I think we are going to start. Good morning, everyone. I'm Aarti Singhal the Head of Investor Relations for National Grid, and it is my pleasure to welcome you to the full year results presentation. As always we're going to start with safety. If you hear a fire alarm, it's not a test, it's for real. And in case of emergency please use the front exit, turn left and go to the end of the hall. The other important thing to take note of is the cautionary statement, which is included in your packs. And for those of you who are joining on the web thank you for watching the webcast, all the material is available on the website, and on the investor relations app. So, thank you very much for your attention. And I'd not like to hand you over to our first speaker, our Chairman, Sir Peter Gershon. Thank you.

Thank you, Aarti. At the half year results presentation last November I said a few words about CEO succession, and said that Steve isn't going yet and still has the second half to deliver. The results we're announcing today mark a strong finish to Steve's leadership of National Grid. Steve stepped down at the end of March as CEO and handed the baton on to John Pettigrew. Steve has made an outstanding contribution to the Group over his 15 year career with National Grid, including over nine years as its Chief Executive. The Group composition has changed significantly over that time, with outstanding total shareholder return delivered during his tenure as Chief Executive. To my mind, the real test of a CEO is the quality of the team, and the business that they leave behind. The results today should give you confidence that the business is in great shape. And the Board and I are delighted with the strength of the leadership team that we have in place to take this business forward. John Pettigrew has spent his whole career at National Grid in key roles throughout the Group both here and the UK, and in the U.S. and I am confident he will prove to be a great successor to Steve. As you would have seen we have also announced that Nicola Shaw will be joining to head the UK business on the July 1. Nicola brings with her enormous experience in the fields of regulation and infrastructure investment and, alongside Andrew and Dean, completes a very strong team of Executive Directors. So, many thanks to Steve for his hard work, his commitment, his drive and focus, which have not only created great value for shareholders, but also for his leadership which has made National Grid the trusted and responsible Company it is today. And now that's quite enough from me, so over to you, John.

Thank you, Sir Peter and good morning everybody. So let me start by adding my own thanks to what Peter's already said, and just recognizing Steve's tremendous contribution to National Grid over the last 10 years. And I'm very proud to taking over a business that's in such good shape, as demonstrated by the results that we've announced this morning. So let me pick up on the main highlights of those results. As you can see here, it's been another year of strong performance. Headline operating profit of £4.1 billion is up 6% from last year, driving earnings per share of 63.5 pence, and Group return on equity increasing by 50 basis points to 12.3%. In line with our dividend policy, we're recommending a final dividend of 28.34 pence per share, bringing the proposed full year dividend to 43.34 pence an increase of 1.1%, reflecting last year's average inflation. We continue to invest significant CapEx in infrastructure across the UK, and the U.S. Last year we had the highest level of capital investment for the Group, investing £3.9 billion, up £364 million from the prior year. Looking ahead, we expect to maintain the high level of investment in existing and new assets. Overall, despite the low level of inflation last year's capital spend resulted in our combined RAV and rate base growing by 4%. Safety and reliability remain our top priorities, and I'm pleased to say we've had one of our best years for safety performance across the Group. In the UK, we've improved our key measures including our employee incident frequency rates which at 0.07, benchmarks as world class. In the U.S. we've continued a positive trend. This year we saw double-digit improvement of over 20% in most of our key safety metrics, and this has been achieved despite…

Thank you, John and good morning everybody. As John has outlined, our financial performance in 2015, 2016 was strong. Our regulated business was delivered solid results, which were enhanced by the strong contribution from other activities. Total operating profit increased by 6% to £4.1 billion, a 4% increase at constant currency; and earnings per share rose by 10% to 63.5 pence per share. Importantly, Group return on equity, a key measure of performance, increased by 50 basis points to 12.3%. Despite low inflation, our regulated assets grew by 4% with value added of £1.8 billion; and our balance sheet remains strong. Now let me walk you through the performance of each of our segments. Starting with UK electricity transmission, which continued to perform well with a return on equity of 13.9%, overall the business delivered 370 basis points of outperformance. Through our continued focus on innovation and efficiency we met our network output measures, and this contributed 210 basis points of Totex outperformance. Other incentive performance, at 80 basis points, benefited from the balancing system incentive scheme, which delivered £27 million of profit. Additional allowances contributed 80 basis points of outperformance, broadly in line with the previous year. IFRS operating profit was £1.2 billion; slightly down on last year as the business started to return prior year efficiencies, and as last year benefited from a one off legal settlement. Capital investment totaled £1.1 billion; and the yearend regulated asset value increased by 4% to £11.8 billion. Moving now to UK gas transmission, which delivered a return on equity of 12.5%, the returns were down from last year, reflecting the expected reduction in additional allowances, and the end of the gas permit scheme. Despite the impact of these items, incentive performance was strong and enabled us to outperform the allowed base…

