The £15bn merger of National Grid and Transco is costing 750 jobs, it emerged yesterday as the company unveiled new cost-cutting targets alongside its maiden annual results.
National Grid Transco also disclosed that the hole in its various pension schemes had risen by 50 per cent since last October to £2.2bn following the sharp decline in share prices over the last six months.
The company now expects to save £135m compared with the £100m figure it gave when the merger was first announced a year ago. Initially, National Grid Transco said there would be about 100 job losses as the two companies were put together. It now emerges that there will be a further 650 cutbacks.
The bulk of the job losses will be in London and the West Midlands where two head offices and operational centres are being combined into one. But there will also be cutbacks in its transmission and masts business, which provides sites for mobile phone operators.
The job losses are in addition to the 2,400 redundancies Transco is pushing through to meet efficiency targets set by the regulator Ofgem under its latest price control formula. So far 1,800 of the redundancies have been achieved. Roger Urwin, National Grid Transco's chief executive, said that ongoing cost-reduction programmes were ahead of schedule in all three of its core divisions, UK gas transmission, UK electricity transmission and the US, and were now running at £140m.
The company is carrying out an actuarial valuation of its Transco and Grid pension funds which were £1.2bn and £303m in deficit respectively at the end of March. The US fund has a £742m deficit. Mr Urwin said the company expected to have to increase contributions although not significantly.
He was speaking as National Grid Transco announced pre-tax profits of £667m for 2002-03 after incurring net exceptional charges of £447m to cover restructuring and merger-related costs.
Net debt rose to £14bn - equivalent to 100 per cent of the company's regulatory asset value. Interest charges increased to £939m, reflecting the increased debt taken on as a result of the company's spending spree in the US where it has forked out £9bn buying three electricity businesses in New England and New York.
The dividend rose by 7 .2 per cent to 17.2p for the full year.
Mr Urwin confirmed that the company was interested in selling off part of its UK gas distribution business, which is valued at £10bn but did not expect to strike any deals this financial year. Ofgem is publishing a consultative document next month but there will also need to be detailed discussions with the Health and Safety Executive.Reuse content