Results Presentation for or the the six mo month per perio iod - - PowerPoint PPT Presentation

Mark Horsley David Waite

Results Presentation

for

• r the

the six mo month per perio iod end ended 30 Sep September 2018

2

In Introduction

NGN aim to be the best Gas Distribution Network (GDN) in:

• customer service,
• safety,
• and efficiency.

3

Customer Satisfaction Performance

During the 2018/19 regulatory year to date:

• NGN were ranked 3rd within GDNs by Ofgem for customer service,
• have had strong customer survey scores: planned 8.9; emergency 9.5

and connections 9.0 (out of 10),

• have currently resolved 71% of complaints within 60 minutes.

During the 2013-2018 period, NGN has been the greatest performing GDN overall.

8.75 9.01 9.17 9.17 9.17 13/14 14/15 15/16 16/17 17/18

Customer Satisfaction Scores - NGN

8.47 7.91 8.48 8.26 9.03 8.98 8.76 8.97 EOE LON NW WM NGN SC SO WWU

GDN Performance 2013 - 2018

4

Engaging with

• ther CKI

companies to review methods

• f avoiding

buried services Mental health awareness and wellbeing workshops Better use of technology to manage higher risk activities Training and development of new procedures Management of deep excavations

Ensuring consistency

• f knowledge and

understanding

Industry leading in safety

accident frequency rate of just 0.04

Safety

improvements/ initiatives

Safety In Initiatives

Safety Perf rformance - (6 (6 months to 30 September)

5

2017 2018 2017 2018

21 23

2017 2018

16 21

Lost Time Injuries Injury to Members of the Public Cable Damages Road Traffic Collisions

2017 2018 1

Efficiency In Initiatives

6

NGN has already taken significant efficiency steps in the current price control period which position us well for the start of the RIIO-GD2 environment, and we continue to push this efficiency challenge.

• Introduction of modern T&Cs to replenish the workforce and ongoing

implementation of an over-55s release programme

• The transition of all repex work from large tier 1 contractors to direct service

providers (small local businesses)

• Outsourcing of functions where it has been efficient to do so (maintenance)
• Movement of much IT activity from large external contractors to small

contractors and in-house solutions

• Capital IT project delivery brought in house and moved to an agile delivery

model

• Upgrading & refurbishment of depots and offices to provide great places to work

Adopting a totex approach to operations: to deliver a joined-up approach to operations, give autonomy to empowered leaders and provide superior flexibility to tackle severe winter conditions and major incidents Optimising direct labour operations to improve working methods, drive down costs and increase outputs, notably the number of jobs completed per team per week Future Ways of Working: new processes and IS technology (notably SAP4 HANA) to deliver one simple way of working to evolve the business so that it is fully prepared for the operational challenges ahead ONGOING:

DONE:

INDUSTRY FIRST INDUSTRY FIRST ONLY GDN TO EXECUTE INDUSTRY FIRST INDUSTRY FIRST INDUSTRY FIRST

Efficiency Through In Innovation

7

• Innovation is embedded throughout NGN’s operations delivery efficiency savings of around

£2.0million achieved in 2017/18.

• Vehicle journeys, days spent in the highway, amount of spoil sent to landfill and excavations dug have

all dramatically reduced.

• Successfully implemented innovation projects include:
• Core & vac technology,
• Back blade protector,
• Use of sniffer dogs to detect gas leaks,
• Use of innovative devices to locate and remove water from pipes.

8

Profit Performance - Revenue, , EBITDA and PAT

0.0 50.0 100.0 150.0 200.0 250.0

2018 2017

47.0 46.3 129.3 124.1 201.5 202.1

6 mo months end ended 30 Sep September PAT (£m) EBITDA (£m) Revenue (£m)

• There has been a slight decrease in revenue in the first

six months of 2018 compared with 2017 based on Ofgem revenue modelling in the current price control period.

• EBITDA growth of £5.2m despite this reduction to

revenue, due to tight cost control management.

• PAT has had a steady increase of £0.7m.

9

Cash Flo low Performance - Operating Cash and Div ivid idends

• 2018 has seen an increase in operating cash flow after tax

and interest of £1.3m which has been a result of:

• £7m increase in UK corporation tax paid,
• £3m increase in operating profit,
• £5m decrease in working capital.
• Dividend payments at 30 September 2018 are in line with

expectations at £17.8m.

