Trusted to Perform
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Trusted to perform Annual Report and Accounts 2013/14 National Grid Annual Report and Accounts 2013/14, interactive PDF The functionality of this PDF is outlined below. Please note that tablet users will find a reduced functionality. Key: Previous page Next page Previous view Main contents page Section content page Print Search Strategic Report Corporate Governance Financial Statements Additional Information About National Grid Connecting you to your energy today, trusted to help you meet your energy needs tomorrow. National Grid’s job is to connect people to the energy they use, safely. We are at the heart of one of the greatest challenges facing our society – delivering clean energy to support our world long into the future. We work with all our stakeholders to promote the development and implementation of sustainable, innovative and affordable energy solutions. And we are proud that our work, and our people, underpin the prosperity and wellbeing of our customers, communities and investors. National Grid took delivery of a new Bell 429 helicopter in 2013. We use two helicopters to inspect pylons in England and Wales and to undertake critical maintenance. Shown here with Chris Land, a live-line engineer, helicopters have proved a cost-effective way of keeping an accurate and documented record of the state of the network. It takes three on-the-ground linesmen one day to inspect three pylons, while an airborne observer can inspect six pylons in one hour. For a full search facility, please go to the pdf of our Annual Report and Accounts 2013/14 in the investor relations section of our website and use a word search. Cover image National Grid’s Ken Kujawa stands alongside Ford’s Darrell Rowser at Ford’s Buffalo Stamping Plant in upstate New York. National Grid has helped Ford replace its standard light fittings with 1,740 energy-efficient LED fixtures, delivering predicted annual energy savings for Ford of 10.7 million kilowatt hours for up to 10 years. National Grid is investing over $50 million to rebuild the Gardenville power station, connected to the Stamping Plant via National Grid’s 115 kV electricity lines. The investment will improve the electricity reliability for Ford and other customers when the project is completed. Contents Strategic Report Highlights Contents Operating profit Strategic Report pages 02 to 41 £3,735m 0% 02 Chairman’s statement Chief Executive’s review 2012/13: £3,749m1 04 06 Financial review Adjusted operating profit2 10 Non-financial KPIs 12 Operating environment 14 Our vision and strategy £3,664m +1% 16 What we do 2012/13: £3,639m1 20 How we make money from our regulated assets 21 How our strategy creates value Earnings per share 22 Internal control and risk management 26 How executive remuneration aligns to Company strategy 29 Principal operations 66.4p +15% 40 People 2012/13: 57.8p1,3 Adjusted earnings per share2 Corporate Governance pages 42 to 73 The Corporate Governance Report, introduced by the 54.0p +5% Chairman, contains details about the activities of the Board 2012/13: 51.4p1,3 and its committees during the year, including reports from the Audit, Nominations, Remuneration, Finance, and Safety, Cash generated from operations Environment and Health Committees, as well as details of our shareholder engagement activities. £4,419m +9% 42 Corporate Governance contents 2012/13: £4,037m 57 Directors’ Report statutory and other disclosures 58 Remuneration Report Regulated assets Financial Statements pages 74 to 159 £34.7bn +3% 2012/13: £33.7bn Including the independent auditors’ reports, consolidated financial statements prepared in accordance with IFRS Group return on equity and notes to the consolidated financial statements, as well as the Company financial statements prepared in accordance 11. 4% with UK GAAP. 2012/13: 11.2%1 74 Contents of financial statements 75 Introduction to the financial statements Ordinary dividends 76 Statement of Directors’ responsibilities 77 Independent auditors’ report 42.03p +3% 81 Report of Independent Registered Public Accounting Firm 2012/13: 40.85p Additional Information pages 160 to the 1. Comparatives have been restated for the impact of IAS 19 (revised). Further detail is given in note 1 on page 92. inside back cover 2. Excludes the impact of exceptional items, remeasurements and stranded cost recoveries. See page 182 for more information about these adjusted profit measures. Additional disclosures and information, definitions and 3. Comparative earnings per share (EPS) data has been restated for the glossary of terms, summary consolidated financial impact of the scrip dividend issues. information and other useful information for shareholders, Our financial results are reported in sterling. The average exchange rate, including contact details for more information or help. as detailed on page 85, was $1.62 to £1 in 2013/14 compared with the average rate of $1.57 to £1 in 2012/13. Except as otherwise noted, the figures in this Report are stated in sterling or US dollars. All references 160 Contents of Additional Information to dollars or $ are to the US currency. 