National Grid plc (NG) Earnings Call Transcript & Summary

Good morning. I'm Paula Reynolds, and I'm the Chair of National Grid. And I want to welcome you to the 2024 AGM. Thank you very much for coming. For those of you who are with us in person here at the Warwick Conferences at the University of Warwick. Our main campus is located quite nearby and a substantial number of our employees are based here. Warwick is also the home of our U.K. transmission business. So holding our meeting here gives us the opportunity to invite some of our employees to join us in person, see what an AGM looks like in person, and for the Board actually to travel around to various of our nearby operations areas while they are here. So again, my thanks to those of you who've made the journey here today. As per the notice of the meeting, today's AGM is again a hybrid one. So we do have the opportunity for live engagement for all attendees, whether you're in the room or you can actually participate over the Internet. And we'll cover the details of how attendees can participate in a moment. But first, I would like to introduce you to the Board members who are with us in the room today. Of course, on stage here, I'm joined by our CEO, John Pettigrew, who many of you know; and Andy Agg, our Chief Financial Officer. And we have a new Group Secretary with us today, Julian Baddeley. Also in attendance, and you may have actually, I hope, met them in the lobby outside, before the meeting, are our nonexecutive directors. And so I'm going to ask each one of them to stand as I call their name and maybe they can give a look around, so that you can see them if you are sitting behind them. So first, Ian Livingston, our Senior Independent Director; Iain Mackay, the Chair of our Audit Committee; Anne Robinson; Earl Shipp, who chairs our Safety and Sustainability Committee; Jonathan Silver; Tony Wood; and then last but not least, our Head of Remuneration, Martha Wyrsch. Unfortunately -- we do have one other director, Jacqui Ferguson. And Jacqui did come yesterday and she was intending to be on a field trip with the group, but she was unwell, and the group decided that they really didn't need her in the van if she was unwell. And unfortunately, she's still unwell and unable to join us here in person. Okay. On to the order of business, I'll offer just a few brief remarks on behalf of the Board, and then we'll pass the podium over to our CEO, who will share with you the overview of the business in the last 12 months. We'll then take questions from shareholders, following which we'll do the formal business of the meeting, where we'll consider the resolutions that were set out in the notice of meeting. Given the events of last week here in this country, the words growth and change are very much in the air, aren't they? And at National Grid, these themes are very much how the Board has sought to help guide the company over the last year. Indeed, really growth and change have been the themes over the last several years. We've conferred with our management on how to focus on the most important businesses; how to allocate capital to those businesses; how to ensure the growth in the future on behalf of you, our shareholders; how to change, become more efficient, more digitally enabled; how to use technology to make the business better on behalf of customers. You've no doubt read in the general media that the demand for electricity is likely to increase quite significantly because of advanced computing AI. Our role at National Grid is to enable this growth for the construction of major infrastructure. And so in doing so, we feel that we're part of a higher mission, which is that we support the nations where we do business. We create jobs, we uplift our communities. We ensure the flexibility and resilience of our energy systems for the future. Over the next decade, National Grid anticipates commissioning a significantly larger amount of new and upgraded infrastructure compared to the previous years. And John will cover some of that with you, and you got a little bit of a sense of it in the video as well. Despite the challenges of mobilizing the global supply chain, navigating the planning and permitting complexities, the Board is confident in National Grid's ability to deliver these ambitious goals. It's really a privilege for me and my fellow Board members to be part of this company as we innovate to achieve these challenges ahead. To accomplish these ambitions, you'll know that we recently offered shareholders the right to purchase additional shares in the company. This process of rights offering provides National Grid with the necessary resources to invest in future infrastructure, while maintaining the financial strength of the company. The Board is quite gratified that the opportunity to invest further was overwhelmingly supported by shareholders. Namely 91% of the shareholder base invested further in National Grid and the company raised in total GBP 7 billion. The Board also recognizes that a rights issue is a complex process. We certainly learned that ourselves in coming to the decision to approve this way of raising capital. And when you actually go out to do a rights issue, that's a limited time table, and it's done this way, so that the potential to get the subscription and obtain the capital is done in a way that you hope that external events or market disruptions won't get in the way if you're actually getting the rights offering done. This time table meant that shareholders were only given a very limited window in which to make their elections. And we do know that a small number of individual shareholders did not fully understand what steps that might take or they ran out of time to exercise their rights. During the course of the meeting, our CFO, Andy Agg, can answer questions about the rights issue and how it works broadly. Some of you may be here with questions about the process or you may be online with questions about the process and what it means for you. So in advance, let me, first of all, offer apologies for any lack of communication that the offering process might have created. But I'd ask you to hold individual questions about your holdings or your situation for our registrars, Equiniti. I really wish you people would change your name. It's really a mouthful for people at the podium. But anyways, our registrars, Equiniti, handle the administration of that program, and they are the ones who can actually answer any individual questions. So they're available after the meeting to speak with you on any queries you might have related to your own shareholdings. This capital raise of GBP 7 billion was the largest in the U.K. market in many years, and now it does provide us with the financial flexibility to deliver on the group strategy. Therefore, on behalf of the Board, I'd like to thank all of you shareholders for the strong support of the company and its future investment plans. It is exceedingly reaffirming [Audio Gap]. There you go.

