##### Table of Contents



Exhibit
    15.1
    NATIONAL
    GRID PLC
  TABLE OF
    CONTENTS
  PageFORM 20-FItem 3.


Key InformationNote 38  Differences Between IFRS
    and US generally accepted accounting principles



153-162Note 39  Condensed US GAAP
    financial information



163-167Note 38(c) Pensions and other
    Post-retirement benefits



155Risk factors



84-85Item 4.


Information on the CompanyOperating and Financial Review



20-63Note 36  Subsidiary undertakings
    and joint ventures



152Glossary of Terms



180Definitions



181Discontinued operations



63Item 5.


Operating and Financial Review and ProspectsOperating and Financial Review



20-75Research and development



86Item 6.


Directors, Senior Management and EmployeesBoard of Directors



18-19Directors Remuneration Report



88-98Note 8  Pensions and other
    post-retirement benefits



119-123Corporate Governance



77-83Employees



87Note 31  Share capital



145-148Item 7.


Major Shareholders and Related Party TransactionsNote 34  Related Party Transactions



151Item 8.


Financial InformationConsolidated balance sheet



109Consolidated income statement



108Consolidated statement of recognised income and
    expense



110Consolidated cash flow statement



111Notes to the accounts



112-172Legal and related matters



25Returns to shareholders



43Item 10.


Additional InformationAcquisitions and disposals



33-34Item 11.


Quantitative and Qualitative Disclosures about Market RiskTreasury policy



65-66Commodity contracts



67-68Item 18.


Financial StatementsStatement of Directors responsibilities



100Accounting policies



102-107Consolidated income statement



108Consolidated balance sheet



109Consolidated cash flow statement



111Consolidated statement of recognised income and
    expense



110Notes to the accounts



112-172




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##### Table of Contents



EXTRACTED
    FORM OF THE ANNUAL REPORT AND ACCOUNTS 2006/07
  PageBusiness OverviewBoard of directors



18Operating and Financial Review



20About National Grid



20Current and future developments



24Objectives and strategy



26Key performance indicators



30Performance during the year



32Transmission



44Gas Distribution



50Electricity Distribution



56Non-regulated Businesses and other



60Discontinued operations



63Financial position and financial
    management



64Accounting policies



71Independent verifiers report on
    corporate responsibility*



76Corporate Governance



77Directors Reports



86Directors report



86Directors remuneration
    report



88Financial Statements



99Contents to financial statements



99Statement of Directors
    responsibilities



100Independent auditors report



101Accounting policies



102Consolidated income statement



108Consolidated balance sheet



109Consolidated statement of recognised
    income and expense



110Consolidated cash flow statement



111Notes to the accounts



112Company accounting policies



173Company balance sheet



175Notes to the Company accounts



176Glossary of terms



180Definitions



181Summary consolidated financial
    information



182Shareholder Information



183     *
    
    The Independent Verifiers Report on Corporate
    Responsibility on page 76 relates to the corporate
    responsibility elements of the full Annual Report and Accounts
    available on our website.




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01 Sir John ParkerChairman  Appointed October 2002, Age 65,N (ch)
 02Steve HollidayChief Executive  Appointed March 2001, Age 50,E (ch), F
       Committee membershipA
    
    AuditE
    
    ExecutiveF
    
    FinanceN
    
    NominationsR
    
    RemunerationR&R
    
    Risk & Responsibility(ch)
    
    denotes Committee chairman




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Annual Report and Accounts 2006/07 19
  03Steve LucasFinance Director  Appointed October 2002, Age 53,E, F
 04Nick WinserExecutive Director  Appointed April 2003, Age 46,E
 05Mark FairbairnExecutive Director  Appointed January 2007, Age 48,E
 06Edward AstleExecutive Director  Appointed September 2001, Age 53,E
 07Ken HarveyNon-executive Director andSenior Independent Director  Appointed October 2002, Age 66,N, R, R&R
 08Linda AdamanyNon-executive Director  Appointed November 2006, Age 55,A, R&R
 09John AllanNon-executive Director  Appointed May 2005, Age 58,A, R (ch)
 10Paul JoskowNon-executive Director  Appointed March 2000, Age 59,F (ch), N
 11Stephen PettitNon-executive Director  Appointed October 2002, Age 56,F, R, R&R (ch)
 12Maria RichterNon-executive Director  Appointed October 2003, Age 52,A, F, R&R
 13George RoseNon-executive Director  Appointed October 2002, Age 55,A (ch), N, R
 14Helen MahyCompany Secretaryand General Counsel  Appointed October 2002, Age 46,E




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20 National Grid plc
  Operating and Financial Review
  About
National Grid  Principal operations Our principal operations are the ownership and operation of regulated electricity and gas
infrastructure networks in the UK and the US. We also have interests in related markets, including
electricity interconnectors, metering services, liquefied natural gas (LNG) facilities and property
in the UK. History
  Key milestones1986
    
    British Gas incorporated as a public limited company.1990
    
    Electricity transmission network in England and Wales transferred to National Grid on electricity privatisation.1995
    
    National Grid listed on the London Stock Exchange.1997
    
    British Gas (BG) demerged Centrica.1997
    
    National Grid demerged Energis.2000
    
    Lattice Group demerged from BG and listed separately.2000
    
    New England Electric System and Eastern Utilities Associates acquired by National Grid.2002
    
    Niagara Mohawk Power Corporation merged with National Grids US operations.2002
    
    Merger of National Grid and Lattice Group to form National Grid Transco.2004
    
    Acquisition of UK wireless infrastructure network from Crown Castle International Corp.2005
    
    Sales of four UK regional gas distribution networks.2005
    
    Adoption of National Grid as our name.2006
    
    Agreement to acquire KeySpan.2006
    
    Acquisition from Southern Union Company of its Rhode Island gas distribution network.2006
    
    Announcement of new strategy, including our decision to focus on core energy markets in the UK and US.2007
    
    Sale of UK and US wireless infrastructure operations.
 Content of Operating and Financial Review20
    
    About National Grid24
    
    Current and future developments26
    
    Objectives and strategy30
    
    Key performance indicators32
    
    Performance during the year44
    
    Transmission50
    
    Gas Distribution56
    
    Electricity Distribution60
    
    Non-regulated Businesses and other63
    
    Discontinued operations64
    
    Financial position and financial management71
    
    Accounting policies76
    
    Independent verifiers report on corporate responsibility
 Businesses and segments
  Business
    
    Segment
    
    Description of principal activitiesTransmission
    
    Transmission
 UK
    
    Owner and operator of the high-voltage electricity transmission
network in England and Wales,
the gas national transmission
system in Great Britain, an electricity
interconnector with France and
storage facilities for LNG. Operator
of the electricity transmission
networks in Scotland.Transmission
 US
    
    Owner and operator of high-voltage
electricity transmission networks in
the northeastern US.Gas 
Distribution
    
    Gas Distribution
 UK
    
    The distribution of gas within
England as the owner and operator
of four of the eight gas distribution
networks in Great Britain.Gas Distribution
 US
    
    The delivery of gas in upstate
New York and Rhode Island.Electricity 
Distribution
    
    Electricity
Distribution
 US
    
    The delivery of electricity
in upstate New York and New England.US stranded
cost recoveries
    
    Recovery, through charges to
electricity customers in the US,
of costs mainly incurred prior to
divestiture of electricity generation.Non-regulated 
Businesses
    
    Other
activities
    
    Our other activities comprise our
non-regulated operations, including
metering services, property
management and our LNG import terminal in the UK, together with
business development and other
corporate activities.Corporate 
activitiesWireless
and Australia
    
    Discontinued
operations
    
    Businesses that we committed
during the financial year to exit,
principally our UK wireless
infrastructure operations, sold on
3 April 2007, together with our
smaller US wireless infrastructure
operations and the Basslink
electricity interconnector in Australia.




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Annual Report and Accounts 2006/07 21
  External market environment
    Energy delivery in the UK
 Energy delivery in the northeastern US
  
   Other markets in which we operate




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##### Table of Contents



22 National Grid plc
  Regulation
     Country
    
    OverviewUK
    
    We have two price controls for each of our UK
electricity and gas transmission operations, one
in our role as transmission owner and the other as
the system operator. For our UK gas distribution
operations, we have four price controls, one for
each of our four regional gas distribution networks.These price controls are based around incentives.
We have a financial incentive to invest, receiving a
return on efficiently incurred capital expenditure which
increases our regulatory asset base, and we can
gain or lose through incentive arrangements for our
performance in managing system operation, internal
costs, pass-through costs and service quality.US
    
    We have electricity rate plans in New York,
Massachusetts and Rhode Island covering our
electricity distribution networks and, in the case
of New York, our electricity transmission network.
Our rates in New Hampshire and those for our
electricity transmission networks in New England
are subject to regulatory approval.We have two gas rate plans covering our gas
distribution networks in New York and Rhode Island
respectively.Our rate plans are based around the efficiency of
our cost base, with earned savings mechanisms that
allow us to retain a proportion of the savings we
achieve with the balance benefiting customers. We
receive a return on approved capital expenditure and
we can gain or lose through incentive or penalty
arrangements based on our performance against
reliability and service quality benchmarks.We are also permitted to recover commodity and
other pass-through costs which we incur, together
with the recovery of stranded costs.
 Business and geographic analysis




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Annual Report and Accounts 2006/07 23
  Business drivers
  Price controls
and rate plans
    
    The prices we charge for use of our electricity and
gas transmission and distribution networks are
determined in accordance with regulator approved
price controls in the UK and rate plans in the US.The negotiation of these arrangements has a
significant impact on the revenues we obtain from
our operations.In addition, these arrangements include incentives
that permit us to earn additional revenues based on
our performance or penalise us if we do not meet
agreed performance targets.The period of these arrangements is significant to
us in that they provide stability to our operations and
allow us to plan ahead and invest in the confidence
that we will obtain financial returns. In the UK, our
price controls typically cover periods of 5 years,
while in the US our electricity and gas rate plans
range from periods of 3 to 10 years.Multi-year 
contractual 
arrangements
    
    Revenues in our other businesses, including
metering services, our LNG import terminal
and the Basslink interconnector in Australia (and
in our wireless infrastructure operations in the UK
prior to their disposal) are determined by contractual
arrangements, which are usually long-term and
with blue chip customers.Safety and
reliability
    
    Our ability to operate safely and reliably is of
paramount importance to us, our employees, our
contractors, our customers, the public and our
regulators. Our financial performance is affected
by our performance in these areas.Efficiency
    
    Our objective, and that of our regulators, is for us
to deliver services as efficiently as possible. This
allows us to limit price increases or to reduce prices
to our customers and improve our own financial
performance to the benefit of our shareholders.Capital 
investment
    
    Capital investment is a significant driver for organic
growth.In our regulated energy networks, the prices
we charge include an allowed return for capital
investment determined in accordance with our price
controls and rate plans. These provide incentives for
us to enhance the quality and reach of our networks
through capital improvements.For other businesses, our capital investment in new
assets allows us to develop new revenue streams or
to increase revenues from existing assets.Acquisitions
and disposals
    
    Investment in new businesses is also a significant
driver of growth, provided that we can create value
through operational improvements, synergies and
financial benefits.Disposals can crystallise value for shareholders,
where we believe that the price on offer is better
than the long-term return we can obtain ourselves
or where a business does not fit with our long-term
strategy.Relationships
and
responsibility
    
    Our reputation is vitally important to us. Delivering
sustainable value depends on the trust and confidence
of our stakeholders and this can only be earned by
conducting our business in a responsible manner.
 Weather and
volumes
    
    Changes in the quantities of electricity and gas
delivered through our transmission and distribution
networks may result in an increase or decrease in
our revenues. Volumes are affected by weather,
consumer demand and network availability as well
as other factors.The impact of changing volumes may sometimes be
offset by changes in costs or may sometimes result
in an under- or over-recovery against our allowable
revenues, with a corresponding increase or decrease
in revenues in future periods.Exchange 
rates
    
