Business Context and Reporting Period
This Form 6-K filing by National Grid plc, dated July 30, 2007, serves as an Interim Management Statement covering the period from April 1, 2007, to July 27, 2007. The company is a foreign issuer reporting under Rule 13a-16 of the Securities Exchange Act of 1934. The filing focuses on strategic progress, specifically the near-completion of the KeySpan acquisition, asset divestitures, and shareholder returns.
Key Financial Metrics
- Shareholder Returns: The company repurchased 72.8 million shares at a cost of £530 million during the period. This action completed the return of approximately £150 million in US stranded asset post-tax cash flows for 2007/08 and advanced the return of £1.8 billion following wireless business sales.
- Asset Sales: Total proceeds of £2.7 billion were generated from the sale of the UK Wireless business and the agreed sale of the US Wireless business. The sale of the Basslink interconnector in Australia is also advanced.
- Debt and Liquidity: The financial position is described as strong. Approximately 80% of net debt is at fixed rates or index-linked. Committed financing is in place to complete the KeySpan acquisition.
- Cash Flow and Capex: Both cash flow and capital expenditure remain broadly in line with plans.
- Historical Comparative Data (Six months ended Sept 30, 2006): Total operating profit was £1,078 million (including £202 million in US stranded cost recoveries). Operating profit excluding US stranded costs was £876 million.
Material Changes and Operational Updates
- KeySpan Acquisition: The acquisition is close to completion. Regulatory approvals have been secured from the New Hampshire Public Utilities Commission and the Long Island Power Authority. An agreement in principle was reached with New York Public Service Commission staff, with a vote expected on August 22, 2007.
- UK Weather Impact: Severe flooding in the UK during June and July affected Transmission and Gas Distribution operations. Initial assessments indicate the impact on operating profit is not significant.
- Regulatory Environment: Ofgem published initial proposals for the UK Gas Distribution Price Control Review (2008-2013), with updated proposals expected in September.
- Currency: The strengthening of the pound against the dollar is expected to have only a small impact on earnings.
Guidance, Outlook, and Risks
- Outlook: Management states the outlook for the year is ahead of previous expectations. Earnings growth prospects are expected to be enhanced by the KeySpan acquisition.
- Dividend Policy: A revised dividend policy reflecting the strong outlook of the enlarged business will be announced later in the financial year.
- Board Changes: Tom King was appointed as an Executive Director effective August 13, 2007, with responsibility for US Electricity Distribution and Generation. Non-executive Director Paul Joskow stepped down on July 31, 2007.
- Risks and Contingencies: Forward-looking statements are subject to risks including delays in regulatory approvals for KeySpan, unseasonable weather, currency fluctuations, changes in energy market prices, and integration challenges. The filing includes a standard cautionary statement regarding these uncertainties.
Investor Verification Checklist
- Confirm the final regulatory approval status and closing date of the KeySpan acquisition.
- Verify the final sale price and closing date for the Basslink interconnector.
- Monitor the impact of UK flooding on future operating costs and insurance claims.
- Review the upcoming revised dividend policy announcement later in the financial year.
- Track the outcome of the Ofgem UK Gas Distribution Price Control Review expected in September.