Exhibit
    15.1
    NATIONAL
    GRID PLC
  TABLE OF
    CONTENTS
  FORM 20-F
 PagePART IItem 3.

Key InformationRisk factors

91-93Financial Calendar

188Item 4.

Information on the CompanyOperating and Financial Review

10-79Note 6  Discontinued operations

134Key milestones

188Definitions and glossary of terms

184-186Note 1  Segmental analysis

125-126Management structure  from
    4 April 2011

22Management structure  until
    3 April 2011

23Note 36  Subsidiary undertakings,
    joint ventures and associates

169Note 11  Property, plant and
    equipment

138Where We Operate

20-21Principal Operations

24-25Item 5.

Operating and Financial Review and ProspectsOperating and Financial Review

10-79Directors Report statutory disclosures

81Adoption of new accounting standards

119Definitions and glossary of terms

184-186Item 6.

Directors, Senior Management and EmployeesBoard of Directors

8-9Directors Remuneration Report

96-108Note 23  Pensions and other
    post-retirement benefits

146-147Note 30  Actuarial information on
    pensions and other
    post-retirement
    benefits

153-156Corporate Governance

80-95Employees

51Note 2  Operating Costs: (b)
    Number of Employees

127Note 25  Share Capital

149Item 7.

Major Shareholders and Related Party TransactionsNote 29  Related Party Transactions

153Item 8.

Financial InformationAccounting policies

112-118Adoption of new accounting standards

119Consolidated balance sheet

122Consolidated income statement

120Consolidated statement of comprehensive income

121Consolidated statement of changes in equity

123Consolidated cash flow statement

124




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PageNotes to the consolidated financial
    statements  analysis of items in the primary
    statements


125-151Notes to the financial statements 
    supplementary information


152-176Details of material litigation as at
    31 March 2011


76Total Shareholder return


55Item 11.

Quantitative and Qualitative Disclosures about Market RiskFinancial position and financial management


70-77Treasury policy


71Commodity contracts


74-75Note 31  Supplementary information on
    the derivative financials instruments


156Note 32  Financial risk


157-162Note 33  Commodity risk


162-164PART IIItem 16G.

Corporate GovernanceCorporate governance practices: difference from
    New York Stock Exchange (NYSE) listing standards


95PART IIIItem 18.

Financial StatementsAccounting policies


112-118Adoption of new accounting standards


119Consolidated income statement


120Consolidated cash flow statement


124Consolidated balance sheet


122Consolidated statement of changes in equity


123Consolidated statement of recognised income and
    expenseNotes to the consolidated financial
    statements  analysis of items in the primary
    statements


125-151Notes to the financial statements 
    supplementary information


152-176




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EXTRACTED
    FORM OF THE ANNUAL REPORT AND ACCOUNTS 2010/11
  PageBusiness OverviewBoard of directors

8How the UK electricity industry
    works

12How the US electricity industry
    works

14How the UK gas industry works

16How the US gas industry works

18Where we operate

20Management structure from 4 April
    2011

22Management structure until 3 April
    2011

23Principal operations

24Review of the year

26Operating environment

28Regulatory environment  UK
    regulation

30Regulatory environment  US
    regulation

32Summary of US price controls and rate
    plans

35Business drivers, principal risks and
    opportunities

36Vision, strategy and objectives

38Key performance indicators

40Performance against objectives

42Financial performance

54Financial position and financial
    management

70Accounting policies

78Corporate GovernanceCorporate governance

80Directors ReportsDirectors remuneration
    report

96Financial StatementsContents to financial statements

109Statement of Directors
    responsibilities

110Independent auditors report

111Accounting policies

112Adoption of new accounting
    standards

119Consolidated income statement

120Consolidated balance sheet

122Consolidated statement of recognised
    income and expenseConsolidated cash flow statement

124Notes to the consolidated financial
    statements  analysis of items in the primary
    statements

125Notes to the consolidated financial
    statements  supplementary information

152Company accounting policies

177Company balance sheet

179Notes to the Company financial
    statements

180Useful InformationDefinition and glossary of terms

184Summary consolidated financial
    information

187




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Exhibit 15.1
 Business Overview
 Board of Directors
 
 Board of Directors
  
 1. Sir John Parker, Chairman
 Committee membership: Nominations Committee (chairman)
 Skills and experience:
 External appointments:
 2. Steve Holliday, Chief Executive
 Committee membership: Executive Committee (chairman),
 Finance Committee
 Skills and experience:
 External appointments:
 3. Andrew Bonfield, Finance Director
 Committee membership: Executive Committee, Finance Committee
 Skills and experience:
 External appointments:
 4. Tom King, Executive Director
 Committee membership: Executive Committee
 Skills and experience:
 5. Nick Winser, Executive Director
 Committee membership: Executive Committee
 Skills and experience:
 External appointments:
 6. Ken Harvey CBE, Non-executive Director and Senior Independent Director
 Committee membership: Nominations Committee,
Remuneration Committee, Risk & Responsibility Committee
 Skills and experience:
 External appointments:
    
 08       National Grid plc | Annual Report and Accounts 2010/11




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7. Linda Adamany, Non-executive Director
 Committee membership: Audit Committee, Risk & Responsibility Committee
 Skills and experience:
 External appointments:
 8. Philip Aiken, Non-executive Director
 Committee membership: Audit Committee, Risk & Responsibility Committee
 Skills and experience:
 External appointments:
 9. John Allan CBE, Non-executive Director
 Committee membership: Finance Committee, Remuneration Committee (chairman)
 Skills and experience:
 External appointments:
 10. Stephen Pettit, Non-executive Director
 Committee membership: Finance Committee, Remuneration Committee, Risk & Responsibility Committee
(chairman)
 Skills and experience:
 External appointments:
 11. Maria Richter, Non-executive Director
 Committee membership: Audit Committee,
Finance Committee (chairman), Nominations Committee
 Skills and experience:
 External appointments:
 12. George Rose, Non-executive Director
 Committee membership: Audit Committee (chairman),
Nominations Committee, Remuneration Committee
 Skills and experience:
 External appointments:
 13. Helen Mahy, Company Secretary & General Counsel
 Committee membership: Executive Committee
 Skills and experience:
 External appointments:
 
   
 Annual Report and Accounts 2010/11 | National Grid plc       09




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Operating and Financial Review
 Connecting our energy future
  We are facing a number of challenging opportunities for the future of the energy industry in the UK
and US. National Grid is at the heart of securing energy supplies for future generations.
 
 2010 ONGOING
Our huge investment programme will help our network meet future energy challenges.
2012
We will continue to work closely with schools and colleges to enthuse and inspire young students
about the world of science and engineering.
2050
The Climate Change Act requires the UK to cut greenhouse gases by 2050.
Meeting these targets requires us to dramatically change the way we produce gas and electricity.
2020
We will play a key role in connecting new generation to the grid.
 
   
 10       National Grid plc | Annual Report and Accounts 2010/11




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Operating and Financial Review
  National Grid is an international electricity and gas company cross listed on the London and New
York stock exchanges and is one of the largest investor owned energy companies in the world. We
play a vital role in delivering gas and electricity to many millions of people across Great Britain
and northeastern US.
 Overview
    
    
    12
    
    How the UK electricity industry works
    
    
    This overview
section provides an
accessible
introduction to
what we do and the
environment in
which we operate.
We show in
pictographic form
the electricity and
gas industries in
the UK and US, and
show how the
various market
participants
interact. We
discuss how we
organise ourselves
into lines of
business, describe
the principal
activities of each
line of business
and highlight some
significant
developments during
2010/11.14
    
    How the US electricity industry works16
    
    How the UK gas industry works18
    
    How the US gas industry works20
    
    Where we operate22
    
    Management structure from 4 April 201123
    
    Management structure until 3 April 201124
    
    Principal operations26
    
    Review of the yearOperating environment
    
    
    28
    
    Operating environment
    
    
    This section
provides an
overview of the
external factors
affecting our
operations. Since
97% of National
Grids operating
profit arises from
regulated
activities, an
understanding of
the work of our
economic regulators
is key to
understanding our
business, so we
provide a detailed
explanation of the
regulatory
processes in the UK
and US.30
    
    Regulatory environment  UK regulation32
    
    Regulatory environment  US regulation35
    
    Summary of US price controls and rate plansDelivering operational performance
    
    
    36
    
    Business drivers, principal risks and opportunities
    
    
    This section sets
out the key factors
that drive our
business, and how
our strategy and
the Company
objectives are
designed to address
those factors. The
objectives form the
basis for the
execution of our
strategy and our
performance is
measured against
those objectives.
Our key performance
indicators are
shown on pages 40
and 41 and the
discussion which
follows includes a
number of further
quantitative and
qualitative
measures.38
    
    Vision, strategy and objectives40
    
    Key performance indicators42
    
    Performance against objectivesFinancial information
    
    
    54
    
    Financial performance
    
    
    This section
discusses our
financial
performance. It
also describes our
approaches to
capital management
and risk
management,
including the
policies and
strategies which
govern our use of
financial and
commodity
derivatives.70
    
    Financial position and financial management78
    
    Accounting policies
 
   
 Annual Report and Accounts 2010/11 | National Grid plc       11




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Operating and Financial Review
 
 
 How the UK electricity industry works
  
 
   
  
 
   
 12       National Grid plc | Annual Report and Accounts 2010/11




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Annual Report and Accounts 2010/11 | National Grid plc       13




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Operating and Financial Review
 
 
 How the US electricity industry works
   
 
 
   
  
 
    
 14       National Grid plc | Annual Report and Accounts 2010/11




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Annual Report and Accounts 2010/11 | National Grid plc       15




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Operating and Financial Review
 
 
 How the UK gas industry works
   
 
 
    
  
 
    
 16       National Grid plc | Annual Report and Accounts 2010/11




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Annual Report and Accounts 2010/11 | National Grid plc       17




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Operating and Financial Review
 
 
 How the US gas industry works
   
 
 
    
  
 
    
 18       National Grid plc | Annual Report and Accounts 2010/11




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Annual Report and Accounts 2010/11 | National Grid plc       19




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Operating and Financial Review
 
 
 Where we operate
  National Grid owns and operates regulated electricity and gas infrastructure networks in the
UK and northeastern US, serving around 19 million customers directly and many more indirectly.
 
   
 20       National Grid plc | Annual Report and Accounts 2010/11




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Annual Report and Accounts 2010/11 | National Grid plc       21




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Operating and Financial Review
 
 
 Management structure   from 4 April 2011
   Management structure
   █
 █
 █
  █
  █
 New management structure
 
   
 22       National Grid plc | Annual Report and Accounts 2010/11




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Management structure   until 3 April 2011
 
   
 Annual Report and Accounts 2010/11 | National Grid plc       23




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Operating and Financial Review
 
 
 Principal operations
 (IMAGE)
    
    
    Transmission UKElectricity transmission ownerWe own the electricity transmission system
in England and Wales.Electricity system operatorWe are the national electricity transmission
system operator, responsible for managing
the operation of both the England and Wales
transmission system, which we own, and the
two high voltage transmission networks in
Scotland, which we do not own. Day-to-day
operation of the system involves the continuous
real-time matching of demand and generation
output, ensuring the stability and security of
the power system and the maintenance of
    
    satisfactory voltage and frequency. We are
also designated as system operator for the
new offshore electricity transmission regime.Gas transmission ownerWe own the gas national transmission system
(NTS) in Great Britain, connecting to eight
distribution networks and to third party
independent systems for onward transportation
of gas to end consumers.Gas system operatorWe operate the NTS. Day-to-day operation
involves balancing supply and demand.(IMAGE)
    
    
    Gas Distribution UKGas distribution operatorWe own and operate four of the eight regional
gas distribution networks in Great Britain. Our
networks comprise approximately 132,000 km
(82,000 miles) of gas distribution pipeline
and we transport gas from the gas NTS to
around 10.8 million consumers on behalf of
26 active gas shippers. Gas consumption in
our UK networks was 304 TWh in 2010/11
compared with 299 TWh in 2009/10.
    
    National gas emergency number operatorWe manage the national gas emergency
number (0800 111 999) for all the gas
distribution networks and for other gas
transporters in Great Britain. This service,
along with the enquiries line, appliance repair
helpline and meter number enquiry service,
handled 2,816,403 calls during 2010/11.(IMAGE)Electricity distributionWe own and operate electricity distribution
networks in upstate New York, Massachusetts,
Rhode Island and New Hampshire.Through our electricity distribution networks,
we serve approximately 3.4 million electricity
consumers in New England and upstate
New York.We also maintain and operate the electricity
transmission and distribution system on
Long Island owned by the Long Island Power
Authority (LIPA), providing energy to homes,
    
    small businesses, and large commercial and
industrial enterprises.The LIPA service territory covers approximately
3,185 square km (1,230 square miles),
encompassing nearly 90% of Long Islands
total land area. LIPA owns approximately
2,170 km (1,350 miles) of transmission line
facilities that deliver power to approximately
177 substations. From these substations,
approximately 24,300 circuit km (15,100 miles)
of transmission and distribution facilities
distribute electricity to 1.1 million consumers.(IMAGE)Grain LNGGrain LNG is one of three LNG importation
facilities in the UK. It was constructed in three
phases, phases I and II becoming operational
in 2005 and 2008 respectively and phase III
being commissioned in December 2010.
    
    BritNedBritNed is a joint venture between National
Grid and TenneT, the Dutch transmission
system operator, to build and operate a
1,000 MW, 260 km (162 mile) subsea electricity
link between the UK and the Netherlands.
BritNed was fully commissioned and went
live on 1 April 2011.
 
 24       National Grid plc | Annual Report and Accounts 2010/11




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Transmission USFrench interconnectorWe own and operate the UK assets, and a
portion of the subsea cables, that comprise
the electricity interconnector between England
and France as part of a joint arrangement
with the French transmission operator.LNG storageWe own and operate three liquefied natural
gas (LNG) storage facilities in Great Britain.
    
    Electricity transmission ownerWe own and operate an electricity transmission
network spanning upstate New York,
Massachusetts, Rhode Island, New Hampshire
and Vermont. Our US electricity transmission
facilities operate at voltages ranging from
69 kV to 345 kV. We are the largest electricity
transmission service provider in New England
and New York by reference to the length of
these high voltage transmission lines.
    
    Canadian interconnectorWe own and operate a 224 km (139 mile)
direct current transmission line rated
at 450 kV that is a key section of an
interconnector between New England
and Canada.
 Gas Distribution USGas distribution ownerOur US gas distribution networks provide
services to around 3.5 million consumers
across the northeastern US, located in service
territories in upstate New York, New York City,
Long Island, Massachusetts, New Hampshire
and Rhode Island. Our network of approximately
58,000 km (36,000 miles) of gas pipeline serves
an area of approximately 26,400 square km
(10,200 square miles). We are actively seeking
to increase our customer base in these areas
and in 2010/11 added more than 42,000 new
gas heating customers.
    
    Gas storageWe maintain a diversified and flexible
portfolio of gas supply and storage assets,
and are able to deliver additional benefits to
customers and shareholders by optimising
the use of these assets. During cold weather,
we supplement gas from the interstate
pipeline system with LNG and propane
facilities in 19 locations.Electricity generationWe own 57 electricity generation units on
Long Island that together provide 4.1 GW
of power under contract to LIPA. Our plants
consist of oil and gas fired steam turbine,
gas turbine and diesel driven generating
units ranging from 2 MW to 385 MW. Any
available power not needed to meet LIPAs
requirements is made available for sale
on the open market.
 Shared activities
 Customer operations
 In addition to the operation of our gas and electricity distribution networks, we are also
responsible for billing, customer service and supply services.
 Energy procurement
 We are responsible for the planning, procurement and administration of gas and electricity
commodity supply for our customers. We forecast, plan for and procure approximately 15 billion
standard cubic metres of gas and 34 TWh of electricity annually across four states. We also manage
gas assets such as transportation and storage capacity to ensure supply adequacy for delivery to
customers. Through our fuel management services, we procure gas and fuel oil to supply the power
generation units on Long Island, most of which we own.
  MeteringNational Grid Metering and OnStream
provide installation and maintenance services
to energy suppliers in the regulated and
unregulated markets respectively in Great
Britain. OnStream also provides meter reading
services. Our metering businesses provide
services for an asset base of about 20 million
domestic, industrial and commercial meters.
    
    UK PropertyNational Grid Property is responsible for
managing our occupied properties in the UK and
for the management, clean up and disposal of
surplus sites, most of which are former gasworks.
XoserveXoserve delivers transactional services
on behalf of all the major gas network
transportation companies in Great Britain,
including National Grid. Xoserve is jointly
owned by National Grid, as majority
shareholder, and the other gas distribution
network companies.
    
    US non-regulated businessesIncludes LNG storage, LNG road
transportation, transmission pipelines
and West Virginia gas fields.Corporate activities
and shared services functionCorporate activities comprise central
overheads, insurance and expenditure
incurred on business development.
 
   
 Annual Report and Accounts 2010/11 | National Grid plc       25




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Operating and Financial Review
 
 
 Review of the year
  Transmission
    
    
    
    In October 2010, we finished
commissioning the Wormington
to Sapperton gas pipeline. This
pipeline, of approximately 44 km
(27 miles), is required to provide
additional exit capacity in the
southwest of England to meet
increases in distribution network
and forecast power station demand
    
    
    
    On 16 November 2010, we signed our
largest ever connection contract,
with East Anglia Offshore Wind Ltd,
for the full 7.2 GW of its capacity.
The project will commission wind
turbines in 10 stages between 2015
and 2021, delivering 6.6 GW before
2020, and connects to existing
substations at Bramford and
Norwich along with a new site
to be developed in the areaGas Distribution
    
    
    
    In the UK, the first release of the
new Gas Distribution front office
system, a significant investment
in the replacement of legacy IT
applications, went live in October
2010 to over 1,000 employees. The
full rollout of the programme is due
to be completed by spring 2012
    
    
    
    Gas Distribution contractor safety
in the UK and US improved
substantially with the lost time injury
frequency rate reducing to 0.08
A new campaign to reduce the
number of electric cable strikes
was introduced in the UK and has
contributed to a 10% reduction
during 2010/11Electricity Distribution
& Generation
       
    
    
    We met all New York regulatory
reliability targets for the third year
in a row
    
    
    
    The outcome of our Niagara Mohawk
rate case in upstate New York was
disappointing
    
    By March 2011, we had delivered
$1.41 billion of the $1.47 billion
investment in New York in line
with the KeySpan merger agreement
and ahead of schedule
    
    
    
    Capital recovery mechanisms were
agreed in Massachusetts, Rhode
Island and New YorkNon-regulated businesses
and other
       
    
    
    On 1 December 2010, Grain LNG
phase III started full commercial
operation, the first operating day
for all three phases at Grain. The
terminal now has 1 million cubic
metres of storage capacity and
has a capacity of approximately
650 GWh per day
    
    
    
    On 1 April 2011, BritNed successfully
achieved go live, with a capacity
of 1,000 MW along the 260 km
(162 mile) high voltage direct current
interconnector between Maasvlakte
in the Netherlands and the Isle of
Grain in the UK
 
 26       National Grid plc | Annual Report and Accounts 2010/11




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  By November 2010, the number of
contracted generation agreements
had met a significant milestone.
Enough transmission-connected
renewable generation had been
contracted to meet our plans for
achieving the governments 2020
renewable energy targets (32 GW
contracted against a target of
approximately 29 GW)
    
      On 13 December 2010, the Secretary
of State gave consent for a pressure
reduction installation at Tirley in
Gloucestershire. Construction
started on this installation in March
2011. Accordingly, we envisage
that the full contracted capacity
of 950 GWh in the Milford Haven
gas pipeline will be available for
winter 2012/13
    
      We have funded an independent
report on the costs of undergrounding
electric cables compared with the
use of overhead lines. The work is
being conducted by Kema, and will
be endorsed and published by the
Institution of Engineering and
Technology. We have also launched
a public consultation on our approach
to undergrounding new electricity
transmission lines  Severe winter weather in the
UK led to us failing several of our
emergency standards of service.
We met all but one of our other
regulatory standards  In the US, we connected 42,416
new gas heating customers
    
      In the UK, Ofgem imposed a
fine of £8 million for inaccurate
reporting of gas mains replacement
data during 2005/06 to 2007/08  Our first biomethane injection plant
has been constructed to connect
Adnams Bio Energy Ltd, the first
production facility built for injecting
biomethane into the UK gas network
    
      In our UK networks, actual gas
consumption was 304 TWh in
2010/11 compared with 299 TWh
in 2009/10  During the winter of 2010/11, the US
gas network supported consumption
of more than 218 TWh compared
with 201 TWh in 2009/10  The central and eastern regional
control centres both achieved the
significant milestone of one year
without a switching error  We reduced lost time injuries by 7%
    
      The Edison Electric Institute (EEI)
recognises companies that make an
outstanding effort to restore service
to their customers through the EEI
Emergency Response Awards. In
March 2011 EEI presented an award
to National Grid for our response to
a storm on 13 and 14 March 2010,
which affected nearly 270,000
LIPA customers
    
      The Port Jefferson power station
and the generation materials
management division both recently
passed the threshold of 1,000 days
without a lost time incident. The
Northport, E. F. Barrett, Glenwood,
and Far Rockaway power stations
have all gone more than a year
without a lost time incident  Our competitive metering business,
OnStream, won Innovation of the
Year and Meter Manufacturer
and Technology of the Year at
the European Smart Metering
Awards 2011
    
      Our application to appeal against
the £15 million fine imposed last
year on our metering business for
a breach of the Competition Act
was unsuccessful
 
   
 Annual Report and Accounts 2010/11 | National Grid plc       27




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Operating and Financial Review
 
 
 Operating environment
  UK and European energy policy
    US energy policy
 Economic environment
 
   
 28       National Grid plc | Annual Report and Accounts 2010/11




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Corporate responsibility
 Business conduct
 
   
 Annual Report and Accounts 2010/11 | National Grid plc       29




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Operating and Financial Review
 
 
 Regulatory environment   UK regulation
  Regulatory framework
    Regulatory licences
  l
    
    the gas transportation businesses of National Grid Gas plc, consisting of the national
transmission system and the retained distribution network businesses. There are also four
independent distribution networks, which we previously owned and which we sold in 2005;l
    
    National Grid Metering, which is a subsidiary of National Grid Gas and manages the
latters domestic and non domestic metering assets;l
    
    the electricity transmission
business of National Grid Electricity Transmission plc; andl
    
    the interconnector business
of National Grid Interconnectors Ltd.
 Price control mechanism
    Building blocks
 
   
 30       National Grid plc | Annual Report and Accounts 2010/11




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Current price controls
    Allowed
        
    Actual
        
    Returnvanilla
        
    vanilla
    
    
    onRAV
    
    
    return
    
    
    return
        
    equityElectricity transmission
    
    
    £8,388m
    
    
    
    5.05%
    
    
    
    6.40%
    
    
    
    13.6%Gas transmission
    
    
    £4,889m
    
    
    
    5.05%
    
    
    
    7.20%
    
    
    
    15.8%Gas distribution
    
    
    £7,520m
    
    
    
    4.94%
    
    
    
    5.54%
    
    
    
    12.1%Total
    
    
    £20,797m
    
    
    
    
    

    
    
    
    
    
    
    13.6%
 Ofgems review of price controls: RPI-X@20
 The RIIO model
      l
    
    a longer price control, lasting eight years, to provide stronger incentives for
networks to manage costs;l
    
    encouraging network companies to work more closely with
stakeholders to identify what they want from energy network companies. This should help networks to
identify, and so better meet, the developing needs of the energy market;l
    
    rewarding
network companies with higher returns where they meet the needs of the network users and consumers
in innovative and efficient ways. However, network companies that perform poorly can expect to
receive lower returns;l
    
    encouraging network companies to become actively involved in
delivering a sustainable energy sector;l
    
    supporting the development and delivery of a
network service that provides long-term value for money to existing and future consumers; andl
    
    providing clarity to future investors to ensure that network companies can raise the finance
needed in a timely manner and at a reasonable cost to consumers.
 Impact on National Grid
 
   
 Annual Report and Accounts 2010/11 | National Grid plc       31




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Operating and Financial Review
 
 
 Regulatory environment   US regulation
  Regulators
    Regulatory process
 Regulatory lag
    Our rate plans
 
   
 32       National Grid plc | Annual Report and Accounts 2010/11




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Features of our rate plans
 Regulatory filings
   
  Massachusetts gas rate case
 
   
 Annual Report and Accounts 2010/11 | National Grid plc       33




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Operating and Financial Review
 Regulatory environment   US regulation continued
  Massachusetts electricity revenue decoupling  and pension expense filing
  Upstate New York electricity rate case
   Downstate New York deferrals filing
  Rhode Island filings
 New Hampshire gas rate case
   Disposal of New Hampshire businesses
  Liberty Consulting Group audit
 
   
 34       National Grid plc | Annual Report and Accounts 2010/11




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Summary of US price controls and rate plans
 
  
    Revenue decouplingA mechanism that removes the link between a utilitys revenue and sales volume so that the
utility is indifferent to changes in usage. Revenues are reconciled to a revenue target, with
differences billed or credited to customers. Allows the utility to support energy efficiency.
 

    Capital trackerA mechanism that allows for the recovery of the revenue requirement of incremental capital
investment above that embedded in base rates, including depreciation, property taxes and a return
on the incremental investment.
 §

    Commodity related bad debt true upA mechanism that allows the Company to reconcile commodity related bad debt to either actual
commodity related bad debt or to a specified commodity related bad debt write-off percentage. For
electricity utilities, this mechanism also includes working capital.
 ◊

    Pension/OPEB true upA mechanism that reconciles the actual non capitalised costs of pension and other
post-employment benefits and the actual amount recovered in base rates. The difference may be
amortised and recovered over a period or deferred for a future rate case.
 
  
 Annual Report and Accounts 2010/11 | National Grid plc       35




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Operating and Financial Review
 
 
 Business drivers, principal risks  and opportunities
  
 
   
 36       National Grid plc | Annual Report and Accounts 2010/11




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Annual Report and Accounts 2010/11 | National Grid plc       37




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Operating and Financial Review
 
 
 Vision, strategy and objectives
 Vision
  We, at National Grid, will be the foremost international electricity and gas company, delivering
unparalleled safety, reliability and efficiency, vital to the wellbeing of our customers and
communities.
 We are committed to being an innovative leader in energy management and to safeguarding our global
environment for future generations.
 Strategy
   We will build on our core UK and US, electricity and gas, regulated business base and financial
discipline to deliver sustainable growth and superior financial performance.
 Objectives
  l
    
    Driving improvements in our safety, customer and operational performancel
    
    Delivering strong, sustainable regulatory and long-term contracts with good returnsl
    
    Modernising and extending our transmission and distribution networksl
    
    Expanding our capabilities and identifying new financeable opportunities to growl
    
    Becoming more efficient through transforming our operating model and increasingly aligning our processesl
    
    Building trust, transparency and an inclusive and engaged workforcel
    
    Developing our talent, leadership skills and capabilitiesl
    
    Positively shaping the energy and climate change agenda with our external stakeholders
in both regions
 Line of sight
  Performance for growth
  Strategy for 2011/12
 
   
 38       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



Annual Report and Accounts 2010/11 | National Grid plc       39




---



##### 



Operating and Financial Review
 
 
 Key performance indicators (KPIs)
  Financial KPIsCompany strategy and objectives
    
    Financial KPIs
    
    DefinitionsSustainable growth and superior financial
performance
    
    Adjusted earnings per share
    
    Adjusted earnings* divided by the weighted
average number of sharesTotal shareholder return
    
    Average of the closing daily TSR levels
for the 30 day period up to and including
that date, assuming dividends have been
reinvestedDelivering strong, sustainable regulatory
and long-term contracts with good returns
    
    Group return on equity
    
    Adjusted earnings* with certain regulatory
based adjustments divided by equityBecoming more efficient through
transforming our operating model
and increasingly aligning our processes
    
    Regulated controllable operating costs
    
    Regulated controllable operating costs,
excluding bad debts, as a proportion of
regulated assets
  
 
    
 
  *
    
    Adjusted earnings exclude exceptional items, remeasurements and stranded cost recoveries+
    
    2007/08 data include continuing operations acquired with KeySpan for the period from 24 August 2007 to 31 March 2008 or as at 31 March 2008
    
    Comparative data have been restated for the impact of the bonus element of the rights issue and the scrip dividend issues^
    
    2007/08 results include KeySpan operations on a pro forma financial performance basis assuming the acquisition occurred on 1 April 2007◊
    
    Prior years have been restated on a constant currency basis
 
   
 40       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



Non-financial KPIsCompany objectives
    
    Non-financial KPIs
    
    DefinitionsModernising and extending our transmission
and distribution networks
    
    Network reliability targets
    
    Various definitions appropriate to the
relevant line of businessDriving improvements in our safety,
customer and operational performance
    
    Customer satisfaction
    
    Our position in customer satisfaction
surveysEmployee lost time injury frequency rate
    
    Number of employee lost time injuries per
100,000 hours worked on a 12 month basisBuilding trust, transparency and an inclusive
and engaged workforce
    
    Employee engagement index
    
    Employee engagement index calculated
using responses to our employee surveyPositively shaping the energy and climate
change agenda with our stakeholders in
both regions
    
    Greenhouse gas emissions
    
    Percentage reduction in greenhouse gas
emissions against our 1990 baseline
 Network reliability
    
    
    
    
    Performance
    
    
    Measure
    
    
    Targettargets
    
    
    
    
    06/07
    
    
    07/08
    
    
    08/09
    
    
    09/10
    
    
    10/11
    
    
    
    
    
    
    10/11Electricity transmission  UK
    
    
    99.9999
    
    
    
    99.9999
    
    
    
    99.9999
    
    
    
    99.9999
    
    
    
    99.9999
    
    
    
    %
    
    
    
    99.9999Gas transmission  UK
    
    
    100
    
    
    
    100
    
    
    
    100
    
    
    
    100
    
    
    
    100
    
    
    
    %
    
    
    
    100Gas distribution  UK
    
    
    99.999
    
    
    
    99.999
    
    
    
    99.9999
    
    
    
    99.999
    
    
    
    99.999
    
    
    
    %
    
    
    
    99.999Electricity transmission  US
    
    
    259
    
    
    
    437
    
    
    
    266
    
    
    
    147
    
    
    
    414
    
    
    MWh losses
    
    
    
    <204Electricity distribution  US
    
    
    121
    
    
    
    110
    
    
    
    114
    
    
    
    114
    
    
    
    123
    
    
    Mins of outage
    
    
    
    <122See page 45 for additional details on network reliability
  Customer satisfaction
    
    
    
    
    Performance (quartile)
    
    
    Measure
    
    
    Target08/09

    
    09/10

    
    10/11Gas Distribution  UK
    








    4th
    
    4th
    
    4th
    
    Quartile ranking
    
    
    To improveGas Distribution  US: Residential








    
    4th
    
    3rd
    
    2nd
    
    Quartile ranking
    
    
    To improveGas Distribution  US: Commercial








    
    3rd
    
    2nd
    
    4th
    
    Quartile ranking
    
    
    To improveElectricity Distribution & Generation: Residential








    
    4th
    
    4th
    
    3rd
    
    Quartile ranking
    
    
    To improveElectricity Distribution & Generation: Commercial








    
    4th
    
    3rd
    
    2nd
    
    Quartile ranking
    
    
    To improve
 
   
 Annual Report and Accounts 2010/11 | National Grid plc       41




---



##### 



Operating and Financial Review
 
 
 Performance against objectives
  Alignment of performance measures and strategy
  We will build on our core UK and US electricity and gas regulated business base...
   ...and financial discipline...
 ...to deliver sustainable growth...
   ...and superior financial performance.
   Future changes to performance measures
 
   
 42       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



Driving improvements in our safety, customer and operational performance
 Safety
  Process safety
    Occupational safety
 Public safety
  Enforcement action
 
   
 Annual Report and Accounts 2010/11 | National Grid plc       43




---



##### 



Operating and Financial Review
 Performance against objectives continued
  Customer service
  Gas Distribution UK
 Transmission UK
 
   
 44       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



US
  Customer satisfaction
    Customer energy solutions
 Reliability
 Transmission
   Gas Distribution
   Electricity Distribution & Generation
 
   
 Annual Report and Accounts 2010/11 | National Grid plc       45




---



##### 



Operating and Financial Review
 Performance against objectives continued
  Delivering strong, sustainable regulatory and long-term contracts with good returns
 Regulation
   Long-term contracts
 
   
 46       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



Modernising and extending our transmission and distribution networks
 2
 
   
 Annual Report and Accounts 2010/11 | National Grid plc       47




---



##### 



Operating and Financial Review
 Performance against objectives continued
  Transmission UK
  Transmission US
  Gas Distribution UK
 Gas Distribution US
  Electricity Distribution & Generation
  Non-regulated businesses and other
 
   
 48       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



Expanding our capabilities and identifying new financeable opportunities to grow
     Grain LNG
 Offshore transmission
  Belgian interconnector
 
   
 Annual Report and Accounts 2010/11 | National Grid plc       49




---



##### 



Operating and Financial Review
 Performance against objectives continued
  Carbon capture and storage (CCS)
  Technological developments
 Becoming more efficient through transforming our operating model and increasingly aligning our processes
 Gas Distribution front office (GDFO)
     Information services (IS) transformation
 
   
 50       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



US foundation
  UK business process outsourcing
 Building trust, transparency and an inclusive and engaged workforce
 
 
 Employees
 
   
 Annual Report and Accounts 2010/11 | National Grid plc       51




---



##### 



Operating and Financial Review
 Performance against objectives continued
  Inclusion and diversity
 Developing our talent, leadership skills and capabilities
     
 52       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



Positively shaping the energy and climate change agenda
     Climate change
   2 2
 2
 
 
   
 Annual Report and Accounts 2010/11 | National Grid plc       53




---



##### 



Operating and Financial Review
 
 
 Financial performance
 Contents
 Measurement of financial performanceUse of adjusted profit measures
    
    
    54Exchange rates
    
    
    54Continuing and discontinued operations
    
    
    55Timing
    
    
    55Key performance indicators
    
    
    55Total shareholder return
    
    
    55Group return on equity
    
    
    55Regulated controllable operating costs
    
    
    55Adjusted earnings per share
    
    
    55Other performance measures
    
    
    55Dividends and dividend cover
    
    
    55Interest cover
    
    
    56Profit for the yearAdjusted profit, adjusted earnings and
adjusted earnings per share
    
    
    56Profit, earnings and earnings per share
    
    
    56Revenue by operating segment
    
    
    57Operating profit by segment
    
    
    57Adjusted operating profit by segment
    
    
    57Diluted earnings per share
    
    
    58Net finance costs
    
    
    58Exceptional items
    
    
    58Taxation
    
    
    58Analysis of adjusted operating profit
    
    
    59Transmission UK
    
    
    60Transmission US
    
    
    61Gas Distribution UK
    
    
    62Gas Distribution US
    
    
    63Electricity Distribution & Generation
    
    
    64Non-regulated businesses and other
    
    
    65Comparative financial informationTransmission UK
    
    
    66Transmission US
    
    
    66Gas Distribution UK
    
    
    67Gas Distribution US
    
    
    67Electricity Distribution & Generation
    
    
    68Non-regulated businesses and other
    
    
    68Cash flows
    
    
    69Statutory disclosuresResearch and development
    
    
    69Charitable donations
    
    
    69Political donations and expenditure
    
    
    69Policy and practice on payment of creditors
    
    
    69
 Measurement of financial performance
  
 Use of adjusted profit measures
        
 Exchange rates
 
   
 54       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



Continuing and discontinued operations
  
 Timing
  
 Key performance indicators (KPIs)
 
 
 Total shareholder return (TSR)
   
 Group return on equity
 Regulated controllable operating costs
   
 Adjusted earnings per share
  
 Other performance measures
 
 Dividends and dividend cover
  
   2011
    
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007Dividends
    
    pence
    
    
    pence
    
    
    pence
    
    
    pence
    
    
    penceInterim
    
    
    12.90
    
    
    
    13.65
    
    
    
    12.64
    
    
    
    11.70
    
    
    
    10.90Final
    
    
    23.47
    
    
    
    24.84
    
    
    
    23.00
    
    
    
    21.30
    
    
    
    17.80Total
    
    
    36.37
    
    
    
    38.49
    
    
    
    35.64
    
    
    
    33.00
    
    
    
    28.70Dividends per ADS
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $Interim
    
    
    1.02
    
    
    
    1.15
    
    
    
    0.95
    
    
    
    1.21
    
    
    
    1.03Final
    
    
    1.90
    
    
    
    1.77
    
    
    
    1.74
    
    
    
    2.05
    
    
    
    1.76Total
    
    
    2.92
    
    
    
    2.92
    
    
    
    2.69
    
    
    
    3.26
    
    
    
    2.79
 
   
 Annual
Report and Accounts 2010/11 | National Grid plc       55




---



##### 



Operating and Financial Review
 Financial performance continued
     Dividend
    Proportion taking up scrip2008/09 final
    
    
    25%2009/10 interim
    
    
    20%2009/10 final
    
    
    23%2010/11 interim
    
    
    14%
  
 Interest cover
 Profit for the year
 
 Adjusted profit, adjusted earnings and adjusted earnings per
share
    
 
 Profit, earnings and earnings per share
    
 56       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



Reconciliation of adjusted earnings to earnings
  Years ended 31 March2011
    
    
    2010
    
    
    2009Continuing operations
    
    £m
    
    
    £m
    
    
    £mAdjusted earnings
    
    
    1,747
    
    
    
    1,418
    
    
    
    1,250Exceptional items
    
    
    (16
    )
    
    
    (270
    )
    
    
    (247
    )Remeasurements
    
    
    219
    
    
    
    17
    
    
    
    (340
    )Stranded cost recoveries
    
    
    209
    
    
    
    221
    
    
    
    256Earnings
    
    
    2,159
    
    
    
    1,386
    
    
    
    919
 Reconciliation of adjusted earnings per share to total
earnings per share
 Years ended 31 March2011
    
    
    2010
    
    
    2009Continuing operations
    
    £m
    
    
    £m
    
    
    £mAdjusted earnings per share
    
    
    51.7
    
    
    
    49.5
    
    
    
    43.3Exceptional items
    
    
    (0.5
    )
    
    
    (9.4
    )
    
    
    (8.6
    )Remeasurements
    
    
    6.5
    
    
    
    0.6
    
    
    
    (11.8
    )Stranded cost recoveries
    
    
    6.2
    
    
    
    7.7
    
    
    
    8.9Earnings per share
    
    
    63.9
    
    
    
    48.4
    
    
    
    31.8
 
 Revenue by operating segment
 Years ended 31 March2011
    
    
    2010
    
    
    2009Continuing operations
    
    £m
    
    
    £m
    
    
    £mTransmission UK
    
    
    3,484
    
    
    
    3,475
    
    
    
    3,517Transmission US
    
    
    429
    
    
    
    405
    
    
    
    420Gas Distribution UK
    
    
    1,524
    
    
    
    1,518
    
    
    
    1,468Gas Distribution US
    
    
    3,811
    
    
    
    3,708
    
    
    
    4,786Electricity Distribution & Generation
    
    
    4,567
    
    
    
    4,339
    
    
    
    4,972Other activities
    
    
    678
    
    
    
    741
    
    
    
    750Total segmental revenues
    
    
    14,493
    
    
    
    14,186
    
    
    
    15,913Less: sales between operating segments
    
    
    (150
    )
    
    
    (179
    )
    
    
    (226
    )Total
    
    
    14,343
    
    
    
    14,007
    
    
    
    15,687
 
 Operating profit by segment
 Adjusted operating profit by segment
 
 Reconciliation of adjusted operating profit to adjusted
profit and adjusted earnings
 Years ended 31 March2011
    
    
    2010
    
    
    2009Continuing operations
    
    £m
    
    
    £m
    
    
    £mAdjusted operating profit
    
    
    3,600
    
    
    
    3,121
    
    
    
    2,915Net finance costs excluding exceptional
items and remeasurements
    
    
    (1,134
    )
    
    
    (1,155
    )
    
    
    (1,150
    )Share of post-tax results of joint ventures
    
    
    7
    
    
    
    8
    
    
    
    5Adjusted profit before taxation
    
    
    2,473
    
    
    
    1,974
    
    
    
    1,770Taxation excluding tax on exceptional
items, remeasurements and stranded
cost recoveries
    
    
    (722
    )
    
    
    (553
    )
    
    
    (517
    )Adjusted profit
    
    
    1,751
    
    
    
    1,421
    
    
    
    1,253Attributable to non-controlling interests
    
    
    (4
    )
    
    
    (3
    )
    
    
    (3
    )Adjusted earnings
    
    
    1,747
    
    
    
    1,418
    
    
    
    1,250pence
    
    
    pence
    
    
    penceAdjusted earnings per share
    
    
    51.7
    
    
    
    49.5
    
    
    
    43.3Reconciliation of operating profit to profit and earningsYears ended 31 March2011
    
    
    2010
    
    
    2009Continuing operations
    
    £m
    
    
    £m
    
    
    £mTotal operating profit
    
    
    3,745
    
    
    
    3,293
    
    
    
    2,623Net finance costs
    
    
    (1,128
    )
    
    
    (1,108
    )
    
    
    (1,234
    )Share of post-tax results of joint ventures
    
    
    7
    
    
    
    8
    
    
    
    5Profit before taxation
    
    
    2,624
    
    
    
    2,193
    
    
    
    1,394Taxation
    
    
    (461
    )
    
    
    (804
    )
    
    
    (472
    )Profit
    
    
    2,163
    
    
    
    1,389
    
    
    
    922Attributable to non-controlling interests
    
    
    (4
    )
    
    
    (3
    )
    
    
    (3
    )Earnings
    
    
    2,159
    
    
    
    1,386
    
    
    
    919pence
    
    
    pence
    
    
    penceEarnings per share
    
    
    63.9
    
    
    
    48.4
    
    
    
    31.8
 
   
 Annual
Report and Accounts 2010/11 | National Grid plc       57




---



##### 



Operating and Financial Review
 Financial performance continued
    Reconciliation of adjusted operating profit to total
operating profit
  Years ended 31 March2011
    
    
    2010
    
    
    2009Continuing operations
    
    £m
    
    
    £m
    
    
    £mAdjusted operating profit
    
    
    3,600
    
    
    
    3,121
    
    
    
    2,915Exceptional items
    
    
    (350
    )
    
    
    (268
    )
    
    
    (275
    )Remeasurements
    
    
    147
    
    
    
    71
    
    
    
    (443
    )Stranded cost recoveries
    
    
    348
    
    
    
    369
    
    
    
    426Total operating profit
    
    
    3,745
    
    
    
    3,293
    
    
    
    2,623Reconciliation of adjusted profit before tax to total profit
before taxAdjusted profit before tax is presented on the face of the
income statement under the heading profit before tax before
exceptional items, remeasurements and stranded cost recoveries.Years ended 31 March2011
    
    
    2010
    
    
    2009Continuing operations
    
    £m
    
    
    £m
    
    
    £mAdjusted profit before taxation
    
    
    2,473
    
    
    
    1,974
    
    
    
    1,770Exceptional items
    
    
    (380
    )
    
    
    (301
    )
    
    
    (275
    )Remeasurements
    
    
    183
    
    
    
    151
    
    
    
    (527
    )Stranded cost recoveries
    
    
    348
    
    
    
    369
    
    
    
    426Total profit before taxation
    
    
    2,624
    
    
    
    2,193
    
    
    
    1,394
 
 Diluted earnings per share
    
 Net finance costs
 Exceptional items
    Exceptional finance costs and remeasurements
   
 Taxation
 
   
 58       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



Analysis of adjusted operating profit
  2010/11 compared with 2009/10
 
 2009/10
compared with 2008/09
 
   
 Annual
Report and Accounts 2010/11 | National Grid
plc       59




---



##### 



Operating and Financial Review
 Financial performance continued
 
 Transmission UK
 
 Years ended 31 March2011
    
    
    
    2010
    
    
    2009£m
    
    
    
    £m
    
    
    £mRevenue and other operating income
    
    
    3,484
    
    
    
    3,475
    
    
    
    3,517Operating costs excluding exceptional items
    
    
    (2,121
    )
    
    
    (2,164
    )
    
    
    (2,391
    )Adjusted operating profits
    
    
    1,363
    
    
    