Thank you, Andrew. As the new CEO of National Grid, I'd now like to share with you my initial thoughts on our priorities in both the short and the long term. Maximizing value for our existing businesses has been, and will continue to be, the key priority. And this year, we have a number of important activities underway, including the sale of a majority stake in our gas distribution business, and the US rate filings. Let me start by updating you on the progress we've made on each of these; and after that, I'll highlight the key areas that I believe are important for the continued long-term success of National Grid. So starting with the update on our plans to sell a majority stake in the UK gas distribution business. With regards to the transaction itself, we've seen a good level of buyer interest, and have been approached by a range of investors, who are in the process of forming bidding consortia. However, before formally launching the sales process, there's a huge amount of work required to start the separation of the businesses. UK gas distribution is not a standalone business; it's fully integrated with the other UK businesses and utilizes shared services from finance, HR, and IT. This means that separating out the business is complex. Our goal is to create a standalone business that can operate efficiently, whilst maintaining its primary goal -- role as a provider of safe and reliable networks. Internally, we're consulting with our employees and with the pension trustees; and externally, we're working closely with Ofgem and the HSE to secure all the necessary regulatory consents prior to separation. I'm pleased to say that this work is progressing well. The formal sales process will launch in the summer, and we continue to expect the…

Thank you. I have two questions. Mark Freshney from Credit Suisse. I have two questions. Firstly, on the competitive tendering, it seems that the governments are very intent on going ahead with this, alongside Ofgem. What is some of the infra funds that you're competing against, and also looking to sell assets to, are taking exceptionally low returns; and if you were to compete against them, taking those low returns, it may be dilutive to the overall Group performance. So in this new world of competitive tendering, what would be your competitive advantage, so to speak? And just secondly, on the sale of UK gas distribution, I think there's been some press speculation on difficulties with, or challenges with innovating bonds, and also on the pensions liabilities. What kind of structure can we expect to see? Would you prepackage it with debt and make it easier, or would it need a bigger financing package?

So let me start with the competitive onshore transmission. Clearly, work's still progressing on that in terms of exactly what the shape of that competition is. We've been very clear to Ofgem, and to other stakeholders, that if onshore competition is in the interests of customers then we're very supportive of it. But there's still a long way to go to make sure that we understand exactly what that onshore competition looks like. The select committee last week you will have seen their findings, which I think were very sensible, in setting out that for significant onshore transmission projects then there should be an assessment of whether there is actually benefits for customers or not. So there's a long way to go Mark, in terms of exactly what it would look like. In RIIO-T1, there are only two projects that Andrew set out in his presentation that would be impacted by competition. It's still not clear whether they will be or not because we don't know exactly what the definitions are. But back in 2013 Ofgem said the strategic wider works which is basically, Hinckley and Moorside NuGen could be open to competition. They're incredibly complex projects. We've been at Hinckley for five years, and up in the North West for three. I'm sure Ofgem will need to assess not just the economics but actually the timeliness of delivery as well. So there's only two projects will be impacting RIIO-T1. And then further on there may be further impacts. In terms of competitive advantage, well it depends on the definition of competition. National Grid's got a huge amount of experience in developing major infrastructure projects right across the UK. The whole process of planning, consenting and getting agreement with local communities to design and agree the infrastructure is something that National Grid's got a lot of experience and infra funds certainly haven't. In terms of the gas sale, let me start, and then I'll hand over to Andrew perhaps, to talk about the bond issue. As I said in my presentation the process is on track. We're expecting to formally start the process this summer, and we're on track to complete the transaction in early 2017. As I said, it is complex in that we need to separate out the business. But all that work is progressing very, very well. Andrew?

