ofgem to deliver a regulatory framework that both incentivizes investment and protects consumers when it publishes its final determination in December 2020. In the U.S., we are resuming settlement negotiations in the KEDNY/ KEDLI rate cases and aim to agree on a multiyear rate plan that mitigates bill impacts for our customers, while allowing us to maintain safe and reliable service, advance our clean energy goals and earn a reasonable return. If we are unable to reach a negotiated settlement, the rate cases will continue to a litigated outcome, which is not unusual, at which time we would then plan to file a new multiyear rate case proposal. In light of the financial hardships that our customers have experienced from the COVID-19 pandemic, Niagara Mohawk Power Corporation delayed the implementation of certain previously approved rate increases. Niagara Mohawk also delayed filing of a rate case this spring and are exploring options, including an extension of the current rate plan, or a rate case filing later this summer. And finally, I'd like to highlight some people changes. Our U.S. Executive Director, Dean Seavers, stood down from the Board for personal reasons in November 2019. The Board appointed Badar Khan, who was already a member of the Executive Committee, as interim President of the U.S. business. Following a thorough process to identify a permanent successor, which included both internal and external candidates, I'm delighted that Badar was confirmed as President of the U.S. business in April 2020. Now I'd like to take a look forward. The tragic death of George Floyd and the subsequent widespread expressions of public support for the Black Lives Matter movement have reinforced the right of everyone to equal opportunities, to have their voice heard and to feel safe as they go about their daily life. These recent events highlight that companies have a vital role to play in addressing inequality and injustice wherever we see it, encouraging our employees to speak up, challenge and act where something does not feel right. We will not condone intolerance of any kind at National Grid. The Board hosted several meetings throughout the year with a cross-section of employees to ensure the voice of the employee was heard by the Board, and we are pleased with the effectiveness of these sessions, but we know that there is more we can do, and it's something that our teams across National Grid will be working on throughout the year. During the year, National Grid evolved its vision to reflect our long-held belief that a responsible business needs to stand for something beyond profit. We have a responsibility to demonstrate our commitment to society more broadly, and that's why our vision is to be at the heart of a clean, fair and affordable energy future, ensuring everyone benefits from the energy transition, that builds are not a burden for individuals or families and that no one gets left behind. Our purpose remains to bring energy to life, providing the heat, light and power people and businesses rely on and supporting local communities to prosper. John will go into more detail on how this vision will drive our priorities and activity for this year, so let me now hand over to him. John?

