National Grid (NGG) 2005年年度報告「NYSE」.pdf

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1、Experts in NetworksAnnual Report and Accounts 2004/05 National Grid Transco Annual Report and Accounts 2004/05790592 cover.qxp 17/6/05 5:01 pm Page fc1National Grid TranscoAnnual Report and Accounts 2004/05The strength of our results demonstrates thesuccessful delivery of our strategy and the qualit

2、y of our overall operational performance in both the UK and the US.Cautionary StatementThis document contains certain statements that are neither reportedfinancial results nor other historical information.These statementsare forward-looking statements within the meaning of Section 27Aof the Securiti

3、es Act of 1933,as amended,and Section 21E of theSecurities Exchange Act of 1934,as amended.Because theseforward-looking statements are subject to assumptions,risks anduncertainties,actual future results may differ materially from thoseexpressed in or implied by such statements.Many of theseassumptio

4、ns,risks and uncertainties relate to factors that arebeyond our ability to control or estimate precisely,such as delays in obtaining or adverse conditions contained in regulatory approvals,competition and industry restructuring,changes in economicconditions,currency fluctuations,changes in interest

5、and tax rates,changes in energy market prices,changes in historical weather patterns,changes in laws,regulations or regulatory policies,developments in legal or public policy doctrines,the impact ofchanges to accounting standards,technological developments,the failure to retain key management,the av

6、ailability of newacquisition opportunities or the timing and success of futureacquisition opportunities.Other factors that could cause actualresults to differ materially from those described in this documentinclude the ability to continue to integrate the US and UK businessesacquired by or merged wi

7、th the Group,the failure to achievereductions in costs or to achieve operational efficiencies,unseasonable weather impacting on demand for electricity and gas,the behaviour of UK electricity market participants on systembalancing,the timing of amendments in prices to shippers in the UKgas market,the

8、 performance of our pension schemes and the regulatory treatment of pension costs,the impact of the separationand the planned disposals of four of our UK Gas Distributionnetworks and any adverse consequences arising from outages onor otherwise affecting energy networks which we own and/oroperate.For

9、 a more detailed description of these assumptions,risksand uncertainties,together with any other risk factors,please seeour filings with the US Securities and Exchange Commission(and inparticular the Risk Factors section of this document).Readers arecautioned not to place undue reliance on these for

10、ward-lookingstatements,which speak only as of the date of this document.National Grid Transco does not undertake any obligation to releasepublicly any revisions to these forward-looking statements to reflectevents or circumstances after the date of this document.8,521mGroup turnover2004/052003/04200

11、2/038,521m8,875m8,833mOperating profit2004/052003/042002/032,212m1,852m2,213m1,837m2,148m1,696m 1,852m 2,212mAdjusted*Continuing operations*Excludes impact of exceptional items and goodwill amortisationNet cash inflow from operating activities2004/052003/042002/033,103m2,909m3,058m2,810m3,154m2,826m

12、 2,909m 3,103mAdjustedExcludes impact of exceptional items Ordinary dividends2004/052003/042002/0323.7p19.8p17.2pon last yearEarnings per share2004/052002/0335.9p29.5p35.0p27.1p11.4pAdjusted*Excludes impact of exceptional items and goodwill amortisation23.7p+20%29.5p 35.9p2003/0433.9pFinancial Highl

13、ightsContents01Experts in Networks02Chairmans Statement04Chief Executives Review07Operating Safely09Operating Performance12Investing for Growth13Investing in our People15Our Responsibility for the Environment17Our Responsibility to Society18Board of Directors21Operating and Financial Review21Introdu

14、ction25Operating Review45Financial Review60Directors Report62Corporate Governance and Risk and Compliance Management62Corporate Governance67Risk and Compliance Management69Directors Remuneration Report80International Financial ReportingStandards82Independent Verifiers Report83Independent Auditors Re

15、port 84Statement of Directors Responsibilities 85Accounting Policies88Group Profit and Loss Account89Balance Sheets90 Group Cash Flow Statement90 Group Statement of Total Recognised Gains and Losses91 Notes to the Accounts144 Glossary of Terms145 Definitions146 Summary Group Financial Information147

16、 Shareholder Information790592 cover.qxp 17/6/05 5:01 pm Page ifc2Annual Report and Accounts 2004/05 National Grid TranscoExperts in NetworksNational Grid Transco is dedicated to being theworld s premier network utility,primarily focused on delivering energy safely,reliably and efficiently.We own th

17、e high-voltage electricity transmissionsystem in England and Wales and operate thesystem across Great Britain.We also own andoperate the high pressure gas transmission systemin Britain.In addition,we have electricitytransmission systems in the northeastern US.Our local distribution networks deliver

18、gas to homesand businesses throughout Britain.We distributeelectricity in the northeastern US to approximately3.3 million customers and gas in upstate New Yorkto around 565,000 customers.We also have a number of businesses operating in related areas such as wireless networkinfrastructure for broadca

19、st and mobile telephones,metering and interconnectors.All our networks are highly complex requiring a unique mixture of skills,experience and plannedinvestment.01Experts in Networks790592 pp001-pp08.qxp 17/6/05 4:21 pm Page 01Chairmans StatementNational Grid TranscoAnnual Report and Accounts 2004/05

20、02This has been a particularly active year inwhich we have taken two important strategicsteps.The planned sales of four of our UK Gas Distribution networks for 5.8 billionmeans we can return 2 billion of value to our shareholders and repay around 2.3 billion of debt when the sales arecompleted.We al

21、so acquired the UKoperations of Crown Castle InternationalCorp.for 1.1 billion and are now the UK sleading independent provider of wirelessinfrastructure services.In everything we do,safety is paramount.I am therefore pleased that we haveachieved still higher standards of safetyacross the Group in o

22、ur drive towards ourtarget of zero incidents.Our operational performance has also beengood and we have continued to achieveworld-leading standards of reliability in thedelivery of energy.In the UK last year,wedelivered all but one unit in five million units ofthe electricity demanded a standardbette

23、red only once in the last decade.We are proud that,for a second year,thestrength of our performance has beenrecognised by our 2nd place ranking inBusiness in the Community s CorporateResponsibility Index.Indeed,we have beenrated as the top utility in this index for thesecond year running.Group resul

24、ts and dividendThese achievements complement asuccessful set of financial results despite the continued weakness of the US dollar,theimpact of a warm winter on our UK GasDistribution business and increasedreplacement expenditure.The Group delivered a solid financialperformance for the year ended 31

25、March2005.We have continued to drive adjustedearnings per share*,up 6%over the We are committed to operating our networks to thehighest standards of safety,reliability and efficiency.Chairmans Statement790592 pp001-pp08.qxp 17/6/05 4:22 pm Page 02Annual Report and Accounts 2004/05 National Grid Tran

26、scoChairmans Statement03same period last year from 33.9 penceto 35.9 pence.Adjusted operating profit*rose by 3%from 2,148 millionto 2,212 million,based on a constant US dollar/sterlingexchange rate.In the light of these results and ourconfidence in the Group s longer-termprospects,your Board is reco

27、mmending a final dividend of 15.2 pence per ordinaryshare(US$1.3869 per American DepositaryShare(ADS).This brings the total dividend for the year to 23.7 pence perordinary share(US$2.1734 per ADS).Thiswill bring dividend growth of nearly 40%since the merger of the Lattice and NationalGrid groups.Fro

28、m this higher dividend level,we will then maintain our target of 7%annualdividend growth over the three years toMarch 2008.The return of 2 billion to shareholders,following the planned sales of the UK GasDistribution networks,will be by way of a B share scheme,followed by a shareconsolidation.This w

29、ill provide shareholderswith the choice of receiving the return as a dividend or as a repurchase of B shares.More information on this is provided in theCircular to Shareholders.Strategic directionOur strategy remains focused on creatingvalue for shareholders through growingorganically by investing i

30、n our networkinfrastructure and operating it moreeffectively,as well as through selectiveacquisitions.We continue to exercise strictdiscipline in the allocation of capital to ensurethat any acquisition is capable of enhancingvalue no other criteria being acceptable.To strengthen our Group identity a

31、fter theplanned sales of four of our UK GasDistributionnetworks,the Board isproposing to change the Group name fromNational Grid Transco to National Grid.Thiswill reflect the new shape of the Group andachieve a consistent identity in the UK andthe US,where we have been unable to usethe Transco name.

32、GovernanceSince the formation of National Grid Transco,we have been committed to pursuingleading governance practices.We strive for constant improvement through rigorousannual evaluation of our Board andExecutive effectiveness,which is describedon page 63.Modern boards,operating internationally,face

33、 constant change on many fronts.During the year,we have positioned theGroup for the introduction of the newInternational Financial Reporting Standards(IFRS),as well as embarking on extensivepreparations for reporting management sinternal control assessment underSarbanes-Oxley in 2006/07.The BoardInc

34、reasingly,important work is delegated to Board Committees.We are fortunate that ours are led by highly competent Non-executive Directors who report regularly to the Board on key issues,decisions and recommendations.In order to ensure that Committees are refreshed and the workload spread,Committeemem

35、bership has recently been reviewed and adjustments made.The Nominations Committee has paidcareful attention to the preparation ofsuccession and development plans forExecutive Directors and the leadership groupbelow the Board.We also consider,on aregular basis,our Non-executive Directorsuccession pla

36、ns and development needsas well as ensuring our skill and experiencemix is fit for purpose.As announced at last year s Annual GeneralMeeting,Deputy Chairman James Rossretired from the Board in October 2004 on the second anniversary of the merger.I would like to record my very deepappreciation for th

37、e significant contributionthat James made to the establishment of our new Group.James s role as SeniorIndependent Director has been taken on byKen Harvey.I am pleased to announce theappointment of John Allan,Chief Executiveof Exel plc,as a new Non-executive Directorwith effect from 1 May 2005.We wis

38、h Kenand John every success in their new roles.Investing in the communityWe continue to place considerable emphasis on our relationships with the local communities we serve and the widersocial needs of the societies in which weoperate.In order to enhance Group-wide co-ordination across our operation

39、s,a new Social Policy Committee has beenestablished,which will absorb the previousvaluable work undertaken by the NationalGrid Transco Foundation.The Committee is chaired by Roger Urwin,our Group Chief Executive.One initiative of which I am particularly proud is the Young Offender Training andEmploy

40、ment Programme,which won aNational Training Award for outstandingachievement in 2004.This year,the schemewas also commended by two parliamentarycommittees as making a real contribution to the rehabilitation of offenders.Theprogramme trains young offenders in the final stages of their prison sentence

41、s.Oncompletion of the course,they are offeredavailable jobs in their home areas.NationalGrid Transco is spearheading the national roll-out of this Government-backedprogramme.Over the past year,some 50companies have committed to replicate thescheme across a range of business sectors.PeopleWe have ach

