National Grid 2008 Annual Report Download - page 336

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 5667
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: 130
Description: EXH 2(B).6.1
0/2734.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/734/2*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 5667
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: 130 Description: EXH 2(B).6.1
0/2734.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/734/2*
NOTE K – COST OF REMOVAL AND ASSET RETIREMENT OBLIGATION
SFAS No. 143, “Accounting for Asset Retirement Obligations” provides the accountin
g
requirements for retirement obli
g
ations
associated with tangible long-lived assets. The Company does not have any material asset retirement obli
g
ations arisin
g
from
legal obligations as defined under SFAS No. 143. However, under the Company’s current and prior rate plans, it has collected
throu
g
h rates an implied cost of removal for its plant assets. This cost of removal collected from customers differs from the
SFAS No. 143 definition of an asset retirement obli
g
ation in that these collections are for costs to remove an asset when it is no
lon
g
er deemed usable (i.e. broken or obsolete) and not necessarily from a le
g
al obli
g
ation. These collections have been
recorded to a re
g
ulatory liability account to reflect future use. The Company estimates it has collected over time approximately
$642 million and $538 million for cost of removal throu
g
h March 31, 2007 and 2006, respectively. Of the $642 million balance at
March 31, 2007, $83 million represents the cost of removal recorded as a result of the acquisition of the Rhode Island
g
as
assets of New England Gas Company.
In March 2005, the FASB issued Interpretation No. 47 (FIN 47), “Accounting for Conditional Asset Retirement Obligations,”
which is an interpretation of SFAS No. 143, and which was adopted by the Company for the fiscal year ended March 31, 2006.
FIN 47 clarifies that the term “conditional asset retirement obligation” used in SFAS No. 143 refers to a le
g
al obli
g
ation to
perform an asset retirement activity in which the timin
g
and/or method of settlement are conditional on a future event that may
or may not be within the control of the Company. The Company continues to monitor such contin
g
encies, which do not have a
material impact on the Company’s results of operations or its financial position for the periods ended March 31, 2007 and 2006.
NOTE L – ACQUISITIONS
Pending Acquisition of Keyspan Corporation (Keyspan)
In 2006, National Grid plc, the ultimate parent of the Company, announced the proposed acquisition of KeySpan for $7.3 billion
to
g
ether with the assumption of approximately $4.5 billion of debt. This would si
g
nificantly expand its operations in the
northeastern US as KeySpan is the fifth lar
g
est distributor of natural
g
as in the US and the lar
g
est in the northeast US, servin
g
2.6 million customers in New York, Massachusetts and New Hampshire. KeySpan also operates an electricity transmission and
distribution network serving 1.1 million customers in New York under a long-term contract with the Lon
g
Island Power Authority.
KeySpan’s other interests include 6.6 GW of generation capacity, together with a small portfolio of non-regulated, energy-
related services, and strate
g
ic investments in certain
g
as pipeline, stora
g
e and liquefied natural
g
as assets. The planned
combination of its current US operations with those of KeySpan would result in National Grid plc becomin
g
the third lar
g
est
energy utility in the US.
Acquisition of Rhode Island Gas Assets
On Au
g
ust 24, 2006, the Company acquired the Rhode Island
g
as assets of New En
g
land Gas Company from Southern Union
Company for approximately $574 million which consisted of $497 million in cash and the assumption of $77 million of debt. The
Company received a contribution from the parent company (National Grid plc) in the amount of $500 million to finance the
acquisition, which is reflected in
F-45
March 31, March 31, March 31, March 31,
2007 2006 2007 2006
Shares Amount Call
Com
p
an
y
Outstandin
g
(
in 000’s
)
Price
4.64% Series Narragansett 57,057 57,057 2,854 2,854 52.125
Total 576,243 576,243 $ 52,317 $ 52,317
(
a
)
Noncallable