    1,311
    
    
    
    1,126Exceptional items
    
    
    (70
    )
    
    
    (59
    )
    
    
    (63
    )Operating profit
    
    
    1,293
    
    
    
    1,252
    
    
    
    1,063
 2010/11 compared with 2009/10
 
   
 60       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



Transmission US
 
 Years ended 31 March2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £mRevenue and other operating income
    
    
    429
    
    
    
    405
    
    
    
    420Operating costs excluding exceptional items
    
    
    (273
    )
    
    
    (252
    )
    
    
    (245
    )Adjusted operating profits
    
    
    156
    
    
    
    153
    
    
    
    175Exceptional items
    
    
    (2
    )
    
    
    (2
    )
    
    
    (2
    )Operating profit
    
    
    154
    
    
    
    151
    
    
    
    173
 2010/11 compared with 2009/10
 
   
 Annual
Report and Accounts 2010/11 | National Grid
plc       61




---



##### 



Operating and Financial Review
 Financial performance continued
 
 Gas Distribution UK
 
 Years ended 31 March2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £mRevenue and other operating income
    
    
    1,524
    
    
    
    1,518
    
    
    
    1,468Operating costs excluding exceptional items
    
    
    (813
    )
    
    
    (795
    )
    
    
    (796
    )Adjusted operating profits
    
    
    711
    
    
    
    723
    
    
    
    672Exceptional items
    
    
    (40
    )
    
    
    (41
    )
    
    
    (43
    )Operating profit
    
    
    671
    
    
    
    682
    
    
    
    629
 2010/11 compared with 2009/10
    
 62       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



Gas Distribution US
 
 Years ended 31 March2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £mRevenue
    
    
    3,811
    
    
    
    3,708
    
    
    
    4,786Operating costs excluding exceptional

items and remeasurements
    
    
    (3,157
    )
    
    
    (3,294
    )
    
    
    (4,174
    )Adjusted operating profits
    
    
    654
    
    
    
    414
    
    
    
    612Exceptional items and remeasurements
    
    
    (14
    )
    
    
    34
    
    
    
    (386
    )Operating profit
    
    
    640
    
    
    
    448
    
    
    
    226
 2010/11 compared with 2009/10
 
   
 Annual
Report and Accounts 2010/11 | National Grid
plc       63




---



##### 



Operating and Financial Review
 Financial performance continued
 
 Electricity Distribution & Generation
 
 Years ended 31 March2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £mRevenue excluding stranded cost recoveries
    
    
    4,212
    
    
    
    3,963
    
    
    
    4,537Operating costs excluding exceptional

items and remeasurements
    
    
    (3,615
    )
    
    
    (3,589
    )
    
    
    (4,272
    )Adjusted operating profits
    
    
    597
    
    
    
    374
    
    
    
    265Exceptional items and remeasurements
    
    
    (35
    )
    
    
    (42
    )
    
    
    (160
    )Stranded cost recoveries
    
    
    348
    
    
    
    369
    
    
    
    426Operating profit
    
    
    910
    
    
    
    701
    
    
    
    531
 2010/11 compared with 2009/10
    
 64       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



Non-regulated businesses and other
 
 Years ended 31 March2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £mRevenue and other operating income
    
    
    678
    
    
    
    741
    
    
    
    750Operating costs excluding exceptional items
    
    
    (559
    )
    
    
    (595
    )
    
    
    (685
    )Adjusted operating profit
    
    
    119
    
    
    
    146
    
    
    
    65Exceptional items
    
    
    (42
    )
    
    
    (87
    )
    
    
    (64
    )Operating profit
    
    
    77
    
    
    
    59
    
    
    
    1
 2010/11 compared with 2009/10
 
   
 Annual
Report and Accounts 2010/11 | National Grid
plc       65




---



##### 



Operating and Financial Review
 Financial performance continued
 
 Transmission UK
  
 
 Transmission US
    
 66       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



Gas Distribution UK
  
 
 Gas Distribution US
 
   
 Annual
Report and Accounts 2010/11 | National Grid
plc       67




---



##### 



Operating and Financial Review
 Financial performance continued
 
 Electricity Distribution & Generation
  
 
 Non-regulated businesses and other
    
 68       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



Cash flows
 Cash flows from operating activities
  
  Cash flows from investing activities
    Cash flows from financing activities
 Statutory disclosures
 
 Research and development
  
 Charitable donations
  
 Political donations and expenditure
  
 Policy and practice on payment of creditors
 
   
 Annual
Report and Accounts 2010/11 | National Grid
plc       69




---



##### 



Operating and Financial Review
 
 
 Financial position and financial management
   Contents
 Going concern
    
    
    70Financial position
    
    
    70Balance sheet
    
    
    70Net debt
    
    
    70Capital structure
    
    
    71Rights issue
    
    
    71Liquidity and treasury management
    
    
    71Treasury policy
    
    
    71Current condition of the financial markets
    
    
    72Cash flow and cash flow forecasting
    
    
    72Funding and liquidity management
    
    
    72Use of derivative financial instruments
    
    
    72Refinancing risk management
    
    
    72Interest rate risk management
    
    
    73Foreign exchange risk management
    
    
    73Counterparty risk management
    
    
    74Valuation and sensitivity analysis
    
    
    74Commodity contracts
    
    
    74Energy purchase contracts
    
    
    75Commodity purchase contracts accounted for as derivative contracts
    
    
    75Derivative financial instruments linked to 
commodity prices
    
    
    75Sensitivity analysis
    
    
    75Commitments and contingencies
    
    
    75Contractual obligations at 31 March 2011
    
    
    75Off
balance sheet arrangements
    
    
    76Details of material litigation at 31 March 2011
    
    
    76Metering competition investigation
    
    
    76Gas Distribution mains replacement investigation
    
    
    76KeySpan Department of Justice investigation
    
    
    76KeySpan class actions
    
    
    76Related party transactions
    
    
    76Retirement arrangements
    
    
    77Net pension and other post-retirement obligations
    
    
    77UK funding valuation
    
    
    77Contributions
    
    
    77Plan assets
    
    
    77
 Going concern
  
 Financial position
 
 Balance sheet
   NetAssets
    
    
    Liabilities
    
    
    assets£m
    
    
    £m
    
    
    £mProperty, plant and equipment and

non-current intangible assets
    
    
    32,457
    
    
    
    
    
    
    
    32,457Goodwill and non-current investments
    
    
    5,369
    
    
    
    
    
    
    
    5,369Current assets and liabilities
    
    
    2,822
    
    
    
    (3,794
    )
    
    
    (972
    )Other non-current assets and
liabilities
    
    
    135
    
    
    
    (3,405
    )
    
    
    (3,270
    )Post-retirement assets and
obligations
    
    
    556
    
    
    
    (2,574
    )
    
    
    (2,018
    )Deferred tax
    
    
    
    
    
    
    (3,766
    )
    
    
    (3,766
    )Total before net debt
    
    
    41,339
    
    
    
    (13,539
    )
    
    
    27,800Net debt
    
    
    5,061
    
    
    
    (23,792
    )
    
    
    (18,731
    )Total as at 31 March 2011
    
    
    46,400
    
    
    
    (37,331
    )
    
    
    9,069Total as at 31 March 2010
    
    
    43,553
    
    
    
    (39,342
    )
    
    
    4,211
  
 Net debt
 
   
 70       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



*
    Negative figure indicates that cash and short-term financial investments exceed debt maturities 
 Capital structure
 2011
    
    
    2010RAV gearing
    
    %
    
    
    %Regulated transmission and distribution businesses
within National Grid Gas plc
    
    
    54
    
    
    
    57National Grid Electricity Transmission plc
    
    
    54
    
    
    
    56
  
 Rights issue
  
 Liquidity and treasury management
 
 
 Treasury policy
 
   
 Annual
Report and Accounts 2010/11 | National Grid
plc       71




---



##### 



Operating and Financial Review
 
 Financial position and financial management continued
   Current condition of the financial markets
  
 Cash flow and cash flow forecasting
    
 Funding and liquidity management
 Use of derivative financial instruments
   
 Refinancing risk management
 
   
 72       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



Interest rate risk management
 Foreign exchange risk management
 
   
 Annual
Report and Accounts 2010/11 | National Grid
plc       73




---



##### 



Operating and Financial Review
 Financial position and financial management continued
   Counterparty risk management
    
 Valuation and sensitivity analysis
 2010/11
    
    
    2009/10Other
    
    
    
    
    
    
    OtherIncome
    
    
    equity
    
    
    Income
    
    
    equitystatement
    
    
    reserves
    
    
    statement
    
    
    reserves£m
    
    
    £m
    
    
    £m
    
    
    £mUK retail price index ±0.50%
    
    
    19
    
    
    
    
    
    
    
    17
    
    
    
    UK interest rates ±0.50%
    
    
    38
    
    
    
    50
    
    
    
    51
    
    
    
    71US interest rates ±0.50%
    
    
    39
    
    
    
    15
    
    
    
    52
    
    
    
    14US dollar exchange rate ±10%
    
    
    44
    
    
    
    636
    
    
    
    68
    
    
    
    623
 
 
 Commodity contracts
 
   
 74       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



Energy purchase contracts
  
 Commodity purchase contracts accounted for as derivative contracts
   
 Derivative financial instruments linked to
 commodity prices
 Sensitivity analysis
   2010/11
    
    
    2009/10Other
    
    
    
    
    
    
    OtherIncome
    
    
    equity
    
    
    Income
    
    
    equitystatement
    
    
    reserves
    
    
    statement
    
    
    reserves£m
    
    
    £m
    
    
    £m
    
    
    £m10% increase incommodity prices
    
    
    58
    
    
    
    
    
    
    
    71
    
    
    
    (1
    )10% decrease incommodity prices
    
    
    (54
    )
    
    
    
    
    
    
    (64
    )
    
    
    1
 
 Commitments and contingencies
   2011
    
    
    2010*£m
    
    
    £mFuture capital expenditure contractedbut not provided for
    
    
    1,614
    
    
    
    1,738Total operating lease commitments
    
    
    795
    
    
    
    926Power commitments
    
    
    3,543
    
    
    
    3,948Guarantees and letters of credit
    
    
    762
    
    
    
    1,189
 
 *
    Comparatives have been restated to present items on a basis consistent with the current year
classification   
 Contractual obligations at 31 March 2011
 
   
 Annual
Report and Accounts 2010/11 | National Grid
plc       75




---



##### 



Operating and Financial Review
 Financial position and financial management continued
   Less
    
    
    
    
    
    
    
    
    
    
    Morethan
    
    
    1-3
    
    
    3-5
    
    
    than1 year
    
    
    years
    
    
    years
    
    
    5 years
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mFinancial liabilitiesBorrowings
    
    
    2,616
    
    
    
    2,762
    
    
    
    2,141
    
    
    
    15,314
    
    
    
    22,833Interest payments

on borrowings
    
    
    828
    
    
    
    1,548
    
    
    
    1,278
    
    
    
    8,050
    
    
    
    11,704Finance lease liabilities
    
    
    20
    
    
    
    71
    
    
    
    52
    
    
    
    105
    
    
    
    248Other non interest-
bearing liabilities
    
    
    2,320
    
    
    
    279
    
    
    
    
    
    
    
    
    
    
    
    2,599Derivatives payments
    
    
    1,213
    
    
    
    514
    
    
    
    881
    
    
    
    464
    
    
    
    3,072Derivatives receipts
    
    
    (1,596
    )
    
    
    (1,056
    )
    
    
    (1,151
    )
    
    
    (455
    )
    
    
    (4,258
    )Commodity contracts
    
    
    290
    
    
    
    124
    
    
    
    62
    
    
    
    (19
    )
    
    
    457Other contractual
obligationsCapital commitments
    
    
    1,217
    
    
    
    294
    
    
    
    92
    
    
    
    11
    
    
    
    1,614Operating leases
    
    
    83
    
    
    
    172
    
    
    
    142
    
    
    
    398
    
    
    
    795Energy commitments
    
    
    1,081
    
    
    
    808
    
    
    
    513
    
    
    
    1,141
    
    
    
    3,543Total at 31 March 2011
    
    
    8,072
    
    
    
    5,516
    
    
    
    4,010
    
    
    
    25,009
    
    
    
    42,607
 
 Off balance sheet arrangements
  
 
 Details of material litigation as at 31 March 2011
 Details of material litigation as at 31 March 2011
  
 Metering competition investigation
  
 Gas Distribution mains replacement investigation
 KeySpan Department of Justice investigation
   
 KeySpan class action
  
 Related party transactions
 
   
 76       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



Retirement arrangements
     
 Net pension and other post-retirement obligations
   UK
    
    
    US
    
    
    TotalNet plan liability
    
    £m
    
    
    £m
    
    
    £mAs at 1 April 2010
    
    
    (646
    )
    
    
    (2,452
    )
    
    
    (3,098
    )Exchange movements
    
    
    
    
    
    
    125
    
    
    
    125Current service cost
    
    
    (90
    )
    
    
    (112
    )
    
    
    (202
    )Expected return less interest
    
    
    79
    
    
    
    (54
    )
    
    
    25Curtailments, settlements and other
    
    
    (7
    )
    
    
    2
    
    
    
    (5
    )Actuarial gains/(losses) on plan assets
    
    
    124
    
    
    
    234
    
    
    
    358 on plan liabilities
    
    
    301
    
    
    
    (88
    )
    
    
    213Employer contributions
    
    
    149
    
    
    
    417
    
    
    
    566As at 31 March 2011
    
    
    (90
    )
    
    
    (1,928
    )
    
    
    (2,018
    )Represented by:Plan assets
    
    
    15,353
    
    
    
    4,616
    
    
    
    19,969Plan liabilities
    
    
    (15,443
    )
    
    
    (6,544
    )
    
    
    (21,987
    )Net plan liability
    
    
    (90
    )
    
    
    (1,928
    )
    
    
    (2,018
    )
 UK funding valuation
     
 Contributions
   
 Plan assets
 
   
 Annual
Report and Accounts 2010/11 | National Grid
plc       77




---



##### 



Operating and Financial Review
 
 Accounting policies
   Basis of accounting
   Choices permitted under IFRS
   Presentation formats
 We use the nature of expense method for our income statement and total our
balance sheet to net assets and total equity.
 In the income statement, we present subtotals of total operating profit, profit before tax and
profit from continuing operations, together with additional subtotals excluding exceptional items,
remeasurements and stranded cost recoveries. Exceptional items, remeasurements and stranded cost
recoveries are presented separately on the face of the income statement.
 Customer contributions
 Contributions received prior to 1 July 2009 towards capital expenditure are
recorded as deferred income and amortised in line with the depreciation on the associated asset.
 
 Financial instruments
 We normally opt to apply hedge accounting in most circumstances where this is
permitted. For net investment hedges, we have chosen to use the spot rate method, rather than the
alternative forward rate method.
 
 Timing of goodwill 
impairment reviews
 Goodwill impairment reviews are carried out annually in the final quarter of the financial year.
   Critical accounting policies
 Revenue
 Revenue includes an assessment of energy and accruals for transportation services supplied to
customers between the date of the last meter reading and the year end. Changes to the estimate of
the energy or transportation services supplied during this period would have an impact on our
reported results.
 Unbilled revenues at 31 March 2011 are estimated at £303 million in the UK and £445 million in the
US compared with £308 million and £415 million respectively at 31 March 2010.
 
 Estimated economic lives of property, plant and equipment
 The reported amounts for depreciation of
property, plant and equipment and amortisation of non-current intangible assets can be materially
affected by the judgements exercised in determining their estimated economic lives.
 
 Hedge accounting
 We use derivative financial instruments to hedge certain economic exposures
arising from movements in exchange and interest rates or other factors that could affect either the
value of our assets or liabilities or our future cash flows. Movements in the fair values of
derivative financial instruments may be accounted for using hedge accounting where we meet the
relevant eligibility, documentation and effectiveness testing requirements. If a hedge does not
meet the strict criteria for hedge accounting, or where there is ineffectiveness or partial
ineffectiveness, then the movements will be recorded in the income statement immediately instead of
being recognised in other comprehensive income or by being offset by adjustments to the carrying
value of debt.
 Exceptional items, remeasurements and stranded cost recoveries
 Exceptional items, remeasurements
and stranded cost recoveries are items of income and expense that, in the judgement of management,
should be disclosed separately on the basis that they are material, either by their nature or their
size, to an understanding of our financial performance and distort the comparability of our
financial performance between periods.
 Items of income or expense that are considered by management for designation as exceptional items
include such items as significant restructurings, write-downs or impairments of non-current assets,
significant changes in environmental or decommissioning provisions, integration of acquired
businesses, gains or losses on disposals of businesses or investments and debt redemption costs as
a consequence of transactions such as significant disposals or issues of equity.
 Remeasurements comprise gains or losses recorded in the income statement arising from changes in
the fair value of commodity contracts and of derivative financial instruments. These fair values
increase or decrease as a consequence of changes in commodity and financial indices and prices over
which we have no control.
 Stranded cost recoveries relate to the recovery, through charges to
electricity customers in upstate New York and in New England, of costs mainly incurred prior to
divestiture of generation assets.
 Tax estimates
 Our tax charge is based on the profit for the year and tax rates in effect. The determination of
appropriate provisions for taxation requires us to take into account anticipated decisions of tax
authorities and estimate our ability to utilise tax benefits through future earnings and tax
planning.
   
 78       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



Carrying value of assets and potential for impairments
 The carrying value of assets recorded in the
consolidated balance sheet could be materially reduced if an impairment were to be assessed as
being required. Impairment reviews are carried out either when a change in circumstance is
identified that indicates an asset might be impaired or, in the case of goodwill, annually. An
impairment review involves calculating either or both of the fair value or the value in use of an
asset or group of assets and comparing with the carrying value in the balance sheet.
 These calculations involve the use of assumptions as to the price that could be obtained for, or the
future cash flows that will be generated by, an asset or group of assets, together with an
appropriate discount rate to apply to those cash flows.
 
 Assets and liabilities carried 
at fair value
 Certain assets and liabilities, principally financial
investments, derivative financial instruments and certain commodity contracts, are carried in the
balance sheet at their fair value rather than historical cost.
 The fair value of financial
investments is based on market prices, as is that of derivative financial instruments where market
prices exist. Other derivative financial instruments and those commodity contracts carried at fair
value are valued using financial models, which include judgements on, in particular, future
movements in exchange and interest rates as well as equity and commodity prices.
 
 Provisions
 Provisions are made for liabilities, the timing and amount of which is uncertain. These include
provisions for the cost of environmental restoration and remediation, decommissioning of nuclear
facilities we no longer own but to which we still have a responsibility to contribute,
restructuring, and employer and public liability claims.
 Calculations of these provisions are based on estimated cash flows relating to these costs,
discounted at an appropriate rate where significant. The amounts and timing of cash flows relating
to these liabilities are based on management estimates supported by external consultants.
 
 Pensions and other post-retirement obligations
 Pensions and other post-retirement benefit
obligations recorded in the balance sheet are calculated actuarially using a number of assumptions
about the future, including inflation, salary increases, life expectancy, length of service and
pension and investment returns, together with the use of a discount rate to calculate the present
value of the obligation.
 These assumptions can have a significant impact on both the pension obligation recorded in the
balance sheet and on the net charge recorded in the income statement.
 
 Energy commitments
 Our energy commitments relate to contractual commitments to purchase electricity or gas to satisfy
physical delivery requirements to our customers or for energy that we use ourselves. In
managements judgement these commitments meet the normal purchase, sale or usage exemption in IAS
39 and are not recognised in the financial statements.
 If these commitments were judged not to meet the exemption under IAS 39 they would have to be
carried in the balance sheet at fair value as derivative instruments, with movements in their fair
value shown in the income statement under remeasurements.
 Revenue accruals
 A 10%
change in our estimate of unbilled revenues at 31 March 2011 would result in an increase or
decrease in our recorded net assets and profit for the year by approximately £49 million net of
tax.
 
 Asset useful lives
 An increase in the economic useful lives of assets of one year on average would reduce our annual
depreciation charge on property, plant and equipment by £40 million (pre-tax) and our annual
amortisation charge on intangible assets by £7 million (pre-tax).
 
 Hedge accounting
 If using
our derivative financial instruments, hedge accounting had not been achieved during the
year ended 31 March 2011 then the profit after tax for the year
would have been £336 million higher
than that reported net of tax, and net assets would have been
£82 million lower.
 Assets carried at fair value
 A 10% change in assets and liabilities carried at fair value would
result in an increase or decrease in the carrying value of derivative financial instruments and
commodity contract liabilities of £114 million and £11 million respectively.
 
 Provisions
 A 10% change in the estimates of future cash flows estimated in respect of provisions for
liabilities would result in an increase or decrease in our provisions of approximately £181
million.
 
 Pensions and other post-retirement obligations
 Our pension and post-retirement obligations are
sensitive to the actuarial assumptions used. A 0.1% increase in the discount rate, a 0.5% increase
in the rate of salary increases or an increase of one year in life expectancy would result in a
change in the net obligation of £304 million, £162 million and £653 million and a change in the
annual pension cost of £7 million, £8 million and £7 million respectively.
   Accounting developments
 Accounting standards, amendments to standards 
and interpretations adopted in 2010/11
  Accounting
standards, amendments to standards 
and interpretations not yet adopted
 
   
 Annual
Report and Accounts 2010/11 | National Grid
plc       79




---



##### 



Corporate Governance
 
 Corporate Governance
 
 Chairmans foreword
 I am delighted to report we are again compliant with the Combined Code and have made preparations
for our future reporting under the UK Corporate Governance Code.
      
 Sir John Parker
 Board focus during the year
 =
    
    safety, including actions taken to reduce risks and improve performance;=
    
    the rights issue and subsequent investor reaction;=
    
    reorganisation of the Company and associated changes in Executive Director responsibilities
announced 31 January 2011;=
    
    risks associated with the political and regulatory landscape, including the US rate cases; and=
    
    the performance evaluation process, including how the Board and its Committees could operate more
effectively.
 Expected Board focus for the next year
 =
    
    safety, as part of the Chief Executives monthly report;=
    
    monitoring implementation of the
reorganisation, including progress with anticipated efficiencies and associated employee relations
issues;=
    
    strategy sessions, including business development;=
    
    UK and US regulatory updates;=
    
    impact of the Bribery Act 2010;=
    
    reviewing and implementing as appropriate the recommendations of the Davies Review;=
    
    updates on
the allocation of US expenses; and=
    
    monitoring and discussing progress with Ofgem on price
controls.
 Governance framework
 
   
 80       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



Directors Report statutory disclosures
 94
    
    Annual General Meeting83
    
    Articles of Association89
    
    Audit information8-9
    
    Board of Directors83
    
    Change of control provisions69
    
    Charitable donations
 83
    
    Code of Ethics30-35
    
    Contractual and other arrangements83
    
    Directors indemnity96-108
    
    Directors share interests55-56
    
    Dividends51-52
    

Employees  I&D
 72-75, 78
    
    Financial instruments11-79
    

Future
developments95
    
    Material interests in shares69
    
    Policy and practice on payment of creditors69
    
    Political donations and expenditure
 83
    
    Post balance sheet events11-95
    

Principal
activities and business review69
    
    Research and development94
    
    Share capital
 
 Our Board
   The role of the Board
   
    
    corporate governance, including policy and procedure statements, codes of conduct, the
Delegations of Authority, the Framework for Responsible Business and Doing the Right Thing  Our
Standards of Ethical Business Conduct;
    
    overall business strategy;
    
    financial policy, the budget and business
plan;
    
    acquisitions or divestments;
    
    shareholder documents;
    
    Director/employee issues such as Director succession planning, with input and
recommendations from the Nominations Committee; and
    
    stock exchange and listing
requirements such as approval/ recommendation of dividend and approval of results announcements,
interim management statements and the Annual Report and Accounts.
   
    
    safety, health and the environment;
    
    financial status of the Company;
    
    operational headlines from the Companys businesses, together with a detailed update
from one of the business areas on a rotating basis;
    
    business development and strategy
implementation;
    
    external matters affecting the Company and any legal or new risk
issues;
    
    reports from the Board Committees; and
    
    updates on the governance of the Company and its businesses.
 The Board and its Committees
     Non-executive Director independence
   Roles of the Chairman, Chief Executive and
Senior Independent Director
 
   
 Annual Report and Accounts 2010/11 National Grid plc     81




---



##### 



Corporate Governance
 Corporate Governance continued
   Director induction, development and support
   
    
    informing them at each Board meeting of the latest training courses
which may be of interest;
    
    attendance at key site visits;
    
    providing updates
on legal, economic, corporate governance and best practice matters; and
    
    tailored
management presentations.
  
    
    external
coaching;
    
    attendance at external training; and
    
    experience of other
boardrooms through non-executive appointments.
 Performance evaluation
 
   
  82     National Grid plc Annual Report and Accounts 2010/11




---



##### 



Area
    
    
    Actions completed 2010/11Training and
development
    
    
    Enhancement of the Non-executive Directors
familiarity and interaction with each line
of business.Responsibility: BoardInformation
and support
    
    
    Development of a more standard
presentation format for in depth line of
business reviews, in order to promote
consistency and ease of comparison.Responsibility: Executive DirectorsInformation
and support
    
    
    Greater transparency of key performance
indicator data provided to the Board.Responsibility: Chief Executive
 Area
    
    
    Actions for 2011/12Training and
development
    
    
    Ongoing review and assessment of training
and development opportunities for Board
members, including any areas of interest for
training sessions to be delivered by internal
or external parties.Responsibility: BoardBoard composition
    
    
    Review and agree clarity of succession
planning focus between the Nominations
Committee and the Board.Responsibility: Board and Nominations
CommitteeRole and structure
    
    
    Continue to monitor and review advice from,
and effectiveness of, advisors including
appropriateness of each advisor.Responsibility: Remuneration and Risk
& Responsibility Committees
  Director appointment and election
 Conflicts of interest
  
 Directors indemnity
  
 Code of Ethics
  
 Change of control provisions
  
 Articles of Association
  
 Post balance sheet events
 
   
  Annual Report and Accounts 2010/11 National Grid plc     83




---



##### 



Corporate Governance
 Corporate Governance continued
  Our Board and Committee governance structure
 The Board
 Executive Committee
 Role and focus
  Membership and attendance
 Name
    
    Attendance*Committee chairmanSteve Holliday
    
    11 of 11Executive DirectorsAndrew Bonfield **
    
    5 of 5Tom King
    
    11 of 11Nick Winser
    
    11 of 11Steve Lucas ***
    
    8 of 8Mark Fairbairn ****
    
    11 of 11Other membersDavid Listerchief information officer
    
    11 of 11Helen MahyCompany Secretary & General Counsel
    
    11 of 11George Mayhewcorporate affairs director
    
    11 of 11Mike Westcottglobal human resources director
    
    11 of 11Alison Woodglobal director of strategy and businessdevelopment
    
    11 of 11
 Other attendees:
 Finance Committee
 Role and focus
  Membership and attendance
 Name
    
    Attendance*Committee chairmanMaria Richter
    
    5 of 5Executive DirectorsSteve Holliday
    
    5 of 5Andrew Bonfield **
    
    3 of 3Steve Lucas ***
    
    3 of 3Non-executive DirectorsJohn Allan
    
    5 of 5Stephen Pettit
    
    5 of 5
 Other attendees:
 
    
    global director of tax and treasury;
    
    head of group tax;
    
    head of risk and insurance;
    
    global head of retirement plans;
    
    external advisors as appropriate; and
    
    management, as required.
 Nominations Committee
 Role and focus
  Membership and attendance
 Name
    
    Attendance*Committee chairmanSir John Parker
    
    5 of 5Non-executive DirectorsKen Harvey
    
    5 of 5Maria Richter
    
    5 of 5George Rose
    
    4 of 5
 Other attendees:
 
    
    Chief Executive;
    
    global human resources director; and
    
    external advisors, as required.
 
 84     National Grid plc | Annual Report and Accounts 2010/11




---



##### 



Board composition, attendance and independence
   Non independentName
    
    Attendance*Non-executive ChairmanSir John Parker
    
    10 of 10Chief ExecutiveSteve Holliday
    
    10 of 10Executive DirectorsAndrew Bonfield **
    
    4 of 5Tom King
    
    10 of 10Nick Winser
    
    9 of 10Steve Lucas ***
    
    7 of 7Mark Fairbairn ****
    
    10 of 10
 IndependentName
    
    Attendance*Non-executive DirectorsKen Harvey
(Senior Independent Director)
    
    10 of 10Linda Adamany
    
    10 of 10Philip Aiken
    
    10 of 10John Allan
    
    10 of 10Stephen Pettit
    
    10 of 10Maria Richter
    
    10 of 10George Rose
    
    8 of 10
 *
    Attendance is expressed as number of
meetings attended out of number possible or
applicable for the individual Director**
    Andrew Bonfield was appointed to the Board on 1 November 2010***
    Steve Lucas retired on 31
December 2010****
    Mark Fairbairn left the Company on 31 March 2011
  Remuneration Committee
 Role and focus
  Membership and attendance
 Name
    
    Attendance*Committee chairmanJohn Allan
    
    9 of 9Non-executive DirectorsKen Harvey
    
    9 of 9Stephen Pettit
    
    9 of 9George Rose
    
    8 of 9
 Other attendees:
 
    
    Chairman;
    
    Chief Executive;
    
    global human resources director and global head of compensation & benefits; and
    
    independent external advisors.
 Risk & Responsibility Committee
 Role and focus
  Membership and attendance
 Name
    
    Attendance*Committee chairmanStephen Pettit
    
    4 of 4Non-executive DirectorsLinda Adamany
    
    4 of 4Philip Aiken
    
    4 of 4Ken Harvey
    
    4 of 4
 Other attendees:
 
    
    Chief Executive;
    
    Company Secretary & General Counsel;
    
    director of UK safety, health and environment;
    
    US senior VP safety, health, environmental services;
    
    Executive Directors, as appropriate; and
    
    director of corporate audit or corporate affairs director on an alternate basis.
 Audit Committee
 Role and focus
  Membership and attendance
 Name
    
    Attendance*Committee chairmanGeorge Rose
    
    6 of 6Non-executive DirectorsLinda Adamany
    
    6 of 6Philip Aiken
    
    6 of 6Maria Richter
    
    6 of 6
 Other attendees:
 
    
    external auditors;
    
    Chairman;
    
    Chief Executive;
    
    Finance Director;
    
    director of corporate audit, financial controller, Company Secretary & General Counsel; and
    
    other Executive Directors, global director of tax and treasury, chief accountant and global head of
risk management, as appropriate.
  á Reporting line
 Disclosure committee
    
    See page 88
 
   
 Annual Report and Accounts 2010/11 National Grid plc 85




---



##### 



Corporate Governance
 Corporate Governance continued
   Steve Holliday
 
 Review of the year
  
    
    the financial, operational, safety and environmental performance of the Company and its
businesses, including process safety improvements;
    
    strategic business development and implementation, in particular the redesign of our
organisational structure;
    
    approving capital and operational expenditure under the authorities delegated to it by the Board;
    
    global regulatory matters, including the UK price controls RIIO T1 and RIIO GD1, and US rate
filings;
    
    business conduct, risk and compliance reports, including adequacy and effectiveness of internal
control and risk management;
    
    employee issues such as inclusion and diversity, employee reward and succession planning; and
    
    global information systems strategic issues.
 
 Our focus this year has been on the delivery
of our strategic actions, including the step up in
our capital plan and regulatory developments. We
have also reviewed and redesigned our
organisational structure from a global line of
business model to a regional model, as our
customers and regulators look for a business more
closely tuned to their needs. This represents an
evolution in the way we run our business. We will
of course continue to collaborate to share best
practice and knowledge and maintain the value that
we have gained from our global lines of business.
 Steve Holliday
 Maria Richter
 
 Review of the year
  
    
    transaction structure for the rights issue;
    
    debt management policy, with policy changes to take advantage of market conditions, an external
presentation on the 2010 debt capital markets and key drivers for 2011;
    
    UK and US tax strategy;
    
    activities of the energy procurement risk management committee in the US;
    
    pensions update, including the funding status of all plans, discussions on actions to address
funding deficits and their treatment in price control reviews;
    
    insurance, including a review of premium levels and liability policy limits; and
    
    approved financing to meet the Companys anticipated increased role in US energy efficiency
programmes.
 
 It has been a particularly busy year for the
Committee. Weve considered several proposals
between the scheduled meetings to enable the
Company to remain competitive with its financing
activities and to secure the best market deals
available. Despite the uncertainties within the
economy, I am pleased to say that our specialist
finance, treasury, tax, insurance and pensions
teams have all risen to the challenges and we
remain well placed for the year ahead.
 Maria Richter
 Sir John Parker
 
 Review of the year
Appointment during the year
   
    
    the size of the Board, its structure and composition;
    
    aspects of the performance evaluation process, see pages 82 and 83 for details;
    
    ongoing succession planning for Board members and senior management; and
    
    development plans for senior management, as proposed by the Chief Executive and global human
resources director.
 
 Succession planning ensures the Company
continues to be managed by people with the
necessary skills, experience and knowledge and that
the Board itself has the right balance of skills
and experience to be able to perform its duties
effectively. With the renewed focus on Board gender
diversity, the Committee will continue to review
Board succession aiming to ensure that, following
the Davies Review, we can meet our aspirational
goals.
 Sir John Parker
   
  86     National Grid plc Annual Report and Accounts 2010/11




---



##### 



John Allan
 
 Review of the year
  
    
    impact of the rights issue on the employee share plans, including on the earnings per share
performance condition in the Performance Share Plan;
    
    salary review proposals and performance objectives;
    
    compensation and benefit arrangements for departing and new Executive Directors;
    
    market trends in remuneration and benchmarking of individual roles;
    
    long-term ill health benefits within the defined contribution section of The National Grid UK
Pension Scheme; and
    
    impact of UK income tax relief changes on pensions.
  
 Remuneration at Board and senior management level
has again been firmly in the public eye over the
last year. The Committee acknowledges that there is
considerable focus on this topic and that decisions
it makes must be fully justifiable. We have
continued to consider the interests of
shareholders, customers, regulators and other
stakeholders as appropriate, which has been
illustrated by the consultation with major
shareholders in respect of the new Long Term
Performance Plan.
 John Allan
 Stephen Pettit
 
 Review of the year
  
    
    serious incident and near miss reports, such as an electric arc flash incident at a US
substation, noting root causes and associated learning;
    
    climate change strategy, performance against targets and the challenges related to Scope III
emissions;
    
    safety, health and environment audit plans and findings from such audits;
    
    progress toward embedding a security culture and actions being taken to improve digital and asset
security;
    
    changes in the non-financial risk profile of the Company; and
    
    findings from the new external safety
advisor and subsequent response from
management.
 
 We undertook a number of site visits during
the year starting with a tour of a US LNG site,
which focused on process safety. We also went to a
London electricity substation, where we gained a
greater understanding of the issues associated with
the failure of certain types of transformer and the
actions being taken to manage them. Later in the
year, we visited a Gas Distribution training centre
in the UK, where we observed the work under way to
increase our level of performance in the field.
During all these visits, we were impressed by the
commitment of everyone we met to safety  of
themselves, their colleagues and the public.
 Stephen Pettit
 George Rose
 
 Experience
  Review of the year
  
    
    developments in the US finance environment including recruitment to strengthen
capabilities;
    
    accounting for goodwill, including an outline of the approach adopted for goodwill impairment
testing;
    
    implications of the Bribery Act 2010, including a review of policies and procedures to ensure
adequate controls are in place;
    
    the risk management process in Transmission, noting the principal risks; and
    
    the rights issue, including the transaction structure and the external auditors review of
working capital projections.
 
 The role and responsibilities of audit
committees have come under continued scrutiny.
During the year, the bodies responsible for
oversight of financial reporting, both in the UK
and internationally, have consulted on initiatives
to improve the accountability and transparency of
companies reporting. We have observed closely and
participated in these processes and aim to be at
the forefront of transparent financial reporting.
The Committee will continue to consider best
practice reporting to stakeholders as an integral
part of its business.
 George Rose
 
   
  Annual Report and Accounts 2010/11 National Grid plc     87




---



##### 



Corporate Governance
 Corporate Governance continued
  Audit Committee
   Financial reporting
   Disclosure committee
 Confidential reporting procedures and whistleblowing
    Internal (corporate) audit
   External audit
  Auditor independence and objectivity
 
   
 88     National Grid plc Annual Report and Accounts 2010/11






---



##### 



Audit information
  Internal control, risk and compliance
 Risk management and internal control
   Framework
  Review
   
    
    the receipt of a Letter of Assurance from the Chief Executive, which consolidates key
matters of interest raised through the year-end assurance process;
    
    assurance from its Committees as appropriate, with particular reference to the reports
received from the Audit Committee and Risk & Responsibility Committee on the reviews
undertaken at their respective meetings; and
    
    assurances in relation to the certifications required under the Sarbanes-Oxley Act
2002 as a result of the Companys NYSE listing.
 
   
 Annual Report and Accounts 2010/11 National Grid plc 89






---



##### 



Corporate Governance
 Corporate Governance continued
  Risk management
    Compliance management
 Internal control
 Internal
control  information assurance
    Internal
control over financial reporting  Sarbanes-Oxley
 
   
 90 National Grid plc | Annual Report and Accounts 2010/11






---



##### 



Risk factors
  Changes in law or
regulation and
decisions by
governmental bodies
or regulators
    
    Many of our businesses are utilities or networks that are subject to regulation by governments and other authorities.
Changes in law or regulation or regulatory policy and precedent in the countries or states in which we operate
(including the new RIIO approach in the UK) could materially adversely affect us. Decisions or rulings concerning,
for example:  whether licences, approvals or agreements to operate or supply are granted or are renewed or whether
there has been any breach of the terms of a licence, approval or regulatory requirement; and  timely recovery of incurred expenditure or obligations, the ability to pass through commodity costs, a
decoupling of energy usage and revenue and other decisions relating to the impact of general economic conditions on
us, our markets and customers, implications of climate change, remuneration for stranded assets, the level of
permitted revenues and dividend distributions for our businesses and in relation to proposed business development
activities,
could have a material adverse impact on our results of operations, cash flows, the financial condition of our
businesses and the ability to develop those businesses in the future.
For further information, see the Operating and Financial Review and, in particular, the operating environment section.Potentially harmful
activities, the
environment and
climate change
    
    Aspects of our activities are potentially dangerous and could potentially harm members of the public and our
employees, such as the operation and maintenance of electricity generation facilities and electricity lines and the
transmission and distribution of gas. We are subject to laws and regulations in the UK and US governing health and
safety matters protecting the public and our employees. Electricity and gas utilities also typically use and generate
in their operations hazardous and potentially hazardous products and by-products. In addition, there may be other
aspects of our operations that are not currently regarded or proved to have adverse effects but could become so, such
as the effects of electric and magnetic fields.
We are subject to laws and regulations relating to pollution, the protection of the environment, and the use and
disposal of hazardous substances and waste materials. These expose us to costs and liabilities relating to our
operations and our properties whether current, including those inherited from predecessor bodies, or formerly owned
by us and sites used for the disposal of our waste. The cost of future environmental remediation obligations is often
inherently difficult to estimate and uncertainties can include the extent of contamination, the appropriate
corrective actions and our share of the liability. We are increasingly subject to regulation in relation to climate
change and are affected by requirements to reduce our own carbon emissions as well as reduction in energy use by our
customers.
We commit significant expenditure toward complying with these laws and regulations and to meeting our obligations
under negotiated settlements. If additional requirements are imposed, or our ability to recover these costs under
regulatory frameworks changes, this could have a material adverse impact on our businesses, results of operations and
financial position. Furthermore, any breach of our regulatory or contractual obligations, or our climate change
targets, or even incidents that do not amount to a breach, could materially adversely affect our results of
operations and our reputation.
For further information about environmental, climate change and health and safety matters relating to our businesses,
see the Corporate responsibility section of our website at www.nationalgrid.com.Network failure or
interruption, the
inability to carry
out critical non
network operations
and damage to
infrastructure
    
    We may suffer a major network failure or interruption or may not be able to carry out critical non network
operations. Operational performance could be materially adversely affected by a failure to maintain the health of the
system or network, inadequate forecasting of demand, inadequate record keeping or control of data or failure of
information systems and supporting technology. This could cause us to fail to meet agreed standards of service or
incentive and reliability targets or be in breach of a licence, approval, regulatory requirement or contractual
obligation, and even incidents that do not amount to a breach could result in adverse regulatory and financial
consequences, as well as harming our reputation.
In addition to these risks, we may be affected by other potential events that are largely outside our control such as
the impact of weather (including as a result of climate change), unlawful or unintentional acts of third parties,
insufficient supply or force majeure. Weather conditions, including prolonged periods of adverse weather, can affect
financial performance and severe weather that causes outages or damages infrastructure will materially adversely
affect operational and potentially business performance and our reputation. Malicious attack, sabotage or other
intentional acts may also damage our assets or affect corporate activities and as a consequence have a material
adverse impact on our results of operations and financial condition. Even where we establish business continuity
controls, these may not be sufficient.
 
   
 Annual Report and Accounts 2010/11 | National Grid plc 91






---



##### 



Corporate Governance
 Corporate Governance continued
  Business performance
    
    Earnings maintenance and growth
from our regulated businesses
will be affected by our ability
to meet or exceed efficiency and
integration targets and service
quality standards set by, or
agreed with, our regulators. In
addition, from time to time, we
publish cost and efficiency
savings targets for our
businesses. If we are to meet
these targets and standards,
perform well against our peers,
meet the expectations of our
stakeholders and deliver our
business plan, we must continue
to improve operational
performance, service reliability
and customer service and continue
to invest in our infrastructure
and the development of our
information technology. We are
also restructuring our
organisation and carrying out
other major internal
transformation projects. If we do
not meet these targets and
standards, deliver our business
plan or implement the
restructuring or transformation
projects as envisaged, we may not
achieve the expected benefits,
our business may be materially
adversely affected and our
performance, results of
operations and reputation may be
materially harmed.Exchange rates, interest rates and
commodity price indices
    
    We have significant operations in
the US and we are therefore
subject to the exchange rate
risks normally associated with
non domestic operations,
including the need to translate
US assets and liabilities, and
income and expenses, into
sterling, our primary reporting
currency. In addition, our
results of operations and net
debt position may be affected
because a significant proportion
of our borrowings, derivative
financial instruments and
commodity contracts are affected
by changes in exchange rates,
interest rates and commodity
price indices, in particular the
dollar to sterling exchange rate.
Furthermore, our cash flow may be
materially affected as a result
of settling hedging arrangements
entered into to manage our
exchange rate, commodity and
interest rate exposure, or by
cash collateral movements
relating to derivative market
values, which also depend on euro
and other exchange rates. For
further information see the
financial performance section of
the Operating and Financial
Review.Borrowing and debt arrangements,
funding costs, tax, access to financing
and holding company
    
    Our business is financed through
cash generated from ongoing
operations, bank lending
facilities and the capital
markets, particularly the
long-term debt capital markets.
Some of the debt we issue is
rated by credit rating agencies
and changes to these ratings may
affect both our borrowing
capacity and the cost of those
borrowings. In addition,
restrictions imposed by
regulators may limit the manner
in which we service the financial
requirements of our current
businesses or the financing of
newly acquired or developing
businesses. The effective rate of
tax we pay may be influenced by a
number of factors including
changes in law and accounting
standards, the results of which
could increase that rate and
therefore have a material adverse
impact on our results of
operations.
Financial markets can be subject
to periods of volatility and
shortages of liquidity and, if we
were unable to access the capital
markets or other sources of
finance at competitive rates for
a prolonged period, our cost of
financing may increase, the
uncommitted and discretionary
elements of our proposed capital
investment programme may need to
be reconsidered and the manner in
which we implement our strategy
may need to be reassessed. The
occurrence of any such events
could have a material adverse
impact on our business, results
of operations and prospects.
In addition, National Grid plc is
a holding company and, as such,
has no revenue generating
operations of its own. As a
result, National Grid plc depends
on (i) the earnings and cash
flows of its operating
subsidiaries, (ii) the ability of
its subsidiaries to pay dividends
(which may be restricted due to
legal or regulatory constraints
or otherwise), (iii) subsidiaries
repaying funds due to it and (iv)
the maintenance by its
subsidiaries of certain minimum
credit ratings (which also depend
on the credit rating of National
Grid plc). If National Grid plcs
subsidiaries are unable to
achieve any of the foregoing,
National Grid plc may be unable
to pay dividends and there may be
a material adverse impact on its
operations, costs associated with
financing or its ability to
access the capital markets or
other forms of bank financing at
competitive rates.Inflation
    
    Our income under our price
controls in the UK is linked to
the retail price index. During a
period of inflation our operating
costs may increase without a
corresponding increase in the
retail price index and therefore
without a corresponding increase
in UK revenues. Our income under
the rate plans in the US is not
typically linked to inflation. In
periods of inflation in the US,
our operating costs may increase
by more than our revenues. In
both the UK and US such increased
costs may materially adversely
affect our results of operations.Business development activity
    
    Business development activities,
including acquisitions and
disposals, entail a number of
risks, including an inability to
identify suitable acquisition
opportunities or obtain funding
for such acquisitions, that such
transactions may be based on
incorrect assumptions or
conclusions, the inability to
integrate acquired businesses
effectively with our existing
operations, failure to realise
planned levels of synergy and
efficiency savings from
acquisitions, unanticipated
operational, financial and tax
impacts (including unanticipated
costs) and other unanticipated
effects. We may also be liable
for the past acts, omissions or
liabilities of companies or
businesses we have acquired,
which may be unforeseen or
greater than anticipated at the
time of the relevant acquisition.
The occurrence of any of these
events could have a material
adverse impact on our results of
operations or financial
condition, and could also impact
our ability to enter into other
transactions.
 