42、ieved a great deal this year and none of it would have been possiblewithout the skills and dedication of everyonein the Group.I would like to thank theExecutive team for its strong leadership andall our employees for their commitment andenthusiasm to achieving our aim to be theworld s premier networ

43、k utility.In particular,I pay tribute to the considerableefforts of all those involved in the complexnetwork sales process in the UK and thereadiness of our employees to respond to calls for help in the US when Florida wasdevastated by hurricanes.OutlookThe continued robust performance of ourbusines

44、ses across the Group underpins ourconfidence that we will continue to createvalue for shareholders,earning premiumreturns through the delivery of our strategy.Sir John ParkerChairman*Excludes the impact of exceptional items and goodwill amortisationRestated for Financial Reporting Standard(FRS)20Res

45、tated from 2,213 million on an actual currency basis to aconstant currency basis using 2004/05 average US dollar/sterlingexchange rate790592 pp001-pp08.qxp 17/6/05 4:22 pm Page 03Chief Executives Review National Grid TranscoAnnual Report and Accounts 2004/0504Chief Executives ReviewIt hasbeenanother

46、goodyearforNationalGrid Transco,with improved operational and financial performance.We are delivering our strategy.790592 pp001-pp08.qxp 17/6/05 4:22 pm Page 04?Good financial performance,withunderlying earnings per share up by 6%.?Good organic growth,including acontinued high level of investment of

47、 1.9 billion during the year.?Excellent reputation as a responsiblebusiness.In April 2005,we were placed2nd in Business in the Community s thirdCorporate Responsibility Index.We alsoimproved our placing in the Dow JonesWorld and Stoxx sustainability indices,which together influence some 2 billion of

48、responsible investment around the world.We also made two strategic steps.Our most significant move was the agreement,in August 2004,to sell four of our GasDistribution networks in the UK at a price of5.8 billion,a considerable premium to theregulatory value at 31 March 2005.We haveannounced the prop

49、osed return of 2 billionto shareholders with around 2.3 billion ofthe proceeds to be used to repay debt.Followingthe completion of these sales,which are now anticipated to occur on 1 June 2005,we will still own the largest GasDistribution network in the country,but with a new unified structure which

50、 will enable usto place an increased emphasis on safety andefficiency,and on the sharing of bestpractice.In August,we also completed the 1.1 billionpurchase of the UK operations of CrownCastle International Corp.Combined with our existing Gridcom UK business,we arenow the UK s leading independent pr

51、ovider of towers and masts for mobile phoneoperators.We are one of two providers ofbroadcast transmission towers in the UK,providing transmission services to the BBCand BSkyB amongst others.Our corenetwork skills put us in a strong position totake advantage of the growing demand in this key area,whi

52、ch we refer to as wirelessinfrastructure.In the following pages,we take a closer look at our progress in the key areas of our business our safety,our operations,our investment,our people,and ourcommitment to the environment and society.More detail can be found in our Operatingand Financial Review on

53、 pages 21 to 59 and on our website .Annual Report and Accounts 2004/05 National Grid TranscoChief Executives Review05StrategyOur goal is to be the world s premier networkutility.We concentrate on regulated networkswhich transport gas and electricity.Ourworld is highly regulated,which means thatgood

54、relationships with economic and safetyregulators and all our stakeholders areessential to our success because they setthe frameworks within which we operate.Ourability to manage this complexenvironment puts us in a strong position to create opportunities and to make superiorfinancial returns.We aim

55、for operational excellence,setting ourperformance against efficiency benchmarksand regulatory targets,with the utmostattention to safety and reliability.We instil a disciplined approach to capitalmanagement which means that investmentopportunities,organic or strategic,areconsidered only where value

56、can be created.The skills of our employees are at the heart of our success in reaching world-classsafety,operating and financial performance.We rely on their skills to take advantage ofopportunities to grow our businessorganically and to invest in new energydelivery networks as well as other network

57、-related businesses which we believe have an acceptable risk profile.ProgressDelivering our strategy is our day-to-daywork.We continue to look to improve ourperformance safety,financial andoperational;share knowledge and skills;and invest responsibly for growth.Our drive to be the best that we can b

58、e is key to theresults of our business.We have made significant operationalprogress:?Improved safety performance,with 29%fewer incidents where employees neededto taketime off work compared with2003/04.?Good operating performance,includingthe reliable delivery of all but one unit out of every five mi

59、llion units of theelectricity demanded in the UK.790592 pp001-pp08.qxp 17/6/05 4:22 pm Page 05Chief Executives ReviewNational Grid TranscoAnnual Report and Accounts 2004/05National Grid TranscoAnnual Report and Accounts 2004/05There is considerable scope for organic growthwithin our existing UK and

60、US businesses and this will be our first priority.Financial performanceWe have delivered a good operatingperformance across the Group.We havecontinued to produce strong operating cash flows and have invested 3 billion forfuture growth.Adjusted operating profit*from our UKelectricity and gas transmis

61、sion businessincreased 7%compared with last year from759 millionto 809 million,and from ourUS electricity transmission business was up to 123 million,an increase of some 3%,based on a constant US dollar/sterlingexchange rate.Our UK Gas Distribution businesscontribution to the Group s adjustedoperati

62、ng profit*was down to 570 million,due,as expected,to a decline in formulaincome,exacerbated by a very mild winter,and to the increased investment in our mainsreplacement programme.However,whilstmanaging the highly complex process ofselling four regional networks,controllablecosts were reduced by ano

63、ther 3%in real terms.The performance from US electricity and gas distribution was particularly strong,withadjusted operating profit*up by 15%to 374 million compared with 325 millionlast year,based on a constantUSdollar/sterling exchange rate.This increasewas largely attributable to the continuedsucc

64、ess of our efficiency programmes.Adjusted operating profit*for wirelessinfrastructure was up 40 million at 46 milliondue to the strategic acquisition of the UKoperations of Crown Castle InternationalCorp.in August 2004.The business isperforming in line with the Group s expectationsand the integratio

65、n with the Group s existingbusiness,Gridcom UK,is on track.The Group s other activities contributed162 million to adjusted operating profit*,anadditional 66 million(69%)compared with 96 millionlast year.This reflectedincreased property stock sales by SecondSiteProperty,elimination of losses from Ful

66、crumConnections and items relating to insurance,in part offset by the expected impact of lowerprices charged by the Group s Meteringbusiness under new contracts signed with itsgas supply customers.OutlookWe see considerable scope for organicgrowth within our existing UK and USbusinesses and this wil

67、l be our first priority.We will do this by investing appropriately and continuing to control costs in our corebusinesses.Overall,we will remain focused on ourstrategyto achieve world-class performanceand deliver premium returns in a responsiblemanner for our shareholders.Roger UrwinGroup Chief Execu

68、tive06*Excludes the impact of exceptional items and goodwill amortisationRestated for FRS 20790592 pp001-pp08.qxp 17/6/05 4:22 pm Page 06During 2004/05 we included,for the first time,directly supervised contractors in ouremployee safety statistics for UK GasDistribution,as this more accuratelyrecogn

69、ises the day-to-day management oftheir safety performance.When the numberof Lost Time Injuries(LTIs)in 2003/04(254)isrestated to include this type of contractor,the number of LTIs across the Group hasreducedfrom 283 in 2003/04 to 201 in2004/05,a 29%improvement.The GroupIncident Frequency Rate(LTIs p

70、er 100,000hours worked)over the same period hasimproved from 0.51 to 0.37,a 27%improvement.These are very encouraging figures,makingus more determined than ever to eliminate all injuries.We are putting greater focus on contractorsafety.As part of this,we have activelyengaged our contractors in repor

71、ting nearmisses both in the UK and US.During2004/05,contractor LTIs across the Grouphave fallen by 37%.Against this much improved background,we record with regret the following deathsassociated with our operations.In separateincidents,two contractors died whileworking on our US electricity distribut

72、ionsystem and one contractor died whiletravelling in the UK between work sites.Sadly too,an elderly member of the publicdied after being hit by a vehicle from our UKGas Distribution operations.In the UK,anemployee died while travelling to work.Our networks deliver vital energy andservices to consume

73、rs,safely and reliablyeach and every day.We aim to ensure that all our networks are properly designed,installed,monitored and maintained to do their jobs.Annual Report and Accounts 2004/05 National Grid TranscoIn the UK,there is substantial investment torenew certain iron gas mains with modernmateri

74、als,carried out as part of Health andSafety Executive(HSE)requirements.Wehave decommissioned approximately 5%more iron mains compared with last year.This means 2004/05 is another year wherewe have made significant progress towardsthe delivery of the HSE s long-term ironmains replacement programme,ma

75、king our network safer.We manage Great Britain s national gasemergencyservice.We again exceededourtargets on safety-related standards ofservice more than 98%of uncontrolledgas escapes(where the gas leak cannot bestopped by turning the gas supply off at themeter)were attended within one hour andmore

76、than 99%of controlled gas escapes(where the gas leak can be stopped at themeter)were attended within two hours.Wewill continue to manage the national gasemergency number(0800 111 999)onbehalf of all gas transporters following thenetwork sales.During late summer 2004,Florida wasbattered by hurricanes

77、,leaving millions ofpeople without power.On two occasionswithin a matter of weeks,crews from ourNew York and New England operationstravelled to Florida to help restore powerfollowing requests for aid by one of thestate s power companies.Each time,around100 of our employees answered the call forhelp.

