National Grid 2016 Annual Report Download - page 61

Therese Esperdy
Committee chairman
In the second half of the year, the Committee spent time
on the financing related aspects of the proposed sale
of a majority stake in our UK Gas Distribution business.
This included reviewing the pension and tax aspects
of the proposed transaction, together with planning our
approach to the associated liability management exercise.
This will continue to be a major focus for the Committee
in the year ahead.
In April 2016, the Committee received an external
update on the potential impact of the forthcoming
referendum on the UK’s membership of the European
Union. We assessed the treasury and other issues that
might arise, together with their potential impact on
the Company.
We will also continue to review our ongoing funding needs,
liquidity management, pension funding and our future
insurance strategy.
Examples of key matters the Committee
considered during the year included:
• funding requirements and financing for the
business plan;
• setting and reviewing treasury policies;
• treasury performance updates;
• UK and US tax updates;
• update on US energy procurement activities and
electricity and gas trading activities in the UK;
• foreign exchange policy and interest rate
risk management;
• the draft going concern statement for the half- and
full-year results prior to consideration by the Board;
• update on pension and post-retirement healthcare
arrangements; and
• insurance renewal programme and overall
insurance strategy.
The Committee in action –
rebalancing our debt portfolio
The Committee has had oversight of management’s
plans to rebalance our debt portfolio relating to the
potential sale of a majority stake in our UK Gas
Distribution business.
We initially reviewed and challenged management’s
overall strategy for the restructuring programme, and
subsequently received presentations over multiple
meetings on the proposed methodology and risks
associated with delivering it.
Various options were considered and we concurred
with management’s proposed approach on this
important issue. We will continue to oversee progress
in the coming year.
Therese Esperdy
Committee chairman
Finance Committee
Review of the year
This was my first full year as Committee chairman, during
which we have focused on our funding programme taking
into account international market conditions, as well as
overseeing the early stages of the treasury and other
finance related aspects of the proposed sale of a majority
stake in our UK Gas Distribution business.
At the end of the year, we said farewell to Steve Holliday
as a member of the Committee as he stepped down
from his Chief Executive role, and from the start of April
we welcomed John Pettigrew to the Committee as he
transitioned into that role. I would like to thank Steve for
his contribution to this Committee as part of his wider
leadership of National Grid over many years.
2015/16 has also seen changes within the treasury team,
with a new Group Tax and Treasury Director taking on the
role in early 2016. With accompanying changes in the UK
and US treasury teams I look forward to working with the
new management team to build on the strong base they
have inherited.
The Committee has met with management and employees
across the treasury, tax, pensions and insurance functions
in both the UK and US through the course of our routine
meetings. In addition, all members of the Committee met
separately with the new Group Tax and Treasury Director
as part of his induction into the role.
As part of our continuous review of counterparty risk,
in June we received a presentation from external advisors
on the banking market initiatives designed to improve
the capital position of banks. Following the Committee’s
approval to simplify our liquidity policies last year,
the revised policy was successfully implemented
and we reviewed performance during the year.
The Committee approved the issuance of a non-dilutive
convertible bond in September. This innovative
funding transaction demonstrates our focus on funding
diversification and cost effectiveness, and was recognised
with the Deal of the Year Award for 2015 by the Association
of Corporate Treasurers.
During the year, the Committee received an update on
the activities and performance of our captive insurance
companies, which highlighted the cost savings generated
by these arrangements. We also reviewed the future
strategy for the insurance function, our outsource
arrangements, and the ongoing plans for the captive
insurance companies.
59National Grid Annual Report and Accounts 2015/16
Corporate Governance
Finance Committee