National Grid : NGG Finance plc Annual Report and Accounts 2023/2024

DocuSign Envelope ID: 42D07C7E-60CC-40BB-9173-2ADE2A4AE303

Company Registration Number: 4220381

NGG Finance plc

Annual Report and Financial Statements

For the year ended 31 March 2024

DocuSign Envelope ID: 42D07C7E-60CC-40BB-9173-2ADE2A4AE303

NGG Finance plc

Strategic Report

For the year ended 31 March 2024

The Directors present their Strategic Report on NGG Finance plc ('the Company') for the year ended 31 March 2024.

Review of the business

The Company obtains and provides finance to its parent company, National Grid plc, via external borrowings and intercompany balances.

Executive summary

At 31 March 2024, the Company had in issue three fixed rate bonds listed on the London Stock Exchange with notional values of £1,000 million, €750 million and €500 million, see note 11 to the financial statements for further details. The consideration received from these bonds was advanced to its immediate parent company, National Grid plc, on the same terms to that of the securities with a small additional fee.

There have been no significant changes in the Company's trading activities during the year as reported in the profit and loss account. The Company pays interest on its external borrowings and receives interest on its intercompany assets. Interest income and interest expense also include the foreign exchange movements on the revaluation of the Company's euro assets and liabilities.

Results, as detailed below, largely reflect the Company's fee from its financing activities and interest receivable on its intercompany loan to its immediate parent, which arose from profits made on activities prior to the issue of the current bonds.

Results

The Company's profit for the year was £29 million (2023: £14.5 million profit).

Financial position

The financial position of the Company is presented in the balance sheet. Total shareholders' equity at 31 March 2024 was £570 million (2023: £691 million) comprising current assets of £2,702 million (2023: £2,843 million) less current liabilities of £491 million (2023: £57 million) less long term creditors of £1,641 million (2023: £2,095 million).

Key performance indicators and principal risks and uncertainties

As the Company is part of a larger group, the management of the Company does not involve the use of key performance indicators in measuring the development, performance or the position of the Company and the principal risks and uncertainties are integrated with the principal risks of National Grid plc. For information on the development, performance, risks, uncertainties and position of National Grid plc and its subsidiaries ('National Grid'), and of the key performance indicators used, refer to the Strategic Report included in National Grid plc's Annual Report and Accounts 2023/24, which does not form part of this report.

Financial risk management

The management of the Company and the execution of the Company's strategy are subject to several financial risks. The Directors have identified the need to manage the Company's material financial risks, including liquidity, credit, interest rate and foreign exchange risks. These risks are monitored through National Grid's Treasury ('Treasury') management function which invests surplus funds, mitigates foreign exchange and interest rate exposure and manages borrowings for National Grid plc and its subsidiaries.

Treasury also seeks to limit third party counterparty risk which arises from the investment of surplus funds and the use of derivative financial instruments. Treasury monitors the exposure that National Grid has with any one counterparty against agreed limits and these limits are monitored regularly and updated for changes in credit ratings.

Each year National Grid reviews the effectiveness of the internal control systems and risk management processes covering all material systems, including financial and compliance controls, to make sure they remain robust. National Grid has specific internal mechanisms to govern the financial reporting process and the preparation of the Annual Report and Financial Statements. National Grid's financial controls guidance sets out the fundamentals of internal control over financial reporting, which are applied across the National Grid group, including NGG Finance plc. National Grid's financial processes include a range of system, transactional and management oversight controls.

1

DocuSign Envelope ID: 42D07C7E-60CC-40BB-9173-2ADE2A4AE303

NGG Finance plc

Strategic Report (continued)

For the year ended 31 March 2024

Financial risk management (continued)

As NGG Finance plc is a subsidiary undertaking of a parent undertaking subject to Disclosure Guidelines and Transparency Rules 7.1 and 7.2, it has used its immediate parent's Finance Committee as a suitable alternative body and it is not required to comply with the Financial Conduct Authority's requirements to report on compliance with, and application of, the UK Corporate Governance Code.

Treasury Policy

All funding is approved by the National Grid Finance Committee and the use of derivative financial instruments is controlled by policy guidelines set by the National Grid plc Board. The Treasury function will raise all the funding for the Company and manages interest rate and foreign exchange risk.

