Exhibit 99.1
KEYSPAN NEWS
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KeySpan Corporation For Immediate Release
Contacts: Investors Media Relations
George Laskaris 718.403.2503
718.403.2526
KeySpan Announces Increased Earnings Results for 2006
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National Grid and KeySpan Transaction Continues to Move Forward
Company Raised Annual Dividend to $1.90 per Share
Brooklyn, New York, February 22, 2007 - KeySpan Corporation (NYSE: KSE)
announced consolidated earnings of $434.2 million or $2.48 per share for 2006,
compared to $388.0 million or $2.28 per share for 2005, a 9% increase in
earnings per share. These results reflect strong operational performance in the
face of a very warm winter and very cool summer as well as the addition of new
generation capacity in the New York City market. In addition, the 2006 results
include lower interest and tax expense as well as incremental merger costs of
$27.1 million, primarily reflecting investment banking and other related fees.
For the quarter ending December 31, 2006, consolidated earnings were $126.5
million or $0.72 per share, as compared to $114.8 million or $0.66 per share for
the same period last year, a 9% increase in earnings per share. These results
were driven by lower operating expenses in the gas business, as well as lower
consolidated tax expense.
"I am very pleased with the results we were able to achieve in 2006", said Mr.
Catell, Chairman and CEO. "Despite the extremely warm winter weather experienced
in both our heating seasons, the Company met its goal of achieving $50 million
in new gross profit margin in our gas business, again reinforcing the strength
of our marketing program and demonstrating the organic growth potential in our
service territories. Our electric business, although impacted by increased
competition in the New York City market, performed exceptionally well with
summer plant availability in excess of 95%. In addition, we continued to
maintain our strong financial position with increased cash flows and a debt to
total capitalization ratio of approximately 50%."
The previously announced acquisition of KeySpan by National Grid continues to
move forward. National Grid and KeySpan have received all the necessary
approvals, except for the New York State Public Service Commission and the New
Hampshire Public Utilities Commission. Procedural schedules have been set in
both states and the regulatory proceedings are well underway on the merger and
rate plans.
"I am very happy with the approval progress made during 2006 for our transaction
with National Grid," said Mr. Catell. "We are working very diligently with the
New York and New Hampshire state regulatory commissions to receive approval for
this transaction. The integration teams from both companies continue to work
well together and have made significant progress in developing organizational
structures which will complement the strategies of the combined entity. The
selection of the senior management team is well underway. We look forward to
completing the transaction with National Grid by the middle of this year."
It should be noted the 2005 results include a loss of $1.8 million or $0.01 per
share from discontinued operations, representing the sale of the mechanical
contracting companies in the first half of 2005, and the non-cash charge of $6.6
million or $0.04 per share due to the change in accounting principle from the
implementation of FIN 47 (Accounting for Conditional Asset Obligations).
Segment Highlights
Results in 2006 and 2005 are reported on an Operating Income basis as follows:
- -------------------------------------------------------------- ------------ ------------- ------------ ------------
4th 4th YTD 2006 YTD 2005
Operating Income / (Loss) [$ millions] Quarter Quarter
-------------------------------------- 2006 2005
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Gas Distribution 203.5 188.9 568.6 565.7
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Electric Services 21.2 76.0 293.0 342.3
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Energy Investments 4.1 4.0 15.5 20.6
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Energy Services 0.8 4.0 5.3 (2.7)
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Total Operating Segments 229.6 272.9 882.4 925.9
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Other (34.4) (9.8) (54.9) (18.1)
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Total Operating Income 195.2 263.1 827.5 907.8
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2006 Weather
Operating income results for 2006 were heavily impacted by the very unusual
winter and summer weather we incurred. In terms of heating degree days, the
first and fourth quarter heating seasons were 15% and 20% warmer than the same
periods last year, respectively, while summer weather was 25% cooler than that
experienced in the prior year.
