National Grid PLC (NGG) 2011 Q2 法說會逐字稿

Good morning, ladies and gentlemen, I'm John Dawson, Head of the Investor Relations team at National Grid. It's my pleasure to welcome you here today to National Grid's half-year results presentation for 2011/'12. Shortly I'll hand over to Steve Holliday who will kick off the presentation but before I do just a few notices.

Before we start could I please ask you to turn off any mobile devices, they could interfere with today's presentation and broadcast. As usual, we will have a question and answer session at the end, could I ask you please to use the microphones and state your name and the name of the organization you represent. We will give plenty of time for questions so please try to avoid asking multiple questions at once.

Our presentation today may contain forward-looking statements. I need to draw your attention to the relevant statements in your pack and at the start of the online presentation. Please refer to these when considering our comments today.

Without further ado, let me hand you over to Steve.

Thank you very much, John, and good morning, everybody. Just before Andrew and I start with the formalities of the presentation I just want to say a couple of word about Sir John Parker who, as I suspect everyone knows, steps down as our Chairman next month. Sir John was intending to be here today but, as you may have heard on the news this morning, the Government have announced a new international engineering prize and Sir John has to be at that announcement as he's now the Chairman of the Royal Academy of Engineering, so he sends his apologies.

But I think, Tom, Nick, Andrew and I and many others in the team would just like to take this opportunity to say thank you to him. He's been an outstanding chairman of this company, nine years of National Grid and 11 years in total. He chaired the businesses, of course, since the merger of the two offshoots of the UK nationalized gas and electricity industry, chaired it through the growth and all the things that have gone on over nine years to create the business that we have today. During my time as Chief Executive his counsel and his guidance have just been invaluable actually and for that I'd like to publically give my personal thanks to John.

Just before Andrew runs through the financials, I want to just talk about the highlights, summarize particularly where we are operationally at the half year and then come back at the end and touch on what are our clear priorities for the second half of this financial year.

Financially, it has been a solid six months. Profit before tax is up 2% at constant currency despite the significant costs with Hurricane Irene in the US and the big swing that we anticipated associated with timing compared to last year. And if you adjust for those timing impacts and the hurricane, underlying profit before tax is up 19%.

On an operating profit basis the first six months are up 7% taking into account those adjustments, with business performance operating profit down 4% at constant currency.

Financing costs and tax both favorable to last year, so overall earnings have increased by 6%, despite the negative impacts I've mentioned. Due to the impact from dilution from the June 2010 rights issue, earnings per share are down slightly, down 2%.

So, overall solid results and a strong platform for a good full year.

I'm please, as ever, to announced the board has approved an 8% increase in our interim dividend to 13.93p per share, in line with our policy. Just a mention on the dividend as you look forward, we expect to announce a one year outlook on our dividend in January next year for the fiscal year 2012/'13. And then once we have understood fully the outcome from the UK price controls under RIIO we plan to announce a longer-term policy for dividend that will run from April 2013 onwards.

As a business we're making good progress. We announced in January a radical restructuring and cost saving program in the US. Tom's new team has been in place since April. We've aligned ourselves to focus on our jurisdictions and we are already seeing the benefits from that. The regional presidents have crystal clear accountability and that is leading to improved scrutiny and management of our capital investments and operational metrics. We have, in less than six months, reduced over 1,150 roles in the US and we're pursuing a number of other cost saving opportunities.

All of the changes together are already delivering both operational and financial benefits and they'll underpin the progress that we're making on further improving the returns in our US businesses and we remain confident that this year we will hit the $200m per annum of cost savings by the end of March 2012.

Our capital investments are continuing to drive the growth in our asset base with, as you can notice, a greater focus on regulated businesses and we continue to deliver procurement and efficiency savings in our capital program, and those ultimately, of course, feed into cost savings for customers. Andrew will provide more detail on our capital program in a moment.

In October we disposed of two non-regulated businesses. We realized $153m from the sale of Seneca Upshur, a small US exploration and production company that we acquired in 2007 with KeySpan. And we followed that on with the sale of Onstream, the non-regulated arm of our UK metering business for GBP274m. The proceeds from those sales will be used to fund the long-term development of our core regulated activities.

Back in May Andrew and I were talking about the portfolio, about the approach we have to managing our business and that where we clearly saw greater shareholder value in selling a business rather than continuing to own it, we would crystallize that value. These transactions are a good example of that.

Additionally, in October, we issued the UK's first corporate RPI-linked retail bond that to date has raised GBP280m.

So we turn to regulation. In July we submitted our comprehensive well-justified business plans to Ofgem for the two UK transmission businesses. These plans are profoundly different to anything we've ever submitted before, they reflect an enormous amount of consultation with stakeholders, gathering views on financing, investment needs and, importantly, what customers prioritize and value. And we were pleased with the initial feedback from Ofgem last month, in October, which was largely very positive recognizing both the quality of the plans that we've submitted, but also the inevitable complexity. These business plans underpin an enormous requirement for investment in UK infrastructure and the integral role that we know we have to play on making sure we deliver a reliable, sustainable, clean energy future.

At the end of November we'll be submitting the RIIO gas distribution plans for the four networks we own. Then following engagement with Ofgem and another consultation with the stakeholder groups, we'll be resubmitting any amendments to our transmission plans in March 2012. Any adjustment we make will be directly related to the feedback that we receive through those consultations.

The one-year rollover for our UK gas and electricity transmission price controls is nearing completion; we're expecting the final proposals from Ofgem in a matter of weeks, with those price controls taking effect from April 1 next year.

In the US, as directed in last year's Niagara Mohawk case we filed in July for the recovery of our deferral account. Last year we initiated an audit, the Liberty audit, of all of our procedures and practices in how we were accounting for and allocating costs in our US business.

Since April we've implemented a number of the recommendations that have come out of that report and that is part of preparing, as many other preparations are underway for the planned filings we have next year, for New York and Rhode Island. Our current intention is to file both gas and electric rate plans for both our Niagara Mohawk and our Narragansett businesses. The precise timings of these filings are dependent on a number of things, but particularly for New York, the completion of an audit that the PSC initiated, the Overland audit.

Safety, I do need to talk about safety this morning despite, I know it's always in the financials, it's just it's such a crucial part of what we do and how we run our business. It underpins the way we operate as an organization and we've maintained our robust lost-time injury frequency rate for our own employees in the first half, flat, and over the past few years we've been increasingly focused on process safety and building on some solid foundations, but as ever it continuously is updated. We learn from incidents like the San Bruno incident in California, make sure that's taken account of, but it's not just about our employees it's also about making sure our contractors are safe and members of the public are not put at risk by the operations of our company. We are concerned about the number of serious incidents in the last six months and I'm determined that we will redouble our efforts to achieve world-leading safety performance.