78、The assistance included overhead linecrews supported by employees andsupervisors from Fleet Management andTelecommunicationsand staff from ourMobile Emergency Operations Centre toprovide logistical support.Annual Report and Accounts 2004/05 National Grid TranscoOperating Safely07Safety is paramount

79、and we constantly emphasise the importance for each of us to ensure our ownsafety,the safety of our colleagues,our contractorsand the public,as well as the safety of our networks.Operating SafelyDuring late summer 2004,Florida wasbattered by hurricanes,leaving millionsof people without power.On twoo

80、ccasions within a matter of weeks,crews from our New York and NewEngland operations travelled to Floridato help restore power following requestsfor aid by one of the states powercompanies.790592 pp001-pp08.qxp 17/6/05 4:22 pm Page 07Operating SafelyNational Grid TranscoAnnual Report and Accounts 200

81、4/05National Grid TranscoAnnual Report and Accounts 2004/0508Top A member of one of our overheadline teams from Engineering Servicesworking on a transmission tower.OurUK electricity transmission systemincludes some 4,500 miles of overheadlines.Over the next few years,weanticipate increasing investme

82、ntsubstantially in replacing parts of the UKelectricity network,as these assets will be due for renewal.Bottom Following completion of thenetwork sales,the national emergencynumber(0800 111 999)will remain thesame and we will continue to manage iton behalf of all gas transporters.Operating safelyIn

83、our UK Gas Distribution business,ourengineers respond to over one millionreports of controlled and uncontrolledgas escapes from the public each year;assessing each situation and making safe.More than 98%of uncontrolled gasescapes(where the leak cannot be stoppedby turning off the supply at the meter

84、)areattended within one hour.This is the frontline of safety delivery.Wayne Henden brings 16 years ofexperience to the job and still relishes thedifferent challenges that each day presents.But fast response and engineeringexcellence are only part of the story.Newways of working for instance,Wayne is

85、 a senior trainer on our new field basedcomputer system,Quarterback contribute to improving safety.In everything we do,safety is paramount.Wayne Henden Craftsperson,UK Gas Distribution,Birmingham,UK790592 pp001-pp08.qxp 17/6/05 4:22 pm Page 08incentivised to keep the costs of balancingsupply and dem

86、and as low as possibleagainst a defined target.The benefits ofsavings against this target are shared withcustomers.To carry out these enhancedresponsibilities,we have installed newsystems to manage electricity operationsacross Great Britain,including the integratedenergy management system.US Transmi

87、ssionIn the US,we provide electricity transmissionin New York through Niagara Mohawk PowerCorporation and in New England principallythrough New England Power Company.Our US Transmission business in NewEngland operates co-operatively within anindependent system operator(ISO)withresponsibility for ove

88、rall system operationand coordination of the regional transmissionsystem for the whole of New England.Witheffect from 1 February 2005,ISO NewEngland became the regional transmissionorganisation for New England,giving us theopportunity to seek a higher allowed returnon equity,for which an application

89、 iscurrently under review by the Federal EnergyRegulatory Commission.In addition,in the midwestern US,ourGridAmerica business manages a range of electricity transmission operations on behalfof its participant utilities.It was the first multi-system independent transmission companyand was formed unde

90、r agreements withthree partner companies and the MidwestIndependent System Operator(MISO).Aftercareful review with our partners,GridAmericawill cease operations on 1 November 2005.The Group will be looking to reapply the skillsand knowledge brought to its participation inGridAmerica as it seeks to d

91、evelop interestsin North America.Annual Report and Accounts 2004/05 National Grid TranscoAnnual Report and Accounts 2004/05 National Grid TranscoUK TransmissionOur drive to be the premier network utilitymeans we need to ensure the reliability of theelectricity and gas networks throughoperating them

92、and investing in them in anefficient and economic way.Our reliability in the electricity market last year has beenbettered only once in the last decade.During2004/05,our reliable delivery of electricityequated to 99.99998%of energy demandedduring the year.We have maintained theaverage annual availab

93、ility of the UKelectricity network at 95.3%in 2004/05.Internationally,we are one of the worldleaders in terms of transmission reliability.In 2005,Ofgem introduced a new incentivescheme which allows us to receivepayments if we maintain or improve reliabilityof the England and Wales electricitytransmi

94、ssion system by delivering aboveaverage reliability of the network.Theincentive target equates to a level of reliabilityof better than 99.9999%.Over 2004/05,the performance of ourcompressor fleet improved,with the averagetime between compressor failures 24%above our five-year average.Thecompressors

95、are used to maintain thepressure at key points on the gastransmission system and the ability of thesystem to transport the available gas isdependent on the performance of ourcompressor fleet.On 1 April 2005,changes were introducedsuch that the electricity transmission andtrading arrangements for Eng

96、land and Waleswere extended to apply across Great Britain.We took on responsibility for managing theoperations of the Scottish electricitytransmission system as well as that inEngland and Wales.As system operator ofthe electricity network in Great Britain,we areOperating Performance09Our overall ope

97、rating performance has been good.In the UK,our reliable delivery of electricity has beenbettered only once in the last decade.OperatingPerformanceIn November 2004,we opened the newGas National Control Centre,from wherethe gas National Transmission System(NTS)is operated.The centre representsan inves

98、tment of 3.3 million and isequipped with the latest technology tocope with the increasing network andcommercial complexity we expect in the next few years.790592 pp009-pp19.qxp 17/6/05 4:26 pm Page 09to create a more unified structure for theretained business,which will enable us toplace increased e

99、mphasis on safety andefficiency,and share best practice across theorganisation.This business will distribute gasto around 11 million consumers,includingthose in parts of London,Birmingham,Manchester and Liverpool,in a networkcovering just over a quarter of Great Britain.We aim to make it the most ef

100、ficient UK gasdistribution network.US DistributionOur US Distribution business met orexceeded the majority of its service standardsfor reliability,customer service and safety.However,we did miss some reliability targetsand we recognise that we need to reducethe inconvenience customers suffer with Op

101、erating PerformanceNational Grid TranscoAnnual Report and Accounts 2004/05UK Gas DistributionWe have met or exceeded almost all of ourmajor performance targets.Requests toconnect homes or businesses to our gasnetwork must be carried out to meet certainconnections-related standards.Ourperformance aga

102、inst these connections-related standards has improved significantlyduring the latter part of 2004/05.However,Ofgem is currently investigating ourperformance against these standards for2003/04.Over the year,considerable work has goneinto the planning and execution of the saleprocess within our UK Gas

103、 Distributionnetworks.At the same time,our Way Aheadprogramme of restructuring the four retainednetworks is well advanced.Our aim has been10Driving for world-class performanceOur US electricity distribution business servesapproximately 3.3 million customers over a network ofsome 72,000 circuit miles

104、 and keeping supply goingthrough New England s harsh winters and hot summersis a challenging job.In her 14 years with the company,Deanna D Amato hasseen many aspects of the business.After seven years inCustomer Service she moved out of the office into meterreading and for the last six years has been

105、 working in thehot and often confined spaces of underground cabling.During that time,she has seen increasing investmentand new working practices introduced to improveefficiency,reliability and safety.Our success is built on a drive for world-classperformance across all our operations.Deanna DAmatoCa

106、ble splicer 1st Class,Worcester,Massachusetts,USAThe Way Ahead restructuringprogramme is well advanced as we move to a new unified structure which is supported by two key centres,one in Hinckley and the other at our newoffice in Northampton(pictured above).This will enable us to place increasedempha

107、sis on safety and efficiency,andshare best practice across theorganisation.790592 pp009-pp19.qxp 17/6/05 4:26 pm Page 10operators and one of two providers oftransmission networks for analogue anddigital television and radio broadcasters in the UK.Through Crown Castle UK,we own twolicences for scarce

108、 digital channel capacity.The availability of the BBC s priority TVservices has not fallen below 99.96%sincethe Crown Castle acquisition,compared with a contracted target of 99.9%.Other operationsWe operate two UK Metering businesses,Transco Metering and OnStream.TranscoMetering played a major role

109、in the four-yearindustry-wide project to develop newcontracts,industry processes andinformation systems to support Ofgem sReview of Gas Metering Arrangements,implemented in July 2004.During 2005/06,it is our intention to bring together the twobusinesses under a single legal entity,reinforcing our po

110、sition as the nationalleading provider of utility metering services in Great Britain.Our gas connections business,FulcrumConnections,is being restructured so thatthe domestic connections activity it carriesout for UK Gas Distribution will bereintegrated into the retained distributionnetworks over th

111、e coming year.During 2004/05,we also consolidated all ofour UK property holding and managementactivities into a single unit,Property ServicesGroup.Through its SecondSite Propertyarm,it isresponsible for the management,clean up and disposal of surplus non-operational properties.Annual Report and Acco

112、unts 2004/05 National Grid TranscoTop In the US,we recently launched thefirst test of a field force automationprogramme,giving computers to agroup of our supervisors in the field.Inthe coming months we plan to expandthe programme to more of our fieldworkers and to introduce features thatwill allow u

113、s to locate workers,delegateassignments and monitor their status inreal time in order to improve our efficiency.BottomA typical example of a CrownCastle UK tower capable of carryingbroadcast services and multiple site share tenants.Site sharing minimises the number of towers needed to providenationa

114、l coverage.Operating Performance11supply interruptions,as well as enhancesafety and standardise best practices.Wehave a number of plans to do this.One keyscheme is to reduce the frequency andduration of interruptions by boosting ourinvestment in asset enhancement,replacement and maintenance in the c

115、omingyear and beyond.This will ensure thatresources are used efficiently to respond tooutages and create a safer work environment.In October 2004,we agreed a new 42-monthcontract with our labour union in New York.Together with last year s agreement with ourNew England unions,the new contract willall

116、ow us to increase productivity throughmore efficient working practices,and toimprove safety and service.The people who know our operations bestare our employees.In 2004/05,we formed a joint efficiency team charged with seekingand evaluating their ideas for innovation.Weare already sharing best pract

117、ices across theUS and between our UK and US operations.Other initiatives during the year include themerger of information technology functionsacross the New York and New England regionsand the implementation of new financial andwork management systems.We alsocompleted the conversion to automatedmete

118、r reading for our residential customers,one of the largest projects of its kind in theUS,which allows meters to be read from thestreet by a specially equipped vehicle.About3.6million devices are now in service,helping reduce customer inconvenienceandimprove customer satisfaction.Wireless infrastruct

119、ureFollowing our acquisition of the UKoperations of Crown Castle InternationalCorp.,we are the leading independentprovider of network infrastructure to mobile790592 pp009-pp19.qxp 17/6/05 4:26 pm Page 11Investing for GrowthNational Grid TranscoAnnual Report and Accounts 2004/05In 2004/05,some 522 mi

120、llion was investedin our UK electricity and gas transmissionnetworks and 74 million in our US electricitytransmission networks.In addition,weinvested 272 million in our UK GasDistribution business and 234 million in theUS electricity and gas distribution networksthis past year.This is just the start

121、.Replacement expenditure on our UK GasDistribution network was some 474 million,compared with 388 million in 2003/04 and is set to increase further over the nextfew years.Declining gas reserves in the UK continentalshelf mean that the UK is rapidly becoming anet importer of gas.New sources of supply

122、for import are now being planned across theUK,which will lead us to expand our gas andelectricity transmission networks.We expectto invest in excess of 750 million over thenext five years in new high pressure gaspipeline projects across the UK,as well as upto 500 million for the Isle of Grain liquef

123、iednatural gas(LNG)project,the first phase ofwhich will be ready for commissioning inJune 2005.The second phase will provideadditional capacity,scheduled for late 2008.In the UK,we are also reviewing with Ofgemand the Government the necessaryinvestment for the electricity transmissionnetwork to supp

124、ort the development ofrenewable energy projects.Financing of108 million will be allocated to upgrade theAnglo-Scottish interconnector,subject to relevant consents.Over the next few years,we anticipateincreasing investment substantially inrenewing parts of our UK electricity network.The bulk of these

125、 assets was installed duringthe 1960s and 1970s and will be due forrenewal over the next few years.In the US,we are also planning to increase investmentin reliability programmes and asset renewal,which is included in the 222 million spendingcommitted for next year.Turning to our wireless infrastruct

