FORM 425
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 425
(LOGO) NATIONAL GRID GROUP, PLC
(Exact name of registrant as specified in charter)
UNITED KINGDOM
(State or other jurisdiction of
incorporation or organization)
15 Marylebone Road, London NWI 5JD, England
(Address of principal executive offices)
Registrant's telephone number, including area code
(011 44 207 312 5600)
Filed by National Grid Group plc
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12 of the
Securities Exchange Act of 1934
Commission File No.: 001-02987
Subject Company: Niagara Mohawk Holdings, Inc.
THE FOLLOWING IS AN INTERIM RESULTS ANNOUNCEMENT FOR NATIONAL
GRID GROUP PLC AND SLIDES FROM AN ANALYST PRESENTATION
<PAGE>
NATIONAL GRID GROUP plc
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2000
Strong operational and financial performance
Further major step taken in US strategy
New five year dividend policy announced
<TABLE>
<CAPTION>
Financial highlights
<S> <C>
- profit after tax and minorities excluding up 17.5% to 218.7m
exceptionals and goodwill amortisation pound sterling
- additional exceptional profits after tax 228.6m pound sterling net
- basic earnings per share excluding up 17.5% to 14.8p
exceptionals and goodwill amortisation
- interim dividend - 5% real increase up 8.2% to 6.05p per share
</TABLE>
Dividend policy
- aim to increase dividends per share by 5% real in each of the next five
years
Electricity - UK
- new price control gives stable framework for 5 years from April 2001
- confident of achieving Ofgem's demanding efficiency targets
Electricity - USA
- return on investment for first half 9.3% (up from 8.3% at announcement
of acquisitions and on track for 10.5% target)
- completed acquisitions immediately earnings enhancing after goodwill
amortisation - one year ahead of initial expectations
- Niagara Mohawk acquisition a further major step in US - doubles size of
US business
Telecoms
- strong performance from Energis (34.6% holding)
- Brazil start-up operating losses of 69.7 million pound sterling -
within September forecast
Commenting, James Ross, Chairman, said:
"National Grid continues to perform well and deliver on its strategy.
"In the US, our acquisition of Niagara Mohawk is a further major step
forward, creating the potential for significant synergies and taking us
into the top 10 of US electricity businesses. Upon completion towards the
end of 2001, more than half of our operating profits will come from the
Northeast US, a region already demonstrating its ability to provide long
term regulatory stability and significantly higher returns than in the UK.
"The new price control settlement in the UK, which comes into effect next
April, will provide a stable framework for the next five years. We are
confident of achieving Ofgem's demanding efficiency targets.
"Our telecoms strategy is to use our infrastructure skills across a range
of telecoms start-ups. We own 34.6% of Energis, which once again has
reported excellent half year results, and we have a joint venture with
Energis in Poland. We have three ventures in Latin America of which
Intelig, in Brazil, is the largest. As announced in September, Intelig's
start-up losses are higher than expected. We and our partners, Sprint and
France Telecom, with Intelig's management, are taking actions to curtail
these and to reinforce Intelig's focus on the fast-growing business
market.
"The Board is raising the interim dividend by 8.2% (5% real). Our
confidence in the Group's future financial strength and in the prospects
for growth and greater diversity of earnings has increased. We are
committed to delivering sustained real dividend growth. Consequently the
Board today announces its aim to increase dividends per share by 5% real
in each of the next five years."
Analysts' presentation
City Presentation Centre, 4 Chiswell Street, London EC1Y 4UP at 9:00 am
(UK time) today
Live coverage of the presentation
UK: +44 (0) 20 8515 2306
USA: +1 416 231 6596
Telephone replay of the presentation (available for 5 days)
UK: +44 (0) 20 8797 2499 pin 114026
USA: +1 416 640 1917 pin 73883
Website replay of the presentation from around 4:00 pm (UK time) today on
www.nationalgrid.com (available for 6 months)
Teleconference at 3.00 pm UK time (10.00 am Eastern Time and 7.00 am
Pacific Time)
UK: +44 (0) 20 8240 8245
USA: +1 303 267 1000
<PAGE>
Replay of the teleconference (available for 5 days)
UK: +44 (0) 20 8288 4459 pin 630372
USA: +1 303 804 1855 pin 858297
Photographs are available at www.newscast.co.uk.
Contact
National Grid
David Jones
Stephen Box
Investors UK:
Jill Sherratt +44 (0) 20 7312 5781
mobile:+44 (0 )7768 490807
Diane Boddy
US: Karen Shih 1 508 389 3176
Press: Susan Stevens 44 (0) 20 7312 5755
Sam Cohen mobile:44 (0) 7733 300054
Citigate Dewe Rogerson 44 (0) 20 7638 9571
Anthony Carlisle mobile:44 (0) 973 611888
Sue Pemberton
<PAGE>
GROUP RESULTS
The electricity businesses performed well with a particularly strong first
contribution from the US while start up losses in our Brazilian telecoms
joint venture were higher than originally expected. Total operating
profit for the period, before exceptional US integration costs and
goodwill amortisation, was up 27.6 per cent to 358.6 million pound
sterling.
Net interest increased 68.4 million pound sterling to 98.7 million pound
sterling, reflecting the increase in net debt attributable to the
acquisitions of New England Electric System (NEES) and Eastern Utilities
Associates (EUA), which were completed in March and April 2000
respectively. The impact of these acquisitions was partially offset by
the proceeds from the sale of Energis shares in February 2000 and a 17.4
million pound sterling benefit from the closing out of interest rate
swaps. Interest cover, excluding exceptional integration costs, goodwill
amortisation and the impact of exchangeable bonds, was 4.7 times.
Profit before tax for the period, excluding exceptional items and goodwill
amortisation, increased to 259.9 million pound sterling from 250.7 million
pound sterling for the same period last year.
