Commenting, James Ross, Chairman, said:

“National Grid has delivered another strong financial and operational performance and has taken further major strategic steps in utilising its capital and core skills to transform the scale, profile and prospects of the Group’s business.

“In the UK, we continue to maintain high operational standards, to offset the impact of UK regulation with efficiency gains and to generate strong cash flows. However, it is clear that there is limited scope for growing UK transmission profits. This is why the Group embarked upon its expansion strategy, which exploits our core skills of electricity and telecoms infrastructure construction and management and deploys our capital to maximum effect.

“A year ago, less than 3 per cent of National Grid’s electricity operating profits came from outside the UK. Now it is 36 per cent, almost all from the US, where we are demonstrating our ability to secure higher returns and substantially greater regulatory certainty. This proportion is set to increase to some 60 per cent when our acquisition of Niagara Mohawk completes. We will then be the leading US electricity business focused exclusively on transmission and distribution. In parallel, our portfolio of telecoms interests is on track to deliver good long-term returns.

“National Grid is financially strong and powerfully cash generative. Overall, we expect continued growth this year along with improved quality of earnings through diversity and regulatory stability. As a result, the Board has had no hesitation in confirming its target to raise dividends by 5 per cent in real terms each year for a further five years.”

Roger Urwin, Group Chief Executive, said:

“The growth and performance of our US electricity distribution and transmission business has more than offset the expected reduction in our regulated UK profits and the increased losses in our telecoms development businesses. As a result, operating profit before exceptional US integration costs and goodwill amortisation, grew 34 per cent to £731.9 million.

“Allowing for the higher interest expense, we held pre-tax profit before exceptional items and goodwill amortisation level at £481.3 million and increased earnings per share on the same basis by 9 per cent. We also had exceptional profits of over £470 million relating to the reduction in our holding in Energis.

“Our telecoms interests have significant potential for value creation. Energis continues to perform to all expectations; the rate of start up losses of Intelig in Brazil has been reduced; Silica launched services in Argentina last week; and Energis Polska launches next month.

“Looking ahead, we have achieved agreement with the UK regulator for a five year period. We intend to reduce controllable costs by a further 20 per cent over the price control period. In the US, we are moving towards our target of 10.5 per cent return on investment. We are targeting the completion of our acquisition of Niagara Mohawk by the end of this year and are confident we will achieve the significant synergy benefits. Our financial results give us the flexibility to increase the cash element of the consideration for Niagara Mohawk from one third to at least 50 per cent.

“Looking further ahead in the US, we see opportunities for more efficient management of transmission networks both within and beyond the Northeast region.

“I am confident that the strength of National Grid’s management team will continue to create significant shareholder value both from our electricity businesses and from our telecom interests”.

Analysts’ presentation
City Presentation Centre, 4 Chiswell Street, London EC1Y 4UP
9:00 am (UK time) today

Live telephone coverage of analyst presentation
UK: +44 (0) 20 8515 2305
replay +44 (0) 20 8797 2499 (pin 117518#)
US: +1 613 688 2795
replay +1 303 590 3060 (pin 113600#)
Replay is available until Friday 25 May

Teleconference with Roger Urwin and Stephen Box
15.00 BST (10.00 EST & 07.00 PST),
UK: +44 (0) 20 8240 8240 (quote National Grid and Roger Urwin)
replay +44 (0) 20 8288 4459 (access code 646 422)
US: +1 303 267 1001 (quote National Grid and Roger Urwin)
replay + 1 303 804 1855 (access code 102 8310)
Replay is available until Tuesday 29 May

Photographs are available from midday on www.newscast.co.uk