The Treasury function is not operated as a profit centre. Debt and treasury positions are managed in a non- speculative manner, such that all transactions in financial instruments or products are matched to an underlying current or anticipated business requirement of National Grid. As part of its business operations, National Grid is exposed to risks arising from fluctuations in interest rates and exchange rates. National Grid uses derivative financial instruments to manage exposures of this type and as such they are a useful tool in reducing risk. The policy is not to use derivatives for trading purposes.

Liquidity risk

The Company finances its operations through a combination of retained profits, external bonds and intercompany loans. This is to ensure that the Company has sufficient long-term and short-term funds available for current operations and future activities.

Credit risk

The Treasury function seeks to limit counterparty risk by conducting all its banking and dealing activities with a limited number of major international banks, whose status is kept under review. No exposure is considered to exist in respect of intercompany loans as the subsidiaries are solvent and are covered by the National Grid group's liquidity arrangements.

Interest rate risk

The Company has one intercompany loan which can fluctuate between an asset and liability which exposes it to interest rate risk. This agreement, entered into prior to the issue of the current external bonds, carries a floating

interest rate, which is charged based upon Sterling Overnight Index Average (SONIA). In addition, where the Company has borrowed at fixed rates it has on-lent those amounts to its immediate parent company on the same terms and receives a loan fee for this service which is recorded within interest receivable.

Foreign exchange risk

To the extent that external bonds are entered into in currencies different to that of the functional currency, there is an exposure to movements in exchange rates. This exposure is managed by lending to the immediate parent company in the same currencies. The Company principally has euro denominated external bonds and intercompany loan assets as at the balance sheet date.

Future developments

The Directors do not foresee a change in the activities of the Company.

2

DocuSign Envelope ID: 42D07C7E-60CC-40BB-9173-2ADE2A4AE303

NGG Finance plc

Strategic Report (continued)

For the year ended 31 March 2024

Section 172(1) statement

The Directors of the Company, as those of all UK companies, must act in accordance with section 172 ('s172') of the UK Companies Act 2006. Section 172 requires a Director to consider, where relevant, the following in making their decisions:

• the likely long term consequences of the decision;
• the interests of the Company's employees;
• the need to foster the Company's business;
• the need to foster relationships with suppliers, customers and others;
• the impact of the Company's operations on the community and the environment;
• the desirability of the Company maintaining a reputation for high standards of business conduct; and
• the need to act fairly between members of the Company

The Directors of National Grid plc (the 'Group Directors') are responsible for overseeing the governance of the National Grid Group (the 'Group') as a whole. The Group operates a single governance framework, and the Group Directors have considered the matters under s172 at Group level. To the extent applicable for understanding the Company's position, the Group summary of s172 considerations is set out on pages 82 to 83 of the National Grid plc Annual Report and Accounts (available at: www.nationalgrid.com/investors).

The Company is a financing company with listed debt. The Company's main purpose is to provide long term finance to National Grid plc, its immediate and ultimate parent company. The Company's key stakeholders are considered to be its shareholders and its investors, banks and any organisations with which it conducts financing activities. The Company has no other operational activities, employees or external suppliers or customers.

During the year, the Directors have considered the Company's investments in accordance with the Group's corporate and social responsibility strategy, applicable risk policies and in light of the wider aims of the Group and proposed an interim dividend. The Board received relevant information from Group management to inform its decisions. All decisions have been taken in accordance with the Group delegations of authority policy and with due regard to National Grid's aims and governance structure.

The Directors are of the opinion that they have acted fairly and in good faith to promote the success of the Company for the benefit of its members as a whole, with consideration of the applicable matters under s172. The Directors have carried out these duties and have made decisions and undertaken short- and long-term strategies to maintain its financial performance and position. The Directors also continue to recognise the importance of maintaining its high standards of business conduct in line with the Group's Code of Ethical Business Conduct which

applies to all subsidiaries within the Group.

The Strategic Report was approved by the Board of Directors and was signed by order of the Board on its behalf by:

K S Hollis

Company Secretary

8 July 2024

3

DocuSign Envelope ID: 42D07C7E-60CC-40BB-9173-2ADE2A4AE303Finance plc

Directors' Report

For the year ended 31 March 2024

The Directors present their Report and the audited financial statements of the Company for the year ended 31 March 2024.

Future developments

Details of future developments have been included within the Strategic Report on page 2.

Principal risk and uncertainties

Details of principal risks and uncertainties have been included within the Strategic Report on page 1.

Financial risk management

Details of financial risk management have been included within the Strategic Report on page 1.

Dividends

During the year, the Company has paid an interim ordinary dividend of £150 million (2023: £nil). The Directors do

not recommend the payment of a final dividend (2023: £nil).

