Exhibit 99.1
KEYSPAN NEWS
- --------------------------------------------------------------------------------
KeySpan Corporation For Immediate Release
Contacts: Investors Media Relations
George Laskaris
718.403.2526 718.403.2503
KeySpan Announces Strong 2nd Quarter Results
--------------------------------------------
KeySpan/National Grid Transaction Receives Hart Scott Rodino and CFIUS Clearance
Brooklyn, New York, August 3, 2006 - KeySpan Corporation (NYSE: KSE) announced
consolidated earnings of $49.4 million or $0.28 per share for the second quarter
of 2006, as compared to $16.2 million or $0.10 per share for the same period
last year. These favorable results reflect higher operating income from the gas
distribution segment, as well as lower financing and tax expenses.
For the six month period ended June 30, 2006, KeySpan reported consolidated
earnings of $257.4 million or $1.47 per share, compared to $250.6 million or
$1.51 per share for the same period last year. These year-to-date results
reflect increased electric operating income as well as the lower financing and
tax expenses noted above, partially offsetting the impact on operating results
of the very warm weather experienced during the first quarter of this year in
the gas distribution segment.
Discontinued operations reflected a loss of $1.8 million or $0.01 per share for
the three and six months ended June 30, 2005, respectively as a result of the
sale of KeySpan's mechanical contracting business during the first half of 2005.
"I am particularly pleased with the solid performance of our core gas
distribution business. The Company continues to add new gas customers in all our
service territories. In spite of the current relatively high gas price
environment, we are on track to achieving our new customer growth in the gas
business, with a goal for 2006 of close to $50 million in new gross profit
margin," said Robert B. Catell, KeySpan Chairman and Chief Executive Officer.
"Our electric business is in top form and ready to meet the ever increasing
electric demand experienced by both Long Island and New York City. Our financial
condition remains strong with a 47.3% debt to total capitalization ratio".
The previously announced acquisition of KeySpan by National Grid continues to
move forward as the required federal and state regulatory filings and approvals
are progressing. KeySpan and National Grid filed a joint merger application with
the Federal Energy Regulatory Commission on May 25th. The companies also cleared
review by the Federal Trade Commission under the Hart-Scott-Rodino Antitrust
Improvements Act on July 10 and the Committee of Foreign Investment in the
United States (CFIUS) on July 12. In addition, the merger approval request and
long term rate plans for KeySpan's two New York gas distribution utilities were
8
filed with the New York Public Service Commission on July 20 which would provide
more than $500 million in savings to New York City, Long Island and upstate
customers. Filings with the New Hampshire Public Utilities Commission and the
State of New Jersey Board of Public Utilities are expected in the next several
weeks.
"I am pleased with the progress made by KeySpan and National Grid on the
transaction as we have received several approvals and have submitted additional
filings," said Mr. Catell. "The integration process commenced in April and both
companies are working well together to realize the potential of this
transaction. We will work very closely with the state regulatory commissions to
receive approval for this transaction which will provide substantial benefits to
our customers and investors. We look forward to completing the transaction next
year."
Segment Highlights
Results in 2006 and 2005 are reported on an Operating Income basis as follows:
- -------------------------------------------------------------------------------------------------------------------
2nd 2nd YTD YTD
Operating Income / (Loss) [$ millions] Quarter Quarter 2006 2005
-------------------------------------- 2006 2005
- -------------------------------------------------------------- ------------ ------------- ------------ ------------
Gas Distribution 39.5 30.4 376.0 422.3
- -------------------------------------------------------------- ------------ ------------- ------------ ------------
Electric Services 62.4 65.7 127.3 116.7
- -------------------------------------------------------------- ------------ ------------- ------------ ------------
Energy Investments 3.7 5.5 6.7 11.9
- -------------------------------------------------------------- ------------ ------------- ------------ ------------
Energy Services 2.0 (2.8) 1.6 (5.6)
- -------------------------------------------------------------- ------------ ------------- ------------ ------------
Total Operating Segments 107.6 98.8 511.6 545.3
- -------------------------------------------------------------- ------------ ------------- ------------ ------------
Other (0.1) 4.4 (15.0) (3.4)
----- --- ------ -----
- -------------------------------------------------------------- ------------ ------------- ------------ ------------
Total Operating Income 107.5 103.2 496.6 541.9
- -------------------------------------------------------------- ------------ ------------- ------------ ------------
Operating income for the second quarter of 2006 increased $4.3 million or
approximately 4%, to $107.5 million, compared to 2005. These results primarily
reflect higher earnings from the gas distribution segment from higher net
revenues, offset by lower capacity and energy margins at the Ravenswood plant in
the electric business. For the first half of 2006, operating income decreased
$45.3 million or 8%, to $496.6 million, compared to $541.9 million for the same
period last year. The main driver of this decrease was the gas distribution
business, which was impacted by the unusually warm weather in the first quarter.
