Annual Report Annual Report

Keyspan EnergyKeyspan Energy

Michael Titone Michael Titone

ACG2021ACG2021

Executive SummaryExecutive Summary Keyspan energy transmits and distributes electricity and natural gas Keyspan energy transmits and distributes electricity and natural gas

to 4 million customers from Massachusetts, New Hampshire, New to 4 million customers from Massachusetts, New Hampshire, New York, and Rhode Island.York, and Rhode Island.

Keyspan is a member of the S&P 500 and is traded on the NYSE Keyspan is a member of the S&P 500 and is traded on the NYSE under KSEunder KSE

This company is the largest distributor of natural gas in the This company is the largest distributor of natural gas in the Northeast and the 5Northeast and the 5thth largest gas distributor in the United States. largest gas distributor in the United States. Keyspan is also the biggest electric generator in the state of New Keyspan is also the biggest electric generator in the state of New York. York.

In the past year Keyspan has diversified it’s largest none core In the past year Keyspan has diversified it’s largest none core assets ( The Houston Exploration Company and Keyspan Energy assets ( The Houston Exploration Company and Keyspan Energy Canada. This generated I Billion in cash proceeds which has paid Canada. This generated I Billion in cash proceeds which has paid of debt and allowed the company to purchase additional core of debt and allowed the company to purchase additional core assets.assets.

Executive Summary Cont.Executive Summary Cont. This allowed for Keyspan to raise dividends for the 1This allowed for Keyspan to raise dividends for the 1stst time since time since

1998 to 1.82 per share.1998 to 1.82 per share. This helped contribute to the companies “A” credit rating on the S&P This helped contribute to the companies “A” credit rating on the S&P

and over the past five years Keyspan provided a total return to and over the past five years Keyspan provided a total return to shareholders of 118 percent. From 2003 to 2004 Keyspan earnings shareholders of 118 percent. From 2003 to 2004 Keyspan earnings per share increased more the 25 cents. per share increased more the 25 cents.

Keyspan also has interests in Iroquois gas pipeline of 20%, Keyspan also has interests in Iroquois gas pipeline of 20%, ownership of (LNG) storage facility as well as 50% interest in ownership of (LNG) storage facility as well as 50% interest in Islander East and 21% of interest in Millennium pipeline projects.Islander East and 21% of interest in Millennium pipeline projects.

I feel Keyspan is a growing company that is going to continue I feel Keyspan is a growing company that is going to continue expanding throughout the northeast. Along with the companies expanding throughout the northeast. Along with the companies transportation, production, distribution, and storage strategic as well transportation, production, distribution, and storage strategic as well a the prominent investments in natural gas exploration and pipeline a the prominent investments in natural gas exploration and pipeline development Keyspan will continue to succeed in increasing development Keyspan will continue to succeed in increasing dividends for it’s stockholders.dividends for it’s stockholders.

IntroductionIntroduction

Chief Executive Officer- Robert B. CatellChief Executive Officer- Robert B. Catell Keyspan's general office is at One Metro Keyspan's general office is at One Metro

Tech Center, Brooklyn, New York, 11201Tech Center, Brooklyn, New York, 11201 Keyspans last fiscal year was 2004 and Keyspans last fiscal year was 2004 and

the company is mainly involved with gas the company is mainly involved with gas distribution and electricity for the distribution and electricity for the Northeast. Specifically New York state Northeast. Specifically New York state and New York city with it’s 5 boroughs. and New York city with it’s 5 boroughs.

Audit ReportAudit Report

Keyspan is audited by Independent Auditors.Keyspan is audited by Independent Auditors. The Independent Registered Public Accountants The Independent Registered Public Accountants

of Deloitte & Touche LLP of 2 World Financial of Deloitte & Touche LLP of 2 World Financial Center, New York, New York, 10281 (212-436-Center, New York, New York, 10281 (212-436-2000)2000)

With the companys recent divesting of some it’s With the companys recent divesting of some it’s largest none core assets Keyspan is proving to largest none core assets Keyspan is proving to be a good company to invest in.be a good company to invest in.

Stock Market InformationStock Market Information As of March 3As of March 3rdrd, 2006 4:03 p.m. ET Keyspan last traded , 2006 4:03 p.m. ET Keyspan last traded

at $40.80.\at $40.80.\ In the past 12 months Keyspan has a had a steady none In the past 12 months Keyspan has a had a steady none

flux in stock prices through Aug. 05 – Oct. 05,( only flux in stock prices through Aug. 05 – Oct. 05,( only changed 4 points) and from the beginning of Oct. 05 to changed 4 points) and from the beginning of Oct. 05 to the beginning of Feb. 06 the stock fell as much as 9 the beginning of Feb. 06 the stock fell as much as 9 points. However, from Mid Feb. 06 to present day the points. However, from Mid Feb. 06 to present day the stock has jumped to a near high of $41.stock has jumped to a near high of $41.

