National Grid plc (NG) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the 2026 AGM of National Grid. I'm Paula Reynolds, Chair of the Board. And since we have a quorum present, I now declare the meeting open.

Thank you all for joining us today here at King's High School in Warwick. It's a new venue for us, which we've chosen principally because it's close to our work campus, which is just down the -- down the road, and which is the home of our U.K. electricity transmission business and also our National Grid Ventures business. The venue for those of you who've been with us in the past, you'll note that this is a bit smaller than ones we've used previously which I think is more appropriately sized to the number of shareholders who do wish to be with us in person rather than online. So we thank those of you who travel to be with us and those of you who are actually listening to this call -- listening to this meeting online. One of the things about being here in Warwick is that this gives us an opportunity for our employees to join us in person and also for our Board to visit some of our various operations and just month Board members have just been to a briefing around our cybersecurity, which obviously is something that's very much top of mind in this day and age. As set out in the notice of the meeting, the AGM is being held in a hybrid format. So shareholders have the option to participate in person or online. And we'll cover details on how everyone can participate momentarily. First, I want to introduce you to our Board members who are an extremely hard-working group of individuals. And first, I want to start with our CEO, who is here on stage. ZeiUnivit joined us last year as the CEO designate. So she was in the shareholder audience last year while our prior CEO, John Pedigree fielded your questions. So we officially took up the role last November 17. And with several months of advanced preparation, she didn't miss a beat at the time of the transition. And I would say it was a pleasure to be the Board chair when I watch 2 marvelous executives work so cooperatively on that handoff. So it's a great pleasure to have her on stage with us today in her official capacity. And I think you'll quickly understand why she was selected by the Board as our next CEO. Also joined by our long-standing CFO, Andy Agg; and Julian Battle, who you might remember from previous years as our Group Company Secretary. So now I want to go to the directors who are seated upfront. I'm going to ask them to stand and turn so you can see them. And as I introduce each one. First, Jackie Ferguson, and then Ian Livingston, our Senior Independent Director; Ian Mai, our Chair of the Audit and Risk Committee, Earl Shipp, Chair of our Safety and Operations Committee, which is a reformulated committee because of the nature of the amount of construction that we're doing. Tony Wood, who is Chair of a new committee called our Responsible Business Committee because of all the challenges of sustainability media and reputation that we have to manage every day. And then Martha Wyrsch, Chair of our People and Remuneration Committee, again, a bit of a renamed committee is very much on top of talent and our people. Unfortunately, we have 1 director who was not able to be with us Ann Robinson due to some unforeseen and unfortunate circumstances. She sends her apologies. Last, there is a director who will be standing down because he's not sought reelection by shareholders this year, and that's Jonathan Silver. Jonathan has served for 7 years as a Board member a very creative thinker who brought really unique perspectives to the Board and he's standing down because of other commitments. And obviously, we wish him well in his endeavors, which are very much in the energy space. Now on to the order of business. First, I'm going to pass the podium to Zoe who will share a brief overview about the business in the last 12 months. Then Zoe, Andy and I will take your questions specifically on the resolutions or matters pertaining to the business. If there are preregistered questions actually, there are a couple, we'll alternate those with live questions so that we get all questions to make sure we get all themes and please note, if you have any specific questions about your shareholding, those should go to Equiniti because they're here present at the meeting to handle any individual matters. So with that, I'll turn to Zee for her update on strategy and performance.

