National Grid plc (NG) Earnings Call Transcript & Summary

[Presentation]

My intention today is that you'll take away the following 4 key messages. The first is that our pivot to electricity brings visibility and certainty of growth, right now and out to 2050. Second, our scale magnifies our vital role at the heart of the energy transition. And third, we have a strong track record of delivering growth. And then finally, with green CapEx making up GBP 13 billion of our investment over the next 5 years, we are the energy transition company. So hello, everyone, and welcome to our 2021 investor event. It's great that so many of you are here to join us today. Whether you're here live or watching remotely, I hope that both of you will really have a positive experience. And I'm delighted to be joined by my senior management team today, who you'll have a chance to meet through the course of this event. My team has more than 300 years of experience in the energy industry across multiple geographies, and each of them has a track record of delivery, they're purpose-driven and they lead through their values. So we have a lot to share with you today as we focus on our regulated businesses, which will deliver over 90% of our investment over the next 5 years, and where we see significant opportunities over the decades to come as National Grid enables the energy transition. So let me start today by laying up my vision for our energy networks. National Grid will be a leader in pioneering smarter, low-carbon energy networks, which at their core are made up of resilient transmission and distribution grids. These grids will integrate multiple sources of energy, from massive nuclear power stations to offshore wind farms to small distributed solar generation, enabling reliable power for all. Our networks will enhance the flexibility of power supply through cutting-edge demand response, by enabling smarter homes to sense grid conditions and automatically modify their consumption, and vehicle-to-grid technology that allows electric vehicle batteries to store energy and sell it back to the network, when it's most needed. Our existing gas networks, in time, will be used to support a move to hydrogen and decarbonize natural gas, utilizing existing infrastructure to ensure affordability for our consumers. Ultimately, my aim is for our networks to power the technologies of tomorrow to enable greater choice and flexibility of supply, improve resilience, and importantly, maintain the affordability of delivered energy. This vision for our future energy networks aligns with a global push to net zero and demonstrates the vital role that we'll play. And with that vision, as I look to the decades ahead, I believe the scale of opportunity across our businesses is significant. The regions we work across have very ambitious climate goals. The U.K., New York and Massachusetts all have net zero by 2050 targets. So do we. They all have ambitious 2030 and 2040 goals. And so do we. Meeting these targets will require a step change in infrastructure investment to deliver the onshore and offshore clean energy that will enable the decarbonization of power, the electrification of transport and the decarbonization of heat. So let's just put that into context. In 2020, the International Energy Agency forecast $400 billion of annual global network investment by 2030. In the U.S., the Infrastructure Bill includes over $70 billion for power infrastructure and another $7.5 billion to build out a national EV charging network. And Princeton's Net Zero America report suggest Massachusetts and New York will have the fourth and fifth highest network investment needs across the nation. And in the U.K., the Climate Change Committee's sixth carbon budget forecasts a doubling of electricity demand by 2050, and a sharp increase in network CapEx to meet 2030 targets. These are all big numbers. And I saw firsthand at COP26 the strong commitment to them from government and industry, but now it's critical that we turn these commitments into action. We believe that our track record, along with the changes that we're making inside the group, will put us in a strong position to take advantage of those opportunities. So let's just look at the last 5 years. We've consistently delivered world-class safety performance. We've operated some of the most reliable electricity and gas networks in the world. We've turned around our U.S. performance. We've outperformed our U.K. regulatory contracts, and we've built world-leading interconnector business, a business focused on enhancing our role in the energy transition. In addition, we've also made significant progress in reducing emissions in our own businesses and across our geographies. Since 2000 across the U.K., carbon emissions are down by more than 35% and down nearly 20% in the U.S. Northeast. National Grid is playing its part, with emissions from our own operations, known as Scope 1 and 2, down by nearly 70% by 1990. Now this exceeds our original goal, but we remain committed to reduce our Scope 1 emissions further and Scope 2 by 80% by 2030, by 90% by 2040 and to net zero by 2050. But our contribution is so much greater than this. We're also tackling Scope 3 emissions and are targeting a reduction of 35.5% by 2034. Right now, across our regulated businesses, we're enabling cleaner electricity, with 22 gigawatts of renewables now connected to our U.K. and U.S. Electricity Transmission and distribution networks. And we're also enabling the take up of electric vehicles. In our Electricity Transmission business, we're helping to deliver ultrafast charging infrastructure as part of the U.K.'s Rapid Charging Fund. And in the U.S. jurisdictions that we own, we're supporting the installation of more than 20,000 EV charging points by 2025, and have recently filed for another 32,000 in Massachusetts. And we're also working on ways to decarbonize our gas networks. So for example, we're testing the impact of blending hydrogen on our gas networks through the FutureGrid pilot in the U.K. and the Department of Energy's HyBlend initiative in the U.S. But our focus is just not on regulated networks. National Grid Ventures is also playing its part. And I'm particularly delighted by the recent early commissioning of our fifth interconnector of 720-kilometer North Sea Link connection to Norway. This 1.4 gigawatt link will enable flow of zero carbon electricity, about 23 million tonnes of carbon emissions by 2030. And in the U.S., our onshore renewables business continues to add capacity, having secured over 2 gigawatts of power offtake agreements with household names such as Walmart and Home Depot. And since its inception 3 years ago, National Grid Partners has invested $290 million in 35 companies whose transformational technologies are helping to make grids greener and more resilient. So I hope this just gives you a flavor of the many things we've been doing across our businesses to support energy transition, and you'll -- we'll share more examples of these during the course of the day. However, you'd be pleased to hear we're not just relying on our performance and environmental track record. We're also making big changes to ensure we're positioned to deliver on the opportunities ahead. As many of you know, we announced a significant strategic pivot in our portfolio in March, and this is now taking shape. Our acquisition of WPD, the U.K.'s largest electricity distribution business, is now complete and I'm pleased to be able to welcome our new colleagues to National Grid. As part of our repositioning, we'll shortly be saying goodbye to our colleagues in Rhode Island's business, when we complete the sale in the first quarter of 2022. We've also just launched the sale process for a majority stake in our Gas Transmission business here in the U.K. and expect to complete the sale by the summer next year. These moves will increase our exposure to electricity, enhance the long-term growth profile of the group while cementing our position at the heart of the energy transition on both sides of the Atlantic. And as we've position the group strategically for the operational -- strategically for the opportunities ahead, we're also implementing a new organizational structure, which enables us to be closer to our customers, to our regulators and communities with a real focus on best-in-class service, to drive decision-making down to the local level, making us more agile as a business and developing new processes and digital solutions to drive efficiencies. And this last point is key. As we advance along the path to our clean energy future, we need to consider customer affordability to make sure that no one is left behind on this journey. In this respect, we're no different to any other business. We need to deliver our output to the most competitive price with a focus on efficiency and a drive for innovation in the way we build, operate and maintain our networks. And of course, we have a great track record of doing just that. For example, through RIIO-T1, we generated over GBP 850 million of savings for our customers, largely through CapEx outperformance. And going forward, we need to do more, which is why, in addition to our continued focus on outperforming our capital allowances, we're committing to a significant cost efficiency program to deliver over GBP 400 million of savings over the next 3 years. And this will translate into a flat controllable cost base in our regulated businesses, which we're confident of being able to achieve despite the fact that we expect growth of over 20% in our asset base. And a key contributor to these savings will be through process improvements. So just one example. In the U.K., we've seen demand for new connections to the electricity transmission network increased fourfold in the last 5 years. To address this, we developed digital self-service tools that help customers connect faster and easier and by reducing their costs. And you'll see great examples like this today, all of which help to underpin the target that we've set of EPS growth of 5% to 7% a year. So as you can see, we have a track record that gives us the confidence in the future, and we've reshaped our portfolio and our organization for the opportunities ahead. However, we know to be successful, we recognize we must also use our voice to help shape policy and regulatory forms that are needed to deliver net zero and minimize the impact on customer bills. So in the U.S., for example, we're developing new rate case mechanisms which allows greater visibility for investment, creating opportunities for further efficiencies, whilst helping us align our environmental aims with the states we operate within. And we're also agreeing plans that can develop step changes in behavior, whether it's our award-winning energy efficiency programs or investment in EV charging to deliver more ports and reduce range anxiety. But there's so much more that we can do. We're working with policymakers in the U.S. to develop cost-effective routes to net zero. This work is really about helping to educate all stakeholders, underpins the importance of investment in our gas and electricity infrastructure in order to make climate change targets. For example, in New York City, we've recently published a joint report with the mayor's office, looking at fully costed decarbonization pathways right out to 2050. It considers 3 pathways from electrification to a more diversified energy mix with all 3 showing the importance that a gas network will play for decades to come. In the U.K., we're also working closely with policymakers. Alongside the work we're doing on the Rapid Charging Fund, we're heavily engaged with regulators and government on enabling 40 gigawatts of offshore wind by 2030, and working with the electricity system operator on building and understanding of the 15 projects required to deliver this target. And in National Grid Ventures, we're working with regulators and partners across Europe to think through future models to deliver offshore infrastructure requirements efficiently. And as you'll see in the breakout, our teams are setting out a North Sea Vision to enable these goals to be met. We're also looking beyond RIIO-T2 and the up-and-coming ED2 price control. And we're thinking about the changes that are needed to ensure there's a framework that will continue to attract investment and meet the U.K. government's ambitious climate targets. And so we're engaging decision makers, thought leaders and industry experts with our ideas to reform institutional governance, regulatory frameworks and market mechanisms in a way that looks across the intersections between energy, the hydrogen economy and a decarbonized transport sector. We're doing all of this to increase the probability of successfully delivering the energy transition affordably and at pace. And alongside evolving the regulatory and policy frameworks, of course, we also need to bring all our customers on this journey. Electricity will deliver much more of society's energy's needs going forward from broadly around about 20% today to potentially 60% by 2050. We know customers want a reliable, resilient and safe energy network, and we know that they're really passionate about net zero, which is why we'll continue to engage widely on why we've set up an independent user group which will run right throughout RIIO-T2. In the U.S., in New York and Massachusetts, we've also set up advisory groups to do the same. So there's no time to lose if we want to help our regions meet their ambitious climate goals. With the work that we're doing both inside and outside National Grid, we're ready to play our part in delivering our ambitious growth plans. So over the next 5 years, we'll invest up to GBP 35 billion. It's the highest level of CapEx to date from National Grid. This is investment we're doing right now to deliver safe, reliable and low-carbon energy networks. So for example, in the U.K., we're enabling 6 million homes and businesses to access low-carbon electricity through the Hinkley Connection transmission project. And in the U.S., we're unlocking renewable generation capacity with 100 miles of transmission rebuild with a Smart Path Connect project. And we're making our gas networks cleaner through pipeline replacement program and investment in renewable natural gas and hydrogen projects. We are the energy transition company. We're investing GBP 13 billion over the next 5 years directly in decarbonizing energy networks right now. That proportion will only increase over time. And this is measured using the conservative definitions in our Green Financing Framework, which is closely aligned to the EU taxonomy and excludes clean spend in areas like connecting nuclear power or lowering methane emissions through our gas pipeline replacement program. There are many companies investing in clean energy, but few are investing at this level. And what differentiates us further is our stability and risk profile. National Grid has attractive growth that delivers a resilient progressive dividend. And we do this without needing to take on significant merchant exposure at either end of the energy value chain. We know that as the energy landscape undergoes dramatic change, our regulated networks will become even more important. Over 90% of this investment over the next 5 years is within our regulated businesses. Now I know the words regulated businesses may not always generate huge excitement outside of the National Grid boardroom, but it does deliver a compelling investor proposition. Over the past 20 years, we have delivered sustainable growth, enabling us to be one of only a handful of FTSE 100 companies that's maintained a growing dividend, which, of course, has been key to delivering strong shareholder returns with an annualized total shareholder return of nearly 10% over the last 10 years. And the high degree of certainty that we have over the next 5 years gives us the stability and visibility we need to deliver asset growth of 6% to 8% per year, earnings growth of 5% to 7% per year, whilst maintaining a resilient balance sheet and continue to track -- continuing our track record of execution excellence in our performance. And we're doing this, of course, to ensure we can continue to deliver attractive shareholder returns into the future. But growth does not stop after 5 years. Indeed, in the U.K. and in the U.S., it's likely to continue with further waves of investment. In the second half of this decade and in the decades beyond additional investment is going to be needed. It's going to be needed to meet offshore wind targets and unlock renewable onshore capacity. It's going to be needed to deliver ambitious EV targets. And it's going to be needed to empower consumers with technology like advanced metering infrastructure, enabling them to engage with energy networks in real time. In the breakout, you'll have a chance to see what our teams are working on today, such as the new transmission routes that will come into New York as well as our grid modernization program in Massachusetts. Looking even further out, additional waves of investment are needed to meet 2035, 2040 and 2050 commitments across our U.K. and U.S. regions as electrification continues to grow. In particular, this growth will be driven by the decarbonization of heat, which today accounts for about 1/3 of carbon emissions in both the U.K. and the U.S. Northeast. This will be achieved through a mosaic of solutions, in my view, including heat pumps, hydrogen and low carbon and renewable natural gas, all of which National Grid is working on today. And so what I want you to take away from all of this is that the energy transition gives us enormous growth opportunities, not just for the next 5 years but also for decades to come. And this growth will continue at a pace where we're confident that we can deliver. Now we have much more to share with you this afternoon on these plans. And in a moment, I'm going to ask Phil Swift to join me to introduce our new electricity distribution business. But before that, I want to leave you with these final comments. I'm incredibly passionate about what we're doing here at National Grid because right now, as one of the world's largest publicly listed utilities, we're making a tangible difference by taking on some of the biggest energy challenges and driving innovation to get us there faster. We're bringing people together as we do so through our unique position of working alongside governments, regulators and customers. And that's what I mean when I say National Grid is at the heart of a clean, fair and affordable energy future. And we're doing it right now so we can drive long-term value growth and returns for our shareholders and to enable net zero across our communities. As investors, you're partnering with us in achieving that mission. Thank you. [Presentation]

Okay. So we're going to start our first session this afternoon. And really, I'm excited about this. It's an opportunity for me to introduce WPD as part of National Grid to everybody. So I'm sure everybody in this audience is aware that the acquisition of WPD was an incredibly important part of the strategic pivot that we announced in March. And I was obviously delighted when we had the approval from the CMA back in June. But I'm equally delighted to welcome Phil at this stage as the President of WPD. So Phil and I have actually known each other for a very long time. We've both been in the industry, I think, 29 or 30 years. I think I'm 30, he's 29. So...

I'm the young one, obviously.

So Phil, why don't we start. Just why don't you introduce yourself?

Yes. Hi. Well, as John said, I've been with the company 29 years, almost 30, so multiple roles across the organization. I guess the latter -- the last 10 years, I was Ops Director from 2013 for the 4 licenses; and then CEO/President from 2018. So that's my history.

It's a great history to have, Phil. You know how excited we are that WPD is now part of National Grid. And you also were very aware because you were fully involved, of course, in all the potential buyers that were interested in WPD. So I think it would be great just to share with everyone sort of what was your reaction when you heard the National Grid was going to be the new owners of WPD? And how did the organization view it?

Yes. I mean, certainly, the -- with any sale acquisition comes a high degree of uncertainty for management and staff combined. And I think when we reached the end of the process, as you say, John, and National Grid with a successful bidder, I think that was treated with a lot of happiness, if that's the right word. It's a fantastic result for WPD and its staff. If you look at National Grid and you look at the culture and the values, they align with WPD and it's a journey we've been on. The vision looking forward in terms of decarbonization that you just explained in your introduction there, we're aligned on that as well. And then overlay National Grid's world-class engineering and safety performance, which is important to all of our businesses as operational businesses, it's a very good fit for WPD within that organization. The other thing for me is our previous owner, PPL, was a long-standing owner for 25 years with a long-term interest in infrastructure assets and doing the right thing moving into the grid group of companies. We can see that, that alignment is there as well. So I think it's a really good result. And of course, as we've known each other, so have our operational teams, known each other. And so we've solved a number of challenging technical issues over the years. If I look back to 2015, '16, we had a huge amount of renewable generation in the Southwest, and it was actually -- the solution was a combined National Grid-WPD technical solution at minimal cost that actually dealt with the problem we had in terms of allowing connections to take place. So that's a good track record. And right now, of course, the teams work together on Hinkley to unlock the -- to build the infrastructure and unlock the generation from the new Hinkley C reactor. So all good stuff.