The tax charge for the period, excluding exceptional items, of 38.5
million pound sterling is net of the release of 20 million pound sterling
of tax provisions in respect of prior year tax computations. The
underlying tax charge for the period is based on the estimated effective
tax rate for the year ending 31 March 2001 of 26 per cent.
Profit after tax and minority interests, excluding exceptional items and
goodwill amortisation, was 218.7 million pound sterling, up from 186.1
million pound sterling for the same period last year.
The results include post-tax exceptional profits of 228.6 million pound
sterling net, comprising:
- A profit of 132.1 million pound sterling, before and after tax, arising
from reductions in the Group's interest in Energis, primarily as a
result of the placing of 77.7 million shares by Energis in September;
- US acquisition integration costs of 43.5 million pound sterling (46.8
million pound sterling before tax); and
- A tax credit of 140 million pound sterling, arising from the
realisation of a capital loss for tax purposes as a result of a Group
restructuring.
Basic earnings per share rose 124 per cent to 28.0 pence. Excluding
exceptional items and goodwill amortisation, basic earnings per share
increased 17.5 per cent to 14.8 pence. If telecoms start-up losses are
also excluded, basic earnings per share increased 48.9 per cent to 20.1
pence.
Interim dividend
The Board has declared an interim dividend of 6.05 pence per share to be
paid on 15 January 2001 to shareholders on the register at 1 December
2000. This is an increase of 8.2 per cent (5 per cent real) over the
interim dividend last year.
REVIEW OF ACTIVITIES
ELECTRICITY
National Grid Company
UK Transmission
As expected, operating profit from the UK Transmission business was down
11.1 million pound sterling to 242.8 million pound sterling mainly as a
result of lower RPI-x income.
This was partially offset by a further 3% real reduction in controllable
operating costs and a 2.7 million pound sterling increase in operating
profit from the Transmission Services Scheme. With the delay of the New
Electricity Trading Arrangements (NETA), this scheme will now run until
the end of the financial year. However, we do not expect to benefit from
a repeat of the exceptional generator bidding behaviour seen last winter.
We have accepted Ofgem's final proposals for the next price control period
in respect of the Transmission Owner activities (TO). The new control,
which takes effect on 1 April 2001, provides a stable framework for five
years, a year longer than the current price control period. We are
confident that we can achieve Ofgem's demanding efficiency targets.
Discussions with Ofgem on the price control and incentive arrangements for
the System Operator activity (SO) are continuing and will be introduced on
the implementation of NETA, which is scheduled for 27 March 2001.
Market services
Our market services businesses are no longer core to our strategy and we
are announcing today the sale of our energy settlements and information
services company, ESIS, and EPFAL (Energy Pool Funds Administration
Limited) to Logica for a net consideration of 38 million pound sterling.
We are in discussions with other parties interested in acquiring our
metering businesses.
National Grid USA
Existing businesses
National Grid USA was formed on the acquisition of NEES in March 2000 and
incorporates EUA, the acquisition of which was completed on 19 April 2000
at a cost of 414.0 million pound sterling.
The transmission and distribution operations of NEES and EUA were
successfully integrated on 1 May 2000. The 20-year rate settlements in
Massachusetts and Rhode Island, which provide long term incentives for us
to improve efficiency for the benefit of customers and shareholders, came
into effect on that date. The exceptional costs of integrating NEES and
EUA were 46.8 million pound sterling. Integration savings amount to 27
million pound sterling a year, 10 per cent of the combined controllable
cost base.
<PAGE>
National Grid USA is performing ahead of expectations. Total operating
profit, before exceptional integration costs and goodwill amortisation,
was 148.6 million pound sterling. This included 73.9 million pound
sterling from Distribution, reflecting higher than expected volume growth
of 3.6 per cent over the same period last year on a weather corrected
basis. It also included 20.5 million pound sterling from Transmission,
38.9 million pound sterling from Stranded costs recovery and generation,
11.0 million pound sterling from the US/Canada interconnector and 1.5
million pound sterling from Telecoms.
The acquisitions of NEES and EUA were earnings enhancing after goodwill
amortisation, but before exceptional integration costs, in the six months
ended 30 September. This is a year earlier than originally expected. The
nominal pre-tax return on our investment (ROI) for the six months ended 30
September was an annualised 9.3 per cent.
Acquisition of Niagara Mohawk
In September, we announced the proposed acquisition of Niagara Mohawk, a
focused electricity and gas delivery business in New York State, valuing
the equity at approximately 2 billion pound sterling and the enterprise
value at approximately 6 billion pound sterling.
The acquisition of Niagara Mohawk provides substantial upside potential.
We expect integration synergies to produce cost savings of approximately
10 per cent per annum of the combined controllable cost base of National
Grid USA and Niagara Mohawk, approximately 63 million pound sterling per
year, within four years of completion, with at least half in the first
full financial year. In addition, there is potential to improve
operational performance and bring Niagara Mohawk's efficiency nearer to
that projected for National Grid USA.
The acquisition is expected to enhance earnings per share after the
amortisation of goodwill in the first full financial year after completion
and will substantially enhance our cash flow from completion.
The acquisition of Niagara Mohawk will more than double the size of our US
distribution operations (with over 3 million customers) and makes our
transmission network the most extensive in the New England and New York
Power Pools. We expect the combined US operation to contribute more than
half of the Group's operating profit following completion.
The acquisition is subject to a number of conditions, including regulatory
and other consents and approvals in the US, the sale of Niagara Mohawk's
nuclear facilities or other satisfactory arrangements being reached and
the approval of the shareholders of both National Grid and Niagara Mohawk.
The shareholder meetings are expected to take place in January 2001 and,
following regulatory approvals, completion of the acquisition is expected
by late 2001.
Other electricity operations
Operating profit from Interconnectors, excluding the US/Canada
interconnector, was down 2.4 million pound sterling to 22.1 million pound
sterling. This reflects the exceptionally high level of capacity payments
under the French contracts last year.