On both on from a pensions perspective we are working with the pension trustees, and working very well with them, to get to agreement on how we actually separate the liabilities in to the different entities. So that report was actually incorrect, from that perspective. And then secondly, on the liability management exercise, we actually do have to work through a process of actually putting, because don't forget, all the bonds that have been issued in NGG we would have to get consent from bondholders to switch over. So we will look to see what's the optimal way of actually putting a mixture of existing debt, and new debt in to the structure. But effectively, that is an ongoing process. The time issue at the moment for us actually is the separation from a business perspective on the back office and the people part. That is actually probably the bigger time constraint than actually liability management or pensions. So, no real issue there.

Thank you. It's Bobby Chada from Morgan Stanley. Can I just follow up on the onshore competition point? Specifically those two examples you quoted of Hinkley and Moorside, National Grid's put a lot of time, effort, organizational skill in to those projects already, would you be -- will there be any compensation?

So, actually Bobby, for the strategic wider works, as part of the RIIO funding mechanism, there was a pot of money put aside for the pre-engineering work, so National Grid's effectively had its costs recovered for that. Where costs aren't recovered they're a part of pre-engineering, then we look to indemnify with the customer themselves.

So in a sense, if they force these projects to go in to some kind of competitive tender, you could have acted as a effectively, you've sort of facilitated them. But in the next round of competitive tenders you wouldn't expect to take that facilitation role, would you?

No. It's sort of at the heart of what's the definition of competition? So are they going to compete a requirement that the system operator has for an increase in capacity, which is they've described as the early model, or are they going to actually have detailed work done by National Grid or other parties to do all the design work and all the planning and then only compete out actually a project that's fully engineered and designed? That I think, is still being discussed and debated. But in a world in which it's early and it was competed out no National Grid wouldn't do it.

And when do you expect to have a decision on early versus well defined?

Well, the timetable seems to be working through over the next few months. Ofgem have been doing the consultations, they've set out some of the preferences and recommendations, so I suspect it's towards the end of the summer.

Dominic Nash, Macquarie. Two questions, please. Firstly, on system operation, when are we expecting the news flow from the SO's? And what are the options actually available as to, in extremis could it be stripped from you in to an independent company? And following up from Bobby's question, would there be compensation for that role? And secondly, all the action going forward in networks looks like it's getting more local and distributed and the DSO the creation of a DSO, when we would expect to hear from a potential creation of a lower voltage system operator? And my second question, sorry probably three I guess, which is on the storage. Terna's building a big storage facility in Southern Italy as a transmission -- as replacement for transmission. When do you start to expect to see large-scale storage in the UK? And what options and threats does that throw up your way?

Have a go at each of them in turn. Shall we start with the system operator? A bit of context here, so this goes right back to Anne Bernhard's research speech, where she mentioned she wanted to look at whether there was value in increased separation system operator. And it's probably worth just saying that the system operator role has evolved every year over the last 20-odd years, and National Grid has always had to put the right controls and governance and separation in place to make sure that there aren't any perceived or actual conflicts of interest. But we do recognize that the market needs to have confidence that those separations and those controls are in place. So there is discussion going on with DECC and with Ofgem about what they might look like. The options are that, given that the role has evolved over the last couple of years, there may be a need for further controls to be put in place. That is one option. The second option, which is debated far and wide, is a move to an independent system operator. My personal view is I don't think moving to an independent system operator is the right thing for the UK, at this time. There's an awful lot going on in the industry with a need for inward investment. We need stability as we focus on things like balancing the network with a new generation coming on, and it would be hugely disruptive thing to do. But in terms of the timescales, it's with government. We're in discussions. I'm not sure what the exact time scales are; my personal view, it is probably going to be in 2016. The second question was around, I think, just the interaction between distribution and transmission networks.

Integration of a DSO itself.