Thank you, Paula. Good morning to those of you joining here in Warwick and for those of you who are also joining us online. I'm really pleased to be speaking to you today, my first AGM as the National Grid Chief Executive; and to provide you with an update of our company's performance over the past year. As Chief Executive, my ambition is really clear: -- to build on National Grid's strong foundations strengthen our execution and position the company for sustained long-term success as a best-in-class business. To help us to deliver on that ambition, we've introduced a clear strategic framework -- it's not a change in strategy. Our purpose, priorities and growth opportunity remain the same. But what this framework does is it sharpens how we execute and how we hold ourselves accountable for delivery. Brilliant Basics are about leading on performance through consistent delivery, covering asset reliability, capital efficiency, customer centricity and functional excellence. And the big shifts are about recognizing how our markets and our stakeholder expectations are changing and how we must step up to respond to this challenge. We're concentrating on 3 key areas here: people, leadership and performance, external positioning and policy advocacy and technology and innovation. And disciplined growth is about building on delivery credibility to create long-term value and support the energy systems of the future. National Grid is a company with a very clear purpose. We bring energy to power possibilities. Every day, millions of people and businesses depend on the networks we own and operate. They depend on us to connect new sources of energy that are needed for the future. But our role goes beyond delivering energy. The availability of reliable energy influences where businesses can invest where industries can expand and where jobs are created. By expanding and modernizing our network, we help create the conditions for economic growth and prosperity in the communities that we serve. Our role is to get the most out of our networks today and invest to enhance reliability and support the changing energy mix, like the connections of renewables and to make sure our networks can meet the evolving needs of our customers. The responsibility that we carry is significant, delivering well requires operational excellence, prudent investment and financial discipline. This year, we delivered a strong performance, investing a record GBP 11.6 billion in our networks and other energy infrastructure, that's 20% higher than last year, growing our asset base by 10.9%. Underlying operating profit has increased to GBP 5.7 billion, with earnings per share up by 8% at constant currency, in line with our guidance. And we increased our dividend by 3.8% in line with U.K. CPIH inflation. This performance shows that we are delivering today while investing in a stronger future. Since becoming Chief Executive last autumn, I spent a great deal of time across both our U.K. and our U.S. operations. I've also spent time with regulators, governments, customers, suppliers and investors. These conversations have reinforced my confidence in our foundations and the scale of the opportunity ahead while reminding me that sustained success depends upon a relentless focus on continuous improvement. In the U.K., over the next 5 years, we expect to connect after 35 gigawatts of new generation to our transmission network. We also expect to connect 19 gigawatts of new demand. That includes demand from homes, businesses, transport, data centers and industrial customers. These are large number -- but put simply, the U.K. needs more network capacity and National Grid has a central role in delivering it. Our task is not just to build new infrastructure, but to get more from the assets we already have using technology and innovation to unlock capacity as efficiently as possible. In the U.S., we serve customers in New York and New England, where continued investment is essential to maintain safe reliable and resilient networks. Demand is also growing, supported by economic development and manufacturing, electrification and data centers. As power demand continues to evolve, we're also exploring new ways to support large energy users with reliable and integrated solutions. That's why National Grid Ventures has recently agreed to invest $1.75 billion for a 35% stake in Deland, forming a strategic partnership focused on serving this growing market demand. Our gas networks continue to play an important role in resilience and affordability, particularly at times of peak demand. Across both the U.K. and the U.S., the same broad themes apply, including reliability, affordability, energy security and economic growth. Our job is to balance these needs responsibly, delivering consistently, continuing to transform the business and investing for the future. How we do this is just as important. Our values are not separate from the strategy, they're how we deliver it. We continue to do the right thing, find a better way and make it happen. And everything we do starts with safety. On leadership and performance, we're sharpening accountabilities and making sure objectives are clear from the group level through to individual teams. A company of our scale needs clarity discipline and a strong performance mindset. On technology and innovation, we're changing the way we build, run and operate our networks by standardizing designs and working at scale with our supply chain to using digital platforms to improve productivity, we're reducing cost and complexity. And at the same time, data automation and AI are helping us unlock more capacity, get ahead of risks and deliver a better service for customers every day. On external positioning and policy advocacy, we'll continue to engage constructively with governments, regulators and other stakeholders. The energy transition requires investment, but it also requires frameworks that support affordability, resilience and timely delivery. Energy affordability is at the heart of discussions on both sides of the Atlantic. It matters deeply to households and businesses. Network investment has a cost but done well, it reduces costs over time by connecting lower cost generation, reducing congestion, improving reliability and avoiding more expensive solutions later. In the U.K., we will be engaging with a new administration on this and other topics. Given the strength of our role and impact, we are well placed to support the government's ambitions. Now let me briefly bring our delivery to life by covering our 5-year plans. In March, we set out our updated 5-year financial framework. We plan to invest at least GBP 70 million over the next 5 years, the largest capital investment program in our history. We have strong visibility over this program, around 2/3 of the GBP 70 billion investment is already covered by regulatory agreements with delivery mechanisms secured for around 3/4 of it, giving us confidence whilst recognizing the scale of the delivery ahead. This investment is not just about energy infrastructure. It supports jobs, skills and economic growth with around 6,000 new jobs in the U.K. over the next 5 years, including around 2,000 graduates and apprentices. There are also wider benefits through our contractors, suppliers and the communities in which we operate. Delivery is the key to turning this opportunity into value. We have a strong track record, but we're not complacent. We are continuing to strengthen project assurance, improve supply chain coordination, standardized designs, where it makes sense and use technology to help plan and manage delivery more effectively. We're also investing in better customer service for our customers. And innovation is a core part of how we deliver that. Through National Grid partners, we're investing technologies that can improve efficiency, unlock capacity and support faster connections. Let me now turn to our financial resilience. National Grid's investment case is built on visible growth and a resilient business model with predictable cash flows from regulated assets and frameworks that support efficient investment and appropriate returns. That does not mean there's no risk. We operate in complex environments, and we must manage factors like inflation, supply chain pressures, interest rates alongside operational challenges. But our business model is designed to be resilient. In the U.K., inflation-protected returns across our regulated asset base provides a natural hedge. In the U.S., a high proportion of our supply chain is domestically sourced, which reduces exposure to some global pricing pressures. We also manage financing and currency exposure carefully. Cash generated from continuing operations was at GBP 7.9 billion last year, up 15% compared with the prior year at constant currency supported by operational performance across our regulated businesses. Net debt increased to GBP 44.2 billion at constant currency, reflecting the scale of our capital investment program and partly offset by proceeds from disposals. Our balance sheet remains an important part of how we create long-term value. We're committed to maintaining a strong overall investment-grade credit rating. And we also retain flexibility in how we fund the business including through debt markets and other funding options where appropriate. For shareholders, the financial framework is clear. Over the next 5 years, we expect asset growth of around 10% per year underlying earnings per share growth CAGR of 8% to 10% per year and continued growth in the dividend per share in line with CPIH inflation. For the current financial year, we expect capital investment to grow by around 10% and to nearly GBP 13 billion, and we expect underlying earnings per share growth of 13% to 15% from our 25 to 26 baseline. These are ambitious commitments and delivery will require discipline, but they're underpinned by strong visibility, the critical infrastructure nature of our assets and the central role that networks play in the energy system. So let me close now with 3 key messages: First, National Grid has delivered strong results and has strong foundations. Second, we are sharpening how we operate, innovate and deliver. So that we're ready for a rapidly changing world. Third, the growth opportunity ahead is clear and significant, and we're investing with discipline to capture it. I'm excited to be leading National Grid at this important time I'm also grateful to our 33,000 colleagues their commitment and expertise and dedication. Thank you for your continued support as shareholders of National Grid. And as I hand back to Paula, I'd like to share a short film showing how we're delivering innovation at scale and building the energy system the U.K. needs for the future. Let's take a look. [Presentation]