The UK/Isle of Man interconnector was commissioned in October 2000. We
expect to commence construction of Basslink, the interconnector between
Tasmania and the Australian mainland, around the end of 2001. In
addition, the seabed survey for the proposed UK/Norway interconnector has
been successfully completed. Construction will commence in 2002 subject
to consents and satisfactory commercial arrangements.
Our electricity businesses in Argentina and Zambia both reported increased
profits.
TELECOMS
Energis
Energis, of which we now own 34.6 per cent, continues to perform strongly
with turnover up 81 per cent to 368.0 million pound sterling, and EBITDA
up 71 per cent to 65.5 million pound sterling. Our share of its operating
profit for the period increased by 3.3 million pound sterling to 2.5
million pound sterling before the amortisation of goodwill.
The Government has proposed new rules which will allow relief in respect
of capital gains tax on disposals of corporate holdings of over 20 per
cent if the proceeds are reinvested within one year prior to, and three
years after the disposal. The rules are expected to become effective from
1 April 2001 and will apply to our holding in Energis, which was valued at
2.8 billion pound sterling at yesterday's closing market price.
Telecoms joint ventures
We have a range of joint venture telecoms interests leveraging our
infrastructure skills in designing, building and maintaining networks. Our
partners bring product development, sales and marketing and telecoms
operational skills. We have invested a total of 389.5 million pound
sterling to 30 September in these joint ventures.
Intelig
Intelig is our Brazilian joint venture with Sprint and France Telecom.
Our share of operating losses for the six months ended 30 September was
69.7 million pound sterling. This was higher than originally expected but
within the level forecast in our September trading statement.
There have been a number of contributing factors, including a higher than
expected proportion of low-margin, off-peak voice traffic, much of which
has been uneconomic to bill. Actions being taken by Intelig management
include the roll out of the network which will reduce interconnect and
leased line costs, the roll out of data services, the establishment of co-
billing arrangements with regional telecoms operators and the introduction
of new tariffs. As a result we expect this to be the peak year of
operating losses.
Sprint is again participating in Intelig, after nine months absence
enforced by the Brazilian regulator consequential upon its proposed merger
with Worldcom. As a result Intelig is once again pursuing debt financing
from equipment suppliers.
<PAGE>
Manquehue net
Manquehue net (formerly Telefonica Manquehue) is our joint venture with
Williams and MetroGas in Santiago, Chile. It provides local
telecommunications services to targeted customer groups, including the
business and internet markets.
Silica Networks
Silica Networks (formerly Southern Cone Communications) is our joint
venture in Argentina and Chile with Manquehue net and Williams. It is
making good progress. The licences have now been received, construction
of the 2,500 mile state-of-the-art network continues and roll out of its
managed bandwidth services is expected to commence in March 2001.
Poland
We have a joint venture in Poland with Energis which has received its data
licence. It is developing a state-of-the-art, broadband network
connecting major cities across Poland and interconnecting with Energis'
network in Germany. An internet Datacentre is being constructed in
Warsaw, which will be integrated with Energis' pan-European IP and voice
backbone network. Services will be launched in Spring 2001.
NEESCom
NEESCom is a natural extension to National Grid USA's business. It
installs and leases dark fibre and now has 150,000 fibre miles mainly on
our electricity network in New England, presently expanding into New York
State. The present value of new sales contracts over the last six months
is 27 million pound sterling, bringing the total value of sales contracts
to 115 million pound sterling.
DIVIDEND POLICY
Looking ahead, the profile of the Group will be very different. Our
confidence in the Group's future financial strength and in the prospects
for growth and greater diversity of earnings has increased. We are
committed to delivering sustained real dividend growth. Consequently the
Board today announces its aim to increase dividends per share by 5% real
in each of the next five years.
<PAGE>
<TABLE>
NATIONAL GRID GROUP plc
GROUP PROFIT AND LOSS ACCOUNT
Six months ended 30 September 2000
<CAPTION>
Six months ended Year ended
30 September 31 March
2000 1999 2000
Notes m m m
(pound sterling)
<S> <C> <C> <C> <C>
Group turnover - continuing operations 3 1,792.8 741.7 1,614.7
Operating costs - continuing operations (1,456.6) (462.6) (1,042.6)
-------- ------- ---------
Operating profit of Group undertakings 3 336.2 279.1 572.1
Share of joint ventures' and associate's
operating loss (59.1) (0.6) (33.5)
-------- ------- ---------
Total operating profit
- Before exceptional integration costs
and goodwill amortisation 358.6 281.0 546.5
- Exceptional integration costs 4(a) (46.8) - -
- Goodwill amortisation (34.7) (2.5) (7.9)
3 277.1 278.5 538.6
Exceptional profit relating to partial
disposals of Energis 4(b) 132.1 - 1,027.3
Net interest 5 (98.7) (30.3) (64.9)
-------- ------- ---------
Profit on ordinary activities before taxation 310.5 248.2 1,501.0
Taxation - excluding exceptional items (38.5) (64.6) (123.1)
- exceptional items 143.3 - (229.5)
6 104.8 (64.6) (352.6)
-------- ------- ---------
Profit on ordinary activities after taxation 415.3 183.6 1,148.4
Minority interests (2.7) - -
-------- ------- ---------
Profit for the period 412.6 183.6 1,148.4
Dividends 7 (89.5) (82.5) (205.5)
-------- ------- ---------