Dividend per share- $3.80Dividend per share- $3.80 I fell Keyspan is a company worth buying and holding I fell Keyspan is a company worth buying and holding

onto since it has personally bought out Brooklyn Union onto since it has personally bought out Brooklyn Union Gas Company which has been under my parents stock Gas Company which has been under my parents stock portfolio for the past 15 yrs.portfolio for the past 15 yrs.

Industry Situation and Company Industry Situation and Company PlansPlans

As stated by Keypan’s chief executive officer 2004 was a As stated by Keypan’s chief executive officer 2004 was a successful year. Overall, it was a year typified by successful year. Overall, it was a year typified by accomplishments, advancement, and positioning for the accomplishments, advancement, and positioning for the future. The focus for 2005 is to improve financial future. The focus for 2005 is to improve financial performance, gas and electrical services, none-core performance, gas and electrical services, none-core asset sales, earnings, shareholder return and increase asset sales, earnings, shareholder return and increase dividends. For instance in 2004 shareholder return dividends. For instance in 2004 shareholder return increased 12 percent (4.5 percent in dividend yield and 7 increased 12 percent (4.5 percent in dividend yield and 7 percent in stock price appreciation) along with the percent in stock price appreciation) along with the companies dividend increase to 1.82 per share Keyspan companies dividend increase to 1.82 per share Keyspan is looking to be a strong prominent company.is looking to be a strong prominent company.

http://investor.keyspanenergy.comhttp://investor.keyspanenergy.com http://ccbn.mobular.net/ccbn/7/912/969/http://ccbn.mobular.net/ccbn/7/912/969/

Income StatementIncome Statement

Single Step- 2004 l 2003Single Step- 2004 l 2003• 4,4072924,407292 4,101,2724,101,272• 579,563579,563 574,254574,254• 2,664,6622,664,662 2,444,4852,444,485• 1,089,7731,089,773 1,067,2001,067,200

• 463,665 net income463,665 net income 386,730 net income 386,730 net income • in thousandsin thousands

This shows growth in net income of almost 100,000 in This shows growth in net income of almost 100,000 in one year.one year.

Balance SheetBalance Sheet

Asset= Liabilities + Stockholders’ EquityAsset= Liabilities + Stockholders’ Equity 13,364,130 = 5,030,991 + 8,333,139 (2004)13,364,130 = 5,030,991 + 8,333,139 (2004) 14,640,182 = 5,275,010 + 9,365,172 (2003)14,640,182 = 5,275,010 + 9,365,172 (2003)

There is not much change in assets from There is not much change in assets from 2003 to 2004 although assets were higher in 2003 to 2004 although assets were higher in 2003.2003.

Statement of Cash FlowsStatement of Cash Flows

In 2004 a decrease of 473.3 million or 39% In 2004 a decrease of 473.3 million or 39% compared to 2003. This is due to federal tax compared to 2003. This is due to federal tax refunds in 2003. For 2004 Net Income was refunds in 2003. For 2004 Net Income was 463,665 and for 2003 it was 386,730 in 463,665 and for 2003 it was 386,730 in thousands of dollars.thousands of dollars.

Keyspan in growing primarily through buying out Keyspan in growing primarily through buying out smaller companies (ie. My Brooklyn Union Gas smaller companies (ie. My Brooklyn Union Gas Company) to dominate the gas distribution in the Company) to dominate the gas distribution in the northeast even more and by purchasing northeast even more and by purchasing additional core assets.additional core assets.

Financial Analysis and Liquidity Financial Analysis and Liquidity RatiosRatios

20042004 20032003 Working capital- 796,306Working capital- 796,306 535,045535,045 Current ration- 1.35Current ration- 1.35 1.291.29 Receivable turnover- 8.43 times 7.18 timesReceivable turnover- 8.43 times 7.18 times Average Sales Uncoll.- 7 6Average Sales Uncoll.- 7 6 Inventory Turnover-16.9 times 17.2 timesInventory Turnover-16.9 times 17.2 times

Financial Analysis Profitability Financial Analysis Profitability RatiosRatios

20042004 20032003 Profit Margin- 7% 6%Profit Margin- 7% 6% Asset Turnover- 49.7% 44.6%Asset Turnover- 49.7% 44.6% Return on Assets- 3.46% 2.64%Return on Assets- 3.46% 2.64% Return on Equity- 22% 18.9% Return on Equity- 22% 18.9%

Financial Analysis Solvency RatioFinancial Analysis Solvency Ratio

20042004 20032003 Debt to equity- 53% 58%Debt to equity- 53% 58%

Financial Analysis Market Strength Financial Analysis Market Strength RatiosRatios

20042004 20032003 Earnings per share- 2.89 2.44Earnings per share- 2.89 2.44 Dividend yield- 4.7% 4.6%Dividend yield- 4.7% 4.6%