So thank you, Paula, and good morning, everyone. It's great to see so many of you here this morning, with others joining virtually as well. So when I spoke to you a year ago, I said that energy had been in the spotlight. And as I look back on the last 12 months, that certainly still holds true. In fact, our economy is becoming increasingly digital, electrified and decarbonized. The need for greater amounts of clean energy infrastructure has never been more pressing. And with the broad recognition that a decarbonized energy system will help with energy affordability and security supply, whilst creating new green jobs and unlocking future economic growth, government, regulators and industry in both the U.K. and in the U.S. are increasingly focused on achieving this goal. And our pivot towards electricity has cemented our position as a major player in this energy transition, and we're ready to take advantage of the significant growth opportunities ahead for National Grid. All of this means I have a lot to cover in my update to you today. So let me just take a moment to set out what I'd like to share. I'll start by covering the announcement of our new 5-year plan and the comprehensive financing package that sits behind it, before moving on to an overview of our financial and operational performance over the last year, and then finally, I'll set out our priorities for the year ahead. So let me start by reminding you the details of the announcement we made in May, in which we set out a significant step-up in growth with a new 5-year financial framework, delivering around GBP 60 billion of capital investment between now and 2029. This is nearly double our investment over the prior 5 years. It will be broadly split 50-50 between the U.K. and the U.S., and 85% of it will be green investment aligned to the EU taxonomy, making National Grid one of the biggest investors in clean energy in the FTSE 100. This investment will drive group asset growth of around 10% per annum, which will see the group's regulated asset base reach almost GBP 100 billion by 2029. And it will also deliver a 6% to 8% earnings per share annual growth rate and an inflation-protected dividend from a rebased level, representing an attractive investor proposition of growth and yield. This investment is supported by a carefully balanced and comprehensive financing plan, which includes selling assets to redeploy capital, rebasing the dividend, continued use of debt financing, utilization of our scrip dividend program, and as you know, raising equity through a successful GBP 7 billion rights issue. So turning to the rights issue, which offered eligible shareholders the opportunity to support our 5-year plan and participate in expected growth by purchasing additional shares at a discounted price. By offering new shares in proportion to each shareholders' existing holding, a rights issue is considered as one of the most inclusive ways to raise capital and is a standard way of raising equity in the U.K. In our rights issue, National Grid shareholders had the opportunity to buy 7 new shares for every 24 shares they already owned at a price of GBP 6.45 per share. Shareholders had the option to take up all of their rights offered to them, to sell some of their rights and use the proceeds to take up the remainder, choose to sell all of their rights in the market for cash, or do nothing, so that the rights can be sold on their behalf at the end of the rights issue, also resulting in a cash payment. Put simply, this means that those shareholders who did not participate still receive some compensation. Turning to the dividend, which we know is an important part of what makes National Grid attractive to investors. Given this, we carefully consider the balance between changes to the dividend and the amount of equity needed to support our 5-year plan. And as a result, we took the decision to keep the total overall level of the dividend the same, whilst maintaining our policy to grow the dividend in line with U.K. CPIH, a measure of U.K. inflation. However, even though we are distributing the same amount overall, as a result of the rights issue, we now have more shares in circulation, so the dividend per share is lower. This rights issue was the largest in Europe for 15 years outside of the banking sector. And on behalf of the Board and all my colleagues at National Grid, I'd like to echo Paula's thanks to our shareholders for your support. And our shareholders are also showing confidence in our ability to deliver on the scale of the network investment that we're making. Our track record of delivering critical infrastructure projects on time and on budget speaks for itself with recent examples, including the GBP 1 billion Hinkley Point C connection and our strong progress on the $4 billion electricity transmission program in New York or the Upstate Upgrade, as we call it. And we're developing the capabilities to deliver large-scale projects offshore as well. With the recent completion of Viking Link, our interconnectors portfolio is now nearly 8 gigawatts, which represents around 80% of the U.K.'s interconnector market. And given the growth that we're seeing in our energy networks, we've taken the decision to refine our strategy to make National Grid the preeminent pure-play networks business. As a result, we're planning to sell National Renewables, our U.S. onshore renewables business as well as our Isle of Grain LNG terminal in the U.K. Going forward, therefore, our National Grid Ventures business will focus on interconnectors, including offshore hybrid assets in the U.K. and competitive electricity transmission in the U.S. So with that, I'll now look to share some of the key headlines from our full year results. We delivered another year of strong financial performance, demonstrated by underlying operating profit of GBP 4.8 billion and underlying earnings per share of 78p, both up 6% on the prior year at constant currency. Our regulated businesses delivered a record GBP 7.6 billion of investment, 17% year-on-year against constant currency. In U.K. Electricity Transmission, we delivered a 47% increase in capital investment, reflecting early progress on our ASTI projects. It was also a year of impressive firsts. We connected the world's largest wind farm, Dogger Bank, and the Larks Green solar project, the first of its kind to be connected directly to the U.K. transmission network. In New York, where investment increased by GBP 300 million to GBP 2.7 billion, we made strong progress on the $4 billion Upstate Upgrade program, which includes 70 projects, all enabling clean energy over the next decade. In Massachusetts, we filed for $2 billion of funding for our future grid plan, an important milestone in setting out the investment required over the next 5 years to help the state meet its clean energy goals. In National Grid Ventures business, our sixth interconnector, Viking Link's demo came online in December, within budget and earlier than planned. At 765 kilometers, it's the world's longest onshore and subsea HVDC cable and a great example of the world-class capabilities within National Grid. And finally, the team has made great progress on the separation of the electricity system operator, and we expect to complete the sale and transfer to the government later this year. So it was a year of strong progress both financially and operationally, and we've taken the necessary steps that will set the group up for success in the long term. So let me now take you through our priorities for the year ahead before I hand back to Paula. So starting with the U.S., where we're investing nearly half of the GBP 60 billion of capital investment. In New York, we're increasing our investment over the next 5 years by 60%, with expected CapEx of GBP 17 billion. This will be driven by our Upstate Upgrade investment I mentioned earlier, where we'll construct or rebuild more than 1,000 miles of transmission lines, making it the biggest investment in New York's electricity transmission network in over a century. We also plan to invest $5 billion over the next 3 years in our downstate gas businesses as part of our new rate plans for KEDNY and KEDLI. Looking at the priorities for the year ahead downstate, alongside stepping up the levels of investment, we'll be focusing on our new higher allowed return of 9.35%. And Upstate, we're focused on finalizing our next rate case for Niagara Mohawk. And on the policy front, we'll continue to advocate for our clean energy vision and the work that we're doing to support a balanced and affordable energy transition. In New England, we set out investment of GBP 11 billion over the next 5 years, including investment in advanced metering, grid modernization, storm hardening and asset health work, alongside our continued investment in our leak prone pipe replacement program in our gas business. A key priority this year is to agree new rates for our Massachusetts Electric business. And as in New York, we'll continue to advocate for further regulatory reforms consistent with our clean energy vision. Turning to the U.K., where the next 5 years will see us invest over GBP 30 billion and connect more renewable energy to the system more quickly than ever before. In our U.K. Electricity Transmission business, we'll invest around GBP 23 billion over the next 5 years. The investment is already underway and our priorities are focused on ensuring we make significant progress this year. For example, our ASTI projects are already moving ahead at pace. And over the next 12 months, we'll commence construction on 3 offshore and 4 onshore projects, including the Eastern Green Links 1 and 2 offshore boot straps, the latter being the largest ever investment in LCC transmission in Great Britain. Another of our key priorities is to ensure that we have the right supply chain to support our capital program. We've already taken significant steps to progress this. And finally, on the regulatory front, Ofgem is due to publish its methodology decision document for RIIO-T3, and we'll be submitting a fully funded business plan at the end of this year ahead of a new price control beginning in 2026. Moving next to U.K. Electricity Distribution, where we expect to invest GBP 8 billion over the next 5 years. With 4 years remaining in our ED2 price control, we have a high degree of visibility around the investment levels and 95% of our CapEx agreed is within baseline allowances. In the year ahead, the key priority is to continue to deliver the capital program effectively with a focus on delivering a target 100 to 125 basis points of outperformance and synergies of GBP 100 million over 3 years. We'll also continue to progress connections reform at the distribution level, where we're making good headway. And then finally, in National Grid Ventures, our key priority this year is to progress the sale processes for our Isle of Grain LNG terminal and National Grid Renewables business. In both of these businesses, we've delivered impressive growth and believe there will be significant interest in these assets. So in summary, this is a defining moment for National Grid as we enter into a new and exciting phase of growth to deliver network investment of unprecedented magnitude. In my 33 years in this sector, it's the most exciting time that I've known and it's a tremendous privilege for all of us at National Grid to work right at the heart of the energy transition, driving forward huge change. I believe National Grid has a unique investor proposition with low-risk, high-quality asset growth, strong earnings growth, and an inflation-protected dividend. We now have the visibility of GBP 60 billion of investment through to 2029, and complete confidence in our ability to deliver it as well as the certainty around financing our plans. The business is increasingly weighted towards electricity, ensuring that we can continue to access attractive growth for many years to come. National Grid is enabling the digital, the electrified, and the decarbonized economies of the future. This is opening up opportunities for us today, over the next 5 years, and for decades to come, ensuring that we can drive long-term value growth and returns for you, our shareholders, enabling net zero for the U.K. and Northeast U.S., and creating growth across the communities we serve. So with that, I will hand you back to Paula.

