National Grid 2007 Annual Report Download - page 7

National Grid Electricity Transmission Annual Report and Accounts 2006/07 5
In considering the opportunities we have to grow and develop
our business, we have identified a number of risks and
uncertainties in achieving our objectives. The most significant
risk factors we have identified relate to:
1 changes in laws or regulations;
1 breaches in environmental or health and safety law or
regulations;
1 network failure or inability to carry out critical non-network
operations;
1 achievement of business performance objectives, including
regulatory targets and delivering anticipated cost and
efficiency savings;
1 regulatory treatment of commodity costs passed through to
consumers;
1 reputation damage from disruptions to supply, even if
outside our control;
1 fluctuations in exchange rates and interest rates and their
impact on borrowings and derivatives;
1 increases in interest rates;
1 restrictions in borrowings and changes in credit ratings or in
tax rates;
1 future funding requirements of pension schemes; and
1 changes in accounting standards.
These are described in more detail on pages 8 to 10.
Shareholder Value
By achieving our objectives around performance, growth, talent,
relationships and responsibility we aim to deliver sustainable
growth to create value for National Grid’s shareholders.
The following pages set out some of the specific objectives we
have set ourselves in these areas in order to support our overall
goals. Our objectives are set in the context of our strategy of
increasing our focus, seeking to benefit from improved
integration and being disciplined in our approach.
Performance
Our aim is for operational excellence, performing to the highest
standards of safety, reliability and efficiency and continuing to
improve our financial performance:
Safety Safety is paramount.
Our most important goals are: to ensure that
members of the public are not injured as a direct
result of our operations; to deliver a working
environment where there are zero work-related
injuries or illnesses; and to improve the health of
our employees so they are fit for work every day.
Measures we use to monitor our performance
against our safety objectives include: members of
the public injured as a direct result of our
operations; employee lost time injury frequency
rate; and employee sickness absence rate.
Reliability Our principal operations are critical to the
functioning of the UK economy
. The reliability of our
electricity transmission networks, and the delivery
of electricity to our customers, are therefore our
next highest priorities after safety.
Our approach to maintaining and improving
reliability involves: investing in infrastructure and
systems to provide the operational tools and
techniques necessary to manage our assets and
operations to high standards and investing in the
renewal of assets; investing in the skills and
capabilities of our people to give them the ability to
operate our networks to a high degree of service
excellence; and maintaining a constant focus on
reliability as one of our principal objectives,
ensuring we are proactive about planning to ensure
reliability and that we react quickly to factors that
could compromise reliability.
We use business-specific indicators
to measure our
reliability performance.
Efficiency By improving efficiency we can constrain th
e cost of
our operations borne by customers and improve
returns to shareholders. We review our operations
continually to identify opportunities to improve the
operational productivity of our assets and our
people, and to identify areas in which we can
reduce costs or restrict cost increases. Planning
ahead is essential in our approach to maintaining
and improving efficiency.
Our primary method of measuring improvements in
efficiency is through our financial performance as
described below.
Financial
performance
If we achieve our objectives, we should be able to
deliver continued improvements in financial
performance. This will contribute to National Grid
delivering
on its commitment to growing its dividend
by 7% per annum until 31 March 2008.
The principal measures we use to monitor financial
performance are adjusted operating profit* and
operating cash flows.
* Adjusted operating profit is operating profit before exceptional items and
remeasurements.
Growth
Investment and financial discipline are critical to our plans to
grow our businesses.
Investment We invest in our existing businesses in order to
grow those businesses.
Measures we use to monitor investment include
capital expenditure.
Generate value
from our
investment
We aim to generate value from our investment by
improving the operating performance of our
networks and by selecting investments that will
provide the best return.
Measures we use to monitor the value we generate
from our investments include our return on
investment.