National Grid 2008 Annual Report Download - page 650

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 6418
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: 123
Description: EXHIBIT 15.1
0/7319.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/319/7*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 6418
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: 123 Description: EXHIBIT 15.1
0/7319.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/319/7*
Table of Contents
Annual Report and Accounts 2007/08
131
4. Exceptional items, remeasurements and stranded cost recoveries
2008 2007 2006
£m £m £m
Exce
p
tional items
–
restructurin
g
costs
(
i
)
(
133
)
(
22
)
(
55
)
Exce
p
tional items
–
environmental related
p
rovisions
(
ii
)
(
92
)
–
–
Exceptional items – gain on disposal of subsidiary (iii) 6 – –
Exce
p
tional items
–
p
rofit on sale and reversal of im
p
airment
(
iv
)
–
–
21
Exce
p
tional items
–
other
(
v
)
(
23
)
–
–
Remeasurements
–
commodit
y
contracts
(
vi
)
232 81
(
49
)
Stranded cost recoveries (vii)* 379 423 489
Total exceptional items, remeasurements and stranded
cost recoveries included within o
p
eratin
g
p
rofit* 369 482 406
Exce
p
tional items
–
debt restructurin
g
costs
(
viii
)
–
(
45
)
(
49
)
Remeasurements
–
commodit
y
contracts
(
vi
)
(
9
)
(
19
)
(
14
)
Remeasurements – net (losses)/gains on derivative financial instruments (ix) (7) (153) 6
Total exce
p
tional items and remeasurements included within finance costs
(
16
)
(
217
)
(
57
)
Total exce
p
tional items, remeasurements and stranded cost recoveries before taxation* 353 265 349
Exce
p
tional tax item
–
deferred tax credit arisin
g
from reduction in UK tax rate
(
x
)
170
–
–
Tax on exceptional items – restructuring costs (i) 49 12 7
Tax on exce
p
tional items
–
environmental related
p
rovisions
(
ii
)
20
–
–
Tax on exce
p
tional items
–
g
ain on dis
p
osal of subsidiar
y
(
iii
)
(
4
)
–
–
Tax on exce
p
tional items
–
other
(
v
)
5
–
–
Tax on remeasurements – commodity contracts (vi) (90) (25) 25
Tax on exce
p
tional items
–
debt restructurin
g
costs
(
viii
)
–
14 15
Tax on remeasurements
–
derivative financial instruments
(
ix
)
(
28
)
169
(
17
)
Tax on stranded cost recoveries
(
vii
)
*
(
150
)
(
169
)
(
196
)
Tax on exce
p
tional items, remeasurements and stranded cost recoveries*
(
28
)
1
(
166
)
Total exceptional items, remeasurements and stranded cost recoveries* 325 266 183
Total exce
p
tional items after taxation
(
2
)
(
41
)
(
61
)
Total commodity contract remeasurements after taxation 133 37 (38)
Total derivative financial instrument remeasurements after taxation
(
35
)
16
(
11
)
Total stranded cost recoveries after taxation* 229 254 293
Total exce
p
tional items, remeasurements and stranded cost recoveries after taxation* 325 266 183
*Comparatives have been adjusted to present items on a basis consistent with the current year classification
(i) Restructuring costs relate to planned cost reduction programmes in the UK and US (2007: UK and US; 2006: UK only) businesses. For the year ended 31 March 2008, restructuring costs
included pension related costs of £83m arising as a result of redundancies (2007: £10m; 2006: £25m).
(ii) The environmental charge for the year ended 31 March 2008 includes a charge of £44m resulting from revised cost estimates in the UK and £48m in the US. Costs incurred with respect
to US environmental provisions are substantially recoverable from customers.
(iii) The gain on disposal of subsidiary relates to the sale of Advantica.
(iv) Gain on disposal of an investment in Energis Polska of £8m and reversal of a prior year impairment of £13m related to National Grid’s investment in Copperbelt Energy Corporation
(CEC).
(v) A cost of £15m was incurred during the year ended 31 March 2008 relating to the potential disposal of National Grid’s property business which we subsequently decided not to proceed
with. In addition, there was a £4m amortisation charge on acquisition-related intangibles and a £4m increase in nuclear decommissioning provisions.
(vi) Remeasurements – commodity contracts represent mark-to-market movements on certain commodity contract obligations, primarily indexed-linked swap contracts, in the US. Under the
existing rate plans in the US, commodity costs are fully recovered from customers, although the pattern of recovery may differ from the pattern of costs incurred. These movements are
comprised of those impacting operating profit which are based on the change in the commodity contract liability and those impacting finance costs as a result of the time value of money.
(vii) Stranded cost recoveries capture the recovery of some of our historical investments in generating plants that were divested as part of the restructuring and wholesale power deregulation
process in New England and New York during the 1990s. These recoveries are no longer considered to be part of our core business. Stranded cost recoveries on a pre-tax basis consist
of revenue of £382m (2007: £426m; 2006: £517m) and operating costs of £3m (2007: £3m; 2006: £28m).
(viii) Debt restructuring costs in the year ended 31 March 2007 represent debt redemption costs related to the restructuring of our debt portfolio. For 2006 these related to costs incurred on the
early redemption of debt following the disposal of four gas distribution networks (£39m), together with issue costs associated with the B share scheme (£10m).
(ix) Remeasurements – net (losses)/gains on derivative financial instruments comprise losses and gains arising on derivative financial instruments reported in the income statement. These
exclude gains and losses for which hedge accounting has been effective, which have been recognised directly in equity or offset by adjustments to the carrying value of debt. These
remeasurements include a loss of £3m (2007: £126m; 2006: £nil) relating to pre-tax losses on investment related derivative financial instruments that offset on a post-tax basis. The tax
charge in the year ended 31 March 2008 includes an £11m adjustment in respect of prior years (2007: £56m credit; 2006: £nil).
(x) The exceptional tax credit in the period of £170m arose from a reduction in the UK corporation tax rate from 30% to 28% included in the Finance Act 2007. This resulted in a reduction in
deferred tax liabilities.