Directors

The Directors of the Company during the year and up to the date of signing of the financial statements were:

A J Agg
L Barbrook	(Resigned 1 April 2024)
K M Dickie
S W Grant
A M Lewis
A K Mead
D Pettifer	(Appointed 1 April 2024)

Directors' indemnity

National Grid has arranged, in accordance with the Companies Act 2006 and the Articles of Association, qualifying third-party indemnities against financial exposure that Directors may incur during their professional duties. Equivalent qualifying third-party indemnities were, and remain, in force for the benefit of those Directors who stood down from the Board in prior financial years for matters arising when they were Directors of the Company. Alongside these indemnities, National Grid places Directors' and Officers' liability insurance cover for each Director.

Going concern

These financial statements have been prepared on a going concern basis, which presumes that the Company has adequate resources to remain in operation, and that the Directors intend it to do so, for at least one year from the date the financial statements are signed. As the Company is part of a larger group it participates in the Group's centralised treasury arrangements and so shares banking arrangements with its subsidiaries. The Directors expect to be in a position to draw on intercompany loans, should this liquidity be required for the Company to meet its future obligations as they fall due.

Disclosure of information to auditors

Having made the requisite enquiries, so far as the Directors in office at the date of the approval of this report are aware, there is no relevant audit information of which the auditors are unaware and each Director has taken all reasonable steps to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information. This confirmation is given in accordance with the provisions of section 418 of the Companies Act 2006.

Auditors

Subject to approval by National Grid plc shareholders at its 2024 Annual General Meeting, Deloitte LLP, will be reappointed as its external auditor for the next financial year. Pursuant to section 487 of the Companies Act 2006, Deloitte LLP will subsequently be deemed to be reappointed as the Company's auditor and will continue in office.

4

DocuSign Envelope ID: 42D07C7E-60CC-40BB-9173-2ADE2A4AE303Finance plc

Directors' Report (continued)

For the year ended 31 March 2024

Statement of Directors' responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

UK company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including FRS 101 'Reduced Disclosure Framework'. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 101 "Reduced Disclosure Framework", give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;
• the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces; and
• the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

The Directors' Report was approved by the Board of Directors and was signed by order of the Board on its behalf by:

K S Hollis

Company Secretary

8 July 2024

Registered office:

1-3 Strand

London

WC2N 5EH

Registered in England and Wales

Company registration number: 4220381

5

DocuSign Envelope ID: 42D07C7E-60CC-40BB-9173-2ADE2A4AE303

Independent auditor's report to the members of NGG Finance plc

Report on the audit of the financial statements

1. Opinion

In our opinion the financial statements of NGG Finance plc ('the Company'):

• give a true and fair view of the state of the Company's affairs as at 31 March 2024 and of its profit for the year then ended;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice including Financial Reporting Standard 101 "Reduced Disclosure Framework"; and
• have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements which comprise:

• the profit and loss account;
• the balance sheet;
• the statement of changes in equity; and
• the related notes to the financial statements 1 to 14.

The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 101 "Reduced Disclosure Framework" (United Kingdom Generally Accepted Accounting Practice).

2. Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor's responsibilities for the audit of the financial statements section of our report.

We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council's (the 'FRC's') Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that we have not provided any non-audit services prohibited by the FRC's Ethical

Standard to the company.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

3. Summary of our audit approach

The key audit matter that we identified in the current year is:

Key audit matters

- Recoverability of receivables from the immediate parent company.

	The materiality that we used in the current year was £11.0m. We have used
Materiality	"Net assets" as the primary benchmark for determining materiality. Our resulting
materiality is £11m, with a performance materiality of £7.7m and reporting
	threshold of £0.55m.
Scoping	Audit work to respond to the risks of material misstatement was performed
directly by the audit engagement team.
Significant changes in	There have been no significant changes made to the audit approach to that
our approach	adopted in the prior year audit.

4. Conclusions relating to going concern

In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Our evaluation of the Directors' assessment of the Company's ability to continue to adopt the going concern basis of accounting included:

• considering the nature of the Company, its business model and related risks as part of our risk assessment;
• assessing the appropriateness of the assumption that the Directors expect to be in a position to draw on intercompany loans, should this liquidity be required for the Company to meet its future obligations as they fall due;

6

DocuSign Envelope ID: 42D07C7E-60CC-40BB-9173-2ADE2A4AE303

Independent auditor's report to the members of

NGG Finance plc (continued)

4. Conclusions relating to going concern (continued)

• evaluating the clerical accuracy and appropriateness of the model used to prepare forecasts at the National Grid consolidated group level;
• evaluating the Directors' plans for future actions in relation to their going concern assessment; and
• assessing the appropriateness of the going concern disclosures within the financial statements.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

5. Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

5.1. Recoverability of receivables from the immediate parent company

Key audit matter Receivables from the immediate parent company are stated in the balance

descriptionsheet at £1,061m (FY23: £748m) due within one year and £1,641m (FY23: £2,095m) due after more than one year.