Retained profit 323.1 101.1 942.9
======= ======= =========
Earnings per ordinary share
- Basic, on profit for the period 8 28.0p 12.5p 78.0p
- Basic, on adjusted profit for the
period* 8 14.8p 12.6p 24.3p
- Diluted, on profit for the period 8 26.5p 12.2p 73.4p
- Diluted, on adjusted profit for
the period* 8 14.3p 12.3p 23.8p
<PAGE>
*Adjusted profit excludes exceptional items and
goodwill amortisation
Dividends per ordinary share 7 6.05p 5.59p 13.94p
</TABLE>
<PAGE>
<TABLE>
NATIONAL GRID GROUP plc
GROUP BALANCE SHEET
At 30 September 2000
<CAPTION>
At 30 September At 31 March
2000 1999 2000
m m m
(pound sterling)
<S> <C> <C> <C>
Fixed assets
Intangible assets - goodwill 1,140.6 14.0 844.7
Tangible assets 5,467.9 3,156.5 4,938.3
Investments 890.6 260.7 519.0
--------- --------- ---------
7,499.1 3,431.2 6,302.0
--------- --------- ---------
Current assets
Stocks 35.6 14.5 29.3
Debtors (due within one year) 781.4 142.6 490.1
Debtors (due after one year) 882.5 50.6 798.3
Assets held for exchange 16.6 16.6 16.6
Businesses held for resale 133.7 - 118.9
Cash and deposits 649.7 1,519.8 1,011.6
--------- --------- ---------
2,499.5 1,744.1 2,464.8
Creditors (due within one year) (2,138.5) (1,436.5) (1,861.1)
--------- --------- ----------
Net current assets 361.0 307.6 603.7
--------- --------- ----------
Total assets less current liabilities 7,860.1 3,738.8 6,905.7
Creditors (due after more than one year) (3,975.0) (1,635.8) (3,500.2)
Provisions for liabilities and charges (597.0) (44.7) (461.4)
--------- --------- ----------
Net assets employed 3,288.1 2,058.3 2,944.1
========= ========= ==========
Capital and reserves
Called up share capital 174.7 174.5 174.7
Share premium account 275.0 266.7 274.7
Profit and loss account 2,783.7 1,616.3 2,459.6
--------- --------- ---------
Shareholders' funds 3,233.4 2,057.5 2,909.0
Minority interests 54.7 0.8 35.1
--------- --------- ---------
3,288.1 2,058.3 2,944.1
========= ========= =========
Net debt 3,766.1 722.7 2,663.6
Gearing 115% 35% 90%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NATIONAL GRID GROUP plc
SUMMARISED GROUP CASH FLOW STATEMENT
Six months ended 30 September 2000
Six months ended Year ended
30 September 31 March
2000 1999 2000
Note m m m
(pound sterling)
<S> <C> <C> <C> <C>
Net cash inflow from operating activities 9 343.4 309.1 682.0
Dividends from joint ventures 8.7 0.3 4.5
Net cash outflow for returns on
investments and servicing of finance (125.0) (35.7) (64.7)
Corporate tax paid (58.4) (0.6) (274.3)
Net cash outflow for capital expenditure (198.6) (135.0) (279.2)
Net cash outflow for acquisitions
and disposals (648.0) (42.1) (1,236.7)
Equity dividends paid (123.2) (115.1) (197.6)
-------- -------- ---------
Net cash outflow before management of
liquid resources and financing (801.1) (19.1) (1,366.0)
Net cash inflow from the management
of liquid resources 372.3 5.9 618.8
Issue of ordinary shares 2.9 4.4 5.5
Repurchase of ordinary shares - - (1.1)
New borrowings 1,841.2 82.4 1,029.3
Borrowings repaid (1,425.6) (57.3) (260.1)
Increase in borrowings 415.6 25.1 769.2
Net cash inflow from financing 418.5 29.5 773.6
--------- ------- --------
Movement in cash and overdrafts (10.3) 16.3 26.4
========= ======= ========
</TABLE>
<PAGE>
<TABLE>
NATIONAL GRID GROUP plc
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Six months ended 30 September 2000
<CAPTION>
Six months ended Year ended
30 September 31 March
2000 1999 2000
m m m
(pound sterling)
<S> <C> <C> <C>
Profit for the period 412.6 183.6 1,148.4
Exchange adjustments 1.0 (4.8) 3.1
------- ------- --------
Total recognised gains and losses relating
to the period 413.6 178.8 1,151.5
======= ======= ========
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
Six months ended 30 September 2000
Six months ended Year ended
30 September 31 March
2000 1999 2000
m m m
(pound sterling)
Profit for the period 412.6 183.6 1,148.4
Dividends (89.5) (82.5) (205.5)
------- ------- --------
323.1 101.1 942.9
Issue of ordinary shares 0.3 8.7 11.6
Repurchase of ordinary shares - - (1.1)
Exchange adjustments 1.0 (4.8) 3.1
------- ------- --------
Net increase in shareholders' funds 324.4 105.0 956.5
Shareholders' funds at start of period 2,909.0 1,952.5 1,952.5
-------- --------- ---------
Shareholders' funds at end of period 3,233.4 2,057.5 2,909.0
========= ========= =========
</TABLE>
<PAGE>
NATIONAL GRID GROUP plc
NOTES
1. Basis of preparation
The financial information contained in this announcement has been prepared
on the basis of the accounting policies set out in the Annual Report and
Accounts for the year ended 31 March 2000 and does not constitute statutory
accounts as defined in Section 240 of the Companies Act 1985. The
financial information in respect of the year ended 31 March 2000 has been
derived from the statutory accounts for the year ended 31 March 2000, which
have been delivered to the Registrar of Companies. The auditors' report on
those statutory accounts was unqualified and did not contain a statement
under Section 237(2) or (3) of the Companies Act 1985. The financial
information in respect of the six months ended 30 September 2000 is
unaudited but has been reviewed by the auditors and their report is set out
on page 20.
This interim results announcement was approved by the Board of Directors on
20 November 2000.
2. Acquisition of Eastern Utilities Associates (EUA)
The acquisition of EUA (completed on 19 April 2000) cost 414.0m pound
sterling
and the net assets acquired had a provisional fair value of 213.7m pound
sterling, resulting in goodwill of 200.3m pound sterling which has been
capitalised and is being amortised over 20 years. The operations of EUA
and New
England Electric System (NEES) were successfully integrated on 1 May 2000,
as a
consequence of which it is not possible to provide an indication of EUA's
contribution to the Group's results for the period.
