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Financial Statements
40. National Grid Gas plc additional US GAAP disclosures
The following condensed consolidating financial information, comprising income statements, balance sheets and cash flow statements, is given in respect of National Grid Gas plc (Subsidiary guarantor), which became joint full and unconditional guarantor on 11 May 2004 with National Grid plc (Parent guarantor) of the 6.625% Guaranteed Notes due 2018 issued in June 1998 by British Transco Finance Inc. (then known as British Gas Finance Inc.) (Issuer of notes). National Grid Gas plc and British Transco Finance Inc. are wholly-owned subsidiaries of National Grid plc.
The following financial information for National Grid plc, National Grid Gas plc and British Transco Finance Inc. on a condensed consolidating basis is intended to provide investors with meaningful and comparable financial information and is provided pursuant to Rule 3-10 of Regulation S-X in lieu of the separate financial statements of each subsidiary issuer of public debt securities.
In addition, the financial information for National Grid plc is provided pursuant to Rule 4-08(e) of Regulation S-X. This parent company-only financial information should be read in conjunction with the Company's financial statements and footnotes presented in our 2006/07 Annual Report and Accounts.
Summary income statements are presented, on a consolidating basis, for the three years ended 31 March 2007. Summary income statements of National Grid plc and National Grid Gas plc are presented under US GAAP measurement principles, as modified by the inclusion of the results of subsidiary undertakings on the basis of equity accounting principles.
The summary balance sheets of National Grid plc and National Grid Gas plc include the investments in subsidiaries recorded under the equity method for the purposes of presenting condensed consolidating financial information under US GAAP. The US GAAP summary balance sheets present these investments within ‘Investments’.
The consolidation adjustments column includes the necessary amounts to eliminate the inter-company balances and transactions between National Grid plc, National Grid Gas plc, British Transco Finance Inc. and other subsidiaries.
Summary income statement for the year ended 31 March 2007 - US GAAP
| Parent guarantor |
Issuer of notes |
Subsidiary guarantor |
||||
|---|---|---|---|---|---|---|
| National Grid plc £m |
British Transco Finance Inc. £m |
National Grid Gas plc £m |
Other subsidiaries £m |
Consolidation adjustments £m |
National Grid consolidated £m |
|
| Revenue | - | - | 2,248 | 6,756 | (318) | 8,686 |
| Other operating income | - | - | 6 | 63 | - | 69 |
| Operating costs | ||||||
| Depreciation and amortisation | - | - | (505) | (511) | - | (1,016) |
| Payroll costs | - | - | (226) | (590) | - | (816) |
| Purchases of electricity | - | - | - | (1,887) | - | (1,887) |
| Purchases of gas | - | - | (113) | (426) | - | (539) |
| Rates and property taxes | - | - | (211) | (260) | - | (471) |
| Electricity transmission services scheme direct costs | - | - | - | (565) | - | (565) |
| Payments to Scottish electricity transmission network owners | - | - | - | (237) | - | (237) |
| Expense relating to impairment of receivables | - | - | 1 | (64) | - | (63) |
| Other operating charges | (2) | - | (532) | (1,088) | 323 | (1,299) |
| (2) | - | (1,586) | (5,628) | 323 | (6,893) | |
| Operating profit | (2) | - | 668 | 1,191 | 5 | 1,862 |
| Net finance costs | 15 | - | (304) | (349) | - | (638) |
| Dividends receivable | - | - | - | 1,850 | (1,850) | - |
| Profit before taxation | 13 | - | 364 | 2,692 | (1,845) | 1,224 |
| Taxation | 8 | - | (210) | 70 | - | (132) |
| Profit for the year | 21 | - | 154 | 2,762 | (1,845) | 1,092 |
| Minority interests | - | - | - | (2) | - | (2) |
| Interest in equity accounted affiliates | 1,071 | - | 12 | 2 | (1,083) | 2 |
| Net income from continuing operations attributable to equity shareholders | 1,092 | - | 166 | 2,762 | (2,928) | 1,092 |
| Net income from discontinued operations | 54 | - | 13 | 32 | (45) | 54 |
| Net income for the year attributable to equity shareholders | 1,146 | -(i) | 179 | 2,794 | (2,973) | 1,146 |
(i) Net income for the year for British Transco Finance Inc. is £nil as interest payable to external bond holders is offset by interest receivable on loans to National Grid Gas plc.