126、urebusiness,we are continuing to invest in the development of the 3G infrastructureneeded to meet the growing demand for 3G services.We are also well positioned toinvest in the build out of the new digitalterrestrial television networks that will beneeded to replace the existing analoguetelevision n

127、etworks.We are already workingclosely with the broadcast industry on theplanning of the analogue to digital switchover,which we anticipate will take place on a regionby region basis between 2008 and 2012.The Basslink project,which is a 600 MWinterconnector linking the electricity networkfrom Austral

128、ia to Tasmania remains broadlyin line with the 300 million budget.Demands placed on our networks arechanging and we need to keep pace withthese changes to make the most of them forour shareholders.Responsible investmentshould enable us to meet these demandsand create value.Top Laying transmission pi

129、pelinesbetween Aberdeen and Lochside.Other major pipelaying projects are alsoplanned to deal with new gas importschemes.Bottom We are investing some 500 million in the Isle of Grain LNGimport terminal,the first phase of which will be ready for commissioning in June2005.The second phase is scheduled

130、toprovide additional capacity in late 2008.12We invest in our assets to grow our business.Across the Group,we invested 1,905 million*in 2004/05.Investing for Growth*Excludes the acquisition of the UK operations of Crown CastleInternational Corp.790592 pp009-pp19.qxp 17/6/05 4:26 pm Page 12Annual Rep

131、ort and Accounts 2004/05 National Grid TranscoInvesting in our People13As the electricity system operator,we are responsible for the operation of the high-voltage electricity transmissionsystem across Great Britain.Thispredominantly takes place from ourcontrol centres in Berkshire.Employee opinion s

132、urvey In July 2004,we carried out our first Group-wide employee opinion survey since thecreation of National Grid Transco in 2002.Over 12,000 of our employees responded,giving encouraging feedback on ourapproaches to safety,environmentalmanagement,business ethics and the fairtreatment of employees.T

133、his is a highresponse rate for a survey of this kind.Employees also identified areas forimprovement,including internalcommunication,ensuring that our strategyand new ways of working are clearlyexplained,and recognising the need toreinforce our values through the continueddevelopment of leadership sk

134、ills.Employee engagementWe know from the employee opinion surveythat our people are proud to work for us,arepersonally motivated to make the Companysuccessful and are willing to put in increasedefforts to achieve success.However,we doneed to improve communications andmanage change better.We are crea

135、ting opportunities to involveemployees to a greater degree and theemployee opinion survey,focus groups and project-specific steering groups haveenabled to us to promote two-way feedback.Recruitment and trainingWe continue to invest in the recruitment and training of skilled staff for the future.Our

136、Developing Business Leadersprogramme for Group-wide seniormanagement continues to build on thestrong partnerships with the Centre for High Performance Development andWharton and Insead Business Schools.Our recruitment schemes for apprentices,graduates and university placementstudents in the UK,and i

137、ntern programme inthe US have been successful and continueto go from strength to strength in terms ofthe quality of development and robustness of the programmes.The need to grow ourtalent from within and to address the declinein students graduating from technicalengineering subjects remain essential

138、 areasof focus for the future success of ourbusiness.Employee healthNo business can be competitive and whollyproductive without a healthy workforce.Weare committed to eliminating work-related ill-health among our employees by identifyingoccupational risks and managing them,offering advice,and encour

139、aging healthyliving.During 2004/05,around 2.4%ofavailable workdays in the UK and 3.5%intheUS were lost due to sickness absence.This compared with 2.4%as an average forthe UK energy/water sector.No similarcomparison is available for the US.Our employee opinion survey looked to identifyany underlying

140、causes of work-relatedstress.Subsequent independent expertanalysis of the results has shown that wecompare well with other organisations.Ours is a business relying on our employees and we emphasise the importance of retaining goodpeople who are well-motivated and enabled to achieve their potential.I

141、nvesting in our People790592 pp009-pp19.qxp 17/6/05 4:26 pm Page 13Investing in our PeopleNational Grid TranscoAnnual Report and Accounts 2004/05feel comfortable that reported issues will beproperly and thoroughly investigated.Valuing people through inclusion We seek to encourage diversity throughop

142、en,honest and mutually respectfulcommunication and behaviour.We arecommitted to developing and operating ourbusiness in a way that is designed to lead toa more diverse and inclusive culture.In January,we launched a Group-wideInclusion and Diversity Vision and sent aninformation pack to every employe

143、e.Wehave established steering groups to developand execute action plans and we willestablish a set of measures against which totrack our progress.Business ethicsWe want to operate to the highest ethicalstandards.Standards of Conduct have been in place for more than a decade in the US and,in April 20

144、04,we communicated our Code of Business Conduct to all UK employees.We operate 24-hour ethics helplines whereinappropriate conduct can be reported.Reported breaches are thoroughly andpromptly investigated and,whereappropriate,acted on,with any necessaryimprovements implemented.The employee opinion s

145、urvey confirmed thatthe majority of staff believe we are an ethicalorganisation,are aware of the codes,and Investing in our peopleDavid Wright joined National Grid Company in 1992 as a chartered electrical engineer and worked in a variety of roles planning andcontrolling the national power system.Si

146、nce the formation of National Grid Transcohe has broadened his experience working onthe gas transmission system.His knowledgeand skills have developed so that,supportedby us,he became the first person in theCompany to qualify as a chartered gasengineer as well.He now manages a team of up to 45 whopr

147、ovide control support functions andoperational strategies to enable the day-to-dayoperation of the new Gas National ControlCentre balancing input from seven coastalterminals,transmission over 4,300 miles ofhigh pressure pipes,and output to around21million consumers.Each year,the systemdelivers over

148、100,000 million cubic metres of gas(that s over half the UK s energy).Our business relies on the skills of ouremployees.David WrightStrategy and Support Manager,Gas National Control Centre,The Midlands,UK14Inclusion and Diversity VisionWe will strive to develop and operate ourbusiness in a way that

149、results in a moreinclusive and diverse culture.This willenable us to attract and retain the bestpeople,improve our effectiveness,deliversuperior performance and enhance thesuccess of the Company.We will ensure all employees,regardless of race,gender,nationality,age,disability,sexual orientation,reli

150、gion and background,have the opportunity to develop to their fullpotential.We will prevent artificial orprejudicial barriers from getting in the wayof their development.?We believe that fostering diversity is everyone s responsibility.?We believe that open,honest andrespectful communication is theco

151、rnerstone of good business.?We believe that a positive approach toInclusion and Diversity is not a nice tohave but is fundamentally the right thingto do for us as a business.790592 pp009-pp19.qxp 17/6/05 4:27 pm Page 14We have an active programme for the reclamation and disposal ofcontaminated forme

152、r gas works sitesfor beneficial use.One of thetechniques we use is thermaldesorption where harmful chemicalsare removed from soil by heating in adesorber until the chemicals changeinto gases.The gases are collected,separated and disposed of safely.The clean soil is returned to the site.Annual Report

153、 and Accounts 2004/05 National Grid TranscoEnergy delivery and climate changeIn December 2004,we published a PublicPosition Statement,Energy Delivery andClimate Change.We continue to provideessential infrastructure that will facilitategenerators moving to alternative sources ofenergy,including renew

154、ables,with the aimof reducing greenhouse gas emissions.We have improved the capture of ourgreenhouse gas emissions by including forthe first time in 2004/05,emissionsassociated with electricity transmission anddistribution losses for our New Yorkoperations.Our emissions for 2004/05amounted to some 1

155、2.4 million tonnesCO2equivalent(mte CO2).The graph(left)shows our comparative performance withprevious years.Across our operations,the largest source of greenhouse gas emissions continues tobe methane leakage and venting from ourUK gas networks,accounting for some38%of our total emissions.Our long-t

156、ermprogramme to replace iron mains withpolyethylene pipes will progressively reducethis leakage.A detailed analysis of our greenhouse gasemissions,including an explanation of thechanges,will be available on our website.Contaminated landWe continue to manage our portfolio ofpotentially contaminated s

157、ites.They includeformer manufactured gas plants,industriallandfills,former gas holders and oldersubstations on both our electricitydistribution and transmission networks.Sites can sometimes have a complex mix ofcontamination dating back over 100 years.Environmental managementWe have improved our met

158、hodology fordetermining the significance of incidentsresulting in the release of methane from ourUK gas networks to bring it in line with theapproach used for our other significantgreenhouse gas,sulphur hexafluoride.As a result,the total number of significantincidents in 2003/04 arising directly fro

159、mour activities is restated from 46 to 36.Forthe same reason,the number of significantincidents resulting indirectly from third partydamage to our networks,including adverseweather conditions,is restated from 26 to12.During 2004/05,significant incidentsarising directly from our activities andresulti

160、ng from third party action numbered22 and 11 respectively.None of these incidents led toenvironmental damage that resulted inprosecution by enforcement bodies.Central to our approach to managing ourenvironmental impacts is the ISO14001international standard for environmentalmanagement systems and th

161、e majority ofour operations already conform to it.Thismeans that 85%of employees across theGroup are now working to a certifiedenvironmental management system.As with safety,our employees haveprovided valuable feedback on ourapproach to environmental managementwith 85%of responses confirming that th

162、eyfeel the Group does act responsibly onenvironmental issues.We take very seriously our responsibility for protectingand preserving the environment for future generations.Our Responsibility for the EnvironmentOur Responsibility for the Environment15790592 pp009-pp19.qxp 17/6/05 4:27 pm Page 15In the

163、 UK,our remediation programme has its main focus on managingenvironmental risk followed by theremediation and subsequent developmentof land for commercial reasons.In the US,in any given year we remediate the siteswith highest environmental risk and/orthose sites we are required to remediate by regul

164、atory agencies,with the goal ofreturning these sites to productive public or private use.In 2004/05,we completedremediation projects at 39 locations in theUK and two sites in the US.Electric and magnetic fieldsElectric and magnetic fields(EMFs)aregenerated from a wide variety of sources,including ou

165、r power lines andtelecommunications infrastructure.Whilethe balance of scientific evidence is againstEMFs resulting in adverse health impacts,we recognise that there is some limitedscientific evidence suggesting the possibilityand that there are parts of society that are concerned about this issue.I

166、n 2003,we took the initiative to improve the dialogue between the various partieswith an interest in this issue,by creating a Stakeholder Advisory Group on EMFs(SAGE)with representation from industry,Government,academia,professionalbodies and interest groups.As a result ofthe success of SAGE,the par

167、ticipants havenow agreed to establish a more formalStakeholder Advisory Group under thesponsorship of the Department of Health.Our Responsibility for the EnvironmentNational Grid TranscoAnnual Report and Accounts 2004/0516Using a technique pioneered in the UK,our New York business nowcarries out liv