Receivables due within one year are presented within current assets on the balance sheet due to the expected repayment profile and there being an expectation that the balance will be repaid within a short period. Receivables due after more than one year are also presented within current assets on the balance sheet due to Companies Act format requirements. There is judgement involved in determining the recoverability of these receivables based on the financial position and future prospects of the immediate parent company.

	Therefore, due to the quantitative significance of the loans and the judgement in
	determining the existence and the valuation of the expected credit loss ('ECL')
	in the context of IFRS 9, recoverability of these receivables has been identified
	as a key judgement. No ECL has been recognised in relation to the
	intercompany loans receivable.
	For additional detail on this refer to notes 8 and 9 to the financial statements.
How the scope of our	We assessed management's judgements regarding the appropriateness of the
audit responded to	carrying value through obtaining a copy of the latest audited financial
the key audit matter	information of the immediate parent company for the year ended 31 March
	2024 and by assessing the intercompany receivables for recoverability against
	the retained earnings, profit for the year and current assets of the counterparty.
	We challenged management's ECL assessment in the context of IFRS 9. This
	included assessing management's policy in accordance with the requirements
	of IFRS 9. Additionally, our audit procedures involved evaluating management's
	judgement relating to the valuation of liquid assets of the borrowing entity and
	their determination of the existence of an expected credit loss.
Key observations
	Based on the work performed, we have concluded that the receivables from the
	immediate parent company are appropriately stated.

7

DocuSign Envelope ID: 42D07C7E-60CC-40BB-9173-2ADE2A4AE303

Independent auditor's report to the members of

NGG Finance plc (continued)

1. Our application of materiality

1. Materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Materiality £11.0m (2023: £13.8m)

Basis for 2% of net assets (2023: 2% of net assets) determining

materiality

Rationale for NGG Finance plc holds listed debt and as such, the bond holders monitor the Company's net the benchmark current assets value, as well as the solvency (net assets value) to ensure that it has the ability to

applied pay the bonds as and when they become due. Therefore, we have determined materiality based on net assets as this is the key metric used by the bond holders and investors when assessing the entity's financial position. As the Company is non-trading, operating primarily as a holding company for the Group's trading entities and is not profit-oriented, we concluded that the net asset position is the most appropriate benchmark to use.

6.2. Performance materiality

We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Performance materiality was set at 70% of materiality for the 2024 audit (2023: 70%). In determining performance materiality, we considered the following factors:

• our cumulative experience from prior year audits;
• the level of corrected and uncorrected misstatements identified; and
• our risk assessment, including our understanding of the entity and its environment.

6.3. Error reporting threshold

We agreed with those charged with governance that we would report all audit differences in excess of £0.55 million (2023: £0.69 million), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the those charged with governance on disclosure matters that we identified when assessing the overall presentation of the financial statements.

1. An overview of the scope of our audit

1. Scoping

Our audit was scoped by obtaining an understanding of the entity and its environment, including internal control and assessing the risks of material misstatement. Audit work to respond to the risks of material misstatement was performed directly by the audit engagement team.

8

DocuSign Envelope ID: 42D07C7E-60CC-40BB-9173-2ADE2A4AE303

Independent auditor's report to the members of

NGG Finance plc (continued)

7. An overview of the scope of our audit (continued)

7.2. Our consideration of the control environment

Our audit approach was to rely on the General IT Controls (GITCs) associated with systems relevant to the entity's financial reporting process. To test the relevant GITCs, our IT audit specialists performed testing on access security, change management, data centre operations and network operations.

We placed reliance on the relevant controls over the following business processes:

• Intercompany transactions (valuation and allocation)
  2 External borrowings

8. Other information

The other information comprises the information included in the Annual Report, other than the financial statements and our auditor's report thereon. The Directors are responsible for the other information contained within the annual report.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated.

If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

9. Responsibilities of Directors

As explained more fully in the statement of Directors' responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

10. Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the FRC's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

9