This was partially offset by the electric segment which benefited from a
financial capacity swap gain. Both the quarter and year to date results also
benefited from enhanced profitability in the Energy Services segment.
Key Operating Income Drivers by Segment
o The Gas Distribution segment, which serves New York City, Long Island and
New England, reported second quarter operating income of $39.5 million, an
increase of $9.1 million over the same period last year, benefiting from
increased net gas revenues and improved pricing in the temperature control
market.
Year-to-date results of $376 million were $46.3 million lower than last
year, due to weather in the first quarter which was 15% warmer than last
year, substantially higher gas prices and higher operating expenses. In
spite of these conditions, the Company continued to add customers in the
first half of 2006 as KeySpan completed approximately 19,000 gas
installations, consistent with plan, which should add approximately $19
9
million in new gross profit margin. Net revenues for the year decreased $33
million, as the favorable impact of load growth additions was more than
offset by lower usage per customer resulting from the warm weather and
higher gas prices. The favorable operating results from the second quarter
partially offset the impact of weather in the first quarter. In addition,
operating expenses increased $13.5 million, primarily due to higher
employee benefit related expenses and a larger provision for uncollectible
accounts driven by the impact of higher gas prices.
o The Electric Services segment owns and operates generation in the New York
City and Long Island "load pockets" and manages the Long Island Power
Authority's transmission and distribution system under long-term contracts.
This segment reported operating income of $62.4 million for the second
quarter, a decrease of $3.3 million, due primarily to lower net energy and
capacity revenues from the Ravenswood generating plant, resulting primarily
from new generating capacity added in New York City. Earlier in the year,
KeySpan entered into a fixed for float unforced capacity financial swap
with Morgan Stanley for a three year period, which is settled on a monthly
basis. KeySpan realized a gain of $17.7 million on this swap transaction
for the quarter, which is reflected in the results for this segment.
Year-to-date results of $127.3 million were $10.6 million higher than the
same period last year, primarily reflecting the gain from the financial
capacity swap. The Ravenswood generating plant experienced a decrease in
net revenues of $1 million.
o The Energy Investments segment reported operating income of $6.7 million
for the first half of 2006, compared to $11.9 million in 2005. This segment
includes the Company's complementary assets in natural gas pipelines,
storage and other energy related investments as well as our Seneca Upshur
gas exploration and production operations. These results primarily reflect
lower earnings from KeySpan's investment in the Iroquois gas pipeline
system. In addition, 2005 results include the earnings from the Premier
pipeline company which was sold in 2005.
o The Energy Services segment includes companies that provide energy related
services to homes and businesses in the New York City and Boston
metropolitan areas. This segment reported an operating profit of $1.6
million for the first half of 2006, as compared to a loss of $5.6 million
incurred in the same period last year. This improved performance reflects
higher gross profit and operating margins in the engineering division and
residential equipment installation and service contract business.
Financial Update
Despite a rising interest rate environment, the Company was able to reduce
interest expenses in the second quarter by $13.2 million to $59.4 compared to
the same period last year. Part of this reduction was the result of a favorable
tax resolution with New York City regarding income taxes relating to the
Ravenswood generating facility. As a result of the settlement of this issue,
KeySpan reversed a previously recorded $6 million interest reserve. The
remaining benefit stems from the Company's reduction of debt outstanding. At the
end of the second quarter of 2006, the Company's debt-to-total-capitalization
improved to 47.3% from 50.7% at year end 2005, reflecting our continued strong
financial position.
10
In addition, two issues were resolved with the IRS regarding tax returns from
1996 to 1999 for predecessor companies. As a result of this settlement and the
settlement with New York City, KeySpan realized a tax benefit of $16 million in
the second quarter.