   
 92     National Grid plc | Annual Report and Accounts 2010/11






---



##### 



Funding of our pension schemes and
other post- retirement benefits
    
    We participate in a number of
pension schemes that together cover
substantially all our employees. In
both the UK and US, the principal
schemes are defined benefit schemes
where the scheme assets are held
independently of our own financial
resources. In the US, we also have
other post-retirement benefit
schemes. Estimates of the amount
and timing of future funding for
these schemes are based on
actuarial assumptions and other
factors including the actual and
projected market performance of the
scheme assets, future long-term
bond yields, average life
expectancies and relevant legal
requirements. The impact of these
assumptions and other factors may
require us to make additional
contributions to these pension
schemes which, to the extent they
are not recoverable under our price
controls or state rate plans, could
materially adversely affect our
results of operations and financial
condition.Customers and counterparty risk
    
    Our operations are exposed to the
risk that customers and
counterparties to our transactions
that owe us money or commodities
will not perform their obligations,
which could materially adversely
affect our financial position. This
risk is most significant where our
subsidiaries have concentrations of
receivables from gas and
electricity utilities and their
affiliates, as well as industrial
customers and other purchasers and
may also arise where customers are
unable to pay us as a result of
increasing commodity prices or
adverse economic conditions.
A substantial portion of our US
electricity distribution and
generation businesss revenues are
derived from a series of agreements
with the Long Island Power
Authority (LIPA) pursuant to which
we manage LIPAs transmission and
distribution system and supply the
majority of LIPAs generating
capacity. These agreements are
largely scheduled to expire in
2013. If these agreements are not
renewed, our income may be reduced
and we may suffer stranded costs,
for which we may not be
remunerated.Employees and others
    
    Our ability to implement our
long-term business strategy depends
on the capabilities and performance
of our personnel. Loss of key
personnel or an inability to
attract, train or retain
appropriately qualified personnel
(in particular for technical
positions where availability of
appropriately qualified personnel
may be limited), or if significant
disputes arise with our employees,
our ability to implement our
long-term business strategy may be
affected and there may be a
material adverse effect on our
business, financial condition,
results of operations and
prospects.
There is a risk that an employee or
someone acting on our behalf
commits a breach of anti-bribery
legislation or otherwise commits a
breach of our internal controls or
internal governance framework. This
could impact our results of
operations, our reputation and our
relationship with our regulators
and other stakeholders.Seasonal fluctuations
    
    Our electricity and gas businesses
are seasonal businesses and are
subject to weather conditions. In
particular, revenues from our gas
distribution networks in the US are
weighted towards the end of our
financial year, when demand for gas
increases due to colder weather
conditions. As a result, we are
subject to seasonal variations in
working capital because we purchase
gas supplies for storage in the
first half of our financial year
and must finance these purchases.
Accordingly, our results of
operations for this business
fluctuate substantially on a
seasonal basis. In addition,
portions of our electricity
businesses are seasonal and subject
to weather and weather related
market conditions. Sales of
electricity to customers are
influenced by temperature changes.
Significant changes in heating or
cooling requirements, for example,
could have a substantial effect. As
a result, fluctuations in weather
and competitive supply between
years may have a significant effect
on our results of operations for
both gas and electricity
businesses.
 
   
 Annual Report and Accounts 2010/11 | National Grid plc      93






---



##### 



Corporate Governance
 Corporate Governance continued
   Shareholder and share capital information
 Shareholders
         Shareholder networking
 Annual General Meeting
  
 Share capital
 17 43
 
   
 94 National Grid plc Annual Report and Accounts 2010/11




---



##### 



Dividends
    Shareholdings
 Shareholder analysis
  Size of
    
    Number of
    
    
    % of
    
    
    Number of
    
    
    % ofshareholding
    
    shareholders
    
    
    shareholders
    
    
    shares
    
    
    shares150
    
    
    190,832
    
    
    
    17.3231
    
    
    
    5,656,922
    
    
    
    0.155151100
    
    
    309,117
    
    
    
    28.0606
    
    
    
    21,879,729
    
    
    
    0.5997101500
    
    
    475,163
    
    
    
    43.1337
    
    
    
    98,764,846
    
    
    
    2.70715011,000
    
    
    62,591
    
    
    
    5.6818
    
    
    
    43,761,154
    
    
    
    1.19951,00110,000
    
    
    60,728
    
    
    
    5.5127
    
    
    
    148,499,028
    
    
    
    4.070310,00150,000
    
    
    2,095
    
    
    
    0.1902
    
    
    
    37,952,684
    
    
    
    1.040350,001100,000
    
    
    204
    
    
    
    0.0185
    
    
    
    14,789,851
    
    
    
    0.4054100,001500,000
    
    
    424
    
    
    
    0.0385
    
    
    
    101,943,724
    
    
    
    2.7942500,0011,000,000
    
    
    155
    
    
    
    0.0140
    
    
    
    114,266,975
    
    
    
    3.13201,000,001+
    
    
    296
    
    
    
    0.0269
    
    
    
    3,060,824,562
    
    
    
    83.8964Total
    
    
    1,101,605
    
    
    
    100
    
    
    
    3,648,339,475
    
    
    
    100
 
 Material interests in shares
  % of voting rightsBlack Rock Inc
    
    
    5.21Capital Group Companies, Inc
    
    
    5.04Crescent Holding GmbH
    
    
    4.31Legal and General Group plc
    
    
    3.99
 Share dealing, individual savings accounts (ISAs) and ShareGift
    
 Corporate governance practices: differences from New York
Stock Exchange (NYSE) listing standards
  
    
    different tests of
independence for Board members are applied under the Code and Section 303A;
    
    there is no
requirement for a separate corporate governance committee in the UK; all Directors on the Board
discuss and decide upon governance issues and the Nominations Committee makes recommendations to
the Board with regard to certain of the responsibilities of a corporate governance committee;
    
    while the Company reports compliance with the Code in each Annual Report and Accounts, there
is no requirement to adopt and disclose separate corporate governance guidelines; and
    
    while the Audit Committee, having a membership of four independent Non-executive Directors,
exceeds the minimum membership requirements under Section 303A of three independent Non-executive
Directors, it should be noted that the quorum for a meeting of the Audit Committee, of two
independent Non-executive Directors, is less than the minimum membership requirements under Section
303A.
 
   
 Annual Report and Accounts 2010/11 National Grid plc 95






---



##### 

\

Directors Remuneration Report
 
 
 Directors Remuneration Report
  
  Review of the year by John Allan, Chairman of the
Remuneration Committee
 Remuneration Committee
        
    
    Towers Watson, independent remuneration advisors. It
also provides general remuneration and benefits advice to the
Company. In this respect, the Remuneration Committee is
satisfied that any potential conflicts are appropriately
managed. The Remuneration Committee has carefully reviewed the
voluntary code of conduct in relation to executive consulting
in the UK;
 
    
    Alithos Limited, provision of Total Shareholder
Return calculations for the Performance Share Plan;
 
    
    Linklaters LLP, advice relating to Directors
service contracts as well as providing other legal advice to
the Company; and
 
    
    KPMG LLP, advice relating to pension taxation legislation.
 
   
 96     National Grid plc Annual Report and Accounts 2010/11




---



##### 



Remuneration policy
  
    
    total rewards
should be set at levels that are competitive in the relevant market. For UK-based Executive
Directors, the primary focus is placed on companies ranked (in terms of market capitalisation)
11-40 in the FTSE 100. This peer group is therefore weighted towards companies smaller than
National Grid and positioning the package slightly below median against this group is considered to
be appropriate for a large, international but predominately regulated business. For US-based
Executive Directors, the primary focus is placed on US utility companies;
    
    a significant
proportion of the Executive Directors total reward should be performance based. Performance based
incentives will be earned through the achievement of demanding targets for short-term business and
individual performance as well as long-term shareholder value creation, consistent with our
Framework for Responsible Business which can be found at: www.nationalgrid.com/corporate/About+Us/
CorporateGovernance/Other;
    
    for higher levels of performance, rewards should be
substantial but not excessive;
    
    incentive plans, performance measures and targets should
be stretching and aligned as closely as possible with shareholders long-term interests; and
    
    remuneration structures should motivate employees to enhance the Companys performance
without encouraging them to take undue risks, whether financial or operational.
   Executive Directors remuneration
  
    
    salary;
    
    Annual Performance Plan including the Deferred Share Plan;
    
    long-term
incentive, the Performance Share Plan, to be replaced by the Long Term Performance Plan;
    
    all-employee share plans;
    
    pension contributions; and
    
    non-cash benefits.
 Salary
  Annual Performance Plan including the Deferred Share Plan
(DSP)
 
   
 Annual Report and Accounts 2010/11 National Grid plc 97




---



##### 



Directors Remuneration Report continued
   Level of performance achieved in 2010/11as determined by the Remuneration CommitteeFinancial measures
    Company targets
    Divisional targetsAdjusted EPS
    Between target
and stretchConsolidated cash flow
    StretchRegulated controllable costs
    Between target
and stretchOperating profit
    
    Varied performance
(i), (ii)Line of business returns targets
    
    Varied performance
(iii), (iv), (v)
 
 (i)
    
    Transmission and Gas Distribution between target and stretch.(ii)
    
    Electricity
Distribution & Generation at stretch.(iii)
    
    Transmission between target and stretch, UK and US.(iv)
    
    Gas Distribution between threshold and target (UK), at stretch (US).(v)
    
    Electricity
Distribution & Generation at stretch (US only).   Long-term
incentive  Performance Share Plan (PSP)operated for awards between 2003 and 2010
inclusive
 Vested 2007 PSP award
  New
long-term incentive  Long Term Performance Plan (LTPP)
 
   
 98     National Grid plc Annual Report and Accounts 2010/11




---



##### 



Common elements of the PSP and LTPP
      Recruitment
promise  Special Retention Award (SRA)
  Share ownership guidelines
  Share dilution through the operation of share-based incentive plans
 
   
 Annual Report and Accounts 2010/11 National Grid plc 99




---



##### 



Directors Remuneration Report
 Directors Remuneration Report continued
   Executive Directors remuneration package
  Executive Directors remuneration package
 
 All-employee share plans
 
    
    Sharesave: Employees resident in the UK, including UK-based Executive Directors, are
eligible to participate in HM Revenue & Customs approved all-employee Sharesave schemes. Under
these schemes, participants may contribute between £5 and £250 in total each month, for a fixed
period of three years, five years or both. Contributions are taken from net salary. At the end of
the savings period, these contributions can be used to purchase ordinary shares in National Grid at
a discount capped at 20% of the market price set at the launch of each scheme.
    
    Share Incentive Plan (SIP): Employees resident in the UK, including UK-based Executive
Directors, are eligible to participate in the SIP. Contributions up to £125 are deducted from
participants gross salary and used to purchase ordinary shares in National Grid each month. The
shares are placed in trust and if they are left in trust for at least five years, they can be
removed free of UK income tax and National Insurance Contributions.
    
    US Incentive Thrift Plans: Employees of National Grids US companies (including
US-based Executive Directors) are eligible to participate in the Thrift Plans, which are
tax-advantaged savings plans (commonly referred to as 401(k) plans). These are defined contribution
pension plans that give participants the opportunity to invest up to applicable Federal salary
limits ie for pre-tax contributions, a maximum of 50% of salary limited to $16,500 for those under
the age of 50 and $22,000 for those over 50 for calendar years 2010 and 2011; for post-tax
contributions, up to 15% of salary limited to the lesser of 100% of compensation or $49,000 for
calendar years 2010 and 2011. Employees may invest their own and Company contributions in National
Grid shares or various mutual fund options.With effect from 1 January 2011, the Company matches 50% of the first 8% of salary contributed.
Prior to that, the Company matched 100% of the first 2% and 75% of the next 4% of salary
contributed, resulting in a maximum matching contribution of 5% of salary up to the Federal salary
cap. For employees in legacy KeySpan plans, the Company matched 50% of the first 6% of salary
contributed. With effect from 1 January 2011, the Company no longer provides a discount to purchase
Company
 stock, however, prior to this date legacy KeySpan employees invested in National Grid shares
at a 10% discount.
    
    Employee Stock Purchase Plan (ESPP): Employees of National Grids US companies
(including US-based Executive Directors) are eligible to participate in the ESPP (commonly referred
to as a 423b plan). Eligible employees have the opportunity to purchase ADSs on a monthly basis at
a 10% discounted price. Under the plan employees may contribute up to 20% of base pay each year up
to a maximum annual contribution of $18,888 to purchase ADSs in National Grid. Any ADSs purchased
through the ESPP may be sold at any time, however, there are tax advantages for ADSs held for at
least two years from the offer date.
 Pensions
 
   
 100     National Grid plc Annual Report and Accounts 2010/11




---



##### 



Non-cash benefits
  Flexible benefits plan
   Executive Directors service contracts, termination and mitigation
 Date of contract
    
    Notice periodExecutive DirectorsSteve Holliday
    
    1 April 2006
    
    12 monthsAndrew Bonfield (i)
    
    1 November 2010
    
    12 monthsNick Winser
    
    28 April 2003
    
    12 monthsTom King
    
    11 July 2007
    
    12 monthsSteve Lucas (ii)
    
    13 June 2002
    
    12 monthsMark Fairbairn (iii)
    
    23 January 2007
    
    12 months
 
 (i)
    
    Andrew Bonfield joined the Board on 1 November 2010.(ii)
    
    Steve Lucas retired from the
Board on 31 December 2010.(iii)
    
    Mark Fairbairn left the Company on 31 March 2011. External appointments and retention of fees
  RetainedCompany
    
    fees (£)Executive DirectorsSteve Holliday
    
    Marks and Spencer Group plc
    
    
    81,000Andrew Bonfield (i)
    
    Kingfisher plc
    
    
    30,000Nick Winser
    
    Kier Group plc
    
    
    43,000Steve Lucas (ii)
    
    Compass Group PLC
    
    
    71,000
 
 (i)
    
    Andrew Bonfields paid external appointment was taken up prior to joining the Board on 1
November 2010. The retained fees shown reflect the period 1 November 2010 to 31 March 2011.(ii)
    
    The retained fees for Steve Lucas reflect the period 1 April 2010 to 31 December 2010 when he
was an Executive Director of National Grid. Non-executive
Directors remuneration  
pre January 2011
 
   
 Annual Report and Accounts 2010/11 National Grid plc 101




---



##### 



Directors Remuneration Report
 Directors Remuneration Report continued
   Non-executive
Directors remuneration  
post January 2011
   Non-executive Directors letters of appointment
  Date ofappointment
    
    Date of nextto the Board
    
    electionNon-executive DirectorsSir John Parker
    
    21 October 2002
    
    2011 AGMKen Harvey
    
    21 October 2002
    
    2011 AGMLinda Adamany
    
    1 November 2006
    
    2011 AGMPhilip Aiken
    
    15 May 2008
    
    2011 AGMJohn Allan
    
    1 May 2005
    
    Stephen Pettit
    
    21 October 2002
    
    2011 AGMMaria Richter
    
    1 October 2003
    
    2011 AGMGeorge Rose
    
    21 October 2002
    
    2011 AGM
 Performance graph
 
   
 102     National Grid plc Annual Report and Accounts 2010/11




---



##### 



Remuneration during the year ended 31 March 2011
  1. Directors emoluments
   Year ended31 MarchTable 1A
    
    Year ended 31 March 2011
    
    
    
    
    
    
    2010Annual
    
    
    Benefits
    
    
    BenefitsPerformance
    
    
    in kind (ii)
    
    
    in kind (ii)
    
    
    OtherSalary (i)
    
    
    Plan
    
    
    (cash)
    
    
    (non-cash)
    
    
    emoluments
    
    
    Total
    
    
    Total£000s
    
    
    £000s
    
    
    £000s
    
    
    £000s
    
    
    £000s
    
    
    £000s
    
    
    £000sExecutive DirectorsSteve Holliday
    
    
    946
    
    
    
    1,154
    
    
    
    12
    
    
    
    14
    
    
    
    
    
    
    
    2,126
    
    
    
    2,273Andrew Bonfield (iii)
    
    
    281
    
    
    
    346
    
    
    
    83
    
    
    
    1
    
    
    
    
    
    
    
    711
    
    
    
    Nick Winser
    
    
    482
    
    
    
    573
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    1,070
    
    
    
    1,129Tom King (iv)
    
    
    684
    
    
    
    855
    
    
    
    5
    
    
    
    17
    
    
    
    
    
    
    
    1,561
    
    
    
    1,582Steve Lucas (v)
    
    
    375
    
    
    
    500
    
    
    
    
    
    
    
    12
    
    
    
    201
    
    
    
    1,088
    
    
    
    1,270Mark Fairbairn (iii),
(vi), (vii)
    
    
    469
    
    
    
    540
    
    
    
    2
    
    
    
    13
    
    
    
    
    
    
    
    1,024
    
    
    
    1,002Total
    
    
    3,237
    
    
    
    3,968
    
    
    
    102
    
    
    
    72
    
    
    
    201
    
    
    
    7,580
    
    
    
    7,256
 
 (i)
    With effect from 1 June 2011, the Executive Directors salaries are as follows: Steve
Holliday £975,000; Andrew Bonfield £695,000; Nick Winser £530,000 and Tom King £714,740.(ii)
    Benefits in kind comprise benefits such as private medical insurance, life assurance, either a
fully expensed car or cash in lieu of a car and the use of a driver when required. In the case of
Andrew Bonfield, a cash allowance in lieu of additional Company pension contributions is included
(see Table 2 for further details).(iii)
    These Executive Directors participate in the UK flexible benefits plan which operates by way
of salary sacrifice, therefore, their salaries are reduced by the benefits they have purchased. The
value of these benefits is included in the Benefits in kind (non-cash) figure. The values are:
Andrew Bonfield £155.68 and Mark Fairbairn £543.36.(iv)
    For the US-based Executive Director, the exchange rate averaged over the year 1 April 2010 to
31 March 2011 to convert dollars to UK pounds sterling is $1.574:£1.(v)
    Steve Lucas left National Grid on 31 December 2010. He had a contractual entitlement of one
years salary on leaving, of which he worked three months. He therefore was entitled to nine months
salary, which is payable in six monthly instalments and is subject to mitigation, at the
Remuneration Committees discretion, should he take employment during the period.
Payment of £201,000 referred to above in Other emoluments reflects the first three months of those
instalments.(vi)
    Mark Fairbairn left National Grid on 31 March 2011. He had a contractual entitlement to one years salary on leaving, of which he worked two months. He therefore was
entitled to 10 months salary, which is payable in six monthly instalments and is subject to mitigation, at the Remuneration Committees discretion, should he take employment
during the period.(vii)
    In addition to the amounts shown in the above table, Mark
Fairbairn, on leaving, was entitled to a statutory redundancy payment of £10,200. Year ended31 MarchTable 1B
    
    Year ended 31 March 2011
    
    
    2010OtherFees
    
    
    emoluments
    
    
    Total
    
    
    Total£000s
    
    
    £000s
    
    
    £000s
    
    
    £000sNon-executive DirectorsSir John Parker (i)
    
    
    550
    
    
    
    71
    
    
    
    621
    
    
    
    615Ken Harvey
    
    
    83
    
    
    
    
    
    
    
    83
    
    
    
    80Linda Adamany
    
    
    74
    
    
    
    
    
    
    
    74
    
    
    
    78Philip Aiken
    
    
    68
    
    
    
    
    
    
    
    68
    
    
    
    68John Allan
    
    
    81
    
    
    
    
    
    
    
    81
    
    
    
    82Stephen Pettit
    
    
    83
    
    
    
    
    
    
    
    83
    
    
    
    82Maria Richter
    
    
    89
    
    
    
    
    
    
    
    89
    
    
    
    94George Rose
    
    
    79
    
    
    
    
    
    
    
    79
    
    
    
    81Total
    
    
    1,107
    
    
    
    71
    
    
    
    1,178
    
    
    
    1,180
 
 (i)
    
    Sir John Parkers Other emoluments comprise private medical insurance, life assurance and
a fully expensed car.
 
   
 Annual Report and Accounts 2010/11 National Grid plc 103




---



##### 



Directors Remuneration Report
 Directors Remuneration Report continued
  2. Directors pensions
  Transfer valueof increase inaccrued benefit inAdditional benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional benefit
    
    
    the year endedearned during
    
    
    Accrued
    
    
    Transfer value of accrued
    
    
    
    
    
    
    earned in the year
    
    
    31 March 2011year ended
    
    
    entitlement as at
    
    
    benefits as at 31 March (i)
    
    
    Increase in transfer
    
    
    ended 31 March 2011
    
    
    (excluding inflation31 March 2011
    
    
    31 March 2011
    
    
    
    
    
    
    
    
    
    
    value less Director's
    
    
    (excluding inflation)
    
    
    & Director'spension
    
    
    pension
    
    
    2011
    
    
    2010
    
    
    contributions (ii)
    
    
    pension
    
    
    contributions) (ii)Table 2
    
    £000s
    
    
    £000s
    
    
    £000s
    
    
    £000s
    
    
    £000s
    
    
    £000s
    
    
    £000sSteve Holliday (iii)
    
    
    39
    
    
    
    352
    
    
    
    7,122
    
    
    
    5,995
    
    
    
    1,127
    
    
    
    24
    
    
    
    478Andrew Bonfield (iv)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Nick Winser (v)
    
    
    18
    
    
    
    215
    
    
    
    3,888
    
    
    
    3,379
    
    
    
    509
    
    
    
    9
    
    
    
    157Tom King (vi)
    
    
    62
    
    
    
    222
    
    
    
    1,212
    
    
    
    832
    
    
    
    380
    
    
    
    62
    
    
    
    341Steve Lucas (vii)
    
    
    30
    
    
    
    299
    
    
    
    6,985
    
    
    
    6,006
    
    
    
    979
    
    
    
    23
    
    
    
    543Mark Fairbairn (viii)
    
    
    30
    
    
    
    229
    
    
    
    7,200
    
    
    
    3,714
    
    
    
    3,486
    
    
    
    21
    
    
    
    657
 
 (i)
    The transfer values shown at 31 March 2010 and 2011 represent the value of each Executive
Directors accrued benefits based on total service to the relevant date. Transfer values for the
UK-based Executive Directors have been calculated in line with transfer value bases agreed by the
UK Pension Scheme Trustees. The transfer values for the US-based Executive Director have been
calculated using discount rates based on high quality US corporate bonds and associated yields at
the relevant dates.(ii)
    The UK-based Executive Directors participate in Flexible Pension Savings (FPS), a salary
sacrifice arrangement, the effects of which have not been taken into account in the table above.
Contributions paid via FPS should be deducted from the figures shown above.(iii)
    In addition to the pension above, for Steve Holliday there is an accrued lump sum entitlement
of £111,000 as at 31 March 2011. The increase to the accumulated lump sum including inflation was
£2,000 and excluding inflation was nil in the year to 31 March 2011. The transfer value information
above includes the value of the lump sum.
 Contributions were paid via FPS of £19,000.(iv)
    Andrew Bonfield does not participate in either of the Companys defined benefit pension
arrangements. Andrew joined the Defined Contribution Section of the National Grid UK Pension Scheme
and the Company has made contributions of £9,000 to this arrangement. In addition, £4,500 was paid
via FPS. Andrew also received a cash allowance in lieu of additional Company contributions equal to
26% of base salary. This allowance is included in Table 1A on page 103.(v)
    In addition to the pension above, for Nick Winser there is an accrued lump sum entitlement of
£271,000 as at 31 March 2011. The increase to the accumulated lump sum including inflation was
£11,000 and excluding inflation was nil in the year to 31 March 2011. The transfer value
information above includes the value of the lump sum. Contributions were paid via FPS of £29,000.(vi)
    For Tom King, the exchange rate as at 31 March 2011 was $1.60700:£1 and as at 31 March 2010
was $1.51845:£1. In addition to the pension quoted above, through participation in the 401(k) plan
in the US, the Company made contributions worth £5,497 to a defined contribution arrangement.(vii)
    Contributions were paid via FPS of £24,000. It was agreed that £293,000, representing the
value of 52,984 shares which Steve Lucas would otherwise have received in respect of his PSP awards
(see Table 4 on page 107), instead be transferred into his pension fund. This is equivalent to nine
months additional pension credit and is included above. Steve received a deferred pension on
cessation of employment. He opted to take an immediate pension which was reduced for early
retirement under the standard terms of the Trust Deed and Rules of the Pension Scheme.(viii)
    In addition to the pension above, for Mark Fairbairn there is an accrued lump sum
entitlement of £306,000 as at 31 March 2011. The increase to the accumulated lump sum including
inflation was £26,000 and excluding inflation was £13,000 in the year to 31 March 2011. The
transfer value information above includes the value of the lump sum.
Contributions were paid via FPS of £28,000. Mark left the Company on 31 March 2011 and received an
immediate unreduced pension on cessation of employment under the standard redundancy terms of the
Trust Deed and Rules of the Pension Scheme.
 
   
 104     National
Grid plc Annual Report and Accounts 2010/11




---



##### 



3. Directors interests in share options
 Executive Share Option Plan (ESOP)
      Adjusted no. ofoptions held
    
    
    Adjusted no.
    
    
    
    
    
    
    
    
    
    
    Adjusted no. ofat 1 April
    
    
    options
    
    
    
    
    
    
    Options
    
    
    options held at
    
    
    Adjusted2010 or, if later,
    
    
    exercised or
    
    
    Market price at
    
    
    granted
    
    
    31 March 2011
    
    
    exercise priceon appointment *
    
    
    lapsed during
    
    
    exercise
    
    
    during
    
    
    or, if earlier, on
    
    
    per shareTable 3
    
    (i)
    
    
    the year (i)
    
    
    (pence)
    
    
    the year
    
    
    retirement  (i)
    
    
    (pence) (ii)
    
    
    Normal exercise periodSteve HollidayESOP
    
    
    77,129
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77,129
    
    
    
    421.36
    
    
    Jun 2005 to Jun 2012Share Match
    
    
    11,827
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,827
    
    
    100 in total
    
    
    Jun 2005 to Jun 201216,092
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,092
    
    
    100 in total
    
    
    Jun 2006 to Jun 201321,383
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,383
    
    
    
    nil
    
    
    May 2007 to May 2014Sharesave
    
    
    3,921
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,921
    
    
    
    427.05
    
    
    Apr 2014 to Sep 2014Total
    
    
    130,352
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    130,352Andrew BonfieldSharesave
    
    
     *
    
    
    
    
    
    
    
    
    
    
    
    3,421
    
    
    
    3,421
    
    
    
    445
    
    
    Apr 2016 to Sep 2016Total
    
    
     *
    
    
    
    
    
    
    
    
    
    
    
    3,421
    
    
    
    3,421Steve Lucas (iii)ESOP
    
    62,167 (iv)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,167 
    
    
    
    380.02
    
    
    Jan 2011 to Dec 2011Sharesave
    
    3,416 (iv)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,416 
    
    
    
    455.06
    
    
    Jan 2011 to Jun 2011Total
    
    
    65,583
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,583Mark Fairbairn (iii)Sharesave
    
    
    2,011 (v)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,011
    
    
    
    488.31
    
    
    Apr 2011 to Sep 2011585 (v)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    585
    
    
    
    573.19
    
    
    Apr 2011 to Sep 2011Total
    
    
    2,596
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,596
 
 (i)
    The option numbers shown, for awards granted prior to the rights issue which completed on
14 June 2010, were adjusted using an adjustment factor of 1.14271765.(ii)
    The exercise prices
shown above, for awards granted prior to the rights issue which completed on 14 June 2010, were
adjusted using an adjustment factor of 0.87510681.(iii)
    On 1 April 2010, the first day of the
financial year, Steve Lucas and Mark Fairbairn exercised Sharesave options over 1,693 and 862
shares respectively as reported in footnote (i) of Table 3 of the 2009/10 Directors Remuneration
Report. As a result, these options were not adjusted for the rights issue which completed on 14
June 2010 and are not included in this table.(iv)
    On leaving, Steve Lucas was permitted 12 months from his termination date in which to exercise
his ESOP options and six months to exercise his Sharesave options.(v)
    On leaving, Mark Fairbairn
was permitted six months from his termination date in which to exercise his Sharesave options.
 
   
 Annual Report and Accounts 2010/11 National Grid plc 105




---



##### 



Directors Remuneration Report
 Directors Remuneration Report continued
  4. Directors interests in the PSP, DSP and SRA
  Adjusted no. ofPSP, DSPand SRAconditional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Adjusted
    
    
    
    
    
    
    Adjusted no. ofawards at
    
    
    Adjusted no. of
    
    
    Adjusted no. of
    
    
    
    
    
    
    
    
    
    
    market price
    
    
    
    
    
    
    conditional awards1 April 2010 or, if
    
    
    awards
    
    
    awards
    
    
    Release
    
    
    
    
    
    
    at award
    
    
    
    
    
    
    at 31 March 2011later, on
    
    
    lapsed
    
    
    vested
    
    
    of PSP
    
    
    
    
    
    
    (pence
    
    
    
    
    
    
    or, if earlier, onType of
    
    
    appointment *
    
    
    during year
    
    
    in year
    
    
    awards
    
    
    Awards granted
    
    
    except #)
    
    
    
    
    
    
    retirement Table 4
    
    award
    
    
    (i)
    
    
    (i)
    
    
    (i)
    
    
    in year
    
    
    during year
    
    
    (ii)
    
    
    Date of award
    
    
    (i)
    
    
    Release dateSteve HollidayPSP
    
    
    159,085
    
    
    55,441 (iii)
    
    
    103,644 (iii)
    
    
    
    
    
    
    
    
    
    
    
    648.24
    
    
    Jun 2007
    
    
    
    103,644
    
    
    Jun 2011PSP
    
    
    88,271
    
    
    30,763 (iii)
    
    
    57,508 (iii)
    
    
    
    
    
    
    
    
    
    
    
    700.95
    
    
    Nov 2007
    
    
    
    57,508
    
    
    Nov 2011PSP
    
    
    316,472
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    584.57
    
    
    Jun 2008
    
    
    
    316,472
    
    
    Jun 2012PSP
    
    
    391,212
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    472.89
    
    
    Jun 2009
    
    
    
    391,212
    
    
    Jun 2013PSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    384,220
    
    
    
    494.5076
    
    
    Jun 2010
    
    
    
    384,220
    
    
    Jun 2014DSP
    
    
    97,481
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    610.37
    
    
    Jun 2008
    
    
    
    97,481
    
    
    Jun 2011DSP
    
    68,960 (iv)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    541.14
    
    
    Jun 2009
    
    
    
    68,960
    
    
    Jun 2012DSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    130,636
    
    
    
    506.294
    
    
    Jun 2010
    
    
    
    130,636
    
    
    Jun 2013Total
    
    
    
    
    
    
    1,121,481
    
    
    
    86,204
    
    
    
    161,152
    
    
    
    
    
    
    
    514,856
    
    
    
    
    
    
    
    
    
    
    
    1,550,133Andrew BonfieldPSP
    
    
     *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    236,464 (v)
    
    
    
    570.9098
    
    
    Nov 2010
    
    
    
    236,464
    
    
    Nov 2014Total
    
    
     *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    236,464
    
    
    
    
    
    
    
    
    
    
    
    236,464Nick WinserPSP
    
    
    85,712
    
    
    29,871 (iii)
    
    
    55,841 (iii)
    
    
    
    
    
    
    
    
    
    
    
    648.24
    
    
    Jun 2007
    
    
    
    55,841
    
    
    Jun 2011PSP
    
    
    47,559
    
    
    16,574 (iii)
    
    
    30,985 (iii)
    
    
    
    
    
    
    
    
    
    
    
    700.95
    
    
    Nov 2007
    
    
    
    30,985
    
    
    Nov 2011PSP
    
    
    158,166
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    584.57
    
    
    Jun 2008
    
    
    
    158,166
    
    
    Jun 2012PSP
    
    
    195,521
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    472.89
    
    
    Jun 2009
    
    
    
    195,521
    
    
    Jun 2013PSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    196,356
    
    
    
    494.5076
    
    
    Jun 2010
    
    
    
    196,356
    
    
    Jun 2014DSP
    
    
    41,146
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    610.37
    
    
    Jun 2008
    
    
    
    41,146
    
    
    Jun 2011DSP
    
    33,804 (iv)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    541.14
    
    
    Jun 2009
    
    
    
    33,804
    
    
    Jun 2012DSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64,370
    
    
    
    506.294
    
    
    Jun 2010
    
    
    
    64,370
    
    
    Jun 2013Total
    
    
    561,908
    
    
    
    46,445
    
    
    
    86,826
    
    
    
    
    
    
    
    260,726
    
    
    
    
    
    
    
    
    
    
    
    776,189Tom KingPSP
    
    ADSs 27,432
    
    
    9,560 (iii)
    
    
    17,872 (iii)
    
    
    
    
    
    
    
    
    
    
    
    $72.907 #
    
    
    Nov 2007
    
    
    17,872
    
    
    Nov 2011PSP
    
    ADSs 36,680
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    57.2505 #
    
    
    Jun 2008
    
    
    36,680
    
    
    Jun 2012PSP
    
    ADSs 54,403
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    38.6002 #
    
    
    Jun 2009
    
    
    54,403
    
    
    Jun 2013PSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ADSs 57,762 (vi)
    
    
    $
    37.4465 #
    
    
    Jun 2010
    
    
    57,762
    
    
    Jun 2014Nov 2008SRA
    
    ADSs 13,517
    
    
    
    
    
    
    
    13,517 (vii)
    
    
    
    
    
    
    
    
    
    
    
    $73.978 #
    
    
    Nov 2007
    
    
    
    
    
    to Nov 2010DSP
    
    ADSs 5,534
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $59.61 #
    
    
    Jun 2008
    
    
    5,534
    
    
    Jun 2011DSP
    
    ADSs 13,804
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    39.2373 #
    
    
    Jun 2009
    
    
    13,804
    
    
    Jun 2012DSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ADSs 18,776 (vi)
    
    
    $
    37.7474 #
    
    
    Jun 2010
    
    
    18,776
    
    
    Jun 2013Total ADSs
    
    ADSs 151,370
    
    
    ADSs 9,560
    
    
    ADSs 31,389
    
    
    
    
    
    
    ADSs 76,538
    
    
    
    
    
    
    
    
    
    
    ADSs 204,831
 
   
 106     National
Grid plc Annual Report and Accounts 2010/11




---



##### 



Adjusted no. ofPSP, DSPand SRAconditional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Adjusted
    
    
    
    
    
    
    Adjusted no. ofawards at
    
    
    Adjusted no. of
    
    
    Adjusted no. of
    
    
    
    
    
    
    
    
    
    
    market price
    
    
    
    
    
    
    conditional awards1 April 2010 or, if
    
    
    awards
    
    
    awards
    
    
    Release
    
    
    
    
    
    
    at award
    
    
    
    
    
    
    at 31 March 2011later, on
    
    
    lapsed
    
    
    vested
    
    
    of PSP
    
    
    
    
    
    
    (pence
    
    
    
    
    
    
    or, if earlier, onType of
    
    
    appointment *
    
    
    during year
    
    
    in year
    
    
    awards
    
    
    Awards granted
    
    
    except #)
    
    
    
    
    
    
    retirement Table 4
    
    award
    
    
    (i)
    
    
    (i)
    
    
    (i)
    
    
    in year
    
    
    during year
    
    
    (ii)
    
    
    Date of award
    
    
    (i)
    
    
    Release dateSteve LucasPSP
    
    
    97,051
    
    
    33,822 (iii)
    
    
    63,229 (iii)
    
    
    
    
    
    
    
    
    
    
    
    648.24
    
    
    Jun 2007
    
    
    
    63,229 
    
    
    Jan 2011PSP
    
    
    53,850
    
    
    18,767 (iii)
    
    
    35,083 (iii)
    
    
    
    
    
    
    
    
    
    
    
    700.95
    
    
    Nov 2007
    
    
    
    35,083 
    
    
    Jan 2011PSP
    
    179,619 (viii)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    584.57
    
    
    Jun 2008
    
    
    
    179,619 
    
    
    Jan 2011PSP
    
    222,039 (viii)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    472.89
    
    
    Jun 2009
    
    
    
    222,039 
    
    
    Jan 2011PSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    216,579 (viii)
    
    
    
    494.5076
    
    
    Jun 2010
    
    
    
    216,579 
    
    
    Jan 2011DSP
    
    54,008 (ix)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    610.37
    
    
    Jun 2008
    
    
    
    54,008 
    
    
    Jan 2011DSP
    
    38,656 (iv), (ix)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    541.14
    
    
    Jun 2009
    
    
    
    38,656 
    
    
    Jan 2011DSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,073 (ix)
    
    
    
    506.294
    
    
    Jun 2010
    
    
    
    72,073 
    
    
    Jan 2011Total
    
    
    
    
    
    
    645,223
    
    
    
    52,589
    
    
    
    98,312
    
    
    
    
    
    
    
    288,652
    
    
    
    
    
    
    
    
    
    
    
    881,286 Mark FairbairnPSP
    
    
    77,132
    
    
    26,881 (iii)
    
    
    50,251 (iii)
    
    
    
    
    
    
    
    
    
    
    
    648.24
    
    
    Jun 2007
    
    
    
    50,251
    
    
    Apr 2011PSP
    
    
    42,798
    
    
    14,916 (iii)
    
    
    27,882 (iii)
    
    
    
    
    
    
    
    
    
    
    
    700.95
    
    
    Nov 2007
    
    
    
    27,882
    
    
    Apr 2011PSP
    
    
    158,065 (x)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    584.57
    
    
    Jun 2008
    
    
    
    158,065
    
    
    Apr 2011PSP
    
    
    195,394 (x)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    472.89
    
    
    Jun 2009
    
    
    
    195,394
    
    
    Apr 2011PSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190,694 (x)
    
    
    
    494.5076
    
    
    Jun 2010
    
    
    
    190,694
    
    
    Apr 2011DSP
    
    
    46,446 (x)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    610.37
    
    
    Jun 2008
    
    
    
    46,446
    
    
    Apr 2011DSP
    
    32,605 (iv), (x)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    541.14
    
    
    Jun 2009
    
    
    
    32,605
    
    
    Apr 2011DSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,015 (x)
    
    
    
    506.294
    
    
    Jun 2010
    
    
    
    52,015
    
    
    Apr 2011Total
    
    
    
    
    
    
    552,440
    
    
    
    41,797
    
    
    
    78,133
    
    
    
    
    
    
    
    242,709
    
    
    
    
    
    
    
    
    
    
    
    753,352
 
 (i)
    The award numbers shown, for awards granted prior to the rights issue which completed on
14 June 2010, except those shares detailed in note (iv) below, were adjusted using an adjustment
factor of 1.14271765.(ii)
    The market prices of awards above, for awards granted prior to the rights issue which
completed on 14 June 2010, except those shares detailed in note (iv) below, were adjusted using an
adjustment factor of 0.87510681.(iii)
    The 2007 PSP award vested partially in June 2010 at a vesting level of 65.15% of the award.
The award then entered a retention period. Cash payments in lieu of dividends accrued during the
retention period were paid as follows: Steve Holliday £44,478 in August 2010 and £23,098 in
February 2011; Nick Winser £23,964 and £12,445; Tom King £20,139 and £11,626; Steve Lucas £27,134
in August 2010; and Mark Fairbairn £21,565 and £11,199 respectively.(iv)
    Exceptionally, the 2009 DSP award for UK-based Executive Directors was made over restricted
shares. The award was subject to income tax and National Insurance Contributions on grant and
therefore shares shown reflect the net number of shares. As these shares are beneficially owned,
UK-based Executive Directors were able to participate in the rights issue. They chose to take up
their rights in full and these additional shares are included in Table 5 on page 108.(v)
    Andrew Bonfield was appointed after the June 2010 PSP award was granted and he received a full
award in November 2010.(vi)
    Awards were made over ADSs and each ADS represents five ordinary
shares.(vii)
    Tom King received a SRA as part of a contractual commitment made at the time of his
recruitment. The award vested in three equal tranches over three years, the final vesting for which
was November 2010 for 13,517 ADSs. The ADS price on vesting for the final tranche was $44.8449.(viii)
    Shortly after leaving, Steve Lucas received 246,712 PSP shares that vested as a result of
time pro ration from the date of grant to his leave date, taking into account the performance
criteria achieved for each award. In order to recognise his significant contribution to the
business, the Remuneration Committee exercised its discretion and allowed a further 52,984 shares
to vest. Instead of receiving the additional 52,984 shares, it was agreed an equivalent monetary
value (using a share price of 553p) would be transferred into his pension fund. See Table 2 on page
104. All remaining PSP shares shown in the table above lapsed.(ix)
    Shortly after leaving, Steve Lucas received the DSP shares awarded to him, as detailed in the
table above. This treatment aligns with normal practice for such leavers under the plan rules.(x)
    Shortly after leaving, Mark Fairbairn received the PSP shares for each award that vested as a
result of time pro ration from the date of grant to his leave date, taking into account the
performance criteria achieved for each award. This amounted to 231,407 shares. All remaining PSP
shares shown in the table above lapsed. He also received his DSP shares, as detailed in the table
above. This treatment aligns with normal practice for such leavers under the plan rules.
 