Again, in terms of timing of a DSO, it's unclear to me. You're absolutely right that there is a huge amount of more interaction now between the transmission networks and the distribution networks. And we've done a lot of work over the last 12 months, working with the DNOs, to be able to make sure that we get the right information flow so that there aren't any inhibitors to distributed generation connecting to the distribution networks. We are at a point where quite often reinforcements are now needed on the transmission system in order to facilitate the flows that we are seeing on the distribution network. So the DNOs are becoming more active in the way that they manage their networks. There has been lots of discussion around whether they're going to formally become distribution system operators, but that's going to continue to evolve, in my view. And your third question around storage, in terms of storage, you're right; as technology prices fall then storage starts to become an option for a number of different types of service. So, in our mind, it can provide an extremely useful balancing service. As we see more intermittent generation on the network then the need to have fast-acting frequency response, which battery storage is a fantastic provider of, becomes a really valuable service to us. Of course, you could also see it as being an alternative to building infrastructure, depending on what type of flows you have on the network; and, of course, it's got the opportunity for energy arbitrage as well. When the National Infrastructure Commission came up with their findings, which I think were very helpful, that said that we need to get the right frameworks in place in the UK to make sure that those three tranches of opportunity and storage can be exploited, I think was bang on, in my view. So I think the actions that they put to DECC and Ofgem are going to be important to get the right framework. We are certainly looking at it from a system operation perspective at the moment in terms of potentially seeing if there's an opportunity to have fast-acting frequency response through battery storage.

Thank you, this is Deepa Venkateswaran from Bernstein. I had a couple of questions. The first one is your interconnectors. If there were to be a Brexit, would that actually impact in your existing projects, where you've already taken FID, or maybe even the future projects? Secondly, could you also explain the working capital movements in the US, which I think there was some statement that you wouldn't be seeing a similar working capital move next year. And then, I think the rate base growth was different, so could you just explain what that was?

So in terms of -- give Andrew the working capital one. In terms of the impact on the interconnectors, I think our expectation is that we're not expecting to see a significant impact as a result of Brexit on our interconnector flows. The economics and the desire to have interconnection between the UK and Europe exists, so there are people on both sides that are keen to trade across that interconnector. Exactly what form what will take is really dependent on exactly what the exit looks like, and what set of rules we get the other side of it in terms of whether we're part of the internal energy market in a world in which we're outside of Europe. So it's difficult to exactly predict what that will look like. But the desire to have interconnection between the UK and Europe is on both sides, so I don't see it having a significant impact. In terms of working capital, Andrew?

Certainly, Deepa, on our working capital, some jurisdictions in the US do actually put working capital move in to rate base. And obviously, when you have winter weather fluctuations you do see. So March 31, 2015, very cold winter, very high level of debtors, resulted in very high working capital. And last year, when we talked about underlying growth in the US the headline growth was 9% in rate base, we talked about 5% underlying. This year, obviously, very mild winter in the US so on March 31, 2016, the low level of debtors, we actually saw a working capital reduction. So effectively, the headline rate, the underlying rate was 7.5%, but the headline rate was 6%. We just normalize for that just to take it out so you can see what the real underlying expectation is of rate base growth.

Edmund Reid from Lazarus. Three questions. The first on DSR, you're obviously making quite a push for DSR in the UK. I think DSR is a lot less prevalent in the UK than it is in the U.S. I was wondering why that was the case, and what you can do to improve it. Secondly, on battery storage. Do you think most of the battery storage will be at the transmission or distribution level? Do you see it as more of an opportunity for your UK or your U.S. business? Thirdly, on metering revenues, looks like smart meters are finally being introduced, or speeding up. What's that going to do to your legacy metering business?

