20-F: National Grid Unveils Record Investment and Strategic Refocus Amid Leadership Transition

National Grid plc reports a year of strong financial performance, marked by record capital investment and strategic divestments, as it prepares for a new era of leadership and accelerated energy transition.

Summary

• National Grid achieved a record capital investment of £9.85 billion in the past year, a 20% increase year-on-year, as part of its unprecedented c.£60 billion five-year investment plan (FY2025-FY2029).
• Underlying operating profit increased by 12% to £5.4 billion at constant currency, while underlying earnings per share (EPS) grew by 2% to 73.3p.
• The company successfully completed a £7 billion Rights Issue in Spring 2024, generating net proceeds of £6.8 billion to support its capital investment program.
• Strategic divestments included the sale of the UK Electricity System Operator (ESO) to the UK Government on October 1, 2024, for £673 million, resulting in a £187 million gain, and the sale of its remaining 20% interest in the UK Gas Transmission business on September 26, 2024, for £686 million, yielding a £25 million gain.
• National Grid announced the planned sale of National Grid Renewables to Brookfield for $1.7 billion, expected to close in the first half of FY2026, and launched the sale of its Grain LNG facility.
• An impairment of £303 million was recognized for the Community Offshore Wind (COSW) investment due to a temporary pause in project development.
• The company's dividend per share increased by 3% to 46.7p (rebased), and net debt decreased to £41.4 billion from £43.6 billion, with regulatory gearing improving to 61% from 69%.
• Group Return on Equity (RoE) decreased to 9.0% from 10.5% in the prior year, primarily due to the impact of the Rights Issue on gearing.
• Scope 1 and 2 GHG emissions increased by 8% year-on-year to 7,422 ktCO2e, while Scope 3 GHG emissions increased by 4% to 28,435 ktCO2e, with the company noting non-linear progress towards its net zero targets.
• The Lost Time Injury Frequency Rate (LTIFR) increased to 0.10 from 0.08 in the previous year, attributed to increased reporting of minor incidents.
• John Pettigrew announced his retirement as Chief Executive, effective November 16, 2025, and Zo Yujnovich was appointed as his successor, joining the Board on September 1, 2025.

Sentiment

Score: 8

Explanation: The document presents a strong narrative of strategic execution and financial performance, marked by record investments and successful divestments. While acknowledging challenges like rising emissions and customer satisfaction issues, the overall tone is highly positive, emphasizing growth opportunities and a robust financial position.

Positives

• Achieved a record capital investment of £9.85 billion, representing a 20% increase year-on-year, demonstrating significant progress on its ambitious investment plan.
• Delivered strong underlying operating profit growth of 12% to £5.4 billion at constant currency, reflecting increased regulated revenues and controlled costs.
• Underlying earnings per share (EPS) increased by 2% to 73.3p, indicating continued profitability.
• Successfully completed a £7 billion Rights Issue, strengthening the balance sheet and providing capital for future investments.
• Successfully divested non-core assets, including the UK Electricity System Operator (ESO) for £673 million and the remaining 20% interest in UK Gas Transmission for £686 million, streamlining the business focus on networks.
• Secured regulatory approval for key projects, such as the Massachusetts Electric Sector Modernization Plan (ESMP) for c.$2 billion in anticipatory investments and the LionLink interconnector project.
• Maintained high network reliability at 99.9% across its operations, ensuring consistent service for customers.
• Launched a new £13.8 million Grid for Good Energy Affordability Fund to support vulnerable households in the UK and US.
• Reported strong employee engagement at 80%, indicating a positive internal culture.
• Improved financial strength with net debt decreasing to £41.4 billion and regulatory gearing reducing to 61%.
• Formed significant partnerships, including the £9 billion Great Grid Partnership and £59 billion HVDC framework, to enhance supply chain capabilities and project delivery.
• Connected 3,016 MW of renewable capacity to its networks, contributing to clean energy goals.
• Achieved operational efficiencies of $30 million in New England and $59 million in New York, demonstrating cost management.
• UK Electricity Transmission reported an improved safety performance for its contractors, with an LTIFR of 0.07.
• UK Electricity Distribution exceeded its 2024/25 synergy target, delivering £88 million in cumulative benefits since acquisition.