    The reported results, cash flows and financial position
of our US operations are affected by movements in
the US dollar to sterling exchange rate. However, the
effect of these movements is partially hedged through
the use of US dollar denominated debt and derivative
financial instruments.Commodity
and other
pass-through
costs
    
    We are allowed to recover certain costs, including
commodity costs in the US and other direct costs
in both the UK and the US, through charges to
customers. The timing of recovery of these costs
can vary between financial periods leading to an
under- or over-recovery within any particular financial
period. We are affected by movements in commodity
prices to the extent that they affect our own energy
requirements, the most significant of which relates
to gas purchases required for the operation of our
gas transmission and gas distribution networks
in the UK.Certain US commodity contracts are recorded
in our balance sheet at their fair values and are
affected by movements in commodity prices.
Although remeasurements of the fair values of
these contracts are reflected in our income
statement, we expect to recover the net costs
incurred under these contracts from customers
in current or future periods.Inflation
    
    Without action to improve efficiency, our operating
costs increase each year as a result of wage
increases and inflation in external costs. In general,
our revenues also increase each year, although not
necessarily at the same rate, depending on our
regulatory or contractual arrangements. As a
consequence, our ability to control costs and
improve efficiency is important to our ability to
increase operating profits.Our price controls in the UK are linked to retail price
inflation, as is a proportion of our UK borrowings,
while our electricity regulatory settlements in the US
allow us to recover additional distribution revenues
from customers if there is a significant change in the
rate of inflation.Seasonality
    
    Revenues from our gas distribution networks in the
UK and the US and our gas transmission network in
the UK are weighted towards the end of the financial
year, as gas demand is typically higher during the
winter months. Otherwise, seasonality does not have
a significant impact on revenues.With the exception of commodity and other volume
related costs passed through to customers, our
operating costs are generally not seasonal.Interest rates
    
    The costs of financing our operations are affected
by changes in prevailing interest rates, as some of
our debt is at floating rates. We hedge some of our
exposure to interest rates with fixed-rate debt and
derivative financial instruments to maintain a
proportion of our debt at fixed interest rates.




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##### Table of Contents



24 National Grid plc
  Current and future
developments
  External market developments
 Market structure and ownership
  Energy market developments




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##### Table of Contents



Annual Report and Accounts 2006/07 25
  Regulatory developments
 UK and European regulatory developments
  US regulatory developments
 Price controls and rate plans
     Legal and related matters Metering competition investigation
 Environmental remediation




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26 National Grid plc
  Objectives and strategy
 Strategic review
  
 Focus
 Integration
 Discipline
 Objectives
  Performance
    
    We aim for operational excellence by performing
to the highest standards of safety, reliability and
efficiency. We aim to continue to improve our
financial performance.Growth
    
    We will invest in our existing businesses, and
in acquiring new businesses in our core markets,
to generate future growth. We will be financially
disciplined in the way we invest and in the way
we manage our balance sheet.Talent
    
    We aim to maximise the contribution made by our
employees by motivating our people to strive for
continued improvement, developing their skills and
talents and by promoting a culture that recognises
and respects inclusion and diversity.
  Relationships
    
    We aim to improve our relationships with customers,
regulators, suppliers and the communities in which we
operate by focusing on the areas that are important
to them, such as the quality of service we provide to
customers, the quality of information we provide to
regulators, by investing in local communities and by
the way we address the concerns of, and interact
with, all our stakeholders.Responsibility
    
    We believe operating responsibly is essential to
the way we conduct our operations, invest, develop
our people and manage our relationships and so
responsibility underpins everything we do.We are committed to taking positive action to reduce
our contribution to climate change and our other
impacts on the environment. We want to operate to
the highest standards of corporate governance and
we believe in strong business ethics, based around
our core values of respect, integrity and ownership.




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Annual Report and Accounts 2006/07 27
  Risk
   n
    
    changes in laws or regulations;n
    
    breaches in environmental or health and safety law or regulations;n
    
    network failure or inability to carry out critical non-network operations;n
    
    achievement of business performance objectives, including regulatory targets and delivering anticipated cost and efficiency savings;n
    
    business development activity, including acquisitions and disposals;n
    
    regulatory treatment of commodity costs passed through to consumers;n
    
    reputation damage from disruptions to supply, even if outside our control;n
    
    fluctuations in exchange rates, interest rates and commodity prices and their impact on borrowings, derivatives and commodity contracts;n
    
    increases in interest rates;n
    
    restrictions in borrowings and changes in credit ratings or in tax rates;n
    
    future funding requirements of our pension schemes; andn
    
    changes in accounting standards.
  Shareholder value
 Performance
  Safety
    
    Safety is paramount.Our most important goals are: to ensure that
members of the public are not injured as a direct
result of our operations; to deliver a working
environment where there are zero work-related
injuries or illnesses; to reduce gas leaks on our
distribution networks; and to improve the health of
our employees so they are fit for work every day.Measures we use to monitor our performance
against our safety objectives include: members of
the public injured as a direct result of our operations;
employee lost time injury frequency rate; standards
of service for responding to gas escapes; kilometres
of gas distribution mains replaced in the UK; and
employee sickness absence rate.Reliability
    
    Our principal operations are critical to the functioning
of the economies we serve. The reliability of our
energy networks, and the delivery of energy to our
customers, are therefore our next highest priorities
after safety.Our approach to maintaining and improving reliability
involves: investing in infrastructure and systems to
provide the operational tools and techniques
necessary to manage our assets and operations
to high standards and investing in the renewal of
assets; investing in the skills and capabilities of
our people to give them the ability to operate our
networks to a high degree of service excellence; and
maintaining a constant focus on reliability as one of
our principal objectives, ensuring we are proactive
about planning to ensure reliability and that we react
quickly to factors that could compromise reliability.We use business-specific reliability performance
indicators to measure our reliability performance.Efficiency
    
    By improving efficiency, we can constrain the cost
of our operations borne by customers and improve
returns to shareholders. We review our operations
continually to identify opportunities to improve the
operational productivity of our assets and our
people, and to identify areas in which we can reduce
costs or restrict cost increases. Planning ahead is
essential in our approach to maintaining and
improving efficiency.Our primary method of measuring improvements in
efficiency is through our financial performance as
described below.Financial 
performance
    
    If we achieve our objectives we should be able to
deliver continued improvements in financial
performance, so that we deliver on our commitment
to growing our dividend by 7% per annum until
31 March 2008.The principal measures we use to monitor financial
performance are adjusted operating profit* excluding
US stranded cost recoveries, adjusted earnings per
share* and operating cash flows.
 *
    
    Adjusted operating profit is operating profit before exceptional items and remeasurements,
adjusted earnings per share is basic earnings per share excluding exceptional items and
remeasurements




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28 National Grid plc
  Growth
  Investment
    
    We invest in our existing businesses and,
where we believe we can create value through
operational improvements, synergies and financial
benefits, we consider investing in infrastructure
businesses in our core UK and US energy markets.Measures we use to monitor investment include
capital expenditure and investments in acquisitions.Generate value 
from our 
investments
    
    We aim to generate value from our investments
by improving the operating performance of our
networks, by selecting investments that will provide
the best return or, in the case of acquisitions, by
selecting businesses where we can obtain synergies
for the benefit of our customers and our
shareholders.Measures we use to monitor the value we generate
from our investments include our return on equity
and synergy savings from acquisitions.Financial 
discipline
    
    In order to deliver sustainable growth we must be
disciplined in the way we manage our balance sheet.This means that we will return cash to shareholders
to the extent it is not required for our investment
objectives.
 Talent
  Motivation
and
performance
    
    We plan to improve our operational performance and
the service we provide to our customers by motivating
our employees to strive for continued improvement.Our aim is for a world-class performance
management system, involving integrated common
performance processes, a single set of performance
criteria, pay linked to leadership qualities as well as
operational and financial performance and greater
differentiation between levels of performance.Development
of talent and
skills
    
    Critical to our success is identifying, recruiting
and developing talented people and helping all our
managers and employees to operate to the best of
their abilities.Inclusion
and diversity
    
    In order to develop, recruit and retain talented
people we aim to achieve a more inclusive and
diverse workforce. A number of priority action areas
have been identified to help achieve our vision of
developing and operating our business in a way
that results in a more inclusive and diverse profile,
reflecting the composition of the communities in
which we operate, and to be seen as an employer
of choice across diverse communities.Performance measures we use to monitor our
objective of promoting inclusion and diversity include
the percentage of female employees and the
percentage of black and minority ethnic employees.Values
    
    Our aim is for all our people to be proud to work
for National Grid and to share our core values of
respect, integrity and ownership.
 Relationships
   Customer 
service
    
    Our objective is to impress our customers with
the quality of the services we provide, with our
responsiveness when things go wrong and with
our dedication to continued improvement.In addition to our plans to improve reliability, in
particular of our US electricity distribution networks,
we plan to improve the way we interact with our
customers by enhancing or replacing the systems
we use, through providing our employees with the
training, empowerment and support they need to
deliver and by improving the quality of our
communications with customers and internally.We use business-specific service quality KPIs to
measure our performance in this area.Regulatory 
relationships
    
    Our regulators primary responsibilities are to
electricity and gas consumers. Hence the foundation
of our relationship with regulators is based on the
safety, reliability and efficiency of our operations and
the quality of our customer service. Our strategic
focus on operational excellence and on customer
relationships plays a critical part in improving
relationships with our regulators.The other critical element in our regulatory
relationships is in building trust. This involves
being responsive to the need of our regulators for
high-quality information, complying with rules and
regulations, operating in an ethical way and, most
importantly, delivering on our promises.Suppliers
    
    We aim to work in partnership with our suppliers,
developing constructive relationships and working
together effectively. Our objective is to develop
contractual arrangements with our suppliers that
align their interests with our own as far as possible
and share financial risks appropriately.We expect our suppliers to be as equally committed
as ourselves to safety, reliability and efficiency and
to acting responsibly. In turn we aim to respect the
capabilities and views of our suppliers and to treat
them fairly in all our dealings with them.Community 
involvement
    
    National Grids role as a good corporate citizen
supports our strategic ambitions, and is delivered
through a sustained and consistent approach.In all our community investment we aim to develop
our business, support our employees, support
communities and enhance our reputation. Our
approach is based on two principles: Investment
in our Communities, Investment in our People,
and continues to be centred on three key themes:energy and environment; education and skills; and
community development.Sharing of best practice across our business
and working collaboratively with key partners
and stakeholders enables us to maximise how
communities benefit from our activities.