Yes. Certainly nice to hear all that. Certainly in my experience, as you know, I've been getting out and going to all your operational sites and meeting everybody. And certainly, the values that WPD have really aligned really closely with National Grid. I love that sense of continuous improvement, which is one of our values for National Grid. But one of the things that struck me most of all, I think, when I've been out in about meeting people is just the focus that WPD has on customer service and customer satisfaction. And I know you've got a fantastic track record right through ED1 and before that. So why don't you just share with us what is it that sets WPD apart from the other DNOs when it comes to customer service?

I think the key is having that customer service at the core of our sort of values and our culture. And that's been with us for some considerable time. All of our staff are aligned to doing the right thing for our customers. We recognize that customers actually drive our success. So our success with customers is reciprocated. And when you look at how we operate, any new starter, we've got 100 friends who started with us quite recently. From day 1, they're taught about how we treat customers, how we look after customers, that we focus on the customer, and the same for any trainees or people joining the organization. We talk about the golden rule, which is basically treat customers the way you'd expect to be treated. And then we've got first time every time. So there are two little expressions we use that people really get, and that's really important that you get that embedded into your culture. And when we look at our operational field teams, not only do they deliver outstanding customer service, so they're interacting with customers on a daily basis. But we also look to ensure that our corporate functions that sit in the offices take that passion on board as well. And so as an example, I've used different things over the years. If we got a storm situation, we typically run with 60 to 80 people who can take customer calls. We can ramp that up to almost 300. And we actually use people who aren't normally in the contact center, so those would be people who sit in our accounts department or in our regulatory department or our employee relations department. They're trained, they sit on to the headset and software about once every 6 months to make sure that they stay in tune with that. And so not only is that good for outstanding customer service because that enables us to answer calls within 2 to 4 seconds even in storms, but it also cements that cultural importance of the customer.

So one thing -- that's really helpful though. One of the things I've been quite excited about is how we bring together the capabilities that WPD has and the spikes they've got in performance with National Grid. So what could National Grid learn from WPD when it comes to customer?

I think it is that right from the get-go that the customer is actually driving everything that we do. And as we move forward with decarbonization, never more so is it important. We've seen with COVID as well, even more important than we have reliability. And certainly, if we look at our customer satisfaction scores, on the independent survey that's done by Ofgem itself, we get 90% scores across the 4 licenses. And that's actually a higher score than the likes of Amazon and First Direct. And in context as well, when 25% of the people surveyed are customers who've lost their supply, I think it really is a truly outstanding reflection on how our staff operates. So I think that's the message we'd share.

One of the things I'm looking forward to is you're going out to the U.S., I think, soon to spend some time with our customers.

Absolutely. And just looking at some of the technology here today shows you that there's a lot of lot to be learned us, yes.

So another area that just jumps out in terms of outstanding performance from WPD is the way you performed on the other incentives outside of the customer over the last few years. So just tell us a little bit more about how you're going about doing that.

Yes. Again, it's clarity of leadership and simple processes, I think, are at the heart of it. So we don't overcomplicate things. We look to try and make things as simple as possible right way through the organization. And so we talked about customer service. If we look at reliability, I could use the Midlands as an example. When we acquired the Midlands, we have something called target 60, it was how many customers you restore within 1 hour on a high-voltage fault. And the Midlands was running at just under 60%. Within 3 months, that was at 70% and within 9 months, that was at 90%. So that's a delta of 30% more customers restored with 1 hour. And the thing with it is it was the same people. It was the same operational staff delivering that result. And so it was giving people direction and also empowering them to deliver for the customer. And so when we see incentives, and those incentives clearly are aligned with customer service, then we really go after them. An incentive-based regulation delivers for both entities, if you like. So it's -- customer gets incredibly good benefits and the company get benefits as well.

I can look forward to those incentive performance going forward, Phil..

Absolutely, John. And clearly, we're in discussions now with our ED2 business plan and through next year in terms of the incentives that we're looking for in ED2 and across the wider sector as well.

I mean, one of the things I majored on in my keynote speech this afternoon was around just how important the energy transition is and what a critical role National Grid is playing. I know that WPD has been leading the way for DNOs in the U.K. on distributed system operation and flexibility. So just describe what is it you're up to? What you're doing in that area?

Yes. We were the first to publish a strategy for distribution system operator and then actually to create the core activities. And basically, a distribution system operator is -- where it moves on from a distribution network operator is to fully utilize technology to run an active network rather than what was a traditional passive network. And so that allows us to get a lot more connections and different types of connections, particularly intermittent renewables, onto the network and to be able to cope with those. And so we were the first to do that. We've led the sector on that. We've created -- developed and created a platform that is a contract and dispatch platform. So that's actually being used now by 4 of the other DNOs. So there's only one DNO that's not using it currently. So that's about how we've led on that. And the data and digitalization work that we're doing is going to move us forward to the end of ED1 and into ED2 to further expand on that. In terms of flexibility, flexibility is actually allowing services to contract onto the network. So it's about managing, but also being able to allow those things to happen where people can actually change what they're doing to deliver a solution to us, which is in lieu of a traditional reinforcement-type situation. And we use those -- we look at those first on all investments, but particularly they're good around marginal issues on the network, where basically you can deal with it over short periods of time. We're actually leading on that, so we're over 700 megawatts of contracted flexibility services. And what's really exciting, the last tender round we awarded 250 megawatts of contracts, of which 150 was with Octopus Energy on utilizing electric vehicle and the dynamic nature of electric vehicle charging. So that can really help us on our network down at the low voltage end.

So that must be definitely first in the U.K. and potentially one of the first in the world that's providing that story.

As far as I know, it is the first. I've not heard of anyone else actually contracting for that service.

Yes. Look, I think I should move on and talk about ED2. So certainly since the middle of June, I've gone through all the business plans. And I know you published, I think, 3 of them, which no other DNO has done. I've been hugely impressed by just the level of detail and the level of stakeholder engagement you've had. But why don't you share with us the sort of key takeaways and highlights from the business plan. I guess it's going to be submitted in a couple of weeks' time.

It goes in on December 1. As you say, it's the fourth iteration, which we're the only companies who've done that. And we've involved -- I think we're up to 25,000 stakeholder engagements now. It was 19,000 up to business plan 3. And the key thing is to create that plan with your stakeholders. That was a really important part of Ofgem's requirement to actually meet the threshold on the business plan, and I think we've demonstrated that beyond doubt. And there are 4 main areas I'd focus on in the business plan that goes in. So the first will be connectability. So it's actually about how we are looking to enable those new connections, particularly for electric vehicles, heat pumps and renewable generation to connect to our network. Between now and 2028, we're looking at an additional 1.5 million EVs to take it up to 2 million in total. 600,000 heat pumps and additional 2.6 gigawatts of renewable generation, which is enough at peak output for a couple of million homes. So these are sort of big-ticket items in terms of decarbonization, and that's a real core plank of our business plan is that people can connect when they want to connect. Sustainability is another very important part. So a big chunk of sustainability is driven by those connections because those are renewable connections, but it's also about our own emissions as a business. As you said, we're heavy focus on Scope 1 and Scope 2 and a science-based target of 1.5 degrees in the business plan. Vulnerability, so this customer vulnerability has always been at the center again, of WPD's philosophy. And so we're expanding upon our really good ED1 vulnerability measures to give more customers access to things not necessarily from WPD directly if we utilize partner agencies to provide access to other forms of support, so that may be in terms of energy reduction measured in the house. So energy efficiency, insulating lofts and walls, but also advice to switching suppliers, another access for local authorities because quite often local authorities will have pockets of funding that customers don't know about unless you point them in the right direction. So that actually generates some huge benefits to the customers on WPD's network. And then finally, affordability. So in terms of our investment going forward, it is a 28% increase in investment in ED2. In terms of a run rate from ED1, we're holding bills pretty flat. So again, affordability is really important. People have to have their energy and be able to pay for it.

So I want to come back to one element of it, Phil. So I've just spent much of the last 2 weeks at COP in Glasgow, and it's clear that there's a huge amount of political will to accelerate green investment. So just share with us what's the green investment that's going on within that business plan? I think you referenced a few things around EVs and heat pumps, for example.

Yes. I mean it's the whole package, John. So I mean moving forward with the COP is fantastic news. I'll bring that back down and distill it into the nuts and bolts of WPD. And so the way we deliver and facilitate the delivery of the decarbonization areas are the ones I've alluded to. And we're also doing rapid charges on motorway services. And so it's going to be a National Grid transmission or WPD distribution in our service territories and also working very heavily with local authorities and other major energy users on how we can help them design what they need to deliver their own decarbonization. So that's in addition to the things I spoke about. A lot of data and digitalization effort is going into that as well. So to run a smarter network and use those flex services, allow those connections. The more we really understand the two-way power flows, and absolute time of use information is key going forward. So those are things that we're pushing forward on.

What is the investment for? So you talked about increasing EVs to 2 million I think at the end of ED2. And talk about 600,000 heat pumps. But what's the investment you actually have to make? So just describe for us what that looks like.

Yes. Well, I mean, if you look at a typical household and a typical EV going forward, they actually use about the same amount of energy. So for every EV that connects to our network, you're effectively building another house in terms of energy consumption. And so what that needs is -- that needs us to replace low-voltage cables potentially in the ground, change transformers, and then through the voltage levels, it has different impacts. Certainly, as a distribution business, we're obviously as close as you can get to the customer because we come to the doorstep. And we actually find the diversity amongst customers gets less and less as you can own a voltage level. So the impact is higher. So it's going to be lots of work very much in customers -- the vicinity of our customers. So again, that's where customer service is really important.

And what about heat pumps? Is that similar sort of levels of investment?

Well, yes, I mean heat pumps in terms of energy use will be even higher again. And so the impact of heat pumps could be dramatic. And so that's something that we really need to understand going through ED2. And it's going to present, I believe, further capital opportunities in ED3 and beyond. Obviously, the government have set a deadline of, I think, 2026 now to make a final decision on exactly the heat strategy going forward. But what we do know is that we're going to see some significant increases in load.

Okay. I want to stay on ED2. So we've got a couple of weeks left before the business plan goes in. So just give us a flavor of the conversations that are going on with Ofgem. How is the relationship? How confident are you that we can continue to get an appropriate return for the investments that are going to be needed to support the energy transition?

Yes. But we've got really good working relationships with Ofgem. So whether that's Jonathan Brearley, Akshay Kaul, he's Director of Networks or the operational teams underneath, and I think that working relationship is fostering. I think you kind of foster the right puts, the right outcomes. I think that is important. I met Martin Cave this week. So Martin Cave is the Chair of Ofgem. And it's clear to me in those discussions that we are very much aligned on what needs to be done from a decarbonization viewpoint. But what's also important is when we submit our plan that it's a well-justified business plan. And so that's what I've been talking continuously, it seems, for some time after the senior regulatory team is in terms of this plan is well justified. It's stakeholder-supported, and we've done more work than anyone in terms of local authority engagement as well. So we really understand the local authorities net zero ambitions and the speed with which they want to go at. But it's about responsible business operation, having the customer at the core and understand the vulnerability and fuel poverty as well. So those things are all there. So I think we're in a really good position. I think our business plan is well justified. And I hope, as per ED1, it went through. We get a good outcome.

Yes. Well, I'm certainly pleased to hear that they're aligned in terms of what we're trying to do around net zero. I think that's important.

Yes. And I think -- sorry, I think just the one other thing is clearly the message there is it's in terms of the financial package as well. It needs to be a fair -- it's a fair bill impact but also a fair return for the organizations.

So I'm conscious of time so I'm going to ask one more question, and I'll let you go off the stage. So we talked a lot about the future of distribution networks and the system operator. You talked about what the standout performance of WPD. Why don't we end by -- why don't you just talk and share a little bit, what do you see the benefits for consumers of WPD being part of National Grid going forward? Perhaps an example.

Yes. I mean we've talked a lot about customer service. And I think that if we look at National Grid as a whole, I think WPD can help some of the other parts of National Group in terms of customer service focus and simple processes. And then if we look at the engineering that National Grid brings to the table and the innovation as well. So I've been able to see some of the really innovative ways that National Grid in the states and the U.K. have approached technical challenges. It's a different way of looking at things. I think both organizations share some really, really good innovation teams. So we can definitely harness that availability from there. And if you look at a simple example, the robot outside that I'm sure everybody is avoided, remind me of a Terminator or something. But the robot out there, that's kind of application we may have used for. And we've looked at vegetation management as well. So we do -- there's a lot of our OpEx on vegetation management. And so anything that we can do to drive more efficiency in that, and that's something we know the U.S. operations have got some really good algorithmic learning and data processing capability that we believe we can foster. So I think there's going to be some good sharing of best practice.

Yes. Well, I'm really looking forward to it. I'm excited. I've always said, National Grid -- the benefit to National Grid is the ability for different businesses to share best practice. And now with WPD being part of National Grid, I'm excited about what WPD can teach National Grid in other parts of the business and vice versa. We've out of time. I'm going to say thank you for now. Later on this afternoon, we've got a broader Q&A session. So Phil will be back, and you'll be able to ask him some questions.