Negatives

• Group Return on Equity (RoE) decreased to 9.0% from 10.5% in the prior year, primarily due to the dilutive impact of the Rights Issue on the equity denominator.
• Statutory operating profit decreased in some segments, notably UK Electricity Transmission (down 24%), UK Electricity System Operator (down 156%), and National Grid Ventures (down 99%).
• Scope 1 and 2 GHG emissions increased by 8% year-on-year to 7,422 ktCO2e, attributed to increased generation from Long Island fossil fuel plants due to contractual obligations and unplanned outages at third-party plants.
• Scope 3 GHG emissions increased by 4% year-on-year, primarily due to increased use of sold gas and higher capital expenditure on construction materials.
• The Lost Time Injury Frequency Rate (LTIFR) increased to 0.10 from 0.08 in 2023/24, driven by an increase in reported incidents such as trips, falls, and manual handling injuries.
• Customer satisfaction in the US (New England and New York) was negatively impacted by high inflation and an unseasonably cold winter, leading to higher energy bills.
• UK Electricity Transmission's customer satisfaction score was 6.5 out of 10, impacted by challenges related to the rapidly growing connections pipeline and associated delays.
• The Community Offshore Wind (COSW) investment incurred a £303 million impairment due to a temporary suspension of project development following a US Federal Government Executive Memorandum.
• Availability of the IFA interconnector decreased due to increased planned and short unplanned outages, and BritNed also experienced decreased availability due to extended planned and unplanned outages.
• A billing system conversion in New England led to bill delays for some gas customers, requiring remediation.

Risks

• **Satisfactory regulatory outcomes**: Risk of failing to influence future energy policies and secure satisfactory regulatory agreements, leading to poor outcomes, negative operational impacts, reduced financial performance, fines, increased costs, or reputational damage.
• **Climate change mitigation**: Risk of failing to identify and/or deliver actions to meet climate change targets, potentially leading to legal risks, reputational damage, or inability to achieve net zero by 2050.
• **Political and societal expectations**: Risk of failing to proactively monitor or respond to changes in external political and societal expectations, which could result in reputational damage, political intervention, threats to operating licenses, or inability to achieve objectives.
• **People capability and capacity**: Risk of not having the necessary workforce capability or capacity due to ineffective planning, insufficient development, or challenges in attracting and retaining talent in a competitive market.
• **Catastrophic cyber security incident**: Risk of inability to adequately anticipate and manage disruptive forces from cyber-attacks, poor recovery of critical systems, or malicious parties, potentially leading to network operational failures, asset damage, or data loss.
• **Significant disruption of energy**: Risk of failure to predict and respond adequately to significant energy disruption events (e.g., asset failure, climate change, storms, attacks), leading to customer harm, reputational damage, financial losses, or loss of franchise.
• **Upstream supply**: Risk of failure to prepare and respond adequately to disruptions in energy supply outside of the company's control (e.g., third-party asset failure, system imbalances, demand exceeding capacity), resulting in adverse customer impacts, reputational damage, cost increases, or regulatory consequences.
• **Significant safety or environmental event (asset failure)**: Risk of catastrophic asset failure due to critical asset/system failure, substandard operational performance, inadequate maintenance, third-party damage, or undetected system anomalies, leading to significant public/employee safety or environmental events.
• **Major capital programmes**: Risk of inability to deliver major capital projects within agreed cost and schedule baselines due to regulatory expectations, financial frameworks, complex planning requirements, supply chain impacts, or failure to demonstrate clear economic benefits.
• **Financing our business**: Risk of inability to fund the business efficiently due to lack of access to equity/debt investors, market volatility, unsatisfactory regulatory outcomes, or poor financial/operational performance, impacting strategic objectives.
• **Demand for natural gas is expected to reduce in the long term**: Uncertainty regarding the future role of gas, potentially impacting the useful economic lives (UELs) of gas network assets.
• **Uncertainty in the extent of electricity demand growth**: Risk of underestimating or overestimating future electricity demand, potentially leading to unprepared networks or the construction of surplus assets.
• **Factors affecting ability to deliver commitments**: Reliance on supply chains, talent, and finance, with risks of not delivering future energy networks, missing GHG emissions targets, or failing to compete effectively for talent and equipment.
• **Increased frequency of extreme weather incidents and changing long-term climate trends**: Physical impacts from acute extreme weather events (storms, flooding) and chronic changes (high temperatures, extreme wind, wildfires, low temperatures), leading to asset damage and operational risks.

