National Grid 2008 Annual Report Download - page 111

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 6154
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-2.B.5.1, Doc: 4, Page: 15
Description: EXH 2(B).5.1
0/1494.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/494/1*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 6154
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-2.B.5.1, Doc: 4, Page: 15 Description: EXH 2(B).5.1
0/1494.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/494/1*
Network failure or the inability to carry out critical non-network operations may have significant adverse impacts on bot
h
National Grid’s financial position and its reputation
National Grid may suffer a major network failure or may not be able to carry out critical non-network operations. Operational
performance could be adversely affected by a failure to maintain the health of the system or network, inadequate forecastin
g
of
demand or inadequate record keepin
g
. This could cause National Grid to fail to meet a
g
reed standards of service or to be in
breach of a licence or approval. Even incidents that do not amount to a breach could result in adverse re
g
ulatory action and
financial consequences, as well as harming National Grid’s reputation. In addition to these risks, National Grid may be affected
by other potential events that are lar
g
ely outside of its control such as the impact of weather or unlawful acts of third parties.
Weather conditions can affect financial performance and severe weather that causes outa
g
es or dama
g
es infrastructure will
adversely affect operational and potentially business performance. Terrorist attack, sabota
g
e or other intentional acts may also
physically damage National Grid’s businesses or otherwise si
g
nificantly affect corporate activities and as a consequence
adversely impact the results of operations.
National Grid’s results of operations depend on a number of factors relating to business performance including performanc
e
against regulatory targets, recovery of incurred expenditure and the delivery of anticipated costs and efficiency savings
Earnings maintenance and growth from National Grid’s re
g
ulated
g
as and electricity businesses will be affected by its ability to
meet or better regulatory efficiency targets set by the Office of Gas and Electricity Markets (“Ofgem”) and other re
g
ulators. In
the U.S., under National Grid’s state rate plans, earnings from National Grid’s re
g
ulated businesses will be affected by its ability
to deliver integration and efficiency savings. Earnings from National Grid’s re
g
ulated businesses in both the U.K. and the U.S.
will be affected by its ability to recover incurred expenditure. Levels of earnin
g
s also depend on meetin
g
service quality
standards set by re
g
ulators. In addition, from time to time, National Grid publishes cost and efficiency savin
g
s tar
g
ets for its
businesses in the U.K. and the U.S. National Grid is also reor
g
anisin
g
its operations alon
g
lines of business. To meet these
tar
g
ets and standards, National Grid must improve operational performance, service reliability and customer service. If National
Grid does not meet these tar
g
ets and standards, or is unable to recover incurred expenditure or does not achieve this
reor
g
anisation as envisa
g
ed, it may not achieve the expected benefits and its performance, results of operations and its
reputation may be harmed.
Business development activity, including acquisitions and disposals, may be based on incorrect assumptions or conclusion
s
and significant liabilities may be overlooked or there may be other unanticipated or unintended effects
In February 2006, National Grid announced the acquisition of KeySpan Corporation (“KeySpan”). This acquisition is subject to
a number of conditions precedent of which the approval by the New York Public Service Commission remains outstandin
g
. This
approval may not be received or it may be
g
ranted but on terms that are different than anticipated. National Grid has also
announced that it expects to achieve certain levels of syner
g
y and efficiency savin
g
s as a result of this acquisition, but these
may not subsequently be achievable. Followin
g
completion of the proposed acquisition of KeySpan the risks and uncertainties
that its operations are subject to would be assumed by National Grid. Many of these risks and uncertainties are similar to those
that are faced by National Grid’s existin
g
businesses; however, there are some that are not. These other risks and uncertainties
include the following: KeySpan’s
g
eneration business may be subject to competition and
g
eneral economic conditions havin
g
an impact on demand as well as other related risks; the
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