LONDON – National Grid plc, the British company that is Rhode Island’s main gas and electricity provider, said today its operating profit increased 12 percent to 2.9 billion pounds ($4.4 billion) in 2008-09 thanks in part to the strengthening of the U.S. dollar.
However, National Grid (NYSE: NGG, LSE: NG) said its net profit fell 70 percent, to 944 million pounds ($1.4 billion), for the year ending March 31, compared with earnings of 3.2 billion pounds during the previous 12 months. The company said last year’s earnings were boosted by the one-time sale of businesses in Australia, Bloomberg News reported.
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National Grid’s operating costs jumped by 53 percent to 13.1 billion pounds, in part due to damage caused by the severe ice storms that hit the Northeast last winter, The Associated Press reported. Revenue rose by 37 percent to 15.6 billion pounds, about two-thirds of which came from the company’s operations in the Northeast U.S.
Last November, the R.I. Public Utilities Commission (PUC) approved a 10.9 increase in National Grid’s revenue from gas distribution and a maximum return on equity of 10.5 percent. The changes took effect on Dec. 1.
National Grid said its New England gas distribution made an average return of 8 percent in 2008-09, below the amount allowed by its regulators. The company said it expects that figure to rise as it makes more off customers in Rhode Island and New Hampshire thanks to rate increases.
The utility is currently in the process of finalizing new electricity rates that will take effect in January, and said it wants to increase the amount it makes off customers in Rhode Island and Massachusetts. Its average return in New England was 5.9 percent in 2008-09.
After currency adjustments, National Grid’s net debt increased to 22.7 billion pounds, from 17.6 billion pounds the previous year.
The company increased its dividend by 8 percent, meeting a self-imposed annual target.
National Grid said it expects a “strong performance” in the current fiscal year because of lower borrowing costs, which will reduce the cost of maintaining and expanding its networks. (As a monopoly, about 95 percent of National Grid’s annual returns are set by regulators such as the PUC.) The company said it is working to lock in current interest rates.
Steve Holliday, National Grid’s CEO, told analysts he hopes Moody’s Investors Service will raise the company’s credit rating, which is currently listed as negative, to reflect lower borrowing costs.
“These results are excellent and show that, even in these difficult economic times, National Grid’s low-risk business model is robust,” Holliday said, according to The Financial Times. “We have had a good start to 2009-10 and are confident that it will be another strong year for us.”
Lower energy prices have not hurt National Grid because the utility earns its profit on the service of distributing electricity and gas to customers, not on sales of the actual commodity, which are passed on to the customer without a markup.
National Grid said it plans to invest about 3.4 billion pounds in its infrastructure this year, slightly more than the 3.2 billion pounds it invested in 2008-09.
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 is available at NationalGridUS.com.
