National Grid 2008 Annual Report Download - page 358

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 62061
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-2.B.7.1, Doc: 8, Page: 15
Description: EXH 2(B).7.1
0/1769.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/769/1*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 62061
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-2.B.7.1, Doc: 8, Page: 15 Description: EXH 2(B).7.1
0/1769.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/769/1*
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 dama
g
e National Grid
Gas’s businesses or otherwise significantly affect corporate activities and as a consequence affect the results of operations.
National Grid Gas’s results of operations depend on a number of factors relating to business performance includin
g
performance against regulatory targets and the delivery of anticipated costs and efficiency savings
Earnings maintenance and growth from National Grid Gas’s re
g
ulated
g
as business may be affected by its ability to meet or
better efficiency targets and/or incentives set by Ofgem. Earnings from National Grid Gas’s re
g
ulated businesses will also be
affected by its ability to recover incurred expenditure. Levels of earnings from National Grid Gas’s businesses may also be
affected by failure to meet service quality standards set by Of
g
em. National Grid Gas is also reor
g
anisin
g
its operations alon
g
lines of business. In addition, from time to time National Grid Gas publishes cost and efficiency savin
g
s tar
g
ets for its
businesses. To meet these tar
g
ets and standards, National Grid Gas must improve operational performance, service reliability
and customer service. If National Grid Gas does not meet these tar
g
ets and standards, if it is not able to recover incurred
expenditure or if it does not implement this reor
g
anisation as envisa
g
ed, it may not achieve the expected benefits, its business
may be adversely affected and its performance, results of its operations and reputation may be harmed.
Changes to the regulatory treatment of commodity costs may have an adverse effect on the results of operations
Changes in commodity prices could potentially impact on National Grid Gas’s ener
g
y delivery businesses. Current re
g
ulatory
arran
g
ements in the UK provide the ability to pass throu
g
h virtually all of the increased costs related to commodity prices to
consumers. If Ofgem were to restrict this ability, it could have an adverse effect on National Grid Gas’s operating results.
National Grid Gas’s reputation may be harmed if consumers of energy suffer a disruption to their supply even if thi
s
disruption is outside of National Grid Gas’s control
National Grid Gas is responsible for transportin
g
available
g
as. National Grid Gas consults with and provides information to
Of
g
em and the UK Government and industry participants about future demand and the availability of supply. However, where
there is insufficient supply to meet demand, whether because of extreme weather conditions, or failure of plant or systems
operated by either National Grid Gas or third parties, National Grid Gas’s role is to mana
g
e the relevant system safely, which, in
extreme circumstances, may require National Grid Gas to disconnect consumers.
National Grid Gas is subject to the risk that business development activity, such as significant acquisitions o
r
disposals, will be based on incorrect assumptions or conclusions or that significant liabilities will be overlooked o
r
there may be other unanticipated adverse impacts
In any acquisition or disposal process National Grid Gas evaluates the projected financial impact of the transaction and
conducts appropriate due diligence. Despite National Grid Gas’s efforts, however, unforeseen circumstances or erroneous
assumptions may adversely affect the anticipated financial consequences of a project.
The nature and extent of National Grid Gas’s borrowings means that an increase in interest rates could have a
n
adverse impact on its financial position and business results
A significant proportion of National Grid Gas’s borrowin
g
s are subject to variable interest rates that may fluctuate with chan
g
es
to prevailing interest rates. Increases in these interest rates could therefore increase National Grid Gas’s costs and diminish its
profits.
National Grid Gas’s overall financial position may be adversely affected by a number of factors including restriction
s
in borrowing and debt arrangements, changes to credit ratings and effective tax rates
15