The Company declared a quarterly common stock dividend of $0.465 per share,
payable August 1, 2006, to shareholders of record as of July 12, 2006. This
dividend payment reflects an annual increase of $0.04 per share over last year's
dividend, and is the Company's 33rd consecutive period of paying a dividend as
KeySpan, as the company continues to build upon its long-standing commitment of
dividend payments to its shareholders. The annual dividend rate of $1.86 per
share is supported by the Company's strong cash flows and provides a yield to
shareholders of approximately 4.5%.
- --------------------------------------------------------------------------------
Investors are invited to listen to the KeySpan Corporation 2006 2nd Quarter
Earnings Conference Call on:
Thursday, August 3, 2006 at 10:30 AM (EST)
------------------------------------------
Live Dial-In Number: 866-564-7444
International Dial-In Number: 719-234-0008
Replay will begin two hours after the call ends until 8/7//06 Replay Dial In:
888-203-1112
International Replay: 719-457-0820
Conference ID: 5254836
Audio webcast available at http://investor.keyspanenergy.com
11
A member of the Standard & Poor's 500 Index, KeySpan Corporation (NYSE:KSE) is
the largest distributor of natural gas in the Northeast, operating regulated gas
utilities in New York, Massachusetts, and New Hampshire that serve 2.6 million
customers. These customer-focused businesses are complemented by a portfolio of
service companies that offer energy-related products, services, and solutions to
homes and businesses. KeySpan is also the largest electric generator in New York
State, with approximately 6,650 megawatts of generating capacity that provides
power to 1.1 million customers of the Long Island Power Authority (LIPA) on Long
Island and supplies approximately 25 percent of New York City's capacity needs.
KeySpan also operates LIPA's transmission and distribution system under contract
to LIPA. In addition to these assets, KeySpan has strategic investments in
pipeline transportation, distribution, storage, and production. KeySpan has
headquarters in Brooklyn, New England, and Long Island. For more information,
visit KeySpan's web site at www.keyspanenergy.com.
Certain statements contained herein are forward-looking statements, which
reflect numerous assumptions and estimates and involve a number of risks and
uncertainties. For these statements, we claim the protection of the safe harbor
for forward-looking statements provided by the Private Securities Litigation
Reform Act of 1995. There are possible developments that could cause our actual
results to differ materially from those forecasted or implied in the
forward-looking statements. You are cautioned not to place undue reliance on
these forward-looking statements, which are current only as of the date of this
filing. We disclaim any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. Among the factors that could cause actual results to differ
materially are: general economic conditions, especially in the Northeast United
States; available sources and costs of fuel; volatility of energy prices in a
deregulated market environment as well as in the source of natural gas and fuel
used to generate electricity; potential write-down of the carrying value of our
investment in certain unregulated subsidiaries and natural gas properties when
natural gas prices are depressed or if we have significant downward revisions in
our estimated proved gas reserves; federal and state regulatory initiatives that
increase competition, threaten cost and investment recovery and impact rate
structure; our ability to successfully reduce our cost structures;
implementation of new accounting standards; the degree to which we develop
unregulated business ventures, as well as federal and state regulatory policies
affecting our ability to retain and operate those business ventures; our ability
to identify and make complementary acquisitions, as well as the successful
integration of those acquisitions; inflationary trends and interest rates; and
risks detailed from time to time in reports and other documents filed by us with
the Securities and Exchange Commission.