Thank you, Sir Peter, and good afternoon, everyone. 2019, '20 has been an extremely busy year for National Grid, and I'm pleased with the progress that we've made, despite some significant challenges. As Sir Peter touched on, whilst dealing with the disruption the COVID is causing, National Grid's greatest priority has been our people as well as the safety and well-being of our customers and communities. So let me start by talking you through how we've been reacting to COVID and how well our business continues to deliver, despite this major new challenge. At the end of March, as the crisis unfolded, we successfully implemented our business continuity plans, and I'm proud to say that we took action to change working practices quickly and safely, including risk assessing all our operational and construction projects, issuing new working guidance to our field force and collaborating across the industry, sharing best practices and finding innovative new ways of working. And despite these changes, we continue to deliver strong operational performance. For example, throughout the crisis, our dedicated control room staff have been working tirelessly, sequestered away from their families to ensure they're protected and to maintain our real-time operational systems. Turning now to our customers. Our focus has been to help those who may be in financial difficulty. In the U.S., recognizing the economic environment, we haven't pursued debt collections or disconnected customers, and we've also deferred proposed rate increases in New York. In the U.K., we've continued to work with other network companies and Ofgem, deferring network charges and balancing costs to help suppliers during the crisis. In addition, we've been doing a huge amount to support our communities, including financial donations to help the most vulnerable, employees volunteering to support local charities as well as direct actions taken by our businesses. For example, our gas teams in the U.S. upgraded supplies in record time to help turn a college gym into a 1,000-bed hospital on Long Island. So as you can see, we've adapted extremely well to the challenges of COVID, and I'm proud of how our employees have responded. Of course, as well as ensuring the support of our staff, customers and communities, we also need to manage the financial impact of COVID, which we explained when we announced our results last month. In particular, we said we expect to see a GBP 400 million impact on underlying operating profit in 2021, primarily driven by higher costs and lower revenues in the U.S. Although with our regulatory mechanisms and precedents, we do expect to recover these costs over the medium term. So whilst we see a financial impact on the business in the near term, we don't expect to see significant long-term economic impact. Having provided that context, I'd like to give you a broader view of our financial performance. Our operating profit of GBP 3.5 billion was broadly in line with the prior year. This reflects the expected increase in revenues from new rate cases in the U.S. and lower operating costs as our efficiency programs have started to deliver, but offset by the impact of additional provision for U.S. bad debt. Underpinning this performance was a record year of investment in critical infrastructure, with CapEx up 19% to GBP 5.4 billion. This was driven predominantly by increased spend in our U.K. electricity transmission business, higher U.S. CapEx, much of it mandated on safety spend, and higher CapEx in National Grid ventures from continued interconnector investment as well as the acquisition of Geronimo, and this investment delivered organic asset growth of 9%. We've achieved a group return on equity of 11.7%, in line with the prior year, delivering ongoing sustainable returns for our shareholders. And in accordance with our policy, the Board proposed a final dividend of 32p per share. I'll now turn to our progress on our operational priorities. Starting with the U.S., I'm delighted that the Board confirmed Badar Khan as the new President of our US business. Badar has been with the group for 3 years and takes over our business that has seen strong operational performance. During the year, we achieved a return on equity of 9.3%, an increase of 50 basis points, representing 99% of our load return. We also achieved strong rate base growth of 12%, up from 9.2% last year, as we invested over $4 billion in critical infrastructure. In line with the Chairman's comments earlier, addressing the challenges with gas constraints in Downstate New York has been a major priority of mine. Since the lifting of the moratorium in November, we've had a series of public and virtual meetings that were attended by over 800 people and have filed 2 reports with the regulator, and we're now working proactively with our external stakeholders and customers to progress a longer-term solution. With regards to regulation, in October, we agreed new rates for Massachusetts Electric with a 5-year agreement that gives us longer-term visibility for our investment and more incentives to innovate and create value for our customers. And we've made good progress on our cost-efficiency program, where we've met our target to deliver $30 million of savings this year and remain on course to deliver $50 million in 2021. Turning now to the