Exhibit 99.1
KEYSPAN NEWS
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KeySpan Corporation For Immediate Release
Contacts: Investors Media Relations
George Laskaris
718.403.2526 718.403.2503
KeySpan Announces Strong 2nd Quarter Results
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KeySpan/National Grid Transaction Receives New Hampshire Approval
Settlement Reached in New York
Pro-Rata Dividend Approved
Brooklyn, New York, August 3, 2007 - KeySpan Corporation (NYSE: KSE) announced
consolidated earnings of $52.2 million or $0.30 per share for the second quarter
of 2007, as compared to $49.4 million or $0.28 per share for the same period
last year. For the six month period ended June 30, 2007, KeySpan reported
consolidated earnings of $265.6 million or $1.51 per share, compared to $257.4
million or $1.47 per share for the same period last year.
These favorable results for both the quarter and year-to-date reflect higher
operating income, primarily driven by the strong performance of the gas
distribution segment and lower expenses associated with the National Grid
transaction, partially offset by lower earnings in the electric segment. In
addition, 2007 results reflect higher financing and tax expenses compared to
2006, which benefited from the settlement of certain New York City and IRS
issues in the second quarter of 2006.
"I am pleased with the impressive results and the excellent performance of our
core gas distribution business, which benefited from strong customer demand. We
continued to demonstrate the organic growth of our gas distribution system with
the addition of approximately 18,500 gas installations on a year-to-date basis.
We are on track to achieving our goal of $50 million in additional gross profit
margin in the gas business," said Robert B. Catell, KeySpan Chairman and Chief
Executive Officer. "Although our electric business reported lower results
primarily due to increased competition in the New York City market, our
generation plants are well maintained and ready to meet the increasing demand in
both the New York City and Long Island markets. Our financial condition remains
strong with a 49.4% 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 approvals are
progressing. All federal and shareholder approvals have been received. With
respect to state approvals, on July 16, 2007 the New Hampshire Public Utilities
Commission approved National Grid's acquisition of KeySpan and the merger of the
two companies. New York State is the final regulatory approval necessary to
close the transaction. On July 9, 2007, National Grid filed a "joint proposal"
reflecting an agreement with Staff of the New York Public Service Commission and
other parties on the acquisition of KeySpan. Based on the latest procedural
schedule, the New York Commission is expected to act on the joint proposal on
August 22nd.
"I am pleased with the recent approval received in New Hampshire and the
settlement reached in New York. With these two significant events, we are now in
the final stages of completing the merger and bringing significant benefits to
our customers in New York," said Mr. Catell. "We expect the transaction to close
shortly after the New York State Commission approval is received. The National
Grid-KeySpan merger will provide more than $600 million in savings to our gas
customers in New York City and Long Island over the next five years, on top of
additional savings that will be realized by the Long Island Power Authority and
National Grid's upstate New York gas and electric customers. These savings will
provide base rate stability to our customers through 2012. We look forward to
completing the transaction this month and becoming an important part of one of
the largest and most efficient energy companies in the world."
Segment Highlights
Results in 2007 and 2006 are reported on an Operating Income basis as follows:
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2nd 2nd YTD YTD
Operating Income / (Loss) [$ millions] Quarter Quarter 2007 2006
2007 2006
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Gas Distribution 61.4 39.5 464.0 376.0
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Electric Services 44.3 62.4 42.8 127.3
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Energy Investments 5.5 3.7 10.5 6.7
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Energy Services 2.0 2.0 3.4 1.6
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Total Operating Segments 113.2 107.6 520.7 511.6
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Other 20.2 (0.1) 12.2 (15.0)
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Total Operating Income 133.4 107.5 532.9 496.6
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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 $61.4 million, an
increase of $21.9 million or 55% over the same period last year. This
period benefited from increased demand, new customer additions and improved
pricing in the interruptible market.
Year-to-date results of $464 million were $88 million or 23% higher than
last year, again benefiting from increased customer demand due to the
colder weather in the first half of the year, new customer additions and
increased margins in our interruptible heating market. Net revenues for the
year increased $97.4 million, offset in part, by $10 million in higher
operating expenses. Weather for the first half of the year was 4-5% colder
than normal in all our territories, and 18% and 9% colder than last year
for our New York and New England service territories, respectively. Due to
our strong marketing efforts, the Company continued to add customers in the
first half of 2007 as KeySpan completed approximately 18,500 gas
installations, ahead of plan, which should add approximately $20 million in
new gross profit margin. This puts us on track to meeting our goal of $50
million in new gross profit margin.
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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 $44.3 million for the second
quarter, a decrease of $18.1 million from last year. This was due, in part,
to lower net energy and capacity revenues of $7.6 million from the
Ravenswood generating plant, resulting primarily from new generating
capacity added in New York City and lower hedging gains. In addition, the
realized gain on the financial capacity swap, entered into in May 2006, was
an expected $3.2 million lower than last year. The remaining decrease in
operating income reflects higher operation expenses.