   
 Annual Report and Accounts 2010/11 National Grid plc 107




---



##### 



Directors Remuneration Report
 Directors Remuneration Report continued
  5. Directors beneficial interests
 17 43
 Adjusted no. of
    
    
    Adjusted no. ofOrdinary shares at
    
    
    Ordinary shares at
    
    
    options/awards over
    
    
    options/awards over31 March 2011
    
    
    1 April 2010
    
    
    ordinary shares at
    
    
    ordinary shares ator, if earlier, on
    
    
    or, if later, on
    
    
    31 March 2011 or, if earlier, on
    
    
    1 April 2010 or, if later, onTable 5
    
    retirement  (i)
    
    
    appointment *
    
    
    retirement  (ii)
    
    
    appointment * (ii)Sir John Parker
    
    
    134,712
    
    
    
    81,635
    
    
    
    
    
    
    
    Steve Holliday (iii), (iv), (v)
    
    
    339,451
    
    
    
    221,472
    
    
    
    1,680,485
    
    
    
    1,251,839Andrew Bonfield (iii), (iv), (v)
    
    
    44
    
    
    
     *
    
    
    
    239,885
    
    
    
     *Nick Winser (iv)
    
    
    325,914
    
    
    
    223,138
    
    
    
    776,189
    
    
    
    561,912Tom King
    
    
    155,195
    
    
    
    97,640
    
    
    
    1,024,155
    
    
    
    756,856Steve Lucas (iv), (vi), (vii)
    
    
    214,720 
    
    
    
    167,503
    
    
    
    946,869 
    
    
    
    712,743Mark Fairbairn (iv), (viii)
    
    
    219,781
    
    
    
    143,372
    
    
    
    755,948
    
    
    
    556,023Ken Harvey
    
    
    5,236
    
    
    
    3,740
    
    
    
    
    
    
    
    Linda Adamany
    
    
    2,800
    
    
    
    2,000
    
    
    
    
    
    
    
    Philip Aiken
    
    
    4,900
    
    
    
    3,500
    
    
    
    
    
    
    
    John Allan
    
    
    14,500
    
    
    
    7,000
    
    
    
    
    
    
    
    Stephen Pettit
    
    
    3,906
    
    
    
    2,632
    
    
    
    
    
    
    
    Maria Richter
    
    
    14,357
    
    
    
    10,255
    
    
    
    
    
    
    
    George Rose
    
    
    6,792
    
    
    
    4,852
    
    
    
    
    
    
    
    
 (i)
    The number of shares shown represent beneficial holdings, including those shares
subscribed for by Directors under the rights issue.(ii)
    The option/award numbers shown, for awards granted prior to the rights issue which completed
on 14 June 2010, except those shares detailed in Table 4 note (iv) on page 107, were adjusted using
an adjustment factor of 1.14271765.(iii)
    There has been no other change in the beneficial interests of the Directors in ordinary
shares between 1 April 2011 and 18 May 2011, except in respect of routine monthly purchases under
the SIP (see note (v) below).(iv)
    Each of the Executive Directors, with the exception of Tom King, was for Companies Act
purposes deemed to be a potential beneficiary under the National Grid plc 1996 Employee Benefit
Trust and the National Grid Employee Share Trust; Steve Holliday, Andrew Bonfield, Nick Winser,
Steve Lucas and Mark Fairbairn thereby have an interest in 178,690 and 693,481 ordinary shares in
the aforementioned trusts respectively, as at 31 March 2011 (with the latter trust holding 9,977
ADSs in addition).(v)
    Beneficial interests includes shares purchased under the monthly operation
of the SIP in the year to 31 March 2011. In April and May 2011 a further 42 shares were purchased
on behalf of Steve Holliday and a further 41 shares were purchased on behalf of Andrew Bonfield
thereby increasing their beneficial interests.(vi)
    Steve Lucas was for Companies Act purposes deemed to be a potential beneficiary in 6,188
ordinary shares held by Lattice Group Trustees Limited as trustee of the Lattice Group Employee
Share Ownership Trust as at 31 March 2011.(vii)
    Steve Lucas retired from the Board as a Director on 31 December 2010.(viii)
    Mark Fairbairn left the Company on 31 March 2011. 6. National Grid share price range
   John Allan
    Helen Mahy
 
   
 108     National Grid plc Annual Report and Accounts 2010/11




---



##### 



Contents of financial statements
 
    
 Directors statement and independent
Auditors report110
    
    
    Statement of Directors responsibilities111
    
    
    Independent Auditors report to the Members
of National Grid plcConsolidated financial statements under IFRSBasis of preparation112
    
    
    Accounting policies119
    
    
    Adoption of new accounting standardsPrimary statements120
    
    
    Consolidated income statement121
    
    
    Consolidated statement of comprehensive income122
    
    
    Consolidated balance sheet123
    
    
    Consolidated statement of changes in equity124
    
    
    Consolidated cash flow statementNotes to the consolidated financial statements 
analysis of items in the primary statements125
    
    
    Note 1     Segmental analysis127
    
    
    Note 2     Operating costs129
    
    
    Note 3     Exceptional items, remeasurements and stranded
cost recoveries131
    
    
    Note 4     Finance income and costs132
    
    
    Note 5     Taxation134
    
    
    Note 6     Discontinued operations134
    
    
    Note 7     Dividends135
    
    
    Note 8     Earnings per share136
    
    
    Note 9     Goodwill137
    
    
    Note 10   Other intangible assets138
    
    
    Note 11   Property, plant and equipment139
    
    
    Note 12   Other non-current assets139
    
    
    Note 13   Financial and other investments140
    
    
    Note 14   Derivative financial instruments141
    
    
    Note 15   Inventories and current intangible assets141
    
    
    Note 16   Trade and other receivables142
    
    
    Note 17   Cash and cash equivalents142
    
    
    Note 18   Businesses classified as held for sale143
    
    
    Note 19   Borrowings144
    
    
    Note 20   Trade and other payables144
    
    
    Note 21   Other non-current liabilities145
    
    
    Note 22   Deferred tax assets and liabilities146
    
    
    Note 23   Pensions and other post-retirement benefits148
    
    
    Note 24   Provisions149
    
    
    Note 25   Share capital150
    
    
    Note 26   Other equity reserves151
    
    
    Note 27   Consolidated cash flow statement
 Notes to the consolidated financial statements 
supplementary information152
    
    
    Note 28   Commitments and contingencies153
    
    
    Note 29   Related party transactions153
    
    
    Note 30   Actuarial information on pensions
and other post-retirement benefits156
    
    
    Note 31   Supplementary information on derivative
financial instruments157
    
    
    Note 32   Financial risk162
    
    
    Note 33   Commodity risk165
    
    
    Note 34   Bonds and facilities167
    
    
    Note 35   Share options and reward plans169
    
    
    Note 36   Subsidiary undertakings, joint ventures
and associates170
    
    
    Note 37    National Grid Gas plc and Niagara Mohawk
Power Corporation additional disclosuresCompany financial statements under UK GAAPBasis of preparation177
    
    
    Company accounting policiesPrimary statement179
    
    
    Company balance sheetNotes to the Company financial statements180
    
    
    Note 1     Fixed asset investments180
    
    
    Note 2     Debtors180
    
    
    Note 3    Creditors (amounts falling due within one year)181
    
    
    Note 4     Derivative financial instruments181
    
    
    Note 5    Current asset investments181
    
    
    Note 6    Borrowings182
    
    
    Note 7    Called up share capital182
    
    
    Note 8    Reserves183
    
    
    Note 9    Reconciliation of movements 

in shareholders funds183
    
    
    Note 10   Commitments and contingencies
 
   
 Annual Report and Accounts 2010/11 National Grid plc     109




---



##### 



Financial Statements
 
 
 Statement of Directors responsibilities
 
    
 
    
    select suitable accounting policies and then apply them consistently;
    
    make judgements and estimates that are reasonable and prudent;
    
    state that the consolidated financial statements comply with IFRS as adopted by the
European Union and, with regard to the Company financial statements, that applicable UK Accounting
Standards have been followed, subject to any material departures disclosed and explained in the
financial statements; and
    
    prepare the consolidated financial statements and Company financial statements on a
going concern basis unless it is inappropriate to presume that the Company, on a consolidated and
individual basis, will continue in business, in which case there should be supporting assumptions
or qualifications as necessary.
 
    
    the consolidated financial statements and the Company financial statements, which have
been prepared in accordance with IFRS as adopted by the European Union and UK GAAP respectively,
give a true and fair view of the assets, liabilities, financial position and profit of the Company
on a consolidated and individual basis; and
    
    the Annual Report includes a fair review of the development and performance of the
business and the position of the Company on a consolidated and individual basis, together with a
description of the principal risks and uncertainties that it faces.
  Helen Mahy
 
   
 110     National Grid plc Annual Report and Accounts 2010/11




---



##### 



Independent Auditors report to the
Members of National Grid plc
 
    
 Respective responsibilities of Directors and Auditors
   Scope of the audit of the financial statements
  Opinion on financial statements
  
    
    the financial statements give a true and fair view of the state of the groups and of the
Companys affairs as at 31 March 2011 and of the groups profit and cash flows for the year then
ended;
    
    the consolidated financial statements have been properly prepared in accordance with IFRS as
adopted by the European Union;
    
    the Company financial statements have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
    
    the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006 and, as regards the consolidated financial statements, Article 4 of the lAS Regulation.
 Opinion on other matters prescribed by the Companies Act 2006
  
    
    the part of the Directors Remuneration Report to be audited has been properly prepared in
accordance with the Companies Act 2006; and
    
    the information given in the Directors Report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
 Matters on which we are required to report by exception
   
    
    adequate accounting records have not been kept by the Company, or returns adequate for our audit
have not been received from branches not visited by us; or
    
    the Company financial statements and the part of the Directors Remuneration Report to be audited
are not in agreement with the accounting records and returns; or
    
    certain disclosures of Directors remuneration specified by law are not made; or
    
    we have not received all the information and explanations we require for our audit.
  
    
    the Directors statement, set out on page 70, in relation to going concern;
    
    the part of the Corporate Governance Statement relating to the Companys compliance with the nine
provisions of the June 2008 Combined Code specified for our review; and
    
    certain elements of the report to shareholders by the Board on Directors remuneration.
 Nicholas Blackwood (Senior Statutory Auditor) 
for and on
behalf of PricewaterhouseCoopers LLP
 
   
 Annual Report and Accounts 2010/11 National Grid plc     111




---



##### 



Financial Statements
 
 
 Accounting policies
 
    
 A. Basis of preparation of consolidated financial statements under IFRS
       B. Basis of consolidation
 C. Foreign currencies
    D. Goodwill
 
   
 112     National Grid plc Annual Report and Accounts 2010/11




---



##### 



E. Intangible assets other than goodwill
     Amortisation periods
    
    YearsSoftware
    
    
    3 to 7Acquisition-related intangibles
    
    
    10 to 25Other  licences and other intangibles
    
    
    3 to 5
  F. Property, plant and equipment
 Depreciation periods
    
    YearsFreehold and leasehold buildings
    
    up to 65Plant and machineryElectricity transmission plant
    
    
    15 to 60Electricity distribution plant
    
    
    15 to 60Electricity generation plant
    
    
    20 to 40Interconnector plant
    
    
    15 to 60Gas plant  mains, services and regulating equipment
    
    
    30 to 100Gas plant  storage
    
    
    40Gas plant  meters
    
    
    10 to 33Motor vehicles and office equipment
    
    up to 10
 G. Impairment of assets
 
   
 Annual Report and Accounts 2010/11 National Grid plc     113




---



##### 



Financial Statements
 Accounting policies continued
 
    
 H. Taxation
 Current tax
   Deferred tax and investment tax credits
 I. Discontinued operations, assets and businesses held for sale
     J. Inventories
  K. Decommissioning and environmental costs
 
   
 114     National Grid plc Annual Report and Accounts 2010/11




---



##### 



L. Revenue
     M. Segmental information
  N. Pensions and other post-retirement benefits
 O. Leases
    P. Financial instruments
 
   
 Annual Report and Accounts 2010/11 National Grid plc     115




---



##### 



Financial Statements
 Accounting policies continued
 
    
 
 Q. Commodity contracts
     R. Hedge accounting
 
   
 116     National Grid plc Annual Report and Accounts 2010/11




---



##### 



S. Share-based payments
   T. Business performance and exceptional items, remeasurements and stranded cost recoveries
 
   
 Annual Report and Accounts 2010/11 National Grid plc     117




---



##### 



Financial Statements
 Accounting policies continued
 
    
 U. Emission allowances
   V. Cash and cash equivalents
  W. Other equity reserves
 X. Dividends
  Y. Areas of judgement and key sources of estimation uncertainty
   
    
    The categorisation of certain items as exceptional items,
remeasurements and stranded cost recoveries and the definition
of adjusted earnings  notes 3 and 8.
    
    The exemptions adopted on transition to IFRS on 1 April 2004
including, in particular, those relating to business
combinations.
    
    Classification of business activities as held for sale
and discontinued operations  accounting policy I.
    
    Hedge accounting  accounting policy R.
    
    Energy purchase contracts  classification as being for
normal purchase, sale or usage  accounting policy Q and
note 28.
  
    
    Impairment of goodwill  accounting policy D and note 9.
    
    Review of residual lives, carrying values and impairment
charges for other intangible assets and property, plant and
equipment  accounting policies E, F and G.
    
    Estimation of liabilities for pensions and other
post-retirement benefits  note 23.
    
    Valuation of financial instruments and derivatives 
notes 14 and 31.
    
    Revenue recognition and assessment of unbilled revenue 
accounting policy L.
    
    Recoverability of deferred tax assets  accounting policy
H and note 22.
    
    Environmental and decommissioning provisions  note 24.
 
   
 118     National Grid plc Annual Report and Accounts 2010/11




---



##### 



Adoption of new accounting standards
 
 Adoption of new accounting standards
 
    
 New IFRS accounting standards and interpretations adopted in 2010/11
  
    
    IFRS 3R on business combinations
    
    IAS 27R on consolidated and individual financial statements
    
    Amendment to IAS 39 Financial Instruments: Recognition and measurement on eligible
hedged items
    
    Revised IFRS 1 on first time adoption of IFRS
    
    IFRIC 17 on distribution of non-cash assets to owners
    
    Improvements to IFRS 2009
    
    Amendment to IFRS 2 on group cash-settled share-based payments
    
    Amendment to IFRS 1 on first time adoption of IFRS
    
    Amendment to IAS 32 on classification of rights issues
 New IFRS accounting standards and interpretations not yet adopted
     
    
    IFRS 9 on financial instruments
    
    Revised IAS 24 on related party disclosures
    
    IFRIC 19 on extinguishing financial liabilities with equity instruments
    
    Amendment to IFRIC 14 on prepayments of a minimum funding requirement
    
    Amendment to IFRS 1 on comparative IFRS 7 disclosures
    
    Improvements to IFRS 2010
    
    Amendment to IFRS 7 on disclosures for transfers of financial assets
    
    Amendment to IFRS 1 on severe hyperinflation and removal of fixed dates for first-time
adoption
    
    Amendment to IAS 12 on deferred tax on recovery of underlying assets
    
    IFRS 10 on consolidated financial statements
    
    IFRS 11 on joint arrangements
    
    IFRS 12 on disclosures of interests in other entities
    
    IFRS 13 on fair value measurements
    
    IAS 27 on separate financial statements
    
    IAS 28 on investment in associates and joint ventures
 
   
 Annual Report and Accounts 2010/11 National Grid plc     119




---



##### 



Financial Statements
 
 
 Consolidated income statement
   2011
    
    
    2011
    
    
    2010
    
    
    2010
    
    
    2009
    
    
    2009Notes
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mRevenue*
    
    
    1(a)
    
    
    
    
    
    
    
    14,343
    
    
    
    
    
    
    
    14,007
    
    
    
    
    
    
    
    15,687Operating costs
    
    
    2
    
    
    
    
    
    
    
    (10,598)
    
    
    
    
    
    
    
    (10,714
    )
    
    
    
    
    
    
    (13,064
    )Operating profitBefore exceptional items, remeasurements
and stranded cost recoveries
    
    
    1(b)
    
    
    
    3,600
    
    
    
    
    
    
    
    3,121
    
    
    
    
    
    
    
    2,915Exceptional items, remeasurements and
Stranded cost recoveries
    
    
    3
    
    
    
    145
    
    
    
    
    
    
    
    172
    
    
    
    
    
    
    
    (292
    )Total operating profit
    
    
    1(b)
    
    
    
    
    
    
    
    3,745
    
    
    
    
    
    
    
    3,293
    
    
    
    
    
    
    
    2,623Interest income and similar incomeBefore exceptional items
    
    
    4
    
    
    
    1,281
    
    
    
    
    
    
    
    1,005
    
    
    
    
    
    
    
    1,315Exceptional items
    
    
    3,4
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total interest income and similar income
    
    
    4
    
    
    
    
    
    
    
    1,324
    
    
    
    
    
    
    
    1,005
    
    
    
    
    
    
    
    1,315Interest expense and other finance costsBefore exceptional items and remeasurements
    
    
    4
    
    
    
    (2,415)
    
    
    
    
    
    
    
    (2,160)
    
    
    
    
    
    
    
    (2,465
    )Exceptional items and remeasurements
    
    
    3,4
    
    
    
    (37)
    
    
    
    
    
    
    
    47
    
    
    
    
    
    
    
    (84
    )Total interest expense and other finance costs
    
    
    4
    
    
    
    
    
    
    
    (2,452)
    
    
    
    
    
    
    
    (2,113
    )
    
    
    
    
    
    
    (2,549
    )Share of post-tax results of joint ventures and associates
    
    
    13
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    5Profit before taxBefore
exceptional items, remeasurements and stranded cost recoveries
    
    
    1(b)
    
    
    
    2,473
    
    
    
    
    
    
    
    1,974
    
    
    
    
    
    
    
    1,770Exceptional items, remeasurements
 and Stranded cost recoveries
    
    
    3
    
    
    
    151
    
    
    
    
    
    
    
    219
    
    
    
    
    
    
    
    (376
    )Total profit before tax
    
    
    1(b)
    
    
    
    
    
    
    
    2,624
    
    
    
    
    
    
    
    2,193
    
    
    
    
    
    
    
    1,394TaxationBefore exceptional items, remeasurements
and stranded cost recoveries
    
    
    5
    
    
    
    (722)
    
    
    
    
    
    
    
    (553)
    
    
    
    
    
    
    
    (517
    )Exceptional items, remeasurements and 
stranded cost recoveries
    
    
    3,5
    
    
    
    261
    
    
    
    
    
    
    
    (251)
    
    
    
    
    
    
    
    45Total taxation
    
    
    5
    
    
    
    
    
    
    
    (461)
    
    
    
    
    
    
    
    (804
    )
    
    
    
    
    
    
    (472
    )Profit from continuing operations after taxBefore exceptional items, remeasurements
and stranded cost recoveries
    
    
    
    
    
    
    1,751
    
    
    
    
    
    
    
    1,421
    
    
    
    
    
    
    
    1,253Exceptional items, remeasurements and
stranded cost recoveries
    
    
    3
    
    
    
    412
    
    
    
    
    
    
    
    (32)
    
    
    
    
    
    
    
    (331
    )Profit for the year from continuing operations
    
    
    
    
    
    
    
    
    
    
    2,163
    
    
    
    
    
    
    
    1,389
    
    
    
    
    
    
    
    922Profit for the year from discontinued operations
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25Profit for the year
    
    
    
    
    
    
    
    
    
    
    2,163
    
    
    
    
    
    
    
    1,389
    
    
    
    
    
    
    
    947Attributable to:Equity shareholders of the parent
    
    
    
    
    
    
    
    
    
    
    2,159
    
    
    
    
    
    
    
    1,386
    
    
    
    
    
    
    
    944Non-controlling interests
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    32,163
    
    
    
    
    
    
    
    1,389
    
    
    
    
    
    
    
    947Earnings per share from continuing operations**Basic
    
    
    8
    
    
    
    
    
    
    
    63.9p
    
    
    
    
    
    
    
    48.4p
    
    
    
    
    
    
    
    31.8pDiluted
    
    
    8
    
    
    
    
    
    
    
    63.6p
    
    
    
    
    
    
    
    48.2p
    
    
    
    
    
    
    
    31.7pEarnings per share**Basic
    
    
    8
    
    
    
    
    
    
    
    63.9p
    
    
    
    
    
    
    
    48.4p
    
    
    
    
    
    
    
    32.7pDiluted
    
    
    8
    
    
    
    
    
    
    
    63.6p
    
    
    
    
    
    
    
    48.2p
    
    
    
    
    
    
    
    32.5p
 
   
 120     National
Grid plc Annual Report and Accounts 2010/11




---



##### 



Consolidated statementof comprehensive income
   2011
    
    
    2010
    
    
    2009Notes
    
    
    £m
    
    
    £m
    
    
    £mProfit for the year
    
    
    
    
    
    
    2,163
    
    
    
    1,389
    
    
    
    947Other comprehensive income/(loss):Exchange adjustments
    
    
    
    
    
    
    (95
    )
    
    
    33
    
    
    
    464Actuarial net gains/(losses)
    
    
    23
    
    
    
    571
    
    
    
    (731
    )
    
    
    (2,018
    )Deferred tax on actuarial net gains and losses
    
    
    5
    
    
    
    (181
    )
    
    
    175
    
    
    
    678Net gains/(losses) in respect of cash flow hedges
    
    
    
    
    
    
    7
    
    
    
    (45
    )
    
    
    (1
    )Transferred to profit or loss on cash flow hedges
    
    
    
    
    
    
    (7
    )
    
    
    3
    
    
    
    (53
    )Deferred tax on cash flow hedges
    
    
    5
    
    
    
    (2
    )
    
    
    9
    
    
    
    19Net gains on available-for-sale investments
    
    
    
    
    
    
    16
    
    
    
    54
    
    
    
    9Transferred to profit or loss on sale of available-for-sale investments
    
    
    
    
    
    
    (3
    )
    
    
    (6
    )
    
    
    (18
    )Deferred tax on available-for-sale investments
    
    
    5
    
    
    
    (1
    )
    
    
    (5
    )
    
    
    7Share of post-tax other comprehensive (loss)/income of joint ventures
    
    
    
    
    
    
    (4
    )
    
    
    5
    
    
    
    Other comprehensive income/(loss) for the year, net of tax
    
    
    
    
    
    
    301
    
    
    
    (508
    )
    
    
    (913
    )Total comprehensive income for the year
    
    
    
    
    
    
    2,464
    
    
    
    881
    
    
    
    34Total comprehensive income attributable to:Equity shareholders of the parent
    
    
    
    
    
    
    2,460
    
    
    
    879
    
    
    
    26Non-controlling interests
    
    
    
    
    
    
    4
    
    
    
    2
    
    
    
    82,464
    
    
    
    881
    
    
    
    34
 
   
 Annual
Report and Accounts 2010/11 National Grid plc     121




---



##### 



Financial Statements
 
 
 Consolidated balance sheet
   2011
    
    
    2010Notes
    
    
    £m
    
    
    £mNon-current assetsGoodwill
    
    
    9
    
    
    
    4,776
    
    
    
    5,102Other intangible assets
    
    
    10
    
    
    
    501
    
    
    
    389Property, plant and equipment
    
    
    11
    
    
    
    31,956
    
    
    
    30,855Other non-current assets
    
    
    12
    
    
    
    135
    
    
    
    162Pension assets
    
    
    23
    
    
    
    556
    
    
    
    Financial and other investments
    
    
    13
    
    
    
    593
    
    
    
    486Derivative financial assets
    
    
    14
    
    
    
    1,270
    
    
    
    1,494Total non-current assets
    
    
    
    
    
    
    39,787
    
    
    
    38,488Current assetsInventories and current intangible assets
    
    
    15
    
    
    
    320
    
    
    
    407Trade and other receivables
    
    
    16
    
    
    
    2,212
    
    
    
    2,293Financial and other investments
    
    
    13
    
    
    
    2,939
    
    
    
    1,397Derivative financial assets
    
    
    14
    
    
    
    468
    
    
    
    248Cash and cash equivalents
    
    
    17
    
    
    
    384
    
    
    
    720Total current assets
    
    
    
    
    
    
    6,323
    
    
    
    5,065Assets of businesses held for sale
    
    
    18
    
    
    
    290
    
    
    
    Total assets
    
    
    
    
    
    
    46,400
    
    
    
    43,553Current liabilitiesBorrowings
    
    
    19
    
    
    
    (2,952
    )
    
    
    (2,806
    )Derivative financial liabilities
    
    
    14
    
    
    
    (190
    )
    
    
    (212
    )Trade and other payables
    
    
    20
    
    
    
    (2,828
    )
    
    
    (2,847
    )Current tax liabilities
    
    
    
    
    
    
    (503
    )
    
    
    (391
    )Provisions
    
    
    24
    
    
    
    (353
    )
    
    
    (303
    )Total current liabilities
    
    
    
    
    
    
    (6,826
    )
    
    
    (6,559
    )Non-current liabilitiesBorrowings
    
    
    19
    
    
    
    (20,246
    )
    
    
    (22,318
    )Derivative financial liabilities
    
    
    14
    
    
    
    (404
    )
    
    
    (662
    )Other non-current liabilities
    
    
    21
    
    
    
    (1,944
    )
    
    
    (1,974
    )Deferred tax liabilities
    
    
    22
    
    
    
    (3,766
    )
    
    
    (3,324
    )Pensions and other post-retirement benefit obligations
    
    
    23
    
    
    
    (2,574
    )
    
    
    (3,098
    )Provisions
    
    
    24
    
    
    
    (1,461
    )
    
    
    (1,407
    )Total non-current liabilities
    
    
    
    
    
    
    (30,395
    )
    
    
    (32,783
    )Liabilities of businesses held for sale
    
    
    18
    
    
    
    (110
    )
    
    
    Total liabilities
    
    
    
    
    
    
    (37,331
    )
    
    
    (39,342
    )Net assets
    
    
    
    
    
    
    9,069
    
    
    
    4,211EquityCalled up share capital
    
    
    25
    
    
    
    416
    
    
    
    298Share premium account
    
    
    
    
    
    
    1,361
    
    
    
    1,366Retained earnings
    
    
    
    
    
    
    12,153
    
    
    
    7,316Other equity reserves
    
    
    26
    
    
    
    (4,870
    )
    
    
    (4,781
    )Shareholders equity
    
    
    
    
    
    
    9,060
    
    
    
    4,199Non-controlling interests
    
    
    
    
    
    
    9
    
    
    
    12Total equity
    
    
    
    
    
    
    9,069
    
    
    
    4,211
  Sir John Parker  Andrew Bonfield
      122     National Grid plc Annual Report and Accounts 2010/11




---



##### 



Consolidated statement of changes in equity
       Called-up
    
    
    Share
    
    
    
    
    
    
    Other
    
    
    Total
    
    
    Non-share
    
    
    premium
    
    
    Retained
    
    
    equity
    
    
    shareholders
    
    
    controlling
    
    
    Totalcapital
    
    
    account
    
    
    earnings
    
    
    reserves(i)
    
    
    equity
    
    
    interests
    
    
    equity£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mAt 31 March 2008
    
    
    294
    
    
    
    1,371
    
    
    
    8,943
    
    
    
    (5,252
    )
    
    
    5,356
    
    
    
    18
    
    
    
    5,374Total comprehensive (loss)/income for the year
    
    
    
    
    
    
    
    
    
    
    (396
    )
    
    
    422
    
    
    
    26
    
    
    
    8
    
    
    
    34Equity dividends
    
    
    
    
    
    
    
    
    
    
    (838
    )
    
    
    
    
    
    
    (838
    )
    
    
    
    
    
    
    (838
    )Issue of treasury shares
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    8Repurchase of share capital and purchase of treasury shares
    
    
    
    
    
    
    
    
    
    
    (603
    )
    
    
    
    
    
    
    (603
    )
    
    
    
    
    
    
    (603
    )Other movements in non-controlling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    (12
    )Share-based payment
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    22Tax on share-based payment
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )At 31 March 2009
    
    
    294
    
    
    
    1,371
    
    
    
    7,135
    
    
    
    (4,830
    )
    
    
    3,970
    
    
    
    14
    
    
    
    3,984Total comprehensive income for the year
    
    
    
    
    
    
    
    
    
    
    830
    
    
    
    49
    
    
    
    879
    
    
    
    2
    
    
    
    881Equity dividends
    
    
    
    
    
    
    
    
    
    
    (893
    )
    
    
    
    
    
    
    (893
    )
    
    
    
    
    
    
    (893
    )Scrip dividend related share issue
    
    
    4
    
    
    
    (5
    )
    
    
    205
    
    
    
    
    
    
    
    204
    
    
    
    
    
    
    
    204Issue of treasury shares
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    18Purchase of own shares
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    (7
    )Other movements in non-controlling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    (4
    )Share-based payment
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    25Tax on share-based payment
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3At 31 March 2010
    
    
    298
    
    
    
    1,366
    
    
    
    7,316
    
    
    
    (4,781
    )
    
    
    4,199
    
    
    
    12
    
    
    
    4,211Total comprehensive income for the year
    
    
    
    
    
    
    
    
    
    
    2,549
    
    
    
    (89
    )
    
    
    2,460
    
    
    
    4
    
    
    
    2,464Rights issue
    
    
    113
    
    
    
    
    
    
    
    
    
    
    
    3,101
    
    
    
    3,214
    
    
    
    
    
    
    
    3,214Transfer between reserves
    
    
    
    
    
    
    
    
    
    
    3,101
    
    
    
    (3,101
    )
    
    
    
    
    
    
    
    
    
    
    Equity dividends
    
    
    
    
    
    
    
    
    
    
    (1,064
    )
    
    
    
    
    
    
    (1,064
    )
    
    
    
    
    
    
    (1,064
    )Scrip dividend related share issue
    
    
    5
    
    
    
    (5
    )
    
    
    206
    
    
    
    
    
    
    
    206
    
    
    
    
    
    
    
    206Issue of treasury shares
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    18Purchase of own shares
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )Other movements in non-controlling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    (7
    )Share-based payment
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    25Tax on share-based payment
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5At 31 March 2011
    
    
    416
    
    
    
    1,361
    
    
    
    12,153
    
    
    
    (4,870
    )
    
    
    9,060
    
    
    
    9
    
    
    
    9,069
 
 (i)
    For further details of other reserves, see note 26.
 
    Annual Report and Accounts 2010/11 National Grid plc     123




---



##### 



Financial Statements
 
 Consolidated cash flow statement
  2011
    
    
    2010
    
    
    2009Notes

    
    £m
    
    
    £m
    
    
    £mCash flows from operating activitiesTotal operating profit
    
    
    1
    (b)
    
    
    3,745
    
    
    
    3,293
    
    
    
    2,623Adjustments for:Exceptional items, remeasurements and stranded cost recoveries
    
    
    
    3

    
    
    (145
    )
    
    
    (172
    )
    
    
    292Depreciation and amortisation
    
    
    
    
    
    
    1,245
    
    
    
    1,188
    
    
    
    1,122Share-based payment charge
    
    
    
    
    
    
    25
    
    
    
    25
    
    
    
    22Changes in working capital
    
    
    
    
    
    
    185
    
    
    
    431
    
    
    
    54Changes in provisions
    
    
    
    
    
    
    (93
    )
    
    
    (98
    )
    
    
    (99
    )Changes in pensions and other post-retirement benefit obligations
    
    
    
    
    
    
    (304
    )
    
    
    (521
    )
    
    
    (678
    )Cash flows relating to exceptional items
    
    
    
    
    
    
    (147
    )
    
    
    (135
    )
    
    
    (131
    )Cash flows relating to stranded cost recoveries
    
    
    
    
    
    
    343
    
    
    
    361
    
    
    
    359Cash flows generated from continuing operations
    
    
    
    
    
    
    4,854
    
    
    
    4,372
    
    
    
    3,564Cash flows relating to discontinued operations (excluding tax)
    
    
    27
    (a)
    
    
    
    
    
    
    
    
    
    
    (8
    )Cash generated from operations
    
    
    
    
    
    
    4,854
    
    
    
    4,372
    
    
    
    3,556Tax received/(paid)
    
    
    
    
    
    
    4
    
    
    
    144
    
    
    
    (143
    )Net cash inflow from operating activities
    
    
    
    
    
    
    4,858
    
    
    
    4,516
    
    
    
    3,413Cash flows from investing activitiesAcquisition of investments
    
    
    
    
    
    
    (135
    )
    
    
    (86
    )
    
    
    (73
    )Net proceeds from sale of investments in subsidiaries
    
    
    
    
    
    
    11
    
    
    
    6
    
    
    
    Purchases of intangible assets
    
    
    
    
    
    
    (176
    )
    
    
    (104
    )
    
    
    (78
    )Purchases of property, plant and equipment
    
    
    
    
    
    
    (2,958
    )
    
    
    (3,007
    )
    
    
    (3,107
    )Disposals of property, plant and equipment
    
    
    
    
    
    
    26
    
    
    
    15
    
    
    
    27Dividends received from joint ventures
    
    
    
    
    
    
    9
    
    
    
    18
    
    
    
    Interest received
    
    
    
    
    
    
    26
    
    
    
    21
    
    
    
    85Net movement in short-term financial investments
    
    
    
    
    
    
    (1,577
    )
    
    
    805
    
    
    
    99Cash flows used in continuing operations  investing activities
    
    
    
    
    
    
    (4,774
    )
    
    
    (2,332
    )
    
    
    (3,047
    )Cash flows relating to discontinued operations  investing activities (net of tax)
    
    
    27
    (b)
    
    
    
    
    
    
    
    
    
    
    1,049Net cash flow used in investing activities
    
    
    
    
    
    
    (4,774
    )
    
    
    (2,332
    )
    
    
    (1,998
    )Cash flows from financing activitiesProceeds of rights issue
    
    
    
    
    
    
    3,214
    
    
    
    
    
    
    
    Proceeds from issue of treasury shares
    
    
    
    
    
    
    18
    
    
    
    18
    
    
    
    8Proceeds from loans received
    
    
    
    
    
    
    767
    
    
    
    1,933
    
    
    
    4,892Repayment of loans
    
    
    
    
    
    
    (2,878
    )
    
    
    (2,257
    )
    
    
    (2,618
    )Net movements in short-term borrowings and derivatives
    
    
    
    
    
    
    348
    
    
    
    (175
    )
    
    
    (633
    )Interest paid
    
    
    
    
    
    
    (965
    )
    
    
    (1,003
    )
    
    
    (1,061
    )Exceptional finance costs on the redemption of debt
    
    
    
    
    
    
    (73
    )
    
    
    (33
    )
    
    
    Dividends paid to shareholders
    
    
    
    
    
    
    (858
    )
    
    
    (688
    )
    
    
    (838
    )Repurchase of share capital and purchase of treasury shares
    
    
    
    
    
    
    (3
    )
    
    
    (7
    )
    
    
    (627
    )Net cash flow used in financing activities
    
    
    
    
    
    
    (430
    )
    
    
    (2,212
    )
    
    
    (877
    )Net (decrease)/increase in cash and cash equivalents
    
    
    27
    (c)
    
    
    (346
    )
    
    
    (28
    )
    
    
    538Exchange movements
    
    
    
    
    
    
    (3
    )
    
    
    (1
    )
    
    
    18Net cash and cash equivalents at start of year
    
    
    
    
    
    
    691
    
    
    
    720
    
    
    
    164Net cash and cash equivalents at end of year (i)
    
    
    
    17

    
    
    342
    
    
    
    691
    
    
    
    720
 (i)
    Net of bank overdrafts of £42m (2010: £29m; 2009: £17m).
      124     National Grid plc Annual Report and Accounts 2010/11




---



##### 



Notes to the consolidated financial statements  analysis of items in the primary statements
      1. Segmental analysis
  Transmission UK
    
    High voltage electricity transmission networks, the gas transmission network in Great Britain,
UK liquefied natural gas (LNG) storage activities and the French electricity interconnector.Transmission US
    
    High voltage electricity transmission networks in New York and New England.Gas Distribution UK
    
    Four of the eight regional networks of Great Britains gas distribution system.Gas Distribution US
    
    Gas distribution networks in New York and New England.Electricity Distribution & Generation US
    
    Electricity distribution networks in New York and New England and electricity generation
facilities in New York.
     (a) Revenue
 Sales
    
    
    Sales
    
    
    
    
    
    
    Sales
    
    
    Sales
    
    
    
    
    
    
    Sales
    
    
    SalesTotal
    
    
    between
    
    
    to third
    
    
    Total
    
    
    between
    
    
    to third
    
    
    Total
    
    
    between
    
    
    to thirdsales
    
    
    segments
    
    
    parties
    
    
    sales
    
    
    segments
    
    
    parties
    
    
    sales
    
    
    segments
    
    
    parties2011
    
    
    2011
    
    
    2011
    
    
    2010
    
    
    2010
    
    
    2010
    
    
    2009
    
    
    2009
    
    
    2009£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mOperating segments  continuing operationsTransmission UK*
    
    
    3,484
    
    
    
    (7)
    
    
    
    3,477
    
    
    
    3,475
    
    
    
    (6)
    
    
    
    3,469
    
    
    
    3,517
    
    
    
    (2)
    
    
    
    3,515Transmission US
    
    
    429
    
    
    
    (56)
    
    
    
    373
    
    
    
    405
    
    
    
    (74)
    
    
    
    331
    
    
    
    420
    
    
    
    (83)
    
    
    
    337Gas Distribution UK*
    
    
    1,524
    
    
    
    (60)
    
    
    
    1,464
    
    
    
    1,518
    
    
    
    (70)
    
    
    
    1,448
    
    
    
    1,468
    
    
    
    (79)
    
    
    
    1,389Gas Distribution US
    
    
    3,811
    
    
    
    (4)
    
    
    
    3,807
    
    
    
    3,708
    
    
    
    (5)
    
    
    
    3,703
    
    
    
    4,786
    
    
    
    (3)
    
    
    
    4,783Electricity Distribution & Generation US
    
    
    4,567
    
    
    
    (1)
    
    
    
    4,566
    
    
    
    4,339
    
    
    
    (1)
    
    
    
    4,338
    
    
    
    4,972
    
    
    
    (1)
    
    
    
    4,971Other activities*
    
    
    678
    
    
    
    (22)
    
    
    
    656
    
    
    
    741
    
    
    
    (23)
    
    
    
    718
    
    
    
    750
    
    
    
    (58)
    
    
    
    69214,493
    
    
    
    (150)
    
    
    
    14,343
    
    
    
    14,186
    
    
    
    (179)
    
    
    
    14,007
    
    
    
    15,913
    
    
    
    (226)
    
    
    
    15,687Total excluding stranded cost recoveries
    
    
    
    
    
    
    
    
    
    
    13,988
    
    
    
    
    
    
    
    
    
    
    
    13,631
    
    
    
    
    
    
    
    
    
    
    
    15,252Stranded cost recoveries
    
    
    
    
    
    
    
    
    
    
    355
    
    
    
    
    
    
    
    
    
    
    
    376
    
    
    
    
    
    
    
    
    
    
    
    43514,343
    
    
    
    
    
    
    
    
    
    
    
    14,007
    
    
    
    
    
    
    
    
    
    
    
    15,687Geographical areasUK
    
    
    
    
    
    
    
    
    
    
    5,556
    
    
    
    
    
    
    
    
    
    
    
    5,543
    
    
    
    
    
    
    
    
    
    
    
    5,397US
    
    
    
    
    
    
    
    
    
    
    8,787
    
    
    
    
    
    
    
    
    
    
    
    8,464
    
    
    
    
    
    
    
    
    
    
    
    10,29014,343
    
    
    
    
    
    
    
    
    
    
    
    14,007
    
    
    
    
    
    
    
    
    
    
    
    15,687
 *
    Items previously reported separately as other operating income have been included within revenue
 
    Annual Report and Accounts 2010/11 National Grid plc     125




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
  1. Segmental analysis continued
 (b) Operating profit
  Before exceptional items,
    
    After exceptional items,remeasurements and stranded
    
    remeasurements and strandedcost recoveries
    
    cost recoveries2011
    
    
    2010
    
    
    2009
    
    
    2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mOperating segments  continuing operationsTransmission UK
    
    
    1,363
    
    
    
    1,311
    
    
    
    1,126
    
    
    
    1,293
    
    
    
    1,252
    
    
    
    1,063Transmission US
    
    
    156
    
    
    
    153
    
    
    
    175
    
    
    
    154
    
    
    
    151
    
    
    
    173Gas Distribution UK
    
    
    711
    
    
    
    723
    
    
    
    672
    
    
    
    671
    
    
    
    682
    
    
    
    629Gas Distribution US
    
    
    654
    
    
    
    414
    
    
    
    612
    
    
    
    640
    
    
    
    448
    
    
    
    226Electricity Distribution & Generation US
    
    
    597
    
    
    
    374
    
    
    
    265
    
    
    
    910
    
    
    
    701
    
    
    
    531Other activities
    
    
    119
    
    
    
    146
    
    
    
    65
    
    
    
    77
    
    
    
    59
    
    
    
    13,600
    
    
    
    3,121
    
    
    
    2,915
    
    
    
    3,745
    
    
    
    3,293
    
    
    
    2,623Geographical areasUK
    
    
    2,226
    
    
    
    2,180
    
    
    
    1,875
    
    
    
    2,055
    
    
    
    2,007
    
    
    
    1,729US
    
    
    1,374
    
    
    
    941
    
    
    
    1,040
    
    
    
    1,690
    
    
    
    1,286
    
    
    
    8943,600
    
    
    
    3,121
    
    
    
    2,915
    
    
    
    3,745
    
    
    
    3,293
    
    
    
    2,623Reconciliation to profit before tax:Operating profit
    
    
    3,600
    
    
    
    3,121
    
    
    
    2,915
    
    
    
    3,745
    
    
    
    3,293
    
    
    
    2,623Interest income and similar income
    
    
    1,281
    
    
    
    1,005
    
    
    
    1,315
    
    
    
    1,324
    
    
    
    1,005
    
    
    
    1,315Interest expense and other finance costs
    
    
    (2,415
    )
    
    
    (2,160
    )
    
    
    (2,465
    )
    
    
    (2,452
    )
    
    
    (2,113
    )
    
    
    (2,549
    )Share of post-tax results of joint ventures and associates
    
    
    7
    
    
    
    8
    
    
    
    5
    
    
    
    7
    
    
    
    8
    
    
    
    5Profit before tax  continuing operations
    
    
    2,473
    
    
    
    1,974
    
    
    
    1,770
    
    
    
    2,624
    
    
    
    2,193
    
    
    
    1,394
 (c) Capital expenditure and depreciation
 Capital expenditure
    
    Depreciation and amortisation2011
    
    
    2010
    
    
    2009
    
    
    2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mOperating segments  continuing operationsTransmission UK
    
    
    1,432
    
    
    
    1,254
    
    
    
    1,259
    
    
    
    (400
    )
    
    
    (373
    )
    
    
    (353
    )Transmission US
    
    
    310
    
    
    
    240
    
    
    
    182
    
    
    
    (63
    )
    
    
    (59
    )
    
    
    (56
    )Gas Distribution UK
    
    
    669
    
    
    
    670
    
    
    
    598
    
    
    
    (218
    )
    
    
    (201
    )
    
    
    (177
    )Gas Distribution US
    
    
    415
    
    
    
    409
    
    
    
    421
    
    
    
    (175
    )
    
    
    (173
    )
    
    
    (172
    )Electricity Distribution & Generation US
    
    
    367
    
    
    
    372
    
    
    
    355
    
    
    
    (207
    )
    
    
    (215
    )
    
    
    (223
    )Other activities
    
    
    275
    
    
    
    307
    
    
    
    427
    
    
    
    (189
    )
    
    
    (173
    )
    
    
    (146
    )3,468
    
    
    
    3,252
    
    
    
    3,242
    
    
    
    (1,252
    )
    
    
    (1,194
    )
    
    
    (1,127
    )Geographical areasUK
    
    
    2,310
    
    
    
    2,187
    
    
    
    2,270
    
    
    
    (789
    )
    
    
    (733
    )
    
    
    (679
    )US
    
    
    1,158
    
    
    
    1,065
    
    
    
    972
    
    
    
    (463
    )
    
    
    (461
    )
    
    
    (448
    )3,468
    
    
    
    3,252
    
    
    
    3,242
    
    
    
    (1,252
    )
    
    
    (1,194
    )
    
    
    (1,127
    )By asset typeProperty, plant and equipment
    
    
    3,292
    
    
    
    3,148
    
    
    
    3,164
    
    
    
    (1,182
    )
    
    
    (1,131
    )
    
    
    (1,058
    )Other non-current intangible assets
    
    
    176
    
    
    
    104
    
    
    
    78
    
    
    
    (70
    )
    
    
    (63
    )
    
    
    (69
    )3,468
    
    
    
    3,252
    
    
    
    3,242
    
    
    
    (1,252
    )
    
    
    (1,194
    )
    
    
    (1,127
    )
      126       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



2. Operating costs
 Before exceptional items,
    
    Exceptional items,remeasurements and stranded
    
    
    remeasurements and strandedcost recoveries
    
    cost recoveries
    
    Total2011
    
    
    2010
    
    
    2009
    
    
    2011
    
    
    2010
    
    
    2009
    
    
    2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mDepreciation and amortisation
    
    
    1,245
    
    
    
    1,188
    
    
    
    1,122
    
    
    
    7
    
    
    
    6
    
    
    
    5
    
    
    
    1,252
    
    
    
    1,194
    
    
    
    1,127Payroll costs
    
    
    1,460
    
    
    
    1,354
    
    
    
    1,415
    
    
    
    36
    
    
    
    48
    
    
    
    34
    
    
    
    1,496
    
    
    
    1,402
    
    
    
    1,449Purchases of electricity
    
    
    1,547
    
    
    
    1,592
    
    
    
    2,199
    
    
    
    (65
    )
    
    
    (19
    )
    
    
    28
    
    
    
    1,482
    
    
    