Key Operating Income Drivers by Segment
o The Gas Distribution segment with 2.6 million customers serves New York
City, Long Island and New England, and reported operating income for 2006
of $568.6 million, an increase of $2.9 million compared to last year. This
increase was realized in spite of the extremely warm weather noted above
and lower customer usage due to the high gas price environment. These items
reduced net revenues by $51.7 million compared to 2005. This decrease was
offset by lower operating expenses of $54.7 million, primarily due to a
decrease in uncollectibles. It should be noted that these results include
$57 million from the weather normalization adjustments and $9.1 million
from weather hedges put in place. The Company continued to add new
customers as it completed 48,000 gas installations during 2006.
o The Electric Services segment owns and operates 6,650MW of generation in
the New York City and Long Island "load pockets", while also managing the
Long Island Power Authority's transmission and distribution system under
long-term contracts. This segment reported operating income of $293 million
for 2006, a decrease of $49.3 million, compared to 2005. These results were
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heavily impacted by the addition of 1000MW of new generation in the New
York City market, resulting in a decrease in capacity revenues of $80.5
million compared to last year. In addition, net energy revenues decreased
by $29.8 million compared to last year, due to a combination of the cool
summer weather noted earlier and the additional generation capacity. In
terms of our LIPA contracts, operating income improved by $11 million
primarily due to an increase in off system sales and a reduction in plant
overhaul expenses. In addition, a $46.5 million gain on the financial
capacity swap was recorded. As reported in previous quarters, KeySpan
entered into a financial capacity transaction with Morgan Stanley for a
three year period starting May 1, 2006, which settles on a monthly basis.
o The Energy Investments segment reported operating income of $15.5 million
for 2006, compared to $20.6 million for 2005. This segment includes the
Company's complementary assets in natural gas pipelines, storage and other
energy related investments as well as production and development
investments. These results primarily reflect lower earnings from the
Iroquois gas pipeline system and from our LNG trucking operations. It
should be noted 2005 results included the earnings from the Premier
Pipeline Company of Northern Ireland which was sold in 2005.
o The Energy Services segment achieved an operating profit of $5.3 million
compared to a loss of $2.7 million last year. This improved performance
reflects higher profits and operating margins in our engineering and
services businesses as well as in the Company's fiber optic operations.
This segment includes companies that provide energy related services to
homes and businesses in the New York City and Boston metropolitan areas.
Financial Update
During 2006, the Company maintained its strong financial position. Despite a
rising interest rate environment, the Company was able to reduce interest
expenses by $13.2 million to $256.1 million compared to the same period last
year. Resolution of a New York City tax case related to the Ravenswood
generating facility resulted in half of this savings with the remaining coming
from improved capital performance. This is based on the Company's reduction of
outstanding debt the past several years as well as the refinancing of debt to
lock in favorable interest rates.
At year end, the debt to capitalization ratio decreased to 49.9% from 50.7% at
the end of 2005 on a GAAP basis, reinforcing KeySpan's "A" quality credit
rating.
In addition, cash flow from operations increased $655.3 million compared to last
year due to favorable working capital requirements, which benefited from
improved collections and lower priced gas in storage, and from lower tax
payments.
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 $51.6 million.
During the fourth quarter, KeySpan's New York and Long Island gas distribution
utilities issued $500 million in senior unsecured notes in a private placement
at a rate of 5.6% with a maturity date of 2016. The proceeds were used to
replace current short term borrowings and for general working capital purposes.
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The Company declared an increased quarterly common stock dividend of $0.475 per
share, payable February 1, 2007, to shareholders of record as of January 12,
2007. This is the Company's third year of a dividend increase, as well as the
35th consecutive quarter of paying a dividend, building upon its long-standing
commitment of dividend payments to its shareholders. The new annual dividend
rate of $1.90 per share provides a yield of approximately 4.6%.
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Investors are invited to listen to the KeySpan Corporation 2006 Year End
Earnings Conference Call on:
Thursday, February 22, 2007, at 9:30 AM (EST)
Live Dial-in: (800) 500-0311
International Dial-in: (719) 457-2698
Replay will begin two hours after completion of the call until 3/1/06
Replay Number: (888) 203-1112
International Replay Number: (719) 457-0820
Access Code: 2246531
The replay will begin two hours after the call.
Audio webcast available at http://investor.keyspanenergy.com
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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 6,600 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: the occurrence of any event, change or other circumstances that
could give rise to the termination of the major agreement with National Grid plc
or the failure of the merger to close for any reason; 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.
