National Grid 2008 Annual Report Download - page 536

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 40435
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 20
Description: EXHIBIT 15.1
0/7216.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/216/7*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 40435
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 20 Description: EXHIBIT 15.1
0/7216.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/216/7*
Table of Contents
28
Performance a
g
ainst our ob
j
ectives continued
National Grid plc
We use the aggregate of consideration paid and debt assumed to
monitor our investment in acquisitions. There is no numerical target as
each investment is different and is considered on its own merits.
As part of our monitoring of financial performance we monitor synergy
savings generated following an acquisition (see page 25).
Completion of our acquisition of KeySpan
Following an extensive approval process, we completed the
acquisition of KeySpan on 24 August 2007 for consideration
of £3.8 billion together with the assumption of £2.2 billion of
debt. Goodwill arising on the acquisition was £2.3 billion.
Approvals were received from both National Grid and
KeySpan shareholders and from a number of governmental
and regulatory bodies, including the Federal Trade
Commission in respect of the Hart-Scott-Rodino Antitrust
Improvements Act, the Committee on Foreign Ownership in
the US, the Federal Energy Regulatory Commission, the
New Hampshire Public Utilities Commission and the New
York Public Service Commission. We and KeySpan also
reached an amended agreement with the Long Island Power
Authority (LIPA), which was approved by the comptroller of
New York.
The acquisition of KeySpan has significantly expanded our
operations in the northeastern US as KeySpan was the fifth
largest distributor of natural gas in the US and the largest in
the northeastern US, serving 2.6 million customers in New
York, Massachusetts and New Hampshire. KeySpan also
operates an electricity transmission and distribution network
serving1.1 million customers in New York under a long-term
contract with LIPA. KeySpan’s other interests included 2.5
GW of merchant electricity generation and 4.1 GW of
contracted electricity generation, together with a small
portfolio of non-regulated energy-related services, and
strategic investments in certain gas pipelines, storage and
LNG assets.
Other acquisitions
There were no other acquisitions during the years ended 31
March 2008 or 31 March 2006.
New
businesses
We will consider acquiring new businesses in our
core markets of electricity and gas delivery in the
UK and the US. This may include generation
assets where our exposure to commodity price
fluctuations is limited.
During the year ended 31 March 2007, we completed
the acquisition from Southern Union Company of its
Rhode Island gas distribution business for
£269 million, including transaction costs of £3 million.
Goodwill arising on the acquisition was £144 million.
The Rhode Island gas distribution business served
approximately 245,000 customers through a
distribution network of over 3,000 miles of mains and
substantially overlaps with our electricity distribution
service area in Rhode Island.
Our principal objective on exiting a business is to maximise the
proceeds we can generate from each sale.
Disposals
We have achieved our plans to dispose of non-core
businesses:
Our wireless infrastructure business in the UK was created
through the combination of National Grid’s then existing
wireless infrastructure business with the UK operations of
Crown Castle International Corp., which was acquired for
cash consideration of £1.1billion during the year ended 31
March 2005. Our wireless infrastructure operations in the US
were expanded durin
g
2006/07 with acquisitions at a cost of
£85 million. Its main operations are the construction and
ownership of wireless telecommunications towers in the US.
We constructed the Basslink electricity interconnector across
the Bass Strait between Victoria and Tasmania.
During the year, we also completed the disposal of our
Advantica engineering consultancy business for proceeds of
£18 million and we entered into an agreement, subject to
regulatory approval, to sell our 50% share in Intelig, a
telecommunications business operating in Brazil.
On 31 March 2008, we entered into an agreement to sell the
Ravenswood generation station for $2.9 billion (£1.4 billion).
Its disposal was a condition of regulatory approval for the
KeySpan acquisition. Subject to regulatory approvals of the
proposed disposal, completion is expected to occur during
the summer of 2008.
In addition to exiting non-core businesses, we will also
consider selling businesses where we believe we can obtain
proceeds in excess of the value we can generate ourselves.
During the year we explored the possibility of selling our UK
property business, however our conclusion was that we
could obtain better value through retaining this business.
Exit non-core
businesses
Our decision to focus on our energy delivery
markets in the UK and the US resulted in a
commitment to exit from our wireless
infrastructure operations in the UK and US and
from the Basslink electricity interconnector in
Australia.
We are also required to dispose of the
Ravenswood generation station in New York City
as a condition of our ac
q
uisition of Ke
y
S
p
an.
on 3 April 2007, we completed the sale of our UK wireless
infrastructure business for
p
roceeds of £2.5 billion;
on 15 August 2007, we completed the sale of our US
wireless infrastructure operations for £147 million;
on 31August 2007, we completed the sale of the Basslink
electricity interconnector in Australia for £485 million; and
on 31March 2008, we entered into an agreement to sell
the Ravenswood generation station for $2.9 billion
(£1.4 billion), subject to regulatory approval.