    1,573
    
    
    
    2,227Purchases of gas
    
    
    2,102
    
    
    
    2,294
    
    
    
    3,228
    
    
    
    (82
    )
    
    
    (52
    )
    
    
    334
    
    
    
    2,020
    
    
    
    2,242
    
    
    
    3,562Rates and property taxes
    
    
    945
    
    
    
    907
    
    
    
    881
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    945
    
    
    
    907
    
    
    
    881Balancing Service Incentive Scheme
    
    
    581
    
    
    
    691
    
    
    
    904
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    581
    
    
    
    691
    
    
    
    904Payments to Scottish transmission
owners
    
    
    298
    
    
    
    260
    
    
    
    243
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    298
    
    
    
    260
    
    
    
    243Other
    
    
    2,210
    
    
    
    2,224
    
    
    
    2,345
    
    
    
    314
    
    
    
    221
    
    
    
    326
    
    
    
    2,524
    
    
    
    2,445
    
    
    
    2,67110,388
    
    
    
    10,510
    
    
    
    12,337
    
    
    
    210
    
    
    
    204
    
    
    
    727
    
    
    
    10,598
    
    
    
    10,714
    
    
    
    13,064Operating costs include:Inventory consumed
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    451
    
    
    
    475
    
    
    
    788Operating leases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89
    
    
    
    87
    
    
    
    81Research expenditure
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    19
    
    
    
    10
 (a) Payroll costs
 2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £mWages and salaries
    
























    
    1,592
    
    
    
    1,596
    
    
    
    1,615Social security costs
    
























    
    119
    
    
    
    120
    
    
    
    118Other pension costs
    
























    
    208
    
    
    
    161
    
    
    
    160Share-based payments (note 35)
    
























    
    25
    
    
    
    25
    
    
    
    22Severance costs (excluding pension costs)
    
























    
    56
    
    
    
    16
    
    
    
    162,000
    
    
    
    1,918
    
    
    
    1,931Less: payroll costs capitalised
    
























    
    (504
    )
    
    
    (516
    )
    
    
    (482
    )1,496
    
    
    
    1,402
    
    
    
    1,449
  (b) Number of employees
 31 March
    
    
    Average
    
    
    31 March
    
    
    Average2011
    
    
    2011
    
    
    2010
    
    
    2010Number
    
    
    Number
    
    
    Number
    
    
    NumberUK
    




















    
    9,807
    
    
    
    9,953
    
    
    
    10,211
    
    
    
    10,269US
    




















    
    17,282
    
    
    
    17,719
    
    
    
    17,895
    
    
    
    17,79827,089
    
    
    
    27,672
    
    
    
    28,106
    
    
    
    28,067
 
    Annual Report and Accounts 2010/11 | National Grid plc       127




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
 2. Operating costs continued
 (c) Key management compensation
 2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £mSalaries and short-term employee benefits
    
    
    10
    
    
    
    10
    
    
    
    11Post-retirement benefits
    
    
    6
    
    
    
    4
    
    
    
    3Share-based payments
    
    
    6
    
    
    
    5
    
    
    
    522
    
    
    
    19
    
    
    
    19
  (d) Directors emoluments
  (e) Auditors remuneration
 2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £mTotal services pursuant to legislationAudit services:Audit of parent company and consolidated financial statements
    
    
    1.0
    
    
    
    1.1
    
    
    
    1.5Other services pursuant to legislation: (i)Audit of subsidiary financial statements
    
    
    4.8
    
    
    
    5.4
    
    
    
    5.8Other services supplied
    
    
    2.1
    
    
    
    1.9
    
    
    
    2.47.9
    
    
    
    8.4
    
    
    
    9.7Total other servicesServices relating to tax compliance
    
    
    0.5
    
    
    
    0.6
    
    
    
    0.6Services relating to tax advice
    
    
    0.4
    
    
    
    0.8
    
    
    
    0.3Services relating to information technology
    
    
    0.2
    
    
    
    
    
    
    
    Services relating to corporate finance transactions*
    
    
    0.4
    
    
    
    0.4
    
    
    
    0.1All other services* (ii)
    
    
    1.2
    
    
    
    0.8
    
    
    
    0.82.7
    
    
    
    2.6
    
    
    
    1.8Total auditors remuneration
    
    
    10.6
    
    
    
    11.0
    
    
    
    11.5
 
 * Comparatives have been re-presented on a basis consistent with the current year
classification(i)
    Other services supplied pursuant to legislation represent fees payable for services in relation
to other statutory filings or engagements that are required to be carried out by the auditors. In
particular, this includes fees for reports under section 404 of the US Public Company Accounting
Reform and Investor Protection Act of 2002 (Sarbanes-Oxley) and audit reports on regulatory
returns.(ii)
    All other services include fees relating to corporate responsibility reporting, treasury
related projects and sundry services, all of which have been subject to prior approval by the Audit
Committee.
      128       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



3. Exceptional items, remeasurements and stranded cost recoveries
 2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £mIncluded within operating profit:Exceptional items:Restructuring costs(1)
    
    
    (89
    )
    
    
    (149
    )
    
    
    (192
    )Environmental charges(2)
    
    
    (128
    )
    
    
    (63
    )
    
    
    (78
    )Net gain on disposal of subsidiaries and associate(3)
    
    
    15
    
    
    
    11
    
    
    
    Impairment charges and related costs(4)
    
    
    (133
    )
    
    
    
    
    
    
    Other(5)
    
    
    (15
    )
    
    
    (67
    )
    
    
    (5
    )(350
    )
    
    
    (268
    )
    
    
    (275
    )Remeasurements  commodity contracts(6)
    
    
    147
    
    
    
    71
    
    
    
    (443
    )Stranded cost recoveries(7)
    
    
    348
    
    
    
    369
    
    
    
    426145
    
    
    
    172
    
    
    
    (292
    )Included within interest income and similar income:Exceptional items:Interest credit on tax settlement(8)
    
    
    43
    
    
    
    
    
    
    
    Included within finance costs:Exceptional items:Debt redemption costs(9)
    
    
    (73
    )
    
    
    (33
    )
    
    
    Remeasurements:Commodity contracts(6)
    
    
    
    
    
    
    (1
    )
    
    
    (2
    )Net gains/(losses) on derivative financial instruments(10)
    
    
    36
    
    
    
    81
    
    
    
    (82
    )(37
    )
    
    
    47
    
    
    
    (84
    )Total included within profit before tax
    
    
    151
    
    
    
    219
    
    
    
    (376
    )Included within taxation:Exceptional credits/(charges) arising on items not included in profit before tax:Deferred tax credit arising on the reduction in the UK tax rate(11)
    
    
    226
    
    
    
    
    
    
    
    Deferred tax charge arising from change in UK industrial building allowance regime(12)
    
    
    
    
    
    
    
    
    
    
    (49
    )Other(13,14)
    
    
    59
    
    
    
    (41
    )
    
    
    Tax on exceptional items
    
    
    79
    
    
    
    72
    
    
    
    77Tax on remeasurements (6,10)
    
    
    36
    
    
    
    (134
    )
    
    
    187Tax on stranded cost recoveries
    
    
    (139
    )
    
    
    (148
    )
    
    
    (170
    )261
    
    
    
    (251
    )
    
    
    45Total exceptional items, remeasurements and stranded cost recoveries after tax
    
    
    412
    
    
    
    (32
    )
    
    
    (331
    )Analysis of total exceptional items, remeasurements and stranded cost recoveries after tax:Exceptional items after tax
    
    
    (16
    )
    
    
    (270
    )
    
    
    (247
    )Remeasurements after tax
    
    
    219
    
    
    
    17
    
    
    
    (340
    )Stranded cost recoveries after tax
    
    
    209
    
    
    
    221
    
    
    
    256Total
    
    
    412
    
    
    
    (32
    )
    
    
    (331
    )
 (1)
    
    Restructuring costs include:
    costs related to the integration of KeySpan of £15m (2010: £30m; 2009: £53m);
    transformation related initiatives of £103m (2010: £78m; 2009: £68m);
    a charge of £10m related to the restructuring of our US operations, which includes a severance
provision offset by a pension and other post-retirement benefits curtailment gain; and
    a release of £39m of restructuring provisions recognised in prior years.Charges in 2010 and 2009 also included an amount for the restructuring of our liquefied natural gas
(LNG) storage facilities of £41m and £50m respectively and in 2009 charges related to planned cost
reduction programmes in our UK businesses of £21m.(2)
    
    Environmental charges include £70m (2010: £42m; 2009: £37m) and £58m (2010: £21m; 2009: £41m)
related to specific exposures in the UK and US respectively. Costs incurred with respect to US
environmental provisions are substantially recoverable from customers.(3)
    
    During the year we sold
three wholly-owned subsidiaries and an interest in an associate resulting in a gain of £15m. During
the year ended 31 March 2010 there was a gain of £5m on the sale of an associate and the release of
various unutilised provisions amounting to £6m originally recorded on the sale of a wholly-owned
subsidiary in 2008.
 
    Annual Report and Accounts 2010/11 | National Grid plc       129




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
 3. Exceptional items, remeasurements and stranded cost recoveries continued
 (4)
    
    Impairment charges and related costs include:
    a charge of £49m relating to our investment in Blue-NG, a joint venture investing in combined heat and power generation.
The charge comprises an impairment of the carrying value of the investment together with committed funding and associated
exit costs;
    an impairment charge of £34m against the carrying value of the goodwill relating to our US companies in New Hampshire
following our announcement in December 2010 of the proposed sale of these businesses; and
    a charge of £50m relating to our US generation assets for impairment and associated decommissioning.(5)
    
    Other exceptional charges for the year include an amortisation charge of £7m (2010: £6m;
2009: £5m) in relation to acquisition-related intangibles plus an £8m penalty levied by Ofgem
on our UK Gas Distribution business. For the year ended 31 March 2010, other exceptional items
also included an impairment charge of £11m in relation to acquisition-related intangibles, a
charge of £9m relating to US healthcare costs arising from legislative changes, and £41m
related to a fine of £15m levied by the Gas and Electricity Markets Authority (GEMA) together
with associated costs and provisions against receivables and other balance sheet items. For
further details of the fine levied upon us by GEMA refer to note 28.(6)
    
    Remeasurements  commodity contracts represent mark-to-market movements on certain physical
and financial commodity contract obligations in the US. These contracts primarily relate to
the forward purchase of energy for supply to customers, or to the economic hedging thereof,
that are required to be measured at fair value and that do not qualify for hedge accounting.
Under the existing rate plans in the US, commodity costs are recoverable from customers
although the timing of recovery may differ from the pattern of costs incurred. These movements
are comprised of those affecting operating profit which are based on the change in the
commodity contract liability and those recorded in finance costs as a result of the time value
of money.(7)
    
    Stranded cost recoveries include the recovery of some of our historical investments in
generating plants that were divested as part of the restructuring and wholesale power
deregulation process in New England and New York during the 1990s. Stranded cost recoveries on
a pre-tax basis consist of revenue of £355m (2010: £376m; 2009: £435m) and operating costs of
£7m (2010: £7m; 2009: £9m).(8)
    
    During the year we reached agreement with the US tax authorities on the settlement of
pre-acquisition tax liabilities which resulted in the repayment of tax and interest accruing.(9)
    
    Debt redemption costs represent costs arising from our debt repurchase programme, undertaken
primarily in the first half of the year, to manage our cash resources efficiently following
the rights issue. Debt redemption costs in the year ended 31 March 2010 represented costs
relating to the early redemption of a significant loan.(10)
    
    Remeasurements  net gains/(losses) on derivative financial instruments comprise
gains/(losses) arising on derivative financial instruments reported in the income statement.
These exclude gains and losses for which hedge accounting has been effective, which have been
recognised directly in other comprehensive income or which are offset by adjustments to the
carrying value of debt. The tax credit in the year includes a credit of £104m (2010: £78m
charge; 2009: £1m charge) in respect of prior years.(11)
    
    The exceptional tax credit arises from a reduction in the UK corporation tax rate from 28% to
26% included and enacted in the Finance (No. 2) Act 2010 and the Provisional Collection of
Taxes Act 1968 and applicable from 1 April 2011. This results in a reduction in deferred tax
liabilities.(12)
    
    The exceptional tax charge of £49m in the year ended 31 March 2009 arose from a change in the
UK industrial building allowance regime arising in the 2008 Finance Act. This resulted in an
increase in deferred tax liabilities.(13)
    
    The exceptional tax charge of £41m in the year ended 31 March 2010 arose from a change in US
tax legislation under the Patient Protection and Affordable Care Act.(14)
    
    The exceptional tax credit for the year ended 31 March 2011 primarily arose from a settlement
of pre-acquisition tax liabilities with the US tax authorities.
      130       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



4. Finance income and costs
 2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £mInterest income and similar incomeExpected return on pension and other post-retirement benefit plan assets
    
    
    1,256
    
    
    
    981
    
    
    
    1,236Interest income on financial instruments:Bank deposits and other financial assets
    
    
    22
    
    
    
    18
    
    
    
    61Gains on disposal of available-for-sale investments
    
    
    3
    
    
    
    6
    
    
    
    18Interest income and similar income before exceptional items
    
    
    1,281
    
    
    
    1,005
    
    
    
    1,315Exceptional itemsExceptional interest credit on tax settlement
    
    
    43
    
    
    
    
    
    
    
    Interest income and similar income
    
    
    1,324
    
    
    
    1,005
    
    
    
    1,315Interest expense and other finance costsInterest on pension and other post-retirement benefit plan obligations
    
    
    (1,231
    )
    
    
    (1,193
    )
    
    
    (1,250
    )Interest expense on financial liabilities held at amortised cost:Bank loans and overdrafts
    
    
    (85
    )
    
    
    (80
    )
    
    
    (136
    )Other borrowings
    
    
    (1,184
    )
    
    
    (938
    )
    
    
    (1,149
    )Derivatives
    
    
    84
    
    
    
    22
    
    
    
    5Unwinding of discounts on provisions
    
    
    (128
    )
    
    
    (70
    )
    
    
    (68
    )Less: Interest capitalised (i)
    
    
    129
    
    
    
    99
    
    
    
    133Interest expense and other finance costs before exceptional items and remeasurements
    
    
    (2,415
    )
    
    
    (2,160
    )
    
    
    (2,465
    )Exceptional itemsExceptional debt redemption costs
    
    
    (73
    )
    
    
    (33
    )
    
    
    RemeasurementsNet gains/(losses) on derivative financial instruments included in remeasurements (ii):Ineffectiveness on derivatives designated as:Fair value hedges (iii)
    
    
    40
    
    
    
    67
    
    
    
    (34
    )Cash flow hedges
    
    
    9
    
    
    
    (5
    )
    
    
    (18
    )Net investment hedges
    
    
    7
    
    
    
    (19
    )
    
    
    (2
    )Net investment hedges  undesignated forward rate risk
    
    
    (16
    )
    
    
    51
    
    
    
    112Derivatives not designated as hedges or ineligible for hedge accounting
    
    
    (4
    )
    
    
    (13
    )
    
    
    (140
    )Financial element of remeasurements on commodity contracts
    
    
    
    
    
    
    (1
    )
    
    
    (2
    )36
    
    
    
    80
    
    
    
    (84
    )Exceptional items and remeasurements included within interest expense
    
    
    (37
    )
    
    
    47
    
    
    
    (84
    )Interest expense and other finance costs
    
    
    (2,452
    )
    
    
    (2,113
    )
    
    
    (2,549
    )Net finance costs
    
    
    (1,128
    )
    
    
    (1,108
    )
    
    
    (1,234
    )
 
 (i)
    Interest on funding attributable to assets in the course of construction was capitalised
during the year at a rate of 5.3% (2010: 2.8%; 2009: 5.7%).(ii)
    Includes a net foreign exchange gain on financing activities of £173m (2010: £334m gain;
2009: £1,500m loss) offset by foreign exchange gains and losses on derivative financial
instruments measured at fair value.(iii)
    Includes a net gain on instruments designated as fair value hedges of £86m (2010: £90m loss;
2009: £382m gain) offset by a net loss of £46m (2010: £157m gain; 2009: £416m loss) arising
from fair value adjustments to the carrying value of debt.
 
    Annual Report and Accounts 2010/11 | National Grid plc       131




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
 
 5. Taxation
 Taxation on items charged/(credited) to the income statement
 2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £mTax before exceptional items, remeasurements and stranded cost recoveries
    
    
    722
    
    
    
    553
    
    
    
    517Exceptional tax on items not included in profit before tax (see note 3)
    
    
    (285
    )
    
    
    41
    
    
    
    49Tax on other exceptional items, remeasurements and stranded cost recoveries
    
    
    24
    
    
    
    210
    
    
    
    (94
    )Tax on total exceptional items, remeasurements and stranded cost recoveries (see note 3)
    
    
    (261
    )
    
    
    251
    
    
    
    (45
    )Total tax charge
    
    
    461
    
    
    
    804
    
    
    
    472
 Taxation as a percentage of profit before tax
 2011
    
    
    2010
    
    
    2009%
    
    
    %
    
    
    %Before exceptional items, remeasurements and stranded cost recoveries
    
    
    29.2
    
    
    
    28.0
    
    
    
    29.2After exceptional items, remeasurements and stranded cost recoveries
    
    
    17.6
    
    
    
    36.7
    
    
    
    33.9
  2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £mUnited KingdomCorporation tax at 28%
    
    
    168
    
    
    
    197
    
    
    
    37Corporation tax adjustment in respect of prior years
    
    
    (161
    )
    
    
    (31
    )
    
    
    (54
    )Deferred tax
    
    
    53
    
    
    
    259
    
    
    
    339Deferred tax adjustment in respect of prior years
    
    
    (43
    )
    
    
    (5
    )
    
    
    17
    
    
    
    420
    
    
    
    322OverseasCorporate tax
    
    
    105
    
    
    
    74
    
    
    
    105Corporate tax adjustment in respect of prior years
    
    
    (2
    )
    
    
    (364
    )
    
    
    38Deferred tax
    
    
    393
    
    
    
    279
    
    
    
    37Deferred tax adjustment in respect of prior years
    
    
    (52
    )
    
    
    395
    
    
    
    (30
    )444
    
    
    
    384
    
    
    
    150Total tax charge
    
    
    461
    
    
    
    804
    
    
    
    472
  Tax on items (credited)/charged to other comprehensive income and equity
 2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £mCorporation taxShare-based payments
    
    
    (1
    )
    
    
    (3
    )
    
    
    (2
    )Deferred taxShare of other comprehensive income of joint ventures and associates
    
    
    (2
    )
    
    
    4
    
    
    
    Available-for-sale investments
    
    
    1
    
    
    
    5
    
    
    
    (7
    )Cash flow hedges
    
    
    2
    
    
    
    (9
    )
    
    
    (19
    )Share-based payments
    
    
    (4
    )
    
    
    
    
    
    
    3Actuarial gains/(losses) (i)
    
    
    181
    
    
    
    (175
    )
    
    
    (678
    )177
    
    
    
    (178
    )
    
    
    (703
    )Total tax recognised in the statement of comprehensive income
    
    
    182
    
    
    
    (175
    )
    
    
    (704
    )Total tax relating to share-based payments recognised directly in equity
    
    
    (5
    )
    
    
    (3
    )
    
    
    1177
    
    
    
    (178
    )
    
    
    (703
    )
 
 (i)
    2010 includes a £42m charge relating to a change in US tax legislation under the Patient
Protection and Affordable Care Act.
      132       National Grid plc Annual Report and Accounts 2010/11




---



##### 



5. Taxation continued
  Before
    
    
    After
    
    
    Before
    
    
    After
    
    
    Before
    
    
    Afterexceptional
    
    
    exceptional
    
    
    exceptional
    
    
    exceptional
    
    
    exceptional
    
    
    exceptionalitems,
    
    
    items,
    
    
    items,
    
    
    items,
    
    
    items,
    
    
    items,remeasurements
    
    
    remeasurements
    
    
    remeasurements
    
    
    remeasurements
    
    
    remeasurements
    
    
    remeasurementsand stranded
    
    
    and stranded
    
    
    and stranded
    
    
    and stranded
    
    
    and stranded
    
    
    and strandedcost recoveries
    
    
    cost recoveries
    
    
    cost recoveries
    
    
    cost recoveries
    
    
    cost recoveries
    
    
    cost recoveries2011
    
    
    2011
    
    
    2010
    
    
    2010
    
    
    2009
    
    
    2009£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mProfit before taxBefore exceptional items, remeasurements

and stranded cost recoveries
    
    
    2,473
    
    
    
    2,473
    
    
    
    1,974
    
    
    
    1,974
    
    
    
    1,770
    
    
    
    1,770Exceptional items, remeasurements and
stranded cost recoveries
    
    
    
    
    
    
    151
    
    
    
    
    
    
    
    219
    
    
    
    
    
    
    
    (376
    )Profit before tax
    
    
    2,473
    
    
    
    2,624
    
    
    
    1,974
    
    
    
    2,193
    
    
    
    1,770
    
    
    
    1,394Profit before tax multiplied by UK
corporation
tax rate of 28%
    
    
    692
    
    
    
    735
    
    
    
    553
    
    
    
    614
    
    
    
    496
    
    
    
    390Effects of:Adjustments in respect of prior years
    
    
    (95
    )
    
    
    (258
    )
    
    
    (82
    )
    
    
    (5
    )
    
    
    (45
    )
    
    
    (46
    )Expenses not deductible for tax purposes
    
    
    42
    
    
    
    204
    
    
    
    62
    
    
    
    237
    
    
    
    76
    
    
    
    82Non-taxable income
    
    
    5
    
    
    
    (136
    )
    
    
    (6
    )
    
    
    (131
    )
    
    
    (35
    )
    
    
    (34
    )Adjustment in respect of foreign tax rates
    
    
    74
    
    
    
    120
    
    
    
    37
    
    
    
    77
    
    
    
    38
    
    
    
    32Impact of share-based payments
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Deferred tax impact of change in UK tax rate
    
    
    
    
    
    
    (226
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    3
    
    
    
    21
    
    
    
    (11
    )
    
    
    12
    
    
    
    (14
    )
    
    
    47Total tax
    
    
    722
    
    
    
    461
    
    
    
    553
    
    
    
    804
    
    
    
    517
    
    
    
    472%
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %Effective tax rate
    
    
    29.2
    
    
    
    17.6
    
    
    
    28.0
    
    
    
    36.7
    
    
    
    29.2
    
    
    
    33.9
 Factors that may affect future tax charges
 
    Annual Report and Accounts 2010/11 National Grid plc     133




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
 
 
 6. Discontinued operations
  Results of discontinued operations
 2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £mRevenue
    
    
    
    
    
    
    
    
    
    
    97Operating costs
    
    
    
    
    
    
    
    
    
    
    (84
    )Total operating profit
    
    
    
    
    
    
    
    
    
    
    13Taxation
    
    
    
    
    
    
    
    
    
    
    (4
    )Profit after tax
    
    
    
    
    
    
    
    
    
    
    9Gain on disposal
    
    
    
    
    
    
    
    
    
    
    27Taxation (i)
    
    
    
    
    
    
    
    
    
    
    (11
    )Gain on disposal after tax
    
    
    
    
    
    
    
    
    
    
    16Total profit for the year from discontinued operations
    
    
    
    
    
    
    
    
    
    
    25
 
 (i)
    The tax charge for the year ended 31 March 2009 included a current tax charge of £564m
offset by a deferred tax credit of £564m. 
 7. Dividends
  2011
    
    
    
    
    
    
    
    
    
    
    20102011
    
    
    2011
    
    
    settled
    
    
    2010
    
    
    2010
    
    
    settled
    
    
    2009
    
    
    2009pence
    
    
    Total
    
    
    via scrip
    
    
    pence
    
    
    Total
    
    
    via scrip
    
    
    pence
    
    
    Totalper share
    
    
    £m
    
    
    £m
    
    
    per share
    
    
    £m
    
    
    £m
    
    
    per share
    
    
    £mInterim  year ended 31 March 2011
    
    
    12.90
    
    
    
    451
    
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Final  year ended 31 March 2010
    
    
    24.84
    
    
    
    613
    
    
    
    141
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interim  year ended 31 March 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13.65
    
    
    
    336
    
    
    
    68
    
    
    
    
    
    
    
    Final  year ended 31 March 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23.00
    
    
    
    557
    
    
    
    137
    
    
    
    
    
    
    
    Interim  year ended 31 March 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12.64
    
    
    
    307Final  year ended 31 March 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21.30
    
    
    
    53137.74
    
    
    
    1,064
    
    
    
    206
    
    
    
    36.65
    
    
    
    893
    
    
    
    205
    
    
    
    33.94
    
    
    
    838
  2011
    
    
    2011
    
    
    2011
    
    
    2010
    
    
    2010
    
    
    2010
    
    
    2009
    
    
    2009pence
    
    
    impact
    
    
    pence
    
    
    pence
    
    
    impact
    
    
    pence
    
    
    pence
    
    
    penceper share
    
    
    of rights
    
    
    per share
    
    
    per share
    
    
    of rights
    
    
    per share
    
    
    per share
    
    
    per share(actual
    )
    
    issue
    
    
    (rebased
    )
    
    (actual
    )
    
    issue
    
    
    (rebased
    )
    
    (actual
    )
    
    (rebased
    )Interim  year ended 31 March 2011
    
    
    12.90
    
    
    
    
    
    
    
    12.90
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Final  year ended 31 March 2010
    
    
    24.84
    
    
    
    (3.10
    )
    
    
    21.74
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interim  year ended 31 March 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13.65
    
    
    
    (1.71
    )
    
    
    11.94
    
    
    
    
    
    
    
    Final  year ended 31 March 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23.00
    
    
    
    (1.87
    )
    
    
    20.13
    
    
    
    
    
    
    
    Interim  year ended 31 March 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12.64
    
    
    
    11.06Final  year ended 31 March 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21.30
    
    
    
    18.6437.74
    
    
    
    (3.10
    )
    
    
    34.64
    
    
    
    36.65
    
    
    
    (3.58
    )
    
    
    32.07
    
    
    
    33.94
    
    
    
    29.70
      134       National Grid plc Annual Report and Accounts 2010/11




---



##### 



8. Earnings per share
  (a) Basic earnings per share
 Earnings
    
    
    
    
    
    
    Earnings
    
    
    
    
    
    
    EarningsEarnings
    
    
    per share
    
    
    Earnings
    
    
    per share
    
    
    Earnings
    
    
    per share2011
    
    
    2011
    
    
    2010
    
    
    2010
    *
    
    2009
    
    
    2009
    *£m
    
    
    pence
    
    
    £m
    
    
    pence
    
    
    £m
    
    
    penceAdjusted earnings  continuing operations
    
    
    1,747
    
    
    
    51.7
    
    
    
    1,418
    
    
    
    49.5
    
    
    
    1,250
    
    
    
    43.3Exceptional items after tax
    
    
    (16
    )
    
    
    (0.5
    )
    
    
    (270
    )
    
    
    (9.4
    )
    
    
    (247
    )
    
    
    (8.6
    )Remeasurements after tax
    
    
    219
    
    
    
    6.5
    
    
    
    17
    
    
    
    0.6
    
    
    
    (340
    )
    
    
    (11.8
    )Stranded cost recoveries after tax
    
    
    209
    
    
    
    6.2
    
    
    
    221
    
    
    
    7.7
    
    
    
    256
    
    
    
    8.9Earnings  continuing operations
    
    
    2,159
    
    
    
    63.9
    
    
    
    1,386
    
    
    
    48.4
    
    
    
    919
    
    
    
    31.8Earnings  discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    0.9Earnings
    
    
    2,159
    
    
    
    63.9
    
    
    
    1,386
    
    
    
    48.4
    
    
    
    944
    
    
    
    32.7
 2011
    
    
    
    
    
    
    2010
    
    
    
    
    
    
    2009millions
    
    
    
    
    
    
    millions
    
    
    
    
    
    
    millionsWeighted average number of shares  basic*
    
    
    
    
    
    
    3,378
    
    
    
    
    
    
    
    2,864
    
    
    
    
    
    
    
    2,886
 
 *Comparative EPS data have been restated to reflect the impact of the bonus element of the
rights issue and as a result of the additional shares issued as scrip dividends (b) Diluted earnings per share
 Earnings
    
    
    
    
    
    
    Earnings
    
    
    
    
    
    
    EarningsEarnings
    
    
    per share
    
    
    Earnings
    
    
    per share
    
    
    Earnings
    
    
    per share2011
    
    
    2011
    
    
    2010
    
    
    2010
    *
    
    2009
    
    
    2009
    *£m
    
    
    pence
    
    
    £m
    
    
    pence
    
    
    £m
    
    
    penceAdjusted diluted earnings  continuing operations
    
    
    1,747
    
    
    
    51.4
    
    
    
    1,418
    
    
    
    49.3
    
    
    
    1,250
    
    
    
    43.1Exceptional items after tax
    
    
    (16
    )
    
    
    (0.5
    )
    
    
    (270
    )
    
    
    (9.4
    )
    
    
    (247
    )
    
    
    (8.5
    )Remeasurements after tax
    
    
    219
    
    
    
    6.5
    
    
    
    17
    
    
    
    0.6
    
    
    
    (340
    )
    
    
    (11.7
    )Stranded cost recoveries after tax
    
    
    209
    
    
    
    6.2
    
    
    
    221
    
    
    
    7.7
    
    
    
    256
    
    
    
    8.8Diluted earnings  continuing operations
    
    
    2,159
    
    
    
    63.6
    
    
    
    1,386
    
    
    
    48.2
    
    
    
    919
    
    
    
    31.7Diluted earnings  discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    0.8Diluted earnings
    
    
    2,159
    
    
    
    63.6
    
    
    
    1,386
    
    
    
    48.2
    
    
    
    944
    
    
    
    32.5
 2011
    
    
    
    
    
    
    2010
    
    
    
    
    
    
    2009millions
    
    
    
    
    
    
    millions
    
    
    
    
    
    
    millionsWeighted average number of shares  diluted*
    
    
    
    
    
    
    3,397
    
    
    
    
    
    
    
    2,877
    
    
    
    
    
    
    
    2,903
 
 *Comparative EPS data have been restated to reflect the impact of the bonus element of the
rights issue and as a result of the additional shares issued as scrip dividends (c) Reconciliation of basic to diluted average number of shares
 2011
    
    
    
    
    
    
    2010
    
    
    
    
    
    
    2009millions
    
    
    
    
    
    
    millions
    
    
    
    
    
    
    millionsWeighted average number of ordinary shares  basic
    
    
    
    
    
    
    3,378
    
    
    
    
    
    
    
    2,864
    
    
    
    
    
    
    
    2,886Effect of dilutive potential ordinary shares  employee share plans
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    17Weighted average number of ordinary shares  diluted
    
    
    
    
    
    
    3,397
    
    
    
    
    
    
    
    2,877
    
    
    
    
    
    
    
    2,903
 
    Annual Report and Accounts 2010/11 National Grid plc       135




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
 
 9. Goodwill
 Total£mCost at 31 March 2009
    
    
    5,391Exchange adjustments
    
    
    (289
    )Cost at 31 March 2010
    
    
    5,102Exchange adjustments
    
    
    (280
    )Impairment of goodwill on businesses reclassified as held for sale (notes 3 and 18) (i)
    
    
    (34
    )Reclassified as held for sale
    
    
    (12
    )Cost at 31 March 2011
    
    
    4,776Net book value at 31 March 2011
    
    
    4,776Net book value at 31 March 2010
    
    
    5,102
 (i)
    Relates to our gas operations (£30m) and our electricity distribution operations (£4m).
      136       National Grid plc Annual Report and Accounts 2010/11




---



##### 



10. Other intangible assets
 Acquisition-Software
    
    
    related
    
    
    Other
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £mNon-currentCost at 31 March 2009
    
    
    525
    
    
    
    129
    
    
    
    16
    
    
    
    670Exchange adjustments
    
    
    (8
    )
    
    
    (7
    )
    
    
    
    
    
    
    (15
    )Additions
    
    
    103
    
    
    
    
    
    
    
    1
    
    
    
    104Reclassifications and disposals (i)
    
    
    4
    
    
    
    
    
    
    
    1
    
    
    
    5Cost at 31 March 2010
    
    
    624
    
    
    
    122
    
    
    
    18
    
    
    
    764Exchange adjustments
    
    
    (13
    )
    
    
    (7
    )
    
    
    
    
    
    
    (20
    )Additions
    
    
    176
    
    
    
    
    
    
    
    
    
    
    
    176Reclassified as held for sale
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    (4
    )Other reclassifications and disposals (i)
    
    
    17
    
    
    
    
    
    
    
    (14
    )
    
    
    3Cost at 31 March 2011
    
    
    800
    
    
    
    115
    
    
    
    4
    
    
    
    919Amortisation at 31 March 2009
    
    
    (282
    )
    
    
    (10
    )
    
    
    (8
    )
    
    
    (300
    )Exchange adjustments
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    6Amortisation charge for the year
    
    
    (52
    )
    
    
    (6
    )
    
    
    (5
    )
    
    
    (63
    )Impairment charge for the year
    
    
    (7
    )
    
    
    (11
    )
    
    
    
    
    
    
    (18
    )Reclassifications and disposals (i)
    
    
    1
    
    
    
    
    
    
    
    (1
    )
    
    
    Amortisation at 31 March 2010
    
    
    (334
    )
    
    
    (27
    )
    
    
    (14
    )
    
    
    (375
    )Exchange adjustments
    
    
    4
    
    
    
    3
    
    
    
    
    
    
    
    7Amortisation charge for the year
    
    
    (62
    )
    
    
    (7
    )
    
    
    (1
    )
    
    
    (70
    )Reclassified as held for sale
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3Other reclassifications and disposals (i)
    
    
    6
    
    
    
    
    
    
    
    11
    
    
    
    17Amortisation at 31 March 2011
    
    
    (383
    )
    
    
    (31
    )
    
    
    (4
    )
    
    
    (418
    )Net book value at 31 March 2011
    
    
    417
    
    
    
    84
    
    
    
    
    
    
    
    501Net book value at 31 March 2010
    
    
    290
    
    
    
    95
    
    
    
    4
    
    
    
    389
 (i)
    Primarily represents reclassifications between property, plant and equipment, trade and
other receivables and between categories.
 
    Annual Report and Accounts 2010/11 National Grid plc       137




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
 
 
 11. Property, plant and equipment
 Assets
    
    
    Motorin the
    
    
    vehiclesLand and
    
    
    Plant and
    
    
    course of
    
    
    and officebuildings
    
    
    machinery
    
    
    construction
    
    
    equipment
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mCost at 31 March 2009
    
    
    1,504
    
    
    
    37,516
    
    
    
    2,485
    
    
    
    889
    
    
    
    42,394Exchange adjustments
    
    
    (54
    )
    
    
    (765
    )
    
    
    (19
    )
    
    
    (2
    )
    
    
    (840
    )Additions
    
    
    43
    
    
    
    893
    
    
    
    2,108
    
    
    
    104
    
    
    
    3,148Disposals
    
    
    (12
    )
    
    
    (288
    )
    
    
    (2
    )
    
    
    (48
    )
    
    
    (350
    )Reclassifications (i)
    
    
    91
    
    
    
    1,874
    
    
    
    (2,031
    )
    
    
    83
    
    
    
    17Cost at 31 March 2010
    
    
    1,572
    
    
    
    39,230
    
    
    
    2,541
    
    
    
    1,026
    
    
    
    44,369Exchange adjustments
    
    
    (56
    )
    
    
    (812
    )
    
    
    (30
    )
    
    
    (2
    )
    
    
    (900
    )Additions
    
    
    123
    
    
    
    888
    
    
    
    2,194
    
    
    
    87
    
    
    
    3,292Disposals
    
    
    (22
    )
    
    
    (305
    )
    
    
    
    
    
    
    (25
    )
    
    
    (352
    )Reclassified as held for sale
    
    
    (5
    )
    
    
    (278
    )
    
    
    (3
    )
    
    
    (1
    )
    
    
    (287
    )Reclassifications (i)
    
    
    146
    
    
    
    2,175
    
    
    
    (2,285
    )
    
    
    (33
    )
    
    
    3Cost at 31 March 2011
    
    
    1,758
    
    
    
    40,898
    
    
    
    2,417
    
    
    
    1,052
    
    
    
    46,125Depreciation at 31 March 2009
    
    
    (242
    )
    
    
    (12,084
    )
    
    
    
    
    
    
    (523
    )
    
    
    (12,849
    )Exchange adjustments
    
    
    4
    
    
    
    206
    
    
    
    
    
    
    
    2
    
    
    
    212Depreciation charge for the year (ii)
    
    
    (30
    )
    
    
    (1,027
    )
    
    
    
    
    
    
    (91
    )
    
    
    (1,148
    )Impairment charge for the year (iii)
    
    
    (3
    )
    
    
    (23
    )
    
    
    (2
    )
    
    
    (1
    )
    
    
    (29
    )Disposals
    
    
    10
    
    
    
    261
    
    
    
    
    
    
    
    44
    
    
    
    315Reclassifications (i)
    
    
    (22
    )
    
    
    43
    
    
    
    
    
    
    
    (36
    )
    
    
    (15
    )Depreciation at 31 March 2010
    
    
    (283
    )
    
    
    (12,624
    )
    
    
    (2
    )
    
    
    (605
    )
    
    
    (13,514
    )Exchange adjustments
    
    
    7
    
    
    
    218
    
    
    
    
    
    
    
    
    
    
    
    225Depreciation charge for the year (ii)
    
    
    (39
    )
    
    
    (1,072
    )
    
    
    
    
    
    
    (89
    )
    
    
    (1,200
    )Impairment charge for the year (iv)
    
    
    
    
    
    
    (20
    )
    
    
    
    
    
    
    
    
    
    
    (20
    )Disposals
    
    
    9
    
    
    
    228
    
    
    
    
    
    
    
    19
    
    
    
    256Reclassified as held for sale
    
    
    5
    
    
    
    78
    
    
    
    
    
    
    
    1
    
    
    
    84Reclassifications (i)
    
    
    (108
    )
    
    
    92
    
    
    
    
    
    
    
    16
    
    
    
    Depreciation at 31 March 2011
    
    
    (409
    )
    
    
    (13,100
    )
    
    
    (2
    )
    
    
    (658
    )
    
    
    (14,169
    )Net book value at 31 March 2011
    
    
    1,349
    
    
    
    27,798
    
    
    
    2,415
    
    
    
    394
    
    
    
    31,956Net book value at 31 March 2010
    
    
    1,289
    
    
    
    26,606
    
    
    
    2,539
    
    
    
    421
    
    
    
    30,855
 
 (i)
    Primarily represents reclassifications between categories, other intangible assets, trade
and other receivables and other payables.(ii)
    Includes amounts in respect of capitalised depreciation of £18m (2010: £17m).(iii)
    Relates to write-down of the liquefied natural gas (LNG) storage facilities.(iv)
    Relates to
write-down of certain of our US generation assets. 2011
    
    
    2010£m
    
    
    £mInformation in relation to property, plant and equipmentCapitalised interest included within cost
    
    
    1,023
    
    
    
    903Net book value of assets held under finance leases
    
    
    199
    
    
    
    202Additions to assets held under finance leases
    
    
    68
    
    
    
    13Contributions to cost of property, plant and equipment included within:Trade and other payables
    
    
    40
    
    
    
    39Non-current liabilities
    
    
    1,476
    
    
    
    1,478
      138       National Grid plc Annual Report and Accounts 2010/11




---



##### 



12. Other non-current assets
 2011
    
    
    2010£m
    
    
    £mCommodity contract assets
    
    
    94
    
    
    
    84Other receivables
    
    
    37
    
    
    
    71Prepayments
    
    
    4
    
    
    
    7135
    
    
    
    162
  
 13. Financial and other investments
 2011
    
    
    2010£m
    
    
    £mNon-currentAvailable-for-sale investments
    
    
    237
    
    
    
    236Investments in joint ventures and associates (note 13a)
    
    
    356
    
    
    
    250593
    
    
    
    486CurrentAvailable-for-sale investments
    
    
    2,776
    
    
    
    1,285Loans and receivables
    
    
    163
    
    
    
    1122,939
    
    
    
    1,397Total financial and other investments
    
    
    3,532
    
    
    
    1,883Financial and other investments include the following:Investments in short-term money funds
    
    
    2,498
    
    
    
    1,000Managed investments in equity and bonds (i)
    
    
    388
    
    
    
    385Investment in joint ventures and associates (note 13a)
    
    
    356
    
    
    
    250Cash surrender value of life insurance policies
    
    
    127
    
    
    
    126Other investments
    
    
    2
    
    
    
    7Restricted cash balancesCollateral
    
    
    96
    
    
    
    58Other
    
    
    65
    
    
    
    573,532
    
    
    
    1,883
 (i)
    Includes £282m of current investments which are held by insurance captives and are
therefore restricted.  (a) Investments in joint ventures and associates
 2011
    
    
    2010£m
    
    
    £mShare of net assets at 1 April
    
    
    250
    
    
    
    168Exchange adjustments
    
    
    5
    
    
    
    (7
    )Additions
    
    
    135
    
    
    
    86Share of retained profit for the year
    
    
    7
    
    
    
    8Dividends received
    
    
    (9
    )
    
    
    (18
    )Share of other comprehensive income
    
    
    (7
    )
    
    
    9Impairment charge (note 3)
    
    
    (29
    )
    
    
    Other movements
    
    
    4
    
    
    
    4Share of net assets at 31 March
    
    
    356
    
    
    
    250
 
    Annual Report and Accounts 2010/11 National Grid plc       139




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
 
 14. Derivative financial instruments
  2011
    
    2010Assets
    
    
    Liabilities
    
    
    Total
    
    
    Assets
    
    
    Liabilities
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mFair value hedgesInterest rate swaps
    
    
    99
    
    
    
    (9
    )
    
    
    90
    
    
    
    128
    
    
    
    (4
    )
    
    
    124Cross-currency interest rate swaps
    
    
    450
    
    
    
    (4
    )
    
    
    446
    
    
    
    589
    
    
    
    (20
    )
    
    
    569549
    
    
    
    (13
    )
    
    
    536
    
    
    
    717
    
    
    
    (24
    )
    
    
    693Cash flow hedgesInterest rate swaps
    
    
    6
    
    
    
    (50
    )
    
    
    (44
    )
    
    
    2
    
    
    
    (112
    )
    
    
    (110
    )Cross-currency interest rate swaps
    
    
    685
    
    
    
    (28
    )
    
    
    657
    
    
    
    924
    
    
    
    (16
    )
    
    
    908Foreign exchange forward contracts
    
    
    2
    
    
    
    (1
    )
    
    
    1
    
    
    
    2
    
    
    
    
    
    
    
    2693
    
    
    
    (79
    )
    
    
    614
    
    
    
    928
    
    
    
    (128
    )
    
    
    800Net investment hedgesCross-currency interest rate swaps
    
    
    179
    
    
    
    (329
    )
    
    
    (150
    )
    
    
    135
    
    
    
    (660
    )
    
    
    (525
    )Foreign exchange forward contracts
    
    
    26
    
    
    
    (4
    )
    
    
    22
    
    
    
    5
    
    
    
    (42
    )
    
    
    (37
    )205
    
    
    
    (333
    )
    
    
    (128
    )
    
    
    140
    
    
    
    (702
    )
    
    
    (562
    )Derivatives not in a formal hedge relationshipInterest rate swaps
    
    
    339
    
    
    
    (258
    )
    
    
    81
    
    
    
    200
    
    
    
    (233
    )
    
    
    (33
    )Cross-currency interest rate swaps
    
    
    50
    
    
    
    (4
    )
    
    
    46
    
    
    
    58
    
    
    
    (1
    )
    
    
    57Foreign exchange forward contracts
    
    
    19
    
    
    
    (4
    )
    
    
    15
    
    
    
    3
    
    
    
    (43
    )
    
    
    (40
    )Forward rate agreements
    
    
    
    
    
    
    (20
    )
    
    
    (20
    )
    
    
    
    
    
    
    (47
    )
    
    
    (47
    )408
    
    
    
    (286
    )
    
    
    122
    
    
    
    261
    
    
    
    (324
    )
    
    
    (63
    )1,855
    
    
    
    (711
    )
    
    
    1,144
    
    
    
    2,046
    
    
    
    (1,178
    )
    