U.K. Operationally, both our electricity and gas transmission businesses continued to deliver good levels of performance. During the year, we achieved a return on equity of 12.4%, and we continued our capital program with investment of GBP 1.3 billion, which was up 5% on the prior year, giving asset growth of 3.8%. This takes our total investment in RIIO-1 to over GBP 11 billion, delivering world-class reliability, enabling the connection of 4.6 gigawatts of renewable energy and generating over GBP 700 million of savings for customers. And we've made progress across a number of our large projects, including completing the Feeder 9 tunnel under the Humber, our largest gas project in a decade, and driving forward the second phase of our London Power Tunnels project. As Sir Peter mentioned, on the 9th of August in the U.K., we experienced a rare power outage event that caused huge disruption to many people, and we're pleased that the reports into the incident found no link between National Grid's actions and the power cut. Moving now to National Grid Ventures. It's been another year of significant progress. Investment was up substantially to GBP 815 million, mainly driven by higher interconnector spend, together with our investment in Geronimo. Progress on our new interconnectors remains on track. On IFA2, the subsea cable connections we completed and successfully tested and commissioning the link is on course for the end of this year. On our North Sea Link and Viking Link interconnectors, we've managed the disruption caused by COVID, and commissioning remains on track. And last July, we completed the acquisition of Geronimo Energy and have since announced the start of commercial operations of our 200-megawatt wind farm in South Dakota. So in summary, I'm pleased to report that '19/'20 was a strong year for National Grid, and good strategic progress was made despite the challenging backdrop of the year-end. So let me now turn to our longer-term objectives and priorities for the year ahead. We believe that National Grid has a critical role to play in enabling the energy transition. This is why our vision is to be at the heart of a clean, fair and affordable energy future. Supporting that vision, we have 4 strategic priorities: to enable the energy transition for all; to deliver for our customers efficiently; to grow our organizational capabilities; and to empower our people for great performance. And these strategic priorities underpin our focus for the year. In the U.S., we have 2 focus areas: to ensure we have the right rate plans in place for a post-COVID world; and the efficient delivery of our significant investment program. In the U.K., our focus areas are to agree the RIIO-T2 regulatory framework and to drive innovation and efficiencies for our customers. As Peter has made clear, we were extremely disappointed with Ofgem's draft determination published earlier this month. A focus on mine over the coming months will be to do all that we can to ensure that the final determination in December provides a regulatory framework to both incentivizes investment and protects consumers. And in our National Grid Ventures business, we'll continue to focus on our interconnector program and delivering our Geronimo investment pipeline. And as I said, our clean energy ambition underpins all our activity. And whilst like all companies, where we're working through the ongoing impacts of COVID, we need to ensure we have one eye on the future, and that's precisely why we recently announced that we're strengthening the commitment we made in November, to reach net zero for our own emissions by 2050, while setting ourselves a more ambitious interim target. That target is to achieve 80% reduction on our 1990 baseline by 2030 and 90% reduction by 2040. To support these ambitions, in the U.K., we've committed to replace over 50% of our internal fleet with zero carbon vehicles by 2026, and we're continuing to develop alternatives for the insulating gas, SF6. And in the U.S., we've also made commitments to decarbonize our internal fleet, and we continue to reduce emissions by replacing leak-prone pipes. And whilst we're working to achieve our own internal targets, perhaps more importantly, we're also playing a key role in enabling the wider transition to a low-carbon future. To give you just 2 examples, on power in the U.K., we're working to enable the government's target of 40 gigawatts of offshore wind by 2030, with our engineers working hard on developing options to unlock this increased offshore capacity. And in the U.S. on transport, we're working across all our jurisdictions to deliver a number of initiatives around electric vehicles, including customized support for fleet operators and a number of pilot projects, such as a partnership to deploy electric school buses. And these are just a couple of examples of the many ways that we're helping to drive the clean energy transition. So in summary, National Grid has had a strong year, and I'm pleased with the progress that we've made across all our businesses. I believe our disciplined approach, coupled with our focus on delivering efficiently for our customers, will enable us to continue to create long-term value for our shareholders. Thank you very much for your attention, ladies and gentlemen. I'll now hand you back to Sir Peter.