<PAGE>
<TABLE>
<CAPTION>
3. Segmental analysis
<S> <C> <C>
Six months ended Year ended
30 September 31 March
2000 1999 2000
m m m
(pound sterling)
a) Turnover:
Transmission - UK 643.2 650.0 1,319.7
- USA 100.2 - 3.4
Distribution - USA 662.3 - 25.8
Stranded costs recovery and generation -USA 314.6 - 6.1
Interconnectors - UK 42.4 44.8 86.6
- USA 23.5 - 1.3
Telecommunications - USA 4.3 - 0.2
Other activities - UK(i) 154.5 63.5 207.0
- USA 11.5 1.3 2.4
Sales between businesses (163.7) (17.9) (37.8)
------- ------- -------
Group turnover - continuing operations 1,792.8 741.7 1,614.7
======= ======= =======
Europe 819.1 740.4 1,576.1
North America 973.7 1.3 38.6
-------- -------- --------
1,792.8 741.7 1,614.7
======= ======= =======
</TABLE>
(i) Other activities - UK turnover primarily comprises market services,
including gas trading activities, and contracting activities.
The transmission - UK segment now includes the results of operations of
Ancillary Services, previously reported as a separate segment.
<PAGE>
NATIONAL GRID GROUP plc
NOTES
<TABLE>
<CAPTION>
3. Segmental analysis (continued)
<S> <C> <C>
Six months ended Year ended
30 September 31 March
2000 1999 2000
m m m
(pound sterling)
b) Operating profit:
Transmission - UK 242.8 253.9 523.1
- USA 20.5 - 1.3
Distribution - USA 73.9 - 1.7
Stranded costs recovery and generation -USA 33.6 - 0.2
Interconnectors - UK 22.5 24.5 46.6
- USA 11.0 - 0.6
- Other (0.4) - (0.9)
Telecommunications - USA 1.5 - 0.1
Other activities - UK 7.0 4.0 7.5
- USA (0.9) (2.6) (5.5)
Exceptional integration costs - USA (46.8) - -
Goodwill amortisation - USA (28.5) (0.7) (2.6)
-------- -------- --------
Group undertakings 336.2 279.1 572.1
-------- -------- --------
Telecommunications - Energis 2.5 (0.8) 1.3
- Intelig (69.7) (5.9) (44.1)
- Other (0.6) - -
Generation - USA 5.3 - 0.2
Other electricity 9.6 7.9 14.4
Goodwill amortisation (6.2) (1.8) (5.3)
-------- -------- --------
Joint ventures and associate (59.1) (0.6) (33.5)
-------- -------- --------
Total operating profit 277.1 278.5 538.6
======= ======= =======
Europe 267.6 280.0 572.3
North America 69.6(ii) (3.3) (4.0)
Latin America (62.9) (0.4) (33.7)
Africa 2.8 2.2 4.0
-------- -------- --------
277.1 278.5 538.6
======= ======= =======
Electricity 424.9 287.7 589.2
Telecommunications (66.3) (6.7) (42.7)
-------- -------- --------
Total operating profit - before
exceptional integration costs and
goodwill amortisation 358.6 281.0 546.5
======= ======= =======
</TABLE>
<PAGE>
(ii) 144.9m pound sterling before exceptional integration costs and
goodwill
amortisation.
Stranded costs recovery
Under settlement agreements reached as part of industry restructuring
National Grid USA is allowed to recover its costs (net of sales proceeds)
and, where applicable, a return on those costs, associated with its ongoing
efforts to exit the generation business.
<PAGE>
NATIONAL GRID GROUP plc
NOTES
4. Exceptional items
a) Exceptional integration costs
Exceptional integration costs of 46.8m pound sterling (43.5m pound sterling
after tax) principally comprise early retirement costs arising on the
integration of the operations of the former New England Electric System and
Eastern Utilities Associates (both now comprising, and renamed, National
Grid USA).
b) Exceptional profit relating to partial disposals of Energis
The exceptional profit of 132.1m pound sterling (132.1m pound sterling
after tax) relates to reductions in the Group's interest in Energis plc, an
associated undertaking, primarily as a consequence of the placing by
Energis of 77.7m of its shares.
c) Exceptional tax credit
Details of a 140.0m pound sterling exceptional tax credit are contained in
note 6.
<TABLE>
<CAPTION>
5. Net interest
<S> <C> <C>
Six months ended Year ended
30 September 31 March
2000 1999 2000
m m m
(pound sterling)
Interest payable and similar charges 164.7 76.0 158.4
Interest capitalised (9.7) (12.1) (20.4)
Interest receivable and similar income (73.1) (44.3) (95.0)
-------- -------- --------
81.9 19.6 43.0
Joint ventures and associate 16.8 10.7 21.9
-------- -------- --------
98.7 30.3 64.9
======= ======= =======
</TABLE>
Interest receivable and similar income includes a 17.4m pound sterling gain
(1999 : nil pound sterling) from closing out sterling fixed interest rates
swaps originally entered into as hedges for the Group's sterling
borrowings. These hedges are no longer needed as a result of the reduction
in the Group's sterling borrowings.
