NOT
FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN OR
INTO THE UNITED STATES, CANADA, HONG KONG, JAPAN, SINGAPORE, SOUTH
AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD BREACH ANY
APPLICABLE LAW OR REGULATION.
THIS ANNOUNCEMENT IS AN ADVERTISEMENT FOR THE PURPOSES OF THE
UK PROSPECTUS REGULATION RULES OF THE FINANCIAL CONDUCT AUTHORITY
(THE "FCA") AND DOES NOT CONSTITUTE A PROSPECTUS OR A PROSPECTUS
EQUIVALENT DOCUMENT. NEITHER THIS ANNOUNCEMENT NOR ANY PART OF IT
SHOULD FORM THE BASIS OF OR BE RELIED ON IN CONNECTION WITH OR ACT
AS AN INDUCEMENT TO ENTER INTO ANY CONTRACT OR COMMITMENT
WHATSOEVER. NOTHING IN THIS ANNOUNCEMENT SHOULD BE INTERPRETED AS A
TERM OR CONDITION OF THE RIGHTS ISSUE. ANY DECISION TO PURCHASE,
SUBSCRIBE FOR, OTHERWISE ACQUIRE, SELL OR OTHERWISE DISPOSE OF ANY
NIL PAID RIGHTS, FULLY PAID RIGHTS OR NEW SHARES MUST BE MADE ONLY
ON THE BASIS OF THE INFORMATION CONTAINED IN THE PROSPECTUS ONCE
PUBLISHED. COPIES OF THE PROSPECTUS WILL, FOLLOWING PUBLICATION, BE
AVAILABLE FROM THE REGISTERED OFFICE OF THE COMPANY AND ON ITS
WEBSITE AT WWW.NATIONALGRID.COM.
THIS ANNOUNCEMENT CONTAINS INSIDE
INFORMATION.
FOR
IMMEDIATE RELEASE.
23
May 2024
National Grid
plc
7 for 24 fully underwritten
Rights Issue to raise c.£7.0 billion
New 5-year investment
framework for FY25-29
Deliver £60bn investment in
energy infrastructure
To fund a significant step up in
capital investment to around £60 billion in energy network
infrastructure, the Board of National Grid plc ("National Grid" or the "Company") today announces a capital
raise of approximately £7.0 billion by way of a fully underwritten
Rights Issue of 1,085,448,980 New Shares at 645 pence per New Share
on the basis of 7 New Shares for every 24 Existing Shares (the
"Rights Issue").
National Grid's results for the year
ended 31 March 2024 have been released today in an accompanying
announcement.
HIGHLIGHTS
· National Grid announces capital investment of around £60
billion over the next 5 years (FY25 to FY29), nearly double the
previous 5-year period, to deliver a significant step-change in
critical energy infrastructure in the UK and US in support of the
energy transition and economic growth objectives
· As
part of a comprehensive financing plan to deliver the investment,
National Grid is announcing a 7 for 24 fully underwritten Rights
Issue to raise net proceeds of approximately £6.8
billion
· National Grid's comprehensive financing plan
comprises:
o A
c.£7.0 billion Rights Issue which provides shareholders with the
pre-emptive opportunity to fund and benefit from our higher growth
strategy;
§ the Issue
Price of 645 pence per New Share represents a 34.7% discount to the
theoretical ex-rights price based on the closing middle-market
price on 22 May 2024 (being the last business day before the
announcement of the terms of the Rights Issue) of 1,127.5 pence per
Share, adjusted for the recommended final dividend for FY24 of
39.12 pence per Share
o streamlining of the portfolio to focus on pureplay networks
across regulated and competitive, onshore and offshore networks,
with the intention to sell Grain LNG and National Grid Renewables;
and
o senior debt and future hybrid issuance to maintain balance
sheet strength and investment flexibility
· The
Board unanimously believes this comprehensive financing plan will
allow the Group to fund a significant increase in capital
investment, maintain its strong investment grade credit rating,
deliver for customers, and continue to achieve attractive
shareholders returns
· Alongside this, National Grid is announcing a new 5-year
financial framework from FY25 to FY29, which will see it
deliver:
o Group asset growth of c.10% CAGR;
o 6-8%
underlying EPS CAGR from an FY25 baseline; and
o continuing our progressive dividend policy, maintaining the
total level of dividend following the Rights Issue. Aim to continue
to grow the DPS in line with UK CPIH, from a rebased FY24 DPS
level
· Overall, this makes National Grid one of the FTSE's biggest
investors in the delivery of the energy transition, and positions
the Company to become a pre-eminent pureplay networks
business
John Pettigrew, Chief Executive, said:
"Today is a defining moment for
National Grid as we announce £60 billion of investment, cementing
our position as a leader in the energy transition in the UK and US
northeast.
On both sides of the Atlantic,
governments and regulators are moving with increased urgency to
attract the levels of investment required to meet their
decarbonisation targets. As economies become increasingly digital,
electrified and decarbonised, the need for energy infrastructure
has rarely been more pressing. Our investment will unlock
significant economic growth and, by the end of the decade, National
Grid is expected to support over 60,000 more jobs, while also
decarbonising our energy systems, bolstering security of supply,
and reducing consumer bills in the long term. Our strong track
record of infrastructure delivery, positive engagement with our
regulators and wider stakeholders, alongside clarity on the scale
and profile of our capital investment positions National Grid to
take advantage of the significant growth opportunities we see
ahead."
SUMMARY OF BACKGROUND TO AND REASONS FOR THE RIGHTS
ISSUE
National Grid plays a critical role
in delivering the energy transition across our jurisdictions, by
building and maintaining the transmission and distribution
infrastructure to enable the connection of cleaner, more affordable
renewable energy. Not only will this enable the decarbonisation of
the economies we serve, it will also ensure we can meet the demand
growth we anticipate from a more technology-enabled economy, as
well as greater electrification of homes, heating and
vehicles.
The opportunities presented by the
growth of electricity demand, and the consensus among our
regulators and jurisdictions of the urgent need for decarbonisation
are unprecedented. It's against this backdrop that we expect to
significantly increase our capital investment over the next five
years.
Our geographic position and our work
with governments and regulators provides us with an unprecedented
growth opportunity that we expect will create substantial value for
our shareholders. This investment in new infrastructure will
enhance resiliency and enable the jurisdictions in which we operate
to make meaningful progress in their journeys towards a
decarbonised energy system. The step-up in investment as set out in
our new 5-year financial framework underscores National Grid's
position as one of the FTSE's biggest investors in the delivery of
the energy transition. Over the last three years we have reshaped
our portfolio and now have a mix of businesses that is increasingly
weighted towards electricity transmission and distribution, making
us well-placed to capture the significant network growth
opportunities that lie ahead. With our operational and regulatory
capabilities, combined with a strong track record of delivery, we
are confident that we can deliver this step-up in new
infrastructure that will provide greater levels of energy security
and enable diversification of energy sources to help decarbonise
the economies we serve.
The Board unanimously believes that
raising net proceeds of approximately £6.8 billion through the
Rights Issue will give the Group appropriate financial flexibility
to deliver the Group's strategy over the 5-year financial
framework, and funding clarity until at least the end of the
RIIO-T3 period.
In particular, the Board believes it
will allow the Group to fund a significant increase in capital
investment and continue to deliver attractive returns to
shareholders, whilst maintaining strong investment grade credit
ratings for our operating companies and the Group
overall.