So as you've heard so far, it's a really exciting time to be part of National Grid. Given the opportunities we see ahead of us to deliver sustainable 6% to 8% asset growth per annum over the next 5 years. My priority, as CFO, is to give you confidence in our ability to deliver our commitments and that we can fund this growth with a strong balance sheet and stable leverage. We can grow our EPS by 5% to 7% per annum alongside our asset growth and that we can continue our impressive track record of delivering a progressive dividend. Good afternoon or good morning, everyone. It's no exaggeration to say that the opportunities ahead of us are enormous. And I believe we can deliver on the commitments I just listed because following our acquisition of WPD and our pivot towards electricity, we're a bigger player at the heart of the energy transition, which gives us much more certainty of growth for many years to come. We have a strong track record of delivering efficiently, and our new operating model will deliver a step change in productivity improvements. And we made excellent progress to update our rate plans to better align growth in assets, and growth in earnings. And today, I will set out the building blocks of earnings growth to demonstrate the confidence that we have in delivering our targets. Turning first then to asset growth. As we laid out 6 months ago, we expect to deliver a 6% to 8% asset growth rate across the group over the coming 5 years, driven by our enhanced capital investment program. This chart illustrates the growth in group CapEx that we've seen over the last 2 decades. It shows that investment levels have steadily increased and that the step-up to our new 5-year program should continue to sustain strong group asset growth. Across the group, we have a higher level of regulatory certainty than we've seen in many years. And as we look further out towards 2030, New York, Massachusetts and the U.K. all have ambitious medium-term climate targets, which will require infrastructure to connect the onshore and offshore wind capacity as we look towards these clean electricity goals. Infrastructure strengthening and upgrades to maintain reliability and resilience, and infrastructure to enable the sharp uptake in EVs and to enable the adoption of hydrogen and renewable natural gas over time. All these targets create opportunities for National Grid in the longer term and give us confidence and visibility around sustainable, attractive growth into the late 2020s and beyond. But I want to spend a few minutes in particular talking through our 5-year plan, where our forecast investment of GBP 30 billion to GBP 35 billion is a direct result of governments, regulators and customers calling for bolder steps towards net zero. Over 90% of our investment will come in our regulated networks. Over 2/3 of this investment is already committed and visible through rate settlements and in our nonregulated business. And based on our own conservative assumptions and not including our clean gas investments, we are investing around GBP 13 billion in green infrastructure, facilitating decarbonization and net zero across our jurisdictions. I believe we're in a unique position being a scale, low-risk green infrastructure player. So looking firstly at the U.K. in a little more detail, starting with Electricity Transmission. Between now and 2026, we expect to spend around GBP 8 billion. Within this, our baseline allowance is around GBP 5.5 billion will be invested in asset management and sanctioned major growth projects such as London Power Tunnels. The remaining GBP 2.5 billion of investment falls under uncertainty mechanisms, which can be thought of in 2 ways. Firstly, GBP 1.5 billion of well-defined investment in areas such as network reinforcement, reducing our reliance on the greenhouse gas, SF6 and cyber resilience. These are filed for and agreed on an ongoing basis with Ofgem, and we've already filed 3 projects since the start of RIIO-T2. Secondly, GBP 1 billion for early engineering and preconstruction work on future major projects such as Eastern Link, which you'll hear about in the U.K. breakout. Across WPD our U.K. electricity distribution business, we expect to invest GBP 4 billion to GBP 5 billion over the next 5 years, including our expectation of higher investment levels in the start of the next price control ED2 in 2023. Broadly, half will be on asset maintenance to ensure continued world-class reliability and availability with the latter at an impressive 99.995%. There will also be further investment to accelerate the energy transition with a fourfold increase in electric vehicles expected across its regions by 2028, a threefold increase in heat pumps, as well as the continuing rise of distributed generation connections. Finally, in the U.K., we also have over GBP 1 billion of committed investments in our National Grid Ventures business, driven by our interconnector program as well as investment at our Grain LNG facility. Looking now at the other side of Atlantic, where we expect to spend around half of the group's GBP 30 billion to GBP 35 billion investment in the next 5 years in New York and New England. In New York, we expect to invest around GBP 10 billion within our regulated businesses, made up of around GBP 6 billion in gas safety and reliability and our leak prone pipe projects; over GBP 2 billion in strengthening our electricity distribution networks; as well as connecting and expanding the network to enable the expected 3 gigawatts of clean energy coming on across -- over the next 5 years across our upstate region; and around GBP 1.5 billion on Electricity Transmission projects to unlock renewable generation capacity in upstate New York. In New England, we expect to invest around GBP 7 billion across our regulated businesses. Just over GBP 3 billion is expected to be invested in our gas pipeline replacement program in addition to ongoing safety and reliability spend. And over GBP 2 billion will be invested in electricity distribution on storm hardening and innovative grid modernization projects in Massachusetts, such as advanced metering infrastructure to ready the network for a net zero future. The remaining GBP 2 billion is in our FERC-regulated companies on projects such as rebuilding 130 miles of transmission lines for resiliency and network capacity to further accommodate the region's clean energy goals. Such a high level of visibility in our investment plans gives me confidence around delivering this growth while maintaining our strong balance sheet and remaining comfortably within our current BBB+ and Baa1 group credit ratings at S&P and Moody's. I've said previously that our net debt-to-RAV is expected to remain stable, above 70%, once we have completed our announced portfolio repositioning and that this level keeps us comfortably within the metric ranges required by our credit rating agencies to maintain our existing ratings. As a reminder, our target ranges of 7% to 9% for Moody's RCF-to-debt ratio and 10% to 13% for S&P's FFO-to-debt ratio. And to reiterate we expect to remain at a stable level within these bands over that time frame and that we see this as an efficient level to fund the group on an ongoing basis. Given the essential role we play at the center of energy systems, we understand the careful balancing act required to ensure energy security, maintain customer affordability and deliver the decarbonization of energy systems at pace. The growth plans we've laid out are vital to keeping our networks reliable and resilient, whilst also progressing the energy transition. And we'll do this whilst being mindful of the impact on affordability for our customers. We, therefore, need to continue to be nimble and efficient. And this morning with our first half results, we provided more detail around our realigned organizational structure that moves us closer to our customers. And these organizational changes will drive efficiencies across our businesses, which will deliver benefits to our consumers. And we're, therefore, today announcing a new target to deliver over GBP 400 million of efficiency savings across the group over 3 years, which equates to a flat controllable cost base, even while our regulated assets are expected to grow more than 20% over that time frame. We expect our U.S. businesses to deliver over GBP 300 million of the cost efficiency program, with the remainder across our U.K. Electricity Transmission and National Grid Ventures businesses. These efficiencies will come through a number of areas, such as increasing use of technology and digital solutions that will deliver greater work in practice productivity as well as standardizing our working practices and retaining more of this knowledge within the business. Our strong track record of achieving efficiencies in both our U.K. and U.S. businesses give me the confidence that we can meet the challenge. The target we've announced today does not include WPD, but as Phil touched on a moment ago, we're already working together to find more efficient ways to deliver for our customers, whether that's support in developing the best possible plan for ED2 with the knowledge we've gained through the RIIO-T2 process; or start and take learnings from WPD's incredible focus on customer service, as you heard from Phil earlier; through to sharing engineering expertise across the group looking for ways to better deliver our large projects across our wider portfolio. On top of this OpEx focus, we're also finding ways and driving ways to deliver our capital programs in the most efficient way as we transform our businesses under the new operating model. For example, our strong track record of delivery through RIIO-T1 gives me confidence that we will continue to innovate and deliver efficiencies in our U.K. Electricity Transmission business. And today, we've announced that we are targeting operating outperformance of around 100 basis points on average through RIIO-T2 with much of this driven through totex examples, such as working with our contractors earlier in the project planning process to design efficiencies, reappraising our consenting approach, reducing the time to achieve consent by up to a year. In the U.S., this focus on both OpEx and CapEx efficiency is key to enable the infrastructure investment needed to fulfill climate goals whilst maintaining bill affordability and delivering appropriate returns where our goal remains of achieving at least 95% of our allowed level of ROE going forward. You'll hear more detail around some of these initiatives in the U.K. and U.S. breakouts later. This new operating model and the benefits it brings will play an important role in helping to deliver EPS growth as we continue to grow our asset base. Our objective is to establish a stronger link between asset growth and earnings growth going forward. All the hard work the teams have put in over the past couple of years gives us the confidence to set out a 5-year program for the first time. And we now have the building blocks in place to deliver our annual 5% to 7% EPS growth alongside our 6% to 8% asset growth. The business has been transformed in 4 fundamental areas. Firstly, through our work to update and change our new regulatory settlements. In the U.S., this includes agreed rate increases; inflation protection, including inflation index rates in our Massachusetts electricity and gas businesses, and forward-looking inflation embedded into our New York rates; changes the way we account for storm costs to more closely match the expenditure we are making as storms become stronger and more frequent; and additional regulatory settlements outside of our base filings, such as for grid modernization in Massachusetts, where we will recover revenues as we invest. And in the U.K., under RIIO-T2, you'll see this in a revised capitalization rate that better aligns to our natural OpEx and CapEx split alongside the move from RPI to CPIH indexation and our outperformance targets. Secondly, in our nonregulated business, National Grid Ventures, where earnings growth will come through as new projects come online, including the North Sea Link and Viking interconnectors, Isle of Grain train 4 and our U.S. onshore renewable projects. Thirdly, through the efficiencies we've created historically and through our new efficiency program being launched today, which will help us to maintain flat controllable cost base across our regulated businesses, even as our assets grow by over 20%. And lastly, our pivot towards higher-growth electricity, the integration of WPD into our portfolio will deliver higher asset and earnings growth over the coming period than gas transmission as well as greater certainty of asset growth into the longer term. Our 5-year financial framework has come together through a lot of hard work across all of our businesses over the past couple of years, and it's this that gives me the confidence that we will successfully deliver. Putting all this together, I want to spend a moment on how we think about our financial framework and the commitments we've made. Looking at the sources of capital, they're primarily from our strong operating cash flow, which we expect to grow broadly in line with our EPS growth, and growing balance sheet capacity. As a regulated business, our debt capacity grows as our regulated asset base, or RAB, grows. Over the next 5 years, we expect senior debt capacity to increase by around GBP 2 billion to GBP 3 billion annually. Beyond this, we will have proceeds from divestments, such as the sale of our Rhode Island business and the majority stake in our U.K. Gas Transmission business as well as through our ongoing scrip dividend. In utilizing our capital, our first priority is making the investments agreed in the rate plans in our U.K. and U.S. regulated businesses, along with any committed capital in our nonregulated business and delivering a growing dividend in line with CPIH while maintaining our balance sheet strength. Beyond this, we have potential for additional capital investment opportunities. These include further investments in our regulated businesses, such as large onshore transmission investment approved through the RIIO-2 control; and discretionary investments in our nonregulated business, National Grid Ventures, such as our subsea interconnector portfolio, where returns are in excess of our regulated business. Our choices will always be guided by our responsible business ethos and the opportunity to accelerate the energy transition whilst maintaining our investor proposition to deliver a sustainable growing dividend and attractive total shareholder returns. So the breakouts will shortly take you into our businesses, showcase some of the great people we have working to deliver our projects and the passion we all have to enable the energy transition. As I said at the start, this is a really exciting time for National Grid. We have a multi-decade growth story in front of us, with history showing that we have the capabilities and experience to manage the pace of this growth successfully. We have a vital role to play in the energy transition, and we're doing it right now.

Okay. So as Andy said, we're going to take the opportunity now to take some questions and what you've heard from Andy and myself. And then later on this afternoon, you get an opportunity to have another question-and-answer session with myself and Andy and the Presidents of the businesses. So why don't we just put hands up and take first question. We'll bring a mic around.

It's Martin Young at Investec. If I could ask 2 questions, please. The first relates to the equity return -- return on equity that you might be hopeful to get in the ED2 process. On one hand, the distribution companies in sort of draft business plans have pitched for something that's significantly higher than Ofgem had put out as its working assumptions. And there are obviously a number of reasons why we need to make sure the appropriate incentives are there to get those connections -- to get those EV connections, et cetera, in place. On the other hand, you've got the CMA that has come out and said, "Look, Ofgem was not wrong in what it did in the T1 process." So how do we sort of square the circle on those opposing views as we go through the ED2 process? And then this one is just for Andy, point of clarification on the 100 bps outperformance that you expect in the U.K. business. Is that solely on the sort of the operational side of things and excludes anything that you might do on the financing tax?

Okay. Well, why don't I take the first one and then a second one over to Andy. So obviously, we're a couple of weeks away from submitting the final business plan throughout this distribution in the U.K., WPD. Our approach to it will be -- first of all, we'll looking for fundamentals, as you'd expect, in terms of the capital asset pricing model and update that to reflect the latest views on risk free rates and so on. We'll clearly be -- and we are spending quite a lot of time looking at the detail of what the CMA said. And obviously, that will feed into our assessment. But fundamentally, what you'll see in the business plan is what we believe is an appropriate return for the risk that we're taking whilst also trying to incentivize the energy transition. Ofgem have already said quite clearly that they see distribution leading the energy transition in the U.K., and therefore, it will need an appropriate return to encourage that. And then the final thing I'd say is, as I said, when we did the transmission business plan, actually, what's important is not just the base returns, but also making sure that the overall financial package is right. So base returns are really, really important, but we need to make sure we've got the right incentive package to give us the opportunity to drive innovation and efficiency and also the cash characteristics of that business are right as well. So things like fast and slow money and whether that's at a natural rate or something different. So we're just finalizing all of that at the moment, putting that together and make sure that what we do submit is something that we believe that we can fully defend with Ofgem going forward. Andy, second question.

Yes. Thanks. And in terms of the 100 basis points, then absolutely, that is from operational performance, a combination of things like totex, or CapEx, OpEx outperformance, the incentive portfolio, what we can deliver against that. Anything we are able to achieve on a financing perspective will be over and above that.

Let's go to Dominic.

It's Dominic Nash from Barclays. Just pulling up again on this GBP 400 million number and the RoRE in the U.K., the 100 bps outperformance. How much of that -- or how much of that GBP 400 million is coming from OpCo performance? And how much of it will be coming forth from the holding companies or synergy benefits, that we talk about synergies this morning on the call as well? But -- and does that then mean that the RoRE outperformance that you're -- the 100 bps that you're talking about, is that the total outperformance? Or have we got more above that, that sits outside the regulatory ring fence?

Yes. So if I just break it down, so the GBP 400 million of operating the target we said this morning, there's probably about GBP 300 million will come from the U.S., GBP 100 million from the U.K. through our ET business. None of it is covered by WPD U.K. electricity distribution. In terms of that, that will help to contribute to the 100 basis points of operational performance that Andy has just described. So that outperformance will come from either direct operations within ET or the functions that support ET that make up the ET business. Over and above that, well, we haven't included in that 100 basis points is any outperformance for finance. So that would be over and above. So the 100 basis points is just the operational outperformance. So over and above that, depends on how we do on the financial incentives.

Sorry, apologies, following up here. It's not the financial performance. I'm actually asking is operational in outside of the regulatory company?

No. I think to answer that specifically, the element of sort of GBP 100 million, the portion that is focused in the U.K. ultimately will all turn up within Electricity Transmission or the functions that support, so ultimately within the operating company. So there is -- there won't be savings outside of Electricity Transmission, if that's what the question. But it's part of delivering 100 basis points, yes.

Okay. And say, in the U.S. of 300 as well.

It will turn up ultimately within the operating companies within the U.S. And again, it's part of delivering the 95% of allowed that we've talked about previously.

From Credit Suisse. I have 3 quick questions. Firstly, further to the returns, the 100 bps. Clearly, that's ET in isolation. It's usually commercially sensitive because you don't -- WPD is being price controlled, but presumably, there are synergies between WPD and ET, which may come through over a longer period. So is it fair to assume that where the businesses may benefit from coming together that could be upside to the 100 bps? And secondly, just on the CapEx. I mean the GBP 30 billion to GBP 35 billion was something that you put together, I guess, April, May this year. The world's moved on since then. Ofgem have been agile, and they seem to be moving things forward a lot more quickly. Is that a conservative number? And could it go up? And finally, I think -- I'll just leave it at 2 actually.

In terms of the second, I don't think it's a conservative number. It's our best deal, and that hasn't changed. So it's GBP 30 billion to GBP 35 billion. Within that, we've assumed around about GBP 8 billion for ET, Electricity Transmission. And that assumes a significant number of projects that are progressing energy transition. So we remain confident with that number as a good guide for the next 5 years. In terms of your question around synergies, as you can imagine, our absolute focus at the moment is making sure that we put the very best business plan in at the end of this month, beginning of December. In terms of your question around synergies, as you can imagine, our absolute focus at the moment is making sure that we put the very best business plan in at the end of this month, beginning of December. As you've heard from Phil earlier on, I think the team has done a fantastic job. There's a huge amount of detail in it. They've gone out and I think it's over 20,000 stakeholders are now being discussed. So we're very confident it's a plan that reflects what customers are asking from us and what stakeholders need. As I said, when we did the acquisition, I'm hugely excited by the opportunity of bringing the capabilities that WPD has. They've got a fantastic track record, as you hear today around customer about delivering on short-term incentives, putting that together with the capabilities we've got in National Grid around engineering and asset management, given the energy transition, I think it's something that we're hugely excited about. But at the moment, our focus is very much on making sure we get the best possible business planning.

Deepa from Bernstein. I have 2 questions. Andy, you mentioned there is some headroom in the plan. Can you quantify that, whether as extra CapEx or headroom to the FFO ratio? And the second question, John, on the uncertainty mechanisms. So you've shown those 2 different clusters that can be reopeners and something else. So are you seeing often move fast enough on whatever should be automatic? And then have you seen any change versus RIIO-1 in terms of the other uncertainty mechanism processes moving faster?

Yes. So let me do the second one and Andy do the first. I mean, I think in terms of the uncertainty mechanisms, we have seen a reaction from Ofgem since RIIO-T started. I think -- I mean, Chris Bennett will talk when you do ET later on today. But I think we've already submitted, I think, 3 applications and got a response from Ofgem on one of them already. So we've got some uncertainty mechanisms, which are automatic, as you know. And then we've got somewhere, for the bigger projects, where we have to make a submission. I think the first one we did was on cyber. We got a good reaction from Ofgem with regards to that. So it's early days because we've got a lot of these uncertainty mechanisms, as you know, as the energy transition unfolds. But initially, we're seeing the response that we need, but we need to see that continue.