Operationally, we've had a good six months. Customer satisfaction is trending upwards across our UK electric distribution businesses as well as our UK gas distribution networks with this week's published data showing a 4% improvement in customer satisfaction scores here in the UK. Customer satisfaction is a crucial measure of success, quite clearly, but increasingly it's important to security the right regulatory returns; as such, it remains a huge focus for us.

But when it comes to storm events, not surprisingly, that is challenging. The impact of Hurricane Irene, flooding, a tornado, in fact two tornados now year-to-date in our territory, have combined to make it a pretty exception six months and summer in the US. The response of our US colleagues to Hurricane Irene was truly inspirational. We managed to restore power to over 1m of our customers in three days and restore all 1.4m who were without power within a week.

This was a pretty unique storm, as you know. With the magnitude of the storm up the Eastern Seaboard, less mutual aid was available with other utilities providing resources to help. I'm extremely proud of the fact that our employees did so much themselves, worked tirelessly to restore the services in what were incredibly hard conditions. The cost of that response was significant on an IFRS basis we recognized those costs immediately and that's a net charge of GBP69m in the first half, but we will apply to recover those in revenue over the next few years.

And remarkably, at the end of October, we saw what I can only describe as unseasonably cold weather in October with the leaves still on the trees and in parts of Massachusetts 30 inches of snow. Over 400,000 customers were then again without power across a widespread area. Again the team did an excellent job. While I'm proud of both those responses, I also know that we learned from everyone, we take the time to reflect, make sure we learn the lessons from them and continuously improve.

Here in the UK last year we saw here the coldest December for 100 years, so unsurprisingly we've been making sure we've got a number of improvements in our own preparations and are confident that we're in a strong position to deal with any demands should such a harsh winter repeat itself.

So on balance we started the year well, solid underlying performance and steady progress towards the important strategic goals for the year.

Now let me hand you over to Andrew to talk you through the financials in more detail.

Thank you, Steve, and good morning, everybody, and it's now actually a year since I've arrived at National Grid and it's been an interesting year obviously with all the regulatory process we're going through and one well worth getting to grips with as the FD and all the activity that's been going on.

I actually have finally found a similarity though between National Grid and Cadbury. For those of you who are aware after six months at Cadbury somebody called Irene there came along and actually bid for Cadbury. Six months into the job at National Grid, Hurricane Irene came through and made a complication of the numbers again as we try and explain things through today.

Anyway, today I'd like to take you through the details of our financial performance over the last six months and then I'd like to talk about our new return on capital employed metric which will help you better understand the relative performance of our businesses before handing back to Steve to close and for Q&A.

In line with our new operating structure, this is the first time we are presenting our results in the new business segments of UK Transmission, UK Distribution, US Regulated and Other activities. Also, as we said back in May, 2010/'11 was an exceptional year for timing with a large swing as we recovered revenues owed from previous years. This has substantially impacted year-on-year comparisons and you will see the effects of this in all our business segments.

So beginning with UK Transmission. Timing effects were largely responsible for the 7% decrease in operating profit. Excluding timing, operating profit was up 2%. Net regulated income was up 4% mainly due to inflation adjustments and a large asset base, while controllable costs were up GBP15m in nominal terms, up slightly in real terms as well, reflecting inflation and the investments we are making in our teams and processes to deliver the CapEx program. Depreciation was also up in line with the increase in the asset base.

Timing was also a feature in UK Gas Distribution, as a result operating profit fell by 1%. Excluding timing, operating profit was up by 4%. Net regulated income was up, again mainly due to RPI, while regulated controllable costs were up GBP7m in nominal terms, that's flat in real terms, despite the costs associated with the rollout of new systems. Depreciation has increased mainly due to software amortization costs.

In the US Regulated segment, operating profit was again held back by timing, but also by the GBP69m net charge for Hurricane Irene that Steve mentioned earlier. Excluding timing and storm costs, operating profit increased by GBP38m, or 10%. Importantly, controllable costs are down in both real and nominal term.

In Other activities, operating profit increased by 30%. Grain LNG profits were up reflecting the benefits of our phase III investment. Profits from property were higher, mainly due to reduced operating costs, while metering was also up reflecting increased contract prices. GBP12m of metering's operating profit in the period was from Onstream which, as you know, was sold in October.

Bringing this together at a Group level, reported operating profit was down 4%; however, excluding timing and the impact of Irene profit was up 7%. This reflects the revenue increases due to RPI in the UK, our continued focus on controllable costs, as well as strong performance from our Other activities.

We continue to maintain our focus on regulated controllable operating costs. While the absolute number for the Group excluding post-retirement costs and bad debts has increased by some GBP16m, this represents a GBP15m reduction in real terms. As the cost recovery reduction program in the US is very back-end loaded, we would expect further progress to be make in reducing the US cost base by the year end.

Financing costs were down substantially driven by lower average net debt and lower pension interest. Our tax rate is also down mainly due to a higher proportion of UK operating profit at the newly-lowered UK tax rate. This helped increase earnings by 6% despite the headwinds and timing and Irene.

Turning to look briefly at capital investment, year-on-year spend was around GBP200m lower than in the same period last year, largely reflecting reduced spend in our Other activities segment and JVs as both BritNed and Grain III have now been commissioned. At the same time investment in a number of major UK projects, such as the Western HVDC link have slipped back reflecting planning and approval delays.

In the US, further work as been done to ensure that we invest appropriately and we continue to leverage procurement across the business as a whole.

Overall, we continue to maintain our capital discipline and only invest where we are confident we are able to earn a reasonable return. Carried forward, this lower level of spend impacts our projections for CapEx for the full year, with a GBP200m from the first half flowing through and in addition approximately GBP100m likely to come out in the second half. We are therefore now forecasting CapEx to be in the GBP3.2b to GBP3.3b range for the year. Our longer-term CapEx plans are not affected although volatility of non-regulated CapEx will continue to make precise profiling of capital uncertain.

Turning to cash flow. We delivered a solid operating cash flow of GBP1.8b, lower than last year mainly due to lower operating profit and increased pension costs. Net cash flow after investment, exceptional items and stranded cost recoveries was some GBP350m.

Net debt was up GBP1.3b from March 2011 to GBP20b. Around GBP350m of this is due to exchange rate movements. The proceeds from the recent divestments are not included in these figures.

Overall, our guidance is unchanged from May; we now expect net finance costs to be roughly GBP100m lower than last year due to lower non-cash pension finance charges and lower average net debt and interest rates.