The Rights Issue net proceeds of
approximately £6.8 billion will principally be utilised to fund a
higher-growth investment phase for the Group, with around £60
billion of capital investment expected during the 5-year period
from FY25 to FY29. In the near term, to support efficient
management of funding costs, approximately £750 million of the net
proceeds will be used to refinance a portion of the Group's
outstanding hybrid bonds that have first call dates in the next 15
months.
The Rights Issue provides
shareholders with the pre-emptive opportunity to fund and, we
believe, to benefit from our higher growth strategy. We believe
that the Group will deliver an attractive mix of asset and earnings
growth and dividend yield, while enabling the energy transition in
our UK and US markets. This builds on our track record of having
delivered an over 30% higher Total Shareholder Return compared with
the FTSE 100 over the last decade.
Further details of energy policy and
regulatory progress, as well as National Grid's planned
infrastructure investments are set out in the full "Background To
and Reasons For The Rights Issue" section further down this
announcement.
Key highlights of our new 5-year
financial framework, covering the period from 1 April 2024 to 31
March 2029 (FY25 to FY29), comprise:
· a
significant increase in capital investment to around £60 billion
over the period, with approximately 52% of expected spend to be in
the United Kingdom and 48% in the United States. Around 85%, or £51
billion, is expected to be "green investment" aligned to the EU
Taxonomy, and 98% of the total investment is in our regulated
businesses, including around 80% in our
electricity networks and approximately 10% in offshore;
and
· a high
asset growth phase which we anticipate will result in a compound
annual growth rate ("CAGR")
of around 10% in our group asset base, leading to a forecasted
combined asset base of nearly £100 billion by 2029, of which we
expect nearly 80% to be in our electricity networks, (based on an
assumed average UK CPIH inflation rate of 2.5%);
· translating into a strong underlying earnings per share
("EPS")
growth CAGR of 6 to 8% from a FY25
baseline, following the issuance of New Shares
· We
will continue our progressive dividend policy, maintaining the
total level of dividend following the Rights Issue. Our aim is to
grow Dividend Per Share ("DPS") in line with UK CPIH inflation in
keeping with the current dividend policy. We will aim to increase
the FY25 DPS by UK CPIH following the rebase of the FY24 DPS of
58.52 pence, after taking account of the new shares issued
following the Rights Issue[1]
At a business level, we expect
investment over the period to comprise:
· around
£23 billion into the UK Electricity Transmission business,
representing a more than 250% increase in capital investment versus
the prior 5-year period. This includes continued funding for our 17
Accelerated Strategic Transmission Investment ("ASTI") projects;
· investment of around £8 billion in UK Electricity
Distribution, representing a more than 30% increase in capital
investment versus the prior 5-year period, as we continue to
deliver the remaining four years of our RIIO-ED2 price control and
invest to create the smart distribution network to enable the
accelerated adoption of low carbon technologies, such as electric
vehicles and heat pumps, by our customers;
· together these will help grow our UK regulated asset base to
over £50 billion by 2029 (assuming average UK CPIH of
2.5%)
· In our
US regulated businesses we will invest around £28 billion across
New York and New England, comprising investment of approximately
£17 billion in New York and £11 billion in New England, and
reflecting a 60% increase in capital investment (excluding the
Narragansett Electric Company, which was sold in FY23)
· With
this we expect our combined US rate base to grow from approximately
£25 billion today, to nearly £45 billion in 2029 (at an exchange
rate of £1:$1.25)
· Committed investment of around £1 billion in our National Grid
Ventures (NGV) business
We remain committed to a strong,
overall investment grade credit rating. We expect to maintain
credit metrics above our thresholds for current group credit
ratings through to at least the end of the RIIO-T3 price control
period, with current thresholds of 10% for S&P's FFO/adjusted
net debt, and 7% for Moody's RCF/adjusted net debt. Following
completion of the Rights Issue, we expect regulatory gearing to be
in the low 60% range by March 2025, and then trend back towards the
high 60% range by the end of RIIO-T3.
To maintain a resilient balance
sheet and the strong investment grade credit rating referred to
above, whilst enabling this material step-up in investment in the
coming years, we are setting out a comprehensive plan of financing
measures.
In addition to cashflow generated
from operations, where we aim to continue our successful cost
mitigation program by keeping controllable costs broadly flat as we
continue the strong growth of our asset base, the principal
elements of this plan are:
· Debt:
we will continue to issue senior debt within the capital
markets
· Hybrid
capital: we expect to utilise further hybrid debt issuances later
in the 5-year period to maintain balance sheet strength and enable
investment flexibility
· Proceeds from the planned sales of our Grain LNG terminal and
National Grid Renewables businesses
· Rights
Issue: equity issuance of approximately £7.0 billion, as announced
today
As regards dividends and dividend
policy:
· We
will maintain a progressive total level of dividend, growing from
current levels of approximately £2,168 million which the Board has
recommended for the year to 31 March 2024
· This
equates to a final DPS of 39.12 pence, leading to a total DPS of
58.52 pence for FY24. This will then be rebased to take account of
the new shares issued following the Rights Issue
· We
then aim to grow DPS in line with UK CPIH, in keeping with the
current dividend policy
· We
will continue to offer a scrip dividend, given the continued high
level of group asset growth we expect to deliver
Further details of National Grid's
dividend policy are set out in the full "Background To and Reasons
For The Rights Issue" section further down this
announcement.
PROSPECTUS
A Prospectus setting out the full
details of the Rights Issue is expected to be published on National
Grid's website at www.nationalgrid.com
later today.
The Prospectus will be submitted to
the National Storage Mechanism and will be available for inspection
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism following
publication.
The preceding summary should be read
in conjunction with the full text of the following announcement,
together with the Prospectus.
Unless the context otherwise
requires, words and expressions defined in the Prospectus shall
have the same meanings in this announcement.
INDICATIVE SUMMARY TIMETABLE OF PRINCIPAL
EVENTS
Announcement of Rights
Issue........................................................................
|
|
23 May
2024
|
Publication of the
Prospectus......................................................................
…
|
|
23 May
2024
|
Record date for entitlement under the Rights
Issue.......................................
|
|
6.00 p.m.
on 20 May 2024
|
Despatch of Provisional Allotment
Letters (to Qualifying Certificated Shareholders
only).........................................................................................
|
|
23 May
2024
|
Admission and commencement of dealings in New Shares, nil
paid, on the London Stock Exchange...............................................................................
|
|
8.00 a.m. on 24 May
2024
|
Existing Shares marked "ex-rights" by the London Stock
Exchange.............
|
|
8.00 a.m. on 24 May
2024
|
Latest time and date for acceptance, payment in full and
registration of renunciation of Provisional Allotment
Letters...............................................
|
|
11:00 a.m. on 10 June
2024
|
Expected date of announcement of
results of the Rights Issue through a Regulatory Information
Service.......................................................................
|
|
12 June
2024
|
Commencement of dealings in New Shares, fully paid, to
commence on the London Stock Exchange...............................................................................
|
|
8.00 a.m. on 12 June
2024
|
The Rights Issue is fully
underwritten by Barclays Bank PLC ("Barclays") and J.P. Morgan Securities
plc (which conducts its UK investment banking activities under the
marketing name J.P. Morgan Cazenove) ("J.P. Morgan") acting as Joint Sponsors,
Joint Global Coordinators, Joint Bookrunners and
Underwriters.