Yes. And Deepa, the point about -- you're referring to the overall financial framework that I set out towards the end of my presentation. And I think the point we're making there is, as John said, we -- the best view we have today is with 30 to 35, and that's the level of CapEx that delivers the 6% to 8% and delivers the 5% to 7% of earnings growth. The point I was making is we have further optionality within that. Firstly, within the 5 years. But certainly, as we look ahead of the waves of growth beyond the next 5 years as that frame continues to grow with the size of the balance sheet and -- but the precise scale of the headroom as you say, will depend on ultimately on our performance over the next 5 years.

It's very helpful. I have a couple of questions, and you probably won't like either of them, I'm afraid, so I apologize in advance. But John, I think I'm right in saying that you had the 5-year anniversary as CEO earlier this year, is that right? And so congratulations on that, but I think we're talking about a 5-year plan here. So I just wondered if there's opportunity for you to just confirm for us if you're eager and willing to stay and deliver the next 5 years at the Board's [indiscernible]. We've had a few CEO surprises in the sector before, so it'd be helpful to have your answer on that. And then secondly, I think the other thing I wanted to sort of wrestle with is not RIIO-2, but RIIO-3 and Andy started sort of looking ahead to this. But if I list everything you're saying, CapEx is going to be higher in the future. Arguably, returns are going to need to be higher in the future as well. And I wonder if sometimes we fall in the trap of valuing your very long-term assets on a very short-term view of allowed return. So is there anything you could share with us that will help us think about where returns might go in RIIO-3 and -4 and -5? And just think about the -- I mean, you must think about that when you're valuing assets like WPD or even your gas assets that you're selling, so I'd just love to hear your thoughts on the longer-term return outlook.

Thank you. I'm going to answer 1 and a half, and then I'm going to hand over the half to Andy. So in terms of the first question, I'm loving this job. Any of you that's in the sector at the moment who was not excited about the energy transition and what's going on is in the wrong sector. So I have no intentions of leaving or going anywhere. As long as the board wants me, I'm here to stay. So that answers your first question. In terms of the second, I'll leave it to Andy to do his crystal ball on numbers in RIIO-2,3 and beyond. What I would say is I do think there is a real opportunity actually as we look at the energy transition over the next 10, 20, 30 years. And to stand back, which is a conversation, I think, that we are starting to have, and I referenced it in my keynote speech about what is the right regulatory framework that is really going to encourage and incentivize innovation to deliver what is a massive task. It's a one in a generation task. So I think the regulatory framework, and we've got the right market mechanisms and we've got the right institutional framework. So the discussion around the future of system operator is a small element of that. But I do think there is an opportunity now that we're out of the price control and transmission and will soon be out of the price control on ED2 just to start a broader conversation about what's needed for the next 30 years. What we've had has been great, but I do think there is an opportunity there. There's nothing more in that other than I do think it is a sensible conversation to be had given the levels of investment in infrastructure that's going to be needed over the next several decades. Andy?

Yes. I think what I would say in terms of returns around whether it's ED3, 2, 3, 4 or T3 is, we've always said and consistently that what matters over is the overall financial framework and the allowed return is a part of that, but so are the cash characteristics, whether that now what we've seen is the change in the capitalization rate, the RPI to CPIH switch, the opportunity for incentives, the opportunity to drive efficiencies and outperform and share that with consumers. And we feel overall for T2, certainly, we've got a package now that, as I said, it's going to be challenging, but we believe we can continue to deliver. And I have no reason to assume that won't be the case. So I'm not going to try and second guess what returns might be. Of course, I'd love them to go up slightly. But I think, for me, what's important is the overall package. We've got a good package now to work with the T2, confident that we'll work with Phil and Ofgem to achieve the right package for ED2 and that we'll continue to do that as we look ahead.

There's a question over here. I'll do go there, and then I'll come here.

Richard Alderman, BTIG. Three questions, starting maybe just with the bigger picture one, John. You said you were up at COP26 for a larger period of the time. When you came back and sort of gave feedback to your senior colleagues, how would you summarize what you learnt there that you didn't know? And how would you take that knowledge into perhaps future business plans and things that might adjust your thinking going forward on the CapEx plan, both at high voltage and low voltage? And then maybe a question for either of you. On the 100 million number, you talked about in the U.K. in terms of OpEx savings, you talked about digitalization. What are you doing from a practical point of view that you've not been doing in the last sort of 3 or 4 or 5 years on digitalization, can you give us some examples of that? And then the AGL problem of U.S. storm costs, and you talked on the slide about how to speed up or improve the collection of storm costs. It's always been an issue for yourselves and other U.S. utilities. Can you give us some practical examples about how you might deal with that? How will you pursue the regulators -- is it just cost assessment and quicker rate cases? Or is there something more detailed?

Okay. Well why don't I cover the first 2 and let Andy do storm costs? So I -- we were the principal partners at COP26, which we are very proud to be. And actually, I was there for the whole of the first week personally, and my whole team was there for the whole duration of the second week including many of the senior team that are here today. I left at the end of the first week. I have to say, what's with a sense of relative optimism? I think some of the commitments that have been made at COP26, including deforestation, reduction in methane, the coal commitments, it goes on. I think there's a sense of progress was being made and is being made. There are many people who think that more progress should have been made. But nonetheless, there were significant commitments. What was really interesting, I think, being at COP was one, and I'm certainly not a COP aficionado, but there were many people that seem to have been to the prior 25. Is that it just felt very different. It felt very different in terms of the energy that was there. The makeup of the people that was there, there were way more businesses being represented. I mean you couldn't shake a stick to hit into a CEO. I mean there were every CEO from the FTSE 100 and the Fortune 500 was there. And they were there, and they were seriously engaging in the conversation with what needs to be done. And I think that was the sense of COP, which was it wasn't a debate around the size of the commitment. Actually, it was about what do we need to do and what barriers need to be removed. What I found quite interesting was I sat in a meeting for one breakfast with John Kerry which is quite fascinating. And the topic of the conversation was, what are the barriers that need to be removed? And it was really pertinent because I sort of learned from it that the things that we're grappling within our country are very similar in every other country. And to bring that to life, planning is one of those things. So in the U.K., we've got a commitment to build 40 gigawatts of offshore wind by 2030. So we've got 9 years to do it. Over the last 10 years, we built 10. And everybody, whichever country they are representing was saying if we don't get the planning process right, then we're not going to be able to achieve this target even if we've got the right financing and the right engineering and the right commitments in place. And it's good there in the U.K. BEIS is doing a consultation on that, but there are lots of those types of barriers. So I came away with a sense of optimism. And actually, although there was some sort of dampening of some of the commitments right at the end, I was also optimistic given the commitments come back next year to Egypt, rather than wait 5 years to relook at those commitments. But my expectation is now, going forward, which is there's a lot of conversation of COP around commitments, but actually turning those commitments into actions is going to require a tsunami of policy, not just in the U.K. but right across the globe. So it will be really interesting to see what happens over the next 12 months to see whether that commitment actually translate into policy and ultimately, interaction. And for me, we will be working with BEIS and working with Ofgem about what are the actions that now need to be put in place and by when if we're going to deliver on the commitments that the U.K. has made. In terms of digitization, well, great question, and I'm trying not to preempt because what you're going to see today is lots and lots of examples of where we are delivering innovative and digital solutions to actually deliver on the 400 million commitment we talked about, but actually to serve our customers better. And I'll just give one example. It's a very simple one, through some of the work we've been doing with National Grid Partners in Silicon Valley. We are working with a company that's got military-grade satellite imagery that allows us to more directly manage vegetation management. It might sound very sort of straightforward. But if you manage your vegetation really well, you improve reliability of your customers, and it is the single largest OpEx number in any distribution company. So we're using that digital technology to fundamentally change the way that we manage all the trees that put our networks at risk. And that's just one simple example that will save money and improve reliability. That type of technology wasn't there 10 years ago, it's there today and National Grid is embracing it. Andy?

Yes. Thanks. So on storms, I will start where John finished, which is the first thing we've done is we have to make sure that our storm performance continues to deliver best-in-class and deliver what our regulators and customers expect. And the vegetation management example is one that we have invested in to make sure that the impact of storms is mitigated as best we can as well as we are storm readiness. And that, if you like, is the key, then have the right regulatory debates around the recovery mechanisms. The reference I had earlier on was we were facing potentially perverse incentives that actually the ability to recover storm costs was linked to how bad the storm was, how long people are off, which is completely counter to the real incentive, which is to get people back on as quickly as possible. So we've done some great work as part of current or new rate cases to try and shift that to make sure the incentive matches what we want to do, which is get customers back on. And we've made some good strides in that, which gives me confidence that recovery of those costs better matches how we incur them.

Thanks, Andy. We've run out of time for this segment, and partly because I'm really keen to get you to the breakout, so you can actually see some of the great works that's going on right across National Grid. There is going to be another opportunity for Q&A at the end of this afternoon, so what I'd ask you to do is actually head out from this room and make your way to your breakout, and there's lots of people by the door who can make sure you get to the right place. And I'll see you a little bit later on this afternoon.

Good afternoon, and good morning. I'm Chris Bennett, National Grid's Interim President for Electricity Transmission, standing in Alice Delahunty who's just had a baby. I'm delighted to be here today to share with you the plans for the future of the electricity transmission system in the U.K., both onshore and offshore. I've worked at National Grid for 29 years, and it's been a real pleasure to work for an organization that keeps the lights on and the gas flowing. However, when I speak to people joining the organization today, I'd say not only will they be part of that, but they'll also be at the heart of delivering a clean, fair and affordable energy transition. It's a genuine privilege to work for an organization with such a strong societal purpose. So as we move through the breakout this afternoon, we'll show you to start off with RIIO-2. So that's the price control that runs from the 1st of April 2021 to March 2026. And you'll see that's the start of a period of sustained growth as we invest to maintain, connect and expand the network. As we go to the second cube, I'll be joined by a colleague from National Grid Ventures, and we'll share with you our North Sea vision to support the delivery of the U.K. government's 10-point plan to net zero. You'll see this vision leads to growth in onshore and offshore infrastructure out to 2035 and beyond. So as a quick reminder, within the U.K., National Grid owns and operates the transmission network in England and Wales and operates the network in Scotland. We have a regulated asset base of over GBP 14.5 billion. Earlier, Andy mentioned that we're planning to invest GBP 8 billion of CapEx across the next 5 years, and that compares with the GBP 8 billion we invested in RIIO-1 across 8 years, so that's a 60% increase. The chart behind me shows the buildup of CapEx over RIIO-2. You'll see in blue at the bottom of the chart, we plan to invest GBP 4.5 billion to maintain the reliability of the existing network. At GBP 900 million per annum, that's an increase from the GBP 700 million per annum we invested in RIIO-1. This includes GBP 800 million on our London Power Tunnels project. The chart then shows in gray an estimated GBP 1.5 billion to connect new customers. This includes GBP 400 million to connect the new Hinkley nuclear power station but also battery connections and new data centers. The regulatory framework enables us allowances to flex as new generation and new demand connect to the network. And finally, in green, you can see over GBP 2 billion for expanding the network for net zero. It's in this green area that we see the major investment that increases as we go through RIIO-2 and grows as we go through RIIO-3 and beyond. So in aggregate, you can see that we plan to invest GBP 8 billion over the 5 years, rising from GBP 1 million -- GBP 1 billion at the beginning of the price control period to nearly GBP 2 billion at the end of the period. In a moment, I'll talk about how we are transforming the business to deliver this investment as efficiently as possible. But first, I'd like to share a quick video that really brings to life some of the investments we are doing right now in RIIO-2. If you'd like to follow me. And if you could play the video. [Presentation]

You can see from the video that we're delivering some fantastic engineering across the whole country. But let me now explain how we're transforming our business to deliver this infrastructure. So firstly, we are transforming how we connect our rapidly changing customer base as we look to connect customers both quicker and at a lower cost. Digital is at the heart of this transformation. We are digitizing our customer processes, enabling more self-service and more transparency of the whole connection end-to-end process. We're also using digital to standardize our connection designs. The digital product solution lab is enabling us to go for standard minimum specifications for our customer connections. And we believe through this new digital product, we'll be able to reduce the time to design by 75%, the time to connect by 50% and reduce the cost to connect by 10%. And this is just one of a number of new digital initiatives we'll be implementing in RIIO-2. Secondly, we are developing new innovative ways to increase the opacity of the network. Increasing capacity from our existing network is a key priority, and we will continue to use the Smart Wires technology that we explained in the last video. This is critical if we are to avoid building new overhead lines. It's clear though that we will need to consent and build new infrastructure. We are, therefore, working actively with working actively with stakeholders to reduce the time and the cost of obtaining consent. This will be critical to meeting the government's 2030 commitments. Finally, we are reimagining how we work on our existing network. In addition to standardizing our designs to lock in efficiencies at the beginning of the process, we are increasingly using internal resources to design, develop and project manage T2 asset interventions. Cost savings will be realized through lower contractor costs and greater flexibility to adopt -- to adapt to the plan. 10% to 20% unit cost savings have been realized in the initial projects with further savings targeted as we further digitize our processes and increase productivity. So in summary, we are transforming across our whole portfolio to maintain, expand and connect. We're setting targets across the portfolio to deliver outcomes at 10% below allowances, which when added to incentive performance and unlicensed income equates to the 100 basis points of targeted outperformance across RIIO-2 that Andy have mentioned earlier. If you now follow me, I'll explain how our delivery in RIIO-2 supports the National Grid Investor proposition. So the image behind me shows the expected RAV growth and profit growth drawn in RIIO-2 for NGET, which contributes to the group's 6% to 8% asset growth, 5% to 7% earnings growth and delivering this within the credit metric bands. There are 3 key reasons why operating profit will grow in RIIO-2: firstly, investment growth leads to an increase in our regulatory asset base, which in turn drives higher revenues; secondly, the changes in the regulatory framework in RIIO-2 improve our revenue position. This is driven by moving from RPI to CPIH, which increases in-period revenue collection and also changes to the regulatory capitalization rates which now better align with our actual rates, allowing us to recover a greater proportion of revenue within the RIIO-2 period than was the case in RIIO-1; and finally, controlling our operating costs and spending below our allowances, this directly leads to increased profit. Let me now take you over to cube 2 where Nicola is standing, and we will cover the period beyond RIIO-2. Over to you, Nicola.

Thank you very much, Chris. Good morning and good afternoon. My name is Nicola Medalova, and I'm the Managing Director of Interconnectors, part of National Grid Ventures. We're going to start this section by looking at a video that shows the context of supply and demand out to 2050. [Presentation]

As the video shows, there is a huge change out to 2030 and Nicola and I will now explain what this means to the onshore and offshore network if you'd follow us. So the picture behind us shows you the likely investment -- onshore investment out to 2030. This is to connect the wind farms required to meet the government's 40 by '30 commitments. You can see there is need for significant transmission capacity all along the East Coast. As you can see, there are 15 major projects at an estimated spend of GBP 10 billion, GBP 8 billion of that expected in RIIO-3. We have 2 planned HVDC offshore cables, which will take the wind capacity from Scotland and move it to the demand centers in England. We'll be developing these projects with our Scottish transmission companies as partners. But we're also looking to build a new HVDC offshell cable that will connect Suffolk and Kent to bring the East Coast wind to the demand centers in the south. These major investments account for just over half of the GBP 10 billion forecast and we expect to agree the funding for these projects with Ofgem over the next year in order to let contracts and start construction in RIIO-2. So the other half relates to 10 new onshore projects, which first required us to get planning consent, but these projects are also critical to get the power across the network. Sorry, Nicola.