Thank you, Zoe. I hope you enjoy that little picture of some of the technology that is in the end, going to profoundly change the nature of our business. So the notice of meeting, which includes an explanation of each resolution being proposed today was published on June 3, and for those joining online, the notice of meeting is available under a Documents tab on the Lumi platform in case you want to refer to it during this meeting. Resolutions 1 through 17, inclusive of our proposed as ordinary resolutions and 18 to 22 inclusive or proposed as special resolutions. The Board unanimously in favor of each resolution proposed and recommended votes in favor of all of the resolutions. We trust you've all had an opportunity to read it. And with your permission, we're going to take that notice as read. A poll will be taken on all resolutions each ordinary shareholders entitled to 1 vote for each ordinary share registered in his or her name and each proxy holder or individual representing a corporate shareholder is entitled to 1 vote for each share, which he or she represents. For shareholders attending in person, you can use your paper poll card to vote. I had a lovely talk with 1 shareholder before hand saying I might just ask if anybody is using the polling card because nobody was using the polling card, I could skip all of the explanation of how to use the card. In fact, this gentleman had picked up a polling card because he had reregistered his shares. So for those of you who are not using it, you're going to have to bear with me because we are legally required to do this. So anyone who was present was given a poll card at registration. It details the resolutions and I've appointed Equiniti, which they tell me I can call EQ for simplicity, which is the company's registrar to act as the scrutineers. So I'm going to pass the program over to Julian to take us through the voting process and how to ask questions.