FOR
FURTHER INFORMATION, PLEASE CONTACT:
National Grid:
Investors
Nick Ashworth
|
+44 (0)
7814 355 590
|
Angela Broad
|
+44 (0)
7825 351 918
|
James Flanagan
|
+44 (0)
7970 778 952
|
Media
Molly Neal
|
+44 (0)
7583 102 727
|
Danielle Dominey-Kent
|
+44 (0)
7977 054 575
|
Lyndsey Evans
|
+44 (0)
7714 672 052
|
Barclays
|
+44 (0) 20 7623
2323
|
(Joint Sponsor, Joint Corporate
Broker, Joint Global Co-ordinator, Joint Bookrunner and
Underwriter)
|
Alisdair Gayne
|
|
Neal West
Chris Madderson
|
|
J.P.
Morgan Cazenove
|
+44 (0) 20 7742
4000
|
(Joint Sponsor, Joint Corporate
Broker, Joint Global Co-ordinator, Joint Bookrunner and
Underwriter)
|
Bill Hutchings
|
|
Jamie Riddell
|
|
Alex Watkins
|
|
Robey Warshaw
|
+44 (0) 20 7317
3900
|
(Financial Adviser)
|
Simon Robey
|
|
Philip Apostolides
|
|
Brunswick
|
+44 (0) 20 7404
5959
|
Susan Gilchrist
|
Dan Roberts
|
|
Peter Hesse
|
|
IMPORTANT NOTICES
This announcement has been issued by
and is the sole responsibility of the Company. The information
contained in this announcement is for background purposes only and
does not purport to be full or complete. No reliance may or should
be placed by any person for any purpose whatsoever on the
information contained in this announcement or on its accuracy or
completeness. The information in this announcement is subject to
change without notice.
This announcement is not a
prospectus but an advertisement. Neither this announcement nor
anything contained in it shall form the basis of, or be relied upon
in conjunction with, any offer or commitment whatsoever in any
jurisdiction. Investors should not acquire any Nil Paid Rights,
Fully Paid Rights or New Shares referred to in this announcement
except on the basis of the information contained in the Prospectus
to be published by the Company in connection with the Rights
Issue.
A copy of the Prospectus will,
following publication, be available from the registered office of
the Company and on its website at www.nationalgrid.com
provided that the Prospectus will not, subject to
certain exceptions, be available (whether through the website or
otherwise) to shareholders in the United States, Canada, Hong Kong,
Japan, Singapore, South Africa or any other jurisdiction where the
extension or availability of the Rights Issue (and any other
transaction contemplated thereby) would breach any applicable law
or regulation. Neither the content of the Company's website nor any
website accessible by hyperlinks on the Company's website is
incorporated in, or forms part of, this announcement. The
Prospectus will provide further details of the New Shares, the Nil
Paid Rights and the Fully Paid Rights being offered pursuant to the
Rights Issue.
This announcement does not contain
or constitute an offer for sale or the solicitation of an offer to
purchase securities in the United States. The Nil Paid Rights, the
Fully Paid Rights and the New Shares have not been and will not be
registered under the US Securities Act of 1933, as amended (the
"Securities Act") or under
any securities laws of any state or other jurisdiction of the
United States and may not be offered, sold, pledged, taken up,
exercised, resold, renounced, transferred or delivered, directly or
indirectly, in or into the United States except pursuant to an
applicable exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and in compliance
with any applicable securities laws of any state or other
jurisdiction of the United States or other jurisdiction. There will
be no public offer of the Nil Paid Rights, the Fully Paid Rights,
the Provisional Allotment Letters or the New Shares in the United
States. Subject to certain limited exceptions, Provisional
Allotment Letters have not been, and will not be, sent to, and Nil
Paid Rights have not been, and will not be, credited to the CREST
account of, any Qualifying Shareholder with a registered address in
or that is known to be located in the United States. None of the
New Shares, the Nil Paid Rights, the Fully Paid Rights or the
Provisional Allotment Letters, this announcement or any other
document connected with the Rights Issue has been or will be
approved or disapproved by the United States Securities and
Exchange Commission or by the securities commissions of any state
or other jurisdiction of the United States or any other regulatory
authority, nor have any of the foregoing authorities passed upon or
endorsed the merits of the offering of the New Shares, the Nil Paid
Rights, the Fully Paid Rights or the accuracy or adequacy of the
Provisional Allotment Letters, this announcement or any other
document connected with the Rights Issue. Any representation to the
contrary is a criminal offence in the United States.
This announcement is for information
purposes only and is not intended to and does not constitute or
form part of any offer or invitation to purchase or subscribe for,
or any solicitation to purchase or subscribe for, Nil Paid Rights,
Fully Paid Rights or New Shares or to take up any entitlements to
Nil Paid Rights in any jurisdiction. No offer or invitation to
purchase or subscribe for, or any solicitation to purchase or
subscribe for, Nil Paid Rights, Fully Paid Rights or New Shares or
to take up any entitlements to Nil Paid Rights will be made in any
jurisdiction in which such an offer or solicitation is unlawful.
The information contained in this announcement is not for release,
publication or distribution to persons in the United States,
Canada, Hong Kong, Japan, Singapore, South Africa or any other
jurisdiction where the extension or availability of the Rights
Issue (and any other transaction contemplated thereby) would breach
any applicable law or regulation, and should not be distributed,
forwarded to or transmitted in or into any jurisdiction, where to
do so might constitute a violation of local securities laws or
regulations. The distribution of this announcement, the Prospectus,
the Provisional Allotment Letter and the offering or transfer of
Nil Paid Rights, Fully Paid Rights or New Shares into jurisdictions
other than the United Kingdom may be restricted by law, and
therefore persons into whose possession this announcement comes
should inform themselves about and observe any such
restrictions.
Any failure to comply with any such
restrictions may constitute a violation of the securities laws of
such jurisdiction. In particular, subject to certain exceptions,
this announcement, the Prospectus (once published) and the
Provisional Allotment Letters (once printed) should not be
distributed, forwarded to or transmitted in or into the United
States, Canada, Hong Kong, Japan, Singapore, South Africa.
Recipients of this announcement and/or the Prospectus should
conduct their own investigation, evaluation and analysis of the
business, data and property described in this announcement and/or
if and when published the Prospectus.
This announcement does not
constitute a recommendation concerning any investor's options with
respect to the Rights Issue. The price and value of securities can
go down as well as up. Past performance is not a guide to future
performance. The contents of this announcement are not to be
construed as legal, business, financial or tax advice. Each
shareholder or prospective investor should consult his, her or its
own legal adviser, business adviser, financial adviser or tax
adviser for legal, financial, business or tax advice. Acquiring
investments to which this announcement relates may expose an
investor to a significant risk of losing all of the amount
invested.
INSIDE INFORMATION
This announcement contains inside
information for the purposes of Article 7 of
the UK Market Abuse Regulation. The person responsible
for arranging the release of this announcement on behalf of
National Grid is Justine Campbell, Group General Counsel &
Company Secretary.