Future Outlook

National Grid plans an unprecedented c.£60 billion investment in its networks over the next five years (FY2025-FY2029), aiming for 6-8% compound annual growth in underlying EPS and dividend growth in line with UK CPIH. The company expects to maintain strong credit metrics and manage regulatory gearing. Key future projects include the UK Electricity Transmission's RIIO-T3 plan with up to £35 billion investment (2026-2031), continued development of interconnectors and competitive electricity transmission projects in the US, and the completion of the Grain LNG Cap 25 capacity expansion project in 2025/26. The company anticipates significant electricity demand growth (50% in UK, 25% in US by 2035) and plans to invest approximately £51 billion in green infrastructure to support decarbonization.

Management Comments

• John Pettigrew: "It has been an immense honour for me to lead the company I joined as a graduate, and when I step down later this year, I will do so knowing that we are in a position of great strength."
• John Pettigrew: "Resilient and reliable networks capable of meeting demand for secure, affordable and clean energy are essential to future prosperity, helping to create the industries and technologies of tomorrow, drive economic growth and support millions of jobs."
• John Pettigrew: "I'm pleased to say we've seen good progress in our push for policies that are essential for the energy transition and attract the investment needed to fund the networks of the future."
• John Pettigrew: "We successfully completed the £7 billion Rights Issue last Spring, an important part of our plan to invest around £60 billion. We are grateful for the support you, our shareholders, have shown as we undertake this historic investment."
• John Pettigrew: "National Grid is now embarking on an exciting new phase of growth with an attractive investor proposition underpinned by high quality asset growth, strong earnings growth, and an inflation protected dividend."
• Paula Rosput Reynolds: "The UK Government's bold mission to achieve clean power by 2030 requires a once-in-a-generation rewiring of the country's infrastructure."
• Paula Rosput Reynolds: "The energy landscape is evolving, and so is National Grid. I feel confident that our committed workforce, inspired by John's example and newly led by Zo, will serve our shareholders, customers and communities well in the times ahead."

Industry Context

The energy industry is undergoing a profound transformation driven by government mandates for clean power (e.g., UK's 95% renewable energy by 2030 target) and economic growth, particularly in the US with the rise of AI and reshoring of manufacturing, which are significantly increasing electricity demand. This shift necessitates massive investment in smarter, larger, and more resilient networks, leading to unprecedented capital expenditure across the sector. While there's a resurgence of interest in nuclear technologies like Small Modular Reactors (SMRs), the industry faces challenges from global supply chain constraints, inflationary pressures, and geopolitical tensions impacting energy security. Regulatory environments are evolving, with a growing focus on energy affordability and reliability, alongside the push for decarbonization, creating a complex balancing act for utilities like National Grid.

Comparison to Industry Standards

• National Grid's employee engagement index of 80% is noted as being three points below the 'high performing companies norm' benchmarked by its external survey provider.
• The New England segment's bi-annual Safety Culture Survey results placed it in the top quartile of its external industry benchmark, indicating strong safety performance.
• The New York segment received the Pipeline Safety Management System Recognition Award from the Northeast Gas Association (NGA) for its outstanding commitment to safety and operational excellence.
• National Grid Generation was celebrated as a leader in process safety excellence, ranking #2 out of 316 sites in a third-party safety audit of organizations worldwide.
• The Group's Lost Time Injury Frequency Rate (LTIFR) of 0.10 is in line with its 'world-class safety standard' target of 0.10 or less.
• In the 2024 UK Social Mobility Index (SMI), National Grid ranked 42nd out of the top 75 employers, demonstrating its commitment to social mobility.
• National Grid's Workforce Disclosure Initiative (WDI) survey submission for 2023 achieved an overall disclosure score of 85%, significantly above the Utilities sector average of 62%.
• In the UK 100 Group's Total Tax Contribution Survey for 2023/24, National Grid was ranked as the 15th highest contributor of UK taxes and 12th highest in taxes borne, proportionate to its business size and capitalization.
• US regulated businesses' achieved Return on Equity (RoE) for New England (9.1%) and New York (8.7%) are compared against their allowed returns of 9.9% and 9.2% respectively, indicating performance relative to regulatory expectations.

Management Changes

Corporate Governance

Legal Proceedings

• The Group is party to various litigation, claims, and investigations in the ordinary course of its operations, but does not expect their ultimate resolution to have a material adverse effect on its results of operations, cash flows, or financial position.