168、e gas mains replacement,where the new mains are inserted intothe old mains while they continue tooperate.We can complete our workmore quickly,at a lower cost and withless disruption to our customers and the public.A strategy for growthOur wireless infrastructure business is based on a portfolio of t

169、owers and mastswhich serve mobile telephone operators,and TV and radio broadcasters in theUK.We have made a strategic investment in this growing marketplace,wherethe advent of 3G mobile phones and the switchover from analogue to digitalbroadcasting present growth opportunities.Our infrastructure sit

170、s on around 5,000 active sites,and we have access to some 8,000 marketable sites.We aim to maximise the use of these sites(and minimise the need for new towers)by encouraging site sharing.Simon Halley leads a team of 20 surveyors and support staff working withbroadcasters and telecommunication custo

171、mers in our Eastern Region.They deal with planning,legal and other consents and manage a portfolio ofsites including such well-known landmarks as the Crystal Palace transmittertower and the historic Southall gas holder.Our strategy remains focused on creating value for shareholders throughgrowing or

172、ganically and through selective acquisitions.Simon Halley Regional Asset Manager,Crown Castle UK,Eastern Region,UK790592 pp009-pp19.qxp 17/6/05 4:27 pm Page 16Annual Report and Accounts 2004/05 National Grid TranscoFollowing the devastating Asian tsunami inDecember 2004,we immediately launcheda matc

173、hing scheme for this appeal.Thisenabled employees to have their personaldonations matched pound for pound ordollar for dollar by the Company.Thousandsof employees on both sides of the Atlanticcontributed and their generosity wasoverwhelming,with donations exceeding200,000.In response,we made this a

174、double matching scheme so that the totaldonated to the appeal was more than680,000(including Company donations of over 450,000).The US donations were channelled through the American Red Cross,while the UK donations went to the Disasters Emergency Committee.The corporate responsibility material in th

175、isreport has been independently verified and averification statement is included on page 82.The Responsibility section of our website( additional performance data forthe last three years.Our Responsibility to Society17Top Our Young Offender Training and Employment Programme won aNational Training Aw

176、ard for outstandingachievement in 2004.The programmetrains young offenders in the final stagesof their prison sentences.On completionof the course,they are offered availablejobs in their home areas.BottomNational Grid Transco runs the Redcar and Cleveland Warm Zoneprogramme.This three-year scheme,pa

177、rt of our Affordable WarmthProgramme,aims to apply energyefficiency measures to 80%of the fuelpoor homes in this area.We operate within and serve communitieswherever we do business.We believe that as we show respect for the communities inwhich we work they will,in turn,respect ourCompany.Human right

178、sWe are committed to the protection ofhuman rights within our sphere of influenceand ensuring that our own operations are a force for good.We have continued our work with theBusiness Leaders Initiative on HumanRights.This is a three-year initiative aimedat developing practical business tools toincor

179、porate human rights into day-to-daybusiness decision-making.The value of this initiative in influencing the debate on therole of business in human rights has beenrecognised by the UN High Commissioneron Human Rights.Community involvementWe contribute to the local communities inwhich we operate throu

180、gh our financialdonations and other support.We alsoencourage our employees to contribute tothe communities in which we operate.Our aim is to align our community investmentspend with our business objectives.Anexample is in the area of fuel poverty.In theUK,through our Affordable WarmthProgramme,over

181、344,000 homes have hadenergy saving measures installed and over4,700 people have been trained in energyefficiency skills since 1999.In the US,wemake a considerable financial contributionto providing direct subsidies to customersmaking energy efficiency investments,inaddition to supporting a fuel pov

182、ertyassistance programmein our operatingareas.We place great emphasis on respecting the rights ofpeople affected by our operations and developinglong-term relationships with the local communities inwhich we work.Our Responsibility to Society790592 pp009-pp19.qxp 17/6/05 4:27 pm Page 17Board of Direc

183、torsNational Grid TranscoAnnual Report and Accounts 2004/0518National Grid TranscoAnnual Report and Accounts 2004/05The effectiveness of the Board,its Committees and individual Directors is vital to the overall success of the Group.Board of Directors0102030405060708091011121314*790592 pp009-pp19.qxp

184、 17/6/05 4:29 pm Page 18Annual Report and Accounts 2004/05 National Grid TranscoBoard of DirectorsAnnual Report and Accounts 2004/05 National Grid Transco01Sir John Parker Chairman(appointed October 2002)(Age 63)N(ch)Sir John Parker became Chairman of the Group following themerger of National Grid G

185、roup plc and Lattice Group plc.Hehad been Chairman of Lattice Group plc since its demergerfrom BG Group plc in 2000.He had previously been a Non-executive Director of BG plc from 1997.Sir John s career hasencompassed the engineering,shipbuilding and defenceindustries.He is Chairman of the Peninsular

186、&Oriental SteamNavigation Company,a Non-executive Director of Carnival plcand Carnival Corporation,Inc.and Senior Non-executiveDirector of the Court of the Bank of England.Sir John is aformer Chairman of RMC Group plc,a former Chairman andChief Executive of Harland&Wolff plc and BabcockInternational

187、 Group PLC and a former Non-executive Directorof Brambles Industries plc,GKN plc and British CoalCorporation.He is a Fellow of the Royal Academy ofEngineering.02Roger UrwinGroup Chief Executive(appointed November 1995)(Age 59)E(ch),FRoger Urwin was appointed as a Director of the Group inNovember 199

188、5,becoming Group Chief Executive in April2001.He was previously Chief Executive of London Electricityplc.Earlier,he held a number of appointments within theCentral Electricity Generating Board before joining theMidlands Electricity Board as Director of Engineering.He is a Non-executive Director of U

189、tilico Investment Trust plc and is a Fellow of the Royal Academy of Engineering.03 Steve LucasGroup Finance Director(appointed October 2002)(Age 51)E,FSteve Lucas joined the Board following the merger of NationalGrid Group plc and Lattice Group plc in October 2002.He hadbeen Executive Director,Finan

190、ce of Lattice Group plc since itsdemerger from BG Group plc in 2000.Previously,he wasTreasurer of BG Group plc having joined British Gas plc in1994.A Chartered Accountant,he worked in private practice inthe City of London until 1983.He then joined Shell InternationalPetroleum Company,occupying a num

191、ber of financemanagement positions and treasury roles,including sevenyears in Africa and the Far East.Steve is also a Non-executiveDirector of Compass Group PLC.04Nick WinserGroup Director(appointed April 2003)(Age 44)ENick Winser joined the Board in April 2003 as Group Directorresponsible for UK an

192、d US Transmission operations.He waspreviously Chief Operating Officer of US Transmission for National Grid Transco.He joined National Grid Company plc in1993,becoming Director of Engineering in 2001.Prior to this,he had been with PowerGen since 1991 as principal negotiatoron commercial matters,havin

193、g joined the Central ElectricityGenerating Board in 1983 where he served in a variety oftechnical engineering roles.05Steve HollidayGroup Director(appointed March 2001)(Age 48)ESteve Holliday joined the Group as Group Director,UK andEurope in March 2001.Immediately following the merger ofNational Gr

194、id Group plc and Lattice Group plc,he wasresponsible for the Group s electricity and gas transmissionbusinesses and is now Group Director responsible for UK GasDistribution and Business Services.He was formerly anExecutive Director of British Borneo Oil and Gas.Previously,he spent 19 years with the

195、Exxon Group,where he held senior positions in the international gas business andoperational areas such as refining and shipping.Hisinternational experience includes a four-year spell in the US.He also developed business opportunities in countries asdiverse as China,Australia,Japan,Brazil and the for

196、mer Soviet Union.Steve is also a Non-executive Director of Marks and Spencer Group plc.06 Mike JesanisGroup Director(appointed July 2004)(Age 48)EMike Jesanis joined the Board in July 2004,becoming GroupDirector responsible for US Distribution.He became President of National Grid USA in November 200

197、3,having been its ChiefOperating Officer and responsible for the day-to-dayoperations since January 2001.He was Chief Financial Officerof National Grid USA and New England Electric System(NEES)between March 1998 and January 2001,having joined NEESin July 1983.Mike is also Chairman of the Board of Tr

198、ustees ofBecker College in Worcester,Massachusetts.07Edward AstleGroup Director(appointed September 2001)(Age 51)EEdward Astle joined the Board as Group Director,Telecommunications in September 2001 and is now GroupDirector responsible for Unregulated Business and leads theGroup s Business Developme

199、nt and Strategy.He wasManaging Director of BICC Communications from 1997 to1999,and between 1989 and 1997 he held a variety ofpositions with Cable&Wireless.He was Regional DirectorEurope,CEO of its global networks and marine divisions,and in 1995 joined the Cable&Wireless board as ExecutiveDirector

200、Global Businesses.08Ken HarveyNon-executive Director and Senior Independent Director(appointed October 2002)(Age 64)N,R,R&RKen Harvey joined the Board following the merger of NationalGrid Group plc and Lattice Group plc in October 2002,havingbeen appointed to the Lattice Group plc board in September

201、2000.He is Chairman of Pennon Group plc.A CharteredEngineer,he is a former Chairman and Chief Executive ofNorweb plc,Comax Holdings Ltd,The Intercare Group plc andBeaufort International Group plc.09John AllanNon-executive Director(appointed 1 May 2005)(Age 56)A,RJohn Allan was appointed to the Board

202、 in May 2005.He isChief Executive of Exel plc(previously Ocean Group plc),having been appointed in September 1994.He is a Non-executive Director of PHS Group plc.John started his career in marketing with Lever Brothers,moving to Bristol-MyersCompany Limited and Fine Fare Limited.He joined BET plc in

203、1985 and was appointed to the board in 1987.He is amember of the CBI s Presidents Committee,the InternationalAdvisory Council of the Singapore Economic DevelopmentBoard and the University of Edinburgh Campaign Board.John was previously a Non-executive Director of Wolseley plc,Hamleys plc and Connell

204、 plc.10John GrantNon-executive Director(appointed November 1995)(Age 59)A,N,R(ch)John Grant was appointed a Director of the Group inNovember 1995.He is Chairman of Hasgo Group Limited andThe Royal Automobile Club Motor Sports Association Limitedand a Non-executive Director of Torotrak plc,Corac Grou

205、p Plc,Cordex Plc and The Royal Automobile Club Limited.He wasChief Executive of Ascot Plc from 1997 to 2000 and FinanceDirector of Lucas Industries plc from 1992 to 1996.Hepreviously held a number of senior executive positions during 25 years with Ford Motor Company.11Paul JoskowNon-executive Direct

206、or(appointed March 2000)(Age 57)F(ch),NPaul Joskow was appointed a Director of the Group in March2000 following the acquisition of New England Electric System(NEES).He is a Professor of Economics and Management atthe Massachusetts Institute of Technology(MIT),Director ofMIT Center for Energy and Env