Thank you for that. So let's start with DSR, and I might ask Dean for his comments on the U.S. So certainly in the UK, over the last 12 months National Grid actually launched a program called Power Responsive Campaign, which was really trying to identify where are the blockers in the UK for encouraging increased demand side response. So from a system operative perspective, we see demand side as being a really important part of balancing the network going forward, particularly when you've got increased intermittent generation. So the Power Responsive Campaign was very much about getting people across the industry together to understand where those blockers are and then to try and develop different types of products and services. Over the last year, I think we've had some real successes with that. So we are seeing increased use of DSR in terms of balancing our network. As I mentioned in my speech, we've introduced new products, such as the demand stepper product, and we'll continue to do that. As an aspiration, we've set out that potentially you could see, from a balancing action perspective in the UK, about half of our actions being on the demand side, and half from a generation side. Now that's a long term aspiration, but one that we think is achievable, because of the scale and the capability of the demand side. In terms of so why is it not flourishing in the UK as much as, perhaps, in the U.S.? If you talk to people who are providing those services then what they're looking for is long term contracts and certainty. We need to work with the regulators and with the providers themselves to make sure that they have that to be able to make the investments to shift their processes to be able to provide the services. Dean, did you want to mention anything on the U.S. side, demand side?

Yes. Good morning. I think I don't have a lot to add to that. I think from the standpoint of both working with our regulators, as well as, I'd say, just incentives, we definitely are seeing that in the U.S. I think I did want to pick up on another point, to another question that was asked, relative to the storage piece for us and the distributor generation. The reality is a lot of the regulations and incentives are really driving that. It's put a lot of pressure on the system from a peak standpoint. John mentioned the fact that it has some requirements on our network. But in terms of the test that John mentioned in his earlier prepared speech, the realty is we're testing a lot of those from the micro grid standpoint. If you go from what we're trying to do with our customers from resiliency and from a reliability standpoint, we're testing micro grids and some of our RAV initiatives, so you'll see a lot more results from that going forward.

And in terms of battery storage in the UK, so there are opportunities in transmissions, it's quite clear. Whether they're going to be larger than the people putting the battery on their home, which is what all the evidence is showing at the moment, I think it's just too early to say, if I'm honest. There is an issue in the UK that actually National Grid can own storage, as it's currently defined as an asset class, because at the moment it's classed as a generator. There are a lot of people think that's probably not right in terms of the role that storage plays. But in terms of potentially providing a service to transmission as an alternative infrastructure, clearly if prices keep coming down it's a sensible solution.

And on metering, we did see some reduction in the number of meters, gas meters, obviously this year; most of them were prepayment. But actually, we were able to offset the impact of that, so profits were actually flat year-on-year. It's been interesting watching the metering business. I've now been here for five and a half years and every year it's going to go down. And my budget for next year is slightly down year-on-year, given the change, but we'll obviously just we'll just manage the business as best as we can, Ed. Obviously, overtime, we do expect obviously the rollout of smart to have an impact.

Thanks. It's Iain Turner from Exane. Can I ask a couple of questions? Firstly, could you just go through the change to the tax treatment in RepEx, and explain that a bit more, as I didn't get that? And then secondly, I think in the statement you give a figures for how much tax you paid in the UK, but you don't give a figure for how much you paid in the U.S., which, I guess, means it's probably quite a small number. Is that a liability going forward in terms of the political, the regulatory system, situation in the U.S.?

First of all, on tax change and RepEx, this was a very technical with accounting issue, effectively, relates to adding IFRS accounting to in UK entities. As a result of that, if the as a result of the change to IFRS accounting, effectively remains replacement expenditure was now capitalized and depreciated. That results in a change to the tax treatment, because HMRC was going to follow what IFRS accounting was going to do. So our allowances had to change to reflect that because as you know we're remunerated on cash taxes. In the U.S. we don't pay any cash tax as bonus deprecation, which obviously increases the deferred tax liability. As far as the political climate is concerned, actually they've just extended bonus depreciation through 2019 although tailed it off. It is about the desire to see investment.

Lakis Athanasiou, Agency Partners. Three questions from me. You mentioned the IFRS changes. Are you seeing any different treatments in regard to your current tax on derivative with the change to your subsidiaries being accounted as IFRS? Secondly, could I press you on your response on storage and BSR, particularly in the UK? It is a technology that's very good for a system operator, but it's very bad for a transmission owner. And you seem remarkably relaxed that these activities will cannibalize your growth in assets and I'm thinking particularly the UK, where you do get some good returns on your assets going in to the RAV. And thirdly, on debt separation in gas distribution, Andrew spoke about it, but could I press you on that one a bit more? Because if I was a debt holder in NGG, I certainly wouldn't want my debt ending up in the new gas distribution entity with the potential it gets levered up down the road and I see that as a problem that -- is it surmountable? And how could it be given that bond holders wouldn't want to see their debt going in to the new entity?