Sorry. So Chris, I can see the need for this investment. But will you be doing it all? Or will some of it go to competition?

So it's a great question. We continue to engage with Ofgem and government around the introduction of legislation to introduce onshore competition and whether that's in the interest of consumers. We fully support competition, but I think some of these projects, the timing required to start and develop them and construct them, such as the HVDC cables, the likelihood is that we'll be asked to do them because there's not time to build if we introduce competition. It may well be for some of the later projects. There is time to introduce competition. But in that scenario, I'm very confident that we can bid for that work and win.

That makes perfect sense. And is this all about connecting offshore wind?

So it's not all about offshore wind. You can see there's a load of investment for offshore wind. But on the demand side, there'll be a lot of investment required to meet the electrical vehicle revolution. So the government has said that it will invest GBP 950 million in infrastructure to enable infrastructure for electric vehicles. But it's not just about electric vehicles, we also are seeing new demand connect directly to the grid, whether that will be data centers or batteries. And let's not forget, we've also got the investment that's required to maintain the resilience and reliability of the network. I mentioned earlier that we're planning to invest GBP 900 million per annum in maintaining the reliability of the network, and that's likely to continue as we go through RIIO-3. And that's obviously before we talk about the offshore investments, Nicola.

Absolutely. Please join me at the other side of the cube. So National Grid Ventures already has a very important presence in the North Sea. We currently own and operate 5 interconnectors to France, the Netherlands, Belgium and Norway. Together, they bring 6.4 gigawatts of capacity to the U.K., enabling the powering of many, many millions of U.K. homes. We're also building a sixth link to Denmark called Viking Link. With its capacity, in total, our portfolio is approaching 8 gigawatts of power. We will be able to provide 15% of the U.K.'s electricity needs. But importantly, we will also be able to export that power. And that means that when we have an abundance of wind power or solar power in the U.K., we can share those renewables with Continental Europe. To give you an idea of the scale of these projects, Viking Link, which we expect to be in operation in 2 years' time, is a 760-kilometer subsea cable between the U.K. and Denmark. And the costs in the region of GBP 2 billion. Like all of our interconnectors, National Grid is a 50-50 partner with the joint venture's partners on the other side of the interconnectors. And so we will be investing about GBP 1 billion of that. But that's only Phase 1 of 3 phases for the North Sea. The U.K. government and the European governments have staggering ambitions for the North Sea. And so over the next decade, we'll start to see Phase 2 take hold, and that includes 2 new types of interconnectors. Firstly, multipurpose interconnectors. Now those connect 2 countries like our point-to-point interconnectors do today, but they also pick up wind farms along the way. And that's really important because the offshore wind operators can then access to markets share in renewables further and putting them where they're most needed for security of supply. But it also means that we reduce the number of landfalls to the coastal communities. So if we have, for example, 3 wind farms and 1 interconnector joining together, we have 1/4 of the landfall necessary. 1/4 of the converter stations that would otherwise be needed. And 1/4 of the coastal infrastructure that then joins to Chris's onshore network. That's really important for being able to consent these projects and to do the right thing for our coastal communities. Energy Islands are man-made islands in areas of really intensive energy production, undoubtedly, will include offshore wind, but may also include battery storage, hydrogen production or possibly even the infrastructure for carbon capture and storage. They'll connect to 2, 3, 4 or more different countries, meaning that, again, renewables can be shared further. Phase 3 out beyond 2030. We've heard about the government's ambition for 40 gigawatts of wind by 2030 and an ambition for 18 gigawatts of interconnection. But beyond 2030, that ramps up. We're looking at 100 gigawatts of offshore wind in U.K. water and 300 gigawatts of wind in European Continental waters. And to be able to allow that to transfer around where it's needed, we're looking at a coordinated holistic offshore grid in the North Sea, much like Chris's grid onshore, but replicated in the seabed. So I think we can see clearly that in the near future, the North Sea is going to become very, very busy.

That sounds really exciting, Nicola. Can you tell me why you think you're really well positioned then for this future?

Yes, I'd love to. So for me, that's a combination of 2 things: firstly, capability; and secondly, influence. So we have a 50% share in every single interconnector between the U.K. and Continental Europe, and we operate most of them. We are 1 of the 4 most interconnected owners in the world. We have just built the longest interconnector worldwide to Norway at 720 kilometers. And we're just about to supersede that with the Viking Link at 760 kilometers. We know how to develop these projects. We know how to construct these projects. And we know how to operate interconnectors. Looking at our influence, we have a fantastic relationship with government and with Ofgem. And we are at the heart of the North Sea vision, and we are able to help government and Ofgem to develop some of the frameworks for these interconnectors. The cap and floor mechanism, the regulatory framework that we have for our existing interconnectors, we designed that with government and Ofgem, and now we're doing exactly the same for the next generation of interconnectors.

It looks like you've built some fantastic interconnectors. Is there anything you can tell us about the future interconnectors that you might be working on now?

As you might imagine, much of it is commercially sensitive and subject to nondisclosure agreements. But what I can say is that we are involved in pathfinder projects to the Netherlands and Belgium. Pathfinder projects are those are supported by the U.K. government to allow derogations from existing legislation that might not enable these interconnectors to go ahead before we get new legislation and frameworks in place for them. So we've got a huge support from the U.K. government to try and get us moving and as the name suggests, find a pathway to the delivery of these interconnectors. We have also just agreed a close working agreement with Statnett in Norway, so that we can support each other and work collaboratively in the development of multipurpose interconnectors. So I would just finish by saying that clearly, there is an enormous amount of investment that will be happening in the North Sea over the coming decades. And I can honestly say that I think National Grid is the best company in the world to deliver this.

That's fantastic, Nicola. Can we now just move to our final video that will complete the journey out to 2050. If you move this way? [Presentation]

What an amazing future. It's clear from the video that transmission is going to undergo a massive transformation to meet the government's 2050 net zero commitments. This provides National Grid with a huge array of investment opportunities, both onshore and offshore, to connect renewable forms of generation and also to meet the increased demand as we decarbonize transport and heat. This will be for decades to come. Hopefully, you can see we are genuinely at the heart of delivering a clean, fair and affordable energy transition. Thank you for listening. I propose we now move over here where there's a bit more room and we will take questions.

Thanks, Chris. Thanks, Nicola. Really interesting presentation just given. For those of you who don't know me, I'm Nick Ashworth, I'm the Director of Investor Relations, and I'm going to be your host this afternoon through the -- to the virtual breakouts. And I will -- I'm on hand to ask your questions for you. So if you have questions, please put them into the text box and I'll be able to ask the presenters the questions as we go through the breakout this afternoon. So with that, I've got a few coming in already. I'll start with you, Chris. We've talked about the vision for the next -- well, next 30 years, but certainly, over the next 10 years. And it's just interesting as you've just been in the plenary and listening to Phil and WPD talking about potential acceleration rollout around heat pumps and EVs. And that has an impact across all of the electricity networks. But I guess the broader question is, it feels like there is an acceleration now around changes to the system, and you talked about some of that over the next 10 years, is Ofgem ready? Are we ready? Are there new mechanisms and regulatory changes that need to be made to actually get some of this stuff done?

I mean it's a great question. And you can see there's a lot that needs to be done. So if I refer back to the 40 by '30 targets and just the 15 projects that are required to connect the 40 gigawatts by 2030, we're in regular dialogue with Ofgem and the government about the changes that are probably required to deliver that level of investment. Historically, it will probably take us over more than 10 years to deliver such infrastructure. So there are some changes that are needed. We're working closely with the ESO to develop a holistic network design, so that will be the backdrop for these investments to create the needs case. We are working with Ofgem. Can we bundle some of these investments to mean we can get things through planning and get funding quicker. And as John mentioned in the plenary, we're working with BEIS on the planning process. So I think there are changes. The positive thing is all of the engagement that we're having with BEIS and Ofgem is we're all aligned on the need to drive forward for net zero. So I'm very confident that we'll work together and remove any regulatory barriers that they are because it's all clear that we do need to deliver net zero.

And Nic, on a similar vein, I mean, you talked about the potential 18 gigs of of interconnection that is talked about over that by 2030. Presumably, these all takes partnerships, as we've seen with the interconnectors we've already got. So it feels like there is good government momentum on this side. Given we need partners, are you seeing that there's good momentum on the other side of all these connections as well? And so is it feasible this can get done?

Absolutely. I think that the momentum is equivalent on both sides of the North Sea. And we have some really ambitious targets in Continental Europe, but individual country level and at the European commission level. And we have some differences in the framework and aspirations, but everybody understands the need to deliver this and the fact that this is a critical decade for setting off in the right direction. So we have good cooperation. We have good fodder to be represented at where we can start to think about the future framework. And so like Chris, I'm incredibly confident that we will have frameworks in place soon. And until then, we have the opportunity of Pathfinder projects.

And so Chris, we've had a question on the GBP 10 billion for the 15 projects. And so I think you said GBP 8 billion in T3. So I guess I have 2 questions on the back of this. One is, does that leave the GBP 2 billion in T2? Is that part of the UMs? Or does that come later? And the second part of it is, unsurprisingly, how much of that is going to come when? And therefore, you said that given pace, National Grid could end up doing some of this or maybe a lot of this before competition comes in. Can you sort of give us a sense of scale around that?

Yes, I can. So just to be clear, then the GBP 10 billion in total across the 15 projects, we believe at the moment, based on phasing, that would be GBP 2 billion in RIIO-2 and GBP 8 billion in RIIO-3. So the GBP 2 billion in RIIO-2 is made up of the early engineering and consenting that we need to do on all the projects. So we've got some baseline funding for that. But as I mentioned, we think the HVDC cables to Scotland were likely in RIIO-2, to have got the funding from Ofgem and started the construction phase. So the GBP 2 billion in RIIO-2 is a mixture of preconstruction consenting and early construction of which the HVDC cables to Scotland, I think, are the most likely ones. I mean part of the active debate we're in with government and Ofgem is this potential trade-off between introducing competition and giving the clarity to get on and deliver these projects in one go. So they're still open-minded on all of the projects, whether it is in the interest of consumers to introduce competition. But no, I think I said earlier, I think at least half, I think the time scale would suggest they will come to us in our Scottish counterparts. The others could go out to competition, but we need to work through whether that is the right answer for consumers? Or is it of more interest actually trying to deliver a bit earlier?

And just on that, what should we be waiting out or what should be listening out for in terms of next steps around competition?

Yes. So next steps in terms of competition. I mean each of these projects. So recently, Ofgem have approved the initial needs case for the Eastern link. We'll get the final needs case approved early in the new year, and then we would expect the funding. So the normal regulatory processes will continue and the default is we'll be delivering them. Ofgem then, obviously, we look out to see whether there is the primary legislation that comes in, in any energy bill next year. But onshore competition does need primary legislation. So that would be really the first step in terms of where the competition is happening.

And so I think we are starting to hit up on time. I've got a question which I think is actually good for both of you, and unsurprisingly, it's on returns. And so for Nicola, can you just sort of size -- you didn't talk specifically about the level of returns. You can sort of just size them for us and give us some idea of what we're looking for. And Chris, we've talked about and you mentioned the new performance and efficiency program that Andy mentioned as well as GBP 100 million across the U.K. businesses. How does that fit into what we're talking about potential 100 basis points of outperformance? And so yes.

Thank you. Thank you. So in interconnectors, we enjoy returns that are higher than in the regulated business, we generally have double-digit returns. As we start to move into different types of interconnector, the return range might narrow, but with that will come less volatility and less market dependence. But for the moment, good returns into the double digits. Obviously, a bit of competition particularly between XXXXXXXXXXXXXXX.

I mean in terms of the regulated business, obviously, the returns have now been set for RIIO-2. We were pleased that the CMA overturned the outperformance wedge, so we're at 4.5%. You add on the CPIH on top of that, so let's assume that's at least 200 basis points, I guess, it's 6.5%. I've explained we're targeting 100 basis points of outperformance can get you to 7.5%. And although it's not included in the operational targets under the RIIO contract, there is the potential to outperform on the finance elements in terms of debt as well. That could add up to 100 basis points as well. So we're just now focused on delivering for our customers and, I'll say, through delivering things efficiently, shareholders will benefit as well as consumers.

Thank you very much, both of you.

Thank you.

I'm an electrical engineer. I studied electrical power engineering because I always wanted to be part of the power industry and part of the energy transition. I actually started in a very hands-on role on coal power stations doing high-voltage testing. And then a bit like the energy industry, I transitioned through coal into gas-fired power stations, then into offshore wind. I spent some time in research and development of low-carbon technologies and then joined National Grid. I've been lucky enough to work all over Europe. I spent about 4 years in Slovakia, good few years in Germany, a little bit of time in the U.S. So I've seen the power industry from all sorts of angles and worked along the value chain, which has given me a great insight into how the whole industry comes together. I joined National Grid about 3.5 years ago. I joined to run the 24/7 control room and the development of all the capital schemes that we deliver on the network. And I came into this role as President of ET about 6 months ago. My vision for the ET business is that we are absolutely positioned to be at the heart of the energy transition. And when we brought our new executive team together and we said, what will it take for us to succeed? There was 3 themes that came out really strongly: one was we want to build the organizational health and capability of the business for the future to really set leading edge capability in terms of operating transmission networks; the second was to be able to deliver our outputs sustainably and continuously more efficiently, and so that we just keep going on that efficiency journey for our customers, for our consumers and for our stakeholders; and the third was about turning the net zero ambition into real concrete steps and making those immediate and responsive to the pace at which we need to operate. And if we can do that over the next 5 years, we can really accelerate through to this 2050 ambition and be absolutely central to that for the country and for the world more widely. The fundamental role of National Grid and electricity transmission of transporting electrical energy from where it's generated to where it's needed doesn't change. But actually, in the future, how and where it's generated is changing completely as is how it's being used, and we need to respond to that. So we need to support the government's ambition of 40 gigawatts of offshore wind by 2030. That means instead of generating down through the center of the country, we're generating on the coast. So where the energy needs to move completely changes. But then, how it's being used and where it's being used is also going to change. And we don't fully know how yet, but we know that electricity will be part of the decarbonization of transport and of heating our homes and that that's going to require reinforcements at all levels of the electricity network going forward. The nature of our business is that we have a vast array of stakeholders, and they all touch our business in really different ways. So for customers that are already connected, for consumers, for the distribution networks, the thing that's front of mind for them is resilience and reliability. How we respond in times of bad weather, for example, how we work with local communities, how we create employment, develop skill sets. And by focusing in on those local stakeholder needs, we're able to respond to them and reflect them in those local communities. We have other local communities that are affected in a totally different way when we need to build new infrastructure, hearing their voice considering what that new infrastructure means for them is going to be -- is a very important part of how we work today, but will be even more so in the future as we make space for net zero. Yes. So we've created a delivery unit within the organization that is entirely focused on delivering for customers. From the point of interest to physically connecting to the network. And whereas we've made huge strides in terms of customer service, being focused on our customers and listening to them. The next step change is really in terms of customer need and being able to respond to that customer need. And what we're seeing is that customers want to be able to connect quicker. They want to be able to connect to the network and be part of the net zero transition and we need to facilitate that. And that requires quite significant changes in terms of how we develop work, how we facilitate access to the network. And so creating that home for that focus and that accountability for working with customers to respond to their needs has been a really integral part of how we've designed the new structure. We do have a real array of stakeholders to deal with. And that changes in different areas and at different times. So at the moment, actually, a lot of our times going into engaging with the supply chain because we recognize there's this huge work bank coming up. And it's not just with us, there's other big infrastructure projects going on, whether that's HS2 or the offshore wind developers building their infrastructure. And we're all playing in the same space in terms of equipment, raw materials, critical skill sets, engineering resources. And so working with that supply chain to see what does the next 5, 10 years look like, how are we going to build capability together, how are we going to respond to this challenge ahead of us to the green recovery to the leveling up agenda. These are all really big, important questions. And as we work with the supply chain, equally, we need to engage the right government departments, the regulator and try and coordinate that response and bring everyone together on this incredible challenge and ambition that we have towards net zero. So our RIIO-T2 deal is a really challenging one in that we've got a lot of work to deliver. So there's a step-up in volumes in terms of the asset health work that we need to deliver. We're seeing an increased number of customer applications, and that comes with quite a high level of uncertainty. And we know we've got big infrastructure build and reinforcement to do as well. The deal comes with very prescriptive deliverables, clawback mechanisms and quite significant efficiency challenges with that as well. So as a business, we need -- really need to respond to that and think about how we can sustainably but continuously reduce our cost of delivery without compromising on reliability or the progress that we're making towards net zero. So that's a real focus for us at the moment. We see digital being quite a big part to play in that, and particularly in the asset health work and how we control and operate the network. But also, we're looking at where digital can support in terms of consenting and construction in areas where it hasn't traditionally been used before. In the initial phase, we're putting a lot of effort into maximizing productivity of our field force, so giving them the right information at the right time to make the decisions that they need to make. So mobile devices, giving them absolute clarity of their work, allowing them to record the right information so we can create a continuous feedback loop and learn from that and keep ratcheting up the productivity over time. We're then moving more into the AI space in terms of predicting failures, how we want to control the network of the future. One of our big investments over this period is actually going to be an entirely new control system for the network. Yes. So we've created a fully accountable and empowered business units, and that's about putting together the decision-making around top line objectives with bottom line costs, putting decision-making closer to the assets, closer to the customers. So we get greater ownership and accountability for the results that we're trying to achieve as a business and bringing those really together in a very open and transparent way, so we're able to talk about the decisions we're making and why they've been made and where they've been made. So we're on a pretty significant transformation of the electricity transmission business. We've brought together what was the operational part of the electricity transmission business with our capital delivery construction part of the business, and embedded the functions that support us to create this fully accountable business unit. Within that business unit, we've structured this to be really aligned to our external stakeholders' requirements to post outputs together with cost and create that true accountability for results because we want to be a much more results-orientated organization, with accountability for delivery and decision-making in the right place to support that. That is quite a big change for us as previously, we were organized along internal processes. And so we need to bring the teams on those journeys and provide them with the tools whether that's digital tools or capability or upskilling or support to take on that wider remiss and that accountability for delivering outputs for our stakeholders.