Hurricane Irene and the latest storms in the US will negatively impact operating profit. So far this year as we head into the winter period we have already accumulated an estimated GBP140m of storm costs. By contrast, storm costs for the full year last year were GBP25m. We expect to recover the significant majority of these costs over the next few years; however, I would like to remind you that while storm costs affect our IFRS operating profit they do not have a material impact on our regulated returns on equity which are on a US GAAP basis.

Now I'd like to move on and talk about our new returns metric. Back in May I shared with you my intention to define a new key metric to allow better comparability of rates of return in the two principle geographies. Again, as I said at the time, this metric is in addition to our existing reporting and we will continue to use allowed and achieved ROEs in the US and vanilla returns in the UK as the key measures of operational performance against our regulatory contracts.

Following a review of the different options, looking at the advantages and disadvantages of a wide range of measures and taking onboard how you measure the business, we have decided to focus on using a return on capital employed, or ROCE, measure. This is a measure that can be applied consistently to our businesses on both sides of the Atlantic and is calculated on the regulatory capital employed in each business. The measure is post tax and is based on IFRS operating profit adjusted for the different regulatory achievements such as timing and RPI in the UK. Interest is excluded as financing is a Group decision. The full calculations are included in the appendix and also are available on our website. If you have any questions on the details of these you can either contact me or any of the members of the IR team who will be happy to help.

The numbers presented here are for 2010/'11. The UK ROCE was 8.5%, whilst in the US it was 7.1%. A key point here is that both of these numbers are above the Group's cost of capital. We will be embedding this metric into our investment planning as well as using this to judge the relative performance of the portfolios. At a Group level we will continue to focus on using a return on equity measure to assess our overall return for shareholders. This then accounts fully for all the benefits we can generate from financing as well as operating the business.

Looking back over the last two years, the movement in the UK return on capital employed was principally caused by the lag in RPI indexation on UK allowed revenues which did not increase materially in 2010/'11. In contrast the RAV did increase as a result of actual inflation over the year to March 2010 of 4.4%.

In the US, the improved return on capital employed was the result of stronger performance and increased revenues under new rate plans.

The 140 basis points difference between the UK regulated and US regulated returns, largely reflects the US which, while improving significantly, does not yet meet our expectations.

In parallel with the development of our new metric, we've also made changes to our definitions of rate base and eliminated a number of differing treatments when calculating US ROEs for each regulated entity. The purpose of this is to improve consistency and clarity which will believe is helpful is terms of judging both relative and absolute performance. The result is a single definition for return on equity applicable to all rate plans. Details of the calculation are in the appendix and we will go through the numbers in more detail at the full year results.

As with the return on capital employed measure, we are making this change to increase comparability between the businesses in our portfolio and this will mean that some of the returns we will report will be different to the regulated reported ROEs that we file. Again we will continue to make these available.

I believe these changes should present a much clearer view of our individual businesses' relative performance. As a result I would not expect to make any changes to these regulatory definitions for some time to come.

So to summarize, it's been a good start to the year, we set ourselves some tough financial targets and we've made solid progress against them. I'm also pleased with our progress towards increasing clarity and consistency in our metrics. As a result we remain positive in our outlook for the full year.

I'll now hand you back to Steve to talk to you about some of our strategic priorities.

Thank you, Andrew. Back in May I set out three strategic priorities for this year; a very clear focus for delivering the new operating model, delivering our core investment program and delivering continued reduction in our cost base across all of our businesses. Nothing has changed, they remain the same.

In the US, as you've heard, we've already completed the transition to the new organization under Tom. As I mentioned, we've removed 1,150 roles in the organization, a tremendous effort, tremendous change. And that puts in place a substantial part of the cost savings target, but we still remain focused to continue to make sure we hit that $200m run rate saving by March next year. That clearly remains the priority for Tom and the team.

Against our core investment program, Andrew's covered the progress so far this year. You'll see the results that come out from maintaining a very strong clear discipline around capital and the benefits of global procurement and making sure that we execute on that program efficiently.

Our expectations for the full year on capital are very much in line with our UK regulatory allowances and the submissions under RIIO and, as you've heard, we are investing in people and processes. That's pre-investing today to make sure that we can handle the step up that we know is coming in the UK in years to come.

And finally as you look across the whole of the Group, the strong focus is there on operating costs. We have made progress at the half year but we expect to make significantly more progress in the second half of the year and you'll see that at the full year. Because in addition to the US there's a focus here in the UK in our gas business where we're rolling out new systems of deploying people to work, that's part of the plan to move our gas distribution businesses to the efficiency frontier.

So the priorities haven't changed, they remain very clear. We're confident we can do more to improve performance and deliver attractive returns.

With that I'd very happy to take your questions, Andrew and I, Nick and Tom are both here as well. So we'll turn to questions.

Hello, it's Mark Freshney from Credit Suisse. Just two questions. Firstly on the new performance metrics, you talk about giving people something to assess, or investors something to assess your performance against, but what are the actual internal targets your going for on those three metrics?

And just secondly, I think at the time you announced your cost cutting in the US, I think in February, you alluded that there may actually be some further work on top of that $200m run rate to be done and I think you kind of hinted at that today. Could you perhaps talk about any extra cost-cutting potential there?

Yes, Tom can make a comment on that in a moment. Like any business, Mark, we have a series of hurdles internally. If you work back from what we've been very clear about in the UK, very clear under submissions under RIIO and our rights issue, the ability to earn a 12% return on equity in the UK businesses, translate that into what does that mean in terms of an ROCE in the UK and you're getting up towards the 9% ROCE. That's the sort of number that we expect, 8% to 9%. But the ultimate decision on our portfolio is, are we clearly delivering value over our cost of capital? That's the hurdle rate that we have to have internally, quite clearly.

This metric, as Andy can comment again, it's important that we look through the cycle as well. As we think about the portfolio and what belongs in the portfolio for the future it's a judgment on through the economic cycle will these assets continue to deliver the right sort of ROCEs for us? The clarity here is, of course, what we did, unfortunately by talking about the operating entities themselves, and of course the apples and pears of UK and US, I think confused a lot of people about the comparability. This is putting it on a common basis so you can see the comparability between the UK and the US today and over time and I think it's important that we continue to demonstrate that. I'm sure you'll want to add about cash, of course, Andrew.

The 8% range equates to a 12% ROE so that should be something you should have in mind as being the sort of range that you'd be looking at on both sides of the Atlantic. The point here is to get through to a comparable measure taking out all the gap swings and so forth that we did have in the ROE numbers. The reality, at the end of the day is as a business, I'm actually a great believer in cash, as we all should be, and it's about cash flow that actually is the most important part of that.