207、ironmental Policy Research,Research Associate of the US National Bureau of EconomicResearch and a Fellow of the Econometric Society and of theAmerican Academy of Arts and Sciences.Paul is also anindependent Trustee of the Putnam Mutual Funds and anindependent Non-executive Director of TransCanada.He

208、 hadserved as a Director of NEES between 1987 and its acquisition.12Stephen PettitNon-executive Director(appointed October 2002)(Age 54)F,R,R&R(ch)Stephen Pettit was appointed to the Board following themerger of National Grid Group plc and Lattice Group plc,having been appointed to the Lattice Group

209、 plc board in 2001.He is a Non-executive Director of National Air Traffic Services,Halma plc and is Chairman of ROK Property Solutions plc.Heis a former Executive Director of Cable&Wireless plc.Beforejoining Cable&Wireless,he was Chief Executive,Petrochemicals at British Petroleum.Stephen was previo

210、usly aNon-executive Director of KBC Advanced Technologies plc andNorwood Systems Limited.13Maria RichterNon-executive Director(appointed October 2003)(Age 50)A,F,R&RMaria Richter was appointed to the Board in October 2003.Maria worked for Morgan Stanley between 1993 and 2002,most recently as Managin

211、g Director of its Corporate FinanceRetail Group.Prior to this,she was Managing Director ofInvestment Banking in the Southern Cone of Latin America,and Executive Director and Head of Independent Power andStructured Finance Business.Previous appointments includeVice President of Independent Power Grou

212、p for SalomonBrothers,and Vice President of Prudential Capital Corporationand Power Funding Associates.Maria is also a Director of theWestern Electricity Co-ordinating Council,one of 10 Councilsin North America responsible for promoting electricitysystem reliability.14George RoseNon-executive Direct

213、or(appointed October 2002)(Age 53)A(ch),N,RGeorge Rose was appointed to the Board following the merger of National Grid Group plc and Lattice Group plc,having been appointed to the Lattice Group plc board inSeptember 2000.He has been Finance Director of BAESystems plc(formerly British Aerospace plc)

214、since 1998,having joined the company in 1992.He is a member of theshareholder committee of Airbus SAS and is also a Non-executive Director of SAAB AB and a member of the FinancialReporting Review Panel.George is also a former Non-executive Director of Orange plc.*Helen MahyGroup Company Secretary an

215、d General Counsel(appointed October 2002)(Age 44)EHelen Mahy was appointed as Group Company Secretaryfollowing the merger of National Grid Group plc and LatticeGroup plc,having been Company Secretary at Lattice Group plcsince March 2002.She was additionally appointed as GeneralCounsel from October 2

216、003.Previously,she was Group GeneralCounsel and Company Secretary at Babcock InternationalGroup PLC.Helen was appointed a Non-executive Director of Aga Foodservice Group plc in March 2003.She is a barrister,member of the Bar Council and an Associate of the CharteredInsurance Institute.19Committee me

217、mbershipAAuditEExecutiveFFinanceNNominationsRRemunerationR&R Risk&Responsibilitychdenotes Committee chairman790592 pp009-pp19.qxp 17/6/05 4:29 pm Page 1920ContentsNational Grid Transco Annual Report and Accounts 2004/05Contents21 Operating and Financial Review21 Introduction25 Operating Review45 Fin

218、ancial Review60 Directors Report62 Corporate Governance and Risk and Compliance Management62 Corporate Governance67 Risk and Compliance Management69 Directors Remuneration Report80 International Financial Reporting Standards 82 Independent Verifiers Report on Operating Responsibly83 Independent Audi

219、tors Report to the Members ofNational Grid Transco plc84 Statement of Directors Responsibilities forPreparing the Accounts85 Accounting Policies88 Group Profit and Loss Account89 Balance Sheets90 Group Cash Flow Statement90 Group Statement of Total Recognised Gains and Losses91 Notes to the Accounts

220、91 Note 1 Adoption of Financial Reporting Standard(FRS)2091 Note 2 Segmental analysis95 Note 3 Operating costs95 Note 4 Exceptional items97 Note 5 Payroll costs and employees97 Note 6 Directors emoluments97 Note 7 Pensions and other post-retirement benefits101 Note 8 Net interest102 Note 9 Taxation1

221、03 Note 10 Dividends103 Note 11 Earnings per share and adjusted profit on ordinary activitiesbefore taxation104 Note 12 Intangible fixed assets104 Note 13 Tangible fixed assets105 Note 14 Fixed asset investments105 Note 15 Acquisitions106 Note 16 Stocks106 Note 17 Debtors107 Note 18 Creditors(amount

222、s falling due within one year)107 Note 19 Creditors(amounts falling due after more than one year)107 Note 20 Borrowings109 Note 21 Financial instruments111 Note 22 Provisions for liabilities and charges112 Note 23 Share capital116 Note 24 Reserves116 Note 25 Non-equity minority interests117 Note 26

223、Reconciliation of movement in equity shareholders funds117 Note 27 Group cash flow statement119 Note 28 Related party transactions119 Note 29 Commitments and contingencies121 Note 30 Group undertakings and joint ventures121 Note 31 Subsequent events121 Note 32 Differences between UK and US accountin

224、g principles130 Note 33 Condensed US GAAP financial information135 Note 34 Transco plc additional US GAAP disclosures144 Glossary of Terms145 Definitions146 Summary Group Financial Information147 Shareholder Information790592 pp020-pp24.qxp 17/6/05 4:32 pm Page 2021Annual Report and Accounts 2004/05

225、 National Grid Transco IntroductionOperating and Financial ReviewIntroductionNational Grid Transco is a network utility,based mainly in the UK and the US.Our principal interests are in the transmission and distribution of electricity and gas and in the provision of network infrastructure to thebroad

226、cast and telecommunications industries.We also have interests inrelated markets,including metering services,liquefied natural gas facilitiesand property in the UK,as well as electricity interconnectors in the UK,US and Australia.History and development of the businessNational Grid Transco originated

227、 from the restructurings of the UK gasindustry in 1986 and the UK electricity industry in 1990.We entered the US energy delivery market in 2000 and substantially expanded our UKwireless infrastructure activities in 2004.The UK gas industry was first restructured in 1986 when British Gas wasincorpora

228、ted as a public limited company,British Gas plc.In 1997,Centricawas demerged from British Gas plc which was re-named BG plc.InDecember 1999,BG plc completed a restructuring programme whichresulted in the creation of a new parent company,BG Group plc,andinvolved separating the UK regulated business,B

229、G plc(re-named Transcoplc),from its other businesses.Lattice Group plc was created as theholding company for Transco plc and certain other non-regulatedinfrastructure service businesses and,in October 2000,it was demergedfrom BG Group plc and separately listed on the London Stock Exchange.In 1990 Na

230、tional Grid Company plc took on the ownership and control of the electricity transmission network in England and Wales and certaininterests in the interconnectors with Scotland and France from the CentralElectricity Generating Board.Originally the predominant shareholders inNational Grid Company plc

231、,via a holding company,were the twelveRegional Electricity Companies which owned and operated the localdistribution systems,but in 1995,shares in the holding company werelisted on the London Stock Exchange and by early 1996 the RegionalElectricity Companies had disposed of most of their respectivesh

232、areholdings.We entered the US electricity market in 2000 when we acquired NewEngland Electric System and Eastern Utilities Associates.We expandedfurther into the northeastern US with our acquisition of Niagara MohawkPower Corporation in January 2002.National Grid USA is the holdingcompany for our US

233、 operations.In October 2002 National Grid Group plc,the holding company for NationalGrid Company plc and National Grid USA,merged with Lattice Group plc,changing its name to National Grid Transco plc.In August 2004,we completed the purchase of the UK operations ofCrown Castle International Corp.and

234、integrated it with the Group s existingcommunications business,Gridcom UK,to form a single business,knownas Crown Castle UK.Also in August 2004,we agreed the sales of four of our UK gas distributionnetworks.These sales are expected to complete on 1 June 2005,afterwhich we will still own the largest

235、gas distribution network in the UK.Further details of these planned sales are included in the Operating Reviewon page 33.Regulatory environmentNational Grid Transco is listed on the London Stock Exchange and on theNew York Stock Exchange and,as a consequence,is subject to regulationby the Financial

236、Services Authority in the UK,and by the Securities andExchange Commission(SEC)in the US.As a result of our position in and importance to the economies we serve,our electricity and gas transmission and distribution businesses in the UKand US are subject to UK,European Union and US industry regulation

237、.In the UK these businesses are regulated by the Office of Gas andElectricity Markets(Ofgem).Ofgem operates under the direction andgovernance of the Gas and Electricity Markets Authority,which makes all major decisions and sets policy priorities for Ofgem.In the US our public utilities are regulated

238、 by the commissions in the statesin which we operate and by the Federal Energy Regulatory Commission.These US regulators set service standards and determine our potentiallevels of return.As a result of our ownership of several US public utility companies,NationalGrid Transco is a registered holding

239、company under the US Public UtilityHolding Company Act 1935,for which the regulator is the SEC.This lawimposes various conditions and limitations relating to financing,subsidiarycompany transactions and ownership of non-utility businesses,and therequirement for SEC consent for further US utility acq

240、uisitions.In addition,certain of the UK activities of our Wireless infrastructurebusiness are subject to regulation by the Office of Communications(Ofcom),in particular our UK analogue television and radio transmissionnetworks.We operate two digital multiplexes under the terms of a licencegranted by

241、 Ofcom.Ofcom is also responsible for regulating the broadcastand telecommunication industries to which Crown Castle UK provideswireless infrastructure.Regulatory developmentsOn 1 April 2005,the British Electricity Transmission and TradingArrangements(BETTA)came into operation and,as the Great Britai

242、nSystem Operator,we became responsible for operating the Scottishelectricity transmission network in addition to that of England and Wales.This change is discussed in more detail in the Operating Review on page 26.The European Union Electricity Regulation requires a mandatory inter-operator compensa

243、tion scheme to be established in respect of electricitytransfers between member states.The scheme may be introduced in thecourse of 2006,although this is by no means certain.Any receipts from,orpayments to,the scheme will have to be set against transmission chargesand so the overall impact is expect

244、ed to be neutral.The scheme could alsoimpact on charging arrangements for the interconnector with France.TheRegulation also allows for other changes to be made to transmission tariffsand congestion management across member state borders,althoughdetails of these areas will only be developed over the

245、coming year.A European Union Directive concerning measures to safeguard security ofnatural gas supply is due for implementation in May 2006.This will ensurethat member states have in place,and publish,policies and standards ongas security of supply.In addition,the Gas Regulation on conditions foracc