12
KeySpan Corporation
Consolidated Statement of Income
- ---------------------------------------------------------------------------------------------------------------------------
Three Months Ended June 30, Six Months Ended June 30,
(In Millions of Dollars, Except Per Share Amounts) 2006 2005 2006 2005
- ---------------------------------------------------------------------------------------------------------------------------
Revenues
Gas Distribution $ 873.2 $ 821.1 $ 3,053.3 $ 2,846.5
Electric Services 444.2 468.5 869.0 869.1
Energy Services 50.4 44.2 98.7 88.6
Energy Investments 9.9 8.7 17.8 18.8
-----------------------------------------------------------------
Total Revenues 1,377.7 1,342.5 4,038.8 3,823.0
-----------------------------------------------------------------
Operating Expenses
Purchased gas for resale 539.8 501.6 2,051.2 1,810.5
Fuel and purchased power 115.7 159.2 245.7 292.3
Operations and maintenance 420.6 391.8 826.7 779.0
Depreciation, depletion and amortization 101.2 97.5 211.4 203.6
Operating taxes 95.8 94.0 214.0 205.8
-----------------------------------------------------------------
Total Operating Expenses 1,273.1 1,244.1 3,549.0 3,291.2
Income from equity investments 2.9 4.7 6.3 10.0
Sale of assets - 0.1 0.5 0.1
-----------------------------------------------------------------
Operating Income 107.5 103.2 496.6 541.9
-----------------------------------------------------------------
Other Income and (Deductions)
Interest charges (59.4) (72.6) (125.6) (132.7)
Gain on sale of investments - - - 4.1
Cost of debt redemption - - - (20.9)
Other 6.2 4.1 17.6 13.2
-----------------------------------------------------------------
Total Other Income and (Deductions) (53.2) (68.5) (108.0) (136.3)
-----------------------------------------------------------------
Income Taxes
Current (37.3) 16.0 122.2 144.8
Deferred 42.2 (0.2) 9.0 6.2
-----------------------------------------------------------------
Total Income Taxes 4.9 15.8 131.2 151.0
-----------------------------------------------------------------
Earnings from continuing operations 49.4 18.9 257.4 254.6
Discontinued Operations
Income (loss) from discontinued operations, net of tax - (1.9) - (4.1)
Gain on disposal, net of tax - 0.1 - 2.3
-----------------------------------------------------------------
Loss from discontinued operations - (1.8) - (1.8)
-----------------------------------------------------------------
Net Income 49.4 17.1 257.4 252.8
Preferred stock dividend requirements - 0.9 - 2.2
-----------------------------------------------------------------
Earnings for Common Stock $ 49.4 $ 16.2 $ 257.4 $ 250.6
=================================================================
Basic Earnings Per Share:
Continuing Operations,
less preferred stock dividends $ 0.28 $ 0.11 $ 1.47 $ 1.52
Discontinued Operations - (0.01) - (0.01)
-----------------------------------------------------------------
Basic Earnings Per Share $ 0.28 $ 0.10 $ 1.47 $ 1.51
=================================================================
Diluted Earnings Per Share
Continuing Operations,
less preferred stock dividends $ 0.28 $ 0.10 $ 1.46 $ 1.52
Discontinued Operations - (0.01) - (0.01)
-----------------------------------------------------------------
Diluted Earnings Per Share $ 0.28 $ 0.09 $ 1.46 $ 1.51
=================================================================
Average Common Shares Outstanding (000) 174,989 169,933 174,846 165,529
Average Common Shares Outstanding - Diluted (000) 176,121 170,878 175,848 166,507
- ---------------------------------------------------------------------------------------------------------------------------
13
Segment Information
Three Months Ended June 30, 2006
(In Millions of Dollars)
Energy Total Total
Gas Electric Invest- Energy Operating Reconci- Consoli-
Distribution Services ments Services Segments liations dation
-----------------------------------------------------------------------------------------
Unaffiliated Revenues 873.2 444.2 9.9 50.4 1,377.7 - 1,377.7
Intersegment Revenues - - 1.3 2.2 3.5 (3.5) -
-----------------------------------------------------------------------------------------
873.2 444.2 11.2 52.6 1,381.2 (3.5) 1,377.7
-----------------------------------------------------------------------------------------
Operation Expenses
Purchased Gas 541.1 - - - 541.1 (1.3) 539.8
Purchased Fuel - 115.4 0.2 - 115.6 0.1 115.7
Operations and Maintenance 176.5 195.2 7.4 48.1 427.2 (6.6) 420.6
Depreciation, Depletion and Amortization 69.1 25.1 1.8 2.0 98.0 3.2 101.2
Operating Taxes 47.0 46.1 1.0 0.5 94.6 1.2 95.8
-----------------------------------------------------------------------------------------
Total Operating Expenses 833.7 381.8 10.4 50.6 1,276.5 (3.4) 1,273.1
-----------------------------------------------------------------------------------------