Summary income statement for the year ended 31 March 2006 - US GAAP
| Parent guarantor |
Issuer of notes |
Subsidiary guarantor |
||||
|---|---|---|---|---|---|---|
| National Grid plc £m* |
British Transco Finance Inc. £m* |
National Grid Gas plc £m* |
Other subsidiaries £m* |
Consolidation adjustments £m* |
National Grid consolidated £m* |
|
| Revenue | 1 | - | 2,261 | 6,992 | (363) | 8,891 |
| Other operating income | - | - | 4 | 46 | - | 50 |
| Operating costs | ||||||
| Depreciation and amortisation | - | - | (492) | (516) | - | (1,008) |
| Payroll costs | - | - | (282) | (613) | - | (895) |
| Purchases of electricity | - | - | - | (2,093) | - | (2,093) |
| Purchases of gas | - | - | (148) | (415) | - | (563) |
| Rates and property taxes | - | - | (180) | (259) | - | (439) |
| Electricity transmission services scheme direct costs | - | - | - | (536) | - | (536) |
| Payments to Scottish electricity transmission network owners | - | - | - | (259) | - | (259) |
| Expense relating to impairment of receivables | - | - | - | (24) | - | (24) |
| Other operating charges | - | - | (977) | (1,193) | 795 | (1,375) |
| - | - | (2,079) | (5,908) | 795 | (7,192) | |
| Operating profit | 1 | - | 186 | 1,130 | 432 | 1,749 |
| Net finance costs | (29) | - | (215) | (481) | - | (725) |
| Dividends receivable | - | - | - | 310 | (310) | - |
| Profit before taxation | (28) | - | (29) | 959 | 122 | 1,024 |
| Taxation | 42 | - | (64) | (299) | - | (321) |
| Profit for the year | 14 | - | (93) | 660 | 122 | 703 |
| Minority interests | - | - | - | (3) | - | (3) |
| Interest in equity accounted affiliates | 689 | - | 452 | 3 | (1,141) | 3 |
| Net income from continuing operations attributable to equity shareholders | 703 | - | 359 | 660 | (1,019) | 703 |
| Net income from discontinued operations | 604 | - | 546 | 70 | (616) | 604 |
| Net income for the year attributable to equity shareholders | 1,307 | -(i) | 905 | 730 | (1,635) | 1,307 |
*Comparatives have been adjusted to reclassify amounts relating to discontinued operations
(i) Net income for the year for British Transco Finance Inc. is £nil as interest payable to external bond holders is offset by interest receivable on loans to National Grid Gas plc.
Summary income statement for the year ended 31 March 2005 - US GAAP
| Parent guarantor |
Issuer of notes |
Subsidiary guarantor |
||||
|---|---|---|---|---|---|---|
| National Grid plc £m* |
British Transco Finance Inc. £m* |
National Grid Gas plc £m* |
Other subsidiaries £m* |
Consolidation adjustments £m* |
National Grid consolidated £m* |
|
| Revenue | 1 | - | 2,041 | 5,680 | (514) | 7,208 |
| Other operating income | - | - | 2 | 34 | - | 36 |
| Operating costs | ||||||
| Depreciation and amortisation | - | - | (497) | (417) | - | (914) |
| Payroll costs | (2) | - | (276) | (577) | - | (855) |
| Purchases of electricity | - | - | - | (1,671) | - | (1,671) |
| Purchases of gas | - | - | (85) | (272) | - | (357) |
| Rates and property taxes | - | - | (160) | (243) | - | (403) |
| Electricity transmission services scheme direct costs | - | - | - | (301) | - | (301) |
| Payments to Scottish electricity transmission network owners | - | - | - | - | - | - |
| Expense relating to impairment of receivables | - | - | 4 | (45) | - | (41) |
| Other operating charges | (29) | - | (3,276) | (944) | 3,350 | (899) |
| (31) | - | (4,290) | (4,470) | 3,350 | (5,441) | |
| Operating profit | (30) | - | (2,247) | 1,244 | 2,836 | 1,803 |
| Net finance costs | 123 | - | (443) | (144) | 6 | (458) |
| Dividends receivable | - | - | - | 500 | (500) | - |
| Profit before taxation | 93 | - | (2,690) | 1,600 | 2,342 | 1,345 |
| Taxation | (20) | - | (32) | (245) | (2) | (299) |
| Profit for the year | 73 | - | (2,722) | 1,355 | 2,340 | 1,046 |
| Minority interests | - | - | - | (2) | - | (2) |
| Interest in equity accounted affiliates | 969 | - | 2,930 | (2) | (3,899) | (2) |
| Net income from continuing operations attributable to equity shareholders | 1,042 | - | 208 | 1,351 | (1,559) | 1,042 |
| Net income from discontinued operations | 246 | - | 267 | (21) | (246) | 246 |
| Net income for the year attributable to equity shareholders | 1,288 | -(i) | 475 | 1,330 | (1,805) | 1,288 |
*The method adopted to calculate the market related value of post-retirement plan assets has been amended to achieve greater consistency between pension plans. Consequently, prior year comparatives have been adjusted. Comparatives have also been adjusted to reclassify amounts relating to discontinued operations
(i) Net income for the year for British Transco Finance Inc. is £nil as interest payable to external bond holders is offset by interest receivable on loans to National Grid Gas plc.