<PAGE>
NATIONAL GRID GROUP plc
NOTES
<TABLE>
<CAPTION>
6. Taxation
<S> <C> <C>
Six months ended Year ended
30 September 31 March
2000 1999 2000
m m m
(pound sterling)
Tax on profit, excluding exceptional items,
for the period 58.5 64.6 123.1
Adjustment in respect of prior periods (20.0) - -
-------- -------- --------
Taxation - excluding exceptional items 38.5 64.6 123.1
-------- -------- --------
Tax relating to exceptional integration costs (3.3) - -
Tax relating to exceptional profit on
partial disposals of Energis - - 229.5
Adjustment in respect of prior year
exceptional tax charge arising from
the realisation of a capital loss
for tax purposes as a result of a
Group restructuring (140.0) - -
-------- -------- --------
Taxation - exceptional items (143.3) - 229.5
-------- -------- --------
(104.8) 64.6 352.6
======= ======= =======
</TABLE>
The tax charge of 58.5m pound sterling on profit, excluding exceptional items,
for the six months ended 30 September 2000 is based on the estimated effective
tax rate for the year ending 31 March 2001 of 26%.
7. Dividends
The interim dividend of 6.05p per ordinary share (1999: 5.59p) will be paid
on 15 January 2001 to shareholders on the register on 1 December 2000.
8. Earnings per ordinary share
Basic earnings per ordinary share for the six months ended 30 September 2000
of 28.0p (1999: 12.5p) is calculated based on profit for the period of 412.6m
pound sterling (1999: 183.6m pound sterling) and 1,474.8m (1999: 1,471.6m)
shares - being the weighted average number of shares in issue during the
period, excluding the shares held by employee share trusts.
Basic earnings per ordinary share on the adjusted profit for the six months
ended 30 September 2000 of 14.8p (1999: 12.6p) excludes exceptional items (see
notes 4 and 6) and goodwill amortisation totalling 193.9m pound sterling
(1999: (2.5)m) pound sterling, and is based on earnings of 218.7m pound
sterling (1999: 186.1m pound sterling).
For the purposes of calculating diluted earnings per share, earnings and the
weighted average number of shares have been adjusted for the effects of all
dilutive potential ordinary shares.
NATIONAL GRID GROUP plc
NOTES
<TABLE>
<CAPTION>
9. Net cash inflow from operating activities
<S> <C> <C>
Six months ended Year ended
30 September 31 March
2000 1999 2000
m m m
(pound sterling)
Operating profit of Group undertakings 336.2 279.1 572.1
Depreciation and amortisation 188.9 74.9 157.5
Profit on disposal of tangible fixed assets (6.2) (0.7) (4.3)
Increase in stocks (3.2) (1.8) (0.4)
(Increase)/decrease in debtors (76.8) 13.3 (21.9)
Decrease in creditors (79.0) (55.1) (11.5)
Decrease in provisions (12.6) (0.9) (6.8)
Other (3.9) 0.3 (2.7)
7.2 30.0 109.9
-------- -------- --------
343.4 309.1 682.0
======= ======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
10. Movement in net debt
<S> <C> <C>
Six months ended Year ended
30 September 31 March
2000 1999 2000
m m m
(pound sterling)
Movement in cash and overdrafts (10.3) 16.3 26.4
Cash inflow from management of
liquid resources (372.3) (5.9) (618.8)
Increase in borrowings (415.6) (25.1) (769.2)
-------- -------- --------
Change in net debt resulting from cash flows (798.2) (14.7) (1,361.6)
Acquisition of Group undertakings (161.9) - (611.7)
Certificates of tax deposit surrendered - - (5.9)
Exchange adjustments (138.1) - 29.9
Other movements (4.3) (4.6) (10.9)
-------- -------- --------
Movement in net debt in the period (1,102.5) (19.3) (1,960.2)
Net debt at start of period (2,663.6) (703.4) (703.4)
-------- -------- --------
Net debt at end of period (3,766.1) (722.7) (2,663.6)
======= ======= =======
</TABLE>
<PAGE>
NATIONAL GRID GROUP plc
NOTES
11. Differences between UK and US Generally Accepted Accounting
Principles
("GAAP")
The Group prepares its consolidated accounts in accordance with UK GAAP,
which differ in certain respects from US GAAP. The significant adjustments
necessary to restate net income and shareholders' funds in accordance with
US GAAP are set out below.
<TABLE>
<CAPTION>
<S> <C> <C>
a) Net income Six months ended Year ended
30 September 31 March
2000 1999 2000
m m m
(pound sterling)
Profit for the period, excluding
exceptional items 184.0 183.6 350.6
Exceptional items after taxation 228.6 - 797.8
-------- -------- --------
Net income under UK GAAP 412.6 183.6 1,148.4
-------- -------- --------
Adjustments to conform with US GAAP:
Deferred taxation (83.8) (17.9) (1.4)
Pensions 9.6 1.8 5.7
Share option schemes (4.8) (1.3) (5.4)
Tangible fixed assets 1.7 1.7 3.4
Financial instruments 5.1 (15.2) 27.9
Issue costs associated with EPICs (0.9) (0.9) (1.8)
EPICs liability 65.0 31.9 (115.0)
Severance costs 38.7 (3.3) (11.3)
Recognition of UK transmission income (12.7) - -
Goodwill - effect of US GAAP adjustments (5.9) - (0.2)
Share of associate's adjustments to
conform with US GAAP 22.8 2.8 (40.5)
-------- -------- --------
Total US GAAP adjustments 34.8 (0.4) (138.6)
-------- -------- --------
Net income under US GAAP 447.4 183.2 1,009.8
======= ======= =======
Basic earnings per share - US GAAP 30.3p 12.4p 68.6p
Diluted earnings per share - US GAAP 28.7p 12.2p 64.7p
Net income under US GAAP includes 267.5m pound sterling (1999 : nil pound
sterling; year ended 31 March 2000: 795.7m pound sterling) relating to net
exceptional gains which are treated as exceptional items under UK GAAP.