Thank you, Paula, and good morning, everyone. As indicated by the Chair, voting today will be by a poll. If you're attending in person, please complete your poll card clearly, marking your votes and place it in 1 of the ballot boxes as you leave. If you need any assistance, the Equiniti team is available to shareholder inquiries desk in the foyer. If you're attending online, you can vote using the electronic system on the Lumi platform. The full list of resolutions will appear on your screen with 4 against and withheld options. Once you've made your selection, a vote received message will appear. You can return to the list of resolutions at any time by clicking on the voting icon. If you've already submitted a proxy form and do not wish to change your vote, no further action is needed. However, if you would like to change your vote, please resubmit it using either the poll form or the Lumi platform. In either case, please ensure you cast a vote for every resolution. If you need any further guidance on how to cast your votes via the platform, then please refer to the instructions on the home page or the user guide available on the documents tab. May I remind you that a vote withheld is not a vote in law and will therefore not be counted. The poll remain open for 15 minutes following the conclusion of the meeting. I'll now move on to the process for asking questions. For shareholders attending online, you can submit questions in relation to the business of the meeting through the Lumi platform. Click the messaging icon and type your question in the chat box at the top of the screen then press the send button on the right-hand side to submit. We will try to group questions by topic and alternate between questions in the room and any registered online so that we can answer as many of your questions as possible today. If you're attending in person and have preregistered your question and us you'll bring a microphone to you at the appropriate time. If you haven't registered a question but still wish to ask one, simply raise your hand, and a representative will assist you. To ensure we cover as many topics as possible, please keep your questions concise and relevant to the business of the meeting. When speaking, kindly state your name and whether you're attending as a shareholder, proxy or corporate representative, and please direct all questions to Paula in the first instance. If you have other general questions about the company but not related to the business of the meeting, I will ask you to kindly hold those questions until after the meeting business has formally adjourned. If you are participating online and you have general questions unrelated to the meeting, we will apply to those questions by e-mail after the meeting closes.

Great. Thank you, Julian. So the poll is now open for voting. And so we're going to move on to the Q&A of today's agenda. And Julian will help us coordinate this because he's got some preregistered and questions coming in online. And if you'll forgive me, I'm going to go sit down because I think what we're really trying to do is have a good conversation. And I don't really need to stand here in direct traffic, I don't think so.

Thank you, Paula. So starting with a pre-submitted question from Alan Mondi. So there are 2 questions here, so we'll start with the first. Given the arrival of a new labor prime minister who has championed more public ownership of essential services, we change the way you work with the government as a crucial part of U.K.'s infrastructure.

Maybe I'll start that and turn it to you, Zoe. I think see captured it actually in her prepared remarks of we work with every government, we work with every regulator and the fact that there is a change in government that's pending here in the U.K., we'll work with the new government as well as we have to try to be as close as is appropriately possible. But Zoe, your thoughts? .

Yes. I think I'd just echo that, of course, we will continue to work closely with government, along with other stakeholders and regulators. It's a core part of our business and something for which we deeply value. I think the 1 thing I would say, however, is what we understand as the Prime Minister's policies emerge is that we actually have a lot in common on the trajectory that we are seeing. We can see the need for a broader resilience to the energy network that requires different sources of supply to be connected, but we also see a critical importance to drive the economic growth engine behind the U.K. and, of course, also in the U.S., but focusing on the administration here, how can we continue to ensure that energy policy helps to inform economic opportunity. And I think the grid has a substantial role to play there. The other thing I would say is, of course, National Grid is, in essence, across many parts of the U.K. And so I think we have a real opportunity to really lean into every postcode finding ways to prosper under the investment program that we are delivering and how we can deliver that energy resilience. So we look forward to continuing to work closely as the new government's policies are formed.

