National Grid 2008 Annual Report Download - page 221

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 60055
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: 15
Description: EXH 2(B).6.1
0/2619.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/619/2*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 60055
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: 15 Description: EXH 2(B).6.1
0/2619.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/619/2*
The Group’s financial position may be adversely affected by a number of factors including restrictions in borrowin
g
and debt arrangements, changes to credit ratings or outlook and effective tax rates.
The Group is subject to certain covenants and restrictions in relation to its debt securities and its bank lendin
g
facilities. The
Group is also subject to restrictions on financin
g
that have been imposed by re
g
ulators. These restrictions may hinder it in
servicin
g
the financial requirements of its current businesses or the financin
g
of newly acquired or developin
g
businesses. For
the portion of the Group’s debt that is rated by credit ratin
g
a
g
encies, it can provide no assurances that the ratin
g
s or outlook on
its debt securities will not be reduced or otherwise ne
g
atively chan
g
ed. Chan
g
es to these ratin
g
s or outlook may affect both the
Group’s borrowin
g
capacity and the cost of those borrowin
g
s. The effective rate of tax the Group pays may be influenced by a
number of factors including changes in law and accounting standards, the results of which could increase that rate.
Future funding requirements of Issuer’s pension plans could adversely affect the results of operations of the Issuer.
The Issuer participates in a number of pension plans that together cover substantially all of the Issuer’s subsidiaries’
employees. The principal plans are defined benefit plans where the program assets are held independently of the Issuer’s own
financial resources. Estimates of the amount and timin
g
of future fundin
g
for these plans 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 plan 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 the Issuer to make additional contributions to these pension plans which, to the extent they are not
recoverable (under applicable state rate plans, for example) could adversely affect the results of operations of the Issuer.
New or revised accounting standards, rules and interpretations.
The implementation of new accountin
g
standards or chan
g
es in accountin
g
standards or Generally Accepted Accountin
g
Principles which may require adjustments to financial statements, could have significant adverse effects on the Issuer’s
reported financial results.
The Group’s operating results may fluctuate on a seasonal and quarterly basis.
The Group’s electric and
g
as businesses are seasonal businesses and are subject to weather conditions. The Group receives
most of its
g
as distribution revenues in the third and fourth quarters, when demand for
g
as increases due to colder weather
conditions. As a result, the Group is subject to seasonal variations in workin
g
capital because it purchases
g
as supplies for
storage in the first and second quarters and must finance these purchases. Accordingly, the Group’s results of operations for its
gas distribution business fluctuate substantially on a seasonal basis. In addition, portions of the Group’s electric businesses are
seasonal and subject to weather and market conditions. Sales of electricity to customers are influenced by temperature
chan
g
es. Si
g
nificant chan
g
es in heatin
g
or coolin
g
de
g
ree days, for example, could have a substantial effect. As a result,
fluctuations in weather and competitive supply between years may have a significant effect on the Group’s results of operations
for these businesses; both gas and electric.
Customers and counterparties to the Group’s transactions may fail to perform their obligations, which could harm th
e
Group’s results of operations.
The Group’s operations are exposed to the risk that customers and counterparties to the Group’s transactions that owe it
money or supplies will not perform their obligations. The Issuer’s KeySpan businesses, for example, derive a substantial portion
of revenues in the electric services segment from two customers: the Long Island Power Authority (“LIPA”) and the New York
Independent System Operator (“NYISO”). The Issuer’s KeySpan businesses manage LIPA’s transmission and distribution
system and supply the majority of LIPA’s customers’ electricity needs pursuant to a series of a
g
reements with LIPA; the Issuer
also sells the capacity, energy and ancillary services from its Ravenswood
15