National Grid 2008 Annual Report Download - page 115

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 37792
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: 19
Description: EXH 2(B).5.1
0/1498.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/498/1*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 37792
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: 19 Description: EXH 2(B).5.1
0/1498.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/498/1*
NGET is responsible for transportin
g
available electricity. NGET consults with and provides information to re
g
ulators,
g
overnments and industry participants about future demand and the availability of supply. However, where there is insufficient
supply, NGET’s role is to mana
g
e the relevant system safely, which, in extreme circumstances, may require NGET to
disconnect consumers.
The nature and extent of NGET’s borrowings means that an increase in interest rates could have an adverse impact on it
s
financial position and business results
A significant proportion of NGET’s borrowin
g
s are subject to variable interest rates that may fluctuate with chan
g
es to prevailin
g
interest rates. Increases in these interest rates could therefore increase NGET’s costs and diminish its profits.
NGET’s financial position may be adversely affected by a number of factors including restrictions in borrowing and deb
t
arrangements, changes to credit ratings and effective tax rates
NGET is subject to certain covenants and restrictions in relation to its listed debt securities and its bank lendin
g
facilities. NGET
is also subject to restrictions on financin
g
that have been imposed by re
g
ulators. These restrictions may hinder NGET in
servicin
g
the financial requirements of its current businesses or the financin
g
of newly acquired or developin
g
businesses.
NGET’s debt is rated by credit ratin
g
a
g
encies and chan
g
es to these ratin
g
s may affect both its borrowin
g
capacity and the cost
of those borrowin
g
s. The effective rate of tax that NGET pays may be influenced by a number of factors includin
g
chan
g
es in
law and accounting standards.
Future funding requirements of NGET’s section of the Electricity Supply Pension Scheme could adversely affect its results o
f
operations.
Substantially all of NGET’s employees are members of the Electricity Supply Pension Scheme. The scheme is divided into
sections, one of which is NGET’s. This scheme provides final salary defined benefits on a funded basis. Its assets are held
independently of NGET’s finances in a separate trustee administered fund. Estimates of the amount and timin
g
of future
fundin
g
for the scheme are based on various actuarial assumptions and other factors includin
g
, amon
g
other thin
g
s, the actual
and projected market performance of the scheme assets, future long-term bond yields, avera
g
e life expectancies and relevant
le
g
al requirements. The impact of these assumptions and other factors may require NGET to make additional contributions to
its section of the scheme which, to the extent they are not recoverable under its price control, could adversely affect NGET’s
results of operations.
New or revised accounting standards, rules and interpretations by the U.K or international accounting standard setting board
s
and other relevant bodies could have an adverse effect on NGET’s reported financial results
The accounting treatment under IFRS, as adopted by the European Union, of replacement expenditure, pension and post-
retirement benefits, derivative financial instruments and commodity contracts si
g
nificantly affect the way NGET reports its
financial position and results of operations. As a body of practice develops for IFRS, the application and interpretation of
accounting principles to NGET’s particular circumstances, and to those areas in particular, could result in chan
g
es in the
financial results and financial position that NGET reports. In addition, new standards, rules or interpretations may be issued that
could also have significant effects.
19