And the second part of Mr. Mundy's question, there are 2 parts and Mondays in the audience, thank you for being here. . Given the concerns of people around the world about the threat of global warming, in your U.S. operations, can you lobby Secretary right on our behalf who has rolled back measures to combat climate change and has criticized the U.K.'s commitment to net 0 targets. And the addition -- additional point made today can National Grid lobby the U.S. Secretary of State on his policies as he has reversed sensible environmental policies.

Maybe I'll start with that one since I'm the American on the stage here. And I think the first thing is, is that we have to be respectful in our various jurisdictions on the policies that are prevailing in those jurisdictions. . And in the U.S., we do have a country at the national level and even at the state levels that takes a different view on, in particular, the use of natural gas for energy generation. It's interesting because this afternoon and our Board meeting, we have some data on what's the composition of our rates in our U.S. jurisdictions. And that goes to the issue of what the generation sources are on the electric side and also our sources of natural gas on the gas side. And the fact is, is we operate in regions that are heavily dependent on natural gas for both heating and power generation. So we have a bit of a delicate balance here, while on the 1 hand, I think all of us hope for a more urgent world where we are taking steps to do our part around climate change. We also have to be sensitive to the fact that we operate in places where the alternatives to, for example, fossil fuels are less obvious. So -- so he does meet with Secretary right from time to time. I don't think you've met with the U.S. Secretary of State and probably given his other responsibilities right now, you might not be high on his agenda of meetings he would take. But I'd like to think that we do try to be extremely thoughtful in the way we approach the fact that we do want to be responsible stewards of the environment but that we also have to be respectful of the differences in the business between the 2 countries in which we operate. So with that, if you want to. The only thing I would add is, of course, our regulated business in the U.S. is predominantly regulated by the states. And so whilst we do, of course, have interactions at the federal level across some of our interconnectors, the majority of our conversations on regulated approaches is in the state of Massachusetts and New York. And I think you'll also see the governors of those respective states have shifted to what's called an all of the above strategy, which I think echos Paula's comments around the criticality of understanding how to balance affordability in the regions with the security of supply and the sustainability objectives. And that is indeed a trilemma as we describe it in constantly iterating for the optimum outcome. We move to the question in the room from Mercy Ross. Thank you for your question, and we've been asked to pose this to the panel. National Grid is involved in the Philippines, what capacity is National Grid involved in this country. Shareholder explained -- Mr. Roth, sorry, explained that our family is suffering in that jurisdiction, and we need to justify questions to her family.

Yes. It's actually my understanding that there is a registered company in the Philippines, which is called National Grid Philippines. It is of no connection to National Grid that we are here representing. And so I'm sorry to hear that your family is suffering. Unfortunately, it is not part of our company accountability. It is a separate company entity.

And now move to a question from the floor for Mr. James Hewitt. Good morning. I've already spoken to the Chief Executive about the first question. I've got 2. The risk of drone attacks is critical to national infrastructure and, of course, to our company's infrastructure transmission lines and transform substations the threat seems to be increasing. Does the company plan to respond to this? And because it jeopardizes the capital value of our company's assets and the related flow of revenues. And if so, how I know you've met with government on this very issue. So I'll just turn that.

Yes. Thank you, Mr. Huet for the question. I think right now, I can certainly share that we are not complacent in any way, with respect to both the physical and cyber risks that are exposed to our assets. Paula mentioned that our Board has been this morning to our cybersecurity center under the principal risk that you see in our annual report under physical and cybersecurity, any threats, including things like drone attacks embraced under that holistic risk. We regularly do coordinate with into governmental agencies to understand Intel. And we have a number of barriers in which we engage in to make sure that the health of our system is very strong and we regularly also conduct crisis exercises where we role play in the event that some of these attacks happen, how we would go about responding to ensure the resilience around emergency planning. So it's super question. We don't at all remain complacent, lots of work to continue because it is, of course, an evolving threat landscape.