Thank you, John. And actually, I think maybe to take a moment, when you think of the sheer number of things that are going on, this is actually a great opportunity to say thank you to John and Andy and really the entire team of our thousands of employees in two countries, because it takes everybody to deliver this kind of program. So thank you. Okay. So before moving to the formal business of the meeting and voting on the resolutions, I'd like to address questions from shareholders on any matters relevant to the business. Julian, our group's Company Secretary will be coordinating the Q&A session for us. So to be fair to all participants, Julian will endeavor to alternate between questions in the room and any questions registered online. If there are online questions that have been pre-submitted and are similar in class, Julian will group them together, so that we can be efficient in providing answers. And to keep the meeting flowing briskly, we'd ask that you keep your questions relatively concise. And remember that questions regarding the individual holdings should be saved for a discussion with our registrar after the meeting. Please remember that the questions should be directed to the business of the meeting. And if you have other general questions about the company not related to the business of the meeting, I'd ask you to hold those questions until after the business meeting is formally adjourned. John and Andy and I will be in the lobby after the meeting concludes, and you can speak with us, and we'd be glad to converse. If you're participating online and you have general questions unrelated to the meeting, we will reply to those questions by e-mail after the meeting concludes. So I think with those preliminaries, I'll turn it to Julian, and take it away.

