Interim Results November 2000

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Interim Results November 2000
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J A M E S R O S SC H A I R M A N
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S T E P H E N B O XG R O U P F I N A N C E
D I R E C T O R
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Total operating profit

• 358.6m before goodwill amortisation and
  exceptional costs
• Up 77.6m over last year
• National Grid USA contribution 148.6m
• Share of Intelig start-up losses up by 63.8m
• UK transmission down by 11.1m

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UK transmission

• Turnover
• Price capped 429.0m 9.0m down
• Costs
• Controllable costs 109.8m 3 real reduction
• On target for reduction of 6 real per annum over
  the current price control period
• TSS profit 7.8m 2.7m up
• Operating profits
• Total 242.8m 11.1m down

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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

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National Grid USA

• Operating profit 148.6m
• Distribution 73.9m
• Volume growth 3.6 (weather corrected)
• Transmission 20.5m
• Recovery of stranded costs and generation 38.9m
• US / Canada interconnector 11.0m
• NEESCom 1.5m

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National Grid USA - group impacts

• Acquisition of EUA completed 19 April for 414m
• Provisional fair value of net assets 213.7m
• Goodwill 200.3m
• Operations of NEES and EUA integrated 1 May
• Integration costs 46.8m
• Acquisitions earnings enhancing after goodwill
  amortisation, before exceptional integration
  costs
• Annualised nominal pre-tax return 9.3

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Energis

• Total turnover 368m 81 up
• Group EBITDA 65.5m 71 up
• Operating profit before goodwill amortisation
  6.6m our share 2.5m
• CGT Rollover relief
• NGG 34.6 stake now valued at 2.8bn
• NGG IRR 80

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International joint ventures

• Joint ventures operating loss 55.4m net
• Electricity
• Transener (Argentina) - share of operating profit
  6.8m, up 1.3m
• CEC (Zambia) - share of operating profit 2.8m,
  up 0.4m
• Telecoms
• Intelig (Brazil) - share of start-up losses
  69.7m
• Investment in Intelig to 30 September 495m
  (318.9m)

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Capital expenditure
For the 6 months ended 30 September m
2000 1999
UK Transmission 157.6 118.3 National Grid
USA 60.5 - Other 5.9 14.0 Total 224.0 132.3
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Net interest

• Net interest up 68.4m
• Acquisitions of NEES and EUA
• Proceeds from sale of Energis shares in February
  2000
• 17.4m benefit from closing out
  sterling-fixed-interestrate swaps
• Pensions credit of 6.1m (National Grid USA)
• Interest cover 4.7x (excluding exceptional items,
  goodwill and exchangeable bonds)

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Effective tax rate

• Underlying Group effective tax rate 26 for 2000
  / 01
• 20m of tax provisions released

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Exceptional profits

• 228.6m post tax net profit
• 132.1m gain arising from September share placing
  and other shares issued by Energis
• 140m tax credit arising from the realisation of
  a capital loss for tax purposes as a result of
  Group restructuring
• 43.5m (post-tax) costs associated with the
  integration of NEES and EUA (46.8m pre-tax)

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Earnings and dividend per share

• Basic EPS excluding exceptional items and other
  one-offs, goodwill amortisation and telecoms
  start-up losses up 32.6 to 17.9p
• DPS up 8.2 to 6.05 p

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Summary

• In great shape
• US operating profits (excluding goodwill
  amortisation) as of Group total
• At 30 September 35
• post NiMo acquisition 60
• New dividend policy
• Aim of 5 real increase in each of next 5 years

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D A V I D J O N E SG R O U P C H I E F E X
E C U T I V E
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Telecoms strategy

• Leveraging network experience
• Energis - building on data and internet strength
  in UKand 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

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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

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UK transmission

• New price control - stable framework for next 5
  years
• Assumes cost cutting of 4 pa in real terms
• Tighter consents policy for gas fired stations
  lifted
• Increased income if more than 5GW built

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UK electricity

• NETA delay simplifies transition to SO
  arrangements
• SO final proposals by January
• Sale of ESIS and EPFAL to Logica

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National Grid USA

• Target ROI of 10.5 by 2003 / 04
• First half ROI 9.3
• 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

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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

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US transmission

• Congestion costs have risen tenfold to around
  200m pa
• Developing proposals to FERC with other
  transmission owners and the ISO

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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

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