UPDATE:National Grid:To Restructure US Business, Cut 1,200 Jobs

U.K. gas and electricity network operator National Grid PLC (NG.LN) Monday announced a major restructuring of its U.S. business in a plan that targets a reduction in operating costs by $200 million a year, primarily to be achieved through the reduction of around 1,200 jobs in the U.S.

The restructuring, which also includes the appointment of Tom King as U.S. executive director and president and the creation of several regional presidents in the states where the company operates, comes after the regulator in New York granted the company a smaller-than-expected increase in electricity distribution and transmission rates on Jan. 21.

National Grid CEO Steve Holliday said the restructuring of the U.S. business hadn't been forced upon the company by the series of disappointing regulatory decisions on rates the company can charge in the U.S.

He said the restructure was planned and the company had been waiting to complete the full cycle of regulatory filings before it could make the announcement.

"It's not a knee jerk, it has been thought through for some time," Holliday told reporters on a conference call.

"We're hitting more and more of our performance targets every year, but we are not earning adequate returns thus far in all of our U.S. regulatory jurisdictions so despite an increase in revenues, operating costs in the U.S. are still higher than we are recovering through today's rates," Holliday told reporters on a conference call.

In a separate announcement, the company also said it expects operating profit for 2010/2011 to be "significantly" ahead of last year.

"The strong momentum seen in the first half has continued and has further improved, driven by cold winter weather following the hot weather in the U.S. in the summer," the company said in a statement.

National Grid is to recommend an 8% increase in its full-year dividend, in line with policy.

The majority of National Grid's business in the U.S is regulated and is mostly in electricity and gas distribution. The company operates in New York, Rhode Island and Massachusetts.

At 1508 GMT, National Grid shares were up 2% at 557 pence, outperforming the U.K. power utility sector and the broader FTSE index of which it is a component.

-By Selina Williams, Dow Jones Newswires [phone]l; [e-mail] (Jana Weigand contributed to this story.)