Year-to-date results of $42.8 million were $84.5 million lower than the
same period last year. This reduction in operating income reflects lower
net energy and capacity revenues of $61.1 million from the Ravenswood
generating plant, primarily from lower hedging gains in the energy market
and the addition of 1000 MW of new generation in the New York City market.
The energy margins in 2006 benefited from large oil to gas price
differentials and the dual fuel nature of the Ravenswood plant. In
addition, the realized gain on the financial capacity swap was an expected
$13.1 million lower than last year. The remaining decrease in operating
income reflects higher operation expenses.
o The Energy Investments segment reported operating income of $10.5 million
for the first half of 2007, compared to $6.7 million in 2006. 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
higher earnings from TransGas, the LNG trucking operations, due to colder
weather in the first half of the year and from equity investments as well
as lower expenses.
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 $3.4
million for the first half of 2006, as compared to $1.6 million for the
same period last year. This improved performance reflects higher profits in
our communications business as well as lower expenses.
o The "Other" category reported an increase in operating income of $20.3
million for the second quarter and $27.2 million year-to-date compared to
last year. This was primarily due to a decrease in costs at the holding
company level including those related to the National Grid transaction,
corporate advertising and employee benefit costs that are not allocated to
the KeySpan operating segments.
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Financial Update
The Company was able to keep interest expense flat on a year-to-date basis,
excluding the one time benefit of $6 million associated with the 2006 favorable
tax resolution associated with our New York City Ravenswood facility. This
reflects the refinancing efforts of the Company over the past several years.
This has resulted in a fixed to float debt ratio of over 90%.
At the end of the second quarter of 2007, the Company's
debt-to-total-capitalization was 49.4%, reflecting our continued strong
financial position.
As previously announced, the Company declared a quarterly common stock dividend
of $0.475 per share, payable August 1, 2007, to shareholders of record as of
July 11, 2007. This dividend payment reflects an annual increase of $0.04 per
share over last year's dividend, and is the Company's 37th consecutive period of
paying a dividend as KeySpan. The annual dividend rate of $1.90 per share is
supported by the Company's strong cash flows and provides a yield to
shareholders of approximately 4.5%.
Pro-Rata Dividend
In anticipation of the close of the transaction between National Grid and
KeySpan, the Board of Directors approved the payment of a pro-rata dividend to
shareholders of record one business day prior to the transaction close date with
National Grid. The amount of such dividend will be based on the number of days
elapsed between July 9, 2007 (ex-dividend date), up to but not including the
closing date. Assuming the merger closes on August 24th, a pro-rata dividend
payment of 23.7 cents per share will be made to KeySpan shareholders.
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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 6,650 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.
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KeySpan Corporation
Consolidated Statement of Income
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Three Months Ended June 30, Six Months Ended June 30,
(In Millions of Dollars, Except Per Share Amounts) 2007 2006 2007 2006
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Revenues
Gas Distribution $ 1,011.1 $ 873.2 $ 3,426.6 $ 3,053.3
Electric Services 457.7 444.2 842.2 869.0
Energy Services 52.4 50.4 104.9 98.7
Energy Investments 9.2 9.9 19.2 17.8
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Total Revenues 1,530.4 1,377.7 4,392.9 4,038.8
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Operating Expenses
Purchased gas for resale 649.4 539.8 2,322.1 2,051.2
Fuel and purchased power 138.1 115.7 266.3 245.7
Operations and maintenance 411.4 420.6 842.3 826.7
Depreciation, depletion and amortization 104.6 101.2 216.9 211.4
Operating taxes 98.7 95.8 221.2 214.0
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Total Operating Expenses 1,402.2 1,273.1 3,868.8 3,549.0
Income from equity investments 4.9 2.9 8.5 6.3
Sale of assets 0.3 - 0.3 0.5
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Operating Income 133.4 107.5 532.9 496.6
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Other Income and (Deductions)
Interest charges (69.6) (59.4) (131.1) (125.6)
Other 18.3 6.2 26.4 17.6
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Total Other Income and (Deductions) (51.3) (53.2) (104.7) (108.0)
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Income Taxes
Current 63.7 (37.3) 240.9 122.2
Deferred (33.8) 42.2 (78.3) 9.0
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Total Income Taxes 29.9 4.9 162.6 131.2
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Earnings for Common Stock $ 52.2 $ 49.4 $ 265.6 $ 257.4
