National Grid 2008 Annual Report Download - page 579

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 16535
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: 59
Description: EXHIBIT 15.1
0/8255.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/255/8*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 16535
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: 59 Description: EXHIBIT 15.1
0/8255.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/255/8*
Table of Contents
Annual Report and Accounts 2007/08
67
9.5% 8.4%
(
5
)
% 18%
Regulatory return on
equity in Massachusetts
for 2007/08
Regulatory return on
equity in New York for
2007/08, excluding
one-off items
Decline in adjusted
operating profit on
a constant currency
basis
Increase in capital
investment
Excluding stranded cost recoveries, exceptional items and
remeasurements, operating costs increased by £288 million
in 2007/08 on a constant currency basis. This was primarily
due to the acquisition of KeySpan and higher bad debt costs
of £17 million. Spend on our reliability enhancement
programme also increased in 2007/08. These items were
partially offset by lower purchased electricity and other pass-
through costs of £20 million, which are recovered from
customers as described above, and storm costs which were
£33 million lower in 2007/08. A portion of storm costs
incurred in 2007/08 will be recovered in future periods.
The £16 million decrease on a constant currency basis in
adjusted operating profit from Electricity Distribution &
Generation US in 2007/08 compared to 2006/07 was
primarily due to higher bad debts and other expenses
includin
g
an expected increase in our reliability enhancement
spend, the timing of commodity cost recovery and the non-
recurrence of one-off items incurred in 2006/07. These were
partially offset by lower storm costs of £33 million, increased
deliveries, including the effect of weather, of £17 million, and
the acquisition of KeySpan.
2006/07 compared with 2005/06
The principal movements between 2005/06 and 2006/07 can
be summarised as follows:
Revenue
and other
operating Operating Operating
income costs profit
£m £m £m
2005/06 results 3,654
(
2,897
)
757
Less stranded cost recoveries (517) 28 (489)
Add back remeasurements
–
49 49
2005/06 ad
j
usted results 3,137
(
2,820
)
317
Exchange movements (198) 178 (20)
2005/06 adjusted results at constant
currenc
y
2,939
(
2,642
)
297
Purchased electricity (16) 39 23
Deferral account 72
–
72
De
p
reciation and amortisation
–
(
9
)
(
9
)
Reliabilit
y
enhancement
–
(
8
)
(
8
)
Bad debts – (11) (11)
Pension and benefit costs
–
28 28
Storm costs
–
(
43
)
(
43
)
Other 9 6 15
2006/07 ad
j
usted results 3,004
(
2,640
)
364
2006/07 exce
p
tional items
–
(
9
)
(
9
)
2006/07 remeasurements – 81 81
2006/07 stranded cost recoveries 426
(
3
)
423
2006/07 results 3,430
(
2,571
)
859
Excluding stranded cost recoveries, revenue increased
£65 million in 2006/07 on a constant currency basis
compared with 2005/06. This was primarily due to the
recovery of previously incurred costs in New York of
£72 million through the deferral account mechanism. This
was partially offset by lower purchased electricity and other
pass-through costs of £16 million. Commodity costs are
recovered in full from customers although the recovery of
these costs can occur in more than one financial year.
Operating costs excluding exceptional items,
remeasurements and stranded cost recoveries decreased by
£2 million in 2006/07 on a constant currency basis. This was
primarily due to lower purchased electricity and other pass-
through costs of £39 million, which are recovered from
customers as described above. Storm costs were £43 million
higher in 2006/07. The majority of these storm costs will be
recovered in future periods.
The £67 million increase in adjusted operating profit in
2006/07 compared with 2005/06 on a constant currency
basis was primarily due to the recovery of previously
incurred costs in New York, reduced pension and benefit
costs, and the timing of commodity cost recovery. These
were partially offset by hi
g
her storm costs, the majority of
which will be recovered in future periods, and hi
g
her bad
debts.
Exceptional items of £9 million in 2006/07 related to
integration costs in preparation for the proposed acquisition
of KeySpan. There were no exceptional items in 2005/06.
Remeasurements comprised a credit of £81 million in
2006/07, arising from a reduction in the carrying value of
commodity contract liabilities.
Stranded cost recoveries contributed £426 million to
revenues and £423 million to operatin
g
profit, compared with
£517 million and £489 million respectively in 2005/06. The
£91 million decrease in revenue comparing 2006/07 with
2005/06 resulted from a £32 million reduction as a
consequence of exchange rate movements, a reduction in
purchased power contract cost recoveries due to lower
market commodity prices and lower stranded cost recoveries
in accordance with our rate plans.
Operating profit increased by £102 million as a consequence
of the above changes.