The other thing to note is, also again just to remind you, that the UK is a nominal number -- sorry real, whereas the US is nominal, so actually from a cash flow perspective the US actually continues to generate a greater degree of cash because effectively the UK number includes about a 3% RPI increase, pre-tax that is.

I think I said 9%, didn't I? About 8.5% of course in the UK relates back to an ROE in the UK last year of 13%. That's exactly right.

Hinted at, did we hint at? That's interesting, I wasn't intending to hint at more to come in the US, but as ever in our business we talk about this year and we have ambitions beyond this year. This was a substantial change in the structure, absolute commitment to getting the $200m out this year is clear, is key. We would always want to continue to drive that business quite hard. Tom, I'm sure you've got a couple of comments on that.

Yes, just a few comments, stepping backwards (inaudible). So to step backwards, when we announced the restructure, a pretty significant shift.

That was a critical part of the work that was undertaken over the last six, seven months. To do that, we did a deep assessment of the enterprise on the span of management as well as the layers of management and in that exercise we reduced the organization by two layers, so we went from about nine layers to seven and in most cases we're at six, so there's significant progress on the structure of the organization. We wanted to do that first which allowed us to identify the 1,200 positions, 1,150 at this point.

Then once we get through that, once we finish populating the organization in September, as we step into 2012 we're now going to step back and do an enterprise-wide assessment of end-to-end process in the US, and as we deliver efficiency and more cost savings, deliver a streamline, eliminate redundancies and improve the end-to-end process across the entire US, more costs will fall out from that aspect of it. So this is continuous and it's a strong focus that we will have going into 2012.

Thanks, Tom. Can you pass that in front to Martin and we'll go to Peter then.

Thanks, Martin Brough from Deutsche. You talked about giving an update on your longer-term dividend policy. If one or more of your UK businesses goes to the Competition Commission for appeal, either because you appeal or because a customer group decides to, to what extent will that have an impact on the timing of your decisions over the longer term dividends?

It will have an impact, Martin, quite clearly. As I talk about our plan, which I think is pretty clear frankly, pretty obvious, these businesses often in the past the dividend is set when you have the outcome, when you understand all the implications of a regulatory review, despite the fact our business is UK and US, this is still a significant part of National Grid PLC. So I am therefore implicitly optimistic that we will reach and outcome at the end of 2012 and it will not be challenged by others and we'll move on. If it is challenged by somebody then there will be a deferral until we have complete understanding about the outcome of those reviews are.

Peter.

Morning, it's Peter Atherton from Citigroup. A couple of questions on the US rate base and then one on the storms. The US rate base has been a bit of a moving feast over the last few years, I think for those of us around two or three years ago we can remember a number north of $15b. We're now down at $14.273b, on page 36. Can we sort of confirm this is the last adjustment we're going to see to the US rate base, particularly adjustments down?

And then secondly a question on the year-on-year growth, it seems to have only grown a couple of hundred million on the new definition, despite that fact you've put $1.2b of CapEx in. Is that the sort of ratio of rate base growth to CapEx we can expect going forward? Because I remember from previous guidance you talked about maybe $600m, $700m of rate-based growth for the CapEx.

Yes, I'll let Andrew pick that up but let me just make one point, I'll draw your attention to the statement actually. What we're trying to do here is make sure there is a consistency of definition, because it differs from state to state to state. There's defered taxes in there, there's other things that end up getting in the rate base and we still have that, we have that as an asset, it doesn't help comparability between the different rate bases, and a lot of that we still earn a return on as well but it's not part of the regulated return. So we're trying to be crystal clear here.

Would you like to just continue that, because I suspect there's a bit of education off line, but Andy did make a very important point enduring changes, the answer to part of your question Peter is, this is not intended to be the beginning of more changes, this is it we hope.

Peter, if my understanding is correct, the adjustment a couple of years ago was related to some goodwill which had been included in some of the rate bases which was taken out and that was a change at that point in time. This change was about the fact that we, as Steve mentioned, we are trying to make sure that we only put in the rate base assets which actually achieve, get a regulated return on them. Other assets which we will get money back for but we don't necessarily receive the ROE, the allowed ROE for, we may gain an interest type return on, have been excluded in order to aid comparability. So these assets exist, they haven't disappeared. In fact actually if you look at the numbers the number you're talking to, the $14.3b, if you add the $600m of assets on, actually, it's $14.9b, that compared to $14.7b that was actually in existence at December 31, this is a March 31 number. So actually it did increase.

As regards you comment about the year-on-year the net increase was only $200m. A lot of that was actually due to tax changes with bonus depreciation having quite a significant impact and the fact that we weren't paying much tax in the US in the past couple of years, and obviously in the US you get booked tax as cash in your regulated allowance. So in effect any increase in your deferred tax asset reduces your regulatory asset position.

So going forward if we assume a sort of $1.2b normal CapEx program in the US, what sort of increase in the rate base can we typically expect to see?

Last year was an exceptionally low level relative to the size of the CapEx because of the amount of bonus depreciation and settlement of some tax issues, long term tax issues, so that was slightly higher than normal. As we return to a more normal level of paying cash taxes that will probably increase slightly higher than the $200m to $300m in the prior year, I wouldn't like to quote an exact number today.

Okay, perfect, thanks. And then just on the storms, some of the press and media coverage on the recent storm was pretty negative, as you would expect I guess, but can you just reassure us that nobody on your regulatory side is linking your cost saving program and your headcount reduction to the performance in reconnecting people from the storms? Because clearly if there is a linkage then it would undermine your chances of getting the money back.

Yes, I can absolutely assure you of that. There is nothing at all, in fact we are in very close dialogue, as you'd expect, with all of the regulators and politicians but my comment in my remark was, you can satisfy customers, when a storm comes and you've lost your power for seven days people aren't happy. It doesn't matter how well you've done and statistically we do a lot of analysis, not surprisingly, if you look at the speed of response to the number of lines down etc. etc. this time we're better than we've been in history. We are getting better, even better than the great ice storm of three years ago now. But all of us, as members of the public, our expectations get higher.

A particular challenge we've got is about communications, Peter, actually, quite frankly, how to keep people informed of progress and what's going on and people rightly expect more from us about communications, that's an area we know that we can improve on still further. Absolutely clear that the restructuring has had no impact on our the way we do storms. In fact, frankly, these came in the middle of our restructuring. That's for us why we're so pleased about it.

So all this restructuring was going on and we still handled those storms better than we've handled storms in the past actually, so I think we are confident about that going forward. That's clearly understood. But we have to face that the expectation of people is they want their power back, especially when we've had three storms in four months; people get a bit tired of it actually.