Balance sheet as at 31 March 2007 - US GAAP
| Parent guarantor |
Issuer of notes |
Subsidiary guarantor |
||||
|---|---|---|---|---|---|---|
| National Grid plc £m |
British Transco Finance Inc. £m |
National Grid Gas plc £m |
Other subsidiaries £m |
Consolidation adjustments £m |
National Grid consolidated £m |
|
| Assets | ||||||
| Current assets | ||||||
| Cash and cash equivalents | 748 | - | 172 | 686 | – | 1,606 |
| Marketable securities | 282 | - | 305 | 1,511 | - | 2,098 |
| Accounts and notes receivable | 3 | - | 195 | 440 | - | 638 |
| Inventories | - | - | 28 | 78 | – | 106 |
| Amounts owed by subsidiary undertakings | 9,047 | - | 5,703 | 5,200 | (19,950) | – |
| Regulatory assets | – | – | – | 305 | – | 305 |
| Prepaid expenses and other current assets | 119 | - | 42 | 718 | - | 879 |
| Assets of businesses held for sale | - | - | - | 1,963 | - | 1,963 |
| Total current assets | 10,199 | – | 6,445 | 10,901 | (19,950) | 7,595 |
| Property, plant and equipment | – | – | 10,589 | 9,509 | (30) | 20,068 |
| Goodwill | – | – | 2,451 | 1,708 | - | 4,159 |
| Intangible assets | – | – | 41 | 86 | - | 127 |
| Investments | 6,700 | - | 67 | 16,299 | (22,929) | 137 |
| Amounts owed by subsidiary undertakings | - | 156 | - | - | (156) | - |
| Regulatory assets | - | - | - | 2,575 | - | 2,575 |
| Other receivables | 195 | - | 67 | 203 | - | 465 |
| Total assets | 17,094 | 156 | 19,660 | 41,281 | (43,065) | 35,126 |
| Liabilities and shareholders’ equity | ||||||
| Current liabilities | ||||||
| Bank overdrafts | – | – | 6 | - | – | 6 |
| Accounts payable | – | – | 587 | 1,593 | - | 2,180 |
| Short-term borrowings | 359 | 3 | 346 | 75 | – | 783 |
| Accrued income taxes | – | – | 40 | 31 | – | 71 |
| Amounts owed to subsidiary undertakings | 2,776 | - | 2,424 | 14,750 | (19,950) | – |
| Other accrued liabilities | 52 | - | 82 | 306 | (77) | 363 |
| Liabilities of businesses held for sale | - | - | - | 458 | - | 458 |
| Total current liabilities | 3,187 | 3 | 3,485 | 17,213 | (20,027) | 3,861 |
| Long-term borrowings | 4,513 | 153 | 3,214 | 6,706 | - | 14,586 |
| Amounts owed to subsidiary undertakings | - | - | - | 156 | (156) | - |
| Post-retirement benefits | – | – | – | 1,338 | (9) | 1,329 |
| Deferred income taxes | 10 | - | 2,153 | 1,757 | - | 3,920 |
| Other liabilities | 54 | - | 1,169 | 840 | - | 2,063 |
| Total liabilities | 7,764 | 156 | 10,021 | 28,010 | (20,192) | 25,759 |
| Minority interest – equity | – | – | – | 11 | - | 11 |
| Cumulative preference stock issued by subsidiary undertakings | - | - | - | 26 | - | 26 |
| Shareholders’ equity | ||||||
| Common stock | 308 | - | 45 | 541 | (586) | 308 |
| Additional paid in capital | 7,863 | - | 9,680 | 9,336 | (19,016) | 7,863 |
| Other reserves | 359 | - | - | - | - | 359 |
| Retained earnings | 2,107 | - | (17) | 4,686 | (4,669) | 2,107 |
| Accumulated comprehensive loss | (1,307) | - | (69) | (1,329) | 1,398 | (1,307) |
| Shareholders’ equity | 9,330 | - | 9,639 | 13,234 | (22,873) | 9,330 |
| Total liabilities and shareholders’ equity | 17,094 | 156 | 19,660 | 41,281 | (43,065) | 35,126 |
