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CFOs speak out: Growth Strategy for the 21st Century

For The 21st Century
Fortnightly Magazine - October 2004

you add those pieces together, we should be able to provide our shareholders with very low-risk 10- to 11-percent total return.

Have you provided any guidance on whether you are going to raise the dividend?

GL: Since we earn 95 percent of our earnings in the first and fourth quarter, we'll probably take a look at the fourth quarter and see how that is faring, then make a recommendation to our board.

How will liquefied natural gas issues factor into the company's growth strategy?

GL: We have always had a small percentage of LNG used in the New England area. In fact, we invested in the facility and hope to convert it to a full-scale LNG facility going forward. LNG increasingly will play an important role in our area and in others around the country. …We have already announced a venture together with British Gas to expand our Providence, R.I., facility to receive marine deliveries. It is relatively small and will serve the Northeast.

There has been talk in the investment community of KeySpan buying LIPA's transmission assets. Would you be interested?

GL: We are the provider of service and electricity to the Long Island Power Authority under long-term contracts. They have recently stated that they are re-evaluating their strategy going forward, and they have used the word privatization. Clearly, we have a very large relationship with them. We provide virtually all their power on Long Island. We own 4,000 MW of electricity on Long Island. So, obviously … we would be very interested. It would be a low-risk business and would be consistent with our existing structure and policy, and we certainly have the financial wherewithal. But this is all premature; they are just starting their strategic review.

How do your different businesses contribute to your bottom line?

GL: The LDC is about 65 percent to 70 percent of our bottom line. All the electric businesses contribute 25 percent to operating income. [Breaking it down], electric generation and the Ravenswood complex is a major contributor. Thereafter, the Long Island Power Authority relationship. We have three long-term contracts with them, and we own 4,000 MW of generation fully contracted to them. Those are the three major generators of operating income to the corporation.

What are the three concerns on your mind in terms of the financial environment for utilities? Are you concerned that a new administration might reinstate the dividend tax?

GL: We are a yield stock and are very much committed to our dividend. So, anything that would change that environment would be of concern. High gas prices are a factor to be concerned with as well.

Will we be able to get enough gas to the United States in time to stem a massive gas price shock?

GL: We are clearly the largest gas user in our region, and gas supply is not a concern. But it will clearly demand additions to the infrastructure, such as pipelines and storage, to accommodate the organic growth that I talked about.

Are you concerned about competing with fixed income securities, as interest rates