Following on from that -- sorry, it's Iain Turner from RBS. Following on from that, whenever I go to the US, I'm always struck by how much of the distribution plant is above ground, in harm's way. As the US moves towards a more mature developed economy-type status, surely there's got to be a case for undergrounding the distribution network in a lot of these places if they're going to be subject to these weather events.

I don't think that's going to happen any time soon actually, in any sense. Of course we have some big underground systems in the city, so in the city of Buffalo in particular we've got quite a bit of underground. But no, but you do have an old system, as you know. The CapEx that we're putting in today is making that system more resilient going forward.

But we all know that long term there's an awful lot of investment required in the systems in the US to update them and modernize them. It won't put them underground, by and large, but it certainly will strengthen the system from where it is today. And that's also part of single transmission lines that can fail therefore and takes thousands of people out as opposed to having two or three opportunities to get power into that center.

Do you want to add to that at all, Tom?

Yes, I'd agree with that. And I think when you think about the magnitude of the distribution system, there's two critical issues that have to be addressed. One is modernization and upgrading and replacing. Then second would be is it more effective to underground? I think just the size of the first investment truncates and eliminates the ability to put it underground, plus it would take decades to replace the distribution system and take it from above ground into below ground. So I think the overall investment cost of it and the drive by both the political and the regulatory oversight to keep bill pressure down, that it won't be something we see any time soon.

There's -- we shouldn't spend all morning actually on weather, but this was an exceptional six months. But we do worry, and we talk to our regulators and politicians as well about has the climate fundamentally changed? Are we going to get more of these events? Therefore what extra resilience should we put in the system and invest? And there are things we can do, with other feeders and duplication of systems. That's all going to be part and parcel as we go forward on the asset replacement program.

Dominic?

Hi there. Dominic Nash from Liberum Capital. A question on dividend again and on dividend policy, how sacrosanct is your absolute dividend level? And I think in light of Ofgem commenting on response to your business plans that they thought dividend policy from your subsidiaries appeared high.

And when things start to get a bit tight on the cash flows in a few years' time for you, what sort of priority would you put on massaging like dividend asset disposals or equity raising?

That's about four questions, actually. You broke John's rule; you just cleverly wove them into one question, didn't you?

It is very clear, dividend's incredibly important to all of our investors, absolutely all of our investors. It's also I think very clear, and hats off to Ofgem, not just the consultation that we've run with our stakeholders, including our investors, but also that Ofgem have been involved in, it's become very clear to them just how important it is for equity holders in these businesses to receive a dividend. So all of the companies when they submit their plans, and you'll see it in the gas distribution plans as well when they're submitted at the end of this month, an assumption about the continuation of a healthy dividend throughout the eight-year period. So it's a pillar upon which the financing of these businesses are built. That's at the entity level.

We're very clear about our timetable and our dividend going forward. We understand the importance of it to our investors. We can't talk about it theoretically 18 months away until we've got the final results here. And of course we've got to look long term, when we make the decision at the beginning of 2013, about what is the understanding of the outcome of RIIO for the big businesses in the UK, what are the capital needs of the businesses going forward. But I think we've been pretty consistent and pretty clear about the recognition of the dividend and how important it is to our investors. So that answers your second part about where it sits in a natural hierarchy.

On the overall financing part, just to remind you that the plans that were submitted were on maintaining the existing A-minus ratings for the notional subsidiaries. And that was critical to the way we put together the business plans. Financeability is critical. And if we maintain that, obviously that will help us, as a Group, maintain our overall credit ratings.

Bobby?

Thanks. It's Bobby Chada from Morgan Stanley. Two questions. The first is on transmission, in your comments, Andrew, you talk -- and in the statement it talks about the rising costs from adding engineers. And obviously you've got to do that with the CapEx plan. But CapEx seems to be getting pushed further back. You've cut the number for this year again. The Ofgem -- or the business plan backend-loaded it. Are you able to sculpt the way you add engineers to the CapEx plan, or do you have to effectively frontend-load the OpEx and just wait for it to catch up as CapEx comes through? And what sort of cost pressure should we expect from that? So that's the first question.

And then the second one is on RIIO. The statement talks about Ofgem supporting a lot of the submission, but there were obviously some areas where they had a significant difference of opinion as well on the return on equity, on the transitional period for depreciation and on the overall financing package. How do you expect to change your submission? Are you going to take their comments onboard and factor them in or is your position that your business plan is the correct way to look at it and then they'll have to come in and cut back? It's a different process to a previous regulatory review, so I'm interested in how you're going to address some of that pushback from them.

I'll get Nick to talk about that in a moment. But as Andrew said, we think our plans are very robust plans to finance this business in a way that needs financing through that period. So we have heard what they say, but there's a lot of consultation going on now with stakeholders again. If you input to the first plan, now you've seen what the plan looks like, have we got it right, etc., etc. But Nick can comment on that in a moment.

On your first question, we've actually slowed down because this CapEx is lumpy actually and we get a view of -- the Western Link's gone back six-plus months on when we thought because of planning approvals and various things. Big projects, GBP900m project for us, so it's going to come towards the back end of this year, not in the first half of this year. So we are flexing that actually. So I wouldn't make too big a deal out of it. It is numbers of single millions of pounds, but we've added about 160 engineers in the first half of this year. It's about 500 overall, Nick, isn't it, through the program? But we can control that. We're building it up so it's ready at the right time.

Let's not get too spooked by this CapEx. This is good news. We saved GBP150m on procurement savings across the piece. We've made sure, as Andrew said, we've got the right amount of CapEx aligned against our allowances and delivering what regulators want for us in the US. And there's some big lumps like this project that's not here. And all the unregulated, of which in the number that you'll all recognize, the GBP22b, GBP2.5b of that were unregulated. There's about GBP1.5b of decisions that we will make or not make purely based on returns and discipline. So if we don't have the confidence we can earn those returns, we will not invest that money.

If you look at the underlying investment in the regulated entities out for the next -- that five-year period, still very much on track for GBP20b roughly. And that ties in with what we submitted on RIIO. There will always be some lumps though. So we need to get used to the fact that if something gets delayed because of planning, a lump can shift half-year on half-year. The big picture across this period, the CapEx is very much still in line with everything that we've been talking about, stress test it for changes in any consumption in the UK, stress tested it against if the nuclears go back, etc., etc. big CapEx over that eight-year period still.

Nick, RIIO?

So yes, thanks. So just to add on the CapEx, one of the characteristics of our RIIO submission was to build in some flexibility actually. So if you remember the charts that showed the load-related spend peaking, we built the non-load spend, so the asset replacement around that to try to flatten the profile. So if we do see load-related spend move, then you can expect us to see -- you'd expect to see us moving the asset replacement spend around as well. So actually, like Steve says, the overall sum and probably the phasing of it is not noticeably moving in our view.