</TABLE>
<PAGE>
NATIONAL GRID GROUP plc
NOTES
11. Differences between UK and US Generally Accepted Accounting
Principles
("GAAP") (continued)
<TABLE>
<CAPTION>
<S> <C> <C>
b) Shareholders' funds At 30 September At 31
March
2000 1999 2000
m m m
(pound sterling)
Shareholders' funds under UK GAAP 3,233.4 2,057.5 2,909.0
-------- -------- --------
Adjustments to conform with US GAAP:
Deferred taxation (1,033.9) (722.4) (916.7)
Pensions 175.1 164.8 162.8
Shares held by employee share trusts (13.6) (15.3) (16.3)
Ordinary dividends 89.5 82.5 123.0
Tangible fixed assets (43.3) (46.7) (45.0)
Financial instruments 6.1 (20.9) 1.0
Issues costs associated with EPICs 4.6 6.4 5.5
EPICs liability (50.0) 31.9 (115.0)
Severance liabilities 4.1 7.6 5.5
Recognition of UK transmission income (12.7) - -
Regulatory assets 40.2 - -
Goodwill - effect of US GAAP adjustments 237.9 - 210.6
Share of associate's adjustments to conform
with US GAAP 23.1 (11.5) 21.3
Other adjustments 2.8 - -
-------- -------- --------
Total US GAAP adjustments (570.1) (523.6) (563.3)
-------- -------- --------
Shareholders' funds under US GAAP 2,663.3 1,533.9 2,345.7
======= ======= =======
</TABLE>
<PAGE>
Cautionary statement
This announcement contains certain statements that are neither reported
financial results nor other historical information. These statements are
forward-looking statements within the meaning of the safe-harbor provisions
of the US federal securities laws. Because these forward-looking statements
are subject to risks and uncertainties, actual future results may differ
materially from those expressed in or implied by the statements. Many of
these risks and uncertainties relate to factors that are beyond National
Grid Group's ability to control or estimate precisely, such as the ability
to obtain expected synergies from the acquisition in recent months of New
England Electric System and Eastern Utilities Associates and the agreed,
but not completed, acquisition of Niagara Mohawk, delays in obtaining or
adverse conditions contained in regulatory approvals, competition and
industry restructuring, changes in economic conditions, changes in energy
market prices, changes in historical weather patterns, changes in laws,
regulations or regulatory policies, developments in legal or public policy
doctrines, technological developments, the availability of new acquisition
opportunities, the timing and success of future acquisition opportunities
and other risk factors detailed in National Grid Group's reports filed with
the Securities and Exchange Commission. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of
the date of this announcement. The companies do not undertake any
obligation to publicly release any revisions to these forward-looking
statements to reflect events or circumstances after the date of this
announcement.
<PAGE>
Independent review report to National Grid Group plc
Introduction
We have been instructed by National Grid Group plc to review the financial
information set out on pages 9 to 19 and we have read the other information
contained in the interim report for any apparent misstatements or material
inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein,
is the responsibility of, and has been approved by, the directors. The
Listing Rules of the Financial Services Authority require that the
accounting policies and presentation applied to the interim figures should
be consistent with those applied in preparing the preceding annual
accounts, except where any changes and the reasons for them are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board. A review consists
principally of making enquiries of group management and applying analytical
procedures to the financial information and underlying financial data and,
based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review
excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope
than an audit performed in accordance with Auditing Standards and,
therefore, provides a lower level of assurance than an audit. Accordingly,
we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review, we are not aware of any material modifications
that should be made to the financial information as presented for the six
months ended 30 September 2000.
PricewaterhouseCoopers
Chartered Accountants
London
20 November 2000
<PAGE>
[LOGO]National Grid
<PAGE>
[LOGO] National Grid
Interim Results November 2000
[GRAPHIC]
<PAGE>
[LOGO] National Grid
Presentation by James Ross, Chairman
[GRAPHIC]
<PAGE>
[LOGO] National Grid
Presentation by Stephen Box, Group Finance Director
[GRAPHIC]
<PAGE>
[LOGO] National Grid
Total operating profit
----------------------
358.6 m (pound sterling) before goodwill amortisation and exceptional costs
- Up 77.6m (pound sterling) over last year
- National Grid USA contribution 148.6m (pound sterling)
- Share of Intelig start-up losses up by 63.8m
(pound sterling)
- UK transmission down by 11.1m (pound sterling)
<PAGE>
[LOGO] National Grid
UK Transmission
---------------
Turnover
- Price capped 429.0m (pound sterling) 9.0m (pound sterling)
Costs
- Controllable costs 109.8m (pound sterling) 3 percent real reduction
- On target for reduction of 6 percent real per annum over the
current price control period
TSS profit 7.8m (pound sterling) 2.7m (pound sterling) up
Operating profits
- Total 242.8m (pound sterling) 11.1m (pound sterling) down
<PAGE>
[LOGO] National Grid
Exchange rates
--------------
31 March --------------- 30 September
2000 Average 2000
USD/GBP 1.60 1.50 1.48
US Dollar
- Beneficial impact on US operating profits
- Negative impact on US financing costs and taxes
Brazilian Real
- Negative impact on reported losses
<PAGE>
[LOGO] National Grid
National Grid USA
-----------------
- Operating profit 148.6m (pound sterling)
- Distribution 73.9 m (pound sterling)
Volume growth 3.6 percent
(weather corrected)
- Transmission 20.5 m (pound sterling)
- Recovery of stranded costs and
generation 38.9 m (pound sterling)
- US/Canada interconnector 11.0 m (pound sterling)
- NEESCom 1.5 m (pound sterling)
<PAGE>
[LOGO] National Grid
National Grid USA - group impacts
---------------------------------
- Acquisition of EUA completed 19 April for 414m