Thank you, John. Now we'll move on to the question-and-answer part of the meeting, which Alison Kay will be facilitating. Many thanks to those of you who've already submitted your questions on the website. We will be responding to a combination of presubmitted and live questions today and will cover as many as we can in the time available. If we don't have the opportunity to answer all the questions that have been submitted, we will publish the answers to any outstanding questions on our website. Can I remind you that you can continue to submit your questions through our website until 3 p.m. And now for the first question, please, Alison.

Thank you, Chairman. We have a question from [ Mrs. Patricia Berman ] on overboarding. How can executive members and nonexecutive Board members make decisions that have far-reaching consequences when they hold executive positions with other companies, trust and recognized charities? Surely, they should be devoting their time to National Grid who are their employers. If they choose to be involved with charities, et cetera, it should be done in their own time.

Well, thank you very much, [ Mrs. Berman], for that question. I think at the heart of this is to go about should both executives and nonexecutives effectively be full time in the company. At the heart of the U.K. government system is the concept of a unitary Board, comprising both independent non-executive Directors and then the executive Directors. The view -- and it's not just our view. It's clearly the view of our regulator, the financial reporting council is that in order to be independent, nonexecutives should not be full time in the company because in doing that, they would increasingly lose their independence. Independence is the best way of ensuring that the executive Directors and the wider management are subject to challenge -- constructive challenge by the nonexecutive Directors in reaching the key decisions that a Board has to make. With nonexecutives then being able to participate as well in the Boards of other organizations, both chargeable and for profit, they also continue to get a wide range of perspectives, which can be brought into the boardroom for the benefit of the National Grid Board. Similarly, we also encourage our executive Directors to hold one non-executive position in another company in order to broaden their own set of experiences and perspectives. To give you one example of how that has been very, very beneficial, during the period of lockdown, when the Board was meeting much more frequently than scheduled and reviewing with management, the actions the company was taking to deal with the many challenges arising from the pandemic and from the implications of lockdown, both the nonexecutives and the executives, through their expertise from other companies, were able to bring to the discussion what they were seeing happening in other companies as well as within National Grid, and that helped us refine our overall response to the pandemic, which, as you heard from John, we consider to be extremely successful. So I hope, [ Mrs. Berman ], that it helps explain to you why we believe it is to the -- your benefit as a shareholder that both executives and nonexecutives continue to hold roles inside and outside the company. Thank you.

Thank you, Chairman. A question now from [ Mr. John Farmer ] on New York gas supply. In the Chairman's statement in the annual report, you referenced criticism of National Grid, which was also in a Times article about the New York Governor alleging failure to provide an adequate and reliable service. What happened and why? How is it resolved? And what is being done to avoid recurrence?

So thank you for that question, [ Mr. Farmer ]. As you -- let me say, in the business review, this was something that caused me a considerable distress at what happened, and we commissioned 2 external reviews, which have given us very good insight as to how the U.S. business got into the situation in the first place and triggered also a number of recommendations, which we are pursuing at pace. And I'd like to hand over to John now to give you a little bit more color on what we've learned from that and what some of the recommendations that we are now implementing. John?

Thank you, Chairman. So perhaps I'll start by just painting a picture of what actually happened. So in Downstate New York, we've actually been seeing an increasing gas demand for a number of years. And actually, National Grid has had a program of work that we've been delivering over that period. The last piece of that program was the Northeast Supply Enhancement project, which was an additional transmission pipeline going into Downstate New York to support that demand. When we saw in the autumn last year that, that pipeline, known as NESE, was not going to get its permit, we were in a difficult position of seeing increasing demand of gas and more people wanting to connect to our network, but not having sufficient capacity to be able to meet that demand. And of course, that's a safety issue. And therefore, we took the very difficult decision to enter into a moratorium to stop people connecting to the network. Obviously, that created a huge amount of frustration. And ultimately, we worked with the Governor's office and with the regulator, the PSC, to find a short-term solution. But we also agreed that over the course of the winter, we would do a detailed study to find a long-term solution for New York. That's exactly what we've done. We've engaged with over 800 stakeholders as well as the PSC and the Governor's Office, and we now have a long-term solution that we're taking forward. In terms of lessons learned, I think a couple that I would highlight. One is, clearly, we need to make sure that we engage with our customers and give significant notice when you have these types of impacts, and that's something that we've reflected on very significantly. The other is, as we see the energy transitioning unfold, then we need to think as engineers about what are all the different types of options as well as the traditional options that perhaps we've used in the past, and those are the types of things that are now being undertaken by our US business.

Thank you, John. Alison?

A question from [ Mr. Ian Aiston ] on workforce inclusion. On Page 53 of the annual report, you talk a lot about promoting inclusivity amongst the workforce, but I see no mention of neurodiversity. Please, can I ask the Board what the company has done and plans to do to support existing autistic staff and to make it easier for autistic candidates to be recruited?