Thank you, Paula, and good morning, everyone. For those of you joining electronically, if you've not already presubmitted a question, you can submit one now by selecting the messaging icon that sits in the navigation bar at the top of your screen. Type your question into the text box at the top of that page. For those of you attending in person, I know many of you here have preregistered questions at the desk, and thank you to those who have taken the time to do so. If you did not register your question earlier but still wish to ask one, please make yourself known at any point to our representatives. They will take you through a question point and inform you when it is time for you to ask your question. When asking your question, please begin by giving your name and direct all questions to Paula in the first instance. We will start with a question in the room today from James Hewitt.

My question, I hope it's not too long, expresses anxiety, but I hope it's constructive. I subscribed to the recent rights issue as an independent shareholder. I'm anxious that our company is lagged implicitly by choice in developing the U.K. grid in ways which anticipate long-standing climate change imperatives. That's one. Next part is slightly different. I understand that the leading single-site supplier of electricity to the U.K. grid, Drax Power Station, is also the U.K.'s leading emisser of CO2 and, therefore, not clean power. It will lose its primary subsidies in 2027. If the U.K. is to decarbonize the grid by 2030 instead of 2035, Drax Power Station would have to close before then. It would presumably be remiss if we do not take steps to ensure that other generators do not make up the shortfall and we should be preparing for that. What did our company consider is the probability of having to do this? Bearing in mind that Drax's proposals for carbon capture are implausible and hugely energy-intensive, geological storage sites for capturing CO2 were unlikely to be operating as proposed by 2030, and the forests from which Drax derived fuel cannot recover soon enough. Thank you.

Well, that is a very worthwhile and serious question, so we do appreciate it. And I'm obviously going to give this to John to answer. But I would just say in overview that we are already working with the new government about how 2030 can be achieved with multiple scenarios. And so we are all on the case together. And I think what is really encouraging about this is the fact that within almost minutes of the new government forming, they came into activation around how industry would begin to work collaboratively around trying to secure 2030. So with that, John, over to you.