Hi, and welcome to the New York breakout session. I'm Rudy Wynter, President of National Grid New York.

And I'm Will Haslip, Head of U.S. Business Development and Partnerships at National Grid Ventures.

I've been with National Grid for 33 years, and I can't tell you a more exciting time to be at the helm of the New York business. We are at the point where we're solving large problems like helping the state through the energy transition, while at the same time, making sure we deliver energy safely, deliver it reliably, deliver it cleaner, but also make sure that no one gets left behind on that transition. Today, Will and I are really excited to share with you the New York story. We're going to talk to you about what we're doing in New York that keeps us at the heart of the energy transition. We'll share with you some really exciting growth opportunities. And finally, we'll give a financial outlook for our New York business.

Please follow me into the presentation. [Presentation]

Welcome, everyone, and thank you for joining us, and welcome to New York. I want to show you and start off with our service territory in New York State. And just as a reminder, we are 65% of the group's U.S. asset base. We're investing $2 billion a year in CapEx. We have a rate base of almost $16 billion that's growing at 8%. And probably, more importantly, we have the privilege of serving over 4 million customers in the state. The last point I would make about New York is New York probably has some of the most progressive environmental targets of any state in the United States. Earlier today, you heard Andy and John set out the group's 5-year financial framework. Well, this is how New York aligns to it. 5-year CapEx investment of $14 billion, or GBP 10 billion, and the expected asset growth and earnings growth to follow. We'll deliver this through a focus on efficiencies as well as executing on some of the exciting investment opportunities that we're going to be talking about today. And we've got great visibility with our new rate cases in Downstate New York, our KEDLI, KEDNY case as well as our proposed case for Niagara Mohawk, all of those give us greater alignment to the environmental aims of the state. It gives us greater visibility on how we can drive efficiencies to ensure that we're delivering at 95% of allowed. And then finally, it gives us great visibility for all the important capital investments we have to make in this business. During my time at National Grid, we've always had a good working relationship with our stakeholders, with our regulators, et cetera. It's no secret that a couple of years ago, we had some issues, particularly as it related in Downstate New York to a proposed moratorium on new gas connections. Well, I want to tell you today that we have worked very hard. We've reset that relationship with the state and others. And we've also designed and we're executing programs in Downstate New York that introduced some noninfrastructure solutions into our plans as well. But I'm going to have my colleague, Bryan, tell you all about that.

Hello. My name is Bryan Grimaldi, I'm the Vice President of Corporate Affairs in New York for National Grid. As you know, New York State has a new governor. Kathy Hochul was sworn in on August 24, and has hit the ground running with an ambitious agenda. And we stand ready to assist the state to build back better as we recover from the pandemic. Her early actions and statements on addressing climate change are focused on collaboration in partnership with the private sector. And we've communicated our readiness to assist. Just this week, we collaborated with her office when they reached out Natural Grid proactively to ask our opinion on a piece of pending legislation. We've set up relationships with our key staff members in government relations, communications, regulatory, energy policy with their counterparts and state government. Some of whom are new, all of whom are willing to assist and work with National Grid. Our senior leadership meets regularly with NYSERDA , our public service commission staff and the building blocks are in place to maintain these relationships at a very high level. I very much look forward to continuing to work with the state stakeholders advancing our clean energy future.

Bryan and team New York are doing a great job, like I said, in resetting that relationship. But we have to make sure that we deliver affordably for our customers and make sure we're delivering efficiently so we drive value for our shareholders as well. To do this, we're going to have a laser-like focus on driving some efficiencies in the business as well. Earlier today, you heard Andy talk about the group's new cost efficiency program. Well, New York is going to be playing a role in that as well. New York is targeted to deliver $175 million of efficiencies in that program. And we're going to deliver those targeted efficiencies focused on 3 main themes: the first of which is reducing our external and supply chain spend; the second of which is enhancing our work and asset management capabilities; and introducing new technologies. Just outside of this room on display, we have something called the CISBOT. It's an internal robot that goes inside of the pipeline that helps us seal leaking joints. By utilizing technology like CISBOT, the New York business has been able to save $40 million between the year 2017 and the year 2021. The third example and key theme for efficiencies is focused on digitalization and automation of many of our work processes. For us, we're focused on deploying a digital tool that helps us optimize the routes, bundle work and improved dispatch of all of our field crews. That platform will allow us to save $30 million a year. But it's not only about OpEx. We're also doing a lot to deliver our capital plans more efficiently as well. We'll deliver the same level of output today but deploying 10% less than we did 3 years ago. Now moving on to our growth opportunities. Our goal here is to make sure you leave this session just as excited as we are about the opportunities we have before us in New York. So I'll be breaking down for you really how we're going to be spending that GBP 10 billion over the next 5 years. Largely, you'll see us talk about the gas distribution business and how those investments are going to be critical to ensuring an affordable energy transition. I'll be talking about the investments we're making in electric distribution, much of which is focused on maintaining resiliency and integrating renewables into the grid. And lastly, we'll talk about the electric transmission business and show you some really cool regional solutions that we're deploying, again, to help integrate renewables onto the network. So let's begin with the gas distribution business, where the plan is to invest GBP 6 billion over the next 5 years. 80% of this is largely driven by mandated programs and reliability, specifically our leak prone pipe program. Our leak prone pipe program underpins a lot of our growth. To date, we've replaced over 5,000 miles of leak-prone pipe, and we still have easily another 15 years on this program.

To date, we've replaced over 5,000 miles of leak-prone pipe, and we still have easily another 15 years on this program to go. But I'm going to have my colleague from New York, Corey, tell you all about it. [Presentation]

It's always better seeing Corey and the team talk about it and do it rather than hear me talk about it up here. But the other thing the leak-prone pipe program does is it helps us future-proof that gas distribution network because we do believe that network has a future in a net zero future. We recently published and participated in the study with the City of New York called the Pathway study. The study was designed to look at how do you decarbonize New York City. And 3 big findings came out of that I'll share with you. The first of which is that on the peak day in the winter time, the gas distribution network in New York City is carrying 3x the amount of energy than the electric distribution network is carrying on a peak day in the summer. So it's carrying a lot of energy. The second is the fuel that's going through that pipeline can be decarbonized. And the third is that the diverse building topography we have in New York City, and that might be a read across to any city, it is impossible to electrify everything. As a matter of fact, the study showed that anywhere from 1/3 to 2/3 of those buildings cannot be electrified. Now electrification is part of an ongoing narrative on how we're going to decarbonize the heating sector. And don't get me wrong, we have to electrify a lot of the heating sector. But it is not practical nor is it affordable to electrify everything. The natural gas network will have a role in the future. We're not just talking about these things, but we're actually doing a lot of study work and planning pilots on integrating renewable natural gas and even blending hydrogen into the network. As a matter of fact, in a couple of weeks, you'll hear us announce a hydrogen blending pilot that we'll do in New York. We will blend green hydrogen into the network and distribute that lower carbon fuel to hundreds of customers. So some really exciting things on the horizon. I know Will has some really cool stuff going on with hydrogen as well.

Thank you, Rudy. Hydrogen is a key tool to reach decarbonization goals. And New York is poised to lead with one of the first hydrogen hubs in the United States, and that led us to launch our vision just a couple of months ago. In addition to the upcoming blending project Rudy mentioned, New York is home to one of the leading green hydrogen companies in the world, Plug Power, which recently broke ground on a $250 million facility in upstate New York that will produce 40 tons of green hydrogen each day. Further, Long Island's unique requirements for power generation to maintain reliability, coupled with significant penetration of offshore wind, make it the perfect place to pursue hydrogen-fueled power generation to support the grid when the wind isn't blowing. We also see demand potential in the gas network and in mass transport, including passenger ferries, trains and airports. While investment won't happen for a number of years, there's important work to do today. And when we look out at the future for hydrogen, the opportunity is significant. For example, establishing the hydrogen hub in New York, we forecast, would lead to a 15x increase in hydrogen production to 600 tonnes per day, which could fuel 10 passenger ferries, 45 trains, up to 1 gigawatt of power generation and blend into the natural gas network. Now all of that would represent about $5 billion of investment over the next decade. We're excited about the future for hydrogen and see our role as leading the development of a hydrogen hub in New York, developing hydrogen-fueled power generation and blending into the natural gas network. Being a leader here is critical to remaining at the heart of the energy transition for decades to come.

Thanks, Will. Now let's turn our attention to the electricity business, where we plan to invest of CapEx over the next 5 years, $2 billion in electricity distribution and $2 billion in electricity transmission. The electric distribution business has very similar strong growth drivers that we've seen in the gas distribution business. A lot of it is driven by hardening the network. Remember, my upstate distribution network has about 82% of its lines are above ground. So we're investing in hardening those assets and making that network much more resilient. But I also want to get you excited about just the market dynamics that are going to drive growth not just over the next 5 years, the next 10 and 20 years. Let's take a look at our renewables, for example, in distributed generation in Upstate New York. Over the last 20 years, we've interconnected about 900 megawatts of distributed generation onto our network in upstate New York. I have 4 gigawatts currently in the queue to be interconnected. So that's going to drive some additional investments to ensure that we interconnect that -- those generation on time. Take electric vehicles or EV. That's another great example. When I look at the last 3 years in our upstate footprint, we installed 1,600 electric vehicle charging ports. If I look at the next 3 years going forward, we have an ambition to install 16,000 EV charging ports. And then if we look over a transmission, that's where we actually see some huge opportunities for investment in New York State as the state attempts to really build out a strategy of having a green super highway that can bring cleaner energy from upstate New York down to the load centers in New York City. So what are we seeing and what are we doing about these opportunities? Well, we've been hard at work identifying where that load is going to come on and then, more importantly, what are the local upgrades we've got to make on our distribution and transmission networks in order to facilitate that load coming on. We've prepared all that and made a filing with our regulator, the New York Public Service Commission. If approved, that could be another $2 billion of investments between the 2025 and 2030 time frame, and that is on top of the investments I talked about before. All of this is an effort to create transmission capacity so the state can integrate its renewable energy targets. Another great example of this is a regional solution called the Smart Path Connect project. In 2021, the New York Power Authority selected National Grid as its partner for this project. It's due to be commissioned in the year 2025 and it will help unbottleneck about 1,000 megawatts of existing renewables that are in upstate New York. But I'm going to have my colleague, Bart Franey, tell you all about it.

The wooden structures behind me will soon be upgraded to state-of-the-art design capable of carrying over 1,000 megawatts of additional renewable energy produced in Northern New York to customers all across the state. This transmission project is known as Smart Path Connect and is critical to support New York's ambitious effort under the Climate Leadership and Community Protection Act. Transmission solutions such as this will also be a catalyst for economic growth. By investing in upstate transmission, local communities will benefit economically from construction activities and new transmission will create enduring economic benefits through the growth of renewable generation along their path. National Grid is working with regulators and policymakers to advance additional cost-effective transmission solutions that satisfy clean energy mandates during this critical decade.

That's an exciting project, and it represents an investment for -- of about $500 million for us. But Bart talked about a great transmission project that's happening in upstate New York. Now Will will tell you about a great one that we're planning for in downstate New York.

It is such an exciting time to be part of transforming the transmission network. With the regulated utilities that Rudy just discussed in our commercial businesses and National Grid Ventures, we really are right at the heart of the clean energy transition in New York. And for New York, the single largest source of clean electricity will be offshore wind, and much of that offshore wind will connect to Long Island, making Long Island critical for the New York's clean energy transition. In fact, of the 4.3 gigawatts currently under contract, just over half will connect to the Long Island electric system. And beyond that, we could see another 5 gigawatts over the next 10 to 15 years. Now this will require connecting new transmission, both on the island and connecting the island to the Mainland New York transmission system to be able to integrate all of that offshore wind. Now that's led to a competitive process that's open right now to procure additional transmission cables connecting Long Island to the Mainland system and upgrading the system on Long Island to maintain reliability. We're participating through our New York Transco joint venture, of which we own just under 30%, along with the other 3 utilities in New York State. To further enhance our competitive position, New York Transco has partnered with the New York Power Authority and submitted the proposals as Propel New York Energy. Now in addition to the important goal of integrating offshore wind, Propel New York Energy would also deliver important benefits: emissions reductions from allowing more transfer to and from the island, lower cost to consumers by relieving congestion and increased reliability and delivery of offshore wind to the demand centers. Now to put it in perspective, 3 to 6 gigawatts of transmission capacity is expected to cost in the order of $3 billion to $5 billion. So clearly, this is an exciting opportunity for us.

I'll close it out where I started the presentation. And as I said before, I've been in this business for 33 years, and I don't remember a time where we've had so many exciting growth opportunities before us. But if you look at the regulated businesses we have in New York. We have great investment plans driven by our great regulatory agreements, growth opportunities and underpinned by an efficiency program to ensure that we're delivering on the returns we need to deliver for this business. At the end of the day, we're going to be investing, as I mentioned, $14 billion of CapEx. We'll see an 8% rate base growth followed by 8% operating profit growth. We have a business here in New York that, across the board, whether it's gas distribution, leak prone pipe or it's the electric distribution business, many years of solid growth ahead of us. The things that Will talked about are just adding to that real pipeline of opportunities. So there is a lot going on, and we've done a lot in New York State to make sure we're at the heart of that clean energy transition and making sure we're doing it safely and making sure we're doing it reliably, but there's still so much more to be done, and we look forward to getting to work in New York. So with that, I'd like to open it up to some questions.

Rudy, thank you very much, that was really interesting. So we have some questions coming through. Thank you very much, if you want to ask questions, please do send them through on the web platform. I'll start with you, Rudy. I've had a question on gas. 60% of your investment is going to gas distribution. But the whole energy transition relies on increased electrification and reducing dependence on natural gas. Are you worried about stranded assets?