There's -- it's worth thinking about the regulated, but it's also worth thinking about the non-regulated. Some of what's moved out is the discussions around, of course, CCS. We've seen Longannet. We've still got a very positive view on the Humber. So you can see some of that moving. Interconnectors, we're still in good discussions on interconnectors. Inevitably there's planning and so on going on there, Grain 4, etc. So there's stuff going on there too.

So we will have the opportunity to phase a bit, but essentially it's about flexing the capital program to make sure that we can, over the period, do the total amount of investment.

So on RIIO financing, our submission was carefully crafted, I think, to balance out what we thought were Ofgem's preferences around which levers to put in which position, so with the ROE, the gearing, the incentive package. So we felt that we had judged that about in the preference order that Ofgem was signaling. So we adjusted the 'at risk', that's the package, to get to what we thought was about the right set of things. Together, as a set of components, they form ultimately best value for customers, in our view. So clearly if Ofgem signal to us they'd like to move one lever here, then another lever somewhere else is going to move as well because we think this is the best overall package for customers. So certainly the freedom to have some more debate on that, but it's around the shape, I think, rather than the overall package.

Thanks, Nick. Jamie? Ed, did you want to keep that microphone?

I had one question. I feel guilty because I didn't put my hand up. It was around the emerging US economy and the sort of CapEx requirement there. I was interested in your comments about, and I think you've mentioned this before, the need for investment in the US and I think since 2001 we've been talking about this. Over the next five to 10 years, would you expect the CapEx in the US to go up?

I wish I had a crystal ball that you think we clearly have here. The next five years we're pretty clear on. That goes back to the whole rights issue conversation. We are about GBP1b a year. Someone said GBP1b to GBP1.2b. That's not changed. So through the five-year period, the US will invest about GBP6b in total over the five-year period. That's what's seen in all the regulatory filings we've done. And even the ones we're going to be doing next year are just a continuation of that. Much of the capital's already been agreed with the regulator. So it's not stepping up again in this five-year period.

People often talk about that it was going to step up, wasn't it? If you actually go back to 2001, it's twice what it was back then actually. So it has doubled in this period, though we know from an engineering perspective it needs to go up again. We don't see it going up again in this five-year period. We don't see the appetite in given where the economy is and looks like going right now, don't see that changing in this five-year period. Beyond that five-year period, that's pretty unclear still today.

Thanks.

Jamie?

Thanks. Yes, Jamie from Redburn. Just following up on the earlier point on the RIIO business plan and financeability, there was a comment in there from the Ofgem response about that National Grid had tested sensible credit metrics. And does that -- I just wanted to understand your feeling about what that means. Is that Nick's point that essentially what we're saying here is that Ofgem agreeing with the endpoint that you end up with in 2021, that you're using sensible ratios, sensible levels for those ratios, and so the process from here is more about sculpting, but you're ending up at the same point?

I think that's a good summary. I've forgotten who said just now though about we don't know this process, which is true. There's not a laid out, you know exactly under the old world you get a set of proposals, it's likely to look like this, etc. This process is emerging as we go through it. And it's profoundly different. The fact that we submitted such a holistic plan with everything in it for the eight-year period is very different actually, and they are very good plans.

Ofgem were very clear about that. In fact they were clear in our conversations with them, back to what Andrew said, we've maintained A-minus in these OpCos. We believe that's the right financial strength in those businesses given the capital they have to invest through this period of time. That comment, I think, is a reflection back that says we agree with you. We agree that's the right capital structure and the way these businesses should be financed. And Nick's point is there's lots of levers you can pull, gearing, returns, depreciation, etc., to get it there. We think we've got the right blend between those. If they want us to adjust those, they can be adjusted, clearly.

And then it's just the other big thing is just where that CapEx ends up at.

Yes.

Yes. Okay. Thank you.

Hang onto it, Verity.

Verity Mitchell, HSBC. I've just got a question about efficiencies, but I noticed that you've made a lot in your statement about gas distribution, front office and all the improvements there. Clearly there's lots of improvements going on in the US. Does that mean transmission is very much at the efficiency frontier? Is there nothing to do there? Or if not, does that make you more vulnerable for the transmission review? Where are we? Is transmission absolutely not requiring any additional efficiency work?

Nick will think I set you up to this question actually. No, it just happens to be a reflection of, as there always is in businesses aren't there, a real focus at the moment on the US, quite clear. As Andrew said again, we're not happy with where returns are in aggregate across the US. It's our job. We have to drive those returns up. That's what we're doing.

Gas distribution, we know there's a step change we can make in gas distribution. There's continuous improvement in transmission. There are added costs of course for the capital side, OpEx that eventually gets into CapEx. If you look at our plans, and Nick can comment on this, in our submission to Ofgem we have put into that eight-year period inbuilt efficiencies on OpEx in our transmission businesses.

Yes. So we -- transmission doesn't get much discussion on this point, partly because of course we're investing very strongly to increase the capability. But don't imagine that's any sign that we don't work very hard at this. Obviously we publish a metric, which is about cost per RAV, which tries to talk to this issue that the network's getting a lot bigger, and that metric's been very healthy and continues to be very healthy. Now it's only one metric. How much can you tell from that? It's a very asset-intensive business so it comes in very big lumps. So we'll continue to push that.

We've embedded significant OpEx savings in the RIIO plan, 1.7% per year. We've explained how we'll be doing that. We think that's challenging but certainly achievable. And obviously as part of the review, Ofgem will look, as we do, at other similar utilities and try to judge us against those. In the existing price control period, we're running by and large around the OpEx that was included in the PCR, which had efficiency in it. So lots of hard work still going on on that. And we're certainly not taking our eye off that even though there's such a big capital investment plan.

Yes. I think that was your point, which was -- mine sort of, too, not of that at all. In the context of the OpEx overall if you saw, it's the smallest part of the OpEx, but there's still pressure on that, without question. And it's not just the direct side. IT, shared services, all the other things, of course, actually feed in there, which we continue to make efficiencies on.

And when we put our plans into Ofgem, where has the 1.7% come from? We benchmark against a position where we do benchmark our transmission system internationally actually. It's quite hard to do because this is very different, but it stacks up well. And then what does industry that stacks up well do year on year in terms of productivity? And we believe that 1.7% is challenging but fair.

Can I just ask -- sorry, it's Iain Turner from RBS, again. Can I just ask a question about metering, please? Obviously you sold OnStream during the half. Where does that leave you now with respect to smart metering and with respect to the remaining gas meters? Are those still things you're looking to pursue or should we regard that as non-strategic?