NOTICE TO ALL INVESTORS
Barclays Bank PLC ("Barclays") and J.P. Morgan Securities
plc (which conducts its UK investment banking activities under the
marketing name J.P. Morgan Cazenove) ("J.P. Morgan") (together, the
"Banks" or the
"Underwriters") are each
authorised by the Prudential Regulation Authority ("PRA") and regulated in the United
Kingdom by the FCA and the PRA. The Banks
are acting exclusively for the Company and acting for no one else
in connection with the Rights Issue. They will not regard any other
person as a client in relation to the Rights Issue and will not be
responsible to anyone other than the Company for providing the
protections afforded to their respective clients, nor for providing
advice in connection with the Rights Issue or any other matter,
transaction or arrangement referred to in this announcement.
Robey Warshaw LLP (the "Financial Adviser"), which is
authorised and regulated by the FCA in the UK, is acting
exclusively as financial adviser to the Company and no one else in
connection with the matters described in this announcement and will
not be responsible to anyone other than the Company for providing
the protections afforded to clients of the Financial Adviser nor
for providing advice in connection with the matters referred to
herein.
Neither of the Underwriters nor the
Financial Adviser, nor any of their respective subsidiaries,
branches or affiliates, nor any of their respective directors,
officers or employees accepts any responsibility or liability
whatsoever for the contents of this announcement, (or whether any
information has been omitted from the announcement), or makes any
representation or warranty, express or implied, as to its accuracy,
completeness or verification or for any other statement made or
purported to be made by it, or on its behalf, in connection with
the Company, the Nil Paid Rights, the Fully Paid Rights, the
Provisional Allotment Letter, the New Shares or the Rights Issue,
whether written, oral or in a visual or electronic form, and
howsoever transmitted or made available, or for any loss arising
from any use of this announcement or its contents or otherwise
arising in connection therewith. Subject to applicable law, each of
the Underwriters and the Financial Adviser accordingly disclaims
all and any liability whether arising in tort, contract or
otherwise (save as referred to above) which it might otherwise have
in respect of this announcement or any such statement. Neither of
the Underwriters nor the Financial Adviser, nor any of their
respective subsidiaries, branches or affiliates, nor any of their
respective directors, officers or employees owes or accepts any
duty, liability or responsibility whatsoever (whether direct or
indirect, whether in contract, in tort, under statute or otherwise)
to any person who is not a client of the Underwriters or the
Financial Adviser (as applicable) in connection with the Rights
Issue, this announcement, any statement contained herein, or
otherwise.
In connection with the Rights Issue,
the Underwriters and any of their respective affiliates may, in
accordance with applicable legal and regulatory provisions, take up
a portion of the Nil Paid Rights, the Fully Paid Rights and the New
Shares in the Rights Issue as a principal position and in that
capacity may retain, purchase, sell, offer to sell or otherwise
deal for their own account in securities of the Company and related
or other securities and instruments (including Nil Paid Rights,
Fully Paid Rights and New Shares) and may offer or sell such
securities otherwise than in connection with the Rights Issue
(including through coordinated action to dispose of any New Shares
which they are required to subscribe for as underwriters), provided
that the Underwriters and their respective affiliates may not
engage in short selling for the purpose of hedging their
commitments under the Underwriting Agreement (subject to certain
exceptions contained in the Underwriting Agreement). Accordingly,
references in the Prospectus to Nil Paid Rights, Fully Paid Rights
and New Shares being offered or placed should be read as including
any offering or placement of Nil Paid Rights, Fully Paid Rights and
New Shares to either of the Underwriters or any of their respective
affiliates acting in such capacity. In addition, certain of the
Underwriters or their affiliates may enter into financing
arrangements (including margin loans) with investors in connection
with which such Underwriters (or their affiliates) may from time to
time acquire, hold or dispose of Nil Paid Rights, Fully Paid Rights
and New Shares. Except as required by applicable law or regulation,
the Underwriters do not propose to make any public disclosure in
relation to such transactions.
NOTICE TO INVESTORS IN CANADA
The offer and sale of the Nil Paid
Rights, Fully Paid Rights and/or New Shares in Canada is being made
on a private placement basis only and is exempt from the
requirement that National Grid prepares and files a prospectus
under applicable Canadian securities laws. Any resale of Nil Paid
Rights, Fully Paid Rights and/or New Shares acquired by a Canadian
investor in this offering must be made in accordance with
applicable Canadian securities laws, which may impose restrictions,
under certain circumstances, to resales of the Nil Paid Rights,
Fully Paid Rights and/or New Shares outside of Canada.
Each Canadian investor who exercises
its Nil Paid Rights or Fully Paid Rights and/or purchases New
Shares will be deemed to have represented to the Company, the
Underwriters and to each dealer from whom a purchase confirmation
is received, as applicable, that the investor (i) is purchasing as
principal, or is deemed to be purchasing as principal in accordance
with applicable Canadian securities laws, for investment only and
not with a view to resale or redistribution; (ii) is an "accredited
investor" as such term is defined in section 1.1 of National
Instrument 45-106 Prospectus Exemptions ("NI 45-106") or, in Ontario, as such
term is defined in section 73.3(1) of the Securities Act (Ontario);
and (iii) is a "permitted client" as such term is defined in
section 1.1 of National Instrument 31-103 Registration
Requirements, Exemptions and Ongoing Registrant Obligations. If you
are an "accredited investor" and a "permitted client", in order to
exercise your Nil Paid Rights or Fully Paid Rights and/or acquire
any New Shares upon exercise thereof, you must sign and deliver an
investor letter.
INFORMATION TO DISTRIBUTORS
Solely for the purposes of the
product governance requirements of Chapter 3 of the FCA Handbook
Product Intervention and Product Governance Sourcebook (the
"UK Product Governance
Rules"), and disclaiming all and any liability, whether
arising in tort, contract or otherwise, which any "manufacturer"
(for the purposes of the UK Product Governance Rules) may otherwise
have with respect thereto, the Nil Paid Rights, the Fully Paid
Rights and the New Shares have been subject to a product approval
process which has determined that each are: (i) compatible with an
end target market of retail investors and investors who meet the
criteria of professional clients and eligible counterparties, each
as defined in Chapter 3 of the FCA Handbook Conduct of Business
Sourcebook; and (ii) eligible for distribution through all
permitted distribution channels (the "UK Target Market Assessment").
Notwithstanding the UK Target Market Assessment,
"distributors" (for the purposes of the UK Product
Governance Requirements) should note that: the price of the Nil
Paid Rights, the Fully Paid Rights and/or the New Shares may
decline and investors could lose all or part of their investment;
the Nil Paid Rights, the Fully Paid Rights and/or the New Shares
offer no guaranteed income and no capital protection; and an
investment in the Nil Paid Rights, the Fully Paid Rights and/or the
New Shares is compatible only with investors who do not need a
guaranteed income or capital protection, who (either alone or in
conjunction with an appropriate financial or other adviser) are
capable of evaluating the merits and risks of such an investment
and who have sufficient resources to be able to bear any losses
that may result therefrom. The UK Target Market Assessment is
without prejudice to any contractual, legal or regulatory selling
restrictions in relation to the Rights Issue. Furthermore, it is
noted that, notwithstanding the UK Target Market Assessment, the
Underwriters will only procure investors who meet the criteria of
professional clients and eligible counterparties.