Income From Equity Investments - - 2.9 - 2.9 - 2.9
-----------------------------------------------------------------------------------------
Operating Income 39.5 62.4 3.7 2.0 107.6 (0.1) 107.5
=========================================================================================
14
Segment Information
Three Months Ended June 30, 2005
(In Millions of Dollars)
Energy Total Total
Gas Electric Invest- Energy Operating Reconci- Consoli-
Distribution Services ments Services Segments liations dation
-----------------------------------------------------------------------------------------
Unaffiliated Revenues 821.1 468.5 8.7 44.2 1,342.5 - 1,342.5
Intersegment Revenues - - - 3.7 3.7 (3.7) 0.0
-----------------------------------------------------------------------------------------
821.1 468.5 8.7 47.9 1,346.2 (3.7) 1,342.5
-----------------------------------------------------------------------------------------
Operation Expenses
Purchased Gas 501.6 - - - 501.6 - 501.6
Purchased Fuel - 159.0 0.1 - 159.2 - 159.2
Operations and Maintenance 175.2 176.6 5.2 48.3 405.3 (13.5) 391.8
Depreciation, Depletion and Amortization 67.1 23.1 1.8 2.0 94.1 3.4 97.5
Operating Taxes 46.6 44.1 0.9 0.4 92.0 2.0 94.0
-----------------------------------------------------------------------------------------
Total Operating Expenses 790.6 402.8 8.1 50.7 1,252.2 (8.1) 1,244.1
-----------------------------------------------------------------------------------------
Income From Equity Investments - - 4.7 - 4.7 - 4.7
Gain (Loss) on Sale of Assets - - 0.1 - 0.1 - 0.1
-----------------------------------------------------------------------------------------
Operating Income 30.4 65.7 5.5 (2.8) 98.8 4.4 103.2
=========================================================================================
15
Segment Information
Six Months Ended June 30, 2006
(In Millions of Dollars)
Energy Total Total
Gas Electric Invest- Energy Operating Reconci- Consoli-
Distribution Services ments Services Segments liations dation
---------------------------------------------------------------------------------------
Unaffiliated Revenues 3,053.3 869.0 17.8 98.7 4,038.8 - 4,038.8
Intersegment Revenues - - 2.6 4.7 7.3 (7.3) -
---------------------------------------------------------------------------------------
3,053.3 869.0 20.4 103.4 4,046.1 (7.3) 4,038.8
---------------------------------------------------------------------------------------
Operation Expenses
Purchased Gas 2,053.7 0.1 - - 2,053.8 (2.6) 2,051.2
Purchased Fuel - 245.4 0.2 - 245.6 0.1 245.7
Operations and Maintenance 366.9 350.5 14.0 96.9 828.3 (1.6) 826.7
Depreciation, Depletion and Amortization 145.0 52.2 3.5 4.0 204.7 6.7 211.4
Operating Taxes 111.8 93.5 2.5 0.9 208.7 5.3 214.0
---------------------------------------------------------------------------------------
Total Operating Expenses 2,677.4 741.7 20.2 101.8 3,541.1 7.9 3,549.0
---------------------------------------------------------------------------------------
Income From Equity Investments - - 6.3 - 6.3 - 6.3
Gain (Loss) on Sale of Assets 0.1 - 0.2 - 0.3 0.2 0.5
---------------------------------------------------------------------------------------
Operating Income 376.0 127.3 6.7 1.6 511.6 (15.0) 496.6
=======================================================================================
16
Segment Information
Six Months Ended June 30, 2005
(In Millions of Dollars)
Energy Total Total
Gas Electric Invest- Energy Operating Reconci- Consoli-
Distribution Services ments Services Segments liations dation
----------------------------------------------------------------------------------------
Unaffiliated Revenues 2,846.5 869.1 18.8 88.6 3,823.0 - 3,823.0
Intersegment Revenues - 4.6 - 6.3 10.9 (10.9) -
----------------------------------------------------------------------------------------
2,846.5 873.6 18.8 94.9 3,833.8 (10.9) 3,823.0
----------------------------------------------------------------------------------------
Operation Expenses
Purchased Gas 1,815.1 - - - 1,815.1 (4.6) 1,810.5
Purchased Fuel - 291.9 0.3 - 292.3 0.0 292.3
Operations and Maintenance 356.9 330.2 11.7 95.8 794.7 (15.7) 779.0
Depreciation, Depletion and Amortization 143.9 46.0 3.2 3.9 196.9 6.7 203.6
Operating Taxes 108.4 88.8 1.8 0.8 199.7 6.1 205.8
----------------------------------------------------------------------------------------
Total Operating Expenses 2,424.2 756.9 17.0 100.5 3,298.6 (7.5) 3,291.2
----------------------------------------------------------------------------------------
Income From Equity Investments - - 10.0 - 10.0 - 10.0
Gain (Loss) on Sale of Assets - - 0.1 - 0.1 - 0.1
----------------------------------------------------------------------------------------
Operating Income 422.3 116.7 11.9 (5.6) 545.4 (3.4) 541.9
========================================================================================
17