National Grid 2008 Annual Report Download - page 220

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 3483
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-2.B.6.1, Doc: 6, Page: 14
Description: EXH 2(B).6.1
0/1618.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/618/1*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 3483
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-2.B.6.1, Doc: 6, Page: 14 Description: EXH 2(B).6.1
0/1618.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/618/1*
not limited to, the levels of synergy and efficiency savings contemplated in connection with the Group’s recent acquisition of
KeySpan Corporation (“KeySpan”). Under the Group’s state rate plans, earnin
g
s from its re
g
ulated businesses will be affected
by its ability to deliver integration and efficiency savings. Earnings from the Group’s re
g
ulated businesses 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, the Group publishes cost and efficiency savin
g
s tar
g
ets for its businesses. The Group has also
substantially completed reor
g
anisin
g
its operations alon
g
lines of business. To meet these tar
g
ets and standards, the Group
must continue to improve operational performance, service reliability and customer service. If the Group does not meet these
tar
g
ets and standards, it is not able to recover incurred expenditure or it does not complete implementation of this
reor
g
anisation as envisa
g
ed, the Group may not achieve the expected benefits, its business may be adversely affected and its
performance, results of operations and its reputation may be harmed.
Business development activity risks.
Business development activities, includin
g
acquisitions and disposals, may be based on incorrect assumptions or conclusions;
si
g
nificant liabilities may be overlooked or there may be other unanticipated or unintended effects. The Group has recently
completed the acquisition of KeySpan and plans to achieve certain levels of syner
g
y and efficiency savin
g
s from this
acquisition, but these may not subsequently be achievable. The risks and uncertainties to which KeySpan’s operations are
subject have been assumed by the Group. Many of these risks and uncertainties are similar to those that are faced by the
Group’s pre-existing businesses; however, there are some that are not, including, without limitation, risks related to KeySpan’s
Ravenswood Generating Station.
The Group’s risk mitigation techniques such as hedging and current regulatory arrangements may not adequatel
y
provide protection.
Changes in commodity prices could potentially impact the Group’s energy delivery businesses. To mitigate the Group’s
financial exposure related to commodity price fluctuations, the Group’s ener
g
y delivery businesses routinely enter into contracts
to hed
g
e a portion of its purchase and sale commitments, weather fluctuations, electricity sales,
g
as supply and other
commodities. In addition, current re
g
ulatory arran
g
ements provide the ability to pass throu
g
h virtually all of the increased costs
related to commodity prices to consumers. However, if the Group’s re
g
ulators were to restrict this ability, it could have an
adverse effect on the Group’s operatin
g
results. Moreover, the Group does not always cover the entire exposure of its assets or
its positions to market price volatility and the covera
g
e will vary over time. To the extent the Group has unhed
g
ed positions or
its hedging strategies do not work as planned, fluctuating commodity prices could cause the Group’s sales and net income to
be volatile.
The Group’s reputation and long-term financial condition may be harmed if consumers of energy suffer a disruption t
o
their supply even if this disruption is outside the Group’s control.
The Group’s ener
g
y delivery businesses are responsible for transportin
g
available electricity and
g
as. The development of
additional
g
as reserves requires si
g
nificant capital expenditure by others for explorin
g
, drillin
g
and installin
g
production,
gathering, storage, transportation and other facilities that permit gas to be produced and delivered to the Group’s distribution
systems. Low prices for
g
as, re
g
ulatory restrictions, or the lack of available capital for these projects could adversely affect the
development of additional
g
as reserves. Additional
g
as reserves may not be developed in sufficient amounts to fill the
capacities of the Group’s distribution systems, thus limiting the Group’s prospects for long-term
g
rowth. Such supply issues
could hinder the Group’s ability to successfully contract for
g
as and electricity supplies required to meet the needs of its
customers. In addition, the Group 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, the Group’s role is to mana
g
e
the relevant network safely, which in extreme circumstances may require the Group to disconnect consumers.
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