Credit Update

1. Credit Update October 2019 - London

2. Agenda • Overview of UK Power Networks • Our RIIO ED1 vision • Performance review • Delivering in RIIO ED1 and RIIO-ED2 timeline • Update on capital structure and treasury policy • Conclusion

3. Overview of UK Power Networks

4. About UK Power Networks • Three distribution networks: • London • East of England • South East of England * Average per annum 2010/11-2014/15 4

5. Where we operate East Eastern Power Networks (EPN) We deliver power to North London and East Anglia, encompassing a diverse range of urban and rural areas as well as a huge coastline. EPN RAV March 2019 £2,698m London London Power Networks (LPN) We look after the electricity network for Inner London, with responsibility for delivering power to iconic buildings and businesses as well as high profile international events throughout the year. LPN RAV March 2019 £1,695m South East South Eastern Power Networks (SPN) We serve South London, Kent, East Sussex, and parts of Surrey and West Sussex, covering a rich variety of customers and locations. SPN RAV March 2019 £1,761m 5

6. Our RIIO ED1 vision

7. Our business vision and values Performance focused within an agreed set of values: Integrity - Respect - Continuous Improvement - Responsibility - Unity - Diversity and Inclusiveness

8. Performance review

9. Employer of choice performance 90% Improvement in the frequency rate of Lost Time Incidents since 2010/11 • Our safety performance continues to be the best across GB DNOs • 90% improvement in the frequency rate of Lost Time Incidents (LTIs) since 2010/11 • We have been ranked 9th in the Sunday Times 25 Best Big Companies (2019) • We have been on the list for five consecutive years • We received Gold accreditation from Investors in People • We achieved the National Equality Standard in 2018 • We were ranked 16th in the inclusive Top 50 UK Employers 3 The number of incidents where employees and contractors needed at least a full day off work due to injuries in 2018/19

10. Respected corporate citizen: Quality of Supply performance • In 2018/19 CIs and CMLs were 36% and 34% better than the Ofgem target • Our Quality of Supply performance both in CIs and CMLs is our best ever. • In 2017/18, we earned £43m from the Interruption Incentive Scheme(IIS) • In 2018/19, we expect to earn £49m of IIS incentives

11. Respected corporate citizen - Customer Service performance • Our Customer service performance continues to improve • Our 2018/19 average Broad Measure score of 8.8 is our best ever • We earned £8.3m in incentive revenue from Broad Measure (BMoCS) in the 2017/18 Regulatory Year and expect this to be £9.0m for 2018/19.

12. Sustainably Cost Efficient - Cost performance • Our cumulative totex outperformance over the first half of RIIO-ED1 is 16% • This reflects our increasing capex delivery • Our ED1 target remains to deliver 15% cost outperformance over the ED1 period • Our output delivery is on track • Health index delivery over the first four years of RIIO-ED1 is 57% compared to a target of 50%

13. Delivering in RIIO ED1

14. Different approaches We believe the best performing DNO group should be in the bottom right hand corner

15. ED1cumulative comparative analysis Under/overspend Underspend, Poor Performance Underspend, High Performance Percentage of maximum incentives attained We are the top performing DNO group over the first four years of RIIO-ED1

16. Comparative DNO group Totex analysis UKPN has the highest totex outperformance to date while delivering all the required outputs

17. Comparative DNO group incentive revenue analysis – First four years of RIIO-ED1 UKPN has achieved the highest % of available incentive revenue to date

18. RIIO-ED2 timeline • Ofgem has indicated that its minded to position is to remove the fast track process • UKPN has appointed Ann Bishop, founder of Indepen, as its Customer Engagement Group (CEG) independent chair • Recruitment of panel members underway

19. 5. Update on capital structure and treasury policy

20. Capital structure commitment and dividend policy • The shareholders maintain a conservative and flexible dividend policy • We are committed to maintaining a BBB+ credit rating for the three DNOs • Flexibility evidenced by shareholders taking a reduced dividend from Northern Gas Networks rather than pushing up gearing when RPI fell dramatically • And in our case relating to tax payments in 2018

21. Group sources of liquidity • The facility matures in March 2022 having been extended twice by one year • £160m of borrowings will be repaid to the EIB in January 2020

22. UKPN Debt Maturity Profile

23. Credit Ratings All ratings have a stable outlook from each of the Rating Agencies

24. Conclusion • 2018/19 was another successful year for UK Power Networks • We are delivering lower costs to customers and providing excellent network reliability with good customer service • We were the leading DNO group in 2017/18 and expect to be again in 2018/19 • We are committed to maintaining at least BBB+ or equivalent credit ratings at our three DNOs and our plan delivers metrics consistent with this objective

25. Contact Details Andrew Kluth Head of TreasuryTelephone: 020 7397 7716 Email: andrew.kluth@ukpowernetworks.co.uk Colin Nicholl Head of Business Planning Telephone: 020 7397 7738 Email: colin.nicholl@ukpowernetworks.co.uk