(pound sterling)
Provisional fair value of net assets 213.7 m
(pound sterling)
Goodwill 200.3 m
(pound sterling)
- Operations of NEES and EUA integrated 1 May
Integration costs 46.8m
(pound sterling)
- Acquisitions earnings enhancing after goodwill
amortisation, before exceptional integration costs
- Annualised nominal pre-tax return 9.3 percent
<PAGE>
[LOGO] National Grid
Energis
-------
- Total turnover 368 m (pound sterling) 81 percent up
- Group EBITDA 65.5m (pound sterling) 71 percent up
- Operating profit before goodwill amortisation 6.6m
(pound sterling);
our share 2.5m (pound sterling)
- CGT Rollover relief
- NGG 34.6 percent stake now value at 2.8 billion
(pound sterling)
- NGG IRR 80 percent
<PAGE>
[LOGO] National Grid
International joint ventures
----------------------------
Joint ventures operating loss 55.4m (pound sterling) net
Electricity
- Transener (Argentina) - share of operating profit 6.8m
(pound sterling), up 1.3m (pound sterling)
- CEC (Zambia) - share of operating profit 2.8 m
(pound sterling), up 0.4m (pound sterling)
Telecoms
- Intelig (Brazil) - share of start-up losses 69.7 m
(pound sterling)
- Investment in Intelig to 30 September 495 m Dollars
(318.9 m (pound sterling))
<PAGE>
[LOGO] National Grid
Capital expenditure
-------------------
For the 6 months ended 30 September
million (pound sterling) 2000 1999
_______________________________________________________________________
UK Transmission 157.6 118.3
National Grid USA 60.5 -
Other 5.9 14.0
______________________________________________________________________
Total 224.0 132.3
<PAGE>
[LOGO] National Grid
Net Interest
------------
- Net interest up 68.4 m (pound sterling)
- Acquisitions of NEES and EUA
- Proceeds from sale of Energis shares in February 2000
- 17.4m (pound sterling) benefit from closing out sterling-
fixed-interest rate swaps
- Pensions credit of 6.1m (pound sterling) (National Grid
USA)
- Interest cover 4.7x (excluding exceptional items, goodwill
and exchangeable bonds)
<PAGE>
[LOGO] National Grid
Effective tax rate
------------------
- Underlying Group effective tax rate 26 percent for 2000/01
- 20m (pound sterling) of tax provisions released
<PAGE>
[LOGO] National Grid
Exceptional profits
-------------------
228.6m (pound sterling) post tax net profit
- 132.1m (pound sterling) gain arising from September share placing and
other shares issued by Energis
- 140m (pound sterling) tax credit arising from the realisation of a
capital loss for tax purposes as a result of Group restructuring
- 43.5m (pound sterling) (post-tax) costs associated with the
integration of NEES and EUA (46.8m (pound sterling)pre-tax)
<PAGE>
[LOGO] National Grid
Earnings and dividend per share
-------------------------------
- Basic EPS excluding exceptional items and other one-offs,
goodwill amortisation and telecoms start-up losses up
32.6 percent to 17.9 p
- DPS up 8.2 percent to 6.05 p
<PAGE>
[LOGO] National Grid
Summary
-------
- In great shape
- US operating profits (excluding goodwill amortisation) as
percent of Group total
At 30 September 35 percent
post NiMo acquisition 60 percent
- New dividend policy
Aim of 5 percent real increase in each of next 5 years
<PAGE>
[LOGO] National Grid
Presentation by David Jones, Group Chief Executive
[GRAPHIC]
<PAGE>
[LOGO] National Grid
Telecoms strategy
-----------------
Leveraging network experience
- Energis - building on data and internet strength in UK and Europe
- NEESCom - natural extension of National Grid USA
- Joint ventures - with complementary partners
Poland with Energis
Argentina and Chile with Williams
Brazil with Sprint and France Telecom
<PAGE>
[LOGO] National Grid
Intelig
-------
- Brazil - rapid market growth
- Higher than budgeted losses
- Intelig is addressing the problems
Information system improvements
Co-billing benefits by the end of March 2001
Pricing changes
Reduction of interconnection and leased line costs
- Roll-out of data and internet products progressing
- Sprint resumes participation
Pursuing debt financing from equipment suppliers
<PAGE>
[LOGO] National Grid
UK transmission
---------------
- New price control - stable framework for next 5 years
- Assumes cost cutting of 4 percent pa in real terms
- Tighter consents policy for gas fired stations lifted
- Increased income if more that 5GW built
[GRAPHIC]
<PAGE>
[LOGO] National Grid
UK electricity
--------------
- NETA delay simplifies transition to SO arrangements
- SO final proposals by January
- Sale of ESIS and EPFAL to Logica
[GRAPHIC]
<PAGE>
[LOGO] National Grid
National Grid USA
-----------------
- Target ROI of 10.5 percent by 2003/04
- First half ROI 9.3 percent
- Disposal of non-core businesses largely complete by end this quarter
- Sale of nuclear assets by end of 2001
- Existing rate settlements allow recovery of rising fuel costs
[GRAPHIC]
<PAGE>
[LOGO] National Grid
Acquisition of Niagara Mohawk
-----------------------------
- Experienced integration team
- Meeting key officials in New York State
- Rate plan filing targeted for December
- Completion expected by late 2001
<PAGE>
[LOGO] National Grid
US transmission
---------------
- Congestion costs have risen tenfold to around 200 million
dollars pa
- Developing proposals to FERC with other transmission owners and the
ISO
<PAGE>
[LOGO] National Grid
Summary
-------
- Strong performance in electricity businesses
- Secured regulatory stability in the UK for 5 years
- Niagara Mohawk changes profile of Group
- Establish wide ranging telecoms portfolio
- New dividend policy reflects our confidence in future
prospects of the Group
<PAGE>
[LOGO] National Grid
[GRAPHIC]
<PAGE>
[LOGO] National Grid
[GRAPHIC]
<PAGE>
The proxy statement/prospectus in definitive form to be filed with
the Securities and Exchange Commission (the "SEC") by National Grid
and Niagara Mohawk in connection with the transaction will contain
important information regarding the transaction and we urge you to
read it and any other relevant documents when they become available.
A free copy of the proxy statement/prospectus and other documents
filed by the two parties with the SEC is available at the SEC's web
site at http://www.sec.gov.