246、ess to gas networks is expected to be adopted by the European Unionin the summer of 2005.We expect the impact of these regulations on ourbusinesses to be minimal.790592 pp020-pp24.qxp 17/6/05 4:32 pm Page 2122National Grid Transco Annual Report and Accounts 2004/05IntroductionThere are also a number

247、 of European Directives and Regulations indevelopment covering many issues including electricity security of supply,harmonisation of access to gas systems and infrastructuredevelopment,where the precise impact on our businesses in the future is currently uncertain.Business segmentsWe report our oper

248、ating results by segment,reflecting the managementresponsibilities and economic characteristics of the Group s businessactivities.Our business operations are divided into the following segments:UK electricity and gas transmission;US electricity transmission;UK gasdistribution;US electricity and gas

249、distribution;US stranded cost recoveries;and Wireless infrastructure;with all other activities of the Group beingreported as part of Other activities.Our UK electricity and gas transmission segment comprises the high-voltageelectricity transmission networks and the gas National Transmission Systemin

250、 the UK.Our US electricity transmission segment comprises high-voltageelectricity transmission networks in the northeastern US and transmissionmanagement operations for other utilities in the midwestern US.Our UK gas distribution segment comprises the majority of Great Britain sgas distribution syst

251、em.Information on the planned sales of four regionalgas distribution networks,comprising approximately half of this segment,is given on page 33.Our US electricity and gas distribution segment delivers electricity and gas in New York State and electricity in New England.Our US stranded cost recoverie

252、s segment represents the recovery ofgeneration-related costs through a special rate charged to electricitycustomers.We incurred these costs prior to industry-wide restructuringthat deregulated the generation business.Our Wireless infrastructure segment includes our activities in providingnetwork inf

253、rastructure to the broadcast and telecommunications industries.It was established as a separate segment in 2004/05,when we acquiredthe UK operations of Crown Castle International Corp.and integrated it with our existing Gridcom business in the UK.We also operate in the USthrough Gridcom US.Other act

254、ivities not included in the above segments include meteringservices,property and liquefied natural gas operations in the UK and our electricity interconnector businesses in the UK and Australia.As described in the Financial Review on page 48,these business segments are different from those presented

255、 in last year s Annual Reportand Accounts,and comparative results for the years ended 31 March 2004and 2003 have been restated accordingly.Financial performanceThe summary consolidated results of the Group for the years ended31 March 2005,2004 and 2003 are discussed on page 23.The Operating Review b

256、eginning on page 25 focuses on the performance of individual business segments,including a consideration of the businessenvironment within which each of our business segments operates and the operational and financial performance of each business segment.The Operating Review contains a discussion of

257、 changes in segmentalfinancial results during the years under review.The Financial Review beginning on page 45 primarily focuses on thefinancial impact of matters that do not arise from operating performance orare better discussed in the wider Group context rather than on a segmentby segment basis.C

258、onsequently,it comments on consolidated turnover,adjusted operating profit and operating profit,interest,taxation,exceptionalitems and cash flows.The Operating Review and the Financial Review should be read together to obtain a complete understanding of our results of operations andfinancial conditi

259、on during the years presented in the financial statements.Adjusted profit measuresWe use adjusted profit measures in considering the performance of the Group s operating segments and businesses.References to adjustedoperating profit,adjusted profit before taxation,adjusted earnings and adjusted earn

260、ings per share are stated before exceptional items andgoodwill amortisation.The Directors believe that the use of these adjusted measures betterindicates the underlying business performance of the Group than theunadjusted measures.Excluding exceptional items removes their distortingimpact in order t

261、o provide a clearer comparison from year to year,andexcluding goodwill amortisation enhances comparability with other UKcompanies as this is a standard reporting practice in the UK.Thesemeasures are the primary financial performance measures used by theDirectors to evaluate our operations.Other perf

262、ormance measuresThe Group uses a number of measures of operational and financialperformance relating to its various businesses.The Group s core businessesare regulated utilities and therefore many of our targets are determined by the relevant regulators.Much of the Group s performance depends onmeet

263、ing and exceeding those regulatory targets.Measures of operationalperformance include:Lost Time Injuries(LTIs);the management ofcontrollable costs in relation to our UK and US regulated businesses;reliabilityof our energy delivery networks;and other service quality measures.The Directors believe tha

264、t safety is paramount and,as a fundamental part ofthis,that all work-related injuries and illnesses are preventable.Consequently,we measure the level of LTIs as a key operational performance indicator forthe Group.LTIs are injuries that arise from a person s employment andcause that person to be una

265、ble to attend the workplace and perform his orher duties for one or more shifts or working days.All our businesses arerequired to report on LTIs suffered by their respective employees and anycontractors.The level of controllable costs is another critical performance measure in our core utility busin

266、esses.Our ability to make a profit depends largely on our ability to manage those of our costs that we can control.Controllablecosts include employment costs(excluding pension fund deficits in the UK)and other costs incurred in operating and maintaining transmission anddistribution systems.The manne

267、r in which we calculate controllable costsvaries within the Group as a result of,among other things,different regulatoryregimes and the historical treatment of costs by our regulators.However,the underlying principle is the same,and in the event that the definition ofcontrollable costs is changed fo

268、r any reason,comparatives are amended so that year on year changes are not distorted.Ofgem monitors ourperformance in a number of areas and our ability to reduce controllable costs is important to this process.We also use controllable costs in our US regulated operations as an additional performance

269、 measure.790592 pp020-pp24.qxp 17/6/05 4:32 pm Page 22Certain costs,of course,cannot be controlled and hence are not includedwithin the definition of controllable costs.Some are fixed or semi-fixed andgenerally cannot be altered by management.These costs includedepreciation charges,replacement expen

270、diture,goodwill amortisation andcertain pension and pension deficit related costs.Those commodity andother costs incurred by Group businesses that are passed through to ourcustomers in turnover or commodity costs that change as a result ofmovements in market prices over which we have no control are

271、thereforealso excluded from the definition of controllable costs.Operational reliability is a core measure of our success,and it is fundamentalto our relationships with our regulators and the public.We monitor reliabilityusing various methods,relevant to each particular energy delivery network.We al

272、so measure service quality in each of those businesses,with variousmethods relevant to each particular network,to assess the performance of our management and staff in serving our customers.Summary resultsThe following tables summarise the turnover,adjusted operating profit andoperating profit of th

273、e Group by business segment.Comparative figures for the years ended 31 March 2004 and 2003 have been restated to reflectchanges in accounting policies and changes in the presentation of segmentalinformation as described in notes 1 and 2 to the accounts on page 91.Years ended 31 March200520042003(res

274、tated)(restated)TurnovermmmUK electricity and gas transmission1,9301,8671,893US electricity transmission283318407UK gas distribution2,2152,2452,089US electricity and gas distribution3,1143,4943,306US stranded cost recoveries420507586Wireless infrastructure2087261Other activities844834861Sales betwee

275、n businesses(493)(462)(370)Continuing operations8,5218,8758,833Discontinued operations158586Sales between businesses(19)Group turnover8,5219,0339,400Years ended 31 March200520042003(restated)(restated)Adjusted operating profitmmmUK electricity and gas transmission809759809US electricity transmission

276、123133128UK gas distribution570716547US electricity and gas distribution374362401US stranded cost recoveries121134170Wireless infrastructure466(23)Other activities16296147Continuing operations2,2052,2062,179Discontinued operations(26)Joint ventures77(5)Total adjusted operating profit2,2122,2132,148E

277、xceptional items,which are not included in the adjusted operating profitand other adjusted measures,are defined as material items arising from the ordinary activities of the Group,requiring separate disclosure on thegrounds of size or incidence for the accounts to give a true and fair view.Such exce

278、ptional items include,for example,material restructuring costsand impairments.Page 46 contains a discussion of the nature of theseexceptional items for each year.Years ended 31 March200520042003(restated)(restated)Operating profitmmmUK electricity and gas transmission807745763US electricity transmis

279、sion102105103UK gas distribution390627436US electricity and gas distribution 286194290US stranded cost recoveries121136172Wireless infrastructure10(6)(50)Other activities1292952Continuing operations1,8451,8301,766Discontinued operations(194)Joint ventures77124Total operating profit1,8521,8371,69623A

280、nnual Report and Accounts 2004/05 National Grid Transco Introduction790592 pp020-pp24.qxp 17/6/05 4:32 pm Page 2324National Grid Transco Annual Report and Accounts 2004/05IntroductionTurnover and operating profitMovements from year to year in turnover do not necessarily have an impact on the financi

281、al condition of the Group as the amounts we chargeto customers can vary depending on our costs.In particular,we can passthrough certain elements of our costs to customers,and these therefore donot have a significant impact on adjusted operating profit and operating profit.In addition,there can be ti

282、ming differences in our UK regulated businessesbetween when costs are incurred and when these can be recovered fromcustomers.In these cases,turnover,operating costs,adjusted operatingprofit and operating profit will vary from year to year.Cash flows from operating activities The Group generated posi

283、tive operating cash flows before exceptionalitems of 3,103 million in 2004/05,compared with 3,058 million and3,154 million in 2003/04 and 2002/03 respectively.After exceptionalitems,operating cash inflows were 2,909 million,2,810 million and2,826 million in 2004/05,2003/04 and 2002/03 respectively.C

284、ash flows from our operations are largely stable over a period of years,but they do depend on the timing of customer payments and exchange rate movements.The Group s electricity and gas transmission anddistribution operations in the UK and US are subject to multi-year rateagreements with regulators.