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 2018 2017

17.8 17.3 32.2 30.9

6 mo months end ended 30 Sep September Dividends (£m) Operating Cash (after int. and tax) (£m)

10

Treasury ry

Debt interest mix (a (as at 3 30 September 2018)

• £400m fixed rate bonds 2019/2040.
• £40m fixed rate EIB loan maturing 2024.
• £50m floating rate EIB loan swapped to fixed rate to 2020.
• £505m fixed rate bonds 2027/2035 swapped to floating rate

for life and re-fixed for periods from March 2019 to September 2028 under RIIO hedging strategy.

• £339.5m floating rate EIB loans swapped to fixed rate for

periods from June 2023 to June 2028 under RIIO hedging strategy.

• £50.0m unhedged drawings on syndicated Revolving Credit

Facility.

11

Strong Credit Ratings

• NGN has a conservative financial policy and predictable cash flows.
• NGN's financial policy is to maintain debt to regulatory asset value within 70%, below its bank loans' event of default covenants, which limit debt to RAV

to below 75% and post-maintenance interest coverage ratio to above 1.3x.

• This prudent financial approach and strong operations performance has been well received by rating agencies.
• Baa

Baa1 rating wit ith stable ou

• utlook con
• nfirmed in

in Mar arch 2018 2018.

• ‘NGN remained one of the best-performing networks on all measures of safety and customer service in 2016-17,

and the company's controllable costs were 13% below regulatory allowances in the first four years of RIIO-GD1, which we believe reflects efficiency rather than phasing of spend’

• ‘Strong results in the first four years of the regulatory period’ which ‘imply potential for continuing regulatory
• utperformance’
• BBB+ rating with

ith stab able outl

• utlook con
• nfi

firmed in in Mar arch 2018 2018.

• ‘strong performance across most of the key regulatory requirements including cost efficiency, service level,

customer service, and stakeholder engagement’

• The commitment to an investment grade profile is further underpinned by the Licence condition requiring

licensees to maintain at all times an investment grade issuer credit rating

12

Looking forward - Energy Futures

13

H21 – a project designed to support the viability of converting the UK gas distribution networks to 100% hydrogen. (https://www.northerngasnetworks.co.uk/ wp-content/uploads/2017/08/H21- Network-Innovation-Competition-1.pdf) We are also engaged in a number of exciting initiatives around energy futures: InTEGReL – a newly integrated energy facility, seeing academics and engineers working to deliver breakthroughs in the decarbonisation

• f heat, energy storage and transport.

(https://www.northerngasnetworks.co.uk/ng n-you/the-future/integrel/) HyDeploy – a ground breaking energy trial in partnership with Keele University which could help Britain dramatically reduce its carbon emissions. (https://hydeploy.co.uk/)

Looking forward - RII IIO-GD2

• To ensure that the company is in good shape to meet the financial challenges of GD2, NGN has chosen to implement a number of significant efficiency

initiatives early in the process including:

• Key initiatives that have been progressed during RIIO-GD1 that will transform the business include:
• Adopting a “totex” approach to operations to deliver a ‘Joined-up’ approach to operations, give autonomy to empowered leaders and provide superior

flexibility to tackle severe winter conditions and major incidents,

• Optimising direct labour operations to improve working methods, drive down costs and increase outputs, notably the number of jobs completed per

team per week,

• “Future Ways of Working” - harnessing new IS technology (notably SAP4 HANA) to deliver one simple way of working to evolve the business so that it is

fully prepared for the operational challenges ahead.

Modernising Terms and Conditions Contracting Models Workforce Refresh Technology and Innovation

14

Disclaimer

15

This presentation may only be communicated or caused to be communicated in the United Kingdom to persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or high net worth entities who fall within Article 49(2)(a) to (d) of the Order (all such persons being referred to as “relevant persons”). Any investment or investment activity to which this presentation relates is available only to relevant persons and will be engaged only with relevant persons. This may not be reproduced, redistributed or passed on to any other person or published, in whole or in part, for any purpose, without the prior written consent

• f NGN.

The information in this document is subject to change without notice, its accuracy is not guaranteed, and it may be incomplete and is condensed. These presentation slides may contain certain statements, statistics and projections that are or may be forward-looking. The accuracy and completeness of all such statements, is not warranted or guaranteed. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. Although NGN believes that the expectations reflected in such statements are reasonable, no assurance can be given that such expectations will prove to be correct. There are a number of factors which could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements.