March 31, 2006
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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KeySpan Corporation
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Communication #1
Attached is a script of the testimony that Robert B. Catell, Chairman and Chief
Executive Officer of KeySpan Corporation ("KeySpan") prepared for a the
Planning, Development and Environment Committee of the Nassau County Legislature
hearing on Friday, March 31, 2006 which addressed the acquisition of KeySpan by
National Grid:
Testimony of Robert B. Catell
Chairman and CEO
KeySpan Corporation
Before
The Planning, Development and Environment Committee
Of the Nassau County Legislature
On
"What effect will the sale of KeySpan have on Long Island's energy supply,
generation and rates?"
Friday, March 31, 2006
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o Good afternoon. My name is Robert Catell, and I am Chairman and CEO of
KeySpan Corporation. It's my great pleasure to be here with my colleague,
Michael Jesanis, CEO of National Grid's U.S. Division.
o I want to thank Committee Chairman David Denenberg for inviting me here,
and thank the other members of the committee.
o I also want to thank the Legislatures on Long Island for spending time on
such an important subject: National Grid and KeySpan, and the impact that
transaction will have for Long Island.
o As you know, KeySpan has entered into an agreement with National Grid that
will spell an exciting new chapter in both our company and energy on Long
Island.
o This story began in 1998, when a company called KeySpan came to Long Island
to turn a local utility called LILCO into what I think everyone would agree
is a stronger, more well-regarded organization.
o Today's KeySpan is financially sound, has a strong community presence and
continues to provide the highest levels of service with an extremely
dedicated and qualified work force, most of whom live on Long Island.
o There's a similar story that played out in a similar way about six years
ago, when a company called National Grid acquired a financially troubled
Niagara Mohawk, or NIMO, in upstate New York. Today, that National
Grid-owned business is financially robust, with a good corporate reputation
and a strong community commitment.
o Soon, KeySpan will become part of National Grid's success story - part of a
larger company that will give us access to more resources to make even more
of a difference in the communities we serve.
o Some people claim that foreign ownership isn't a good thing. But I'd like
you to look at the example of European American Bank, or EAB. This
financial institution took over financially troubled Franklin National Bank
back in 1974, and went on to serve and benefit Long Islanders for more than
a quarter-century.
o Also consider this: While National Grid is London-based, 55 percent of its
operations are right here in the U.S. and KeySpan, its fifth acquisition,
is by far its largest.
o Together, National Grid and KeySpan will be able to play a major role in
energy issues around the globe; issues affect us right here on Long Island,
too - like ensuring reliability while we trim our operating costs ...
keeping rates stable or lower ... ensuring adequate gas supplies ... and
the list goes on.
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o But let's look closer to home. Richie Kessel has also been testifying about
the National Grid/KeySpan transaction, and its potential effect on LIPA and
Long Island.
o As you all know, KeySpan and LIPA entered into a very favorable agreement
for customers in December. It includes a two-year rate freeze ... $38
million in operating cost reductions ... a $75 million fuel fund to
mitigate increased fuel costs ... and incentives for continued reliability
and stability to LIPA's 1.1 million electric customers through the year
2013.
o KeySpan is committed to this agreement and the benefits it provides, and we
will work hard in the coming months to see this contract approved to make
sure these benefits remain intact. Once approved, National Grid will be
bound by all the terms of that agreement.
o KeySpan will also continue to advance repowering alternatives with LIPA as
part of a long-range environmental plan for Long Island.
o As part of the recent agreement, LIPA has the opportunity to acquire the
Far Rockaway and Barrett Plants, which are among the least efficient and
most suitable units for repowering.
o And we stand ready to build a new combined-cycle plant at the permitted
site on Spagnoli Road, the perfect location: It's in the center of load
growth, a mile from existing gas supply and just a mile from the nearest
substation. Building Spagnoli would accomplish a "virtual repowering" as
the high-efficient new plant would mean our older plants, like Glenwood,
would run less.
o Our Article X permit is in place; we have an agreement with the Town of
Huntington; engineering is done; the site is ready to go. All we need is
LIPA's agreement to go forward.
o In addition to repowering, we will also continue to explore and invest in
emission reduction technologies at all of our plants. These plants are
still among the cleanest in the country; however, there's more we will do
to make them even cleaner, and more fuel-efficient and cost-effective.
o So as we enter into this agreement with National Grid, we will continue to
pursue all of these things ... plus we stand firmly committed to providing
top-notch service to our customers and communities here on Long Island.
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o And that better service will result from five key benefits of the deal that
I'd like to put on the record today. It will allow us to :
o 1. provide consumers with lower energy delivery costs
o 2. invest in new, secure sources of supply and energy infrastructure,
critical to Long Island
o 3. achieve the scale necessary to achieve fuel cost savings
o 4. utilize advanced, efficient technologies that benefit both customers and
the environment; and
o 5. ultimately, grow, in an increasingly complex, competitive environment.
o Until the National Grid/KeySpan deal receives final regulatory approval, of
course, we are committed to ensuring as smooth a transition as possible;
one that will be seamless to our customers and the community.
o I, in fact, will be staying on as Chairman of National Grid's U.S.