For the avoidance of doubt, the UK
Target Market Assessment does not constitute: (i) an assessment of
suitability or appropriateness for the purposes of Chapters 9A or
10A, respectively, of the FCA Handbook Conduct of Business
Sourcebook; or (ii) a recommendation to any investor or group of
investors to invest in, or purchase, or take any other action
whatsoever with respect to, the Nil Paid Rights, the Fully Paid
Rights and/or the New Shares.
Each distributor is responsible for
undertaking its own target market assessment in respect of the Nil
Paid Rights, the Fully Paid Rights and/or the New Shares and
determining appropriate distribution channels.
FORWARD-LOOKING STATEMENTS
This announcement contains certain
statements that are neither reported financial results nor other
historical information. These statements are forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. These statements include information with
respect to National Grid's (the Company) financial condition, its
results of operations and businesses, strategy, plans and
objectives. Words such as 'aims', 'anticipates', 'expects',
'should', 'intends', 'plans', 'believes', 'outlook', 'seeks',
'estimates', 'targets', 'may', 'will', 'continue', 'project' and
similar expressions, as well as statements in the future tense,
identify forward-looking statements. This document also references
climate-related targets and climate-related risks which differ from
conventional financial risks in that they are complex, novel and
tend to involve projection over long term scenarios which are
subject to significant uncertainty and change. These
forward-looking statements are not guarantees of National Grid's
future performance and are subject to assumptions, risks and
uncertainties that could cause actual future results to differ
materially from those expressed in or implied by such
forward-looking statements or targets. Many of these assumptions,
risks and uncertainties relate to factors that are beyond National
Grid's ability to control, predict or estimate precisely, such as
changes in laws or regulations and decisions by governmental bodies
or regulators, including those relating to current and upcoming
price controls in the UK and rate cases in the US, as well as the
future of system operation in the UK; the timing of construction
and delivery by third parties of new generation projects requiring
connection; breaches of, or changes in, environmental, climate
change and health and safety laws or regulations, including
breaches or other incidents arising from the potentially harmful
nature of its activities; network failure or interruption, the
inability to carry out critical non-network operations and damage
to infrastructure, due to adverse weather conditions including the
impact of major storms as well as the results of climate change,
due to counterparties being unable to deliver physical commodities;
reliability of and access to IT systems, including or due to the
failure of or unauthorised access to or deliberate breaches of
National Grid's systems and supporting technology; failure to
adequately forecast and respond to disruptions in energy supply;
performance against regulatory targets and standards and against
National Grid's peers with the aim of delivering stakeholder
expectations regarding costs and efficiency savings, as well as
against targets and standards designed to support its role in the
energy transition; and customers and counterparties (including
financial institutions) failing to perform their obligations to the
Company. Other factors that could cause actual results to differ
materially from those described in this announcement include
fluctuations in exchange rates, interest rates and commodity price
indices; restrictions and conditions (including filing
requirements) in National Grid's borrowing and debt arrangements,
funding costs and access to financing; regulatory requirements for
the Company to maintain financial resources in certain parts of its
business and restrictions on some subsidiaries' transactions such
as paying dividends, lending or levying charges; the delayed timing
of recoveries and payments in National Grid's regulated businesses,
and whether aspects of its activities are contestable; the funding
requirements and performance of National Grid's pension schemes and
other post-retirement benefit schemes; the failure to attract,
develop and retain employees with the necessary competencies,
including leadership and business capabilities, and any significant
disputes arising with National Grid's employees or breaches of laws
or regulations by its employees; the failure to respond to market
developments, including competition for onshore transmission; the
threats and opportunities presented by emerging technology; the
failure by the Company to respond to, or meet its own commitments
as a leader in relation to, climate change development activities
relating to energy transition, including the integration of
distributed energy resources; and the need to grow the Company's
business to deliver its strategy, as well as incorrect or
unforeseen assumptions or conclusions (including unanticipated
costs and liabilities) relating to business development activity,
including the sale of a stake in its UK Gas Transmission and
Metering business, its strategic infrastructure projects and joint
ventures and the separation and transfer of the ESO to the public
sector. For further details regarding these and other assumptions,
risks and uncertainties that may impact National Grid, please the
'Risk Factors' section of the Prospectus. In addition, new factors
emerge from time to time and National Grid cannot assess the
potential impact of any such factor on its activities or the extent
to which any factor, or combination of factors, may cause actual
future results to differ materially from those contained in any
forward-looking statement. Neither National Grid nor either of the
Underwriters or the Financial Adviser are under any obligation to
update or revise publicly any forward-looking statement contained
within this announcement, whether as a result of new information,
future events or otherwise, other than in accordance with their
legal or regulatory obligations (including, for the avoidance of
doubt, the Prospectus Regulation Rules, the Listing Rules and
Disclosure Guidance and Transparency Rules).
INTRODUCTION TO THE RIGHTS ISSUE
Today we announced a proposed
capital raising of approximately £7.0 billion by way of a fully
underwritten Rights Issue of 1,085,448,980 New Shares at 645 pence
per New Share on the basis of 7 New Shares for every 24 Existing
Shares. The Issue Price represents a 34.7 per cent. discount to the
theoretical ex-rights price based on the closing middle-market
price on 22 May 2024 (being the last business day before the
announcement of the terms of the Rights Issue) of 1,127.5 pence per
Share, adjusted for the recommended final dividend for FY24 of
39.12 pence per Share.
The Rights Issue is fully
underwritten by Barclays Bank PLC ("Barclays") and J.P. Morgan Securities
plc (which conducts its UK investment banking activities under the
marketing name J.P. Morgan Cazenove) ("J.P. Morgan") acting as Joint Sponsors,
Joint Global Coordinators, Joint Bookrunners and
Underwriters.
BACKGROUND TO AND REASONS FOR THE RIGHTS
ISSUE
National Grid plc owns and operates
the regulated high-voltage electricity transmission network in
England and Wales, and the United Kingdom's largest regulated
electricity distribution business. In New York and Massachusetts,
National Grid owns and operates regulated electric transmission and
distribution networks as well as regulated gas distribution
networks. In addition to these networks, National Grid Ventures
(NGV) owns and operates high-voltage electricity interconnectors
between the United Kingdom and Europe, liquefied natural gas
("LNG") storage and
regassification facilities and US competitive transmission, as well
as US renewable and conventional generation.
Over recent years, governments'
focus on the delivery of decarbonisation targets has increased
markedly across the geographies in which we operate.
In Great Britain, the government is
targeting a fully decarbonised electricity system by 2035 and has a
legal obligation under the Climate Change Act 2008 to achieve net
zero by 2050. Reflecting the importance of this ambition, the UK
Office of Gas and Electricity Markets (Ofgem) has also been given a
statutory duty to support the government in meeting its 2050 net
zero obligation.
In New York and Massachusetts, the
state governments have also set out decarbonisation ambitions. New
York State is targeting a 100 per cent. zero-emission electricity
sector by 2040, while Massachusetts has set out a net zero target
by 2050.
National Grid's position in the
energy sector means that we have a critical role to play in the
energy transition across our jurisdictions: by providing the
transmission and distribution infrastructure that will enable the
connection of low carbon electricity generation, and networks
capable of delivering power for electric vehicles and the
decarbonisation of domestic heating, as these technologies are
adopted by consumers over time. In addition, we must meet demands
for new connections, such as the forecasted
increased demand for computing
power, given growth in artificial intelligence and the data centres
needed to support it. The pathway each jurisdiction will take to
meet the needs for new infrastructure will vary, as will the pace.
But as discussed more fully below, we expect to deploy greater
amounts of capital into building energy infrastructure in the years
ahead compared to the levels of capital dedicated in the last
decade in particular.
Energy policy and regulatory progress
We are seeing policy and regulatory
activity on both sides of the Atlantic to foster the expansion of
infrastructure. Governments and regulators are establishing
frameworks that encourage the step-up in investment that will be
required.
In the United Kingdom, government
officials are focused on enabling the energy transition with
urgency. The enactment of the Energy Act in October 2023 provides
for an operationally independent system operator and planner to be
established, introduced onshore competition for networks, and
implemented a "net zero" duty for Ofgem. In addition to the act, in
a paper we issued in May 2023, "Delivering for 2035 - Upgrading the
grid for a secure, clean and affordable energy future", we urged
the UK government to undertake fundamental reforms across a number
of areas, including to timelines for delivering transmission
infrastructure. Since then, the government has proceeded with a
Transmission Acceleration Action Plan; updated energy National
Policy Statements, which provide planning guidance for developers
of nationally significant energy projects; and publication of a
Connection Action Plan, to reform the process for projects
connecting to the grid.
In December 2023, Ofgem published
its Sector Specific Methodology Consultation which provides details
around how it intends to adapt the framework in RIIO-T3, our
upcoming rate setting proceedings; this consultation indicates the
regulator's intent to provide certainty and assurance to investors
that approved transmission projects are viable, investable and
deliverable. Furthermore, and in line with its new duties following
the enactment of the Energy Act 2023, Ofgem has set out a strategy
update, with five pillars, one of which is "Enabling infrastructure
for net zero at pace".
Taken together, these various
initiatives are a mosaic of policies and regulations, all designed
to enable
transmission and distribution owners
and operators to proceed with expansion of transmission and
distribution networks. Having thoroughly reviewed these various
developments, and, given the scale of
energy transition investment
required, we believe that Ofgem recognises the need for an
appropriate financial framework for our future
investments.
In the United States, the federal
Infrastructure Investment and Jobs Act 2021 and Inflation Reduction
Act 2022 have increased the number of renewable energy,
electrification and clean energy manufacturing projects being
brought forward. This provides positive signals for greater levels
of network investment needed both to enable new renewable
generation and support the development of a decarbonised gas
system, which has fed into our conversations with regulators as we
progress rate filings, and agree clean energy investment outside of
rate cases.
We are also seeing action more
locally, from our regulators in both New York and Massachusetts. In
New York, the Public Service Commission has asked utilities to
submit clean investment plans for 2030 in support of the state's
Climate Leadership and Community Protection Act (CLCPA). On the
back of this, National Grid has been awarded nearly $2.9 billion of
investment to deliver new and upgraded transmission
infrastructure.
In Massachusetts, in January, we
filed for $2 billion of clean investment over the next five years
as part of the commonwealth's Electric Sector Modernization Plan.
This follows the Department of Public Utilities requesting all
electric utilities in the state to outline what is required to
upgrade the distribution and transmission systems to meet the
Commonwealth's Clean Energy and Climate Plan 2050 policy
objectives.
All of these policy and regulatory
initiatives reinforce the momentum and support behind the energy
networks we operate, and provide greater detail and precision
around the expected investment levels and profile required to meet
the needs of our customers, governments and regulators where we
operate through the rest of this decade.
A
step change in infrastructure investment is
required
Over the last few years, National
Grid has been preparing for a more extensive role in the energy
transition. In May 2021, we outlined our first 5-year financial
framework, and at our Capital Markets Day in November 2021, we set
out our views of how the energy transition would provide National
Grid with significant growth visibility over the medium and long
term. Since then, the need for network investment has accelerated
further both in the United Kingdom and the northeastern United
States. Given this backdrop, National Grid has been developing the
capabilities to deliver materially more extensive amounts of
infrastructure over the latter half of the decade and beyond,
including announcing in April 2023 the creation of our Strategic
Infrastructure business unit dedicated to delivering major
strategic UK transmission projects. In the United States, we have
developed alliances with neighbouring utilities and public
authorities to build new electric transmission capacity.
In the United Kingdom, 17 major
projects, part of Ofgem's Accelerated Strategic Transmission
Investment (ASTI) framework, have been included within our
electricity transmission licence obligations since October 2023.
Our work to deliver these projects is progressing: in August we
were awarded planning consent for the Eastern Green Link 2 project,
an estimated £4.4 billion joint construction project
with SSE (of which National Grid's
share is £2.4 billion), with high-voltage direct current (HVDC)
cable and converter station contracts signed in February 2024; in
December, we signed contracts totalling £1.8 billion for HVDC
cabling and converter stations for Eastern Green Link 1, a joint
construction project with ScottishPower; and in March 2024, we
received a development consent order for our Yorkshire GREEN
project. In May 2024, we announced The Great Grid Partnership,
which will initially focus on the network design and construction
of nine of the onshore ASTI projects. This forms part of a £9
billion supply chain framework which will also support
infrastructure projects beyond 2030. We have also launched an HVDC
framework tender process to secure key cabling contracts, including
for our Eastern Green Link 3, Eastern Green Link 4 and SEALink
offshore projects within ASTI. We anticipate total capital
investment across the 17 projects to be in the mid-to-high teens of
billions of pounds range.
These initiatives feed into the
ongoing work for our RIIO-T3 business plan, thereby providing a
pathway for the ratemaking that will accompany these
investments.
In March 2024, the Electricity
System Operator (ESO) published its "Beyond 2030" report, which is
a blueprint for a decarbonised electricity system in Great Britain.
This report provides further guidance on the potential
infrastructure investment for electricity transmission into the
2030s, whilst reaffirming the view that there should not be
material additional incremental investment beyond ASTI for the rest
of this decade. While the landscape of new energy demands and the
speed of electrification may be variable, this is aligned with our
view, following our ongoing work with our supply chains, and as we
look at our delivery model over the longer term. This work will be
included in our RIIO-T3 business plan assumptions, and in our new
5-year financial framework for the years FY25 through FY29 (as
discussed more fully below). Coupled with the current RIIO-2 price
control in our Electricity Distribution business, which runs
through to 2028, we have good visibility into our investment
requirements in the United Kingdom for much of the rest of the
decade.
In the United States, we continue to
update and renew our investment and operating plans for our
regulated operating companies. We recently filed a Joint Proposal
with the New York Public Service Commission for a new three-year
rate plan, and accompanying capital plans for our downstate New
York gas distribution companies (KEDNY and KEDLI), where we expect
to invest around $5 billion over the three years. If approved, this
Joint Proposal will outline our system investment plans through to
2027, allowing a return on equity (RoE) of 9.35 per cent., an
increase from 8.8 per cent. in the previous rate plan, and an
increase in capital investment of approximately 30 per cent.
Additionally, the Joint Proposal will reflect an increase in
minimum leak prone pipe removal targets, allowing us to further
reduce methane emissions. Before summer we will file for new rates
in our upstate New York Niagara Mohawk electricity and gas
distribution businesses. We are engaged in dialogue with the
regulator and stakeholders which is providing a good basis on which
to plan for the level of investment in that service territory. In
Massachusetts, we filed for new rates in our electricity
distribution business last November, expected to be effective from
October 2024. We will be filing for new rates in November 2024 in
our Massachusetts gas distribution business, to become effective
from October 2026.