    
    868Hedge positions offset within derivative instruments
    
    
    (117
    )
    
    
    117
    
    
    
    
    
    
    
    (304
    )
    
    
    304
    
    
    
    Total
    
    
    1,738
    
    
    
    (594
    )
    
    
    1,144
    
    
    
    1,742
    
    
    
    (874
    )
    
    
    868
  2011
    
    2010Assets
    
    
    Liabilities
    
    
    Total
    
    
    Assets
    
    
    Liabilities
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mLess than 1 year
    
    
    468
    
    
    
    (190
    )
    
    
    278
    
    
    
    248
    
    
    
    (212
    )
    
    
    36Current
    
    
    468
    
    
    
    (190
    )
    
    
    278
    
    
    
    248
    
    
    
    (212
    )
    
    
    36In 1  2 years
    
    
    129
    
    
    
    (45
    )
    
    
    84
    
    
    
    278
    
    
    
    (174
    )
    
    
    104In 2  3 years
    
    
    167
    
    
    
    (37
    )
    
    
    130
    
    
    
    152
    
    
    
    (69
    )
    
    
    83In 3  4 years
    
    
    96
    
    
    
    (28
    )
    
    
    68
    
    
    
    240
    
    
    
    (106
    )
    
    
    134In 4  5 years
    
    
    66
    
    
    
    (2
    )
    
    
    64
    
    
    
    57
    
    
    
    (14
    )
    
    
    43More than 5 years
    
    
    812
    
    
    
    (292
    )
    
    
    520
    
    
    
    767
    
    
    
    (299
    )
    
    
    468Non-current
    
    
    1,270
    
    
    
    (404
    )
    
    
    866
    
    
    
    1,494
    
    
    
    (662
    )
    
    
    8321,738
    
    
    
    (594
    )
    
    
    1,144
    
    
    
    1,742
    
    
    
    (874
    )
    
    
    868
  2011
    
    
    2010£m
    
    
    £mInterest rate swaps
    
    
    (19,217
    )
    
    
    (13,320
    )Cross-currency interest rate swaps
    
    
    (7,585
    )
    
    
    (9,528
    )Foreign exchange forward contracts
    
    
    (4,028
    )
    
    
    (1,989
    )Forward rate agreements
    
    
    (13,752
    )
    
    
    (10,454
    )Other
    
    
    (314
    )
    
    
    (314
    )Total
    
    
    (44,896
    )
    
    
    (35,605
    )
 *The notional contract amounts of derivatives indicate the gross nominal value of
transactions outstanding at the balance sheet date
      140       National Grid plc Annual Report and Accounts 2010/11




---



##### 



15. Inventories and current intangible assets
 2011
    
    
    2010£m
    
    
    £mFuel stocks
    
    
    114
    
    
    
    198Raw materials and consumables
    
    
    152
    
    
    
    162Work in progress
    
    
    12
    
    
    
    12Current intangible assets  emission allowances
    
    
    42
    
    
    
    35320
    
    
    
    407
  
 16. Trade and other receivables
 2011
    
    
    2010£m
    
    
    £mTrade receivables
    
    
    1,163
    
    
    
    1,296Prepayments and accrued income
    
    
    999
    
    
    
    937Commodity contract assets
    
    
    16
    
    
    
    21Other receivables
    
    
    34
    
    
    
    392,212
    
    
    
    2,293
  Provision for impairment of receivables
 2011
    
    
    2010£m
    
    
    £mAt 1 April
    
    
    311
    
    
    
    303Exchange adjustments
    
    
    (16
    )
    
    
    (15
    )Charge for the year, net of recoveries
    
    
    112
    
    
    
    161Uncollectible amounts written off against receivables
    
    
    (124
    )
    
    
    (138
    )At 31 March
    
    
    283
    
    
    
    311
 Trade receivables past due but not impaired
 2011
    
    
    2010£m
    
    
    £mUp to 3 months past due
    
    
    136
    
    
    
    1113 to 6 months past due
    
    
    34
    
    
    
    35Over 6 months past due
    
    
    74
    
    
    
    102244
    
    
    
    248
 
    Annual Report and Accounts 2010/11 National Grid plc       141




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
 
 17. Cash and cash equivalents
 2011
    
    
    2010£m
    
    
    £mCash at bank
    
    
    94
    
    
    
    136Short-term deposits
    
    
    290
    
    
    
    584Cash and cash equivalents excluding bank overdrafts
    
    
    384
    
    
    
    720Bank overdrafts
    
    
    (42
    )
    
    
    (29
    )Net cash and cash equivalents
    
    
    342
    
    
    
    691
    
 18. Businesses classified as held for sale
   2011£mGoodwill
    
    
    12Other intangible assets
    
    
    1Property, plant and equipment
    
    
    203Other receivables
    
    
    40Non-current assets
    
    
    256Inventories
    
    
    5Trade and other receivables
    
    
    29Current assets
    
    
    34Assets of businesses held for sale
    
    
    290Trade and other payables
    
    
    (17
    )Current liabilities
    
    
    (17
    )Borrowings
    
    
    (9
    )Other non-current liabilities
    
    
    (6
    )Deferred tax liabilities
    
    
    (29
    )Pensions and other post-retirement benefit obligations
    
    
    (9
    )Provisions
    
    
    (40
    )Non-current liabilities
    
    
    (93
    )Liabilities of businesses held for sale
    
    
    (110
    )
      142       National Grid plc Annual Report and Accounts 2010/11




---



##### 



19. Borrowings
 2011
    
    
    2010£m
    
    
    £mCurrentBank loans
    
    
    831
    
    
    
    890Bonds
    
    
    1,595
    
    
    
    1,730Commercial paper
    
    
    457
    
    
    
    121Finance leases
    
    
    20
    
    
    
    29Other loans
    
    
    7
    
    
    
    7Bank overdrafts
    
    
    42
    
    
    
    292,952
    
    
    
    2,806Non-currentBank loans
    
    
    2,118
    
    
    
    2,163Bonds
    
    
    17,787
    
    
    
    19,835Finance leases
    
    
    182
    
    
    
    173Other loans
    
    
    159
    
    
    
    14720,246
    
    
    
    22,318Total
    
    
    23,198
    
    
    
    25,124
  2011
    
    
    2010£m
    
    
    £mIn one year or less
    
    
    2,952
    
    
    
    2,8061-2 years
    
    
    1,225
    
    
    
    2,1462-3 years
    
    
    1,610
    
    
    
    1,3563-4 years
    
    
    1,766
    
    
    
    1,8904-5 years
    
    
    424
    
    
    
    1,862In more than 5 years:by instalments
    
    
    77
    
    
    
    22other than by instalments
    
    
    15,144
    
    
    
    15,04223,198
    
    
    
    25,124
    Finance lease obligations
 2011
    
    
    2010£m
    
    
    £mGross finance lease liabilities are repayable as follows:Less than 1 year
    
    
    20
    
    
    
    301-5 years
    
    
    123
    
    
    
    107More than 5 years
    
    
    105
    
    
    
    135248
    
    
    
    272Less: finance charges allocated to future periods
    
    
    (46
    )
    
    
    (70
    )202
    
    
    
    202The present value of finance lease liabilities is as follows:Less than 1 year
    
    
    20
    
    
    
    291-5 years
    
    
    104
    
    
    
    86More than 5 years
    
    
    78
    
    
    
    87202
    
    
    
    202
 
    Annual Report and Accounts 2010/11 National Grid plc       143




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
 
 20. Trade and other payables
 2011
    
    
    2010£m
    
    
    £mTrade payables
    
    
    1,720
    
    
    
    1,702Deferred income
    
    
    261
    
    
    
    244Commodity contract liabilities
    
    
    118
    
    
    
    184Social security and other taxes
    
    
    129
    
    
    
    132Other payables
    
    
    600
    
    
    
    5852,828
    
    
    
    2,847
  
 21. Other non-current liabilities
 2011
    
    
    2010£m
    
    
    £mDeferred income
    
    
    1,564
    
    
    
    1,566Commodity contract liabilities
    
    
    101
    
    
    
    143Other payables
    
    
    279
    
    
    
    2651,944
    
    
    
    1,974
      144       National Grid plc Annual Report and Accounts 2010/11




---



##### 



22. Deferred tax assets and liabilities
  Deferred tax (assets)/liabilities
 Pensionsand otherAccelerated
    
    
    Share-
    
    
    post-
    
    
    
    
    
    
    Other nettax
    
    
    based
    
    
    retirement
    
    
    Financial
    
    
    temporarydepreciation
    
    
    payments
    
    
    benefits
    
    
    instruments
    
    
    differences
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mDeferred tax assets at 31 March 2009
    
    
    (2
    )
    
    
    (13
    )
    
    
    (1,457
    )
    
    
    (33
    )
    
    
    (504
    )
    
    
    (2,009
    )Deferred tax liabilities at 31 March 2009
    
    
    4,299
    
    
    
    
    
    
    
    69
    
    
    
    29
    
    
    
    136
    
    
    
    4,533At 1 April 2009
    
    
    4,297
    
    
    
    (13
    )
    
    
    (1,388
    )
    
    
    (4
    )
    
    
    (368
    )
    
    
    2,524Exchange adjustments
    
    
    (54
    )
    
    
    
    
    
    
    84
    
    
    
    (3
    )
    
    
    13
    
    
    
    40Charged/(credited) to income statement
    
    
    1,129
    
    
    
    1
    
    
    
    154
    
    
    
    (42
    )
    
    
    (314
    )
    
    
    928Credited to equity
    
    
    
    
    
    
    
    
    
    
    (175
    )
    
    
    
    
    
    
    
    
    
    
    (175
    )Other
    
    
    (285
    )
    
    
    
    
    
    
    180
    
    
    
    (42
    )
    
    
    154
    
    
    
    7At 31 March 2010
    
    
    5,087
    
    
    
    (12
    )
    
    
    (1,145
    )
    
    
    (91
    )
    
    
    (515
    )
    
    
    3,324Deferred tax assets at 31 March 2010
    
    
    (2
    )
    
    
    (12
    )
    
    
    (1,235
    )
    
    
    (103
    )
    
    
    (657
    )
    
    
    (2,009
    )Deferred tax liabilities at 31 March 2010
    
    
    5,089
    
    
    
    
    
    
    
    90
    
    
    
    12
    
    
    
    142
    
    
    
    5,333At 1 April 2010
    
    
    5,087
    
    
    
    (12
    )
    
    
    (1,145
    )
    
    
    (91
    )
    
    
    (515
    )
    
    
    3,324Exchange adjustments
    
    
    (122
    )
    
    
    
    
    
    
    49
    
    
    
    4
    
    
    
    29
    
    
    
    (40
    )Charged/(credited) to income statement
    
    
    251
    
    
    
    (2
    )
    
    
    137
    
    
    
    32
    
    
    
    (67
    )
    
    
    351(Credited)/charged to equity
    
    
    
    
    
    
    (4
    )
    
    
    181
    
    
    
    1
    
    
    
    
    
    
    
    178Reclassified as held for sale
    
    
    (31
    )
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    (3
    )
    
    
    (29
    )Other
    
    
    (1
    )
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    (19
    )
    
    
    (18
    )At 31 March 2011
    
    
    5,184
    
    
    
    (18
    )
    
    
    (771
    )
    
    
    (54
    )
    
    
    (575
    )
    
    
    3,766Deferred tax assets at 31 March 2011
    
    
    (2
    )
    
    
    (18
    )
    
    
    (882
    )
    
    
    (60
    )
    
    
    (706
    )
    
    
    (1,668
    )Deferred tax liabilities at 31 March 2011
    
    
    5,186
    
    
    
    
    
    
    
    111
    
    
    
    6
    
    
    
    131
    
    
    
    5,4345,184
    
    
    
    (18
    )
    
    
    (771
    )
    
    
    (54
    )
    
    
    (575
    )
    
    
    3,766
  2011
    
    
    2010£m
    
    
    £mDeferred tax liabilities
    
    
    3,766
    
    
    
    3,324Deferred tax assets
    
    
    
    
    
    
    3,766
    
    
    
    3,324
   2011
    
    
    2010£m
    
    
    £mCapital losses
    
    
    368
    
    
    
    401Non-trade deficits
    
    
    2
    
    
    
    2Trading losses
    
    
    7
    
    
    
    2
 
    Annual Report and Accounts 2010/11 | National Grid plc       145




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
 
 
 23. Pensions and other post-retirement benefits
   Amounts recognised in the income statement and statement of other comprehensive income
 Pensions
    
    US other post-retirement benefits2011
    
    
    2010
    
    
    2009
    
    
    2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mIncluded within payroll costsDefined contribution scheme costs
    
    
    11
    
    
    
    7
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    Defined benefit scheme costs:Current service cost
    
    
    165
    
    
    
    112
    
    
    
    134
    
    
    
    37
    
    
    
    26
    
    
    
    32Past service cost
    
    
    28
    
    
    
    19
    
    
    
    
    
    
    
    3
    
    
    
    6
    
    
    
    7Curtailment gain on redundancies
    
    
    (4
    )
    
    
    (7
    )
    
    
    (4
    )
    
    
    (29
    )
    
    
    
    
    
    
    Special termination benefits on redundancies
    
    
    6
    
    
    
    26
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    Curtailment cost  augmentations
    
    
    2
    
    
    
    4
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    US healthcare reform cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    208
    
    
    
    161
    
    
    
    160
    
    
    
    11
    
    
    
    41
    
    
    
    39Loss on sale of subsidiary undertaking
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest cost
    
    
    1,084
    
    
    
    1,050
    
    
    
    1,106
    
    
    
    147
    
    
    
    143
    
    
    
    144Expected return on plan assets
    
    
    (1,185
    )
    
    
    (931
    )
    
    
    (1,163
    )
    
    
    (71
    )
    
    
    (50
    )
    
    
    (73
    )(101
    )
    
    
    119
    
    
    
    (57
    )
    
    
    76
    
    
    
    93
    
    
    
    71Included within other comprehensive incomeActuarial net gain/(loss) during the year
    
    
    483
    
    
    
    (572
    )
    
    
    (1,906
    )
    
    
    88
    
    
    
    (159
    )
    
    
    (112
    )Exchange differences
    
    
    38
    
    
    
    64
    
    
    
    (141
    )
    
    
    87
    
    
    
    76
    
    
    
    (408
    )521
    
    
    
    (508
    )
    
    
    (2,047
    )
    
    
    175
    
    
    
    (83
    )
    
    
    (520
    )Cumulative actuarial loss
    
    
    (673
    )
    
    
    (1,156
    )
    
    
    (584
    )
    
    
    (274
    )
    
    
    (362
    )
    
    
    (203
    )
 Amounts recognised in the balance sheet
 Pensions
    
    US other post-retirement benefits2011
    
    
    2010
    
    
    2009
    
    
    2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mPresent value of funded obligations
    
    
    (19,255
    )
    
    
    (19,372
    )
    
    
    (15,797
    )
    
    
    (2,458
    )
    
    
    (2,602
    )
    
    
    (2,299
    )Fair value of plan assets
    
    
    18,903
    
    
    
    18,186
    
    
    
    14,797
    
    
    
    1,066
    
    
    
    950
    
    
    
    722(352
    )
    
    
    (1,186
    )
    
    
    (1,000
    )
    
    
    (1,392
    )
    
    
    (1,652
    )
    
    
    (1,577
    )Present value of unfunded obligations
    
    
    (225
    )
    
    
    (226
    )
    
    
    (203
    )
    
    
    
    
    
    
    
    
    
    
    Other post-employment liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (62
    )
    
    
    (62
    )
    
    
    (74
    )Unrecognised past service cost
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    28
    
    
    
    43Net liability in the balance sheet
    
    
    (573
    )
    
    
    (1,412
    )
    
    
    (1,203
    )
    
    
    (1,445
    )
    
    
    (1,686
    )
    
    
    (1,608
    )Liabilities
    
    
    (1,129
    )
    
    
    (1,412
    )
    
    
    (1,472
    )
    
    
    (1,445
    )
    
    
    (1,686
    )
    
    
    (1,608
    )Assets
    
    
    556
    
    
    
    
    
    
    
    269
    
    
    
    
    
    
    
    
    
    
    
    Net liability
    
    
    (573
    )
    
    
    (1,412
    )
    
    
    (1,203
    )
    
    
    (1,445
    )
    
    
    (1,686
    )
    
    
    (1,608
    )
      146       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



23. Pensions and other post-retirement benefits continued
 Pensions
    
    US other post-retirement benefits2011
    
    
    2010
    
    
    2009
    
    
    2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mChanges in the present value of the defined benefit obligations

(including unfunded obligations)Opening defined benefit obligations
    
    
    (19,598
    )
    
    
    (16,000
    )
    
    
    (16,391
    )
    
    
    (2,602
    )
    
    
    (2,299
    )
    
    
    (1,784
    )Current service cost
    
    
    (165
    )
    
    
    (112
    )
    
    
    (136
    )
    
    
    (37
    )
    
    
    (26
    )
    
    
    (32
    )Interest cost
    
    
    (1,084
    )
    
    
    (1,050
    )
    
    
    (1,106
    )
    
    
    (147
    )
    
    
    (143
    )
    
    
    (144
    )Actuarial gains/(losses)
    
    
    185
    
    
    
    (3,563
    )
    
    
    1,719
    
    
    
    28
    
    
    
    (360
    )
    
    
    215Curtailment gain on redundancies
    
    
    10
    
    
    
    7
    
    
    
    4
    
    
    
    29
    
    
    
    
    
    
    
    Transfers in/(out)
    
    
    1
    
    
    
    (3
    )
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    Special termination benefits
    
    
    (17
    )
    
    
    (26
    )
    
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    Curtailment cost  augmentations
    
    
    (2
    )
    
    
    (4
    )
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    Plan amendments
    
    
    (28
    )
    
    
    (19
    )
    
    
    
    
    
    
    14
    
    
    
    9
    
    
    
    Plan amendments  US healthcare reform
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    Medicare subsidy received
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    (10
    )
    
    
    Employee contributions
    
    
    (3
    )
    
    
    (10
    )
    
    
    (13
    )
    
    
    
    
    
    
    
    
    
    
    Benefits paid
    
    
    985
    
    
    
    1,008
    
    
    
    1,003
    
    
    
    117
    
    
    
    132
    
    
    
    116Transferred to liabilities of businesses held for sale
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    Exchange adjustments
    
    
    229
    
    
    
    174
    
    
    
    (1,058
    )
    
    
    143
    
    
    
    104
    
    
    
    (670
    )Closing defined benefit obligations
    
    
    (19,480
    )
    
    
    (19,598
    )
    
    
    (16,000
    )
    
    
    (2,458
    )
    
    
    (2,602
    )
    
    
    (2,299
    )Changes in the fair value of plan assetsOpening fair value of plan assets
    
    
    18,186
    
    
    
    14,797
    
    
    
    16,536
    
    
    
    950
    
    
    
    722
    
    
    
    737Expected return on plan assets
    
    
    1,185
    
    
    
    931
    
    
    
    1,163
    
    
    
    71
    
    
    
    50
    
    
    
    73Actuarial gains/(losses)
    
    
    298
    
    
    
    2,991
    
    
    
    (3,625
    )
    
    
    60
    
    
    
    201
    
    
    
    (327
    )Transfers (out)/in
    
    
    (1
    )
    
    
    3
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    Employer contributions
    
    
    408
    
    
    
    572
    
    
    
    799
    
    
    
    158
    
    
    
    137
    
    
    
    93Employee contributions
    
    
    3
    
    
    
    10
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    Benefits paid
    
    
    (985
    )
    
    
    (1,008
    )
    
    
    (1,003
    )
    
    
    (117
    )
    
    
    (132
    )
    
    
    (116
    )Exchange adjustments
    
    
    (191
    )
    
    
    (110
    )
    
    
    917
    
    
    
    (56
    )
    
    
    (28
    )
    
    
    262Closing fair value of plan assets
    
    
    18,903
    
    
    
    18,186
    
    
    
    14,797
    
    
    
    1,066
    
    
    
    950
    
    
    
    722Actual return on plan assets
    
    
    1,483
    
    
    
    3,922
    
    
    
    (2,462
    )
    
    
    131
    
    
    
    251
    
    
    
    (254
    )Expected contributions to plans in the following year
    
    
    353
    
    
    
    353
    
    
    
    552
    
    
    
    200
    
    
    
    148
    
    
    
    123
 
    Annual Report and Accounts 2010/11 | National Grid plc       147




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
  
 24. Provisions
 Environ-
    
    
    Decom-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Totalmental
    
    
    missioning
    
    
    Restructuring
    
    
    Emissions
    
    
    Other
    
    
    provisions£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mAt 31 March 2009
    
    
    1,104
    
    
    
    108
    
    
    
    100
    
    
    
    25
    
    
    
    362
    
    
    
    1,699Exchange adjustments
    
    
    (46
    )
    
    
    (9
    )
    
    
    
    
    
    
    (1
    )
    
    
    (12
    )
    
    
    (68
    )Additions
    
    
    85
    
    
    
    5
    
    
    
    36
    
    
    
    4
    
    
    
    16
    
    
    
    146Reclassifications*
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70
    
    
    
    70Unused amounts reversed
    
    
    (4
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    
    
    
    
    (2
    )
    
    
    (8
    )Unwinding of discount
    
    
    54
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    70Utilised
    
    
    (117
    )
    
    
    (8
    )
    
    
    (30
    )
    
    
    (6
    )
    
    
    (38
    )
    
    
    (199
    )At 31 March 2010
    
    
    1,076
    
    
    
    97
    
    
    
    105
    
    
    
    22
    
    
    
    410
    
    
    
    1,710Exchange adjustments
    
    
    (46
    )
    
    
    (5
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (16
    )
    
    
    (69
    )Additions
    
    
    167
    
    
    
    43
    
    
    
    87
    
    
    
    9
    
    
    
    30
    
    
    
    336Unused amounts reversed
    
    
    (12
    )
    
    
    (7
    )
    
    
    (39
    )
    
    
    (6
    )
    
    
    (6
    )
    
    
    (70
    )Reclassified as held for sale
    
    
    (39
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40
    )Unwinding of discount
    
    
    104
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    128Utilised
    
    
    (100
    )
    
    
    (9
    )
    
    
    (24
    )
    
    
    
    
    
    
    (48
    )
    
    
    (181
    )At 31 March 2011
    
    
    1,150
    
    
    
    120
    
    
    
    128
    
    
    
    24
    
    
    
    392
    
    
    
    1,814
 
 *Primarily represents reclassifications from other non-current liabilities 2011
    
    
    2010£m
    
    
    £mCurrent
    
    
    353
    
    
    
    303Non-current
    
    
    1,461
    
    
    
    1,4071,814
    
    
    
    1,710
 Environmental provision
  2011
    
    2010Discounted
    
    
    Undiscounted
    
    
    Discounted
    
    
    Undiscounted
    
    
    Real£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    discount rateUK sites (i)
    
    
    339
    
    
        503
    
    
    
    263
    
    
    
    377
    
    
    
    2.0
    %US sites (ii)
    
    
    811
    
    
        923
    
    
    
    813
    
    
    
    942
    
    
    
    3.2
    %1,150
    
    
        1,426
    
    
    
    1,076
    
    
    
    1,319
 
 (i)
    The remediation expenditure in the UK relates to old gas manufacturing sites and also to
electricity transmission sites. Cash flows are expected to be incurred between 2011 and 2060. A
number of uncertainties affect the calculation of the provision, including the impact of
regulation, accuracy of the site surveys, unexpected contaminants, transportation costs, the impact
of alternative technologies and changes in the discount rate. This provision incorporates our best
estimate of the financial effect of these uncertainties, but future material changes in any of the
assumptions could materially impact the calculation of the provision. The undiscounted amount is
the undiscounted best estimate of the liability having regard to these uncertainties.(ii)
    The remediation expenditure in the US is expected to be incurred between 2011 and 2067. The
uncertainties regarding the calculation of this provision are similar to those considered in
respect of UK sites. However, unlike the UK, with the exception of immaterial amounts of such
costs, this expenditure is expected to be recoverable from ratepayers under the terms of various
rate agreements in the US. Decommissioning provision
      148       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



24. Provisions continued
 Restructuring provision
  Emissions provision
  Other provisions
  
 
 25. Share capital
 Allotted, called upand fully paidOrdinary shares
    
    millions
    
    
    £mAt 31 March 2009
    
    
    2,582
    
    
    
    294Issued during the year in lieu of dividends (i)
    
    
    35
    
    
    
    4At 31 March 2010
    
    
    2,617
    
    
    
    298Rights issue
    
    
    990
    
    
    
    113Issued during the year in lieu of dividends (i)
    
    
    41
    
    
    
    5At 31 March 2011
    
    
    3,648
    
    
    
    416
 
 (i)
    The issue of shares in lieu of cash dividends is considered to be a bonus issue under the
terms of the Companies Act 2006 and the nominal value of the shares is charged to the share premium
account. 17 43
  Rights issue
    Treasury shares
 
    Annual Report and Accounts 2010/11 | National Grid plc       149




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
  
 26. Other equity reserves
 Cash flow
    
    
    Available-
    
    
    CapitalTranslation
    
    
    hedge
    
    
    for-sale
    
    
    redemption
    
    
    Merger
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mAt 31 March 2008
    
    
    (73
    )
    
    
    (42
    )
    
    
    9
    
    
    
    19
    
    
    
    (5,165
    )
    
    
    (5,252
    )Exchange adjustments
    
    
    457
    
    
    
    5
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    459Net (losses)/gains taken to equity
    
    
    
    
    
    
    (1
    )
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    8Transferred to profit or loss
    
    
    
    
    
    
    (53
    )
    
    
    (18
    )
    
    
    
    
    
    
    
    
    
    
    (71
    )Deferred tax
    
    
    
    
    
    
    19
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    26At 31 March 2009
    
    
    384
    
    
    
    (72
    )
    
    
    4
    
    
    
    19
    
    
    
    (5,165
    )
    
    
    (4,830
    )Exchange adjustments
    
    
    30
    
    
    
    3
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    34Net (losses)/gains taken to equity
    
    
    
    
    
    
    (45
    )
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    9Transferred to profit or loss
    
    
    
    
    
    
    3
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    (3
    )Deferred tax
    
    
    
    
    
    
    9
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    4Share of other comprehensive income of joint ventures
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5At 31 March 2010
    
    
    414
    
    
    
    (97
    )
    
    
    48
    
    
    
    19
    
    
    
    (5,165
    )
    
    
    (4,781
    )Exchange adjustments
    
    
    (95
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (95
    )Net gains taken to equity
    
    
    
    
    
    
    7
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    23Transferred to profit or loss
    
    
    
    
    
    
    (7
    )
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    (10
    )Rights issue (i)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,101
    
    
    
    3,101Transfer to retained earnings (i)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,101
    )
    
    
    (3,101
    )Deferred tax
    
    
    
    
    
    
    (2
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (3
    )Share of other comprehensive loss of joint ventures
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )At 31 March 2011
    
    
    319
    
    
    
    (103
    )
    
    
    60
    
    
    
    19
    
    
    
    (5,165
    )
    
    
    (4,870
    )
 
 (i)
    For details of the rights issue and subsequent transfer to retained earnings see note 25.
      150       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



27. Consolidated cash flow statement
 (a) Cash flow from operating activities  discontinued operations
 2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £mOperating profit
    
    
    
    
    
    
    
    
    
    
    13Changes in working capital, provisions and pensions
    
    
    
    
    
    
    
    
    
    
    (21
    )Cash flow relating to discontinued operations
    
    
    
    
    
    
    
    
    
    
    (8
    )
 (b) Cash flow from investing activities  discontinued operations
 2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £mDisposal proceeds (i)
    
    
    
    
    
    
    
    
    
    
    1,617Tax arising on disposal
    
    
    
    
    
    
    
    
    
    
    (564
    )Other investing activities
    
    
    
    
    
    
    
    
    
    
    (4
    )Cash flow relating to discontinued operations
    
    
    
    
    
    
    
    
    
    
    1,049
 
 (i)
    Disposal proceeds are in respect of the sale of assets and liabilities classified as held for sale. (c) Reconciliation of net cash flow to movement in net debt
 2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £m(Decrease)/increase in cash and cash equivalents
    
    
    (346
    )
    
    
    (28
    )
    
    
    538Increase/(decrease) in financial investments
    
    
    1,577
    
    
    
    (805
    )
    
    
    (99
    )Decrease/(increase) in borrowings and related derivatives
    
    
    1,763
    
    
    
    499
    
    
    
    (1,641
    )Net interest paid on the components of net debt
    
    
    1,011
    
    
    
    999
    
    
    
    956Change in net debt resulting from cash flows
    
    
    4,005
    
    
    
    665
    
    
    
    (246
    )Changes in fair value of financial assets and liabilities and exchange movements
    
    
    690
    
    
    
    865
    
    
    
    (3,625
    )Net interest charge on the components of net debt
    
    
    (1,228
    )
    
    
    (996
    )
    
    
    (1,161
    )Reclassified as held for sale
    
    
    9
    
    
    
    
    
    
    
    Other non-cash movements
    
    
    (68
    )
    
    
    
    
    
    
    Movement in net debt (net of related derivative financial instruments) in the year
    
    
    3,408
    
    
    
    534
    
    
    
    (5,032
    )Net debt (net of related derivative financial instruments) at start of year
    
    
    (22,139
    )
    
    
    (22,673
    )
    
    
    (17,641
    )Net debt (net of related derivative financial instruments) at end of year
    
    
    (18,731
    )
    
    
    (22,139
    )
    
    
    (22,673
    )
 (d) Analysis of changes in net debt
 Cash
    
    
    
    
    
    
    Net cashand cash
    
    
    Bank
    
    
    and cash
    
    
    Financialequivalents
    
    
    overdrafts
    
    
    equivalents
    
    
    investments
    
    
    Borrowings
    
    
    Derivatives
    
    
    Total(i)£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mAt 31 March 2008
    
    
    174
    
    
    
    (10
    )
    
    
    164
    
    
    
    2,095
    
    
    
    (20,993
    )
    
    
    1,093
    
    
    
    (17,641
    )Cash flow
    
    
    545
    
    
    
    (7
    )
    
    
    538
    
    
    
    (184
    )
    
    
    (1,316
    )
    
    
    716
    
    
    
    (246
    )Fair value gains and losses and exchange movements
    
    
    18
    
    
    
    
    
    
    
    18
    
    
    
    207
    
    
    
    (3,222
    )
    
    
    (628
    )
    
    
    (3,625
    )Interest charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79
    
    
    
    (1,245
    )
    
    
    5
    
    
    
    (1,161
    )At 31 March 2009
    
    
    737
    
    
    
    (17
    )
    
    
    720
    
    
    
    2,197
    
    
    
    (26,776
    )
    
    
    1,186
    
    
    
    (22,673
    )Cash flow
    
    
    (16
    )
    
    
    (12
    )
    
    
    (28
    )
    
    
    (826
    )
    
    
    2,079
    
    
    
    (560
    )
    
    
    665Fair value gains and losses and exchange movements
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    2
    
    
    
    644
    
    
    
    220
    
    
    
    865Interest charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24
    
    
    
    (1,042
    )
    
    
    22
    
    
    
    (996
    )At 31 March 2010
    
    
    720
    
    
    
    (29
    )
    
    
    691
    
    
    
    1,397
    
    
    
    (25,095
    )
    
    
    868
    
    
    
    (22,139
    )Cash flow
    
    
    (333
    )
    
    
    (13
    )
    
    
    (346
    )
    
    
    1,551
    
    
    
    2,933
    
    
    
    (133
    )
    
    
    4,005Fair value gains and losses and exchange movements
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )
    
    
    (34
    )
    
    
    402
    
    
    
    325
    
    
    
    690Interest charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    (1,337
    )
    
    
    84
    
    
    
    (1,228
    )Reclassified as held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    9Other non-cash movements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (68
    )
    
    
    
    
    
    
    (68
    )At 31 March 2011
    
    
    384
    
    
    
    (42
    )
    
    
    342
    
    
    
    2,939
    
    
    
    (23,156
    )
    
    
    1,144
    
    
    
    (18,731
    )Balances at 31 March 2011 comprise:Non-current assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,270
    
    
    
    1,270Current assets
    
    
    384
    
    
    
    
    
    
    
    384
    
    
    
    2,939
    
    
    
    
    
    
    
    468
    
    
    
    3,791Current liabilities
    
    
    
    
    
    
    (42
    )
    
    
    (42
    )
    
    
    
    
    
    
    (2,910
    )
    
    
    (190
    )
    
    
    (3,142
    )Non-current liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,246
    )
    
    
    (404
    )
    
    
    (20,650
    )384
    
    
    
    (42
    )
    
    
    342
    
    
    
    2,939
    
    
    
    (23,156
    )
    
    
    1,144
    
    
    
    (18,731
    )
 
 (i)
    Includes accrued interest at 31 March 2011 of £162m (2010: £232m).
 
    Annual Report and Accounts 2010/11 | National Grid plc       151




---



##### 



Financial Statements
 
 
 Notes to the consolidated financial statements  supplementary information
  
 28. Commitments and contingencies
 2011
    
    
    2010£m
    
    
    £mFuture capital expenditureContracted for but not provided
    
    
    1,614
    
    
    
    1,738Operating lease commitmentsLess than 1 year
    
    
    83
    
    
    
    91In 1-2 years
    
    
    79
    
    
    
    84In 2-3 years
    
    
    93
    
    
    
    79In 3-4 years
    
    
    72
    
    
    
    96In 4-5 years
    
    
    70
    
    
    
    76More than 5 years
    
    
    398
    
    
    
    500795
    
    
    
    926Energy purchase commitments (i)*Less than 1 year
    
    
    1,081
    
    
    
    1,195In 1-2 years
    
    
    480
    
    
    
    506In 2-3 years
    
    
    328
    
    
    
    372In 3-4 years
    
    
    272
    
    
    
    304In 4-5 years
    
    
    241
    
    
    
    245More than 5 years
    
    
    1,141
    
    
    
    1,3263,543
    
    
    
    3,948Guarantees and letters of creditGuarantee of sublease for US property (expires 2040)
    
    
    328
    
    
    
    377Letter of credit and guarantee of certain obligations of BritNed Interconnector (expire 2011)
    
    
    36
    
    
    
    374Guarantees of certain obligations of Grain LNG Import Terminal (expire up to 2028)
    
    
    139
    
    
    
    164Other guarantees and letters of credit (various expiry dates)
    
    
    259
    
    
    
    274762
    
    
    
    1,189
 
 *Comparatives have been restated to present items on a basis consistent with the current year classification(i)
    Energy commitments relate to contractual commitments to purchase electricity or gas that are
used to satisfy physical delivery requirements to our customers or for energy that we use ourselves
(ie normal purchase, sale or usage) and hence are accounted for as ordinary purchase contracts.
Details of commodity contracts that do not meet the normal purchase, sale or usage criteria, and
hence are accounted for as derivative contracts, are shown in note 33.  Litigation and claims
 Metering competition investigation
  Gas Distribution mains replacement investigation
  KeySpan class actions
      152       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



29. Related party transactions
  2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £mSales: Services and goods supplied to a pension plan and joint ventures
    
    
    11
    
    
    
    5
    
    
    
    4Purchases: Services and goods received from joint ventures (i)
    
    
    84
    
    
    
    73
    
    
    
    44Interest income: Interest receivable on loans with joint ventures
    
    
    2
    
    
    
    1
    
    
    
    Receivable from a pension plan and joint ventures
    
    
    2
    
    
    
    1
    
    
    
    Loan to joint venture (ii)
    
    
    
    
    
    
    23
    
    
    
    Payable to joint ventures
    
    
    8
    
    
    
    6
    
    
    
    6Dividends received from joint ventures (iii)
    
    
    9
    
    
    
    18
    
    
    
    
 
 (i)
    During the year the Company received services and goods from a number of joint ventures,
including Iroquois Gas Transmission System, L.P. of £40m (2010: £38m) and Millennium Pipeline
Company, LLC of £28m (2010: £26m) for the transportation of gas in the US.(ii)
    Following a decision in August 2010 to cease investing in Blue-NG Limited (a joint venture),
an impairment charge was recorded against the carrying value of the investment, together with
provision against recovery of loans from National Grid to Blue-NG of £30m (2010: £23m) and
associated interest receivable. For further details see note 3.(iii)
    Dividends were received from Iroquois Gas Transmission System, L.P. of £9m (2010: £17m).  
 30. Actuarial information on pensions and other post-retirement benefits
 UK pension schemes
  NG UK pension scheme
    
    
    NG section of ESPSLatest full actuarial valuation
    
    31 March 2007
    
    
    31 March 2007Actuary
    
    Towers Watson
    

    
    Hewitt AssociatesMarket value of scheme assets at latest valuation
    
    
    £12,923m
    
    
    
    £1,345mActuarial value of benefits due to members
    
    
    £(13,365)m
    
    
    
    £(1,750)mMarket value as percentage of benefits
    
    
    97%
    
    
    
    77%Funding deficit
    
    
    £442m
    
    
    
    £405mFunding deficit (net of tax)
    
    
    £327m
    
    
    
    £300m
 National Grid UK Pension Scheme
 
    Annual Report and Accounts 2010/11 | National Grid plc       153




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
  
 30. Actuarial information on pensions and other post-retirement benefits continued
 Electricity Supply Pension Scheme
   US pension plans
   US retiree healthcare and life insurance plans
  Asset allocations
 UK pensions
    
    US pensions
    
    US other post-retirement benefits2011
    
    
    2010
    
    
    2009
    
    
    2011
    
    
    2010
    
    
    2009
    
    
    2011
    
    
    2010
    
    
    2009%
    
    
    %
    
    
    %
    
    
    %
    
    
    %
    
    
    %
    
    
    %
    
    
    %
    
    
    %Equities (i)
    
    
    34.5
    
    
    
    36.8
    
    
    
    35.2
    
    
    
    51.5
    
    
    
    52.8
    
    
    
    50.4
    
    
    
    76.5
    
    
    
    68.6
    
    
    
    63.7Corporate bonds (ii)
    
    
    30.3
    
    
    
    32.3
    
    
    
    32.7
    
    
    
    40.7
    
    
    
    41.5
    
    
    
    42.3
    
    
    
    22.6
    
    
    
    24.8
    
    
    
    34.2Gilts
    
    
    26.8
    
    
    
    22.4
    
    
    
    22.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Property
    
    
    5.9
    
    
    
    5.9
    
    
    
    5.4
    
    
    
    2.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    2.5
    
    
    
    2.6
    
    
    
    4.5
    
    
    
    5.8
    
    
    
    5.7
    
    
    
    7.3
    
    
    
    0.9
    
    
    
    6.6
    
    
    
    2.1Total
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
 
 (i)
    Included within equities at 31 March 2011 were ordinary shares of National Grid plc with
a value of £12m (2010: £17m; 2009: £17m).(ii)
    Included within corporate bonds at 31 March 2011 was an investment in a number of bonds issued
by subsidiary undertakings with a value of £39m. Target asset allocations
 US
    
    
    USNGUK PS
    
    
    ESPS
    
    
    pensions
    
    
    OPEBs%
    
    
    %
    
    
    %
    
    
    %Equities (i)
    
    
    32
    
    
    
    49
    
    
    
    60
    
    
    
    70Bonds, property and other
    
    
    68
    
    
    
    51
    
    
    
    40
    
    
    
    30Total
    
    
    100
    
    
    
    100
    
    
    
    100
    
    
    
    100
 
 (i)
    Included within equities are hedge fund and active currency investments.
      154       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



30. Actuarial information on pensions and other post-retirement benefits continued
 Actuarial assumptions
   UK pensions

    
    US pensions

    
    US other post-retirement benefits2011
    
    
    2010
    
    
    2009
    
    
    2011
    
    
    2010
    
    
    2009
    
    
    2011
    
    
    2010
    
    
    2009%
    
    
    %
    
    
    %
    
    
    %
    
    
    %
    
    
    %
    
    
    %
    
    
    %
    
    
    %Discount rate (i)
    
    
    5.5
    
    
    
    5.6
    
    
    
    6.8
    
    
    
    5.9
    
    
    
    6.1
    
    
    
    7.3
    
    
    
    5.9
    
    
    
    6.1
    
    
    
    7.3Expected return on plan assets
    
    
    6.1
    
    
    
    6.4
    
    
    
    6.2
    
    
    
    7.2
    
    
    
    7.5
    
    
    
    7.8
    
    
    
    7.1
    
    
    
    7.2
    
    
    
    7.4Rate of increase in salaries (ii)
    
    
    4.4
    
    
    
    4.7
    
    
    
    3.8
    
    
    
    3.5
    
    
    
    3.5
    
    
    
    3.5
    
    
    
    3.5
    
    
    
    3.5
    
    
    
    3.5Rate of increase in pensions
in payment
    
    
    3.5
    
    
    
    3.8
    
    
    
    3.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aRate of increase in pensions

in deferment
    
    
    3.5
    
    
    
    3.8
    
    
    
    2.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aRate of increase in RPI
(or equivalent)(iii)
    
    
    3.5
    
    
    
    3.8
    
    
    
    2.9
    
    
    
    2.2
    
    
    
    2.4
    
    
    
    2.3
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aInitial healthcare cost trend rate
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    8.5
    
    
    
    8.5
    
    
    
    9.0Ultimate healthcare cost trend rate
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    5.0
    
    
    
    5.0
    
    
    
    5.0
 
 (i)
    
    The discount rates for pension liabilities have been determined by reference to
appropriate yields on high quality corporate bonds prevailing in the UK and US debt markets at the
balance sheet date.(ii)
    
    A promotional scale has also been used where appropriate.(iii)
    
    In September 2010, the UK Government changed the basis for statutory pension increases from
the Retail Price Index (RPI) to the Consumer Price Index (CPI). The Scheme rules of National Grids
two UK pension schemes specifically reference RPI. As a consequence the impact of the Governments
move to CPI was predominantly limited to National Grids Guaranteed Minimum Pensions. The financial
consequence of the change as at 31 March 2011 was an approximate £55m reduction in present value of
the defined benefit obligation. 2011
    
    
    2010UK
    
    
    US
    
    
    UK
    
    
    USyears
    
    
    years
    
    
    years
    
    
    yearsAssumed life expectations for a retiree at age 65TodayMales
    
    
    22.4
    
    
        18.8
    
    
    
    21.0
    
    
    
    18.8Females
    
    
    24.9
    
    
        20.8
    
    
    
    23.4
    
    
    
    20.8In 20 yearsMales
    
    
    24.7
    
    
        18.8
    
    
    
    23.4
    
    
    
    18.8Females
    
    
    27.4
    
    
        20.8
    
    
    
    25.7
    
    
    
    20.8Sensitivities to actuarial assumptionsChange in pensions
    
    
    Change in annualand OPEB liability
    
    

pension and OPEB cost2011
    
    
    2010
    
    
    2011
    
    
    2010£m
    
    
    £m
    
    
    £m
    
    
    £mSensitivities (all other assumptions held constant)0.1% change in discount rate
    
    
    304
    
    
    
    317
    
    
    
    7
    
    
    
    40.5% change in long-term rate of increase in salaries
    
    
    162
    
    
    
    166
    
    
    
    8
    
    
    
    8Change of one year to life expectations at age 60
    
    
    653
    
    
    
    670
    
    
    
    7
    
    
    
    5
 2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £mSensitivities to a 1% change in assumed healthcare cost trend ratesIncreaseEffect on the aggregate of the service costs and interest costs
    
    
    28
    
    
    
    25
    
    
    
    29Effect on defined benefit obligations
    
    
    330
    
    
    
    348
    
    
    
    294DecreaseEffect on the aggregate of the service costs and interest costs
    
    
    (23
    )
    
    
    (21
    )
    
    
    (24
    )Effect on defined benefit obligations
    
    
    (282
    )
    
    
    (298
    )
    
    
    (254
    )
 
    Annual Report and Accounts 2010/11 National Grid plc       155




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
  30. Actuarial information on pensions and other post-retirement benefits continued
  2011
    
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mPresent value of funded and unfunded obligations
    
    
    (21,938
    )
    
    
    (22,200
    )
    
    
    (18,299
    )
    
    
    (18,175
    )
    
    
    (17,253
    )Fair value of plan assets
    
    
    19,969
    
    
    
    19,136
    
    
    
    15,519
    
    
    
    17,273
    
    
    
    15,999(1,969
    )
    
    
    (3,064
    )
    
    
    (2,780
    )
    
    
    (902
    )
    
    
    (1,254
    )Difference between the expected and actual return on plan assets
    
    
    358
    
    
    
    3,192
    
    
    
    (3,952
    )
    
    
    (911
    )
    
    
    (81
    )Experience gains/(losses) on plan liabilities
    
    
    28
    
    
    
    509
    
    
    
    (125
    )
    
    
    152
    
    
    
    9Actuarial gains/(losses) on plan liabilities
    
    
    213
    
    
    
    (3,923
    )
    
    
    1,934
    
    
    
    1,343
    
    
    
    446
 
 
 31. Supplementary information on derivative financial instruments
  Treasury financial instruments
   Fair value hedges
  Cash flow hedges
      156       National Grid plc Annual Report and Accounts 2010/11




---



##### 



31. Supplementary information on derivative financial instruments continued
 Net investment hedges
   Derivatives not in a formal hedge relationship
  
 
 32. Financial risk
   (a) Market risk
 (i) Foreign exchange risk
     2011
    
    
    2010Sterling
    
    
    Euro
    
    
    Dollar
    
    
    Other
    
    
    Total
    
    
    Sterling
    
    
    Euro
    
    
    Dollar
    
    
    Other
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mCash and cash
equivalents
    
    
    319
    
    
        1
    
    
        64
    
    
        
    
    
        384
    
    
    
    428
    
    
    
    4
    
    
    
    288
    
    
    
    
    
    
    
    720Financial investments
    
    
    1,046
    
    
        111
    
    
        1,696
    
    
        86
    
    
        2,939
    
    
    
    455
    
    
    
    127
    
    
    
    736
    
    
    
    79
    
    
    
    1,397Borrowings (i)
    
    
    (10,565
    )
    
        (4,896
    )
    
        (7,113
    )
    
        (624
    )
    
        (23,198
    )
    
    
    (10,651
    )
    
    
    (6,361
    )
    
    
    (7,394
    )
    
    
    (718
    )
    
    
    (25,124
    )Pre-derivative position
    
    
    (9,200
    )
    
        (4,784
    )
    
        (5,353
    )
    
        (538
    )
    
        (19,875
    )
    
    
    (9,768
    )
    
    
    (6,230
    )
    
    
    (6,370
    )
    
    
    (639
    )
    
    
    (23,007
    )Derivative effect
    
    
    2,921
    
    
        4,637
    
    
        (6,962
    )
    
        548
    
    
        1,144
    
    
    
    438
    
    
    
    6,172
    
    
    
    (6,388
    )
    
    
    646
    
    
    
    868Net debt position
    
    
    (6,279
    )
    
        (147
    )
    
        (12,315
    )
    
        10
    
    
        (18,731
    )
    
    
    (9,330
    )
    
    
    (58
    )
    
    
    (12,758
    )
    
    
    7
    
    
    
    (22,139
    )
 
 (i)
    Includes bank overdrafts.
 