We own still a huge population of the gas meters. New gas meters that have been fitted over the last six or seven years, and we've been fitting about 15% or 20% of them, and the bulk are competitively fitted now by businesses like OnStream. So it's an asset base generating enormous amounts of cash, not surprisingly, but over time will run down, but has a long life associated with it.

As a result of not actually retaining OnStream, the role that we will play in smart meter rollout in the UK is therefore very small. That will be the business that would have been hugely involved in that going forward.

This is Jose Ruiz from Exane BNP. Just a clarification on the cash flow statement, you have an increase again of charges in pensions, and it always happens when the stock market goes down. So I was wondering if we are going to see again escalation in terms of charges in pensions.

Yes. Obviously the pension charge compromises two parts, obviously what we pay in cash relating to deficit funding, which depends on A, what the actuarial valuation is, and we've just completed an actuarial valuation in the UK. What you'll see is you'll see a pension deficit, a book. We actually doubled, increased to about -- just over GBP2b at the half-year. That was partly due to changes in discount rates and partly due to asset valuations. That's the accounting change.

A point to note about that is that doesn't necessarily translate into cash flow, because actually because your interest charge is lower because your discount rate's lower, you get an increase in your liability, but actually it doesn't necessarily reflect into profit and loss account charges, hence pension interest is actually lower in the first half of the year and we're guiding you lower for the full year. So it is a little bit of a -- dependent on where we are through the actuarial cycle as far as deficit funding is concerned.

And where we were at the end of the year was broadly, at the end of March, our actuarial valuations and our book valuations weren't hugely different as far as the deficits were concerned, so around about the GBP1b, GBP1.5b range.

And it's across all of it. But a huge chunk of it was in the US. The discount rate change in the US was greater than the discount rate change in the UK. That's about the long-term pension liability there, of course which all comes through our rates year on year on year. But you'll see it on the books. And of course if the discount rate goes the other way, you'll see a huge change, which is quite easy to happen in 12 months' time.

And just another question on the cash flow statement. The tax paid increases significantly. Is that because you're paying more tax in the US and less in the UK?

It's actually more tax in the US, yes. If you remember, last year's profitability in the US was higher because of timing, so we actually made tax payments in the US for the first half of the year.

Thank you.

John?

Good morning. It's John Musk from Royal Bank of Canada. Can I ask a question on electricity market reforms and any consensus you're seeing emerging perhaps on how capacity payments are going to work and your role within that? So what role do you see for National Grid within a new capacity system versus what you currently have in terms of your system operator obligations?

Well, there's a timetable that the government have set out. They are, as I understand it, going to issue their technical paper in the middle of December, which is going to lay out the details of the capacity payment, as far as they work them, the details of the feed-in tariffs and the contracts for difference around that, and the institutional arrangements around that. So we're just part of the industry that has been consulting with government. A huge amount of work to go to actually design all of these arrangements.

And I think it's the middle of December they're going to put out a paper which leads then to a publication detail in January, all on schedule for primary legislation in end of first quarter next year. That's as much as I know, John, actually. We need to wait and see what they come out with in the middle of December. But certainly an enormous amount of work going on and a real understanding in government that these are important arrangements to make sure that generation in the UK, particularly low-carbon generation, is going to get built from 2014/'15 onwards.

You can grab it on the way past if you want it.

This is Jose Ruiz again. Can you confirm that you have finished your disposal plan? And considering that you have disposed more than you were saying, have you attempted to sell anything more? Thank you.

Well, be very clear about the portfolio, how we think about, but it's also worth saying there are things you do proactively and there are things you do opportunistically. So we're not proactively running any processes at the moment. But it is about value for investors ultimately, our shareholders. So, we have a clear view of the value that we can create from the businesses and if they fit, but if someone comes along and makes us an offer for a part of our business that we believe exceeds the long-term value to investors, don't be surprised by that. But there are no plans at the moment to do anything in the short term.

Mohammed Hamza, Orbis. When PPL bought E.ON's DNOs, they set out an ROE objective upwards of 20% nominal. And obviously implicit in that was the use of double leverage. When you get to the Group overall ROE of 14.1%, how much of that is use of, if you want, double leverage and how much can you jack that up?

Yes. Well, debt to regulated asset value at the end of last year was around about 59%. Historically it's been about two-thirds. To maintain our current ratings, BBB+, at the Group level would probably be -- that would be about the maximum level of leverage we could get to. Whereas our regulated leverage in the UK is 60%, and in most of our US entities it's around 50%.

And of course, in our RIIO submission, Nick talked about of the levers, the mix of the levers here, the change in depreciation, what's the gearing and the equity, we have moved the gearing in the UK businesses down. That's one of the tools that we believe is the right mix of tools to maintain the financial structure we've been talking about and get the right amount of cash into the business to actually fund the investments for this eight-year period.

So are PPL's numbers then just unrealistic? Because they put our pretty clear numbers saying we're going to do upwards of 20% on UK electricity distribution.

They can do what they like. The reality is they're not -- how they do that within the context of their own credit ratings, what they're trying to do. What I was trying to say is we are -- we would be constrained probably at a maximum level of leverage, maintaining our current credit rating at about two-thirds. And that's where we would expect -- we have no intention of changing our current credit rating. So if you look at that, that would be the maximum we could go.

Now, again, with financing, you can always look about as if you've got a group and a portfolio of businesses, you can allocate that leverage where you like within your portfolio, but the reality is at some -- at the group level you are going to end up constrained. And so we could talk about one individual business being double-leveraged, but that's not the way we look at it. We look at it as a Group as a whole and as a portfolio as a whole and try and get out of -- if we were going a single acquisition and we were looking at in that way, yes, we may talk to you about it in that context, which is, I think, what they were trying to do.

That's very polite, Andrew, yes. We could argue that either the grade is 99% levered actually and return on equity in that business is some ridiculous number, it's just fictitious. It's important in the UK. The UK, and in the US in a different way, the regulatory view of what equity should be in those businesses. And the reason why regulators want equity in those businesses is so those businesses are financeable and can handle shocks going forward. And of course in the UK there are laws in which those businesses can be re-appropriated essentially if they go under.

So I think people have to be very careful. There is a real, clear view of regulators that it needs a decent buffer of equity in those businesses, something that we believe in as well, which is all part of our filings in both the US and the UK.

I can't see who's behind there actually, but it should be behind Ed rather than Ed. No offense, Ed, but you can go next.

Hi. It's Peter Bisztyga from Barclays Capital. Hi. Could you give us a view of what your expectations are for electricity load growth over the next couple of years given the current deteriorating economic conditions? And are there any potential implications for your longer-term CapEx plans should we hit a lower run rate of electricity demand?