Thank you for the question. I don't think it would be a surprise to hear that National Grid spends a huge amount of time both with the government and key stakeholders and regulators making sure that we understand what we're being asked to do as part of the energy transition. And it's quite clear that in delivering a fully decarbonized network, it's going to require everybody across the sort of spectrum to take action, whether that's government putting the right policies in place, regulators taking decisions in a very nimble way, making sure we've got the right regulatory frameworks, the supply chain, making sure there's the capacity to be able to build the equipment. And National Grid has got a role to play. And the GBP 60 billion of investment that we set out in May is our part of that role. And in the U.K., as we said, nearly half of that investment is in the U.K. Up until last week, obviously the targets in terms of decarbonization was to get 50 gigawatts of offshore wind connected by 2030, and to fully decarbonize for 2035. As Paula referenced, the Labour government has come in with a new target, which is it's aiming to decarbonize by 2030. That is a huge ask and is hugely ambitious. We will work with the government. We will work with the regulators on what that means, what are the implications for that, and what can be achieved in those time scales. But there's no doubt that it is a significant and ambitious target to be achieved. In terms of Drax specifically, rather than talk about Drax specifically, I think it is important, as we think about the energy transition and we think about the increased reliance on intermittent generation in the U.K., that we also think about what's the backup associated with that. So in order to be a decarbonized economy, we're going to need to think about potentially carbon capture and storage, and I know that the new government is thinking about that. We're probably going to have to think about hydrogen storage as an opportunity there, as well as other technologies like nuclear. So all of that is being considered in the round, if you like, as we think about how the energy transition unfolds.

Thank you for that. I would certainly feel very much more comfortable if there was more explicit emphasis on how we're going to manage reduction of demand. Because I'm not so sure that we're going to be able to meet 2030 if we can account growing as projected. So maybe somebody were pretty potential to it all could advise like, "Let's reduce consumption big time."

So just one thing to add. So one of the roles that the electricity system operator has played historically and will continue to play in its new form is to always be looking forward at what is the load forecast that's coming into the U.K. and what's the generation background and what's the plant margin, so what's the surplus generation over that. And the reason they do that is to look far enough out, so then action can be taken if there is a concern that it's insufficient to meet generation. So they've recently published an early indication of next winter, which they're expecting the plant margin to be around 9%, which is actually slightly higher than it was previous years. So to give you some comfort, what was part of National Grid, what will be the new electricity system operator is always looking to make sure that they can see how the energy margin is going to unfold.

And it's such a timely question as well because tomorrow at our Board meeting, we have a specific segment devoted to the resource picture and the demand picture in both of our countries where we do business because of the fact that we have these very similar concerns. And there's quite a bit of analysis that's been presented to the Board, and we're going to try to see if we come to a common view out of it, but very much engaged in this very, very significant question.

Next question, thanks, Paula, is presubmitted on the rights issue from Andrew Pierce. And the question is, in National Grid's provisional allotment letter to shareholders in May, why was the value or price of the rights offered to shareholders quoted as 645p per right, whereas when shareholders elected to sell their rights, the proceeds they received were much less than this? Why was the sale price per share or right as opposed to the purchase price not stated clearly in the letter?

I think, Andy, this goes right into the category of there can still be questions about the rights offering. So would you please?

Thanks, Paula, and thank you for the question. I think as we said in the intro remarks, we recognize that the rights issue was a complex undertaking, and a lot of the guidance was therefore also complicated. But as the question, I think, alludes to, the GBP 6.45 that was quoted was effectively the discounted subscription price for the new shares. So the question there is the difference between the two, i.e., the value of the rights, is therefore determined by the market. And actually, during the trading period of the 2 weeks when the rights issue was open, those rights are traded on the market and therefore the value changes. So one of the reasons we weren't able to quote that upfront is because we don't actually know until the rights issue itself closes. Absolutely, when shareholders either chose to sell their rights or their rights lapsed because they didn't respond or chose not to respond. And yes, GBP 1.90, which was the premium of the difference determined by the market at that point was then paid over to shareholders. So the reason we couldn't give it upfront was effectively we had to let the market determine that price over the 2 weeks of trading.

Thanks, Andy, and thanks, Mr. Pierce, for the question.

Right. And of course, if there's a follow-up, we can answer that in e-mail form after the meeting.

Next question is live in the room at Point B, [ Sofia Howard ].

Chair, my name is [ Sofia Howard ]. And my question is, I would like the company to give a standard of professional accountability, so that the named person in the pensions update booklet provides a signature, just a sample signature, so that it is a way of checking who they are. And there's a trend of using more electronic communication, but there's a risk that artificial intelligence can be abused. So I think that might be a way of strengthening the company's pensions operations.

Well, thank you very much. I think actually, in your question, there's kind of a couple of layers, which is who is the signatory, in fact, to the pensions update report, and how do we assure that it's not susceptible to any kind of cyber intrusion. And so Andy, I think we'll give that to you if we could.

Sure. No, and thank you for the question. And what I'd say is, generally, we take cybersecurity and the risk as you called out around scammers is real and growing as we know. I think in this particular instance, we also have to work with the trustees of the pension scheme. Because I think the booklet you're referring to is actually a trustee publication, which is independent of management and the company. But absolutely, we'll make sure that we take that feedback back. We'll work with the trustees to see if we can enhance anything in that space as well. But the broad point is well made, and thank you.

Okay. The next question is received online from [ Richard Trevithick ]. Is the 5-year CapEx plan fully funded from existing resources or will there be further rights issues?

Well, John, I think you alluded to that in your prepared remarks. So why don't you take that and give assurance here?

Yes. So thank you, Richard, for the question. Yes, so I can give assurance that the plans that we've laid out of the GBP 60 billion over the next 5 years is fully funded, not just by the rights issue. As you heard in my remarks this morning, actually we have a comprehensive financing package, which includes a number of things, including access to the debt markets, as we said, rebasing of the dividend as well as some sales of some assets as well. But when you put it all together, that is a financial plan that supports the GBP 60 billion of CapEx over the next 5 years.

And so to clarify, for that question, we do not have in that plan any intention of further rights issues because of the fact that we have access to capital markets in other ways.

The next question is in the room from Fiona Gilmore.

Good morning, Chair, Chief Executive Board of Directors, ladies and gentlemen. I'm Fiona Gilmore, Founder and Director of Suffolk Energy Action Solutions. I'm also a shareholder. And I applaud you on your results today. We are a community group promoting the benefits of offshore solutions with landfall and connections to the grid at brownfield sites closer to demand. I'm not an [ MB ], I'm not actually on the front line. I'm an unpaid volunteer, who is hoping in retirement to write a book, but instead I found myself running this group. We wish to influence the strategic planning of energy infrastructure in the U.K. and globally. We have ecologists, engineers specializing in HVDC. We have superconducting producers in the Republic of Ireland. We have innovators, entrepreneurs. I was a strategic adviser in alternative fuels in the Middle East for some years. And I'm a bit of a geek now, even though I was a modern linguist from Cambridge. And the reason I've spent so much time in the last 5 years speaking to Belgium's Artelia, speaking to TenneT in Holland, speaking with the Danes and the Germans is I applaud their innovation. I applaud the fact that they use holistic network design criteria and I applaud the fact that they recognize that sometimes we can get a bit carried away and we lose sight of balance. And on Page 43 of your wonderful report, you say that you need to understand what fair means. Now we all know the term asymmetric warfare. I think we can ascribe the word asymmetric energy infrastructure and think about, if so much electricity is used as a through road in one small area of 5 square miles, in this particular case, the coast of Suffolk, is that asymmetric in the fact that it is unequal? That the burden that is imposed on the communities and the wildlife and the environment was never actually realized in 2017, when your team had one PLC group, it wasn't separated as an electricity system operator. Was it, if you like, nobody's fault. You thought about this as the right place. And suddenly, it's mushroomed and we welcome Great British Energy, we welcome the acceleration towards these solutions. But is it now the case that we should really think about? And I think Mark Carney's reflector speech where he said so eloquently, how do we value in our society those things that do not have a price tag? How do we value our nightingales, our ancient Hydros and oak trees? Is this an opportunity for National Grid to do brilliantly well by having the imagination as well as the common sense to say, "Hey, guys, in 2017, that looked like a great idea. But actually in 2024, when we want to accelerate, let's do what Ofgem is proposing, and let's go for cheaper, faster acceleration of offshore solutions. Let's use the word grid. You're a bit shy of that word. Let's use it, and let's do what makes sense." And so I'm asking you the question, one, when you look at your election of directors and nonexecutive directors, is your Board not really truly diverse in the fullest sense today? In other words, yes, it's diverse in terms of cultural identity, ethnic groups and gender. But is it diverse in terms of where is your ecologist? Where is your environmentalist? Where is your community representative, someone like me? Where are these people who are challenging being devil's advocate at Board level saying, have we got asymmetric energy infrastructure? And my second question is, you say brilliantly well, in Page 43, you need to deliver energy security fast. But is this an opportunity now to say, hey, these North Sea countries, yes, their wind farms are smaller than yours. But actually, we can carry 10 gigawatts by 2032 in HVDC superconducting cables. We can take this energy to brownfield sites, pre-industrialized sites, so that these 26-meter high concrete monolithic converters and substations covering 80 football pitches of tarmac and concrete, they're not plonked in this area of outstanding natural beauty and SSSI, which is actually our rain forests. It is the equivalent of a rain forest. It's called vital lowland wetlands. So I would like to invite you, the Chair, the Chief Executive, and your Board, and BlackRock, your major investor, Vanguard and the UAE to come to Suffolk Coast & Heaths to talk with our community, to hear our views, which we don't think have really been heard, and to talk about these innovative solutions that we think could be a win-win for Britain, a win for you and your shareholders, and a win for the interests of this country, because we mustn't forget that we have one chance. Thank you for your attention.

Thank you very much for that very thoughtful discussion. And it's very clear that we can't possibly address all the points that you have raised here. Nor do I think that you want us to. You want to be heard and you want to make sure that you've left an impression. So let me try to get to the couple of questions, turn it to John, and just suggest that we need to have a way to convene off-line. And the first is with respect to the issue of the director slate and why there is not an ecologist on Board. There are many disciplines on this that are not on this Board, and really what the role of the Board is to make sure that it's taking the proper advice about these things. And I can assure you that there's been quite a bit of discussion about permitting, citing biodiversity, replacement of the natural habitat, reducing the impact. And in fact, a number of directors were actually out in, I think, East Anglia yesterday. And I, myself, have actually been out and traveled the country. I've actually learned quite a bit about the geology, geography and biosphere in this part of the world. It's been quite fascinating. And I actually feel this heartfelt expression on your part. I absolutely take this in because this is a country that many people say to me is biologically used up. And so, so much of what we do is not just to restore, but to increase the biodiversity and anything that we touch, and we certainly take that quite seriously. So no, we don't have an expert who's an ecologist on the Board, but there is plenty of discussion going on about our route selections, our process, about the quality of engagement. And we do not live in a little bubble where we don't hear about this and read about this. And really, we embrace every opportunity to be trying to navigate this together. So I can assure you, beginning of a conversation with you. There are many conversations going on. I'll turn it to John to maybe speak a little bit about some of the process. And again, we look forward to conferring with you afterwards.

Thank you for your articulation of all the issues. I'm going to start by just painting a bit of a picture of the context of how we think about it and the network, so that everybody's got the broader picture. The network in the U.K. was built in the 1960s and '70s, as you know. Predominantly, the infrastructure is in the middle of the country, linking the power stations that were fueled by coal and taking the energy all over the country, but generally North to South, where the large load is. There is very little infrastructure actually on the edges of the country and there never has been. The government is setting a policy, which is to move to fundamentally a generation background system in the U.K., which is going to be driven by offshore wind and a target of 50 gigawatts of offshore wind creates a huge challenge in terms of how do we get the power from where it's being produced to where it's going to be consumed. And that is the obligation that National Grid has. Now our role is to make sure that we build infrastructure to get it from where it's produced to where it's consumed. And as we think about that, we ensure that we follow all the guidance that has been set out by government in terms of the national policy statements and the Planning Act. So we always start by optioneering and looking at all the possible options that are available to us. We are not constrained in any way when we start that thinking. And we look to balance a number of factors, which is the obligation that we have. So we have to take into account the cost of the infrastructure, because customers pay for that. We have to take into account the engineering feasibility of the solutions, the environment, both offshore and onshore, and we also have to take into account the views of the local community. And as we walk through the consultation process, we try and balance all of those different competing factors to come to a recommendation that we ultimately make to the planning authorities. And as you know, the Secretary of State will ultimately sign on to it. We also, in doing that, look at what is the latest and most available technology to deliver those solutions, whilst having to ensure that we meet our license obligations. So at the moment, we have a license obligation to deliver a significant amount of transmission by 2030 that has been placed on us by the regulator. We're in the midst of a series of consultations, as you know, on the East Coast. And we are spending a huge amount of time with local communities, because we want to hear what their concerns are and try and find a balanced solution, which ultimately we can then put forward to the Secretary of State as a recommendation. But if you look at over the course of the last few years, we are putting more and more infrastructure offshore than we ever have before. But ultimately, the reality is, it has to come onshore at some point. And with very little infrastructure on the East Coast from Scotland down, ultimately, we have to find a way of building infrastructure to deliver that, whether it's all the headlines, which is the presumption that we have in the national policy statements. Although there are exceptions in areas of outstanding natural beauty, national parks or where there are other reasons more locally. But we have to take all that into account. And as a result of that, that's what we've been doing.

Thank you for your answer. I think my final word on that is brownfield sites closer to demand, we believe, should be part of the design principles for the special energy planning as Nick Winser proposed and as Ofgem are now recommending. And that's where I think is an opportunity for just a reshift and something that I hope we can carry on a conversation with over the next few weeks and months.