    Annual Report and Accounts 2010/11 National Grid plc      157




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
 32. Financial risk continued
  2011
    
    
    2010Sterling
    
    
    Euro
    
    
    Dollar
    
    
    Other
    
    
    Total
    
    
    Sterling
    
    
    Euro
    
    
    Dollar
    
    
    Other
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mTrade and other
receivables
    
    
    91
    
    
        
    
    
        1,122
    
    
        
    
    
        1,213
    
    
    
    128
    
    
    
    
    
    
    
    1,228
    
    
    
    
    
    
    
    1,356Trade and other payables
    
    
    (1,319
    )
    
        
    
    
        (1,248
    )
    
        
    
    
        (2,567
    )
    
    
    (1,221
    )
    
    
    
    
    
    
    (1,382
    )
    
    
    
    
    
    
    (2,603
    )Other non-current
liabilities
    
    
    (26
    )
    
        
    
    
        (354
    )
    
        
    
    
        (380
    )
    
    
    (15
    )
    
    
    
    
    
    
    (393
    )
    
    
    
    
    
    
    (408
    )
  (ii) Cash flow and fair value interest rate risk
    2011
    
    
    2010£m
    
    
    £mFixed interest rate borrowingsLess than 1 year
    
    
    (1,313
    )
    
    
    (1,237
    )In 1-2 years
    
    
    (808
    )
    
    
    (1,413
    )In 2-3 years
    
    
    (1,467
    )
    
    
    (956
    )In 3-4 years
    
    
    (1,189
    )
    
    
    (1,762
    )In 4-5 years
    
    
    (307
    )
    
    
    (1,265
    )More than 5 years
    
    
    (8,487
    )
    
    
    (8,791
    )(13,571
    )
    
    
    (15,424
    )Floating interest rate borrowings (including inflation linked)
    
    
    (9,627
    )
    
    
    (9,700
    )Total borrowings
    
    
    (23,198
    )
    
    
    (25,124
    )
  2011
    
    
    2010Fixed
    
    
    Floating
    
    
    Inflation
    
    
    
    
    
    
    
    
    
    
    Fixed
    
    
    Floating
    
    
    Inflationrate
    
    
    rate
    
    
    linked
    (i)
    
    Other
    (ii)
    
    Total
    
    
    rate
    
    
    rate
    
    
    linked
    (i)
    
    Other
    (ii)
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mCash and cash
equivalents
    
    
    315
    
    
        69
    
    
        
    
    
        
    
    
        384
    
    
    
    599
    
    
    
    121
    
    
    
    
    
    
    
    
    
    
    
    720Financial investments
    
    
    759
    
    
        2,053
    
    
        
    
    
        127
    
    
        2,939
    
    
    
    602
    
    
    
    673
    
    
    
    
    
    
    
    122
    
    
    
    1,397Borrowings (iii)
    
    
    (13,571
    )
    
        (3,933
    )
    
        (5,694
    )
    
        
    
    
        (23,198
    )
    
    
    (15,424
    )
    
    
    (4,604
    )
    
    
    (5,096
    )
    
    
    
    
    
    
    (25,124
    )Pre-derivative position
    
    
    (12,497
    )
    
        (1,811
    )
    
        (5,694
    )
    
        127
    
    
        (19,875
    )
    
    
    (14,223
    )
    
    
    (3,810
    )
    
    
    (5,096
    )
    
    
    122
    
    
    
    (23,007
    )Derivative effect (iv)
    
    
    295
    
    
        531
    
    
        318
    
    
        
    
    
        1,144
    
    
    
    (1,552
    )
    
    
    2,292
    
    
    
    204
    
    
    
    (76
    )
    
    
    868Net debt position
    
    
    (12,202
    )
    
        (1,280
    )
    
        (5,376
    )
    
        127
    
    
        (18,731
    )
    
    
    (15,775
    )
    
    
    (1,518
    )
    
    
    (4,892
    )
    
    
    46
    
    
    
    (22,139
    )
 (i)
    The post-derivative impact represents financial instruments linked to UK RPI.(ii)
    Represents financial instruments which are not directly affected by interest rate risk, such
as investments in equity or other similar financial instruments.(iii)
    Includes bank overdrafts.(iv)
    The impact of 2011/12 (2010: 2010/11) maturing short-dated interest rate derivatives is
included.
      158       National Grid plc Annual Report and Accounts 2010/11




---



##### 



32. Financial risk continued
 (b) Fair value analysis
  2011
    
    
    2010Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mAssetsAvailable-for-sale investments
    
    
    2,834
    
    
        179
    
    
        
    
    
        3,013
    
    
    
    1,346
    
    
    
    175
    
    
    
    
    
    
    
    1,521Derivative financial instruments
    
    
    
    
    
        1,684
    
    
        54
    
    
        1,738
    
    
    
    
    
    
    
    1,706
    
    
    
    36
    
    
    
    1,7422,834
    
    
        1,863
    
    
        54
    
    
        4,751
    
    
    
    1,346
    
    
    
    1,881
    
    
    
    36
    
    
    
    3,263LiabilitiesDerivative financial instruments
    
    
    
    
    
        (594
    )
    
        
    
    
        (594
    )
    
    
    
    
    
    
    (874
    )
    
    
    
    
    
    
    (874
    )Total
    
    
    2,834
    
    
        1,269
    
    
        54
    
    
        4,157
    
    
    
    1,346
    
    
    
    1,007
    
    
    
    36
    
    
    
    2,389
 Level 1:
    
    Financial instruments with quoted prices for identical instruments in active markets.Level 2:
    
    Financial instruments with quoted prices for similar instruments in active markets or quoted prices for identical or similar
instruments in inactive markets and financial instruments valued using models where all significant inputs are based directly
or indirectly on observable market data.Level 3:
    
    Financial instruments valued using valuation techniques where one or more significant inputs are based on unobservable
market data.
   2011
    
    
    2010Level 3
    
    
    Level 3valuation
    
    
    valuation£m
    
    
    £mAt 1 April
    
    
    36
    
    
    
    10Net gains for the year (i)
    
    
    21
    
    
    
    29Settlements
    
    
    (3
    )
    
    
    (3
    )At 31 March
    
    
    54
    
    
    
    36
 (i)
    Gains of £21m (2010: £29m) are attributable to assets or liabilities held at the end of
the reporting period and have been recognised in finance costs in the income statement.  (c) Credit risk
  Treasury related credit risk
  Maximum limit
    
    
    Long-term limitRating
    
    £m
    
    
    £mAAA rated G8 sovereign entities
    
    Unlimited
    
    
    UnlimitedTriple A vehicles
    
    
    275
    
    
    
    233Triple A range institutions (AAA)
    
    
    938 to 1,415
    
    
    
    472 to 741Double A range institutions (AA)
    
    
    560 to 705
    
    
    
    285 to 353Single A range institutions (A)
    
    
    192 to 275
    
    
    
    99 to 140
 
    Annual Report and Accounts 2010/11 National Grid plc       159




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
  32. Financial risk continued
   Wholesale and retail credit risk
  (d) Liquidity analysis
   Less
    
    
    
    
    
    
    
    
    
    
    Morethan
    
    
    
    
    
    
    
    
    
    
    than1 year
    
    
    1-2 years
    
    
    2-3 years
    
    
    3 years
    
    
    TotalAt 31 March 2011
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mNon-derivative financial liabilitiesBorrowings, excluding finance lease liabilities
    
    
    (2,616
    )
    
        (1,188
    )
    
        (1,574
    )
    
        (17,455
    )
    
        (22,833
    )Interest payments on borrowings (i)
    
    
    (828
    )
    
        (807
    )
    
        (741
    )
    
        (9,328
    )
    
        (11,704
    )Finance lease liabilities
    
    
    (20
    )
    
        (38
    )
    
        (33
    )
    
        (157
    )
    
        (248
    )Other non interest-bearing liabilities
    
    
    (2,320
    )
    
        (279
    )
    
        
    
    
        
    
    
        (2,599
    )Derivative financial liabilitiesDerivative contracts  receipts
    
    
    1,596
    
    
        407
    
    
        649
    
    
        1,606
    
    
        4,258Derivative contracts  payments
    
    
    (1,213
    )
    
        (169
    )
    
        (345
    )
    
        (1,345
    )
    
        (3,072
    )Commodity contracts
    
    
    (290
    )
    
        (84
    )
    
        (40
    )
    
        (43
    )
    
        (457
    )Total at 31 March 2011
    
    
    (5,691
    )
    
        (2,158
    )
    
        (2,084
    )
    
        (26,722
    )
    
        (36,655
    )
 Less
    
    
    
    
    
    
    
    
    
    
    Morethan
    
    
    
    
    
    
    
    
    
    
    than1 year
    
    
    1-2 years
    
    
    2-3 years
    
    
    3 years
    
    
    TotalAt 31 March 2010
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mNon-derivative financial liabilitiesBorrowings, excluding finance lease liabilities
    
    
    (2,390
    )
    
    
    (2,100
    )
    
    
    (1,322
    )
    
    
    (18,927
    )
    
    
    (24,739
    )Interest payments on borrowings (i)
    
    
    (915
    )
    
    
    (874
    )
    
    
    (845
    )
    
    
    (9,829
    )
    
    
    (12,463
    )Finance lease liabilities
    
    
    (30
    )
    
    
    (53
    )
    
    
    (20
    )
    
    
    (169
    )
    
    
    (272
    )Other non interest-bearing liabilities
    
    
    (2,287
    )
    
    
    (265
    )
    
    
    
    
    
    
    
    
    
    
    (2,552
    )Derivative financial liabilitiesDerivative contracts  receipts
    
    
    1,027
    
    
    
    1,649
    
    
    
    171
    
    
    
    2,235
    
    
    
    5,082Derivative contracts  payments
    
    
    (859
    )
    
    
    (1,464
    )
    
    
    (104
    )
    
    
    (1,874
    )
    
    
    (4,301
    )Commodity contracts
    
    
    (488
    )
    
    
    (168
    )
    
    
    (35
    )
    
    
    (101
    )
    
    
    (792
    )Total at 31 March 2010
    
    
    (5,942
    )
    
    
    (3,275
    )
    
    
    (2,155
    )
    
    
    (28,665
    )
    
    
    (40,037
    )
 (i)
    The interest on borrowings is calculated based on borrowings held at 31 March without
taking account of future issues. Floating rate interest is estimated using a forward interest rate
curve as at 31 March. Payments are included on the basis of the earliest date on which the Company
can be required to settle.
      160       National Grid plc Annual Report and Accounts 2010/11




---



##### 



32. Financial risk continued
 (e) Sensitivity analysis
     =
    
    the balance sheet sensitivity to interest rates relates only to derivative financial
instruments and available-for-sale investments, as debt and other deposits are carried at
amortised cost and so their carrying value does not change as interest rates move;=
    
    the sensitivity of accrued interest to movements in interest rates is calculated on
net floating rate exposures on debt, deposits and derivative instruments;=
    
    changes in the carrying value of derivatives from movements in interest rates
designated as cash flow hedges are assumed to be recorded fully within equity;=
    
    changes in the carrying value of derivative financial instruments designated as net
investment hedges from movements in interest rates are recorded in the income statement as
they are designated using the spot rather than the forward translation method.
The impact of movements in the dollar to sterling exchange rate are recorded directly in equity;=
    
    changes in the carrying value of derivative financial instruments not in hedging
relationships only affect the income statement;=
    
    all other changes in the carrying value of derivative financial instruments designated
as hedges are fully effective with no impact on the income statement;=
    
    debt with a maturity below one year is floating rate for the accrued interest part of the calculation;=
    
    the floating leg of any swap or any floating rate debt is treated as not having any
interest rate already set, therefore a change in interest rates affects a full 12 month period
for the accrued interest portion of the sensitivity calculations; and=
    
    sensitivity to the retail price index does not take into account any changes to
revenue or operating costs that are affected by the retail price index or inflation generally.
  2011
    
    
    2010Income
    
    
    Other equity
    
    
    Income
    
    
    Other equitystatement
    
    
    reserves
    
    
    statement
    
    
    reserves+/- £m
    
    
    +/- £m
    
    
    +/- £m
    
    
    +/- £mUK retail price index +/- 0.50%
    
    
    19
    
    
        
    
    
    
    17
    
    
    
    UK interest rates +/- 0.50%
    
    
    38
    
    
        50
    
    
    
    51
    
    
    
    71US interest rates +/- 0.50%
    
    
    39
    
    
        15
    
    
    
    52
    
    
    
    14US dollar exchange rate +/- 10%
    
    
    44
    
    
        636
    
    
    
    68
    
    
    
    623
 
    Annual Report and Accounts 2010/11 | National Grid plc       161




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
 32. Financial risk continued
 (f) Capital and risk management
      
 
 33. Commodity risk
       
 162       National Grid plc | Annual Report and Accounts 2010/11




---



##### 



33. Commodity risk continued
 (a) Fair value analysis
  2011
    
    2010Assets
    
    
    Liabilities
    
    
    Total
    
    
    Assets
    
    
    Liabilities
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mCommodity purchase contracts accounted for as derivative contractsForward purchases of electricity
    
    
    
    
    
    
    (101
    )
    
    
    (101
    )
    
    
    
    
    
    
    (127
    )
    
    
    (127
    )Forward purchases/sales of gas
    
    
    42
    
    
    
    (83
    )
    
    
    (41
    )
    
    
    51
    
    
    
    (101
    )
    
    
    (50
    )Derivative financial instruments linked to commodity pricesElectricity swaps
    
    
    4
    
    
    
    (18
    )
    
    
    (14
    )
    
    
    
    
    
    
    (47
    )
    
    
    (47
    )Electricity options
    
    
    62
    
    
    
    
    
    
    
    62
    
    
    
    51
    
    
    
    
    
    
    
    51Gas swaps
    
    
    2
    
    
    
    (17
    )
    
    
    (15
    )
    
    
    3
    
    
    
    (52
    )
    
    
    (49
    )110
    
    
    
    (219
    )
    
    
    (109
    )
    
    
    105
    
    
    
    (327
    )
    
    
    (222
    )
  2011
    
    2010Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mAssetsCommodity contracts
    
    
    
    
    
    
    6
    
    
    
    104
    
    
    
    110
    
    
    
    
    
    
    
    2
    
    
    
    103
    
    
    
    105LiabilitiesCommodity contracts
    
    
    
    
    
    
    (36
    )
    
    
    (183
    )
    
    
    (219
    )
    
    
    
    
    
    
    (100
    )
    
    
    (227
    )
    
    
    (327
    )Total
    
    
    
    
    
    
    (30
    )
    
    
    (79
    )
    
    
    (109
    )
    
    
    
    
    
    
    (98
    )
    
    
    (124
    )
    
    
    (222
    )
   2011
    
    
    2010£m
    
    
    £mAt 1 April 2010
    
    
    (124
    )
    
    
    (115
    )Net gains for the year (i)
    
    
    20
    
    
    
    8Purchases
    
    
    (42
    )
    
    
    (12
    )Sales
    
    
    
    
    
    
    (1
    )Settlements
    
    
    68
    
    
    
    Reclassification into level 3
    
    
    
    
    
    
    (3
    )Reclassification out of level 3
    
    
    (1
    )
    
    
    (1
    )At 31 March 2011
    
    
    (79
    )
    
    
    (124
    )
 
 (i)
    
    Gains of £14m (2010: £67m loss) are attributable to assets or liabilities held at the end
of the reporting period.
 
    Annual Report and Accounts 2010/11 | National Grid plc       163




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
 33. Commodity risk continued
  2011
    
    
    2010Income
    
    
    Incomestatement
    
    
    statement£m
    
    
    £m10% increase in commodity prices (i)
    
    
    39
    
    
    
    4610% decrease in commodity prices (i)
    
    
    (36
    )
    
    
    (39
    )10% increase in commodity volumes
    
    
    (5
    )
    
    
    (9
    )10% decrease in commodity volumes
    
    
    3
    
    
    
    9Forward curve extrapolation
    
    
    (1
    )
    
    
    (12
    )
 (i)
    
    Level 3 commodity price sensitivity is included within the sensitivity analysis disclosed
in (d) below.  (b) Maturity analysis
  2011
    
    2010Assets
    
    
    Liabilities
    
    
    Total
    
    
    Assets
    
    
    Liabilities
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mLess than one year
    
    
    16
    
    
    
    (118
    )
    
    
    (102
    )
    
    
    21
    
    
    
    (184
    )
    
    
    (163
    )Current
    
    
    16
    
    
    
    (118
    )
    
    
    (102
    )
    
    
    21
    
    
    
    (184
    )
    
    
    (163
    )In 1  2 years
    
    
    18
    
    
    
    (26
    )
    
    
    (8
    )
    
    
    8
    
    
    
    (49
    )
    
    
    (41
    )In 2  3 years
    
    
    9
    
    
    
    (20
    )
    
    
    (11
    )
    
    
    11
    
    
    
    (21
    )
    
    
    (10
    )In 3  4 years
    
    
    8
    
    
    
    (20
    )
    
    
    (12
    )
    
    
    13
    
    
    
    (19
    )
    
    
    (6
    )In 4  5 years
    
    
    11
    
    
    
    (18
    )
    
    
    (7
    )
    
    
    11
    
    
    
    (19
    )
    
    
    (8
    )More than 5 years
    
    
    48
    
    
    
    (17
    )
    
    
    31
    
    
    
    41
    
    
    
    (35
    )
    
    
    6Non-current
    
    
    94
    
    
    
    (101
    )
    
    
    (7
    )
    
    
    84
    
    
    
    (143
    )
    
    
    (59
    )Total
    
    
    110
    
    
    
    (219
    )
    
    
    (109
    )
    
    
    105
    
    
    
    (327
    )
    
    
    (222
    )
 (c) Notional quantities
  2011
    
    
    2010Forward purchases of electricity (i)
    
    4,257 GWh
    
    
    3,883 GWhForward purchases/sales of gas (ii)
    
    12m Dth
    
    
    171m DthElectricity swaps
    
    2,559 GWh
    
    
    3,141 GWhElectricity options
    
    30,248 GWh
    
    
    30,294 GWhGas swaps
    
    27m Dth
    
    
    59m DthGas options
    
    9m Dth
    
    
    
    NYMEX gas futures (iii)
    
    18m Dth
    
    
    48m Dth
 (i)
    
    Forward electricity purchases have terms up to 12 years. The contractual
obligations under these contracts are £240m (2010: £269m).(ii)
    
    Forward gas purchases have
terms up to 7 years. The contractual obligations under these contracts are £247m (2010:
£434m).(iii)
    
    NYMEX gas futures have been offset with related margin accounts. (d) Sensitivity analysis
  2011
    
    2010Income
    
    
    Other equity
    
    
    Income
    
    
    Other equitystatement
    
    
    reserves
    
    
    statement
    
    
    reserves£m
    
    
    £m
    
    
    £m
    
    
    £m10% increase in commodity prices
    
    
    58
    
    
    
    
    
    
    
    71
    
    
    
    (1
    )10% decrease in commodity prices
    
    
    (54
    )
    
    
    
    
    
    
    (64
    )
    
    
    1
  
 164       National Grid plc Annual Report and Accounts 2010/11




---



##### 



34. Bonds and facilities
  Issuer
    
    Original Notional Value
    
    Description of instrument
    
    DueBondsBritish Transco Finance Inc.
    
    USD 300m
    
    6.625% Fixed Rate
    
    
    2018British Transco International Finance BV
    
    USD 1,500m
    
    Zero Coupon Bond
    
    
    2021Brooklyn Union Gas Company
    
    USD 153m
    
    4.7% GFRBs Series 1996
    
    
    2021USD 400m
    
    5.6% Senior Unsecured Note
    
    
    2016KeySpan Corporation
    
    USD 700m
    
    MTN 7.625% (i)
    
    
    2010USD 250m
    
    MTN 8.00%
    
    
    2030USD 307m
    
    5.803% Notes
    
    
    2035USD 150m
    
    4.65% Notes
    
    
    2013USD 150m
    
    5.875% Notes
    
    
    2033KeySpan Gas East Corporation
    
    USD 500m
    
    5.819% Fixed Rate (ii)
    
    
    2041(National Grid Energy Delivery Long Island)Massachusetts Electric Company
    
    USD 800m
    
    5.90% Fixed Rate
    
    
    2039National Grid Electricity Transmission plc
    
    EUR 600m
    
    6.625% Fixed Rate
    
    
    2014GBP 250m
    
    4.75% Fixed Rate (i)
    
    
    2010GBP 300m
    
    2.983% Guaranteed Retail Price Index Linked
    
    
    2018GBP 220m
    
    3.806% Retail Price Index Linked
    
    
    2020GBP 450m
    
    5.875% Fixed Rate
    
    
    2024GBP 360m
    
    6.5% Fixed Rate
    
    
    2028GBP 200m
    
    1.6449% Retail Price Index Linked
    
    
    2036GBP 150m
    
    1.823% Retail Price Index Linked
    
    
    2056GBP 150m
    
    1.8575% Index Linked
    
    
    2039GBP 379m
    
    7.375% Fixed Rate
    
    
    2031National Grid Gas plc
    
    GBP 300m
    
    6.0% Fixed Rate
    
    
    2017GBP 275m
    
    8.75% Fixed Rate
    
    
    2025GBP 100m
    
    1.6747% Retail Price Index Linked
    
    
    2036GBP 115m
    
    1.7298% Retail Price Index Linked
    
    
    2046GBP 100m
    
    1.6298% Retail Price Index Linked
    
    
    2048GBP 100m
    
    1.5522% Retail Price Index Linked
    
    
    2048GBP 300m
    
    1.754% Retail Price Index Linked
    
    
    2036GBP 140m
    
    1.7864% Index Linked
    
    
    2037GBP 100m
    
    1.9158% Index Linked
    
    
    2037GBP 100m
    
    1.7762% Index Linked
    
    
    2037GBP 100m
    
    1.7744% Index Linked
    
    
    2039GBP 100m
    
    1.8625% Index Linked
    
    
    2039GBP 484m
    
    6.375% Fixed Rate
    
    
    2020GBP 503m
    
    4.1875% Index Linked
    
    
    2022GBP 503m
    
    7.0% Fixed Rate
    
    
    2024EUR 800m
    
    5.125% Fixed Rate
    
    
    2013EUR 163m
    
    4.36% EUR-HICP Linked
    
    
    2018GBP 457m
    
    6.0% Fixed Rate
    
    
    2038
 
 Annual Report and Accounts 2010/11 National Grid plc       165




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
 34. Bonds and facilities continued
 Issuer
    
    Original Notional Value
    
    Description of instrument
    
    DueBonds continuedNational Grid plc
    
    CAD 200m
    
    4.98% Fixed Rate
    
    
    2011EUR 1,000m
    
    4.125% Fixed Rate
    
    
    2013EUR 600m
    
    5.0% Fixed Rate
    
    
    2018EUR 500m
    
    4.375% Fixed Rate
    
    
    2020EUR 600m
    
    Floating Rate (i)
    
    
    2010EUR 750m
    
    Floating Rate
    
    
    2012GBP 300m
    
    5.25% Fixed Rate
    
    
    2011GBP 310m
    
    5.5% Fixed Rate
    
    
    2013USD 1,000m
    
    6.3% Fixed Rate
    
    
    2016EUR 578m
    
    6.5% Fixed Rate
    
    
    2014GBP 414m
    
    6.125% Fixed Rate
    
    
    2014NGG Finance plc
    
    EUR 750m
    
    6.125% Fixed Rate
    
    
    2011Niagara Mohawk Power Corporation
    
    USD 750m
    
    4.881% Fixed Rate
    
    
    2019USD 500m
    
    3.553% Fixed Rate
    
    
    2014The Narragansett Electric Company
    
    USD 250m
    
    4.534% Fixed Rate
    
    
    2020USD 300m
    
    5.638% Fixed Rate
    
    
    2040Bank loans and other loansNational Grid plc
    
    USD 200m
    
    Floating Rate (i)
    
    
    2010USD 250m
    
    Floating Rate (i)
    
    
    2014USD 150m
    
    Floating Rate (i)
    
    
    2014National Grid Grain LNG Limited
    
    GBP 120m
    
    Floating Rate
    
    
    2014GBP 140m
    
    Floating Rate
    
    
    2023National Grid Electricity Transmission plc
    
    GBP 200m
    
    Floating Rate
    
    
    2012GBP 200m
    
    Floating Rate
    
    
    2017National Grid Gas plc
    
    GBP 200m
    
    Floating Rate
    
    
    2012GBP 180m
    
    1.88% Retail Price Index Linked
    
    
    2022GBP 190m
    
    2.14% Retail Price Index Linked
    
    
    2022GBP 360m
    
    Retail Price Index Linked (ii)
    
    
    2024National Grid USA
    
    USD 150m
    
    Floating Rate (i)
    
    
    2011USD 250m
    
    Floating Rate (ii)
    
    
    2014USD 150m
    
    Floating Rate (ii)
    
    
    2014National Grid Holdings Limited
    
    GBP 250m
    
    4.13840% Fixed Rate
    
    
    2011
 (i)
    
    Matured or repurchased during the
year ended 31 March 2011.(ii)
    
    Issued during the year ended 31 March 2011.  Borrowing facilities
  2011
    
    
    2010£m
    
    
    £mUndrawn committed borrowing facilities expiring:Less than 1 year
    
    
    330
    
    
    
    1,708In 1-2 years
    
    
    899
    
    
    
    1,314In 3-4 years
    
    
    1,140
    
    
    
    In 4-5 years
    
    
    529
    
    
    
    2,898
    
    
    
    3,022
  
 166       National Grid plc Annual Report and Accounts 2010/11




---



##### 



35. Share options and reward plans
   Active share plans
 
    
    Sharesave scheme  share options are offered to employees at 80% of the market price
at the time of the invitation. The share options are exercisable on completion of a three
and/or five year Save As You Earn contract.
    
    PSP  awards delivered in National Grid shares (ADSs for US participants) are made to
Executive Directors and senior employees. The criteria are based on the Companys total
shareholder return (50%) when compared to FTSE 100 and annualised growth of the Companys EPS
(50%) when compared to the growth in RPI.
    
    Deferred Share Plan  50% of any Annual Performance Plan awarded to the Executive
Directors and a fixed percentage awarded to senior employees is automatically deferred into
National Grid shares (ADSs for US participants) which are held in trust for three years before
release.
    
    Retention Award Plans  awards delivered in National Grid shares (ADSs for US
participants) to senior employees and vest in equal tranches over two and four years provided
the employee remains employed by the Company.
 Additional information in respect of active share plans (excluding Sharesave scheme)
 2011
    
    
    2010millions
    
    
    millionsAwards of ordinary share equivalents at 1 April
    
    
    10.2
    
    
    
    11.0Impact of rights issue
    
    
    1.5
    
    
    
    Awards made
    
    
    5.5
    
    
    
    4.7Lapses/forfeits
    
    
    (1.5
    )
    
    
    (0.9
    )Awards vested
    
    
    (0.9
    )
    
    
    (4.6
    )Awards of ordinary share equivalents at 31 March
    
    
    14.8
    
    
    
    10.2Conditional awards available for release at 31 March
    
    
    1.4
    
    
    
    0.1
 Non-active share plans
  Share options  Sharesave scheme and Executive Share Option Plan
 Sharesave scheme
    
    Executive Share Option PlanWeighted
    
    
    
    
    
    
    Weightedaverage
    
    
    
    
    
    
    average
    
    
    
    
    
    
    Totalprice
    
    
    
    
    
    
    price
    
    
    
    
    
    
    options£
    
    
    millions
    
    
    £
    
    
    millions
    
    
    millionsAt 1 April 2009
    
    
    4.74
    
    
    
    20.1
    
    
    
    4.95
    
    
    
    1.5
    
    
    
    21.6Granted
    
    
    5.20
    
    
    
    3.7
    
    
    
    
    
    
    
    
    
    
    
    3.7Lapsed  expired
    
    
    5.38
    
    
    
    (0.9
    )
    
    
    5.24
    
    
    
    (0.1
    )
    
    
    (1.0
    )Exercised
    
    
    3.77
    
    
    
    (4.5
    )
    
    
    4.93
    
    
    
    (0.5
    )
    
    
    (5.0
    )At 31 March 2010
    
    
    5.05
    
    
    
    18.4
    
    
    
    4.92
    
    
    
    0.9
    
    
    
    19.3Impact of rights issue
    
    
    
    
    
    
    2.1
    
    
    
    
    
    
    
    0.1
    
    
    
    2.2Granted
    
    
    4.45
    
    
    
    3.9
    
    
    
    
    
    
    
    
    
    
    
    3.9Lapsed  expired
    
    
    4.57
    
    
    
    (1.4
    )
    
    
    4.61
    
    
    
    (0.3
    )
    
    
    (1.7
    )Exercised
    
    
    4.31
    
    
    
    (3.5
    )
    
    
    4.37
    
    
    
    (0.2
    )
    
    
    (3.7
    )At 31 March 2011
    
    
    4.43
    
    
    
    19.5
    
    
    
    4.03
    
    
    
    0.5
    
    
    
    20.0ExercisableAt 31 March 2011
    
    
    4.83
    
    
    
    1.2
    
    
    
    4.03
    
    
    
    0.4
    
    
    
    1.6At 31 March 2010
    
    
    4.98
    
    
    
    0.8
    
    
    
    4.71
    
    
    
    0.5
    
    
    
    1.3Weighted average share price at exercise dateYear ended 31 March 2011
    
    
    5.53
    
    
    
    3.5
    
    
    
    5.59
    
    
    
    0.2
    
    
    
    3.7Year ended 31 March 2010
    
    
    5.74
    
    
    
    4.5
    
    
    
    6.03
    
    
    
    0.5
    
    
    
    5.0
  
 Annual Report and Accounts 2010/11 National Grid plc       167




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
 35. Share options and reward plans continued
 Awards under share option and reward plans
 2011
    
    
    2010
    
    
    2009Share optionsAverage share price at date of grant
    
    
    564.5p
    
    
    
    676.0p
    
    
    
    684.0pAverage exercise price
    
    
    445.0p
    
    
    
    520.0p
    
    
    
    488.0pAverage fair value
    
    
    137.0p
    
    
    
    161.1p
    
    
    
    153.7pOther share plansAverage share price at date of grant
    
    
    493.3p
    
    
    
    598.2p
    
    
    
    670.1pAverage fair value
    
    
    327.8p
    
    
    
    355.6p
    
    
    
    458.1p
 Fair value calculation assumptions
 2011
    
    
    2010
    
    
    2009Dividend yield (%)
    
    
    4.4-5.0
    
    
    
    4.4-5.0
    
    
    
    4.4-5.0Volatility (%)
    
    
    22.4-26.1
    
    
    
    22.4-26.1
    
    
    
    22.4-26.1Risk free investment rate (%)
    
    
    2.5
    
    
    
    2.5
    
    
    
    2.5Average life (years)
    
    
    4.0
    
    
    
    4.0
    
    
    
    4.2
   (i)
    
    implied volatility in traded options over the Companys shares;(ii)
    
    historical volatility of the Companys shares over a term commensurate with the expected life of each option; and(iii)
    
    implied volatility of comparator companies where options in their shares are traded.
 Additional information in respect of share options
 2011
    
    
    2010
    
    
    2009£m
    
    
    £m
    
    
    £mShare options exercisedCash received on exercise of all share options during the year
    
    
    18
    
    
    
    18
    
    
    
    8Tax benefits realised from share options exercised during the year
    
    
    3
    
    
    
    8
    
    
    
    4
 
   
 168       National Grid plc Annual Report and Accounts 2010/11




---



##### 



36. Subsidiary undertakings, joint ventures and associates
 Principal subsidiary undertakings
  Principal activityNational Grid Gas plc
    
    Transmission and distribution of gasNational Grid Electricity Transmission plc
    
    Transmission of electricityNew England Power Company (i)
    
    Transmission of electricityMassachusetts Electric Company (i)
    
    Distribution of electricityThe Narragansett Electric Company (i)
    
    Transmission and distribution of electricityNiagara Mohawk Power Corporation (i)
    
    Transmission of electricity and distribution of electricity and gasNational Grid Metering Limited
    
    Metering servicesUtility Metering Services Limited
    
    Metering servicesNational Grid Grain LNG Limited
    
    LNG importation and storageBoston Gas Company (i)
    
    Distribution of gasNational Grid Generation LLC (i)
    
    Generation of electricityKeySpan Gas East Corporation (i)
    
    Distribution of gasThe Brooklyn Union Gas Company (i)
    
    Distribution of gasNGG Finance plc
    
    FinancingNational Grid Property Holdings Limited
    
    Property servicesNational Grid Holdings One plc
    
    Holding companyLattice Group plc
    
    Holding companyNational Grid USA (i)
    
    Holding companyNiagara Mohawk Holdings, Inc. (i)
    
    Holding companyNational Grid Commercial Holdings Limited
    
    Holding companyNational Grid Holdings Limited
    
    Holding companyKeySpan Corporation (i)
    
    Holding company
 
 (i)
    
    Incorporated in the US. Principal joint ventures and associates
  % of ordinaryshares held
    
    Principal activityBritNed Development Limited
    
    50
    
    UK / Netherlands interconnectorMillennium Pipeline Company, LLC (i)
    
    26.25
    
    Transmission of gasIroquois Gas Transmission System, L.P. (i)
    
    20.4
    
    Transmission of gas
 
 (i)
    
    Incorporated in the US.
 
   
 Annual Report and Accounts 2010/11 National Grid plc       169




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
 
 37. National Grid Gas plc and Niagara Mohawk Power Corporation additional disclosures
 
   
 170     National Grid plc Annual Report and Accounts 2010/11




---



##### 



37. National Grid Gas plc and Niagara Mohawk Power Corporation additional disclosures continued
 Summary
income statements for the year ended 31 March 2011  IFRS
 Parent
    
    
    
    
    
    
    
    
    
    
    Subsidiaryguarantor
    
    
    Issuer of notes
    
    
    guarantorNiagaraMohawk
    
    
    British
    
    
    National
    
    
    
    
    
    
    
    
    
    
    NationalNational
    
    
    Power
    
    
    Transco
    
    
    Grid Gas
    
    
    Other
    
    
    Consolidation
    
    
    GridGrid plc
    
    
    Corporation
    
    
    Finance Inc.
    
    
    plc
    
    
    subsidiaries
    
    
    adjustments
    
    
    consolidated£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    
    
    
    
    2,606
    
    
    
    
    
    
    
    2,739
    
    
    
    9,174
    
    
    
    (176
    )
    
    
    14,343Operating costsDepreciation and amortisation
    
    
    
    
    
    
    (133
    )
    
    
    
    
    
    
    (455
    )
    
    
    (664
    )
    
    
    
    
    
    
    (1,252
    )Payroll costs
    
    
    
    
    
    
    (288
    )
    
    
    
    
    
    
    (236
    )
    
    
    (972
    )
    
    
    
    
    
    
    (1,496
    )Purchases of electricity
    
    
    
    
    
    
    (628
    )
    
    
    
    
    
    
    
    
    
    
    (854
    )
    
    
    
    
    
    
    (1,482
    )Purchases of gas
    
    
    
    
    
    
    (244
    )
    
    
    
    
    
    
    (141
    )
    
    
    (1,635
    )
    
    
    
    
    
    
    (2,020
    )Rates and property taxes
    
    
    
    
    
    
    (151
    )
    
    
    
    
    
    
    (239
    )
    
    
    (555
    )
    
    
    
    
    
    
    (945
    )Balancing Service Incentive Scheme
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (581
    )
    
    
    
    
    
    
    (581
    )Payments to Scottish transmission owners
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (298
    )
    
    
    
    
    
    
    (298
    )Other operating costs
    
    
    
    
    
    
    (375
    )
    
    
    
    
    
    
    (489
    )
    
    
    (1,836
    )
    
    
    176
    
    
    
    (2,524
    )
    
    
    
    (1,819
    )
    
    
    
    
    
    
    (1,560
    )
    
    
    (7,395
    )
    
    
    176
    
    
    
    (10,598
    )Operating profit
    
    
    
    
    
    
    787
    
    
    
    
    
    
    
    1,179
    
    
    
    1,779
    
    
    
    
    
    
    
    3,745Net finance costs
    
    
    (261
    )
    
    
    (119
    )
    
    
    
    
    
    
    (395
    )
    
    
    (353
    )
    
    
    
    
    
    
    (1,128
    )Dividends receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    400
    
    
    
    (400
    )
    
    
    Interest in equity accounted affiliates
    
    
    2,360
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    7
    
    
    
    (2,367
    )
    
    
    7Profit before tax
    
    
    2,099
    
    
    
    668
    
    
    
    
    
    
    
    791
    
    
    
    1,833
    
    
    
    (2,767
    )
    
    
    2,624Taxation
    
    
    64
    
    
    
    (236
    )
    
    
    
    
    
    
    (97
    )
    
    
    (192
    )
    
    
    
    
    
    
    (461
    )Profit for the year from continuing operations
    
    
    2,163
    
    
    
    432
    
    
    
    
    
    
    
    694
    
    
    
    1,641
    
    
    
    (2,767
    )
    
    
    2,163Profit for the year from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Profit for the year
    
    
    2,163
    
    
    
    432
    
    
    
    

(i)
    
    
    694
    
    
    
    1,641
    
    
    
    (2,767
    )
    
    
    2,163Attributable to:Equity shareholders
    
    
    2,159
    
    
    
    432
    
    
    
    
    
    
    
    694
    
    
    
    1,637
    
    
    
    (2,763
    )
    
    
    2,159Non-controlling interests
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    (4
    )
    
    
    42,163
    
    
    
    432
    
    
    
    
    
    
    
    694
    
    
    
    1,641
    
    
    
    (2,767
    )
    
    
    2,163
 
 (i)
    
    Profit for the year for British Transco Finance Inc. is £nil as interest payable to external
bond holders is offset by interest receivable on loans to National Grid Gas plc.
 
   
 Annual Report and Accounts 2010/11 National Grid plc       171




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
 37. National Grid Gas plc and Niagara Mohawk Power Corporation additional disclosures continued
 Summary
income statements for the year ended 31 March 2010  IFRS
 Parent
    
    
    
    
    
    
    
    
    
    
    Subsidiaryguarantor
    
    
    Issuer of notes
    
    
    guarantorNiagaraMohawk
    
    
    British
    
    
    National
    
    
    
    
    
    
    
    
    
    
    NationalNational
    
    
    Power
    
    
    Transco
    
    
    Grid Gas
    
    
    Other
    
    
    Consolidation
    
    
    GridGrid plc
    
    
    Corporation
    
    
    Finance Inc.
    
    
    plc
    
    
    subsidiaries
    
    
    adjustments
    
    
    consolidated£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    
    
    
    
    2,409
    
    
    
    
    
    
    
    2,787
    
    
    
    9,008
    
    
    
    (197
    )
    
    
    14,007Operating costsDepreciation and amortisation
    
    
    
    
    
    
    (131
    )
    
    
    
    
    
    
    (430
    )
    
    
    (633
    )
    
    
    
    
    
    
    (1,194
    )Payroll costs
    
    
    
    
    
    
    (274
    )
    
    
    
    
    
    
    (224
    )
    
    
    (904
    )
    
    
    
    
    
    
    (1,402
    )Purchases of electricity
    
    
    
    
    
    
    (575
    )
    
    
    
    
    
    
    
    
    
    
    (998
    )
    
    
    
    
    
    
    (1,573
    )Purchases of gas
    
    
    
    
    
    
    (253
    )
    
    
    
    
    
    
    (155
    )
    
    
    (1,834
    )
    
    
    
    
    
    
    (2,242
    )Rates and property taxes
    
    
    
    
    
    
    (126
    )
    
    
    
    
    
    
    (248
    )
    
    
    (533
    )
    
    
    
    
    
    
    (907
    )Balancing Service Incentive Scheme
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (691
    )
    
    
    
    
    
    
    (691
    )Payments to Scottish transmission owners
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (260
    )
    
    
    
    
    
    
    (260
    )Other operating costs
    
    
    4
    
    
    
    (435
    )
    
    
    
    
    
    
    (633
    )
    
    
    (1,578
    )
    
    
    197
    
    
    
    (2,445
    )4
    
    
    
    (1,794
    )
    
    
    
    
    
    
    (1,690
    )
    
    
    (7,431
    )
    
    
    197
    
    
    
    (10,714
    )Operating profit
    
    
    4
    
    
    
    615
    
    
    
    
    
    
    
    1,097
    
    
    
    1,577
    
    
    
    
    
    
    
    3,293Net finance costs
    
    
    (227
    )
    
    
    (96
    )
    
    
    
    
    
    
    (224
    )
    
    
    (561
    )
    
    
    
    
    
    
    (1,108
    )Dividends receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300
    
    
    
    (300
    )
    
    
    Interest in equity accounted affiliates
    
    
    1,558
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    8
    
    
    
    (1,570
    )
    
    
    8Profit before tax
    
    
    1,335
    
    
    
    519
    
    
    
    
    
    
    
    885
    
    
    
    1,324
    
    
    
    (1,870
    )
    
    
    2,193Taxation
    
    
    54
    
    
    
    (225
    )
    
    
    
    
    
    
    (285
    )
    
    
    (348
    )
    
    
    
    
    
    
    (804
    )Profit for the year from continuing operations
    
    
    1,389
    
    
    
    294
    
    
    
    
    
    
    
    600
    
    
    
    976
    
    
    
    (1,870
    )
    
    
    1,389Profit for the year from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Profit for the year
    
    
    1,389
    
    
    
    294
    
    
    
    
    (i)
    
    
    600
    
    
    
    976
    
    
    
    (1,870
    )
    
    
    1,389Attributable to:Equity shareholders
    
    
    1,386
    
    
    
    294
    
    
    
    
    
    
    
    600
    
    
    
    973
    
    
    
    (1,867
    )
    
    
    1,386Non-controlling interests
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    (3
    )
    
    
    31,389
    
    
    
    294
    
    
    
    
    
    
    
    600
    
    
    
    976
    
    
    
    (1,870
    )
    
    
    1,389
 
 (i)
    
    Profit for the year for British Transco Finance Inc. is £nil as interest payable to external
bond holders is offset by interest receivable on loans to National Grid Gas plc.
 