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Annual Report and Accounts 2006/07 29
  Responsibility
   Climate 
change
    
    Climate change is possibly one of the greatest
challenges facing society in the 21st century. Our
public position statement on energy delivery and
climate change sets out our approach to delivering
energy while playing our role in minimising any
impact our operations may have on the climate.Our target is to reduce National Grids greenhouse
gas emissions by 60% compared with a verified
baseline ahead of the UK Government target of 2050.Our biggest greenhouse gas emission is methane
leakage from our UK gas networks. A major ongoing
programme of replacing old cast iron pipes with
modern polyethylene pipe is reducing leakage from
our distribution system year on year. A programme to
install new compressors at key sites will also reduce
emissions from our UK gas transmission system.We plan to reduce emissions relating to our
own energy use, saving at least 5% in energy
consumption, and use the resultant cost savings
to enable us to procure all of the electricity we use
from renewable sources by the end of 2010.With our skills in balancing supply and demand,
we believe there are no insurmountable technical
problems to accommodating the quantities of
intermittent renewable generation that the market
will bring forward. We are therefore investing in our
networks to connect renewable generators and
to reinforce them, ensuring large-scale, renewably
generated power can get from where it is generated
to where it is used.The key performance indicator we use to monitor
our performance in this area is the percentage
reduction in our greenhouse gas emissions against
our verified baseline.Historically 
contaminated 
land
    
    We manage an inherited portfolio of historically
contaminated land including former manufactured
gas plants, industrial landfills, former gas holders
and older substations on our transmission and
distribution networks. Sites can sometimes have
a complex mix of contamination dating back over
100 years.In the UK, the main focus of our remediation
programme is on managing the environmental
risk and returning land to beneficial use, while in
the US, our highest priority sites for remediation
are those with the highest environmental risk
profile and those we are required to remediate
by regulatory agencies. Our goal is to return
these sites to productive public or private use.
 Protecting the 
environment
    
    We are committed to continuous improvement in
our environmental performance.Our objective is to help protect the environment for
future generations. In addition to aiming actively to
reduce our contribution to climate change we are
committed to:n     being efficient in our use of natural resources;n     keeping our waste to a minimum and increasing the economic value of any waste we produce;n     acting to prevent environmental incidents; andn     improving, where we can, the environmental status of the land on which we operate.We aim to implement environmental management
systems certified to the international standard ISO
14001 in all our businesses to help us deliver
improvements in these areas.Key performance indicators that we monitor in
this area include the number of significant direct
environmental incidents and the total value of
fines from prosecutions and citations.Corporate 
governance
    
    We believe strong corporate governance is essential
to operating responsibly and achieving our goals.We describe our approach to corporate governance
on pages 77 to 85.Business 
ethics
    
    Not only are we committed to ensuring that all
our behaviours are lawful and that we comply with
our policies and licences, we also expect all of our
employees to live up to our core values of respect,
integrity and ownership.Electric and
magnetic
fields
    
    We take the issues that surround electric and
magnetic fields seriously and in all our operations,
as a minimum, we aim to comply with the
regulations, guidelines or practices relating to
electric and magnetic fields in force in the different
jurisdictions in which we operate.Human rights
    
    Our public position statement sets out our
commitment to protect human rights within our
sphere of influence and ensure our own operations
are a force for good wherever we operate in
the world.




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30 National Grid plc
  Key performance indicators
    Objective
    
    KPI
    
    Description
    
    Target
    
    Result
    
    PageShareholder 
value
    
    Total shareholder
return
    
    Change in share price, assuming
reinvestment of dividends and
returns of capital
    
    To increase
    
    2006/07: 44.9%
2005/06: 22.9%
2004/05: 19.0%
    
    43Performance
 safety
    
    Injuries to the public
    
    Members of the public injured
as a direct result of our
operations1
    
    Zero
    
    2006/07: 28
2005/06: 20
2004/05: 52
    
    32Employee lost time
injury frequency rate
    
    Injuries resulting in employees
taking time off work
(per 100,000 hours worked)
    
    Zero
    
    2006/07: 0.34
2005/06: 0.28
2004/05: 0.37
    
    32Gas safety-related
service standards
    
    Proportion of uncontrolled gas
escapes attended within one
hour in the UK
    
    More than 97%
    
    2006/07: 98.51%
2005/06: 97.97%
2004/05: 98.46%
    
    52Gas Distribution  UK
mains replacement
    
    Kilometres of gas main
decommissioned
    
    2006/07: 1,824 km
2005/06: 1,724 km
2004/05: 1,492 km
    
    2006/07: 1,850 km
2005/06: 1,724 km
2004/05: 1,458 km
    
    52Sickness absence rate
    
    Proportion of available work
days which are lost due
to sickness
    
    Zero work-related sickness2
    
    2006/07: 2.48%
2005/06: 2.38%
2004/05: 2.69%
    
    32Performance
 reliability
    
    Transmission  UK
electricity system reliability
    
    Electricity delivered by the
electricity transmission system
as a proportion of electricity
demanded
    
    99.9999%
    
    2006/07: 99.9999%
2005/06: 99.9999%
2004/05: 99.99998%
    
    47Transmission  UK
gas system reliability
    
    Gas delivered by the gas
transmission system as a
proportion of gas demanded
    
    100%
    
    2006/07: 100%
2005/06: 100%
2004/05: 100%
    
    47Transmission  US
electricity system reliability
    
    The number of customer
interruptions and associated
MWh lost
    
    Less than 75 and less than
408 MWh
    
    2006/07: 75 and 264 MWh
2005/06: 97 and 348 MWh
2004/05: 73 and 386 MWh
    
    47Gas Distribution  UK
network reliability
    
    Proportion of total
customer days without
unplanned customer
interruptions
    
    99.999%
    
    2006/07: 99.999%
2005/06: 99.999%
2004/05: 99.999%
    
    52Electricity Distribution 
US network reliability
    
    Average time the average
customer is without power
over the year
    
    Less than 115 minutes
    
    2006/07: 121 minutes
2005/06: 141 minutes
2004/05: 120 minutes
    
    57Other business-specific reliability measures are discussed in the business sections on pages 47, 52, 57 and 61.Performance
 efficiency
and financial
performance3
    
    Adjusted operating profit
excluding stranded4
    
    Operating profit from continuing
operations excluding US
stranded cost recoveries,
exceptional items and
remeasurements
    
    To increase sufficiently
to support 7% dividend
growth through to March
2008
    
    2006/07: £2,031 million
2005/06: £1,968 million
2004/05: £1,936 million
    
    33Adjusted earnings
per share5
    
    Earnings per share from
continuing operations before
exceptional items and
remeasurements
    
    
    
    2006/07: 47.7p
2005/06: 45.5p
2004/05: 41.4p
    
    33Operating cash flows
    
    Cash flows generated from
continuing operations
    
    
    
    2006/07: £3,090 million
2005/06: £2,973 million
2004/05: £2,820 million
    
    33




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##### Table of Contents



Annual Report and Accounts 2006/07 31
 Objective
    
    KPI
    
    Description
    
    Target
    
    Result
    
    PageGrowth 
investment
    
    Capital investment
    
    Additions to plant and
equipment and to
intangible assets
    
    There is no numerical target
for capital expenditure, or
for acquisitions, as each investment is different and
is considered on its merits
    
    2006/07: £2,375 million
2005/06: £2,108 million
2004/05: £1,905 million
    
    33Investments in acquisitions
    
    Consideration in respect
of acquired businesses
    

    
    2006/07: £354 million
2005/06: No acquisitions
2004/05: £1,122 million
    
    34Growth 
value from our
investments
    
    Return on equity
    
    Adjusted earnings excluding
stranded and converted on
to a regulatory basis over
equity on a regulatory basis
    
    This is a new measure
and a target is not yet
established
    
    2006/07: 12.4%
(3 year average)
    
    34Synergy savings
    
    Annualised cost savings
achieved from the integration
of an acquired business
    
    Rhode Island:
$18 million
    
    Rhode Island:
Target to be achieved
in future periods
    
    34Talent 
inclusion and
diversity
    
    Percentage of female
employees
    
    Proportion of employees who
are female
    
    Our ambition is for our
employees to reflect the
communities we serve while
    
    2006/07: 23.7%
2005/06: 23.4%
2004/05: 21.0%
    
    35Percentage of black and
minority ethnic employees
    
    Proportion of employees who
are black and minority ethnic
    
    ensuring that we recruit and
retain talented people
regardless of their gender,
race, disability, sexual
orientation, age, religion
or belief
    
    2006/07: 7.3%
2005/06: 6.7%
2004/05: 6.0%
    
    35Responsibility
 climate
change
    
    Percentage reduction in
greenhouse gas emissions
against verified baseline6
    
    CO2 equivalent emissions
estimated to be caused by
our operations
    
    60% reduction by 2050
    
    2006/07: 35%
2005/06: 26%
2004/05: 28%
    
    36Responsibility
 protect the
environment
    
    Significant direct
environmental incidents
    
    Own fault and contractor-related
environmental incidents
    
    Zero in each case
    
    2006/07: 20, 20
2005/06: 22, 1
2004/05: 20, 3
    
    37Total value of fines from
environmental prosecutions
and citations
    
    Financial quantity of fines
imposed
    
    Zero
    
    2006/07: $4,885
2005/06: Zero
2004/05: $3,000
    
    37
 1
    
    Injuries comprise fatalities, injuries that require the person to receive hospital treatment
and other injuries reported in the UK under the Reporting of Injuries, Diseases and Dangerous
Occurrences Regulations (RIDDOR).2
    
    The sickness absence rate includes absences resulting from both work-related and non work-related
illnesses. Our target relates to work-related illnesses, however, we do not have a measure that
excludes non work-related illnesses sufficiently accurately.3
    
    The KPI for a 30% reduction in controllable costs by 31 March 2007 in our Gas Distribution
business in the UK is no longer included as it was achieved by 31 March 2006.4
    
    This measure has been amended from that presented last year to exclude the impact of US stranded
cost recoveries in line with our strategic announcement to return these cash flows to shareholders,
and also to reflect the reclassification of wireless infrastructure and Basslink in Australia as
discontinued operations. Operating profit from continuing operations including US stranded cost
recoveries and exceptional items and remeasurements increased to £2,513 million in 2006/07 from
£2,374 million in 2005/06 and from £2,113 million in 2004/05.5
    
    Basic earnings per share from continuing operations including exceptional items and
remeasurements increased from 35.9p in 2004/05 to 41.6p in 2005/06 to 48.1p in 2006/07.6
    
    The KPI we use for measuring reduction in greenhouse gas emissions has been changed from last
years measure of greenhouse gas emissions per £m revenue to a measure that aligns with our target
of a 60% reduction in emissions. The verified baseline is based on available historic data for our
various emission sources, for example, methane leakage and venting. The period this data covers
varies by source, therefore our baseline cannot be attributed to a specific year. The baseline will
be adjusted on an annual basis to include businesses we acquire. The derivation of our baseline is
included in the responsibility section of our corporate website.




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##### Table of Contents



32 National Grid plc
  Performance during the year
  Performance
 Safety
   Public safety
  
 Employee safety
 Contractor safety
   Employee health




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##### Table of Contents



Annual Report and Accounts 2006/07 33
  Reliability
     Efficiency
  Financial performance
 Growth
 Investment
 Capital investment
    
  Acquisitions and disposals Significant progress towards proposed acquisition of KeySpan




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##### Table of Contents



34 National Grid plc
  Approval
    
    Filed
    
    ClearedFederal Trade Commission
    
    ü
    
    üCommittee on Foreign Investment in the US
    
    ü
    
    üFederal Energy Regulatory Commission
    
    ü
    
    üNational Grid shareholders
    
    ü
    
    üKeySpan shareholders
    
    ü
    
    üNew Hampshire Public Utilities Commission
    
    ü
    
    AwaitingApprovalNew York Public Service Commission
    
    ü
 
 Acquisition of Rhode Island gas distribution business
 Discontinued operations
  Other acquisitions and disposals
  Generating value from our investments
  Financial discipline
  Talent
 Motivation and performance




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##### Table of Contents



Annual Report and Accounts 2006/07 35
  Development of talent
      Inclusion and diversity
 Relationships
 Customer service
   Regulatory relationships




---



##### Table of Contents



36 National Grid plc
  Suppliers
  Community investment
   Responsibility
  Climate change
 2 2




---



##### Table of Contents



Annual Report and Accounts 2006/2007 37
  2
  Historically contaminated land
   Protecting the environment
 Electric and magnetic fields
  Corporate governance
  Business ethics




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##### Table of Contents



38 National Grid plc
  Human rights
  Financial results
  Continuing and discontinued operations
   Measurement of financial performance and use of adjusted profit measures
 Operating financial performance
 Years ended 31 March2007
    
    
    2006
    
    
    2005Continuing operations
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    8,695
    
    
    
    8,868
    
    
    
    7,174Other operating income
    
    
    83
    
    
    
    80
    
    
    
    67Operating costs excluding
exceptional items and remeasurements
    
    
    (6,324
    )
    
    
    (6,491
    )
    
    
    (4,840
    )Adjusted operating profit
    
    
    2,454
    
    
    
    2,457
    
    
    