Thank you very much, [ Mr. Aiston ], for that important question. In a minute, I'm going to ask John to deal with the -- how the company is responding to the specific point you raised on neurodiversity. But before I do that, I'd just like to set the context for saying that National Grid, I think, has a long and very creditable record of seeking to improve the employability and the employment prospects of disadvantaged members of society. Some of you will recollect that over a decade ago, National Grid was the leader in setting up the Young Offenders Programme to help identify young offenders in institutions, who it was possible to effectively get them back on to the right track, off the wrong tracks for their lives and help get them meaningful employment, both within our own gas business and with other employers as well. And in other areas, we also, I think, have a great track record in finding ways in which we can offer employment opportunities and support people who suffer disabilities of one kind or another and help them get into the labor market. So having set that context, John, would you like to pick up the specific point about neurodiversity?

Thanks, Chairman. And just to add, you would have seen in our annual report, the National Grid is absolutely committed to all forms of diversity. And we've set ourselves as an organization a very simple goal that we want our workforce to reflect the communities in which we operate. With regards to neurodiversity, I'm actually very proud of the progress that we've been making in both the U.K. and in the U.S. We have employee resource groups that provide support and advice to our disabled colleagues and their carers. I'm particularly proud of our EmployABILITY program. This is a program that National Grid established itself, working with local schools to provide young adults who've got learning difficulties, including autism, with the opportunity to have work experience and develop skills, so they can enter into the full-time labor market. And actually, last October, we celebrated the first 100 people going through that program. And then finally, we partner with organizations such as the business -- the Business Disability Forum. And of course, that gives us an opportunity to share best practice and learn what's going on in other organizations. So I think we made good progress. Of course, there's still much to do.

Thank you, John. And I'd just like to add a bit more color. So about a year ago, I had the privilege of coming to Solihull where we are today. And during the course of my visit, I had the opportunity to meet some of the young people that have come from one of the schools for autistic children who were going through this program. And it was very, very heartening and uplifting to be able to hear from them directly about how we were giving them the skills and the opportunities that would help their employability in order to have much better prospects than they might otherwise have done without this intervention by National Grid. Alison?

Thank you, Chairman. Another question from Mr. Farmer, this time, on customer satisfaction rates. In the annual report, Chief Executive Statement, it reports customer satisfaction targets being missed. Can you explain why and any remedial action you have taken?

John, would you like to address that, please?

Thank you, Chairman. So you heard the Chairman earlier on say that I am incredibly proud, actually, of the way that National Grid has responded to COVID. One of the reasons for that is actually the customer satisfaction response surveys that we've done since COVID was -- has been happening have shown some record levels of performance from the team. So I just wanted to mention that to say we've got a real focus on customers as we go through the COVID crisis. With regards to the specifics of your question in terms of performance in '19/'20, again, our electricity transmission and gas transmission businesses in the U.K. achieved their targets, and we saw significant improvement in their customer satisfaction scores. With regards to the U.S. on metering and our electricity system operator businesses, we saw improvements. But actually, they didn't hit the stretching targets that we've set. Some of the things that we need to focus on going forward, particularly in our U.S. and metering business, is our response time. So customers are expecting more to us every single year and, therefore, we have to respond quicker and quicker to their needs. And with regards to the electricity system operator, as you know, this is the first year that we've had legal separation, so the electricity system operator is setting itself up as its own independent business and, therefore, is establishing new relationships with customers. And it needs to provide information that's specific to its customers going forward, and that's a real focus as we move into 2021.

Thank you, John.

A question from [ Mr. Val Branjewski ] on the dividend policy. The current dividend policy is outdated and promotes share price volatility. Hence, when shares go ex-dividend, the income-seeking firm sell out of National Grid. However, if the company were to adopt a quarterly dividend system, it is likely that this would reduce the share price volatility. Many progressive companies have recognized this and have since adopted the quarterly dividend practice. Would the Board consider reviewing this dividend policy? The subject has been raised before, but regrettably rejected without due consideration.