There's statistics, statistics and damn statistics here at the moment, of course. So just a couple of headlines for you. Load-growth electricity in the UK is essentially zero. It's flat. It's been flat for about two years in reality. And there's always the difficulty of normalizing for weather, but to us it's flat. When you look at the projections we've got in our RIIO submissions, we're not forecasting load growth.

If you look at what we need to do in the UK to hit the targets of climate change by 2020, there's a huge efficiency assumption in there as well, and of course there's a shift from heat and transport into electricity in the longer term, but after 2020. So load growth in transmissions, that's not what the investment's about. It's about tying in new sources of power and debottlenecking the transmission system to get the power to where it needs to get to.

Gas is slightly different, because what we're doing quite clearly in the UK is our own production continues to decline. Last year UK production only made up 43% of the UK's gas. That continues to decline and decline and decline, so there's more transmission required to move gas from importing facilities.

At the half-year, just to give you a measure, half-year on half-year, the transmission system has shipped 12.8% less gas than this time last year. If you normalize that for weather, it's about 8% down. Almost all of that is the shift from gas to coal at the power stations. So, domestic gas consumption is marginally down because of the warm weather, but only marginally. The big shift is on consumption in power stations.

But longer term we know we're doing to need to bring more sources of gas into the UK. Again, that's reflected in our RIIO plan where we see the need for some flexibility investment to pump the gas in different positions around the UK, and a chunky -- one of these big chunky projects again, 2017/'18 at the back end of the period.

Ed?

Edmund Reid from JPMorgan. I had a question on financing. I noticed that you issued a retail bond earlier this year. And I was wondering what the all --.

You subscribed to the retail bond, is that what you're saying?

I didn't get a chance, actually. It was all taken up. But I was wondering what the all-in costs were when you can take into account marketing, etc., and whether you thought there was any room to issue more retail bonds.

Well, I'll let Andrew answer, but actually I said in my speech it's 280 at the moment. So it did go beyond our expectations, without any question. Andrew?

Yes. The coupon is obviously RPI plus 1.25. Costs actually were pretty low. I don't think they were that significant on a bond issue that size, just checking with Malcolm. And actually it was a -- it was a lot of effort by the team to get it away. But I think actually, from a -- it does have some benefit because we actually still have a large private shareholder base. And actually there is a nice synergy between actually getting a bond, retail bond, and actually with the share prices, shares as well, in that many of the people who were holders of the shares actually wanted to hold the bonds as well. So they have -- there was actually quite an attractive option for us, particularly with some of the private broker-type dealers to offer it.

So I think from our perspective, our original target was actually probably about half the level we actually achieved. So we were very happy with the uptake. And it'll be an area where we can continue to tap going forward, because now that the rules have changed, which allow lower-denomination bonds, it's another source of financing for us. And particularly RPI-type financing, which in the institutional market is pretty closed up, but actually in the retail market it's an attractive option for retail holders.

Peter? You get one in the middle there. Thank you.

Sorry. Peter Atherton. Just one very brief question. On I think it's called the Transmit Review for transmission charges due to report soon, it looks like that the locational pricing embedded in current transmission prices is going to be substantially watered down, at least according to media reports, or maybe go pretty close to a postage stamp arrangement. Whilst I guess you're neutral on a revenue basis to those changes, I wonder if Nick could just tell us what technical challenges that might lead to and whether it will have a material impact on your projections for CapEx going forward.

This of course is still consulting. The decision that Ofgem are going to make has not yet been made.

Nick, have you got a short comment on that, because I know that is a potentially long subject to discuss?

Yes. There's two -- there's clearly two proposals that are being worked up. One is postage stamp. One is a moderated locational element. I doubt very much that it'll have a significant impact on CapEx. Of course theoretically, the more you move towards postage stamp, the more you would then lean on a transmission system because you don't have the incentives to locate generation and demand together.

But actually in reality I think, well, as you know, Peter, the other things that dominate those decisions are probably going to determine it actually. And we'll just have to see where they come out on the two options. In the very long term it could have an impact on CapEx, but I don't see it as a big thing at the moment.

And I'm right in assuming it's neutral on revenue.

Yes, absolutely.

Yes, absolutely. Yes.

One last question. Anyone? Jose, okay.

Jose Ruiz again. I just wanted to understand the situation on Rhode Island. You say you have got back the decoupling mechanism, but you're appealing other decisions. And you're also thinking about filing again a new rate case. Are you filing again because you're not very optimistic about the appeal? Can you explain us what is going on?

Yes. Tom can explain this. It's interesting you picked that up actually because we don't -- I don't talk in my presentation either for avoidance of getting into lots of detail. The many little filings that go on in the US actually are around making sure we're capturing the revenue that we're due. All the true-ups and all the trackers are continually going on in the background actually and making sure we've got some extra revenue on Rhode Island that we were due. And there were some issues around the last rate case as well and the way it was dealt with as the conversation continues.

But we are getting ready for next year because those businesses are the moment are not set up to generate the returns that we need. And Rhode Island does need investment. Those systems are old.

Tom, you've just an update on where we are though.

Yes. I'm smiling because it's going to require me to go a little bit into the weave, so apologies to everyone for that, but it's important. When you go back to the decision in Rhode Island, the structure of Rhode Island regulation requires that the decision that the commission makes is off of what is in record during the case. And the only appeal direction that we can take is to the Rhode Island Supreme Court, which is exactly what we did.

And the purpose of that was the decision on the capital structure around the Narragansett electric business. None of the elements were on the record of where the commission went. So we decided to go to the Supreme Court and say they've made a decision off of information that wasn't part of the overall case. So all of the oral arguments in the Supreme Court have been made and we do expect a decision at the end of this calendar year. And the real objective around it is to make sure that we challenged a decision that was off record. Data wasn't part of the record. So we feel good about the outcome of that and we feel good about watching where the oral arguments were in that case.

So that was a specific drive to deal with that specific issue. And we want it decided on so when we go into the next rate case we've removed yet one more issue. So, as you said, de-couplings removed. We'll really focus on the cost on Rhode Island so that it really minimizes the amount of issues that the commission will have to deal with when we file. And they'll focus on the cost because we'll have a lot of the structural issues, including the trackers, the cap structure once we get the Supreme Court decision out of the way, and we'll just go in and it'll be a pure straightforward cost of service filing. And it'll give us an opportunity to hopefully true up cost as to what we're exactly experiencing because all the structure issues have been taken care of.

Great. Thank you, Tom. Okay. Thank you very much for joining us, appreciate it.