285、In the UK,this results in essentially stable cashflows in local currency terms.However,weather conditions can affect cashflows in those businesses,with abnormally mild or extreme weather drivingvolumes down or up respectively.In the US,the regulatory mechanisms for recovering costs from customers ca

286、n result in very significant cash flow swings from year to year.Exchange ratesAs shown in the summary results tables on page 23,adjusted operating profit and operating profit from our US businesses each accounted forsome 28%of the totals for Group undertakings for 2004/05.The functionalcurrency for

287、our US operations is US dollars.As a consequence,theirresults are translated into sterling for Group reporting purposes at theaverage rate of exchange for the year.Consequently,to the extent that the US dollar to sterling exchange rate moves from year to year,the sterlingvalue of US dollar denominat

288、ed results will also vary even if the underlyingUS dollar values remain the same.The financial impact of the movement in average US dollar to sterlingexchange rates between years is discussed on page 47 in the FinancialReview.Although during the periods under review there was a significantimpact on

289、operating profit and adjusted operating profit as a result of themovement in this exchange rate,this was substantially offset by the impactof the translation of US dollar denominated interest and taxation.As aconsequence,in comparing the adjusted earnings and earnings of 2004/05with 2003/04 and of 2

290、003/04 with 2002/03,the impact of currencytranslation was less significant as a result of these offsetting movementsnot included in adjusted operating profit or operating profit.Acquisitions,disposals and mergersAs described above under History and development of the business,we have agreed the sale

291、s of four of our regional gas distribution networks,comprising approximately half of the UK gas distribution segment.Cashproceeds from these planned sales are expected to be 5.8 billion.Furtherdetails on the planned sales are included in the Operating Review on page 33.In 2004/05,we acquired the UK

292、operations of Crown Castle InternationalCorp.This acquisition has been accounted for in accordance withacquisition accounting principles(purchase accounting)under UK GAAP.The business was acquired for cash consideration of 1,138 million andgave rise to goodwill amounting to 622 million under UK GAAP

293、.Under US GAAP,goodwill was 510 million,with 220 million ascribed to the valueof other intangible fixed assets that are not recognised under UK GAAP.There were no significant acquisitions,disposals or mergers during 2003/04.During 2002/03,National Grid Group plc merged with Lattice Group plcand the

294、resulting entity was renamed National Grid Transco plc.Inaccordance with UK GAAP,this was accounted for using mergeraccounting principles such that the results of the Group under UK GAAPhave been presented as if the combined Group had been in existence for allof the financial years presented.The res

295、ults for all years are presented onthe basis of uniform accounting policies.Under US GAAP,the business combination of National Grid Group plc with Lattice Group plc was accounted for as an acquisition.Under US GAAP,the purchase consideration for Lattice Group plc was 6,598 million,primarilysatisfied

296、 by the issuance of shares,which gave rise to goodwill amounting to 3,824 million.The US GAAP accounting of this business combination is described in more detail in the Financial Review on pages 57 and 58.790592 pp020-pp24.qxp 17/6/05 4:32 pm Page 2425Operating ReviewAnnual Report and Accounts 2004/

297、05 National Grid TranscoOperating and Financial ReviewOperating ReviewTransmissionOur Transmission business comprises two segments:UK electricity andgas transmission for our UK assets and US electricity transmission for our US assets.Details of each of these segments,including backgroundinformation

298、on their assets and operations,the regulatory environments in which they operate,their operating and financial performance,andinvestment in the networks,are set out on this page to page 31.The results for the Transmission business for the years ended 31 March2005,2004 and 2003 were as follows.Years

299、ended 31 March20052005200520042003UK USTotalTotalTotalelectricityelectricity(restated)(restated)and gasTransmissionmmmmmTurnover1,9302832,2132,1852,300Operating costs excluding exceptional items andgoodwill amortisation(1,121)(160)(1,281)(1,293)(1,363)Adjusted operating profit809123932892937Exceptio

300、nal items(2)(3)(5)(23)(50)Goodwill amortisation(18)(18)(19)(21)Operating profit807102909850866UK electricity and gas transmissionBackground informationOur UK electricity and gas transmission business comprises the ownershipand operation of the high-voltage electricity transmission system in Englanda

301、nd Wales and of the gas National Transmission System(NTS)in GreatBritain.Since 1 April 2005 we have also been responsible for operating thehigh-voltage electricity transmission system in Scotland.We own electricity assets which comprise approximately 4,500 miles ofoverhead line,about 410 miles of un

302、derground cable and 341 substationsat 243 sites.Day-to-day operation of the electricity transmission systeminvolves the continuous real-time matching of generation output withdemand,ensuring the stability and security of the power system and themaintenance of satisfactory voltage and frequency.The N

303、TS comprises approximately 4,300 miles of high pressure pipe and25 compressor stations,connecting to eight distribution networks and tothird party independent systems for onward transportation of gas to endconsumers.Day-to-day operation of the NTS includes balancing supplywith demand,maintaining sat

304、isfactory system pressures and ensuring gasquality standards are met.Our UK electricity and gas transmission business has four separatelyregulated activities:?electricity transmission owner;?gas transmission owner;?electricity system operator;and?gas system operator.As electricity transmission owner

305、 and gas transmission owner,we ownand maintain the physical assets,develop the networks to accommodatenew connections and disconnections,and manage a programme of assetreplacement and investment to ensure the long-term reliability of the systems.As electricity system operator and gas system operator

306、,we undertake a range of activities necessary for the successful delivery in real time of secure,reliable and efficient energy and,in the case of electricity,thecontinuous real-time balancing of supply and demand.The electricity and gas system operator parts of the business are subject to regulatory

307、incentive schemes.RegulationThrough our subsidiary,National Grid Company plc,we own and operatethe electricity transmission assets and are the sole holder of an electricitytransmission licence for England and Wales.We have a duty under theElectricity Act 1989 to develop and maintain an efficient,coo

308、rdinated andeconomical system of electricity transmission and to facilitate competition in the supply and generation of electricity.Under the terms of the transmission licence,we are responsible for settingcharges and maintaining the charging statements,which describe thecharges and methodologies us

309、ed to calculate them.We receive incomethrough charges to generators,distributors,suppliers and directly-connected customers for use of and connection to the transmissionsystem.Transmission Network Use of System charges are levied in respectof the provision of transmission assets and infrastructure(t

310、he electricitytransmission owner activity)and Balancing Services Use of System chargesare levied for operating the system(the electricity system operator activity).Revenue from charges for using the transmission network and charges forconnections made before March 1990 is controlled by a revenue res

311、trictioncondition set out in the transmission licence.This revenue restriction is knownas a price control.The current price control period commenced on 1 April 2001 and was intended to continue until 31 March 2006.However,inorder to align electricity and gas transmission price controls,we are curren

312、tlyundergoing a mini review,which will effectively extend the period to 31 March2007.It is anticipated that this review will address the issue of the increasedlevels of capital investment that have already been committed in the currentprice control.We expect these negotiations to conclude by the end

313、 ofcalendar year 2005.We are also preparing for discussions with Ofgemregarding the next five-year price control commencing on 1 April 2007.Through our subsidiary Transco plc,we own the gas transmission assets,and our operations are undertaken under the terms of the NTS gastransporter licence.We are

314、 subject to separate revenue restrictions,knownas price controls,in respect of gas transmission owner and gas systemoperator activities which will both last until 31 March 2007.With effect from 1 May 2005,our UK gas transmission business and UK Gas Distribution business(and each of the networks whic

315、h we plan tosell)each hold a gas transporter licence.These licences are derived fromthe original integrated transmission and distribution licence but have beensubstantially amended in order to distinguish between the separateactivities of transmission and distribution gas transportation,and to facil

316、itatethe post sales environment with multiple gas distribution transporters.790592 pp025-pp44.qxp 17/6/05 4:35 pm Page 2526Operating Review National Grid Transco Annual Report and Accounts 2004/05Under the terms of the NTS gas transporter licence,we receive incomethrough charges to shippers for entr

317、y and exit capacity(gas transmissionowner activity)and commodity charges(gas system operator activity).The system entry capacity charges are set via auctions.The exit capacitycharges and the entry capacity auction proceeds together recover theallowed revenue under the transmission owner price contro

318、l in respect of the provision of the transmission assets.Electricity transmission ownerThe electricity transmission owner price control takes into account Ofgem sestimates of operating expenditure,capital expenditure,replacementexpenditure and allowed rate of return(which is currently set at a real

319、pre-tax rate of 6.25%)on our regulatory asset value.Our regulatory assetvalue is currently estimated at around 5.2 billion at 31 March 2005.The electricity transmission owner is permitted to set charges forconnections to the transmission system made since March 1990 to recoverthe costs directly or i

320、ndirectly incurred in providing connections,togetherwith a reasonable rate of return.An amended connection charging methodology for our electricitytransmission owner activity,known as Plugs,was introduced from 1 April 2004.The changes for Plugs modified the charging boundarybetween connection assets

321、 that were attributable to specific users and themain interconnected transmission network shared by all users.This requiredus to make repayments to connected parties associated with relevant assetsthat had been subject to capital contributions or other accelerated paymentterms.In total,these repayme

322、nts were approximately 71 million,of which61 million has been refunded in 2004/05.The majority of these repaymentshave been treated as capital expenditure for regulatory purposes.Gas transmission ownerThe gas transmission owner price control takes into account Ofgem sestimates of operating expenditu

323、re,capital expenditure,replacementexpenditure and allowed rate of return(which is currently set at a real pre-taxrate of 6.25%)on our regulatory asset value.Our regulatory asset value iscurrently estimated at around 2.5 billion at 31 March 2005.Electricity system operatorAs electricity system operat

324、or,we are responsible for the operation of thehigh-voltage electricity transmission system across England and Wales.With the implementation of the British Electricity Trading and TransmissionArrangements(BETTA),we also took over responsibility for the operation of the transmission system in Scotland

325、 on 1 April 2005.Our activities aselectricity system operator include the procurement and use of balancingservices to match supply and demand continuously.Balancing servicesinclude commercial agreements with market participants.These enable theelectricity system operator to vary their electricity de

326、mand or generationoutput.Revenue from charges for the provision of balancing services is regulated under an incentive scheme,where benefits of cost savings in system operation compared to a target are shared with customers.The UK Government s Energy Bill was granted Royal Assent on 22 July2004.The A

327、ct includes the legislative framework for BETTA.The frameworkprovides the transitional and enduring licence obligations required in orderto implement BETTA.National Grid Company was formally announced asthe Great Britain(GB)System Operator under BETTA on 1 September 2004.As a result of licence modif

328、ications associated with BETTA,we areresponsible for operating the GB transmission system,setting charges and maintaining the charging statements for all transmission users in GreatBritain.In this role,we recover payments from all GB transmission usersand make payments to the Scottish transmission o

329、perators in accordancewith arrangements set out in the System Operator Transmission OperatorCode.Scottish Power is currently seeking judicial review of the Gas andElectricity Markets Authority s decision to approve the GB electricityTransmission Network Use of System charging methodology developed a

330、nd proposed by National Grid Transco.In addition,under the regulatoryarrangements for BETTA the Scottish interconnector(previously outside of the regulated business)now forms part of the regulated businesses of Scottish Power and ourselves.As GB System Operator,we are also responsible for managing t

331、heoperations of both the Scottish and the England and Wales networks,and also operating the GB energy balancing mechanism.For 2005/06,the electricity System Operator incentive scheme has been set a target of377.5 million,with sharing factors for the System Operator external costs of 40%upside and 20

332、%downside,in relation to the operation of the GBtransmission system.This compares to a target of 415 million with sharingfactors of 40%for upside and downside for 2004/05,which was only inrelation to the operation of the England and Wales transmission system.The reduction in target of 37.5 million c

333、omparing 2004/05 with 2005/06 is due to the change in treatment of transmission losses,such that the grossvalue of losses is removed from the target.This is partly offset by the increasein scope of the incentive scheme,from operation of the England and Walestransmission system to the GB transmission system,following BETTAimplementation.For comparison with the 2004/05 target,an equivalenttarget for