    2,401Exceptional items
    
    
    (22
    )
    
    
    (34
    )
    
    
    (250
    )Remeasurements
    
    
    81
    
    
    
    (49
    )
    
    
    (38
    )Total operating profit
    
    
    2,513
    
    
    
    2,374
    
    
    
    2,113




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##### Table of Contents



Annual Report and Accounts 2006/07 39
  Revenue by business segment
 Years ended 31 March2007
    
    
    2006
    
    
    2005Continuing operations
    
    £m
    
    
    £m
    
    
    £mTransmission  UK
    
    
    2,816
    
    
    
    2,710
    
    
    
    1,995Transmission  US
    
    
    270
    
    
    
    310
    
    
    
    284Gas Distribution  UK
    
    
    1,193
    
    
    
    1,222
    
    
    
    1,113Gas Distribution  US
    
    
    638
    
    
    
    571
    
    
    
    427Electricity Distribution  US
    
    
    3,004
    
    
    
    3,134
    
    
    
    2,633US stranded cost recoveries
    
    
    426
    
    
    
    517
    
    
    
    436Other activities
    
    
    567
    
    
    
    701
    
    
    
    734Total segmental revenues
    
    
    8,914
    
    
    
    9,165
    
    
    
    7,622Less: sales between business segments
    
    
    (219
    )
    
    
    (297
    )
    
    
    (448
    )Total
    
    
    8,695
    
    
    
    8,868
    
    
    
    7,174
 Segmental operating profit before exceptional items and remeasurements
 Years ended 31 March2007
    
    
    2006
    
    
    2005Continuing operations
    
    £m
    
    
    £m
    
    
    £mTransmission  UK
    
    
    946
    
    
    
    844
    
    
    
    859Transmission  US
    
    
    108
    
    
    
    127
    
    
    
    126Gas Distribution  UK
    
    
    409
    
    
    
    483
    
    
    
    424Gas Distribution  US
    
    
    71
    
    
    
    47
    
    
    
    33Electricity Distribution  US
    
    
    364
    
    
    
    317
    
    
    
    342US stranded cost recoveries
    
    
    423
    
    
    
    489
    
    
    
    465Other activities
    
    
    133
    
    
    
    150
    
    
    
    152Adjusted operating profit
    
    
    2,454
    
    
    
    2,457
    
    
    
    2,401Total excluding stranded cost recoveries
    
    
    2,031
    
    
    
    1,968
    
    
    
    1,936
 Segmental total operating profit
 Years ended 31 March2007
    
    
    2006
    
    
    2005Continuing operations
    
    £m
    
    
    £m
    
    
    £mTransmission  UK
    
    
    936
    
    
    
    843
    
    
    
    857Transmission  US
    
    
    107
    
    
    
    127
    
    
    
    119Gas Distribution  UK
    
    
    412
    
    
    
    432
    
    
    
    333Gas Distribution  US
    
    
    67
    
    
    
    47
    
    
    
    17Electricity Distribution  US
    
    
    355
    
    
    
    317
    
    
    
    241US stranded cost recoveries
    
    
    504
    
    
    
    440
    
    
    
    427Other activities
    
    
    132
    
    
    
    168
    
    
    
    119Total operating profit
    
    
    2,513
    
    
    
    2,374
    
    
    
    2,113Total excluding stranded cost recoveries
    
    
    2,009
    
    
    
    1,934
    
    
    
    1,686
  Exchange rates
 2006/07 compared to 2005/06
  Revenueand otheroperating
    
    
    Operating
    
    
    Operatingincome
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2005/06 results
    
    
    8,948
    
    
    
    (6,574
    )
    
    
    2,374Add back 2005/06 exceptional
items and remeasurements
    
    
    
    
    
    
    83
    
    
    
    832005/06 adjusted results
    
    
    8,948
    
    
    
    (6,491
    )
    
    
    2,457Exchange on US operations
    
    
    (282
    )
    
    
    220
    
    
    
    (62
    )2005/06 constant currency results
    
    
    8,666
    
    
    
    (6,271
    )
    
    
    2,395Transmission  UK
    
    
    112
    
    
    
    (10
    )
    
    
    102Transmission  US
    
    
    (21
    )
    
    
    10
    
    
    
    (11
    )Gas Distribution  UK
    
    
    (27
    )
    
    
    (47
    )
    
    
    (74
    )Gas Distribution  US
    
    
    103
    
    
    
    (76
    )
    
    
    27Electricity Distribution  US
    
    
    65
    
    
    
    2
    
    
    
    67US stranded cost recoveries
    
    
    (59
    )
    
    
    24
    
    
    
    (35
    )Other activities
    
    
    (137
    )
    
    
    120
    
    
    
    (17
    )Sales between businesses
    
    
    76
    
    
    
    (76
    )
    
    
    2006/07 adjusted results
    
    
    8,778
    
    
    
    (6,324
    )
    
    
    2,4542006/07 exceptional items
and remeasurements
    
    
    
    
    
    
    59
    
    
    
    592006/07 results
    
    
    8,778
    
    
    
    (6,265
    )
    
    
    2,513




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##### Table of Contents



40 National Grid plc
  2005/06 compared with 2004/05
  Revenueand otheroperating
    
    
    Operating
    
    
    Operatingincome
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2004/05 results
    
    
    7,241
    
    
    
    (5,128
    )
    
    
    2,113Add back 2004/05 exceptional
items and remeasurements
    
    
    
    
    
    
    288
    
    
    
    2882004/05 adjusted results
    
    
    7,241
    
    
    
    (4,840
    )
    
    
    2,401Exchange on US operations
    
    
    169
    
    
    
    (125
    )
    
    
    442004/05 constant currency adjusted
results
    
    
    7,410
    
    
    
    (4,965
    )
    
    
    2,445Transmission  UK
    
    
    715
    
    
    
    (730
    )
    
    
    (15
    )Transmission  US
    
    
    13
    
    
    
    (18
    )
    
    
    (5
    )Gas Distribution  UK
    
    
    113
    
    
    
    (54
    )
    
    
    59Gas Distribution  US
    
    
    125
    
    
    
    (112
    )
    
    
    13Electricity Distribution  US
    
    
    386
    
    
    
    (426
    )
    
    
    (40
    )US stranded cost recoveries
    
    
    61
    
    
    
    (59
    )
    
    
    2Other activities
    
    
    (26
    )
    
    
    24
    
    
    
    (2
    )Sales between businesses
    
    
    151
    
    
    
    (151
    )
    
    
    2005/06 adjusted results
    
    
    8,948
    
    
    
    (6,491
    )
    
    
    2,4572005/06 exceptional items
and remeasurements
    
    
    
    
    
    
    (83
    )
    
    
    (83
    )2005/06 results
    
    
    8,948
    
    
    
    (6,574
    )
    
    
    2,374
 Earnings from continuing operations
 Adjusted earnings
 Years ended 31 March2007
    
    
    2006
    
    
    2005Continuing operations
    
    £m
    
    
    £m
    
    
    £mAdjusted operating profit
    
    
    2,454
    
    
    
    2,457
    
    
    
    2,401Net finance costs excluding
exceptional items and remeasurements
    
    
    (547
    )
    
    
    (602
    )
    
    
    (704
    )Share of post-tax results of joint ventures
    
    
    2
    
    
    
    3
    
    
    
    3Adjusted profit before taxation
    
    
    1,909
    
    
    
    1,858
    
    
    
    1,700Taxation excluding tax on
exceptional items and remeasurements
    
    
    (611
    )
    
    
    (565
    )
    
    
    (424
    )Adjusted profit from continuing operations
    
    
    1,298
    
    
    
    1,293
    
    
    
    1,276Pence
    
    Pence
    
    PenceAdjusted earnings per share
from continuing operations
    
    
    47.7
    
    
    
    45.5
    
    
    
    41.4
 Earnings
 Years ended 31 March2007
    
    
    2006
    
    
    2005Continuing operations
    
    £m
    
    
    £m
    
    
    £mTotal operating profit
    
    
    2,513
    
    
    
    2,374
    
    
    
    2,113Net finance costs
    
    
    (764
    )
    
    
    (659
    )
    
    
    (704
    )Share of post-tax results of joint ventures
    
    
    2
    
    
    
    3
    
    
    
    3Profit before taxation
    
    
    1,751
    
    
    
    1,718
    
    
    
    1,412Taxation
    
    
    (441
    )
    
    
    (535
    )
    
    
    (306
    )Profit from continuing operations
    
    
    1,310
    
    
    
    1,183
    
    
    
    1,106Pence
    
    Pence
    
    PenceEarnings per share from
continuing operations
    
    
    48.1
    
    
    
    41.6
    
    
    
    35.9
 Net finance costs
   Exceptional finance costs and remeasurements




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##### Table of Contents



Annual Report and Accounts 2006/07 41
  Taxation
    Profit for the year from continuing operations
  Adjusted profit measures
  a) Reconciliation of adjusted operating profit to total operating profit
 Years ended 31 March2007
    
    
    2006
    
    
    2005Continuing operations
    
    £m
    
    
    £m
    
    
    £mAdjusted operating profit
    
    
    2,454
    
    
    
    2,457
    
    
    
    2,401Exceptional items
    
    
    (22
    )
    
    
    (34
    )
    
    
    (250
    )Commodity contract remeasurements
    
    
    81
    
    
    
    (49
    )
    
    
    (38
    )Total operating profit
    
    
    2,513
    
    
    
    2,374
    
    
    
    2,113
 b) Reconciliation of adjusted profit before taxation to profit before taxation
 Years ended 31 March2007
    
    
    2006
    
    
    2005Continuing operations
    
    £m
    
    
    £m
    
    
    £mAdjusted profit before taxation
    
    
    1,909
    
    
    
    1,858
    
    
    
    1,700Exceptional items
    
    
    (67
    )
    
    
    (83
    )
    
    
    (250
    )Commodity contract remeasurements
    
    
    62
    
    
    
    (63
    )
    
    
    (38
    )Derivative financial remeasurements
    
    
    (153
    )
    
    
    6
    
    
    
    Total profit before taxation
    
    
    1,751
    
    
    
    1,718
    
    
    
    1,412
  c) Reconciliation of adjusted earnings to earnings (profit for the year from continuing operations
attributable to equity shareholders of the parent)
 Years ended 31 March2007
    
    
    2006
    
    
    2005Continuing operations
    
    £m
    
    
    £m
    
    
    £mAdjusted earnings
    
    
    1,296
    
    
    
    1,291
    
    
    
    1,276Exceptional items
    
    
    (41
    )
    
    
    (61
    )
    
    
    (147
    )Commodity contract remeasurements
    
    
    37
    
    
    
    (38
    )
    
    
    (23
    )Derivative financial remeasurements
    
    
    16
    
    
    
    (11
    )
    
    
    Earnings
    
    
    1,308
    
    
    
    1,181
    
    
    
    1,106
  
 Earnings per share from continuing operations
  Years ended 31 March2007
    
    
    2006
    
    
    2005Continuing operations
    
    pence
    
    
    pence
    
    
    penceAdjusted basic earnings per share
    
    
    47.7
    
    
    
    45.5
    
    
    
    41.4Exceptional items
    
    
    (1.5
    )
    
    
    (2.2
    )
    
    
    (4.8
    )Commodity contract remeasurements
    
    
    1.3
    
    
    
    (1.3
    )
    
    
    (0.7
    )Derivative financial remeasurements
    
    
    0.6
    
    
    
    (0.4
    )
    
    
    Earnings per share  continuing operations
    
    
    48.1
    
    
    
    41.6
    
    
    
    35.9




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##### Table of Contents



42 National Grid plc
  Discontinued operations
 Years ended 31 March2007
    
    
    2006
    
    
    2005Discontinued operations
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    383
    
    
    
    493
    
    
    
    1,313Operating costs before exceptional items
    
    
    (266
    )
    
    
    (362
    )
    
    
    (761
    )Adjusted operating profit
    
    
    117
    
    
    