Division, and serving on the Board and as Deputy Chairman of London-based
National Grid plc for at least two years after the deal closes.
o During that time, I will make it my personal commitment to ensure that our
company continues to forge solid -- and sustainable - relationships with
all the people we interact and conduct business with.
o And I'd like to now introduce you to another person who is committed to the
success of our new company and the interests of Long Island - my colleague,
Mike Jesanis, CEO of National Grid's U.S. Operations.
o After Mike offers some brief remarks, we will open the floor to your
questions.
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Communication #2
Attached is a script of the testimony that Michael E. Jesanis, Chairman,
National Grid's U.S. Division prepared for a the Planning, Development and
Environment Committee of the Nassau County Legislature hearing on Friday, March
31, 2006 which addressed the acquisition of KeySpan by National Grid: o
Testimony of Michael E. Jesanis
Chairman
National Grid's U.S. Division
Before
The Planning, Development and Environment Committee
Of the Nassau County Legislature
On
"What effect will the sale of KeySpan have on Long Island's energy supply,
generation and rates?"
Friday, March 31, 2006
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o Good afternoon everyone. I'm delighted to be with all of you, here on Long
Island. As Bob mentioned, this is a community that we are very much
committed to serving in the best ways possible.
o And I've already had a great opportunity to see that KeySpan is, indeed, a
respected provider, employer and corporate citizen on Long Island.
o So the job of our new company, as I see it, is to continue the excellent
service and reliability record KeySpan has so successfully established.
o That means continuing to provide the top-level service Long Islanders have
come to expect, and we're all committed to doing just that.
o It means continuing the strong community commitment that has so clearly
been a KeySpan trademark.
o And it means taking the opportunity to enhance customer service. And there
are three great ways we'll be able to accomplish that.
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o One, we'll have a larger work force, which means more internal resources to
meet our needs, especially in emergency situations.
o Two, we'll have greater access to capital resources to invest in exciting
new technologies and R&D, as Bob mentioned.
o And three, we'll be able to operate more efficiently - which means synergy
savings that can benefit both shareholders and ratepayers.
o So it's an exciting proposition. And I'm as happy as Bob is that he has
agreed to stay on as Chairman of National Grid's U.S. Division, where I
know he'll assure as smooth a transition as possible.
o Bob really covered a lot already, but I just want to touch on a couple of
things briefly. First, KeySpan's relationship with the Long Island Power
Authority.
o This is a very important relationship, and it's a unique public/private
partnership that has served the Long Island community well over the past
eight years.
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o National Grid has had the pleasure of meeting with LIPA over the past year
and has started to form its own solid relationship with the public
authority. And we are looking forward to continuing that working
relationship with Richard Kessel, LIPA and New York State, as LIPA conducts
due diligence and explores its options moving forward. In fact, we are
already in the midst of developing some joint, storm season initiatives
that we will be discussing with LIPA.
o We've also been kept apprised on the progress and benefits of repowering
... and look forward to continuing to pursue the best options for Long
Island in this critical area which shows a great deal of merit.
o As Bob said, we are committed, too, to being a strong presence on Long
Island and in the other communities we serve - a hallmark of both KeySpan
and National Grid. And we have, in fact, pledged to maintain the current
community commitment level here.
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o We're also dedicated to our employees, another trademark of both companies.
And let me assure you that National Grid is counting on Long Island's
excellent, highly qualified and trained work force to continue to provide
great service and reliability.
o And, as we have always done in the past, we are treating this acquisition
as more of a merger, and will achieve synergy savings through attrition and
voluntary separation.
o In short, we recognize that the KeySpan/National Grid transaction must
provide a few key elements.
o It must have a neutral or positive impact on rates, something we've
accomplished in each of our four previous mergers and plan to do now.
o It must benefit consumers and it will in ways Bob mentioned.
o And, of course, we will be working with the PSC regarding our relationship
with LIPA and the impact of the deal on LIPA customers.
o Finally, we plan to maintain, and even improve upon, both of our companies'
solid performance records with the benefit of additional efficiencies, cost
savings and technologies.
o Thank you and now, as Bob said, we welcome your questions.
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Additional Information and Where to Find It
- -------------------------------------------
KeySpan intends to file with the Securities and Exchange Commission (the "SEC")
a proxy statement and other relevant documents in connection with the proposed
acquisition of KeySpan by National Grid. Investors and security holders of
KeySpan are advised to read the proxy statement and other relevant documents
when they become available, as they will contain important information about the
transaction. Investors and security holders may obtain a free copy of the proxy
statement and other documents filed by KeySpan with the SEC, when they become
available, at the SEC's web site at http:/www.sec.gov.
KeySpan and its directors, executive officers and other members of its
management and employees may be deemed to be participants in the solicitation of
proxies from its security holders in connection with the proposed acquisition.
Information concerning the interests of KeySpan's participants in the
solicitation is set forth in KeySpan's most recent proxy statement and Annual
Report on Form 10-K (filed with the SEC on March 30, 2005 and February 28, 2006,
respectively) and will be set forth in the proxy statement relating to the
acquisition when it becomes available.
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