LONDON – For the six months ended Sept. 30, National Grid plc (NYSE: NGG), the parent of U.S. electric and natural gas utility National Grid USA, posted a profit of 425 million British pounds (nearly $642 million at today’s exchange rate) or 82.3 percent less than the year-ago £2.40 billion ($3.63 billion). The decline came despite a first-half operating profit that rose 4 percent to £1.08 billion ($1.63 billion), led by increases in U.K. natural gas sales.
Earnings per diluted share fell to 16.9 pence (25.5 cents) from the year-ago 89.4 pence ($1.35).
Expenses related to Natural Grid’s acquisition of Brooklyn-based KeySpan Corp. helped boost first-half net financing costs to £524 million ($791 million), an 86-percent increase from a year ago. Results for the period just ended also included after-tax expenses of £118 million for “exceptional items and remeasurements for continuing operations,” which were partly offset by “stranded-cost recoveries” that added £93 million ($140 million) to after-tax earnings, the company said.
The company’s U.S. segment posted an operating profit of £83 million ($125 million), an 8-percent increase from the year-ago £77 million ($116 million), thanks in part to the KeySpan acquisition. The U.K. segment posted an operating profit of £508 million, a 1-percent increase from the 2007-2008 first-half profit of £501 million.
“We have delivered a good operating and financial performance this period,” CEO Steve Holliday said in a statement accompanying today’s report. “Our first-half earnings reflect the seasonality of the former KeySpan businesses” in the U.S. Northeast, he added.
The utility’s natural gas distribution business nearly doubled when it completed its KeySpan acquisitions on Aug. 24, 2007 (READ MORE), National Grid noted in its report. “The profitability of our U.S. gas networks – including the former KeySpan gas businesses – is now heavily weighted to the second half of the year, reflecting the highly seasonal nature of those operation which National Grid acquired last year, nearly doubling the size of its business,” the company said.
Highlights of the period included:
• The sale of KeySpan’s former Ravenswood generating station in New York City, which was acquired by TransCanada for $2.9 billion in a deal that closed Aug. 26. “This sale price was significantly ahead of market expectations and rapidly crystallized shareholder value,” the company said. “We are on track to achieve our target of $100 million of KeySpan synergy savings by March 2009,” Holliday added, noting that “at the end of September, we had delivered savings at a run rate of $56 million.”
• Capital investments totaling £1.6 billion ($2.4 billion) – £684 million ($1.03 billion) in U.K. and £72 million (nearly $109 million) in U.S. investments – “in line with our plans to invest around £3.2 billion ($4.8 billion) for the year, which we project will grow our U.K. regulatory asset base by over 6 percent and our U.S. rate base this year by around 4 percent,” Holliday said. “This will earn returns above our cost of capital, and grow our future earnings. Our plans over the medium term to invest a total of around £3bn per year remain on track, and this investment is expected to be financed from internal cash flow and borrowings, but [only] when we have regulatory certainty that it will deliver appropriate returns.”
• And the repurchase of 85.5 million shares, at a total price of about £594 million ($897 million).
Going forward, Holiday said, “we remain on track to deliver [results] in line with our expectations for the full year.”
“National Grid is well-positioned to deliver low-risk, organic growth,” the CEO added. “We have a strong investment pipeline that we continue to fund successfully, and a secure, progressive dividend policy. We remain focused on executing our strategy and have made good progress in this period, benefiting both shareholders and customers.”
The company’s board of directors therefore has approved an interim dividend of 12.46 pence per U.K. share and 94.76 cents per American Depositary Share, “in line with our policy to target growth in dividends per ordinary share [in British currency] by 8 percent in each of the four financial years through to 31 March 2012,” Holliday said. Those dividends are payable Jan. 21 to shareholders of record on Dec. 5.
National Grid, a division of the U.K.-based National Grid plc (NYSE: NGG, LSE: NG), distributes electricity to approximately 3.3 million customers in Massachusetts, New Hampshire, New York and Rhode Island and natural gas to about 3.4 million customers in those states. Additional information, including the parent company’s 28-page half-year report, is available at www.NationalGridUS.com.