   
 172       National Grid plc Annual Report and Accounts 2010/11




---



##### 



37. National Grid Gas plc and Niagara Mohawk Power Corporation additional disclosures continued
 Summary
income statements for the year ended 31 March 2009  IFRS
 Parent
    
    
    
    
    
    
    
    
    
    
    Subsidiaryguarantor
    
    
    Issuer of notes
    
    
    guarantorNiagaraMohawk
    
    
    British
    
    
    National
    
    
    
    
    
    
    
    
    
    
    NationalNational
    
    
    Power
    
    
    Transco
    
    
    Grid Gas
    
    
    Other
    
    
    Consolidation
    
    
    GridGrid plc
    
    
    Corporation
    
    
    Finance Inc.
    
    
    plc
    
    
    subsidiaries
    
    
    adjustments
    
    
    consolidated£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    
    
    
    
    2,708
    
    
    
    
    
    
    
    2,632
    
    
    
    10,585
    
    
    
    (238
    )
    
    
    15,687Operating costsDepreciation and amortisation
    
    
    
    
    
    
    (135
    )
    
    
    
    
    
    
    (413
    )
    
    
    (579
    )
    
    
    
    
    
    
    (1,127
    )Payroll costs
    
    
    
    
    
    
    (269
    )
    
    
    
    
    
    
    (239
    )
    
    
    (941
    )
    
    
    
    
    
    
    (1,449
    )Purchases of electricity
    
    
    
    
    
    
    (735
    )
    
    
    
    
    
    
    
    
    
    
    (1,492
    )
    
    
    
    
    
    
    (2,227
    )Purchases of gas
    
    
    
    
    
    
    (374
    )
    
    
    
    
    
    
    (168
    )
    
    
    (3,020
    )
    
    
    
    
    
    
    (3,562
    )Rates and property taxes
    
    
    
    
    
    
    (132
    )
    
    
    
    
    
    
    (236
    )
    
    
    (513
    )
    
    
    
    
    
    
    (881
    )Balancing Service Incentive Scheme
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (904
    )
    
    
    
    
    
    
    (904
    )Payments to Scottish transmission owners
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (243
    )
    
    
    
    
    
    
    (243
    )Other operating costs
    
    
    
    
    
    
    (438
    )
    
    
    
    
    
    
    (818
    )
    
    
    (1,653
    )
    
    
    238
    
    
    
    (2,671
    )
    
    
    
    (2,083
    )
    
    
    
    
    
    
    (1,874
    )
    
    
    (9,345
    )
    
    
    238
    
    
    
    (13,064
    )Operating profit
    
    
    
    
    
    
    625
    
    
    
    
    
    
    
    758
    
    
    
    1,240
    
    
    
    
    
    
    
    2,623Net finance costs
    
    
    (213
    )
    
    
    (115
    )
    
    
    
    
    
    
    (400
    )
    
    
    (506
    )
    
    
    
    
    
    
    (1,234
    )Dividends receivable
    
    
    592
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300
    
    
    
    (892
    )
    
    
    Interest in equity accounted affiliates
    
    
    551
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    5
    
    
    
    (548
    )
    
    
    5Profit before tax
    
    
    930
    
    
    
    510
    
    
    
    
    
    
    
    355
    
    
    
    1,039
    
    
    
    (1,440
    )
    
    
    1,394Taxation
    
    
    (8
    )
    
    
    (185
    )
    
    
    
    
    
    
    (307
    )
    
    
    28
    
    
    
    
    
    
    
    (472
    )Profit for the year from continuing operations
    
    
    922
    
    
    
    325
    
    
    
    
    
    
    
    48
    
    
    
    1,067
    
    
    
    (1,440
    )
    
    
    922Profit for the year from discontinued operations
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    (25
    )
    
    
    25Profit for the year
    
    
    947
    
    
    
    325
    
    
    
    
    (i)
    
    
    48
    
    
    
    1,092
    
    
    
    (1,465
    )
    
    
    947Attributable to:Equity shareholders
    
    
    944
    
    
    
    325
    
    
    
    
    
    
    
    48
    
    
    
    1,092
    
    
    
    (1,465
    )
    
    
    944Non-controlling interests
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3947
    
    
    
    325
    
    
    
    
    
    
    
    48
    
    
    
    1,092
    
    
    
    (1,465
    )
    
    
    947
 
 (i)
    
    Profit for the year for British Transco Finance Inc. is £nil as interest payable to external
bond holders is offset by interest receivable on loans to National Grid Gas plc.
 
   
 Annual Report and Accounts 2010/11 National Grid plc       173




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
 37. National Grid Gas plc and Niagara Mohawk Power Corporation additional disclosures
continued
 Balance sheets as at 31 March 2011  IFRS
 Parent
    
    
    
    
    
    
    
    
    
    
    Subsidiaryguarantor
    
    
    Issuer of notes
    
    
    guarantorNiagaraMohawk
    
    
    British
    
    
    National
    
    
    
    
    
    
    
    
    
    
    NationalNational
    
    
    Power
    
    
    Transco
    
    
    Grid Gas
    
    
    Other
    
    
    Consolidation
    
    
    GridGrid plc
    
    
    Corporation
    
    
    Finance Inc.
    
    
    plc
    
    
    subsidiaries
    
    
    adjustments
    
    
    consolidated£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mNon-current assetsGoodwill
    
    
    
    
    
    
    697
    
    
    
    
    
    
    
    
    
    
    
    4,079
    
    
    
    
    
    
    
    4,776Other intangible assets
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    185
    
    
    
    312
    
    
    
    
    
    
    
    501Property, plant and equipment
    
    
    
    
    
    
    3,876
    
    
    
    
    
    
    
    11,290
    
    
    
    16,790
    
    
    
    
    
    
    
    31,956Deferred tax assets
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    Other non-current assets
    
    
    
    
    
    
    64
    
    
    
    
    
    
    
    10
    
    
    
    61
    
    
    
    
    
    
    
    135Amounts owed by subsidiary undertakings
    
    
    311
    
    
    
    
    
    
    
    
    
    
    
    5,611
    
    
    
    
    
    
    
    (5,922
    )
    
    
    Pension assets
    
    
    
    
    
    
    154
    
    
    
    
    
    
    
    
    
    
    
    402
    
    
    
    
    
    
    
    556Financial and other investments
    
    
    9,504
    
    
    
    20
    
    
    
    
    
    
    
    30
    
    
    
    9,841
    
    
    
    (18,802
    )
    
    
    593Derivative financial assets
    
    
    576
    
    
    
    
    
    
    
    
    
    
    
    535
    
    
    
    159
    
    
    
    
    
    
    
    1,270Total non-current assets
    
    
    10,395
    
    
    
    4,815
    
    
    
    
    
    
    
    17,661
    
    
    
    31,644
    
    
    
    (24,728
    )
    
    
    39,787Current assetsInventories and current intangible assets
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    40
    
    
    
    256
    
    
    
    
    
    
    
    320Trade and other receivables
    
    
    3
    
    
    
    498
    
    
    
    
    
    
    
    217
    
    
    
    1,494
    
    
    
    
    
    
    
    2,212Amounts owed by subsidiary undertakings
    
    
    9,985
    
    
    
    16
    
    
    
    190
    
    
    
    107
    
    
    
    9,552
    
    
    
    (19,850
    )
    
    
    Financial and other investments
    
    
    1,424
    
    
    
    12
    
    
    
    
    
    
    
    223
    
    
    
    1,280
    
    
    
    
    
    
    
    2,939Derivative financial assets
    
    
    244
    
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    198
    
    
    
    (54
    )
    
    
    468Cash and cash equivalents
    
    
    200
    
    
    
    2
    
    
    
    
    
    
    
    83
    
    
    
    99
    
    
    
    
    
    
    
    384Total current assets
    
    
    11,856
    
    
    
    552
    
    
    
    190
    
    
    
    750
    
    
    
    12,879
    
    
    
    (19,904
    )
    
    
    6,323Assets of businesses held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    290
    
    
    
    
    
    
    
    290Total assets
    
    
    22,251
    
    
    
    5,367
    
    
    
    190
    
    
    
    18,411
    
    
    
    44,813
    
    
    
    (44,632
    )
    
    
    46,400Current liabilitiesBorrowings
    
    
    (1,125
    )
    
    
    (11
    )
    
    
    (4
    )
    
    
    (410
    )
    
    
    (1,402
    )
    
    
    
    
    
    
    (2,952
    )Derivative financial liabilities
    
    
    (194
    )
    
    
    
    
    
    
    
    
    
    
    (22
    )
    
    
    (28
    )
    
    
    54
    
    
    
    (190
    )Trade and other payables
    
    
    (34
    )
    
    
    (259
    )
    
    
    
    
    
    
    (654
    )
    
    
    (1,881
    )
    
    
    
    
    
    
    (2,828
    )Amounts owed to subsidiary undertakings
    
    
    (7,957
    )
    
    
    (422
    )
    
    
    
    
    
    
    (1,171
    )
    
    
    (10,300
    )
    
    
    19,850
    
    
    
    Current tax liabilities
    
    
    
    
    
    
    (222
    )
    
    
    
    
    
    
    (23
    )
    
    
    (258
    )
    
    
    
    
    
    
    (503
    )Provisions
    
    
    
    
    
    
    (22
    )
    
    
    
    
    
    
    (79
    )
    
    
    (252
    )
    
    
    
    
    
    
    (353
    )Total current liabilities
    
    
    (9,310
    )
    
    
    (936
    )
    
    
    (4
    )
    
    
    (2,359
    )
    
    
    (14,121
    )
    
    
    19,904
    
    
    
    (6,826
    )Non-current liabilitiesBorrowings
    
    
    (3,628
    )
    
    
    (1,293
    )
    
    
    (186
    )
    
    
    (6,535
    )
    
    
    (8,604
    )
    
    
    
    
    
    
    (20,246
    )Derivative financial liabilities
    
    
    (253
    )
    
    
    
    
    
    
    
    
    
    
    (85
    )
    
    
    (66
    )
    
    
    
    
    
    
    (404
    )Other non-current liabilities
    
    
    
    
    
    
    (291
    )
    
    
    
    
    
    
    (1,097
    )
    
    
    (556
    )
    
    
    
    
    
    
    (1,944
    )Amounts owed to subsidiary undertakings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,922
    )
    
    
    5,922
    
    
    
    Deferred tax liabilities
    
    
    
    
    
    
    (286
    )
    
    
    
    
    
    
    (1,873
    )
    
    
    (1,611
    )
    
    
    4
    
    
    
    (3,766
    )Pensions and other post-retirement benefit obligations
    
    
    
    
    
    
    (967
    )
    
    
    
    
    
    
    
    
    
    
    (1,607
    )
    
    
    
    
    
    
    (2,574
    )Provisions
    
    
    
    
    
    
    (243
    )
    
    
    
    
    
    
    (121
    )
    
    
    (1,097
    )
    
    
    
    
    
    
    (1,461
    )Total non-current liabilities
    
    
    (3,881
    )
    
    
    (3,080
    )
    
    
    (186
    )
    
    
    (9,711
    )
    
    
    (19,463
    )
    
    
    5,926
    
    
    
    (30,395
    )Liabilities of businesses held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (110
    )
    
    
    
    
    
    
    (110
    )Total liabilities
    
    
    (13,191
    )
    
    
    (4,016
    )
    
    
    (190
    )
    
    
    (12,070
    )
    
    
    (33,694
    )
    
    
    25,830
    
    
    
    (37,331
    )Net assets
    
    
    9,060
    
    
    
    1,351
    
    
    
    
    
    
    
    6,341
    
    
    
    11,119
    
    
    
    (18,802
    )
    
    
    9,069EquityCalled up share capital
    
    
    416
    
    
    
    116
    
    
    
    
    
    
    
    45
    
    
    
    183
    
    
    
    (344
    )
    
    
    416Share premium account
    
    
    1,361
    
    
    
    1,825
    
    
    
    
    
    
    
    204
    
    
    
    7,183
    
    
    
    (9,212
    )
    
    
    1,361Retained earnings
    
    
    12,153
    
    
    
    (591
    )
    
    
    
    
    
    
    4,796
    
    
    
    3,962
    
    
    
    (8,167
    )
    
    
    12,153Other equity reserves
    
    
    (4,870
    )
    
    
    1
    
    
    
    
    
    
    
    1,296
    
    
    
    (218
    )
    
    
    (1,079
    )
    
    
    (4,870
    )Shareholders equity
    
    
    9,060
    
    
    
    1,351
    
    
    
    
    
    
    
    6,341
    
    
    
    11,110
    
    
    
    (18,802
    )
    
    
    9,060Non-controlling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    9Total equity
    
    
    9,060
    
    
    
    1,351
    
    
    
    
    
    
    
    6,341
    
    
    
    11,119
    
    
    
    (18,802
    )
    
    
    9,069
 
   
 174       National Grid plc Annual Report and Accounts 2010/11




---



##### 



37. National Grid Gas plc and Niagara Mohawk Power Corporation additional disclosures
continued
 Balance sheets as at 31 March 2010  IFRS
 Parent
    
    
    
    
    
    
    
    
    
    
    Subsidiaryguarantor
    
    
    Issuer of notes
    
    
    guarantorNiagaraMohawk
    
    
    British
    
    
    National
    
    
    
    
    
    
    
    
    
    
    NationalNational
    
    
    Power
    
    
    Transco
    
    
    Grid Gas
    
    
    Other
    
    
    Consolidation
    
    
    GridGrid plc
    
    
    Corporation
    
    
    Finance Inc.
    
    
    plc
    
    
    subsidiaries
    
    
    adjustments
    
    
    consolidated£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mNon-current assetsGoodwill
    
    
    
    
    
    
    738
    
    
    
    
    
    
    
    
    
    
    
    4,364
    
    
    
    
    
    
    
    5,102Other intangible assets
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    126
    
    
    
    260
    
    
    
    
    
    
    
    389Property, plant and equipment
    
    
    
    
    
    
    3,920
    
    
    
    
    
    
    
    10,817
    
    
    
    16,118
    
    
    
    
    
    
    
    30,855Deferred tax assets
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    Other non-current assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    155
    
    
    
    
    
    
    
    162Amounts owed by subsidiary undertakings
    
    
    1,700
    
    
    
    
    
    
    
    
    
    
    
    5,611
    
    
    
    1,127
    
    
    
    (8,438
    )
    
    
    Pension assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Financial and other investments
    
    
    6,954
    
    
    
    23
    
    
    
    
    
    
    
    25
    
    
    
    9,731
    
    
    
    (16,247
    )
    
    
    486Derivative financial assets
    
    
    655
    
    
    
    51
    
    
    
    
    
    
    
    564
    
    
    
    224
    
    
    
    
    
    
    
    1,494Total non-current assets
    
    
    9,311
    
    
    
    4,735
    
    
    
    
    
    
    
    17,150
    
    
    
    31,979
    
    
    
    (24,687
    )
    
    
    38,488Current assetsInventories and current intangible assets
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    44
    
    
    
    333
    
    
    
    
    
    
    
    407Trade and other receivables
    
    
    6
    
    
    
    503
    
    
    
    
    
    
    
    270
    
    
    
    1,524
    
    
    
    (10
    )
    
    
    2,293Amounts owed by subsidiary undertakings
    
    
    8,649
    
    
    
    
    
    
    
    202
    
    
    
    114
    
    
    
    7,862
    
    
    
    (16,827
    )
    
    
    Financial and other investments
    
    
    180
    
    
    
    17
    
    
    
    
    
    
    
    307
    
    
    
    893
    
    
    
    
    
    
    
    1,397Derivative financial assets
    
    
    218
    
    
    
    1
    
    
    
    
    
    
    
    72
    
    
    
    43
    
    
    
    (86
    )
    
    
    248Cash and cash equivalents
    
    
    198
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    520
    
    
    
    
    
    
    
    720Total current assets
    
    
    9,251
    
    
    
    553
    
    
    
    202
    
    
    
    807
    
    
    
    11,175
    
    
    
    (16,923
    )
    
    
    5,065Assets of businesses held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total assets
    
    
    18,562
    
    
    
    5,288
    
    
    
    202
    
    
    
    17,957
    
    
    
    43,154
    
    
    
    (41,610
    )
    
    
    43,553Current liabilitiesBorrowings
    
    
    (1,183
    )
    
    
    (27
    )
    
    
    (5
    )
    
    
    (371
    )
    
    
    (1,220
    )
    
    
    
    
    
    
    (2,806
    )Derivative financial liabilities
    
    
    (174
    )
    
    
    
    
    
    
    
    
    
    
    (30
    )
    
    
    (94
    )
    
    
    86
    
    
    
    (212
    )Trade and other payables
    
    
    (30
    )
    
    
    (310
    )
    
    
    
    
    
    
    (665
    )
    
    
    (1,842
    )
    
    
    
    
    
    
    (2,847
    )Amounts owed to subsidiary undertakings
    
    
    (6,701
    )
    
    
    (220
    )
    
    
    
    
    
    
    (942
    )
    
    
    (8,964
    )
    
    
    16,827
    
    
    
    Current tax liabilities
    
    
    
    
    
    
    (32
    )
    
    
    
    
    
    
    
    
    
    
    (369
    )
    
    
    10
    
    
    
    (391
    )Provisions
    
    
    
    
    
    
    (36
    )
    
    
    
    
    
    
    (62
    )
    
    
    (205
    )
    
    
    
    
    
    
    (303
    )Total current liabilities
    
    
    (8,088
    )
    
    
    (625
    )
    
    
    (5
    )
    
    
    (2,070
    )
    
    
    (12,694
    )
    
    
    16,923
    
    
    
    (6,559
    )Non-current liabilitiesBorrowings
    
    
    (5,307
    )
    
    
    (1,358
    )
    
    
    (197
    )
    
    
    (6,387
    )
    
    
    (9,069
    )
    
    
    
    
    
    
    (22,318
    )Derivative financial liabilities
    
    
    (431
    )
    
    
    
    
    
    
    
    
    
    
    (121
    )
    
    
    (110
    )
    
    
    
    
    
    
    (662
    )Other non-current liabilities
    
    
    
    
    
    
    (256
    )
    
    
    
    
    
    
    (1,100
    )
    
    
    (618
    )
    
    
    
    
    
    
    (1,974
    )Amounts owed to subsidiary undertakings
    
    
    (537
    )
    
    
    (341
    )
    
    
    
    
    
    
    (250
    )
    
    
    (7,310
    )
    
    
    8,438
    
    
    
    Deferred tax liabilities
    
    
    
    
    
    
    (131
    )
    
    
    
    
    
    
    (1,890
    )
    
    
    (1,305
    )
    
    
    2
    
    
    
    (3,324
    )Pensions and other post-retirement benefit obligations
    
    
    
    
    
    
    (1,102
    )
    
    
    
    
    
    
    
    
    
    
    (1,996
    )
    
    
    
    
    
    
    (3,098
    )Provisions
    
    
    
    
    
    
    (215
    )
    
    
    
    
    
    
    (108
    )
    
    
    (1,084
    )
    
    
    
    
    
    
    (1,407
    )Total non-current liabilities
    
    
    (6,275
    )
    
    
    (3,403
    )
    
    
    (197
    )
    
    
    (9,856
    )
    
    
    (21,492
    )
    
    
    8,440
    
    
    
    (32,783
    )Liabilities of businesses held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total liabilities
    
    
    (14,363
    )
    
    
    (4,028
    )
    
    
    (202
    )
    
    
    (11,926
    )
    
    
    (34,186
    )
    
    
    25,363
    
    
    
    (39,342
    )Net assets
    
    
    4,199
    
    
    
    1,260
    
    
    
    
    
    
    
    6,031
    
    
    
    8,968
    
    
    
    (16,247
    )
    
    
    4,211EquityCalled up share capital
    
    
    298
    
    
    
    123
    
    
    
    
    
    
    
    45
    
    
    
    183
    
    
    
    (351
    )
    
    
    298Share premium account
    
    
    1,366
    
    
    
    1,942
    
    
    
    
    
    
    
    204
    
    
    
    7,183
    
    
    
    (9,329
    )
    
    
    1,366Retained earnings
    
    
    7,316
    
    
    
    (808
    )
    
    
    
    
    
    
    4,493
    
    
    
    1,821
    
    
    
    (5,506
    )
    
    
    7,316Other equity reserves
    
    
    (4,781
    )
    
    
    3
    
    
    
    
    
    
    
    1,289
    
    
    
    (231
    )
    
    
    (1,061
    )
    
    
    (4,781
    )Shareholders equity
    
    
    4,199
    
    
    
    1,260
    
    
    
    
    
    
    
    6,031
    
    
    
    8,956
    
    
    
    (16,247
    )
    
    
    4,199Non-controlling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    12Total equity
    
    
    4,199
    
    
    
    1,260
    
    
    
    
    
    
    
    6,031
    
    
    
    8,968
    
    
    
    (16,247
    )
    
    
    4,211
 
   
 Annual Report and Accounts 2010/11 National Grid plc       175




---



##### 



Financial Statements
 Notes to the consolidated financial statements continued
 37. National Grid Gas plc and Niagara Mohawk Power Corporation additional disclosures
continued
 Cash flow statements
 Parent
    
    
    
    
    
    
    
    
    
    
    Subsidiaryguarantor
    
    
    Issuer of notes
    
    
    guarantorNiagaraMohawk
    
    
    British
    
    
    National
    
    
    
    
    
    
    
    
    
    
    NationalNational
    
    
    Power
    
    
    Transco
    
    
    Grid Gas
    
    
    Other
    
    
    Consolidation
    
    
    GridGrid plc
    
    
    Corporation
    
    
    Finance Inc.
    
    
    plc
    
    
    subsidiaries
    
    
    adjustments
    
    
    consolidated£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mYear ended 31 March 2011Net cash provided by operating activities
    
    
    55
    
    
    
    742
    
    
    
    
    
    
    
    1,596
    
    
    
    2,465
    
    
    
    
    
    
    
    4,858Net cash provided by/(used in) investing activities
    
    
    2,127
    
    
    
    (377
    )
    
    
    
    
    
    
    (909
    )
    
    
    (1,850
    )
    
    
    (3,765
    )
    
    
    (4,774
    )Net cash (used in)/provided by financing activities
    
    
    (2,180
    )
    
    
    (365
    )
    
    
    
    
    
    
    (621
    )
    
    
    (1,029
    )
    
    
    3,765
    
    
    
    (430
    )Net increase/(decrease) in cash and cash equivalents
in the year
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    66
    
    
    
    (414
    )
    
    
    
    
    
    
    (346
    )Year ended 31 March 2010Net cash provided by operating activities
    
    
    
    
    
    
    527
    
    
    
    
    
    
    
    1,449
    
    
    
    2,540
    
    
    
    
    
    
    
    4,516Net cash provided by/(used in) investing activities
    
    
    600
    
    
    
    (307
    )
    
    
    
    
    
    
    (367
    )
    
    
    (1,451
    )
    
    
    (807
    )
    
    
    (2,332
    )Net cash (used in)/provided by financing activities
    
    
    (637
    )
    
    
    (222
    )
    
    
    
    
    
    
    (1,088
    )
    
    
    (1,072
    )
    
    
    807
    
    
    
    (2,212
    )Net (decrease)/increase in cash and cash equivalents
in the year
    
    
    (37
    )
    
    
    (2
    )
    
    
    
    
    
    
    (6
    )
    
    
    17
    
    
    
    
    
    
    
    (28
    )Year ended 31 March 2009Net cash provided by operating activities 
continuing operations
    
    
    
    
    
    
    419
    
    
    
    
    
    
    
    1,277
    
    
    
    1,725
    
    
    
    
    
    
    
    3,421Net cash used in operating activities 
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    (8
    )Net cash provided by operating activities
    
    
    
    
    
    
    419
    
    
    
    
    
    
    
    1,277
    
    
    
    1,717
    
    
    
    
    
    
    
    3,413Net cash (used in)/provided by investing activities 
continuing operations
    
    
    (2,426
    )
    
    
    (265
    )
    
    
    
    
    
    
    (1,569
    )
    
    
    (4,974
    )
    
    
    6,187
    
    
    
    (3,047
    )Net cash (used in)/provided by investing activities 
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    1,055
    
    
    
    
    
    
    
    1,049Net cash (used in)/provided by investing activities
    
    
    (2,426
    )
    
    
    (265
    )
    
    
    
    
    
    
    (1,575
    )
    
    
    (3,919
    )
    
    
    6,187
    
    
    
    (1,998
    )Net cash provided by/(used in) financing activities
    
    
    2,663
    
    
    
    (157
    )
    
    
    
    
    
    
    291
    
    
    
    2,513
    
    
    
    (6,187
    )
    
    
    (877
    )Net increase/(decrease) in cash and cash equivalents
in the year
    
    
    237
    
    
    
    (3
    )
    
    
    
    
    
    
    (7
    )
    
    
    311
    
    
    
    
    
    
    
    538
 
   
 176       National Grid plc Annual Report and Accounts 2010/11




---



##### 



Company accounting policies
  
 A. Basis of preparation of individual
financial statements under UK GAAP
     B. Fixed asset investments
  C. Taxation
    D. Foreign currencies
 E. Financial instruments
 
   
 Annual Report and Accounts 2010/11 National Grid plc       177




---



##### 



Financial Statements
 Company accounting policies continued
  
 F. Hedge accounting
        G. Parent Company guarantees
 H. Share awards to employees of subsidiary undertakings
   I. Dividends
 
   
 178       National Grid plc Annual Report and Accounts 2010/11




---



##### 



Company balance sheet
   
 2011
    
    
    2010Notes
    
    
    £m
    
    
    £mFixed assetsInvestments
    
    
    1
    
    
    
    7,890
    
    
    
    7,865Current assetsDebtors (amounts falling due within one year)
    
    
    2
    
    
    
    9,988
    
    
    
    8,655Debtors (amounts falling due after more than one year)
    
    
    2
    
    
    
    315
    
    
    
    1,702Derivative financial instruments (amounts falling due within one year)
    
    
    4
    
    
    
    244
    
    
    
    218Derivative financial instruments (amounts falling due after more than one year)
    
    
    4
    
    
    
    576
    
    
    
    655Current asset investments
    
    
    5
    
    
    
    1,624
    
    
    
    377Cash at bank
    
    
    
    
    
    
    
    
    
    
    112,747
    
    
    
    11,608Creditors (amounts falling due within one year)
    
    
    3
    
    
    
    (9,310
    )
    
    
    (8,088
    )Net current assets
    
    
    
    
    
    
    3,437
    
    
    
    3,520Total assets less current liabilities
    
    
    
    
    
    
    11,327
    
    
    
    11,385Creditors (amounts falling due after more than one year)Borrowings
    
    
    6
    
    
    
    (3,628
    )
    
    
    (5,307
    )Derivative financial instruments
    
    
    4
    
    
    
    (253
    )
    
    
    (431
    )Amounts owed to subsidiary undertakings
    
    
    
    
    
    
    
    
    
    
    (537
    )(3,881
    )
    
    
    (6,275
    )Net assets
    
    
    
    
    
    
    7,446
    
    
    
    5,110Capital and reservesCalled up share capital
    
    
    7
    
    
    
    416
    
    
    
    298Share premium account
    
    
    8
    
    
    
    1,361
    
    
    
    1,366Cash flow hedge reserve
    
    
    8
    
    
    
    2
    
    
    
    14Other equity reserves
    
    
    8
    
    
    
    196
    
    
    
    171Profit and loss account
    
    
    8
    
    
    
    5,471
    
    
    
    3,261Total shareholders funds
    
    
    9
    
    
    
    7,446
    
    
    
    5,110
   Sir John Parker  Andrew Bonfield
 
   
 Annual Report and Accounts 2010/11 National Grid plc       179




---



##### 



Financial Statements
 
 
 Notes to the Company financial statements
 
 1. Fixed asset investments
 Shares insubsidiaryundertakings£mAt 31 March 2009
    
    
    7,840Additions
    
    
    25At 31 March 2010
    
    
    7,865Additions
    
    
    25At 31 March 2011
    
    
    7,890
    
 2. Debtors
 2011
    
    
    2010£m
    
    
    £mAmounts falling due within one year:Amounts owed by subsidiary undertakings
    
    
    9,985
    
    
    
    8,649Prepayments and accrued income
    
    
    3
    
    
    
    69,988
    
    
    
    8,655Amounts falling due after more than one year:Amounts owed by subsidiary undertakings
    
    
    311
    
    
    
    1,700Deferred taxation
    
    
    4
    
    
    
    2315
    
    
    
    1,702
 Deferredtaxation£mAt 31 March 2009
    
    
    3Charged to the profit and loss account
    
    
    (1
    )At 31 March 2010
    
    
    2Charged to the profit and loss account
    
    
    (2
    )Credited to equity
    
    
    4At 31 March 2011
    
    
    4
 
 3. Creditors (amounts falling due within one year)
 2011
    
    
    2010£m
    
    
    £mBorrowings (note 6)
    
    
    1,125
    
    
    
    1,183Derivative financial instruments (note 4)
    
    
    194
    
    
    
    174Amounts owed to subsidiary undertakings
    
    
    7,957
    
    
    
    6,701Other creditors
    
    
    34
    
    
    
    309,310
    
    
    
    8,088
 
   
 180       National Grid plc Annual Report and Accounts 2010/11




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##### 



4. Derivative financial instruments
  2011

    
    2010Assets
    
    
    Liabilities
    
    
    Total
    
    
    Assets
    
    
    Liabilities
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mAmounts falling due within one year
    
    
    244
    
    
    
    (194
    )
    
    
    50
    
    
    
    218
    
    
    
    (174
    )
    
    
    44Amounts falling due after more than one year
    
    
    576
    
    
    
    (253
    )
    
    
    323
    
    
    
    655
    
    
    
    (431
    )
    
    
    224820
    
    
    
    (447
    )
    
    
    373
    
    
    
    873
    
    
    
    (605
    )
    
    
    268
  2011
    
    
    2010£m
    
    
    £mInterest rate swaps
    
    
    (9,328
    )
    
    
    (7,337
    )Cross-currency interest rate swaps
    
    
    (4,886
    )
    
    
    (6,463
    )Foreign exchange forward contracts
    
    
    (9,334
    )
    
    
    (7,234
    )Forward rate agreements
    
    
    (10,670
    )
    
    
    (7,784
    )Total
    
    
    (34,218
    )
    
    
    (28,818
    )
  
 5. Current asset investments
 2011
    
    
    2010£m
    
    
    £mInvestments in short-term money funds
    
    
    1,375
    
    
    
    162Short-term deposits
    
    
    200
    
    
    
    197Restricted cash balances  collateral
    
    
    49
    
    
    
    181,624
    
    
    
    377
 
 6. Borrowings
  2011
    
    
    2010£m
    
    
    £mAmounts falling due within one year:Bank loans
    
    
    172
    
    
    
    299Commercial paper
    
    
    
    
    
    
    121Bonds
    
    
    953
    
    
    
    7631,125
    
    
    
    1,183Amounts falling due after more than one year:Bank loans
    
    
    133
    
    
    
    398Bonds
    
    
    3,495
    
    
    
    4,9093,628
    
    
    
    5,307Total borrowings
    
    
    4,753
    
    
    
    6,490
 2011
    
    
    2010£m
    
    
    £mTotal borrowings are repayable as follows:Less than 1 year
    
    
    1,125
    
    
    
    1,183In 1-2 years
    
    
    714
    
    
    
    1,081In 2-3 years
    
    
    381
    
    
    
    900In 3-4 years
    
    
    851
    
    
    
    435In 4-5 years
    
    
    48
    
    
    
    1,180More than 5 years, other than by instalments
    
    
    1,634
    
    
    
    1,7114,753
    
    
    
    6,490
 
   
 Annual Report and Accounts 2010/11 | National Grid plc       181




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##### 



Financial Statements
 Notes to the Company financial statements continued
 
 7. Called up share capital
 Allotted, called upand fully paidOrdinary shares
    
    millions
    
    
    £mAt 31 March 2009
    
    
    2,582
    
    
    
    294Issued during the year in lieu of dividends (i)
    
    
    35
    
    
    
    4At 31 March 2010
    
    
    2,617
    
    
    
    298Rights issue
    
    
    990
    
    
    
    113Issued during the year in lieu of dividends (i)
    
    
    41
    
    
    
    5At 31 March 2011
    
    
    3,648
    
    
    
    416
 (i)
    
    The issue of shares in lieu of cash dividends is considered to be a bonus issue under the
terms of the Companies Act 2006 and the nominal value of the shares
is charged to the share premium
account.
   
 8. Reserves
 Share
    
    
    Cash flowpremium
    
    
    hedge
    
    
    Other equity
    
    
    Profit andaccount
    
    
    reserve
    
    
    reserves
    
    
    loss account£m
    
    
    £m
    
    
    £m
    
    
    £mAt 31 March 2009
    
    
    1,371
    
    
    
    12
    
    
    
    146
    
    
    
    3,603Transferred from equity in respect of cash flow hedges (net of tax)
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    Shares issued in lieu of dividends
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    Purchase of own shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )Issue of treasury shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18Share awards to employees of subsidiary undertakings
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    Loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (353
    )At 31 March 2010
    
    
    1,366
    
    
    
    14
    
    
    
    171
    
    
    
    3,261Transferred from equity in respect of cash flow hedges (net of tax)
    
    
    
    
    
    
    (12
    )
    
    
    
    
    
    
    Merger reserve created on rights issue
    
    
    
    
    
    
    
    
    
    
    3,101
    
    
    
    Transfer to distributable reserves
    
    
    
    
    
    
    
    
    
    
    (3,101
    )
    
    
    3,101Shares issued in lieu of dividends
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    Purchase of own shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )Issue of treasury shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18Share awards to employees of subsidiary undertakings
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    Loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (906
    )At 31 March 2011
    
    
    1,361
    
    
    
    2
    
    
    
    196
    
    
    
    5,471
 
   
 182       National Grid plc | Annual Report and Accounts 2010/11




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9. Reconciliation of movements in shareholders funds
 2011
    
    
    2010£m
    
    
    £m(Loss)/profit for the year after taxation
    
    
    (48
    )
    
    
    335Dividends (i)
    
    
    (858
    )
    
    
    (688
    )Loss for the financial year
    
    
    (906
    )
    
    
    (353
    )Expenses charged to share premium account
    
    
    
    
    
    
    (1
    )Proceeds of issue of treasury shares
    
    
    18
    
    
    
    18Movement on cash flow hedge reserve (net of tax)
    
    
    (12
    )
    
    
    2Share awards to employees of subsidiary undertakings
    
    
    25
    
    
    
    25Purchase of own shares
    
    
    (3
    )
    
    
    (7
    )Rights issue
    
    
    3,214
    
    
    
    Net increase/(decrease) in shareholders funds
    
    
    2,336
    
    
    
    (316
    )Opening shareholders funds
    
    
    5,110
    
    
    
    5,426Closing shareholders funds
    
    
    7,446
    
    
    
    5,110
 (i)
    
    For further details of dividends paid and payable to shareholders, refer to note 7 in the
consolidated financial statements.
 
 10. Commitments and contingencies
 
   
 Annual Report and Accounts 2010/11 | National Grid plc       183




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Useful Information
 
 Definitions and glossary of terms
  A
 American Depositary Shares (ADSs)
  Annual General Meeting (AGM)
  
 B
 bar
  Board
  BritNed
  
 C
 consolidated financial statements
  called up share capital
  carrying value
  circuit length
  the Company, National Grid, we, our or us
  contingent liabilities
  
 D
 Dth
  decoupling
 deferred tax
  derivative
  dollars or $
  
 E
 employee engagement index
  equity
  
 F
 FERC
  finance lease
  financial year
  FRS
  
 G
 Grain LNG
  Great Britain
  GW
 9
 GWh
 
   
 184       National Grid plc | Annual Report and Accounts 2010/11




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##### 



H
 HSE
  
 I
 IAS or IFRS
  individual financial statements
  IFRIC
  
 J
 joint venture
  
 K
 KeySpan
  kV
  kWh
  
 L
 Lifetime Allowance
  LNG
 
 lost time injury
  lost time injury frequency rate
 M
 MW
  MWh
  mbar
  
 N
 National Grid Metering
  New England
  northeastern US
  
 O
 Ofgem
  OnStream
  ordinary shares
 17 43
 
 P
 Personal Lifetime Allowance
  price control
  
 R
 rate base
 
   
 Annual Report and Accounts 2010/11 | National Grid plc       185




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##### 



Useful Information
 Definitions and glossary of terms continued
  rate plan
  regulated controllable operating costs
  regulatory asset value (RAV)
  revenue decoupling
  RIIO
  route length
  
 S
 SEC
  share premium
  shrinkage
  standard cubic metre
 3
 stranded cost recoveries
  subsidiary
  
 T
 treasury shares
  tonne
  tonnes carbon dioxide equivalent (CO2e)
  TWh
  
 U
 UK
  UK Corporate Governance Code
  UK GAAP
  Uniform Network Code
  US
  US GAAP
  
 V
 vanilla return
 
   186     National Grid plc | Annual Report and Accounts 2010/11




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##### 



Summary consolidated financial information
  
 Financial summary (unaudited)
  31 March
    
    
    31 March
    
    
    31 March
    
    
    31 March
    
    
    31 March2011
    
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mSummary income statementRevenue*
    
    
    14,343
    
    
    
    14,007
    
    
    
    15,687
    
    
    
    11,498
    
    
    
    8,778Operating profitBefore exceptional items, remeasurements and stranded cost recoveries
    
    
    3,600
    
    
    
    3,121
    
    
    
    2,915
    
    
    
    2,595
    
    
    
    2,031Exceptional items, remeasurements and stranded cost recoveries
    
    
    145
    
    
    
    172
    
    
    
    (292
    )
    
    
    369
    
    
    
    4823,745
    
    
    
    3,293
    
    
    
    2,623
    
    
    
    2,964
    
    
    
    2,513Profit before taxBefore exceptional items, remeasurements and stranded cost recoveries
    
    
    2,473
    
    
    
    1,974
    
    
    
    1,770
    
    
    
    1,829
    
    
    
    1,486Exceptional items, remeasurements and stranded cost recoveries
    
    
    151
    
    
    
    219
    
    
    
    (376
    )
    
    
    353
    
    
    
    2652,624
    
    
    
    2,193
    
    
    
    1,394
    
    
    
    2,182
    
    
    
    1,751Profit for the year attributable to equity shareholdersBefore exceptional items, remeasurements and stranded cost recoveries
    
    
    1,747
    
    
    
    1,418
    
    
    
    1,259
    
    
    
    1,275
    
    
    
    1,146Exceptional items, remeasurements and stranded cost recoveries
    
    
    412
    
    
    
    (32
    )
    
    
    (315
    )
    
    
    1,915
    
    
    
    2482,159
    
    
    
    1,386
    
    
    
    944
    
    
    
    3,190
    
    
    
    1,394Summary statement of net assetsNon-current assets
    
    
    39,787
    
    
    
    38,488
    
    
    
    37,712
    
    
    
    30,830
    
    
    
    21,109Current assets
    
    
    6,323
    
    
    
    5,065
    
    
    
    6,755
    
    
    
    5,435
    
    
    
    5,312Assets of businesses held for sale
    
    
    290
    
    
    
    
    
    
    
    
    
    
    
    1,506
    
    
    
    1,968Total assets
    
    
    46,400
    
    
    
    43,553
    
    
    
    44,467
    
    
    
    37,771
    
    
    
    28,389Current liabilities
    
    
    (6,826
    )
    
    
    (6,559
    )
    
    
    (7,026
    )
    
    
    (7,146
    )
    
    
    (3,360
    )Non-current liabilities
    
    
    (30,395
    )
    
    
    (32,783
    )
    
    
    (33,457
    )
    
    
    (25,188
    )
    
    
    (20,443
    )Liabilities of businesses held for sale
    
    
    (110
    )
    
    
    
    
    
    
    
    
    
    
    (63
    )
    
    
    (450
    )Total liabilities
    
    
    (37,331
    )
    
    
    (39,342
    )
    
    
    (40,483
    )
    
    
    (32,397
    )
    
    
    (24,253
    )Net assets
    
    
    9,069
    
    
    
    4,211
    
    
    
    3,984
    
    
    
    5,374
    
    
    
    4,136Summary cash flow statementCash generated from operationsContinuing operations
    
    
    4,854
    
    
    
    4,372
    
    
    
    3,564
    
    
    
    3,265
    
    
    
    3,090Discontinued operations
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    10
    
    
    
    1814,854
    
    
    
    4,372
    
    
    
    3,556
    
    
    
    3,275
    
    
    
    3,271Tax received/(paid)
    
    
    4
    
    
    
    144
    
    
    
    (143
    )
    
    
    (110
    )
    
    
    (313
    )Net cash inflow from operating activities
    
    
    4,858
    
    
    
    4,516
    
    
    
    3,413
    
    
    
    3,165
    
    
    
    2,958Net cash flows used in investing activities
    
    
    (4,774
    )
    
    
    (2,332
    )
    
    
    (1,998
    )
    
    
    (3,023
    )
    
    
    (4,061
    )Net cash flows (used in)/from financing activities
    
    
    (430
    )
    
    
    (2,212
    )
    
    
    (877
    )
    
    
    (1,592
    )
    
    
    1,278Net (decrease)/increase in cash and cash equivalents
    
    
    (346
    )
    
    
    (28
    )
    
    
    538
    
    
    
    (1,450
    )
    
    
    175
 
   
 Annual Report and Accounts 2010/11 | National Grid plc       187




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Useful Information
 
 
 Useful information
  Financial calendar
  1 June 2011
    
    Ordinary shares go ex-dividend for 2010/113 June 2011
    
    Record date for 2010/11 final dividend8 June 2011
    
    Scrip reference price announced20 July 2011
    
    Scrip election date2011 Annual General Meeting and25 July 2011
    
    interim management statement2010/11 final dividend paid to qualifying17 August 2011
    
    ordinary shareholders17 November 2011
    
    2011/12 half year results30 November 2011
    
    Ordinary shares go ex-dividend2 December 2011
    
    Record date for 2011/12 interim dividend2011/12 interim dividend paid to qualifying18 January 2012
    
    ordinary shareholdersJanuary/February 2012
    
    Interim management statementMay 2012
    
    2011/12 preliminary results
 
 Key milestones
  1986
    
    British Gas incorporated as a public limited company1990
    
    Electricity transmission network in England and Walestransferred to National Grid on electricity privatisation1995
    
    National Grid listed on the London Stock Exchange1997
    
    Centrica demerged from British Gas (BG)1997
    
    Energis demerged from National Grid2000
    
    Lattice Group demerged from BG and listed separately2000
    
    New England Electric System and Eastern Utilities Associates
acquired2002
    
    Niagara Mohawk Power Corporation merged with National Grid
in US2002
    
    National Grid and Lattice Group merged to form National Grid
Transco2004
    
    UK wireless infrastructure network acquired from Crown Castle
International Corp2005
    
    Four UK regional gas distribution networks sold and National
Grid adopted as our name2006
    
    Rhode Island gas distribution network acquired2007
    
    UK and US wireless infrastructure operations and the Basslink
electricity interconnector in Australia sold2007
    
    KeySpan Corporation acquired2008
    
    Ravenswood generation station sold2010
    
    Rights issue raised £3.2 billion
 Share price
  
 Capital Gains Tax (CGT)
  Website and electronic communication
 
   188       National Grid plc | Annual Report and Accounts 2010/11




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®




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Cautionary Statement
 
 For queries about ordinary shares:
 Capita Registrars
  For queries about American Depositary Shares (ADS or ADR):
 The Bank of New York Mellon
 
 
 
 www.nationalgrid.com