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Basic Earnings Per Share $ 0.30 $ 0.28 $ 1.51 $ 1.47
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Diluted Earnings Per Share $ 0.29 $ 0.28 $ 1.50 $ 1.46
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Average Common Shares Outstanding (000) 175,845 174,989 175,733 174,846
Average Common Shares Outstanding - Diluted (000) 177,220 176,121 177,048 175,848
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KeySpan Corporation
Segment Information
Six Months Ended June 30, 2007
(In Millions of Dollars)
Total
Gas Electric Energy Energy Operating Recon- Total
Distribution Services Services Investments Segments ciliations Consolidation
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Unaffiliated Revenues 3,426.6 842.2 104.9 19.2 4,392.9 - 4,392.9
Intersegment Revenues - 3.9 4.7 2.6 11.2 (11.2) -
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3,426.6 846.1 109.6 21.8 4,404.1 (11.2) 4,392.9
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Operation Expenses
Purchased Gas 2,324.2 0.5 - - 2,324.7 (2.6) 2,322.1
Purchased Fuel - 269.8 - 0.4 270.2 (3.9) 266.3
Operations and Maintenance 368.7 384.8 101.1 12.8 867.4 (25.1) 842.3
Depreciation, Depletion and
Amortization 151.9 50.5 4.2 4.2 210.8 6.1 216.9
Operating Taxes 118.4 97.4 0.9 2.4 219.1 2.1 221.2
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Total Operating Expenses 2,963.2 803.0 106.2 19.8 3,892.2 (23.4) 3,868.8
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Income From Equity Investments - - - 8.5 8.5 - 8.5
Gain (Loss) on Sale of Assets 0.6 (0.3) - - 0.3 - 0.3
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Operating Income 464.0 42.8 3.4 10.5 520.7 12.2 532.9
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KeySpan Corporation
Segment Information
Six Months Ended June 30, 2006
(In Millions of Dollars)
Total
Gas Electric Energy Energy Operating Recon- Total
Distribution Services Services Investments Segments ciliations Consolidation
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Unaffiliated Revenues 3,053.3 869.0 98.7 17.8 4,038.8 - 4,038.8
Intersegment Revenues - - 4.7 2.6 7.3 (7.3) -
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3,053.3 869.0 103.4 20.4 4,046.1 (7.3) 4,038.8
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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 96.9 14.0 828.3 (1.6) 826.7
Depreciation, Depletion and
Amortization 145.0 52.2 4.0 3.5 204.7 6.7 211.4
Operating Taxes 111.8 93.5 0.9 2.5 208.7 5.3 214.0
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Total Operating Expenses 2,677.4 741.7 101.8 20.2 3,541.1 7.9 3,549.0
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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
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Operating Income 376.0 127.3 1.6 6.7 511.6 (15.0) 496.6
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KeySpan Corporation
Segment Information
Three Months Ended June 30, 2007
(In Millions of Dollars)
Total
Gas Electric Energy Energy Operating Recon- Total
Distribution Services Services Investments Segments ciliations Consolidation
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Unaffiliated Revenues 1,011.1 457.7 52.4 9.2 1,530.4 - 1,530.4
Intersegment Revenues - - 2.5 1.3 3.8 (3.8) -
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1,011.1 457.7 54.9 10.5 1,534.2 (3.8) 1,530.4
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Operation Expenses
Purchased Gas 650.7 - - - 650.7 (1.3) 649.4
Purchased Fuel - 137.8 - 0.3 138.1 - 138.1
Operations and Maintenance 177.5 199.6 50.4 6.5 434.0 (22.6) 411.4
Depreciation, Depletion and
Amortization 72.1 25.4 2.0 2.0 101.5 3.1 104.6
Operating Taxes 50.0 50.3 0.5 1.1 101.9 (3.2) 98.7
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Total Operating Expenses 950.3 413.1 52.9 9.9 1,426.2 (24.0) 1,402.2
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Income From Equity Investments - - - 4.9 4.9 - 4.9
Gain (Loss) on Sale of Assets 0.6 (0.3) - - 0.3 - 0.3
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Operating Income 61.4 44.3 2.0 5.5 113.2 20.2 133.4
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KeySpan Corporation
Segment Information
Three Months Ended June 30, 2006
(In Millions of Dollars)
Total
Gas Electric Energy Energy Operating Recon- Total
Distribution Services Services Investments Segments ciliations Consolidation
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Unaffiliated Revenues 873.2 444.2 50.4 9.9 1,377.7 - 1,377.7
Intersegment Revenues - - 2.2 1.3 3.5 (3.5) -
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873.2 444.2 52.6 11.2 1,381.2 (3.5) 1,377.7
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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 48.1 7.4 427.2 (6.6) 420.6
Depreciation, Depletion and
Amortization 69.1 25.1 2.0 1.8 98.0 3.2 101.2
Operating Taxes 47.0 46.1 0.5 1.0 94.6 1.2 95.8
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Total Operating Expenses 833.7 381.8 50.6 10.4 1,276.5 (3.4) 1,273.1
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Income From Equity Investments - - - 2.9 2.9 - 2.9
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Operating Income 39.5 62.4 2.0 3.7 107.6 (0.1) 107.5
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