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KeySpan Corporation
Consolidated Statement of Income
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Three Months Ended 12-Months Ended
December 31, December 31,
(In Millions of Dollars, Except Per Share Amounts) 2006 2005 2006 2005
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Revenues
Gas Distribution $ 1,413.8 $ 1,914.0 $ 5,062.6 $ 5,390.1
Electric Services 446.0 553.9 1,880.6 2,042.7
Energy Services 55.6 57.1 203.4 191.2
Energy Investments 8.8 10.9 35.0 38.0
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Total Revenues 1,924.2 2,535.9 7,181.6 7,662.0
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Operating Expenses
Purchased gas for resale 918.8 1,391.2 3,331.5 3,597.3
Fuel and purchased power 130.4 205.3 548.6 752.1
Operations and maintenance 480.6 474.7 1,680.0 1,617.9
Depreciation, depletion and amortization 101.8 100.7 397.5 396.5
Operating taxes 101.1 104.0 411.2 407.1
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Total Operating Expenses 1,732.7 2,275.9 6,368.8 6,770.9
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Gain on sale of property 0.1 0.5 1.6 1.6
Income from equity investments 3.6 2.6 13.1 15.1
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Operating Income 195.2 263.1 827.5 907.8
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Other Income and (Deductions)
Interest charges (63.4) (69.2) (256.1) (269.3)
Sale of subsidiary stock - - - 4.1
Cost of debt redemption - - - (20.9)
Minority interest (0.2) (0.2) (0.8) (0.4)
Other 12.9 7.0 39.1 16.6
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Total Other Income and (Deductions) (50.7) (62.4) (217.8) (269.9)
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Income Taxes
Current (46.3) 86.6 57.9 206.6
Deferred 64.3 (7.3) 117.6 32.7
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Total Income Taxes 18.0 79.3 175.5 239.3
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Earnings from Continuing Operations 126.5 121.4 434.2 398.6
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Discontinued Operations
Income (loss) from operations, net of tax - - - (4.1)
Gain (loss) on disposal, net of tax - - - 2.3
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Loss from Discontinued Operations - - - (1.8)
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Cumulative Change in Accounting Principles, net of tax - (6.6) - (6.6)
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Net Income 126.5 114.8 434.2 390.2
Preferred stock dividend requirements - - - 2.2
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Earnings for Common Stock $ 126.5 $ 114.8 $ 434.2 $ 388.0
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Basic Earnings Per Share
Continuing Operations, less preferred stock dividends $ 0.72 $ 0.70 $ 2.48 $ 2.33
Discontinued Operations - - - (0.01)
Cumulative Change in Accounting Principles - (0.04) - (0.04)
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Basic Earnings Per Share $ 0.72 $ 0.66 $ 2.48 $ 2.28
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Diluted Earnings Per Share
Continuing Operations, less preferred stock dividends $ 0.71 $ 0.69 $ 2.46 $ 2.32
Discontinued Operations - - - (0.01)
Cumulative Change in Accounting Principles - (0.04) - (0.04)
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Diluted Earnings Per Share $ 0.71 $ 0.65 $ 2.46 $ 2.27
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Average Common Shares Outstanding (000) 175,352 174,365 175,040 169,940
Average Common Shares Outstanding - Diluted (000) 176,615 174,998 176,151 170,801
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Segment Information
Twelve Months Ended December 31, 2006
(In Millions of Dollars)
Total
Gas Electric Energy Energy Operating Reconcili- Total
Distribution Services Investments Services Segments ations Consolidation
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Unaffiliated Revenues 5,062.6 1,880.6 35.0 203.4 7,181.6 - 7,181.6
Intersegment Revenues - - 5.3 9.6 14.9 (14.9) -
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5,062.6 1,880.6 40.3 213.0 7,196.5 (14.9) 7,181.6
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Operation Expenses
Purchased Gas 3,336.6 0.2 - - 3,336.8 (5.3) 3,331.5
Purchased Fuel - 548.2 0.4 - 548.6 - 548.6
Operations and Maintenance 681.5 750.7 26.3 197.6 1,656.1 23.9 1,680.0