So thank you, [ Mr. Branjewski ] for that question. I recollect that you did raise it at an AGM some years ago. And subsequent to that AGM, you received a substantive letter from the company in 2018. We have carefully considered if it would be beneficial for our shareholders to receive more frequent dividend payments and have concluded that we do not believe that moving to quarterly dividend payments would be value adding to National Grid shareholders. Firstly, the great majority of our shareholders invest in National Grid for the long term. They are not short-term, day or quite frequent traders in our shares. And whenever shares go ex-dividend, there will be an adjustment in the price to reflect the fact that they have gone ex-dividend. There would also be additional cost to the company incurred in moving to quarterly dividend payments. And so for that reason, we do not believe that the benefits of this outweigh the cost. However, it remains the case that I think in this area, certainly, we would be very much investor-led. And if there was clear evidence that a significant part of our shareholder base were supportive of such a move, we would, of course, give the matter further serious consideration. But at this point in time, there is no such indication of that from our investors, including our institutional investors. And therefore, the position will remain as it is today, that there will be an interim dividend payment for the half year and the final dividend once approved by the shareholders. Thank you.

Thank you, Chairman. Now a question from PERC, the local authority pension fund for -- relating to climate change. We welcome National Grid's policy on responsible lobbying and disclosure of membership with lobbying organizations. We also welcome your call to ask the U.S. to stay in the Paris Agreement. Related to this, investors are looking for consistency between corporate climate change balances and the positions taken by any trade associations they are members of. There are 2 questions. The investor group on climate change has produced an investor expectations document. Can National Grid commit to providing disclosure in line with this? Number two, regarding lobbying policies and practice, there have been reports of some U.S. customers being asked to sign a petition in favor of a pipeline for fracked gas. Could you provide some commentary around this relating to the company's net zero commitment and commitment to set a Scope 3 emission targets in 2021?

So thank you for that question. I'm going to ask John to deal with the second part of the question, and I will deal with the first part. I have to confess that until we received this question from PERC, I was unaware of the IIGCC investor expectations document. We have set out very clearly on our website, for several years now, our position on responsible political activities that sets the framework in which we conduct these activities consistent with values of integrity, legitimacy, materiality, accountability and oversight consistency and transparency. As a first glance, that does not appear to be anything in the IIGCC document, which is at variance with our statement of responsible political activities. But given that we have not had a sufficient time to study the document in detail, and it clearly merits serious consideration, may I -- I've asked the company secretariat to follow up with PERC to see if we can arrange a meeting in the next few months in order to discuss this further. Thank you. John?

Thank you, Peter. I think there were 3 parts to the question. So first of all, in terms of our commitment to net zero, then as you've heard in the speeches today, you may have seen in the press, National Grid has reinforced its commitment to support net zero, both in terms of our own emissions, which we set ourselves a target of net zero by 2050, and actually have now have interim targets, an 80% reduction by 2030 and 90% by 2040. But we also see that we've got a very important role in enabling net zero in the economy in both the U.K. and in the jurisdictions in the U.S. given the role that we play. That commitment is very strong from National Grid. In terms of the specifics for New York, I suspect this links to the previous question in terms of some of the challenges we had in Downstate New York with regards to the Northeast Supply Enhancement project, the NESE pipeline as it was known. When it became clear to us that it was unlikely that they were going to receive permits, then we did do an education process with our customers and our key stakeholders on the impact of that, and some of them clearly reached out to their representatives. Since then, as I mentioned earlier, we've now found a long-term solution, which is actually a mixture with some reinforcement of some existing gas facilities, together with energy efficiency and demand management, which we're taking forward with the regulator in New York and with the Governor's Office. And then the final part of your question, in terms of Scope 3, so National Grid last month announced that we're undertaking an ESG day on the 5th of October. And actually, in the autumn, we'll be publishing our responsibility charter. In that, we'll be setting out our commitments with regards to Scope 3 to add to the commitments that we've already made in terms of net zero for Scope 1 and 2 emissions.