Related Party Transactions

• Sales of goods and services to joint ventures amounted to £153 million (2024: £221 million; 2023: £100 million), including £114 million to Emerald Energy Venture LLC.
• Sales of goods and services to associates were £1 million (2024: £1 million; 2023: £1 million).
• Sales of goods and services to subsidiaries of an associate totaled £51 million (2024: £70 million; 2023: £6 million), including to National Gas Transmission Plc until its disposal.
• Purchases of goods and services from joint ventures were £6 million (2024: nil; 2023: nil).
• Purchases of goods and services from associates amounted to £29 million (2024: £4 million; 2023: £31 million), including decommissioning expense.
• Purchases of goods and services from subsidiaries of an associate were £1 million (2024: nil; 2023: nil).
• Interest received from joint ventures was £6 million (2024: nil; 2023: nil).
• Receivables from joint ventures totaled £323 million (2024: £80 million; 2023: £58 million), including £320 million from Emerald Energy Venture LLC.
• Receivables from associates were £1 million (2024: nil; 2023: nil).
• Receivables from subsidiaries of an associate were £8 million (2024: £8 million; 2023: nil).
• Payables to joint ventures were £15 million (2024: nil; 2023: £19 million).
• Payables to associates were £1 million (2024: £1 million; 2023: nil).
• Dividends received from joint ventures amounted to £62 million (2024: £152 million; 2023: £150 million), including from BritNed Development Limited and Nemo Link Limited.
• Dividends received from associates totaled £39 million (2024: £117 million; 2023: £32 million), including from GasT TopCo Limited and New York Transco LLC.

Stakeholder Impact

• **Shareholders**: The company aims to deliver an attractive proposition through dividends and asset growth, supported by strong earnings growth and an inflation-protected dividend policy. The successful £7 billion Rights Issue demonstrates strong shareholder support for the investment strategy.
• **Customers**: National Grid is committed to providing secure, affordable, and reliable energy. Initiatives include the new £13.8 million Grid for Good Energy Affordability Fund, expanded energy efficiency programs, improved digital platforms, and efforts to accelerate connections, despite challenges like high bills and connection delays.
• **Employees**: The company fosters an inclusive and safe environment, with an 80% employee engagement index. It invests in talent development through graduate and apprenticeship programs and focuses on fair and equitable pay, supporting thousands of jobs.
• **Suppliers and Delivery Partners**: National Grid is enhancing collaboration through major partnerships like the £9 billion Great Grid Partnership and the £59 billion HVDC framework, offering long-term commitments and promoting sustainable supply chain practices. The company is a signatory to the Prompt Payment Code.
• **Creditors**: The company maintains strong investment-grade credit ratings (BBB+/Baa1) and has reduced regulatory gearing to 61%, indicating a robust financial position and ability to service its debts. It has substantial undrawn committed borrowing facilities to support liquidity.

Next Steps

• Deliver the c.£60 billion investment plan in networks over the next five years (FY2025-FY2029).
• Grow underlying EPS by 6-8% CAGR and dividend per share in line with UK CPIH through March 2029.
• Maintain credit metrics above current rating thresholds and manage regulatory gearing towards the high-60% range by the end of RIIO-T3.
• Continue to use hybrid debt and the scrip dividend program as part of the financing strategy.
• Progress the UK Electricity Transmission's RIIO-T3 business plan, which sets out investment of up to £35 billion between 2026 and 2031.
• Complete the sale of National Grid Renewables to Brookfield in the first half of FY2026.
• Progress the planned sale of the Grain LNG facility.
• Focus National Grid Ventures on interconnectors, including offshore hybrid assets, in the UK, and competitive electricity transmission projects in the US.
• Continue to scale operations to meet electric growth opportunities, including increased loads, electrification of heat and transport, and renewable energy expansion.
• Concentrate on the long-term role of the gas network in New York by using lower carbon fuels and enhancing energy efficiency.
• Continue efforts to improve customer experience by simplifying business interactions, helping manage energy use, and supporting the adoption of clean energy technologies.
• Monitor the implementation of recommendations from the independent external review of the Group's health and safety management approach.
• Conclude on changes in the Board Committee remits and composition in the year ahead.
• Initiate a competitive tender of the external audit contract over the course of 2025/26, with a view to appointing a statutory auditor for the year ending March 31, 2028.

Key Dates

Recommendation

Keywords

National Grid, Energy Utilities, Electricity Transmission, Electricity Distribution, Gas Distribution, SEC Filing, 20-F, Annual Report, Financial Results, Capital Investment, Energy Transition, Net Zero, Renewable Energy, Infrastructure, UK Regulation, US Regulation, ESG, Climate Change, Shareholder Value, Dividend Policy, Operating Profit, Earnings Per Share, Net Debt, Asset Growth, Rights Issue, Divestment, Corporate Governance, Risk Management, Sustainability, Power Grid, System Operator, Interconnectors