National Grid 2005 Annual Report Download - page 20

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LIQUIDITY AND CAPITAL RESOURCES
SHORT TERM
At March 31, 2005, the Company’s principal sources of liquidity included cash and cash equiva-
lents of approximately $355 million and accounts receivable of approximately $1.1 billion. The
Company has a negative working capital balance of $184 million primarily due to long-term debt
due within one year of $568 million and short-term debt due to affiliates of $687 million. Cash is
being generated from sales (via electric rates) to offset stranded cost amortization (non-cash
expense). This excess cash is used for debt payments and other operating needs. As discussed
below, the Company believes it has sufficient cash flow and borrowing capacity to fund such
deficits as necessary in the near term. In addition, construction expenditures planned within one
year are estimated to be $608 million.
Operating Activities
Net cash provided by operating activities increased approximately $782 million in the current year.
The increase is primarily due to:
■Increase in net income (see earnings discussion above) of approximately $288 million.
■Increased stranded cost recovery of $54 million.
■Increased provision for deferred income taxes of approximately $70 million primarily related to
net operating loss carryforwards.
■Decreased pension and other retirement benefit plan expense of approximately $113 million.
■Decreased cash paid to pension and postretirement benefit plan trusts of approximately $171
million primarily due to a one time payment made in fiscal year 2004 related to a settlement
agreement between Niagara Mohawk and the New York PSC that allows Niagara Mohawk to
earn a return on its additional funding.
■Decrease in the change in accounts receivable and accrued interest and taxes of $60 million
and $34 million respectively (increases in cash).
■Increase in accounts payable and accrued expenses of approximately $164 million.
■Increases from other changes of approximately $54 million (i.e. changes in materials and sup-
plies, purchased power obligations, etc.).
Investing Activities
Net cash used in investing activities increased approximately $71 million in the current year. This
increase was primarily due to an increase in construction additions and an increase in other prop-
erty and investments. Capital expenditures increased approximately $40 million during fiscal year
2005 primarily due to increased transmission utility plant expenditures at NEP. The funds neces-
sary for utility plant expenditures during the period were primarily provided by internal funds.
Financing Activities
Net cash used in financing activities increased approximately $702 million in the current year. This
increase is primarily the result of early redemption of third-party debt with internally generated
funds. Also contributing to the increase was a common dividend paid to the Company’s parent of
$218 million for which there was no similar cash outflow in the prior year.
The Company has been refinancing and redeeming early various issues of debt and preferred
stock and replacing them with lower-cost affiliated-company debt.
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National Grid USA / Annual Report