    131
    
    
    
    552Exceptional items
    
    
    (55
    )
    
    
    (20
    )
    
    
    (87
    )Operating profit
    
    
    62
    
    
    
    111
    
    
    
    465Finance income  remeasurements
    
    
    37
    
    
    
    
    
    
    
    Finance costs
    
    
    (2
    )
    
    
    (4
    )
    
    
    (2
    )Share of post-tax results of joint venture
    
    
    
    
    
    
    
    
    
    
    (5
    )Profit from discontinued operations
before tax
    
    
    97
    
    
    
    107
    
    
    
    458Taxation
    
    
    (11
    )
    
    
    (45
    )
    
    
    (153
    )Profit from discontinued operations
    
    
    86
    
    
    
    62
    
    
    
    305Gain on disposal of discontinued
operations
    
    
    
    
    
    
    2,605
    
    
    
    13Profit for the year
    
    
    86
    
    
    
    2,667
    
    
    
    318
 Net profit and total earnings per share for the year
   Cash flows
 Cash flows from operating activities
    Cash flows from investing activities
   Cash flows from financing activities




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##### Table of Contents



Annual Report and Accounts 2006/07 43
  Returns to shareholders 
 
  Dividends in respect of the financial year
 2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Dividends
    
    pence
    
    
    pence
    
    
    pence
    
    
    pence
    
    
    penceInterim
    
    
    10.9
    
    
    
    10.2
    
    
    
    8.5
    
    
    
    7.91
    
    
    
    6.86Final
    
    
    17.8
    
    
    
    15.9
    
    
    
    15.2
    
    
    
    11.87
    
    
    
    10.34Total
    
    
    28.7
    
    
    
    26.1
    
    
    
    23.7
    
    
    
    19.78
    
    
    
    17.20Dividends per ADS
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $Interim
    
    
    1.03
    
    
    
    0.88
    
    
    
    0.79
    
    
    
    0.67
    
    
    
    0.54Final
    
    
    1.76
    
    
    
    1.51
    
    
    
    1.38
    
    
    
    1.05
    
    
    
    0.84Total
    
    
    2.79
    
    
    
    2.39
    
    
    
    2.17
    
    
    
    1.72
    
    
    
    1.38
 Dividend and share buy-back policies




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##### Table of Contents



44 National Grid plc
  Transmission
 About the business
   Transmission  UK
  Electricity transmission owner
    
    We own the electricity transmission system in England and Wales.Our electricity assets comprise approximately 4,479 miles of overhead line, about 420 miles of underground cable and 337 substations at 244 sites.Electricity system operator
    
    We are the Great Britain System Operator, responsible for managing the operations of both the England and Wales transmission system that we own and also the two high-voltage electricity transmission networks in Scotland.Day-to-day operation of the Great Britain electricity transmission 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.Gas transmission owner
    
    We own the gas national transmission system in Great Britain.This comprises approximately 4,326 miles of high pressure pipe and 26 compressor stations, connecting to 8 distribution networks and to third party independent systems for onward transportation of gas to end consumers.Gas system operator
    
    We operate the gas national transmission system.Day-to-day operation includes balancing supply and demand, maintaining satisfactory system pressures and ensuring gas quality standards are met.French interconnector
    
    We 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 storage
    
    We own and operate four liquefied natural gas (LNG) storage facilities in Great Britain.




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##### Table of Contents



Annual Report and Accounts 2006/07 45
  Price controls
 Transmission  US
  Electricity 
transmission 
owner
    
    We own and operate an electricity transmission
network of approximately 8,600 miles 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, utilising nearly 8,500 miles
of overhead lines, 89 miles of underground cable
and 501 substations.We are the largest electricity transmission service
provider in the northeastern US by reference to
the length of these high-voltage transmission lines.Canadian 
interconnector
    
    We own and operate a 139 mile direct current
transmission line rated at 450 kV that is a key
section of an interconnector between New England
and Canada.




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##### Table of Contents



46 National Grid plc
  Rate plans
        Current and future developments
 UK price controls
    Other UK developments




---



##### Table of Contents



Annual Report and Accounts 2006/07 47
  US regulatory developments
   Emissions trading
   Performance during the year
 Performance
  Objective
    
    PerformanceSafety
    
    In the UK during 2006/07 there were 13 lost time
injuries compared with 14 in 2005/06 and 8 in
2004/05. The lost time injury frequency rate was
0.25 in 2006/07 compared to 0.28 in 2005/06 and
0.17 in 2004/05.Our US electricity transmission lost time injury
frequency rate increased to 0.19 in 2006/07 from
zero for 2005/06 as a result of one lost time injury
during the year.Reliability
    
    UK electricity transmission network reliability in
2006/07 was 99.9999%, compared with 99.9999%
in 2005/06 and 99.99998% in 2004/05. Gas
transmission network reliability was 100% in all
three years.Average annual availability of our UK electricity
transmission network in 2006/07 was 95.02%,
compared with 95.09% in 2005/06 and 95.3% in
2004/05. Reduced availability reflects the increased
amount of asset replacement activity to ensure the
reliability of the network for years to come.
System availability at winter peak demand was
98.2% in 2006/07, 97.9% in 2005/06 and 97.6%
in 2004/05.UK gas compressor fleet performance during
2006/07 declined slightly with the average time
between compressor failures at 6% below our five
year average, compared with 10% and 24% above
the five year average time between failures in
2005/06 and 2004/05.In the US, our average annual network availability
in 2006/07 was 98.1%. This compared with 98.5%
in 2005/06 and 98.3% in 2004/05.Overall average network availability was similar in
New England and New York, for both summer and
winter.Efficiency
    
    We have been undertaking a number of internal
business process reviews to seek out further savings
without compromising our other objectives.
Efficiency is reflected in our financial performance,
which is discussed below.Financial 
performance
    
    UK adjusted operating profit of £946 million is 12%
higher than 2005/06. US adjusted operating profit of
£108 million is 9% lower than 2005/06 on a constant
currency basis. These are discussed in further detail
in the financial results sections following.
 Growth
 Investment  UK




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##### Table of Contents



48 National Grid plc
  Years ended 31 March2007
    
    
    2006
    
    
    2005£m
    
    
    £m
    
    
    £mProperty, plant & equipment
    
    
    1,218
    
    
    
    840
    
    
    
    464Intangible assets
    
    
    17
    
    
    
    9
    
    
    
    65Capital investment
    
    
    1,235
    
    
    
    849
    
    
    
    529
 Investment  US
   Customer service
  Financial results  UK
  Years ended 31 March2007
    
    
    2006
    
    
    2005Continuing operations
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    2,816
    
    
    
    2,710
    
    
    
    1,995Other operating income
    
    
    6
    
    
    
    
    
    
    
    Operating costs excluding
exceptional items and remeasurements
    
    
    (1,876
    )
    
    
    (1,866
    )
    
    
    (1,136
    )Adjusted operating profit
    
    
    946
    
    
    
    844
    
    
    
    859Exceptional items
    
    
    (10
    )
    
    
    (1
    )
    
    
    (2
    )Operating profit
    
    
    936
    
    
    
    843
    
    
    
    857
 2006/07 compared with 2005/06
  Revenueand otheroperating
    
    
    Operating
    
    
    Operatingincome
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2005/06 results
    
    
    2,710
    
    
    
    (1,867
    )
    
    
    843Add back 2005/06 exceptional items
    
    
    
    
    
    
    1
    
    
    
    12005/06 adjusted results
    
    
    2,710
    
    
    
    (1,866
    )
    
    
    844Allowed revenues
    
    
    106
    
    
    
    (3
    )
    
    
    103Timing on recoveries
    
    
    (64
    )
    
    
    
    
    
    
    (64
    )Transmission owner depreciation
    
    
    
    
    
    
    27
    
    
    
    27Other
    
    
    70
    
    
    
    (34
    )
    
    
    362006/07 adjusted results
    
    
    2,822
    
    
    
    (1,876
    )
    
    
    9462006/07 exceptional items
    
    
    
    
    
    
    (10
    )
    
    
    (10
    )2006/07 results
    
    
    2,822
    
    
    
    (1,886
    )
    
    
    936
     2005/06 compared with 2004/05
 Operating
    
    
    OperatingRevenue
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2004/05 results
    
    
    1,995
    
    
    
    (1,138
    )
    
    
    857Add back 2004/05 exceptional items
    
    
    
    
    
    
    2
    
    
    
    22004/05 adjusted results
    
    
    1,995
    
    
    
    (1,136
    )
    
    
    859LNG storage
    
    
    34
    
    
    
    (4
    )
    
    
    30French interconnector
    
    
    43
    
    
    
    (3
    )
    
    
    40BSIS
    
    
    214
    
    
    
    (235
    )
    
    
    (21
    )Scottish networks pass-through
    
    
    259
    
    
    
    (259
    )
    
    
    Depreciation and amortisation
    
    
    
    
    
    
    (83
    )
    
    
    (83
    )Other
    
    
    165
    
    
    
    (146
    )
    
    
    192005/06 adjusted results
    
    
    2,710
    
    
    
    (1,866
    )
    
    
    8442005/06 exceptional items
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )2005/06 results
    
    
    2,710
    
    
    
    (1,867
    )
    
    
    843




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##### Table of Contents



Annual Report and Accounts 2006/07 49
  Financial results  US
  2007
    
    
    2006
    
    
    2005£m
    
    
    £m
    
    
    £mRevenue
    
    
    270
    
    
    
    310
    
    
    
    284Operating costs excluding exceptional
items and remeasurements
    
    
    (162
    )
    
    
    (183
    )
    
    
    (158
    )Adjusted operating profit
    
    
    108
    
    
    
    127
    
    
    
    126Exceptional items
    
    
    (1
    )
    
    
    
    
    
    
    (7
    )Operating profit
    
    
    107
    
    
    
    127
    
    
    
    119
 2006/07 compared with 2005/06
  Operating
    
    
    OperatingRevenue
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2005/06 results and adjusted results
    
    
    310
    
    
    
    (183
    )
    
    
    127Exchange movements
    
    
    (19
    )
    
    
    11
    
    
    
    (8
    )2005/06 constant currency results
    
    
    291
    
    
    
    (172
    )
    
    
    119Tariff adjustment not repeated
    
    
    (7
    )
    
    
    7
    
    
    
    GridAmerica
    
    
    (4
    )
    
    
    3
    
    
    
    (1
    )Other changes
    
    
    (10
    )
    
    
    
    
    
    
    (10
    )2006/07 adjusted results
    
    
    270
    
    
    
    (162
    )
    
    
    108Exceptional items
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )2006/07 results
    
    
    270
    
    
    
    (163
    )
    
    
    107
 2005/06 compared with 2004/05
  Operating
    
    
    OperatingRevenue
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2004/05 results
    
    
    284
    
    
    
    (165
    )
    
    
    119Add back 2004/05 exceptional items
    
    
    
    
    
    
    7
    
    
    
    72004/05 adjusted results
    
    
    284
    
    
    
    (158
    )
    
    
    126Exchange movements
    
    
    13
    
    
    
    (7
    )
    
    
    62004/05 constant currency adjusted results
    
    
    297
    
    
    
    (165
    )
    
    
    132Tariff adjustment
    
    
    7
    
    
    
    (7
    )
    
    
    Other changes
    
    
    6
    
    
    
    (11
    )
    
    
    (5
    )2005/06 results and adjusted results
    
    
    310
    
    
    
    (183
    )
    
    
    127




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##### Table of Contents



50 National Grid plc
  Gas Distribution
 About the business
   Gas Distribution  UK




---



##### Table of Contents



Annual Report and Accounts 2006/07 51
  Gas Distribution  US
  
   New York
 Rhode Island




---



##### Table of Contents



52 National Grid plc
  Current and future developments
  UK regulatory price control reviews
   Acquisition of gas operations in Rhode Island
  KeySpan
  Performance during the year
 Performance
  Objective
    