Okay, start with that one first. Firstly, there is a regulatory reason why you wouldn't actually gear up the entity itself and that is actually, because of the interest deduction on cash taxes, there is a restriction on how much debt you would actually be able to put in. So that would be one thing that those of things. You cannot gear these entities up to the level that you're expecting, you will actually have to do it within the structure rather than the actual individual entity.

You get the tax -- you don't get the tax credit. But we've seen in the water sector, when these things happen they come in and they gear up. Now, they lose the taxing, but they still gear up.

But, Lakis, they are just one of the things. We will still have a 49% ownership. We will not want to lose the tax credit, so we actually do have a restriction. We do have things we would continue to watch on. As far as actually on the IFRS accounting for derivatives that doesn't impact us. Derivatives are for our own account, there was no impact. This was because obviously, with RepEx there is a regulatory allowance around whether it was capitalized or not capitalized for IFRS accounting, and then for tax purposes. Tax on derivatives or book tax on derivatives is actually as reflected in the accounts. There will be no impact of that adjusted from a book accounting perspective. I am sorry, excuse me.

My third question on cannibalizing transmission --

In terms of investment in the UK business, as we look forward we've got a strong investment profile. We're going to spend 16 billion on our networks in RIIO-T1 and a large part of that continues to be asset replacement, as well as supporting renewables and new generation. There are opportunities for transmission to use storage, but DSR and storage do impact on the overall profile of demand. So demand has been flat for a number of years now. How that actually plays out, it's just too early to say in terms of exactly what it means. We're actually finding at the moment that through intermittent generation and distributor generation that we're identifying projects on our transmission business that are required in order to support the distribution networks doing what's happening on their DNL networks. So it's not one way is what we're seeing at the moment; it's impact and what we need in terms of reactive power on our networks. We're putting a lot of equipment of reactive on the networks at the moment. So I don't see it as a spiral decline.

Any more questions?

Verity Mitchell, HSBC. I've just a couple questions. One is a technical one about FERC and the complicated moving down and up of returns. Perhaps we can have a bit of clarification about that, the FERC businesses. You earned 11.4% ROE this year, but I know that the FERC is reviewing its allowed returns? That's the first question. And the second question is just about your technical guidance on the strong interconnector performance this year. And perhaps you could explain why you think that might not continue in the current year.

Dean, would you like to take the FERC one?

Yes. On the FERC, we've had a couple of challenges on the returns. And in a couple of cases they've been reduced. But in reality, we've had a case that's just been a comeback and the decision was in the first year it was reduced and in the second year it was actually increased. So, from our perspective obviously in terms of the relationship with the FERC -- the regulator is to make sure we get fair outcomes on that to get the heavyly stabilized. So that's what we're seeing recently.

And Verity, on the technical guidance, to point you out, if you remember at the half-year I did actually point out we saw very strong performance over the summer. Part of that was due to changes with the climate change levy, which did result in a very significant arbitrage opportunity, which boosted auction prices. That we don't expect to recur next year, so we do expect the profitability to decline as a result of that.

Okay, we just take the last couple of questions? There's one here at the front.

James Brand from Deutsche Bank. Two questions. First one is on the US. You talked about a desire to get the returns up in the US to close to the base returns, and that's a key focus. Is that something that we should expect to happen over the course of the next round of rate filings, in the next kind of two to three years? Or is that more of a medium-term ambition for the next five, six years? And the second question, obviously, a lot of folks on your system operate a role, and lots of talk about how next winter looks very, very tight, certainly based on the capacity that's going to be available in the market. Obviously, you have the SBR as well. I was wondering whether you could share some thoughts around next winter, whether you think you have the tools that you need to keep the lights on and keep prices at a reasonable level, and whether there are any levers that you can pull to avoid frequent price spikes next winter.