So not worried about stranded assets because, number one, we do feel there is a role for the natural gas network in the future. It may not be carrying all methane. It will likely be carrying a lower carbon fuel as we mix renewable natural gas and we mix hydrogen into it, but there is a role for that natural gas network.

And as a follow-up to that, can you talk a little bit about hydrogen blending and what we think we can do on the network at the moment and what's going on and what the future holds?

Yes. So right now, the future is -- we're focused on looking at, number one, is the network ready to blend the levels of hydrogen we'd like to blend, doing a lot of studies around that. We're also doing some work around understanding what are the policies that we are going to need in New York State to enable more hydrogen production, green hydrogen production. And then lastly, the pilots that you'll hear us announce are going to be focused on us actually blending some green hydrogen into the network, monitoring it, seeing if customers' equipment changes or it operates efficiently as it would with natural gas. So over the next couple of years, it's a lot of making this real and continuing to learn.

One more on hydrogen and to bring Will into this. You were talking about the opportunities in Long Island. And can you give a bit of a time frame? Because you said it was a few years off, but I think also the capital investment number, suggested the next decade. So can you just sort of scaled up for us, please?

Yes, certainly. So I think I'll start with the infrastructure bill, which does contain some funding for hydrogen, hydrogen hubs. And so we would certainly be targeting that. Now the time frame on that is a competitive process led by the government over the next 6 months. to 1.5 years after that. So certainly, quite some time before a selection would be made there and then we could really get the work. So what we see is a lot of the actual investment in construction taking place in the second half of the decade out much more close to 2030.

And moving on to electricity. And there's a lot of potential growth, as you talked about, coming over the next decade. A lot of it is new connections and moving renewable supply to demand areas. Is a lot of that being driven by offshore? Or is there onshore as well, Rudy?

So there is onshore as well. So New York has a goal of having 70% electricity come from renewables by the year 2030. Today, we have about 27% coming from renewables. So there is a goal of having 9 megawatts of offshore wind along New York, but there is going to also be maybe 10 gigawatts of onshore renewables as well. So in New York, we won't hit those aggressive goals without both.

And in terms of returns, we just had a question around the financial framework at the end that you put up. So you expect 8% rate base growth, 8% operating profit growth. There can sometimes be a lag between the 2. Is the cost savings program expected to close the gap?

So the cost savings program is absolutely going to be a tool to make sure that we're always delivering on our goal of 95% or better return.

Perfect. And in terms of sharing that with customers?

So in New York, we have a mechanism where if we exceed our ROE by greater than 100%. There is a mechanism where we would absolutely share that with customers, and that's the right thing to do.

And Will, just moving on to the transmission projects that you were talking about. Can you give us a bit of time frame around that? And you said bids have just gone in, if I'm right. And so what's the next process? What should be listening out for?

Yes. So we expect the selection to be made in late 2022. So it will be quite a lengthy process. It's quite complicated. But once the selection is made, there's quite a bit of development work. So we shouldn't expect to see any infrastructure placed into service until the second half of the 5-year period at the end of the decade. So call it around about '27 time frame.

Perfect. On the distribution side as well, we often hear about storms and the impact that it has on local communities and the work that we're doing. First, can you talk a little bit about, I think, John or Andy, one of them mentioned regulatory mechanisms changing so that we can more align costs to the storms and recovery. So can you talk a little bit about how the mechanisms are changing and then also a bit of the infrastructure work and can we underground more of them? And can we do something to help going forward?

So yes, so I'll start with the mechanisms for recovery. At least the joint proposal we have before the Public Service Commission now has in it a greater ability for us to recover some of our storm costs for major storms, minor storms as well as certain mechanisms for us to recover costs for prestaging of work, right, before a storm happens. So those are probably better aligned now, as Andy was talking about, than they have been in the past. But I also want to make sure everyone realizes, we have a very reliable network in Upstate New York. This will be our 14th year of hitting our reliability targets. And a lot of that is because we do a tremendous amount of work focused on vegetation management to ensure that we have the trees out of the way from these power lines. So when a storm inevitably comes, our lines are secured. But if and when customers do experience an outage, we try to make sure that we're recovering them in a very timely fashion as well.

Just got time for one last question, if there's a quick answer to us as well. Relationships in New York is what I always get asked from an Investor Relations point of view. There is a new governor, Brian talked a little bit about relationships. Can you just talk from your perspective and what you're doing and how you're connected to different policymakers and decision-makers across the state?

Sure. So when I took on this role, I made sure I went out did a 100-day listening tour, and I met with community leaders, politicians, regulators, all of our key stakeholders took to hear them out, but also send the message that we're looking to reset relationships, step up our game with stakeholder engagement, and we have done that. We're in a much better place now. Brian mentioned the new governor. I spoke to the new governor a couple of -- about 3 weeks ago, about economic development projects we can be doing in public and private partnerships. So the relationships now are very different than they were, say, 2 years ago.

Brilliant, Brilliant Well, thank you very much, indeed.

Thank you. [Presentation]

Welcome to the breakout session to discuss National Grid New England. I'm Steve Warner, President of National Grid, New England.

And I'm Carol Sedewitz, Vice President of Electric Asset Management and Engineering.

I'm excited to be part of the senior leadership team, having joined National Grid at the beginning of October, following a 31-year history at Baltimore Gas on Electric, Constellation Energy and Exelon Utilities, where I have a track record of driving operational excellence across the business. I have experience in working in a utility that owns multiple other distribution companies, and we're looking forward to leveraging what we have with WPD and New York. I do feel that my deep utility experience will be an asset to the senior team as we embark on a journey to achieve efficiencies in our business to make the incremental investments that present growth opportunities enable our clean energy future for our customers. I'm interested in partnering with our customers and the communities that we serve to help them reliably and safely and cost effectively meet the challenges of the climate change challenge. And now I would invite you to follow us around to the other side of the display, just follow Carol.

Yes, to the main presentation area.

I'm going to set the stage behind me, there's a map of the New England region. And what you see is we have 2 distribution companies in a multistate New England electric transmission system that serves over 2 million customers and is positioned to achieve the state's environmental goals for 85% reduction in greenhouse gas emissions by 2030 and net zero by 2050. All of the numbers that Carol and I are going to share with you are Massachusetts or transmission investments. We are not discussing investments we're making in the Rhode Island business because that, as you heard earlier, is positioned for sale to PPL in the first quarter of next year. So while I've been with the company for just over a month at this point, I can confidently say that I've got the leadership team and we collectively have the relationships in this jurisdictional model to be successful in transforming our electric and gas distribution systems to enable safe, reliable and a clean energy future for our customers and the communities that we serve. We're actively participating in the state's future of gas discussions, and I'll talk a little bit more about that later. And another example where we've partnered to improve operational performance already over the last couple of years. Massachusetts has a significant interest in distributed generation to achieve these goals, solar installations. Well, all of those require investments in the transmission system to enable them. And Carol is going to discuss a little bit more. But we've already achieved Massachusetts being the second highest concentration of distributed generation anywhere outside of the state of California. A little more scene setting. You heard Andy and John talk about a 5-year financial framework. Carol and I want to talk to you about New England's piece of that. Over the next 5 years, we're investing GBP 7 billion. This is split between the gas system and the electric distribution and transmission. As you're going to hear, there is a tremendous amount of investment required to enable this clean energy future. We do have performance-based rates for our distribution companies in Massachusetts that secure regulatory support for the investments needed through 2024 in electric distribution and 2026 in gas distribution. But we also have a number of incremental filings to address additional challenges, and I will speak more of that in a few minutes. All of our investments are totally aligned with the state's environmental goals. And the benefit of these multiyear rate filings is it gives us a clear line of sight on the investments required and how we will be compensated for making those investments. It's excellent visibility, which enables us to build the workforce to execute against the growth. So I'm going to first talk about though how we drive efficiency and why are we spending so much time focused on efficiency. Well, it's as simple as this. I mentioned safety and reliability but also cost effective. So as we make these investments, for every dollar I can save in operating expense, I am able to invest $8 of capital for the same impact to my customers. And that's incredibly important to me because I don't want to accomplish these goals without a focus on cost effectiveness. As you heard John and Andy talk about this, the group has a target of GBP 400 million, and that's across the whole group. New England's piece of that is GBP 125 million. Carol and I are going to talk about some of the things we're doing to achieve these. They are categorized in 1 of 3 areas, either automating our work practices, enhancing our work and asset management capabilities or reducing or optimizing our external supply chain spend. An example of the work in asset management, we're leveraging a tool called Copperleaf asset optimization that was actually developed by a company that National Grid partners invest in. This tool allows our planners to select the optimal mix of projects and programs to achieve the safety, reliability and environmental goals that we have set forth to do, and they're key to achieving successful regulatory outcomes for the portfolio of projects that are selected. Carol is going to talk a little bit more about one of the investments that gives -- that target's external supply chain spend, and you heard a little bit about it earlier from John, where we spend our -- one of our most significant external spend is vegetation management, and Carol's going to talk about some new and innovative technology, where we're going to drive improvements in the effectiveness. So as you saw in this morning's announcements, in the New England region, we're falling short of our ROE targets. Now why is that? In Massachusetts, we have a historic test year process for setting rates. And whenever a company is investing at a level of capital that we are, you have a lag effect on that new capital investment. So between incremental filings to address investment needs that are outside of the multiyear period and efficiency, we expect to close that gap over the coming months. Moving to growth opportunities. We are very excited about the opportunities to transform our network over the next 5 years. We're going to talk about $7 billion of investments, $3 billion of gas, $4 billion of electric. I'm going to speak to the investments we're making in gas, and then Carol is going to speak to some of the investments we're making in the electric business. So starting with gas. $3 billion of that $7 billion is being invested in the gas system. This compares -- it's at a 50% greater level of investment than the previous 5 years. The past 5 years, we've spent $2 billion on the system. 80% of this investment is absolutely focused on improving the -- on modernizing the gas network to transform it, meet the state's emission goals as well as drive safety and reliability. In Massachusetts, I mentioned, that we are fully engaged in the future of heat proceedings. What this docket is designed to do is explore strategies that will enable the State of Massachusetts to meet its net zero greenhouse gas goals. And do so in a responsible manner, where you're safeguarding customer interest and ensuring safety, reliability and cost-effective natural gas service. We're going to file our specific plan for this journey in March, and we expect to hear from the regulator later in the year. The biggest investment that we will be doing is GBP 2.6 billion in what's known as our leak prone pipe program. 3,000 of our 11,000 miles of distribution -- gas distribution is targeted by this program. This is replacing outmoded equipment. We began at a more aggressive pace replacing this system back in 2012. In 2014, the Massachusetts legislature, recognizing the importance of this work, passed legislation that allows us to do so at a more accelerated pace and provides a clear line of sight of the remaining years in this program, which is 15 to 20 years. This is quite complex work. In terms of mileage of what we're doing, it's equivalent to installing pipe from Boston, Massachusetts to Houston, Texas, but it's not as simple as installing pipe in a greenfield. This work is performed in customers' neighborhoods in the community under roads and sidewalks. And it comes with challenges. That's why I put a range on the remaining work because we can only move forward at a pace that's also balancing the customer impact. Over the last 10 years, this program has resulted in a reduction in terms of CO2 equivalent emissions of 29,000 metric tons. And over the next 5 years, it targets another 20,000 reduction. This is equivalent to taking 4,300 vehicles off the roadway. And this line aligns completely with the COP26 directions. We are also working with our local communities to look at alternative and less carbon-intensive fuels and how our new improved modern network can become a transport mechanism for renewable natural gas and hydrogen, which can help leverage this system to more cost effectively address the strong winter peak loads that are currently carried by gas in the Northeast winter. The next slide shows some examples of the work we're doing. At the top, you see a bare steel pipe. On the left, you see a cast iron pipe. In both cases, we're installing high-density polyethylene pipe that future-proofs -- not only addresses the aging infrastructure but future-proofs our network to a medium that's capable of transporting multiple different energy transport fuels. And now I'll turn things over to Carol to talk a little bit more about what we're doing in the electric business.

Thank you, Steve. So I have been with National Grid for 34 years. I have worked in our transmission and distribution organizations, both in upstate New York and New England, mainly in our engineering groups. And I can say that I -- this is the most exciting time to be in this energy industry because we really are at the heart of the energy transformation. And we are helping Massachusetts achieve its goals of net zero by 2050 and it aligns with our goals. So this is, again, one of the best times to be in this industry. And I'm so happy to share with you the work we're doing in our electric business in New England. So in our electric business, we intend to spend GBP 4 billion over the next 5 years, split equally between our transmission and our distribution business. The work we're doing is focused in 2 main areas. It's about hardening our system and improving the assets so that we can have them withstand the climate impacts that are coming as well as readying them for electrification of the state. Before I get to some of the growth areas, I'll talk first about the climate work that we're doing or the hardening that we're doing on our system. So if we go to the next slide, when you ask why are we doing all of this hardening work, this graph here shows the increase in storm activity in Massachusetts over the last 8 years. It's been both minor and major storms, and we need to focus on how to improve our performance in the face of these climate impacts. And this is important to us because 73% of our system, our distribution system is above ground. And when we have storms, storms come through with higher winds. They knock down trees, so they knock down our distribution circuits and impact our customers and both -- they are out as well as economic activity in the areas impacted. So our focus is how do we manage that and how do we make sure that our system is operating well. So the investments we are making are in our infrastructure, where we are spending annually $350 million in totex dollars to address climate impacts. One of the main things we're doing is focusing on vegetation, how can we deliver efficiencies and how we manage our vegetation. Our vegetation is we have to figure out a way to do this well. And in the past, we were using annual cycles. And now we are using a digital product, which is very innovative called Vegetation Management Optimization, or VMO. This product uses satellite imagery. It uses our historical reliability information and analytics to help us target where the best trees are to take out so that they are not taking out our distribution lines. This work allows us to be more cost-effective and provide better or the same reliability for customers. Other climate work or hardening work that we're doing is around our distribution system and putting in stronger taller poles at locations that are critical on the distribution network. It's around targeted undergrounding as well as flood mitigation. All of these things are needed in order for us to deliver for our customers in the face of climate. Now most of these were distribution examples. But if I go to the next slide, we'll share with you some of the work we're doing in our transmission businesses of New England Power and the interconnectors. We are investing GBP 2 billion in the transmission network over the next 5 years, and they are in specific projects, many projects, but I'll just point to 5. 5 are rebuilding 171 miles of transmission network across 3 states. That work is being done to help reinforce the system again for climate. And the cost is a $900 million spend, a significant portion of that GBP 2 billion. Now I'll go further into 2 areas that we're spending a significant investment. There are 2 right-of-ways that have 69 kV lines on them that were installed back in the 1910, '20s and '30s. These lines, we are looking at -- we're looking at investing in them to be able to do 3 things: one, help with the resilience, stronger poles, taller poles, a new standard of 115 kV instead of 69 kV, stronger wires to withstand the climate impacts; two, smart, because we're adding fiber optic communications on the line so that we can have a more intelligent network system that we can operate; and three, renewables, adding renewable capacity in this area. In fact, this area of Massachusetts has had a great deal of solar generation coming into it. And these -- the rebuilding of these lines allow us to deliver that renewable capacity in the future. So 3 things: climate, smart and renewables. That brings me to the growth opportunities that we have. If we go to the next slide, when we talk about growth, there are programs that we are investing in that are outside of our base rates that we have made filings for with the state of Massachusetts. One is our grid modernization program as a 4-year program at $300 million; and another is our advanced metering infrastructure, a $400 million program, again, to install smart meters to all of our customers in Massachusetts. Those 2 programs are total $700 million over the next 4 years. Great investments to be able to automate our systems. And when we say grid modernization, we mean adding automation, adding smart sensors to the system that would enable us to deliver higher reliability for our customers more efficiently. Now what we're doing right now is installing FLISR systems. And in fact, in the future, the FLISR systems will be about 100 million of the 300 million investment. FLISR stands for fault location, isolation and service restoration. And we have a video for you that was filmed at our Milbury training center with our engineers as well as our line personnel installing this equipment, and they'll explain more to you about FLISR. [Presentation]

So FLISR, really fantastic innovation as well as efficiency for our customers. Our intention is to install FLISR systems on 50% of our distribution circuits by the year 2031. And that leads me to our last innovation that we wanted to talk about today, which is our robotics, Spot. Spot is an autonomous robot that we use in our transmission substations in New England as well as in upstate New York, where it's able to walk the substation and go in areas where the where it might not be safe for our personnel. It has a payload of thermal vision cameras that's able to identify if there are hot spots in our substation equipment, which allows us to fix it before failure. This is just one of the many innovations that we're working on at the company. And with that, I will turn it back over to Steve, so he can speak more about our electric vehicle infrastructure.