    PerformanceSafety
    
    There were no employee related fatalities during
2006/07 compared with one in 2005/06.In the UK, lost time injuries for the retained networks
fell 12% in 2006/07 to 21, compared with 24 in
2005/06 and 20 in 2004/05. The lost time injury
frequency rate fell to 0.16 in 2006/07 from 0.17 in
2005/06 and 0.35 in 2004/05 (2004/05 includes
sold networks).In both the UK and US, we again exceeded our
regulatory agreed targets on safety-related standards.
In the UK, more than 98% of uncontrolled gas
escapes (where the gas leak cannot be controlled
by turning the gas supply off at the meter) were
attended within one hour, and more than 99% of
controlled gas escapes (where the gas leak can
be controlled at the meter) were attended within
two hours. In New York, we responded to 80% of
gas escapes within 30 minutes (75% target), 93%
within 45 minutes (target of 90%), and 97% within
60 minutes (target of 95%). In Rhode Island, we
responded to 96% within 30 minutes (target of 91%),
and 97% within 45 minutes (target of 93%).We have decommissioned approximately 1,850 km
of gas pipes in 2006/07 exceeding the HSE target
this year, compared with 1,724 km in 2005/06 and
1,458 km in 2004/05.Reliability
    
    Over the year we have achieved all our standards
of service set by Ofgem that relate to our gas
transportation services in the UK and similarly in the
US we have continuously improved the integrity of
our gas distribution system by actively managing our
critical leak backlogs and completing repairs. In the
US we were ranked in the top three major gas
utilities in all three metrics collected by the New York
Department of Public Service as one means in the
industry to assess system integrity, gas leaks
discovered, main leaks/service leaks repaired.Efficiency
    
    We have continued to drive operational efficiency
through the streamlining of processes and best
practice sharing between our UK and US operations.Financialperformance
    
    The adjusted operating profit of Gas Distribution in
the UK and the US combined was £480 million in
2006/07 compared with £530 million in 2005/06 and
£457 million in 2004/05. Further information on the
financial results of Gas Distribution  UK and Gas
Distribution  US is provided on pages 54 and 55.




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##### Table of Contents



Annual Report and Accounts 2006/07 53
  Growth  Investment  UK
  2007
    
    
    2006
    
    
    2005Years ended 31 March
    
    £m
    
    
    £m
    
    
    £mCapital expenditure
    
    
    157
    
    
    
    149
    
    
    
    120Replacement expenditure
    
    
    333
    
    
    
    295
    
    
    
    239Gross investment in the
continuing business
    
    
    490
    
    
    
    444
    
    
    
    359
 Investment  US
   Acquisition of Rhode Island gas operations
  Customer service




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##### Table of Contents



54 National Grid plc
  Financial results  UK
  2007
    
    
    2006
    
    
    2005Years ended 31 March
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    1,193
    
    
    
    1,222
    
    
    
    1,113Other operating income
    
    
    6
    
    
    
    4
    
    
    
    Operating costs excluding
exceptional items
    
    
    (790
    )
    
    
    (743
    )
    
    
    (689
    )Adjusted operating profit
    
    
    409
    
    
    
    483
    
    
    
    424Exceptional items
    
    
    3
    
    
    
    (51
    )
    
    
    (91
    )Operating profit
    
    
    412
    
    
    
    432
    
    
    
    333
 2006/07 results compared with 2005/06
  Revenueand otheroperating
    
    
    Operating
    
    
    Operatingincome
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2005/06 results
    
    
    1,226
    
    
    
    (794
    )
    
    
    432Add back 2005/06 exceptional items
    
    
    
    
    
    
    51
    
    
    
    512005/06 adjusted results
    
    
    1,226
    
    
    
    (743
    )
    
    
    483Price changes
    
    
    73
    
    
    
    
    
    
    
    73Weather and volumes
    
    
    (69
    )
    
    
    
    
    
    
    (69
    )Timing on recoveries
    
    
    (32
    )
    
    
    
    
    
    
    (32
    )Depreciation and amortisation
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )Business rates
    
    
    
    
    
    
    (23
    )
    
    
    (23
    )Other revenues and costs
    
    
    1
    
    
    
    (15
    )
    
    
    (14
    )2006/07 adjusted results
    
    
    1,199
    
    
    
    (790
    )
    
    
    4092006/07 exceptional items
    
    
    
    
    
    
    3
    
    
    
    32006/07 results
    
    
    1,199
    
    
    
    (787
    )
    
    
    412
 2005/06 results compared with 2004/05
  Revenueand otheroperating
    
    
    Operating
    
    
    Operatingincome
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2004/05 results
    
    
    1,113
    
    
    
    (780
    )
    
    
    333Add back 2004/05 exceptional items
    
    
    
    
    
    
    91
    
    
    
    912004/05 adjusted results
    
    
    1,113
    
    
    
    (689
    )
    
    
    424Business rates pass-through
    
    
    23
    
    
    
    (23
    )
    
    
    Weather and volumes
    
    
    12
    
    
    
    
    
    
    
    12Other price changes
    
    
    10
    
    
    
    
    
    
    
    10Way Ahead operating costs
    
    
    
    
    
    
    52
    
    
    
    52Gas commodity costs
    
    
    
    
    
    
    (17
    )
    
    
    (17
    )Other revenues and costs
    
    
    68
    
    
    
    (66
    )
    
    
    22005/06 adjusted results
    
    
    1,226
    
    
    
    (743
    )
    
    
    4832005/06 exceptional items
    
    
    
    
    
    
    (51
    )
    
    
    (51
    )2005/06 results
    
    
    1,226
    
    
    
    (794
    )
    
    
    432




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##### Table of Contents



Annual Report and Accounts 2006/07 55
  Financial results  US
  2007
    
    
    2006
    
    
    2005Years ended 31 March
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    638
    
    
    
    571
    
    
    
    427Operating costs excluding
exceptional items
    
    
    (567
    )
    
    
    (524
    )
    
    
    (394
    )Adjusted operating profit
    
    
    71
    
    
    
    47
    
    
    
    33Exceptional items
    
    
    (4
    )
    
    
    
    
    
    
    (16
    )Operating profit
    
    
    67
    
    
    
    47
    
    
    
    17
  2006/07 results compared with 2005/06
  Operating
    
    
    OperatingRevenue
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2005/06 results and adjusted results
    
    
    571
    
    
    
    (524
    )
    
    
    47Exchange rate movements
    
    
    (36
    )
    
    
    33
    
    
    
    (3
    )2005/06 constant currency basis
    
    
    535
    
    
    
    (491
    )
    
    
    44Purchased gas
    
    
    (77
    )
    
    
    79
    
    
    
    2Rhode Island gas operations
    
    
    176
    
    
    
    (159
    )
    
    
    17Bad debts
    
    
    
    
    
    
    (3
    )
    
    
    (3
    )Pension and benefit costs
    
    
    
    
    
    
    5
    
    
    
    5Other
    
    
    4
    
    
    
    2
    
    
    
    62006/07 adjusted results
    
    
    638
    
    
    
    (567
    )
    
    
    712006/07 exceptional items
    
    
    
    
    
    
    (4
    )
    
    
    (4
    )2006/07 results
    
    
    638
    
    
    
    (571
    )
    
    
    67
 2005/06 compared with 2004/05
  Operating
    
    
    OperatingRevenue
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2004/05 results
    
    
    427
    
    
    
    (410
    )
    
    
    17Add back 2004/05 exceptional items
    
    
    
    
    
    
    16
    
    
    
    162004/05 adjusted results
    
    
    427
    
    
    
    (394
    )
    
    
    33Exchange rate movements
    
    
    19
    
    
    
    (18
    )
    
    
    12004/05 constant currency basis
    
    
    446
    
    
    
    (412
    )
    
    
    34Purchased gas
    
    
    128
    
    
    
    (130
    )
    
    
    (2
    )Environmental
    
    
    
    
    
    
    26
    
    
    
    26Pension
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Other revenues and costs
    
    
    (3
    )
    
    
    (6
    )
    
    
    (9
    )2005/06 results and adjusted results
    
    
    571
    
    
    
    (524
    )
    
    
    47




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##### Table of Contents



56 National Grid plc
  Electricity Distribution
 About the business
   
 Electricity Distribution  US
     New York
 Massachusetts
   Rhode Island




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##### Table of Contents



Annual Report and Accounts 2006/07 57
  New Hampshire
   US stranded cost recoveries
   Current and future developments
  Market and regulatory developments
  Proposed acquisition of KeySpan
 Storms
   Performance during the year
  Performance
  Objective
    
    PerformanceSafety
    
    The number of employee lost time injuries in
Electricity Distribution  US increased by 36% in
2006/07 to 90, compared with 66 in 2005/06 and
81 in 2004/05. As a consequence, our lost time
injury frequency rate rose to 0.59 in 2006/07 from
0.45 in 2005/06 and 0.5 in 2004/05.Reliability
    
    The system average interruption duration for 2006/07,
being the average time the average customer is
without power during the year, was 121 minutes,
compared with a target of 115 minutes.In New England, we missed targets for reliability in
the 2006 calendar year, incurring an aggregate net
penalty of £5.8 million. We have requested that this
penalty not be levied as reliability performance was
impacted by extraordinary storms during the year.We missed targets for reliability in the 2006 calendar
year in New York, incurring an aggregate net penalty
of £4.6 million.




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##### Table of Contents



58 National Grid plc
  Objective
    
    PerformanceEfficiency
    
    We continued to advance efficiency initiatives,
including the introduction of a mobile work
management system, which equips vehicles with
computers to allow for real-time online information.Financial
    
    Adjusted operating profit was £67 million higher in
2006/07 than 2005/06 on a constant currency basis,
an increase of 23% largely driven by the recovery of
costs incurred in prior periods from the New York
deferral account. Further information is included
under financial results below.
 Safety improvements
   Reliability enhancement programme
   Growth
 Customer service
   Financial results  Electricity Distribution  US
  2007
    
    
    2006
    
    
    2005Years ended 31 March
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    3,004
    
    
    
    3,134
    
    
    
    2,633Other operating income
    
    
    
    
    
    
    2
    
    
    
    Operating costs excluding exceptional
items and remeasurements
    
    
    (2,640
    )
    
    
    (2,819
    )
    
    
    (2,291
    )Adjusted operating profit
    
    
    364
    
    
    
    317
    
    
    
    342Exceptional items
    
    
    (9
    )
    
    
    
    
    
    
    (101
    )Operating profit
    
    
    355
    
    
    
    317
    
    
    
    241
  2006/07 compared with 2005/06
  Revenueand otheroperating
    
    
    Operating
    
    
    Operatingincome
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2005/06 results and adjusted results
    
    
    3,136
    
    
    
    (2,819
    )
    
    
    317Exchange movements
    
    
    (197
    )
    
    
    177
    
    
    
    (20
    )2005/06 constant currency
    
    
    2,939
    
    
    
    (2,642
    )
    
    
    297Purchased electricity
    
    
    (16
    )
    
    
    39
    
    
    
    23Deferral account recoveries
    
    
    72
    
    
    
    
    
    
    
    72Depreciation and amortisation
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )Reliability enhancement
    
    
    
    
    
    
    (8
    )
    
    
    (8
    )Bad debts
    
    
    
    
    
    
    (11
    )
    
    
    (11
    )Pension and benefit costs
    
    
    
    
    
    
    28
    
    
    
    28Storm costs
    
    
    
    
    
    
    (43
    )
    
    
    (43
    )Other
    
    
    9
    
    
    
    6
    
    
    
    152006/07 adjusted results
    
    
    3,004
    
    
    
    (2,640
    )
    
    
    364Exceptional items
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )2006/07 results
    
    
    3,004
    
    
    
    (2,649
    )
    
    
    355




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##### Table of Contents



Annual Report and Accounts 2006/07 59
  2005/06 compared with 2004/05
  Revenueand otheroperating
    