Balance sheet as at 31 March 2006 - US GAAP
| Parent guarantor |
Issuer of notes |
Subsidiary guarantor |
||||
|---|---|---|---|---|---|---|
| National Grid plc £m |
British Transco Finance Inc. £m |
National Grid Gas plc £m |
Other subsidiaries £m |
Consolidation adjustments £m |
National Grid consolidated £m |
|
| Assets | ||||||
| Current assets | ||||||
| Cash and cash equivalents | 1,046 | 1 | 221 | 212 | (14) | 1,466 |
| Marketable securities | - | - | 35 | 349 | - | 384 |
| Accounts and notes receivable | 16 | 3 | 171 | 648 | - | 838 |
| Inventories | - | - | 23 | 85 | - | 108 |
| Amounts owed by subsidiary undertakings | 7,093 | - | 5,722 | 4,529 | (17,344) | - |
| Regulatory assets | – | – | – | 246 | - | 246 |
| Prepaid expenses and other current assets | 64 | - | 101 | 798 | - | 963 |
| Total current assets | 8,219 | 4 | 6,273 | 6,867 | (17,358) | 4,005 |
| Property, plant and equipment | – | – | 8,983 | 11,287 | (35) | 20,235 |
| Goodwill | – | – | 2,377 | 2,454 | - | 4,831 |
| Intangible assets | - | - | 33 | 357 | - | 390 |
| Investments | 5,209 | - | 52 | 16,323 | (21,424) | 160 |
| Amounts owed by subsidiary undertakings | - | 157 | - | - | (157) | - |
| Regulatory assets | - | - | - | 2,805 | - | 2,805 |
| Other receivables | 79 | - | 91 | 356 | - | 526 |
| Total assets | 13,507 | 161 | 17,809 | 40,449 | (38,974) | 32,952 |
| Liabilities and shareholders’ equity | ||||||
| Current liabilities | ||||||
| Bank overdrafts | 14 | - | - | 3 | (14) | 3 |
| Accounts payable | – | – | 436 | 1,930 | - | 2,366 |
| Short-term borrowings | 114 | 4 | 689 | 1,758 | - | 2,565 |
| Accrued income taxes | – | – | 70 | 349 | - | 419 |
| Amounts owed to subsidiary undertakings | 1,813 | - | 920 | 14,611 | (17,344) | - |
| Other accrued liabilities | 63 | - | 111 | 160 | (77) | 257 |
| Total current liabilities | 2,004 | 4 | 2,226 | 18,811 | (17,435) | 5,610 |
| Long-term borrowings | 1,741 | 157 | 2,005 | 6,156 | - | 10,059 |
| Amounts owed to subsidiary undertakings | - | - | - | 157 | (157) | - |
| Post-retirement benefits | – | – | – | 1,348 | - | 1,348 |
| Deferred income taxes | 15 | - | 2,151 | 1,897 | - | 4,063 |
| Other liabilities | - | - | 226 | 1,858 | - | 2,084 |
| Total liabilities | 3,760 | 161 | 6,608 | 30,227 | (17,592) | 23,164 |
| Minority interest – equity | – | – | – | 11 | - | 11 |
| Cumulative preference stock issued by subsidiary undertakings | - | - | - | 30 | - | 30 |
| Shareholders’ equity | ||||||
| Common stock | 310 | - | 45 | 541 | (586) | 310 |
| Additional paid in capital | 7,837 | - | 9,680 | 8,072 | (17,752) | 7,837 |
| Other reserves | 359 | - | - | - | - | 359 |
| Retained earnings | 1,867 | - | 1,476 | 2,194 | (3,670) | 1,867 |
| Accumulated comprehensive loss | (626) | - | - | (626) | 626 | (626) |
| Treasury stock | - | - | - | - | - | - |
| Shareholders’ equity | 9,747 | - | 11,201 | 10,181 | (21,382) | 9,747 |
| Total liabilities and shareholders’ equity | 13,057 | 161 | 17,809 | 40,449 | (38,974) | 32,952 |
Cash flow statements - US GAAP
| Parent guarantor |
Issuer of notes |
Subsidiary guarantor |