So another area where we're enabling the state's environmental goals is through our enabling of electrification of the transportation network within the state of Massachusetts. Already, as outlined on this slide, we've had success in implementing 2 phases of our program. In July, we proposed an incremental program, which would dramatically enhance the electrification to enable 30,000 charging points for residential, workplace and fleet charging. Also included in this program is a specific initiative to electrify school buses targeted at -- actually 300 school buses targeted at environmental justice communities and serving the customers in those areas. So as I said in the beginning, Carol and I, our goal today was to outline some of what we're doing from an efficiency point of view, to outline for you how we're preparing for these growth investments, what some of those growth investments are all to align to achieving the state's goals to do so safely, reliability and cost effectively. One point that I want to make, just to make sure it came through, we discussed GBP 7 billion of investments. GBP 6 billion of these investments are already part of regulatory proceedings and approvals that solidify and make it clear how we will earn against these investments. Another GBP 1 billion incremental is actually associated with the 3 targeted filings that we just discussed. And the next slide shows that over the future, our opportunities, and presented here on the Gantt chart, is that we have significant opportunity even beyond this 5-year period as we enable a smart energy transition for our customers and the communities. And now I will pause for your questions.

Thank you both of you. Really, really interesting. So we've got some questions. And again, if you want to ask some questions, please do put it off to the platform, and I will ask some for you. But let's start with jurisdictional model. Steve, you're quite new to National Grid. So you've been here about a half a year. Tell me what do you think of the changes we're making and how does it sit for you?

Well, clearly, I would not have joined but for this jurisdictional focused model. My role is to lead this jurisdiction. And I think it is the best model. because we need to work with our customers and the communities they live in and the state and all of the stakeholders in the area to present, in a collaborative way, our point of view on how we enable the smart energy future. We're going to be much more effective at being able to do that with our focus on the jurisdiction. And we're going to make sure that we don't lose any of the efficiencies that come from having a collection now of 3 distribution companies across the national-grade footprint. I'm looking forward to partnering with Phil to learn how we can not just learn from WPD but improve WPD's operations. And I already have a relationship with Rudy, where we're doing the same thing between New England and New York.

Fantastic. And you touched on efficiencies, and we have a question around returns. And I think you touched on the fact that I think we said this morning returns across New England will be above 80% this year, which hasn't quite at our target of 95% at least 85%. You talked a lot ,you talked a lot about the efficiencies you're driving across the businesses. Can you talk a little bit about your confidence around getting towards 95% and sort of time lines around it?

Sure. The combination of these incremental filings to help solidify how we're going to recover these incremental investments that are outside of traditional rate cases, the ones we discussed today, combined the energy efficiency -- excuse me, the efficiency investments that we're driving in the business, will help us close that gap over the coming 12 months.

And given we -- I've just come from New York, the breakout -- the sessions just come from New York and there's always discussions around relationships there and energy transition and how we're plugged in. Can you both talk about your relationships with policymakers and how we see our business developing and how we're partnering with them?

Would you like to start?

Sure. So our relationships, again, with our policymakers and regulators, our engineers, our operations, our regulatory teams, they are engaged with those policymakers here in the state of Massachusetts. And -- but we are also focusing on maintaining our relationships with our peers in our New York jurisdiction and understanding what's happening there and being able to take the best practices that are occurring in New York and bringing that here to New England or Massachusetts. And we have this great opportunity, again, with WPD to do the same thing. But what we're learning, whether it's with DSO and how we're going to operate as a DSO in Upstate New York, we're applying those same learnings to what we're going to do in New England.

And as I said earlier, although I've only been with the company a little over a month. In that time, I've been able to meet with key state-elected officials, regulators. And I find that they are absolutely hungry to partner and collaborate with us and would like our point of view, particularly on the future of heat.

And so the one thing I actually wanted to touch on because I think it's really interesting about Massachusetts in particular. You talked about grid-mod AMI, EVs and spend outside of -- or investments outside of base rates. This feels like this is part of the business that is changing. And can you talk about some of the time lines around what we're seeing and then when this will come through? But is this something that we should expect across your jurisdiction over the coming years and more outside of the base rates?

Yes. As I mentioned earlier, with the -- although it's a multiyear decision for electric and gas, it's still based on historical test year. So that leaves you exposed for any new incremental investments that weren't part of the plan at the time you file them. So that's why we're making those incremental investments. I would say there's other ways to do this in New York, you're able to propose what the future investments need to be and debate that before you spend it. It's a different model. Right now, the current climate in Massachusetts is much more comfortable with the historic test year. So we still will remain focused on efficiently deploying that capital, getting those benefits, but we will, in the short term, continue to make incremental filings as we develop new investment opportunities to help close the gap on the state's environmental goals.

And I think the state has been very supportive of our company and in the incremental filings that we've been making. It achieves some of the goals that they have. And of course, they're looking at it closely. And these filings, we anticipate approval of them before the summer of 2022. Some of them may come -- some portions of them may come even sooner than that, possibly in the first quarter.

Brilliant. Steve, Carol, thank you very much indeed.

Thank you all for joining us.

For the virtual breakout. I think we have a bit of a break before we go into the primary for Q&A in just over half an hour. So we'll see you then. Thank you. [Break]

Okay. So welcome back, everybody. I hope you found the breakout really, really useful and got some more content on the things that we discussed earlier on this afternoon. As I said earlier on, we're going to have another opportunity for you to ask questions. So I have my team with me. So I'm just going to throw it open to the first question. Mark, I can see Mark at the front here.

So we've had a lot of granularity on all of the various returns targets, the 100 bps, what you're doing in WPD until 2023. How can we encapsulate that? I mean I guess we can do that ourselves, but are you willing to put an overall group return on equity target out there to bring it all together?

I think, Mark, we set out at the beginning of this year, sort of the financial frame. So we're not going to repeat that. So the financial frame that we're working to over the next 5 years is we're going to invest GBP 30 billion, GBP 35 billion. We're going to grow the asset base by 6% to 8%. We're looking to grow earnings by 5% to 7%, continue to grow the dividend by CPIH and maintain the strength of the balance sheet. So that's the financial frame that we're going to -- that we put in place, and we'll report against that on an annual basis. Of course, we'll report on returns. But for today, I think that frame is how we should think about it. Chris?

In the electricity U.K. transmission breakout session, we had an interesting chart showing RIIO-1 operating profit and then moving into RIIO-2. Do you think that RIIO-2 will deliver more stable, less volatile earnings for you? And so the dotted line that looks much more smooth, do you think that's a reasonable expectation? And I'll leave it there and come back if we need to.

Okay, I'm going to ask Andy, just to talk about the financial and perhaps Chris, just to talk about RIIO-2?

I mean, Chris, in terms of the shape of the line, I think I'd love to believe it was going to be quite as smooth as the trajectory of that arrow. But I think that, obviously, it was in my presentation first thing this afternoon as well, I think absolutely. We believe that the way T2 is designed, that the mechanisms are in place to ensure much better alignment. I suspect, inevitably, there's going to be some ups and downs, some waves in that line. But I think the important thing is that as we continue to drive that investment and the asset growth, we will see earnings track that much more closely than some of the sort of the ups and downs that we've seen through T1.

Chris, do you want to...

Yes. I mean we covered a lot in the breakout. So I wasn't -- John did go into ROI performance.

Okay. Thanks, Chris. Question here.

In your session, John, you talked about -- you were asked a question about COP26 and the opportunities. What about what you think of the policymakers? I mean you're in a great position to compare the U.K. and the U.S. here. Who do you think is perhaps lagging the curve? And who do you think is perhaps driving the curve? I suppose I'm particularly thinking about the U.K., Ofgem and the government and what they've got to do to make sure everything gets done. But do you see, let's say, the U.K. driving the bus a bit quicker than the U.S.? Or what are your concerns about not being able to invest at the scale you're talking about over the next 5 to 10 years?

I don't think I can do a sort of comparison of who's faster and who's slower. I mean I would say that a COP26, the U.S. showed up, and we're hugely visible, and we're driving a lot of the discussion and the debate. So irrespective of your politics and what we've seen in the last few years in the U.S., there was no doubt that the U.S. were present and they were looking to think through what do we need to do in order to deliver on climate change. And similarly, U.S., U.K. as the host, I think the whole cabinet was pretty much most days over the course of the 2 weeks. So from my perspective, what we saw was a lot of presence, a lot of visibility and a lot of good engagement with business around the commitments that it needed. I mean from National Grid's perspective, I think we've been very clear in that converting commitment into policy and policy interaction is now hugely urgent and the next step. I don't think that's -- I think a lot of people feel that. The example I gave earlier is a crystal one, which is -- and it's true actually in the U.K. and in the U.S., which is if we're going to build, the infrastructure that's going to be needed, then things like making sure we got the right consenting and planning process are going to be massively critical. And also making sure that we've got stable regulatory frameworks is also, in the longer term, getting massively important because there's a huge amount of investment that needs to be delivered. So I came away, as I said earlier on, optimistic. But there's an expectation, I think, from everybody that, that commitment now needs to turn into significant policy and that policy and interaction. And my sense was that business is there and waiting for that policy to come along to be able to deliver it. All right. So I'm going to go there first. I'm just doing whose hand got up quickest actually.

Yes. In the slides today, you've obviously presented CapEx requirements with a 5 billion range over the period through to 2026. Chris' breakout session, in particular, presented what looks to be a hugely significant investment opportunity through the 2030s. If I think about potential sources of funding for all of that, you will, at some stage, next year be in minority in the gas transmission business here in the U.K. Would it be right to think that, that is something that, if conditions are right in the future, it could be a candidate for monetization to fund the pivot to electricity here in the U.K.?

I think, Martin, in terms of the stake in Gas Transmission, as we said quite clearly, our intent is to sell a majority stake. I think beyond that point, where we describe the pivot that gives us the 70-30 electricity to gas, and that's the mix we're very comfortable with. Obviously, as we've seen in the past, we saw with Cadent, there are further steps taken because the rental acquirer decided they were very keen to take on more over time, and it worked for us from a value perspective. At this point, our focus is on the first majority stake and whatever the outcome of that, and we're comfortable, therefore, with the minority stake remaining in the portfolio. You're right, it then becomes a potential option for us going forward, but it's not 1 that we're assuming certainly within the next 5 years to deliver the frame that we've set out.

2 questions. So one is on the RIIO ED2. Obviously, we are facing maybe a different environment in terms of the pressure on energy bills. So Phil, a question to you, do you -- I mean, obviously, on the WACC, maybe the outlook is more clear, but how confident do you feel about your cost proposals and so on because I'm sure Ofgem is going to be looking at these numbers even more carefully? And second question more broadly is in terms of the plans you've laid out. John, particularly, I think the U.K. transmission, you're generally confident that you will be able to get these 3 -- these through Ofgem. And we won't have a situation where you're not quite leaving -- because the fast money and slow money -- all change earnings and so on. So how confident are you on achieving particularly the U.K. transmission?

Yes. Yes. So in terms of confidence, as I said this morning, it's a stakeholder-led business plan, which Ofgem recognized. It's north of -- I think it's 24,000 in total inputs we've had. And these are real inputs as well and they're not just mailing act people and saying that we engaged with them. I think the key is going to be in what we're proposing to deliver, a 28% increase in totex there, and we're holding those bills flat. So I think if I was the regulator looking at that, I'd like to think they see that in a very positive light because when we're focused on the bill impact and affordability, that's really important. But likewise, as John has said, pushing for decarbonization, we can't wait forever, and the investment is required to allow those connections to take place.

I'm going to let Chris answer this. Chris is closer to this.

Yes, absolutely. I mean so the large transmission infrastructure projects. We're working really closely with Ofgem. So you might have seen the -- prove the initial needs case for the Eastern Link and we've been really transparent when the major milestones are. So for the Eastern Link ones, they're aware, we need the final needs case approved early in the new year because to hit those targets, we need to go up to contract later in the year. So if I take it all the way back, Ofgem absolutely get the need for net zero, and we're working together laying out when the milestones are. And at the moment, we're in a good place that they do not want to hold up these investments.

Thanks, Chris. Next question, please.

It's a question about capital allocation because, even within the regulated businesses, there are lots of plans for the future that I would call quasi discretionary. How are you going to decide but there are so many opportunities now? I mean even putting aside ventures, which is obviously a bit more discretionary.

I think as we look forward, certainly for the next 5 years, I think, and we probably tried to set out this afternoon, much of that capital investment in the frame in the 30 to 35 is clear. It's either mandated in our price controls today or it's highly expected to be negotiated as part of the uncertainty mechanism. So I think the capital allocation flexibility is limited in the next few years. I think, ultimately, and the way the price controls work is although you do have the negotiation with regulators in any jurisdiction, once the price control is set, there is that clarity, and that's a very clear framework to deliver. So I think what we've tried to show this morning is the way -- or this afternoon is the waves of different investment is what's really going to drive those levels of investment. And yes, there is some flexibility in terms of the ultimate levels and the phasing of that. But I think our expectation is that CapEx is going to continue to deliver and continue to grow across all of our operating companies, so potentially less the optionality than you might be thinking.

Any further questions? Okay. We're just going to say thank you, team. So I'll just finish with a few words to finish off the day. So first of all, thank you so much for attending, whether it's virtually or here live today. We really do appreciate it. I hope you found it extremely useful. I started the day by saying that there were sort of 4 key takeaways that I wanted you to take away and one overarching theme, I guess. The first was that the strategic pivot that we've made in the last few months really does give us visibility and certainty of the investment that we need. And I'm hopeful that what you've seen today actually is that visibility and that certainty is not just for the next 5 years. But actually, there are waves of investments that are going to be coming through in all of our businesses as we position ourselves to the energy transition. The second theme was all around National Grid's role is absolutely vital in terms of the energy transition. And again, through all the breakouts that we've done, I'm hopeful that what you've seen in each of the businesses that National Grid has that each of us that each of our businesses is really focusing on what is that role that they play, what investment is needed and how can we be an enabler to the energy transition, whether it's in our gas business or actual business, whether it's transmission or whether it's distribution. The third takeaway is that you should take confidence that we've got a track record that demonstrates that we can deliver. But over and above that, I'm hoping that you took away also through some of the demonstrations of the innovation that we've got going on and some of the fantastic technology that not only do we have a track record, but we're already thinking about how do we do things differently to be able to deliver the energy transition in a way that's affordable for all our customers. We talk a lot about making sure we take everybody along on the journey with us. and really focusing on technology and digitization. And trying to hold customer builds down is our way of being able to contribute to the energy transition in a way that customers can afford. And then fourthly, I talked about the fact that we're going to be investing GBP 13 billion in green investments over the next 5 years, and that number is only going to increase going forward. As I said earlier, there are many companies investing in green investments, but few are doing it at the level of National Grid. And then the overarching theme that I used earlier on is that National Grid is the energy transition company. And if there's one thing you do take away from today, it is that we have a very clear vision. We have a very clear strategy on how we're going to achieve it. You've seen the capability that we have just at the top of National Grid, and the capability below that is absolutely awesome. So you should take away a lot of confidence in our ability to deliver. So thank you very much for attending today, and safe journey home.