    
    Operating
    
    
    Operatingincome
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2004/05 results
    
    
    2,633
    
    
    
    (2,392
    )
    
    
    241Add back 2004/05 exceptional items
    
    
    
    
    
    
    101
    
    
    
    1012004/05 adjusted results
    
    
    2,633
    
    
    
    (2,291
    )
    
    
    342Exchange movements
    
    
    117
    
    
    
    (102
    )
    
    
    152004/05 constant currency
    
    
    2,750
    
    
    
    (2,393
    )
    
    
    357Purchased power
    
    
    334
    
    
    
    (337
    )
    
    
    (3
    )Volume
    
    
    18
    
    
    
    
    
    
    
    18Weather
    
    
    14
    
    
    
    
    
    
    
    14Storm costs
    
    
    
    
    
    
    (13
    )
    
    
    (13
    )Depreciation and amortisation
    
    
    
    
    
    
    (7
    )
    
    
    (7
    )Pension costs
    
    
    
    
    
    
    (21
    )
    
    
    (21
    )Other
    
    
    20
    
    
    
    (48
    )
    
    
    (28
    )2005/06 results
    
    
    3,136
    
    
    
    (2,819
    )
    
    
    317
 Financial performance  US stranded cost recoveries
  2007
    
    
    2006
    
    
    2005Years ended 31 March
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    426
    
    
    
    517
    
    
    
    436Operating costs excluding exceptional
items and remeasurements
    
    
    (3
    )
    
    
    (28
    )
    
    
    29Adjusted operating profit
    
    
    423
    
    
    
    489
    
    
    
    465Remeasurements
    
    
    81
    
    
    
    (49
    )
    
    
    (38
    )Operating profit
    
    
    504
    
    
    
    440
    
    
    
    427
 2006/07 compared with 2005/06
     2005/06 compared with 2004/05




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##### Table of Contents



60 National Grid plc
  Non-regulated Businessesand other
 About the business
   Activity
    
    DescriptionMetering
    
    National Grid Metering and OnStream provide
installation, maintenance and meter reading services
to gas and electricity suppliers in the regulated and
unregulated markets.Our metering businesses provide services on behalf
of gas suppliers for an asset base of over 20 million
domestic, industrial and commercial meters.Grain LNG
    
    National Grid Grain LNG is the first new liquefied
natural gas (LNG) import terminal constructed in the
UK for some 30 years, involving planned investment
of approximately £522 million for Phases I and II.Property
    
    National Grid Property is responsible for managing
all our major occupied properties in the UK, and for
the management, clean up and disposal of surplus
properties, largely comprising former gas works.Advantica
    
    Advantica is a consultancy providing engineering and
software services to enhance safety in the gas, oil,
electricity and water sectors, primarily in the UK, US
and the Middle East.FulcrumConnections
    
    Fulcrum Connections is the leading provider of
gas connections and associated design services
operating across Great Britain.Corporateactivities
    
    This includes corporate overheads that are not
borne by individual businesses, and expenditure
incurred on business development.
 Multi-yearcontractualarrangements
    
    The majority of National Grid Meterings domestic
meters are covered by long-term contracts with
gas suppliers.OnStream has a five year contract with Centrica
for the provision of gas and electricity meters.Phase I of Grain LNG is underpinned by a long-term contract with BP/Sonatrach. Similarly, Phase II,
currently under construction, is underpinned by long-term contracts signed with Centrica, Gaz de France
and Sonatrach.Competition
    
    OnStream, Advantica and Fulcrum Connections
operate in competitive markets and their revenues
are therefore determined by how successful they
are in obtaining business from customers.Capitalinvestment
    
    We are investing to grow our metering businesses
and in infrastructure projects such as Grain LNG.Efficiency
    
    Efficiency in delivering capital programmes and
in operating our businesses and corporate activities
results in driving improved financial performance.




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Annual Report and Accounts 2006/07 61
  Current and future developments
 Metering competition investigation
  Property and environmental matters
   Performance during the year
  Performance
  Objective
    
    PerformanceSafety
    
    There was an increase in the total number of
employee lost time injuries in Non-regulated
Businesses and other operations to 15 in 2006/07
compared with 12 in 2005/06 and 10 in 2004/05.Reliability
    
    Our Non-regulated Businesses and other operations
operated reliably throughout the year.Efficiency
    
    Our Non-regulated Businesses and other operations
operated efficiently during the year.Financialperformance
    
    The financial performance of our Non-regulated
Businesses and other operations improved during
the year. However, this was more than offset by
the impact of changes in corporate insurance costs
and poorer performance from Fulcrum Connections.
Further information on financial performance is
included under financial results on page 62.
 Growth
 Investment




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##### Table of Contents



62 National Grid plc
  Financial results
  2007
    
    
    2006
    
    
    2005Years ended 31 March
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    567
    
    
    
    701
    
    
    
    734Other operating income
    
    
    71
    
    
    
    74
    
    
    
    67Operating costs excluding exceptional
items and remeasurements
    
    
    (505
    )
    
    
    (625
    )
    
    
    (649
    )Adjusted operating profit
    
    
    133
    
    
    
    150
    
    
    
    152Exceptional items
    
    
    (1
    )
    
    
    18
    
    
    
    (33
    )Operating profit
    
    
    132
    
    
    
    168
    
    
    
    119
 2006/07 compared with 2005/06
  Revenueand otheroperating
    
    
    Operating
    
    
    Operatingincome
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2005/06 results
    
    
    775
    
    
    
    (607
    )
    
    
    168Add back 2005/06 exceptional items
    
    
    
    
    
    
    (18
    )
    
    
    (18
    )2005/06 adjusted results
    
    
    775
    
    
    
    (625
    )
    
    
    150Metering
    
    
    19
    
    
    
    (13
    )
    
    
    6Property
    
    
    (20
    )
    
    
    18
    
    
    
    (2
    )Grain LNG
    
    
    11
    
    
    
    (8
    )
    
    
    3Fulcrum Connections
    
    
    (134
    )
    
    
    125
    
    
    
    (9
    )Insurance and other
    
    
    (13
    )
    
    
    (2
    )
    
    
    (15
    )2006/07 adjusted results
    
    
    638
    
    
    
    (505
    )
    
    
    1332006/07 exceptional items
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )2006/07 results
    
    
    638
    
    
    
    (506
    )
    
    
    132
 2005/06 compared with 2004/05
  Revenueand otheroperating
    
    
    Operating
    
    
    Operatingincome
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2004/05 results
    
    
    801
    
    
    
    (682
    )
    
    
    119Add back 2004/05 exceptional items
    
    
    
    
    
    
    33
    
    
    
    332004/05 adjusted results
    
    
    801
    
    
    
    (649
    )
    
    
    152Metering
    
    
    (10
    )
    
    
    38
    
    
    
    28Property
    
    
    (4
    )
    
    
    (10
    )
    
    
    (14
    )Grain LNG
    
    
    27
    
    
    
    (16
    )
    
    
    11Insurance and other
    
    
    (39
    )
    
    
    12
    
    
    
    (27
    )2005/06 adjusted results
    
    
    775
    
    
    
    (625
    )
    
    
    1502005/06 exceptional items
    
    
    
    
    
    
    18
    
    
    
    182005/06 results
    
    
    775
    
    
    
    (607
    )
    
    
    168




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##### Table of Contents



Annual Report and Accounts 2006/07 63
  Discontinued operations
 About the business
   UK wireless infrastructure
   US wireless infrastructure
  Basslink
 Performance during the year
 Performance
  Investment
  Financial results
  2007
    
    
    2006
    
    
    2005Years ended 31 March
    
    £m
    
    
    £m
    
    
    £mRevenue and other operating income
    
    
    383
    
    
    
    325
    
    
    
    211Operating costs excluding exceptional
items
    
    
    (266
    )
    
    
    (255
    )
    
    
    (169
    )Adjusted operating profit
    
    
    117
    
    
    
    70
    
    
    
    42Exceptional items
    
    
    (55
    )
    
    
    (5
    )
    
    
    (13
    )Operating profit
    
    
    62
    
    
    
    65
    
    
    
    29




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##### Table of Contents

\

64 National Grid plc
  Financial position andfinancial management
 Going concern
   Financial position
 Balance sheet
  NetAssets
    
    
    Liabilities
    
    
    assets£m
    
    
    £m
    
    
    £mProperty, plant & equipment
and non-current intangible assets
    
    
    19,039
    
    
    
    
    
    
    
    19,039Goodwill and non-current investments
    
    
    1,617
    
    
    
    
    
    
    
    1,617Current assets and liabilities
    
    
    1,344
    
    
    
    (2,094
    )
    
    
    (750
    )Other non-current assets and liabilities
    
    
    36
    
    
    
    (1,902
    )
    
    
    (1,866
    )Post-retirement obligations
    
    
    37
    
    
    
    (1,282
    )
    
    
    (1,245
    )Deferred tax
    
    
    
    
    
    
    (2,389
    )
    
    
    (2,389
    )Assets and liabilities held for sale
    
    
    1,968
    
    
    
    (450
    )
    
    
    1,518Total before net debt and held for sale
    
    
    24,041
    
    
    
    (8,117
    )
    
    
    15,924Net debt
    
    
    4,348
    
    
    
    (16,136
    )
    
    
    (11,788
    )Total as at 31 March 2007
    
    
    28,389
    
    
    
    (24,253
    )
    
    
    4,136Total as at 31 March 2006
    
    
    25,924
    
    
    
    (22,431
    )
    
    
    3,493
  Net debt and gearing
 Equity shareholders funds




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##### Table of Contents



Annual Report and Accounts 2006/07 65
  Liquidity and treasury management Cash flow  Cash flow forecasting
   Credit facilities and unutilised Commercial Paper and Medium Term Note Programmes
   Facility
    
    Amount
    
    
    StatusNational Grid plcUS commercial paper programme
    
    $3.0 billion
    
    UnutilisedNational Grid Electricity Transmission plcUS commercial paper programme
    
    $1.0 billion
    
    UnutilisedEuro commercial paper programme
    
    $1.0 billion
    
    UnutilisedNational Grid plc and National Grid Electricity Transmission plcEuro medium term note programme
    
    €12.0 billion
    
    €3.2 billionunissuedNational Grid Gas plcUS commercial paper programme
    
    $2.5 billion
    
    UnutilisedEuro commercial paper programme
    
    $1.25 billion
    
    UnutilisedNational Grid Gas plc and National Grid Gas Holdings plcEuro medium term note programme
    
    €10 billion
    
    €5.9 billionunissuedNational Grid plc and certain UK subsidiariesLong-term committed facilities
    
    £1.29 billion
    
    UndrawnShort-term committed facilities
    
    $1.5 billion
    
    UndrawnUncommitted borrowing facilities
    
    £0.9 billion
    
    UndrawnNational Grids US subsidiariesCommitted facilities
    
    $680 million
    
    UndrawnUS commercial paper programme
    
    $2.0 billion
    
    Unutilised
 Regulatory restrictions
  Treasury policy




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##### Table of Contents



66 National Grid plc
  Facility
    
    Moodys
    
    
    S&P
    
    
    FitchNational Grid plc
    
    
    Baa1/P2
    
    
    
    A-/A1
    
    
    
    A-/F2National Grid Electricity
Transmission plc
    
    
    A2/P1
    
    
    
    A/A1
    
    
    
    A/F2National Grid Holdings One plc
    
    
    
    
    
    
    A-/A1
    
    
    
    National Grid Gas plc
    
    
    A2/P1
    
    
    
    A/A1
    
    
    
    A+/ F1National Grid Gas Holdings plc
    
    
    A3
    
    
    
    A-
    
    
    
    ANational Grid USA
    
    
    P2
    
    
    
    A-/A1
    
    
    
    Niagara Mohawk Power Corp.
    
    
    Baa1
    
    
    
    A-
    
    
    
    Massachusetts Electric Co.
    