||||
|---|---|---|---|---|---|---|
| National Grid plc £m |
British Transco Finance Inc. £m |
National Grid Gas plc £m |
Other subsidiaries £m |
Consolidation adjustments £m |
National Grid consolidated £m |
|
| Year ended 31 March 2007 | ||||||
| Net cash provided by/(used in) operating activities – continuing operations | 221 | - | 1,341 | 3,288 | (2,071) | 2,779 |
| Net cash used in operating activities – discontinued operations | - | - | - | 178 | - | 178 |
| Net cash provided by/(used in) operating activities | 221 | - | 1,341 | 3,466 | (2,071) | 2,957 |
| Net cash used in investing activities – continuing operations | (1,545) | - | (1,429) | (2,462) | 1,264 | (4,172) |
| Net cash provided by/(used in) investing activities – discontinued operations | - | - | 27 | (132) | – | (105) |
| Net cash used in investing activities | (1,545) | - | (1,402) | (2,594) | 1,264 | (4,277) |
| Net cash provided by/(used in) financing activities | 1,040 | (1) | 6 | (358) | 807 | 1,494 |
| (Decrease)/increase in cash and cash equivalents in the year | (284) | (1) | (55) | 514 | - | 174 |
| Year ended 31 March 2006* | ||||||
| Net cash (used in)/provided by operating activities – continuing operations | (9) | 1 | 1,501 | 1,428 | (802) | 2,119 |
| Net cash (used in)/provided by operating activities – discontinued operations | - | - | (57) | 158 | - | 101 |
| Net cash (used in)/provided by operating activities | (9) | 1 | 1,444 | 1,586 | (802) | 2,220 |
| Net cash used in investing activities – continuing operations | - | - | (681) | (940) | - | (1,621) |
| Net cash provided by/(used in) investing activities – discontinued operations | - | - | 5,635 | (94) | - | 5,541 |
| Net cash provided by/(used in) investing activities | - | - | 4,954 | (1,034) | - | 3,920 |
| Net cash provided by/(used in) financing activities | 937 | - | (6,181) | 517 | 788 | (4,973) |
| Increase in cash and cash equivalents in the year | 928 | 1 | 217 | 35 | (14) | 1,167 |
| Year ended 31 March 2005* | ||||||
| Net cash provided by/(used in) operating activities – continuing operations | 1,108 | (1) | 3,594 | 1,754 | (4,522) | 1,933 |
| Net cash provided by operating activities – discontinued operations | - | - | 449 | 101 | - | 550 |
| Net cash provided by/(used in) operating activities | 1,108 | (1) | 4,043 | 1,855 | (4,522) | 2,483 |
| Net cash used in investing activities – continuing operations | (273) | - | (5,126) | (717) | 4,763 | (1,353) |
| Net cash used in investing activities – discontinued operations | - | - | (323) | (1,249) | - | (1,572) |
| Net cash used in investing activities | (273) | - | (5,449) | (1,966) | 4,763 | (2,925) |
| Net cash (used in)/provided by financing activities | (723) | - | 1,336 | 68 | (241) | 440 |
| Increase/(decrease) in cash and cash equivalents in the year | 112 | (1) | (70) | (43) | - | (2) |
*Comparatives have been adjusted to reclassify amounts relating to discontinued operations
Cash dividends were received by National Grid plc from consolidated subsidiaries amounting to £220m during the year ended 31 March 2007 (2006: £nil; 2005: £1,139m).