Absolutely. Thank you very much for this thoughtful discussion and bringing it in here today.

Okay. Our next question has been submitted online by [ Morton Singleton ] on behalf of [ Sheryl Cuisia ]. With the consistent outflows of institutional capital from the U.K. since 2021, and the U.K. struggling to maintain its status as a preeminent capital market, what is National Grid's view on engaging its retail shareholders? And what practices does it employ to ensure that this base, which includes employees, is sufficiently engaged and informed on company matters?

Well, thank you very much for the question. And there are various forms of engagement that we undertake. And of course, the AGM is one of them. And by going to a hybrid format, it is really open. This meeting that used to be only in person is now open to every shareholder. We have some 600,000, I think, is our current count. So I think that number one is any question can be asked at the AGM in person or remotely. Second, of course, is through the Investor Relations department and the Corporate Secretary. Again, any kind of engagement, any kind of availability, there's the ability to contact us. And we endeavor to answer every question. The third, of course, is that we have an extremely extensive investor relations outreach. And John and Andy and Nick Ashworth, our Head of Investor Relations, have done hundreds of meetings, hundreds, around this recent rights issue. Now these are dominantly to institutional holders, but institutional holders hold on behalf of retail shareholders. So that's another form of engagement of how that information is transmitted and, in fact, a retail shareholder can access it through the institution with which they participate. Fourth, there are many, many resources online and available at all times, everything from the Investor Relations presentations to lots of enrichment sessions where you can learn more about our company. Once a year I meet with the Retail Shareholders Association, which is an association of retail shareholders. And I think I could go on and on here. But if there's any sense that you don't feel that you have access, please use the opportunity to get in touch with us online. And we think that we're a pretty highly accessible and available company and certainly always doing our best to be as transparent as we can possibly be in terms of the information that we make available. So I think that hopefully covers it.

Very good. So next question is live in the room at Point B, [ Patricia Easton ].

My name is [ Patricia Easton ] and I just live up the road in [indiscernible], and obviously, I'm a shareholder. I made a special effort to come here today in person expecting to see demonstrations about your business in the hall, as there was in 2019 in Birmingham. Otherwise, I would have come to the AGM online. Have you stopped doing that now? There used to be demonstrations about your business, helicopters, all the wiring, and what National Grid does, and I found that very good. I also have been speaking to other people in the room who were expecting that. Have you stopped doing that now? Do you plan to do in the future?

Well, thank you for the question, and I actually did get some feedback from another participant that they, too, were a bit disappointed that we didn't have displays. And I think as you can look at the number of shareholders that we have in the room, the issue is, we have noticed over the years, and particularly since COVID, a real decline in the level of interest of retail shareholders from the public broadly who come in and come to these meetings. And so we've really started to look at the expense of the meetings, how much space we have to have available, what the orchestration has been, and again, increasingly so much has gone to online. As a company, and I know this part can be just a bit controversial, we try to be a digital-first company. You see less paper from us now than ever before. We try to push as much information as possible out through digital means. And so yes, we don't do the demonstrations anymore. I would say, though, we also, again, want to be very open. If you have particular interest, I'd encourage you to let us know about your specific interests, and we are more than glad to get you out to a site and see work going on in your area. We did recently do actually an innovation conference in London, where we brought together a lot of the new technologies that we are piloting as a company. And if that is your interest, let us know. We certainly would be delighted to entertain members of the public to know more. But we just don't want to start bringing in lots of kit anymore because we do have a very limited audience for it at the AGM. And I think you'll find we'll probably continue to move the AGM around our broader service territory to try to give members of the public some opportunity. But I think you see that it is a bit of a ritual that has kind of contracted over the years.

I was just going to make an add to that. So if you go onto YouTube, National Grid's got a series at the moment or sort of behind the scenes of what makes the grid. So I would just promote it. Because for people who are interested in National Grid and what we do, I think you'd find it really enjoyable.

So our next question is an online question from the Councillor, Rob Chapman, who's the Vice Chair of the Local Authority Pension Fund. The LAPFF, the Local Authority Pension Fund Forum, is a collaboration of over 80 local authority pension funds seeking to promote high standards of governance and corporate responsibility. Collectively, we are a significant shareholder in National Grid on behalf of millions of ordinary pensioners and workers. I would like to congratulate National Grid on announcing its expanded capital expenditure plan and climate transition plan, which are a significant step in meeting the growing needs of the energy transition and net zero targets and something that LAPFF has been pressing for. However, these plans do understandably require raising funds from shareholders through the rights issue. In light of this, how confident are you that you will generate acceptable returns for shareholders? And does the election change this in any way?