Indeed. Second question, partly covered as well about data centers and Julen. In the announcement of the recent investment in Julin, our company mentions its aim to connect more than 5 gigawatts of data center demand over the next 5 years, both in U.S. and the U.K. How is this compatible with the climate emergency? By how much would that demand increase electricity prices, worsen fuel poverty and jeopardize the shift from fossil fuel towards electricity as a direct source of energy the third one. Does our company plan to indemnify itself against complicity in harms, which both this and those data centers may cause.

Wow, there are a lot of questions in that, and maybe we'll parse it out a little bit. And so One of the overlays that exists around this question of data centers is the tension between growth, prosperity and the needs of an advanced society because, I mean, these data centers are at the end of the day, they're for all of us in our progressive way of life through advanced computing and the fact that all of these data centers are not going to end up being fueled by renewables. So it is an area of great consideration on the part of all the parties. I mean you do see the great technology companies that always said they would try to be 100% renewables, recognizing that the speed of advanced computing requires data centers and that renewables are not the only answer. So back to Zoe's comment that she made with respect to our U.S. governors there is much more of an all of the above type of consideration going on. Nobody wants to see renewables not used in this environment nor do we expect that it can all be done with renewables. And I'm going to take a little bit of a detour and then I'm going to ask Zoe to go and maybe add to some of the specifics here. But 1 of the challenges that we have in operating these grids today is the fact that we have high aspirations in all the jurisdictions to try to be as close to 100% renewable as we can be. But when we're talking about renewables, Nuclear is very far down the road still in terms of new nuclear even in this country as we have nuclear coming on. And so we really are dependent -- when we talk about renewables, it's wind, solar and then batteries to store some of the patterning. And what we really see as we look at these grids is even though we have many hours of the year where we can rely much more on renewables, we can't rely on them 24 hours a day. And so the fact is, is the data centers tend to be more 24 hours a day because we compute 24 hours a day. Now in that video, you saw a thing called Emerald AI. And Emerald AI is a tool to use with data centers to try to figure out how to optimize their demand so that they can take advantage of this patterning that reduces cost to everybody by exploiting the use of what is available at certain times of day. So what we see is even as the grid struggles in the aggregate around renewables versus nonrenewables, there are tools coming into effect to try to mitigate some of that. And so we are great believers as a company in the fact that actually computing will help us find some of the answers to this. But I think to Joe's point is we don't live in a perfect world. And we do see the necessity of advanced computing in the U.K. and the U.S. I mean we are free societies and a lot of our issues around security are tied up in our ability to have advanced computing. So we believe in it from that perspective. We believe in it from the perspective of ultimately job growth and prosperity in our economies. And what we believe is that technology will be part of the mitigant of the complexity that comes from the fact that we don't live in a perfect world, and we can't simply rely on 100% renewables. I think that was really well explained. I think the only thing maybe to add to your second part of your question around who pays? The PPA with Microsoft has been configured as an islanded configuration, which essentially means 100% of the infrastructure costs associated with that generation is paid for by the off-taker. It is not transferred across the broader rate base, and therefore, there is not an impact to the rate base related to affordability -- in fact, over time, they will be connected into the grid, but that will enable more resilience for the broader rate base for which those investments weren't paid for by the rate base. So it can offer some opportunity for resilience over time. I think the other thing to say, which I think Paula has mentioned really well is there's a lot of opportunities that come with AI as well as risks. And so I think we're seeking to try and find that right balance as we understand how the world evolves so quickly. And mainly finally, I'd say that there's a criticality around pace and delivery here. And so the opportunity to deliver something quickly that enables the data centers to get up and running is what provides that compute power and energy that enables us to deliver all of those technology optimizations back to the grid. So a super question. Thank you very much, Mr. Hewitt.

Thank you. Thank you. Next, we have 2 linked -- pre-submitted questions from Ian Kroton. So number 1 is how many times in the last year in the U.K. have National Grid been fine for working without a permit. And secondly, how much of those fines cost National Grid. .

I'm going to pass that 1 directly to use. It turns out, I'm pretty sure Andy would like this well. SP-13 Thank you. I'll get Andy voice in there. .