18 December 2024
National
Grid plc
RIIO-T3
Business Plan published: framework to deliver most significant step
forward in the UK's transmission network for a
generation
National Grid has today published
the RIIO-T3 business plan for its National Grid Electricity
Transmission (NGET) business, covering the period from April 2026
to March 2031. The submission follows
extensive consultation with national, regional and local
stakeholders.
Investing at an unprecedented level
The plan includes
an unprecedented level of investment
of up to £35 billion over the five years to
March 2031, including:
· baseline investment of over £11 billion to maintain and upgrade our existing networks, alongside
construction works for the first three of our Accelerated Strategic
Transmission Investment (ASTI) projects where project assessments
have been approved; and
· pipeline investment of around £24 billion, which includes
around £15 billion to increase network capacity, most of which
relates to the 14 further confirmed ASTI projects. Pipeline investment also includes additional
potential projects that may be triggered by the UK
government's evolving priorities.
Delivering a future-proofed, innovative and reliable
transmission network
Altogether this ambitious plan
enables NGET to:
· maintain world leading 99.9999%
reliability levels;
· develop and deliver major network
reinforcement and expansion projects,
including the 17 ASTI projects, and the
upgrade of c.3,500km of our existing overhead lines, nearly
doubling the amount of power we can transfer around the
country;
· deploy
innovative technologies such as power control devices, and dynamic
line ratings to maximise the capacity of our existing
infrastructure;
· connect 35GW of new generation and storage, and
19GVA of large demand customers such as data centres
and gigafactories, as well as creating a further 26GW of future
connection options;
· help
consumers avoid c.£12 billion of system constraint costs across the
period;
· contribute to the group's wider UK investment which supports
55,000 more jobs by 2030; and
· deliver
a 50% reduction in our own emissions versus a 2018/19 baseline, and
biodiversity net gain equivalent to more than 8,000 acres of land,
seven times the impact of RIIO-T2.
In line with Ofgem's guidance, the
plan aligns with the National Energy System Operator's (NESO)
Future Energy Scenario 2024 Holistic Transition pathway. The
optionality in the plan also means it can be adapted to the UK
government's clean power plan.
Whilst the specific investments required
will be clarified through NESO's connection reform process in
2025, the RIIO-T3 plan further
underpins and is consistent with
our expected
£60 billion investment across the group for the
five years to March 2029.
The NGET plan includes the financial
framework that we believe is needed to provide an attractive and investable proposition that can
compete with the international demands for
capital. We have clearly set out why we believe a
real 6.3% (at 60% gearing,
CPIH stripped) allowed cost of equity is the right
level to deliver this in RIIO-T3. We also set out the levels of cash generation necessary to support
investment levels and propose a number of
incentive mechanisms that will deliver
benefits to consumers and networks during RIIO-T3.
Commenting on the final Business
Plan, John
Pettigrew, CEO
of National Grid plc, said:
"This plan represents the most significant
step forward in the electricity network that we've seen
in a generation. Through it we will nearly double the amount of
energy that can be transported around the country, support the
electrification of the industries of today and tomorrow; create new
jobs; and support inward investment for the
UK.
It is an ambitious plan, set to future proof the network with
strategic capacity and flexibility for the longer term.
We've laid the foundations for its delivery through the steps
we've already taken to progress ASTI projects, secure the supply
chain, and fund the wider Group. We have done this whilst keeping a
relentless focus on consumer bills and
affordability.
It
is now critical that Ofgem plays its part in developing an
investable framework that will allow us to deliver at the
unprecedented scale and pace that is needed to meet the UK's
ambitious climate goals."
We look forward to engaging further
with all our stakeholders, ahead of draft determinations from Ofgem
in summer 2025, and final determinations in late 2025.
For additional information, please
follow this link to
the RIIO-T3 section of our website.
Notes
Allowed cost of equity of 6.3% CPIH
real at 60% gearing is in line with Ofgem's Sector Specific
Methodology Decision range of 4.57% to 6.35%. Translates to 5.8%
CPIH real at 55% gearing.
Business plan investment of up to
£35 billion relates to total expenditure (or totex) and is quoted
on a 2023/24 price base.
The 17 ASTI projects form a key part
of The Great Grid Upgrade, which is building the significant new
electricity network infrastructure required to connect offshore
wind and reduce the UK's reliance on fossil fuels.
Enquiries and contacts
Investors and Analysts:
Angela Broad
+44 (0) 7825 351 918
Tom Edwards
+44 (0) 7976 962 791
Media:
Ben
Davis
+44
(0) 7971 539 999
CAUTIONARY STATEMENT
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
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'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
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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 announced sale of certain of its businesses, 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 read the
Strategic Report section and the 'Risk factors' on pages 226 to 231
of National Grid's most recent Annual Report and Accounts as
updated by the principal risks and uncertainties statement in its
most recent half year results statement. 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. Except as may be required by law or
regulation, the Company undertakes no obligation to update any of
its forward-looking statements, which speak only as of the date of
this announcement. This announcement is for informational purposes
only and does not constitute an offer to sell or the solicitation
of an offer to buy any securities.