Since 2021, we have also seen
investment focused on clean energy infrastructure solutions
progress in the United States outside our ordinary course of rate
filings.
Drivers of growth are coming from
New York transmission opportunities. In March, we announced our
"Upstate Upgrade", plans to invest more than $4 billion in
transmission network infrastructure in New York. The upgrade is a
collection of more than 70 transmission enhancement projects
through 2030 to deliver a modernised, stronger, and cleaner energy
network in Upstate New York. This investment includes a combined
$2.9 billion of approved CLCPA Phase 1 and 2 projects, with Phase 1
representing $800 million of investment before 2030, including
circuit rebuild projects to support 330 MW of incremental renewable
generation capacity. Phase 2 funding of $2.1 billion will help
unlock around 2,200 MW of existing and 'shovel ready' generation
through building around 400 miles of new transmission lines, also
by 2030. In Massachusetts, we recently submitted our views on
required additional clean electricity investment over the coming
decades in our Electric Sector Modernization Plan. Our plan would
see up to $2 billion of additional investment over the coming five
years across areas such as: network infrastructure, with the
upgrade of power lines, transformers, and substations; technology
and platforms, delivering new planning tools and monitoring
systems; and customer programmes, to help customers reduce their
carbon footprint and drive smarter energy use. We believe the fact
that regulators have solicited our plans and are approving them or
actively deliberating on them is evidence of their commitment to
having us invest capital in our utility systems for the
future.
Elsewhere in the United States, and
since 2021, the New York Transco joint venture (a partnership of
the major New York utilities, which includes National Grid
Ventures) has energised the NY Energy Solution transmission line
upgrade, with National Grid's capital contribution being around
$100 million. NY Transco has also been selected to deliver the
Propel NY Energy transmission project by the New York Independent
System Operator (NYISO). This will increase transmission capacity
between the mainland and Long Island, with National Grid's capital
contribution being around $340 million. This incremental clean
energy investment, combined with our continuing rate filings, gives
us good visibility on the scale and pace of investment required
through the rest of this decade in the northeastern United
States.
A
new five-year financial framework
With greater clarity around the
scale and profile of our investment programme, and further
confidence around the regulatory frameworks to support these
investments, we have put forward our plans for the quantum and pace
of the required investment through the end of the decade. With our
results on 23 May 2024, we have announced our new 5-year financial
framework, alongside the updated financing strategy and investor
proposition.
Key highlights of our new 5-year
financial framework, covering the period from 1 April 2024 to 31
March
2029 (FY25 to FY29),
comprise:
· a
significant increase in capital investment to around £60 billion
over the period, with approximately 52 per cent. of expected spend
to be in the United Kingdom and 48 per cent. in the United States.
Around 85 per cent., or £51 billion, is expected to be "green
investment" aligned to the EU Taxonomy, and 98 per cent. of the
total investment is expected to be in our regulated businesses,
including around 80 per cent. in our electricity networks and
approximately 10 per cent. in offshore; and
· a high
asset growth phase which we anticipate will result in a compound
annual growth rate ("CAGR")
of around 10 per cent. in our group asset base, leading to a
forecasted combined asset base of nearly £100 billion by 2029, of
which we expect nearly 80 per cent. to be in our electricity
networks, (based on an assumed average UK CPIH inflation rate of
2.5 per cent.);
· translating into a strong underlying earnings per share
("EPS") growth CAGR of 6 to
8 per cent. from an FY25 baseline, following the issuance of New
Shares
· We
will maintain a progressive total level of dividend. Our aim is to
grow Dividend Per Share (DPS) in line with UK CPIH inflation in
keeping with the current dividend policy. We will aim to increase
the FY25 DPS by UK CPIH following the rebase of the FY24 DPS of
58.52 pence, after taking account of the new shares issued
following the Rights Issue[2]
At a business level, we expect
investment over the period to comprise:
· around
£23 billion into the UK Electricity Transmission (UK ET) business,
representing a more than 250 per cent. increase in capital
investment versus the prior 5-year period. This includes continued
funding for our 17 ASTI projects;
· investment of around £8 billion in UK Electricity Distribution
(UK ED), representing more than a 30 per cent. increase in capital
investment versus the prior 5-year period, as we continue to
deliver the remaining four years of our RIIO-ED2 price control and
invest to create the smart distribution network to enable the
accelerated adoption of low carbon technologies, such as electric
vehicles and heat pumps, by our customers;
· Together these will help grow our UK regulated asset base to
over £50 billion by 2029 (assuming average UK CPIH of 2.5 per
cent.)
· In our
US regulated businesses we will invest around £28 billion across
New York and New England, comprising investment of approximately
£17 billion in New York and £11 billion in New England, and
reflecting a 60 per cent. increase in capital investment (excluding
the Narragansett Electric Company, which was sold in
FY23).
· With
this we expect our combined US rate base to grow from approximately
£25 billion today, to nearly £45 billion in 2029 (at an exchange
rate of £1:$1.25).
· Committed investment of around £1 billion in our National Grid
Ventures (NGV) business.
Updating our strategy to make National Grid a pureplay
networks business
We see the networks we own and
operate as a key enabler to helping our jurisdictions achieve their
energy transition goals. We expect that onshore and offshore,
competitive and regulated electricity transmission opportunities
will continue to grow. As such, we intend to narrow the focus of
National Grid Ventures to these types of projects and
investments.
Our intention is to sell Grain LNG,
our UK LNG terminal, as well as National Grid Renewables, our US
onshore renewable energy business, and we expect to continue our
record of crystalising good value from asset rotation. The focus
for National Grid Ventures going forward will be interconnectors
(including Offshore Hybrid Assets, a new asset type) in the United
Kingdom and competitive electricity transmission projects in the
United States. These will play a critical role in delivering the
energy transition, and are businesses where we have world class
capabilities and a track record of operational excellence and
strong value creation. Whilst we have attractive opportunities in
NGV, we will maintain our capital discipline, and look to fund any
future growth beyond our current expected commitment through
partnering of existing or future assets, or crystalising further
value in NGV.
Maintaining investment grade credit ratings
We remain committed to a strong,
overall investment grade credit rating. We expect to maintain
credit metrics above our thresholds for current group credit
ratings through to at least the end of the RIIO-T3 price control
period, with current thresholds of 10 per cent. for S&P's
FFO/adjusted net debt, and 7 per cent. for Moody's RCF/adjusted net
debt. Following completion of the Rights Issue, we expect
regulatory gearing to be in the low 60 per cent. range by March
2025, and then trend back towards the high 60 per cent. range by
the end of RIIO-T3.
A
comprehensive financing plan
To maintain a resilient balance
sheet and the strong investment grade credit ratings referred to
above, whilst enabling this material step-up in investment in the
coming years, we are setting out a comprehensive plan of financing
measures.
In addition to cashflow generated
from operations, where we aim to continue our successful cost
mitigation programme by keeping controllable costs broadly flat as
we continue the strong growth of our asset base, the principal
elements of this plan are:
· Debt:
we will continue to issue senior debt within the capital
markets.
· Hybrid
capital: we expect to utilise further hybrid debt issuances later
in the 5-year period to maintain balance sheet strength and enable
investment flexibility.
· Proceeds from the planned sales of our Grain LNG terminal and
National Grid Renewables businesses.