Depreciation, Depletion & Amortization 266.7 102.2 7.3 8.3 384.5 13.0 397.5
Operating Taxes 209.2 186.8 4.2 1.8 402.0 9.2 411.2
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Total Operating Expenses 4,494.0 1,588.1 38.2 207.7 6,328.0 40.8 6,368.8
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Income From Equity Investments - - 13.1 - 13.1 - 13.1
Gain (Loss) on Sale of Assets - 0.5 0.3 - 0.8 0.8 1.6
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Operating Income 568.6 293.0 15.5 5.3 882.4 (54.9) 827.5
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Segment Information
Twelve Months Ended December 31, 2005
(In Millions of Dollars)
Total
Gas Electric Energy Energy Operating Reconcili- Total
Distribution Services Investments Services Segments ations Consolidation
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Unaffiliated Revenues 5,390.1 2,042.7 38.0 191.2 7,662.0 - 7,662.0
Intersegment Revenues - 4.6 5.0 10.8 20.4 (20.4) -
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5,390.1 2,047.3 43.0 202.0 7,682.4 (20.4) 7,662.0
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Operation Expenses
Purchased Gas 3,607.0 (0.2) - - 3,606.8 (9.5) 3,597.3
Purchased Fuel - 751.6 0.5 - 752.1 - 752.1
Operations and Maintenance 727.0 684.5 26.5 195.6 1,633.6 (15.7) 1,617.9
Depreciation, Depletion & Amortization 277.0 91.7 6.8 7.6 383.1 13.4 396.5
Operating Taxes 213.5 178.6 3.8 1.5 397.4 9.7 407.1
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Total Operating Expenses 4,824.5 1,706.2 37.6 204.7 6,773.0 (2.1) 6,770.9
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Income From Equity Investments - - 15.1 - 15.1 - 15.1
Gain (Loss) on Sale of Property 0.1 1.2 0.1 - 1.4 0.2 1.6
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Operating Income 565.7 342.3 20.6 (2.7) 925.9 (18.1) 907.8
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Segment Information
Three Months Ended December 31, 2006
(In Millions of Dollars)
Total
Gas Electric Energy Energy Operating Reconcili- Total
Distribution Services Investments Services Segments ations Consolidation
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Unaffiliated Revenues 1,413.8 446.0 8.8 55.6 1,924.2 - 1,924.2
Intersegment Revenues - - 1.3 2.0 3.3 (3.3) -
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1,413.8 446.0 10.1 57.6 1,927.5 (3.3) 1,924.2
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Operation Expenses
Purchased Gas 920.1 - - - 920.1 (1.3) 918.8
Purchased Fuel - 130.3 0.1 - 130.4 - 130.4
Operations and Maintenance 169.1 223.5 6.8 54.2 453.6 27.0 480.6
Depreciation, Depletion &
Amortization 69.4 25.1 2.0 2.1 98.6 3.2 101.8
Operating Taxes 51.7 45.9 0.8 0.5 98.9 2.2 101.1
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Total Operating Expenses 1,210.3 424.8 9.7 56.8 1,701.6 31.1 1,732.7
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Income From Equity Investments - - 3.6 - 3.6 - 3.6
Gain (Loss) on Sale of Assets - - 0.1 - 0.1 - 0.1
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Operating Income 203.5 21.2 4.1 0.8 229.6 (34.4) 195.2
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Segment Information
Three Months Ended December 31, 2005
(In Millions of Dollars)
Total
Gas Electric Energy Energy Operating Reconcili- Total
Distribution Services Investments Services Segments ations Consolidation
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Unaffiliated Revenues 1,914.0 553.9 10.9 57.1 2,535.9 - 2,535.9
Intersegment Revenues - - 1.3 3.0 4.3 (4.3) -
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1,914.0 553.9 12.2 60.1 2,540.2 (4.3) 2,535.9
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Operation Expenses
Purchased Gas 1,392.2 0.3 - - 1,392.5 (1.3) 1,391.2
Purchased Fuel - 205.2 0.1 - 205.3 - 205.3
Operations and Maintenance 207.3 203.7 7.9 53.8 472.7 2.0 474.7
Depreciation, Depletion & Amortization 69.6 24.1 1.9 1.9 97.5 3.2 100.7
Operating Taxes 56.1 44.7 0.9 0.4 102.1 1.9 104.0
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Total Operating Expenses 1,725.2 478.0 10.8 56.1 2,270.1 5.8 2,275.9
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Income From Equity Investments - - 2.6 - 2.6 - 2.6
Gain (Loss) on Sale of Property 0.1 0.1 - - 0.2 0.3 0.5
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Operating Income 188.9 76.0 4.0 4.0 272.9 (9.8) 263.1
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