In terms of the US rate filings, as I said in my presentation, we've currently got KEDLI and KEDNY and Massachusetts out for rate filings. We expect Massachusetts to conclude in October, and KEDLI and KEDNY to conclude in January. So we will see a small benefit in this fiscal year from those rate filings, which will effectively offset some of the cost pressures we've got in other parts of the business. So, as our outlook sets out, we're expecting returns in the US for this coming year to be similar to what we've seen last year. However, with those rate filings in place, and then with the next tranche of rate filings going in, which will the Niagara Mohawk and Massachusetts Gas, then we would expect to start to reduce that headroom between the low returns than the actual returns. In terms of the system operator role in the next winter, part of our role as National Grid, obviously, is to do the assessment in terms of what does the winter look like. We've done that assessment based on what we see, and with the closures that we've seen in the last 12 months. Next winter looks tight, but manageable, so similar to the words that we've used in previous winters. National Grid has already purchased 3.5 gigawatts of supplemental balance in reserve. We've got a tender out at the moment for demand side supplemental balance in reserve. Based on where we are today and the analysis that we've done, we feel that we've got the tools that we need. But it's a long way to go till the winter. So we continue to reassess it, and we'll continue to do that through the summer, right up to our winter outlook report in the autumn, to make sure that we have the tools to balance the system.

Thank you.

Peter Atherton, Jefferies. These are easy ones, I think. In the financial calculations on the return on RAV, there's a 3% indexation, so can you just remind me when that gets trued up to actual inflation?

The actual numbers we produce, so value-add and actually what the rate base growth we talked about, actually are actual rates of inflation. So they reflect the 1.6% that was there at March 31, on RPI. When we do for purposes of actually giving out ROE calculations and showing our returns, rather than go to effect, because we have nominal regulation in the UK, real -- nominal in the US, real in the UK, we just give a nominal, but we use a long-term inflation assumption, which is 3%, which is the Bank of England 2%, plus 1% for RPI.

Okay, thanks. And just a final one on managing the system. We've seen a collapse in coal output in the UK in recent weeks and months, and it doesn't look great for the coming months as well on the economics of coal. What sort of challenges does that throw off, if any?

In terms of the -- there was a lot in the media, wasn't it, in the last couple of weeks about it was the first time in a 100-odd years that we've run the network without any coal on it. So, the characteristics of the network have changed, Peter, you're absolutely right. We see a lot of solar in the day, a lot of wind, and then the gas coming on in the evening, and lot less coal on the network. The challenges it throws up is particularly around intermittency, which is why we've been developing products like the Demand Turn Up product, and fast frequency response. As the network's evolving, we're having to develop new products to make sure that we can manage the system in real time. I'm very pleased, actually, with the way that the system operators are managing that. And the new products we put in place seem to be very economic, and a good way of meeting the challenges. We're going to take this as a final question, I think.

Elchin Mammadov, Bloomberg Intelligence. Two questions, please. Can you remind us what the system operator earnings are as a part of your operating profit and net income, please? And the second question is on M&A. Obviously, you said you're trying to grow organically mostly, but you're open for new opportunities. Could you give us a bit more color what geographies we are talking about? Is it just US and UK, or are you open to new geographies? And what areas? Is it just the transmission, interconnectors, or distribution?

So in terms of the system operator, the operating profits are very modest; they're about 1% of our total operating profit. So in terms of my comments on M&A, National Grid's in a very good position in terms of sources of growth. So we've got strong growth in our core business in both the UK and the U.S.; and, as Andrew said, we're targeting 5% growth across the Group. In addition to that, we've got some exciting development opportunities with things like interconnectors and transmission in the U.S. But, as you'd expect of a Company like National Grid, from time-to-time we will look to see if there's an opportunity for acquisitions. But we will only do that if we believe it aligns with our strategy and that it creates value for our shareholders. Okay, so I'm going to conclude the Q&A there. Thank you very much, everybody, for attending today. So as you saw, last year, strong results for National Grid. And, hopefully, as you got a sense from the presentation, the management team is very focused on our short term priorities; and in very good shape for the future. So, thank you very much, everybody.