188 Definitions and glossary of terms Important notice Glossary This document contains certain statements that are neither reported We use a number of technical terms and abbreviations within financial results nor other historical information. These statements are this document. For brevity, we do not define terms or provide forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities explanations every time they are used; please refer to the glossary Exchange Act of 1934, as amended. For a description of factors that could on pages 188 to 191 for this information. affect future results, please refer to the full cautionary statement on the inside back cover and to the risk factors section on pages 167 to 169. 01 National Grid Annual Report and Accounts 2013/14 Our vision statement ‘Connecting you to your Chairman’s energy today, trusted to help you meet your statement energy needs tomorrow’ emphasises the importance of trust, which we earn not just by meeting our commitments, but by making sure that we do so in the right way. It has been an important and challenging year for revenue in our principal UK businesses. The The Board is proposing National Grid – and the energy sector in general – commentary on ‘timing differences and regulated a recommended final on both sides of the Atlantic. revenue adjustments’ contained in the Financial dividend of review on page 08 aims to help understanding of Although we did not experience any major storm- this matter. related outages in our service areas during 2013/14, severe winter weather conditions – the polar vortex The Board has recommended an increase in the 27.54p in the US and serious flooding in the UK – continued final dividend to 27.54p per ordinary share ($2.3107 (2012/13: 26.36p) to test the resilience of our networks. I am pleased per American Depositary Share). If approved, this to report these have performed well as a result of will bring the full-year dividend to 42.03p per ordinary prudent investments in past years, as well as the share ($3.4801 per American Depositary Share), an commitment of our people. increase of 2.9% over the 40.85p per ordinary share in respect of the financial year ending 31 March 2013. Energy policies in both the UK and US strive to find an acceptable balance between affordability Effective governance to the ultimate consumers, security of supply and We have developed a new remuneration policy to sustainability considerations. Particularly since last align more closely with RIIO, the continued evolution September, the focus of UK media and political of our US business and shareholder value creation. attention has been moving between each of these The policy will be subject to shareholder approval at three factors, with no enduring consensus of what the AGM in July – a requirement of recent legislation. constitutes the optimum position. You can read our full Remuneration Report, In the UK, the eight year RIIO settlement we introduced by Jonathan Dawson, our new accepted in February 2013 incentivises us to be as Remuneration Committee Chairman, on page 58. efficient as possible while ensuring that savings we As we describe on page 07, the high level of take-up achieve can be shared with consumers. Through of the scrip dividend in the last couple of years led these incentives we can maximise our efforts to help to concerns about the potential dilutive effect of this hard-pressed consumers and deliver good returns option. This meant that we decided not to offer the to our shareholders. scrip element for the 2013/14 interim dividend paid in January this year, as our forecast capital Transparency investment programme was already fully funded. In our continuing efforts to be fair, balanced and I do appreciate, from the letters sent to me, that understandable in our reporting we are including this caused some dissatisfaction. We have now additional information this year and explaining identified a way of offering the scrip option for both some technical matters in greater detail, so that the full-year and interim dividend, which balances we are as transparent as we can be. shareholders’ appetite for the scrip dividend option In particular, I draw your attention to one aspect with our cash requirements. At the AGM we are of our results. There have always been differences seeking approval for the allotment and buy-back between IFRS reported results and underlying authorities we need to do this. The scrip dividend economic performance; however, one of the benefits option has been offered for the 2013/14 final of the RIIO price control regime is that it provides dividend subject to shareholder approval of the greater transparency of regulatory adjustments to relevant resolutions at the AGM.