National Grid 2008 Annual Report Download - page 578

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 35763
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: 58
Description: EXHIBIT 15.1
0/8254.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/254/8*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 35763
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: 58 Description: EXHIBIT 15.1
0/8254.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/254/8*
Table of Contents
66
Electricit
y
Distribution & Generation continued National Grid plc
£3,508m £330m £379m £257m
Revenue Adjusted operating profit Stranded cost recoveries Capital investment
Financial performance
Adjusted operating profit was £16 million lower in 2007/08
than 2006/07 on a constant currency basis, a decrease of
5% largely driven by higher bad debt expense, an increase
in our environmental remediation provision and, as
anticipated, increased spending on our reliability
enhancement programme, partially offset by the contribution
from operations acquired with KeySpan.
Further information is included under financial results below.
The regulatory return on equity for our operating companies
declined in both Massachusetts and New York.
In Massachusetts the regulatory return on equity declined to
9.5% for the 12 months ended 31 December 2007,
principally as a result of an increase in bad debt costs.
In New York, the combined regulatory return on equity
includes electricity transmission, electricity distribution, gas
distribution and stranded cost recoveries. For the rate year
ended 31 October 2007 this was 6.4%, including savings.
Our achieved return reflects gas distribution returns that are
si
g
nificantly less than allowed and, as described on pa
g
e 55,
a new gas rate case is being filed. If one-off items relating to
voluntary early retirement costs and negative adjustments to
our deferral account balance are excluded, our achieved
return was 8.4%. This was lower than the previous year
reflecting an increase in bad debts and higher spending on
our reliability enhancement programme.
Profit
Our objective is to increase profits each year.
Returns
on investment
We measure our return on investment using our
defined regulatory return on equity under the
terms of each rate plan.
Financial results
The results of the Electricity Distribution & Generation
segment for the years ended 31 March 2008, 2007
and 2006 were as follows:
2007/08 compared with 2006/07
The principal movements between 2006/07 and
2007/08 can be summarised as follows:
Excluding stranded cost recoveries, revenue increased by
£272 million in 2007/08 on a constant currency basis as
compared with 2006/07. This was primarily due to the
acquisition of KeySpan partially offset by lower purchased
electricity costs. Commodity costs are recovered in full from
customers although the recovery of these costs can occur in
more than one financial year.
Years ended 31 March
2008 2007 2006
Continuing operations £m £m £m
Revenue excluding stranded cost
recoveries 3,126 3,004 3,134
Other o
p
eratin
g
income
–
–
3
Operating costs excluding exceptional
items and remeasurements
(
2,796
)
(
2,640
)
(
2,820
)
Ad
j
usted o
p
eratin
g
p
rofit 330 364 317
Exce
p
tional items
(
104
)
(
9
)
–
Remeasurements 91 81 (49)
Stranded cost recoveries 379 423 489
O
p
eratin
g
p
rofit 696 859 757
Revenue
and other
operating Operating Operating
income costs profit
£m £m £m
2006/07 results 3,430
(
2,571
)
859
Add back exceptional items – 9 9
Add back remeasurements
–
(
81
)
(
81
)
Add back stranded cost recoveries
(
426
)
3
(
423
)
2006/07 ad
j
usted results 3,004
(
2,640
)
364
Exchan
g
e movements
(
150
)
132
(
18
)
2006/07 adjusted results at constant
currenc
y
2,854
(
2,508
)
346
Purchased electricit
y
(
47
)
20
(
27
)
Volumes, includin
g
weather 17
–
17
Depreciation and amortisation – (7) (7)
Reliabilit
y
enhancement
–
(
13
)
(
13
)
Bad debts
–
(
17
)
(
17
)
Storms
–
33 33
KeySpan acquisition 293 (268) 25
Other 9
(
36
)
(
27
)
2007/08 ad
j
usted results 3,126
(
2,796
)
330
2007/08 exceptional items – (104) (104)
2007/08 remeasurements
–
91 91
2007/08 stranded cost recoveries 382
(
3
)
379
2007/08 results 3,508
(
2,812
)
696