· Rights
Issue: equity issuance of approximately £7.0 billion, as announced
today.
Reasons for the Rights Issue and use of
proceeds
The Board believes that raising net
proceeds of £6.8 billion through the Rights Issue will give it
appropriate financial flexibility to deliver the Group's strategy
over the 5-year framework, and funding clarity until at least the
end of the RIIO-T3 period. In particular, the Board believes it
will allow the Group to fund a significant increase in capital
investment and continue to deliver attractive returns to
shareholders, whilst maintaining investment grade credit ratings
for our operating companies and the Group overall.
The Rights Issue net proceeds of
£6.8 billion will principally be utilised to fund a higher-growth
investment phase for the Group, with around £60 billion of capital
investment expected during the 5 year period from FY25 to FY29. In
the near term, to support efficient management of funding costs,
approximately £750 million of the net proceeds will be used to
refinance a portion of the Group's outstanding hybrid bonds that
have first call dates in the next 15 months.
The Rights Issue provides
shareholders with the pre-emptive opportunity to fund and, we
believe, to benefit from our higher growth strategy. We believe
that the Group will deliver an attractive mix of asset and earnings
growth and dividend yield, while enabling the energy transition in
our UK and US markets. This builds on our track record of having
delivered an over 30% higher Total Shareholder Return compared with
the FTSE 100 over the last decade.
Our geographic position and our work
with governments and regulators provides us with an unprecedented
growth opportunity that we expect will create substantial value for
our shareholders. We believe this investment in new infrastructure
will enhance resiliency and enable the jurisdictions in which we
operate to make meaningful progress in their journeys towards a
decarbonised energy system. The step-up in investment as set out in
our new 5-year financial framework underscores National Grid's
position as one of the FTSE's biggest investors in the delivery of
the energy transition. Over the last three years, we have reshaped
our portfolio and now have a mix of businesses that is increasingly
weighted towards electricity transmission and distribution, making
us well-placed to capture the significant network growth
opportunities that lie ahead. With our operational and regulatory
capabilities, combined with a strong track record of delivery, we
are confident that we can deliver this step-up in new
infrastructure that will provide greater levels of energy security
and enable diversification of energy sources to help decarbonise
our societies.
DIVIDENDS AND DIVIDEND POLICY
· We
will maintain a progressive total level of dividend, growing from
current levels of approximately £2,168 million the Board has
recommended for the year to March 2024.
· This
equates to a total DPS of 58.52 pence for FY24. This will then be
rebased to take account of the new shares issued following the
Rights Issue.
· We
then aim to grow DPS in line with UK CPIH, in keeping with the
current dividend policy, as detailed below
· We
will continue to offer a scrip dividend, given the continued high
level of group asset growth we expect to deliver
As described above, and following
the rebasing of the FY24 DPS following the Rights Issue, the Board
will aim to grow the annual DPS in line with UK CPIH, thus
maintaining the DPS in real terms. The Board will review this
policy regularly, taking into account a range of factors including
expected business performance and regulatory
developments.
The scrip dividend alternative will
continue to be offered, and we do not expect to buy back Shares
whilst we continue to deliver strong asset growth.
PRINCIPAL TERMS OF THE RIGHTS ISSUE
Pursuant to the Rights Issue, the
Company is proposing to offer 1,085,448,980 New Shares to
Qualifying Shareholders, other than, subject to certain exceptions,
Qualifying Shareholders with a registered address, or resident in,
one of the United States or the Excluded Territories. The offer is
to be made at 645 pence per New Share, payable in full on
acceptance by no later than 11.00 a.m. on 10 June 2024 in the case
of Qualifying Certificated and CREST Shareholders, and by 5.00 p.m.
on 7 June 2024 in the case of Qualifying Corporate Sponsored
Nominee Participants. The Rights Issue is expected to raise
proceeds of approximately £6.8 billion, net of expenses. The
aggregate costs and expenses of the Rights Issue and Admission
(including the listing fees of the FCA and the London Stock
Exchange, professional fees and expenses and the costs of printing
and distribution of documents) payable by the Company are estimated
to be £165 million. The Issue Price represents a 34.7 per cent.
discount to the theoretical ex-rights price based on the closing
middle-market price on 22 May 2024 (being the last business day
before the announcement of the terms of the Rights Issue) of
1,127.5 pence per Share, adjusted for the recommended FY24 Final
Dividend of 39.12 pence per Share.
The Rights Issue will be made on the
basis of:
7
New Shares at 645 pence per New Share for every 24 Existing
Shares
held by Qualifying Shareholders (at
6.00 p.m. on the Record Date).
Entitlements to New Shares will be
rounded down to the nearest whole number and fractional
entitlements will not be allotted to Shareholders but will be
aggregated and issued into the market for the benefit of the
Company except for participants in the Corporate Sponsored Nominee.
Any fractional entitlements for participants in the Corporate
Sponsored Nominee will be pro-rated and issued to participants.
Holdings of Existing Shares in certificated and uncertificated form
will be treated as separate holdings for the purpose of calculating
entitlements under the Rights Issue.
The Rights Issue is fully
underwritten by the Underwriters pursuant to the Underwriting
Agreement. The principal terms of the Underwriting Agreement are
summarised in the Prospectus.
The Rights Issue will result in
1,085,448,980 New Shares being issued (representing approximately
29.2 per cent. of the existing issued share capital and 22.6 per
cent. of the enlarged issued share capital (excluding treasury
shares) immediately following completion of the Rights
Issue).
The Rights Issue is conditional,
inter alia,
upon:
i. the
Underwriting Agreement having become unconditional in all respects
save for the condition relating to Admission; and
ii. Admission
becoming effective by not later than 8.00 a.m. on 24 May 2024 (or
such later time and date as the Joint Global Co-ordinators and the
Company may agree).
Certain resolutions authorising the
allotment of further shares in the Company and the waiver of
pre-emption rights in connection with a rights issue were passed at
an annual general meeting of the Company held on 10 July 2023.
These authorities will be relied upon for the purposes of the
Rights Issue.
The New Shares, when issued and
fully paid, will rank pari passu in all respects with the Existing
Shares, save for the right to receive the recommended FY24 Final
Dividend of 39.12 pence per Share which shall only be paid in
respect of the Existing Shares. Application will be made to the FCA
and to the London Stock Exchange for the New Shares to be admitted
to the Official List and to trading on the London Stock Exchange.
It is expected that Admission will occur and that dealings in the
New Shares (nil paid) on the London Stock Exchange will commence at
8.00 a.m. on 24 May 2024.
Some questions and answers, together
with details of further terms and conditions of the Rights Issue,
including the procedure for acceptance and payment and the
procedure in respect of rights not taken up, are set out in the
Prospectus and, where relevant, will also be set out in the
Provisional Allotment Letter.
Overseas Shareholders should refer
to paragraph 2.5 of Part III (Terms and Conditions of the Rights
Issue) of the Prospectus for further information on their ability
to participate in the Rights Issue.
DIRECTORS' INTENTIONS
The Directors are fully supportive
of the Rights Issue and believe that the Rights Issue is in the
best interest of the Company and the Shareholders as a whole. Each
of the Directors who holds Shares will, to the extent that he or
she is able to, take up his or her rights in respect of his or her
Shares to subscribe for New Shares under the Rights Issue as set
out in the Prospectus.