    
    P1
    
    
    
    A/A1
    
    
    
    New England Power Co.
    
    
    A1/P1
    
    
    
    A/A1
    
    
    
    
    Refinancing risk management
   Interest rate risk management
 Foreign exchange risk management




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##### Table of Contents



Annual Report and Accounts 2006/07 67
  Counterparty risk management
  Derivative financial instruments held for purposes other than trading
      Valuation and sensitivity analysis
 Commodity contracts Power purchase contracts for normal sale and purchase
  Commodity derivatives
   Commodity contracts carried at fair value




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##### Table of Contents



68 National Grid plc
  Commodity trading
 Commitments and contingencies
  2007
    
    
    2006Years ended 31 March
    
    £m
    
    
    £mFuture capital expenditure contracted
but not provided for
    
    
    1,554
    
    
    
    1,343Total operating lease commitments
    
    
    800
    
    
    
    831Power commitments
    
    
    3,731
    
    
    
    4,675Other commitments, contingencies
and guarantees
    
    
    537
    
    
    
    334
     Contractual obligations at 31 March 2007
   Less than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsContractual obligations
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mFinancial liabilitiesBorrowings
    
    
    15,937
    
    
    
    776
    
    
    
    2,878
    
    
    
    2,196
    
    
    
    10,087Interest on borrowings
    
    
    8,335
    
    
    
    686
    
    
    
    1,160
    
    
    
    950
    
    
    
    5,539Finance lease liabilities
    
    
    159
    
    
    
    17
    
    
    
    29
    
    
    
    19
    
    
    
    94Other non-interest bearing liabilities
    
    
    1,739
    
    
    
    1,525
    
    
    
    214
    
    
    
    
    
    
    
    Derivative payments
    
    
    3,242
    
    
    
    443
    
    
    
    889
    
    
    
    1,378
    
    
    
    532Derivative receipts
    
    
    (3,405
    )
    
    
    (382
    )
    
    
    (907
    )
    
    
    (1,527
    )
    
    
    (589
    )Commodity contracts
    
    
    389
    
    
    
    56
    
    
    
    93
    
    
    
    70
    
    
    
    170Other contractual obligationsCapital commitments
    
    
    1,554
    
    
    
    1,211
    
    
    
    324
    
    
    
    15
    
    
    
    4Operating leases
    
    
    800
    
    
    
    80
    
    
    
    148
    
    
    
    132
    
    
    
    440Power commitments
    
    
    3,731
    
    
    
    1,233
    
    
    
    1,118
    
    
    
    327
    
    
    
    1,053Total at 31 March 2007
    
    
    32,481
    
    
    
    5,645
    
    
    
    5,946
    
    
    
    3,560
    
    
    
    17,330




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##### Table of Contents



Annual Report and Accounts 2006/07 69
  Off balance sheet arrangements
  Details of material litigation as at 31 March 2007
   Retirement arrangements
    Net pension and other post-retirement obligations
 National Grid UK Pension Scheme
   National Grid Electricity Supply Pension Scheme
   National Grid US pension and post-retirement plans




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##### Table of Contents



70 National Grid plc
  
 Related party transactions




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##### Table of Contents



Annual Report and Accounts 2006/07 71
  Accounting policies
 Basis of accounting
   Choices permitted under IFRS
   Option
    
    Choice adoptedTransitiondate
    
    Our opening IFRS balance sheet was established
as at 1 April 2004. As a consequence goodwill
amortisation ceased on this date and we used
certain balances in our previous UK GAAP financial
statements as the basis for our opening IFRS
balance sheet.Businesscombinations
    
    Business combinations prior to 1 April 2004 were
not changed retrospectively. In particular, we retained
the use of merger accounting for the business
combination with Lattice Group.Financialinstruments
    
    We adopted IAS 39 on 1 April 2005. As a
consequence, the results for 2004/05 are presented
using different accounting policies for financial
instruments from those used for 2005/06 and 2006/07.Carrying valueof assets attransition
    
    In most cases, we used brought forward depreciated
cost, as adjusted for changes in accounting policies
to conform with IFRS, to be the opening carrying
value under IFRS.Share-basedpayments
    
    We recognised all active grants retrospectively.Cumulativetranslationdifferences
    
    We chose to measure and present cumulative
translation differences arising since 1 April 2004 only.
 Option
    
    Choice adoptedPresentationformats
    
    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
and remeasurements. Exceptional items and
remeasurements are presented on the face of
the income statement.Pensions
    
    We recognise actuarial gains and losses each year
in the statement of recognised income and expense.Joint ventures
    
    We use equity accounting for jointly controlled
entities instead of the alternative proportional
consolidation method.Capitalised
interest
    
    We capitalise interest into the cost of assets that
we construct.Capital
contributions
    
    Contributions received towards capital expenditure
are recorded as deferred income and amortised in
line with the depreciation on the associated asset.Timing of
goodwill
impairment
reviews
    
    Goodwill impairment reviews are carried out annually
in the final quarter of the financial year.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.Use of
UK GAAP or
IFRS in
individual
accounts
    
    We have not adopted IFRS, and so continue to use
UK GAAP, in the individual financial statements of
National Grid plc and of UK subsidiary companies.
 Segmental reporting




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##### Table of Contents



72 National Grid plc
  Critical accounting policies
    Estimatedasseteconomiclives
    
    The reported amounts for amortisation of intangible
fixed assets and depreciation of property, plant
and equipment can be materially affected by the
judgements exercised in determining their estimated
economic lives.Intangible asset amortisation and depreciation
of property, plant and equipment of continuing
operations amounted to £41 million and £830 million
respectively in 2006/07 (2005/06: £44 million and
£844 million, 2004/05: £39 million and £743 million).Carrying valueof assets andpotential forimpairments
    
    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. Our total assets at 31 March 2007
were £28,389 million, including £18,895 million of
property, plant and equipment, £1,480 million of
goodwill and £144 million of other intangible assets
(31 March 2006: £25,924 million including £18,935
million, £2,142 million and £321 million respectively).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.Revenueaccruals
    
    Revenue includes an assessment of energy and
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.Our estimates of unbilled revenues at 31 March
2007 amounted to £200 million in the US and
£246 million in the UK compared with £169 million
and £268 million respectively at 31 March 2006.
 Assets andliabilitiescarried atfair 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 are those 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.Hedgeaccounting
    
    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 affect 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 the statement of
recognised income and expense or by being offset
by adjustments to the carrying value of debt.Pensionsand otherpost-retirementbenefit plans
    
    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, length
of service and pension and investment returns,
together with the use of a discount rate based on
corporate bond yields to calculate the present value
of the obligation.The selection of 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.Assets heldfor sale anddiscontinuedoperations
    
    At 31 March 2007, the planned exit of our wireless
infrastructure operations in the UK and the US and our
interconnector in Australia were considered to meet
the criteria to be classified as assets held for sale.At 31 March 2005, the planned sales of four of our
regional gas distribution networks did not meet the
criteria to be classified as assets held for sale. On
1 May 2005, these criteria were met and the assets
and liabilities of these businesses were classified as
assets held for sale and depreciation ceased from
that date until their disposal on 1 June 2005.The results of these operations have been classified
as discontinued operations and the comparatives
reflect this accordingly.The determination of the date that the planned sales
met the criteria to be classified as assets held for
sale is a matter of judgement by management, with
consequential impact on balance sheet presentation
and the amount recorded for depreciation in the
results of the discontinued operations.




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Annual Report and Accounts 2006/07 73
  Exceptionalitems andremeasure-ments
    
    Exceptional items and remeasurements are items
of income and expenditure 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,
material changes in environmental or decommissioning
provisions, integration of acquired businesses and
gains or losses on disposals of businesses or
investments. 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.Provisions
    
    Provisions are made for liabilities that are uncertain
in estimate. These include provisions for the cost
of environmental restoration and remediation, the
decommissioning of nuclear facilities that we no
longer own but still have a responsibility to contribute
towards, 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 the impact
of discounting is significant. The total costs and
timing of cash flows relating to environmental and
decommissioning liabilities are based on
management estimates supported by the use of
external consultants.At 31 March 2007, we have recorded provisions
totalling £594 million (2006: £771 million), including
£372 million and £70 million (2006: £429 million and
£127 million) in respect of environmental liabilities
and nuclear decommissioning respectively.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. Our estimates and
assumptions may differ from future events.
  Useful asseteconomic lives
    
    An increase in the useful economic lives of assets
of one year on average would reduce our annual
depreciation charge on property, plant and
equipment by £44 million (pre-tax) and our annual
amortisation charge on intangible assets by
£7 million (pre-tax).Revenueaccruals
    
    A 10% change in our estimate of unbilled revenues
at 31 March 2007 would result in an increase or
decrease in our recorded net assets and profit for
the year by approximately £29 million net of tax.Assets carriedat fairvalue
    
    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 £23 million and
£27 million respectively.
 Hedgeaccounting
    
    If the gains and losses arising on derivative financial
instruments during the year ended 31 March 2007
had not achieved hedge accounting then the profit
for the year would have been £246 million higher
than that reported net of tax and net assets would
have been £83 million lower.Pensions
    
    Our pension and post-retirement obligations are
sensitive to the actuarial assumptions used. A 0.1%
reduction 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 an increase in
the net obligation of £260 million, £139 million and
£557 million and an increase in the annual pension
cost of £4 million, £8 million and £4 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 net assets of
approximately £40 million.
 Accounting developments
 Accounting standards and interpretations adopted in 2006/07
  Leases
    
    International Financial Reporting Interpretations
Committee (IFRIC) 4 on leases provides guidance
on determining when other forms of contractual
arrangements should also be accounted for as leases.Financialinstruments
    
    Amendments to IAS 39, IFRS 4, and IAS 21 allow
for financial liabilities to be designated as fair value
through profit and loss in certain circumstances,
for certain financial guarantees to be recorded in
the balance sheet at their fair value and permitted
inter-company exchange gains and losses to be
taken to equity reserves on consolidation in certain
circumstances.Otherinterpretations
    
    IFRIC 5, IFRIC 6 and IFRIC 7 contain guidance on
accounting for decommissioning, restoration and
environmental funds, for waste electrical and
electronic equipment and for subsidiaries in
hyperinflationary economies.
 Forthcoming changes in IFRS
  Segmentreporting
    
    IFRS 8 on segment reporting changes the
requirements for segmental reporting. Assuming that
it is adopted by European Union, it will apply with
effect from 1 April 2009. If IFRS 8 had been adopted
in 2006/07, there would have been no change in
business segments reported. However, we would
not have had to report on geographical segments.Serviceconcessions
    
    IFRIC 12 on service concessions, effective from
1 April 2008, requires assets operated on behalf of
a public authority as a concession, where the asset
reverts back to the public authority at the conclusion
of the arrangement, to be recognised as a financial
or intangible asset depending on whether income is
recovered from the public authority or from users.
This is not expected to affect the majority of our
assets and liabilities. However, we have not yet
completed our assessment of this interpretation
and so it is possible that there may be an impact
on our assets and liabilities as a consequence of
the adoption of this interpretation.




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74 National Grid plc
  Borrowingcosts
    
    An amendment of IAS 23 on borrowing costs will
require interest to be capitalised into the cost of
assets we construct. We already adopt this policy
and so this will have no impact.Otherinterpretations
    
    IFRIC 8, IFRIC 9, IFRIC 10 and IFRIC 11 contain
guidance on accounting for share-based exchange
transactions, embedded derivatives, impairments
in half yearly reports and share-based payments.
These interpretations are not expected to have a
material impact on our results, assets or liabilities.
 US GAAP reporting
 Overview
  Results and financial position under US GAAP
 Businesscombinationwith LatticeGroup
    
    The application of then prevailing UK GAAP to the
business combination with Lattice Group plc in
2002/03 resulted in the transaction being treated as
a merger, and merger accounting has been retained
under IFRS. Under US GAAP, purchase accounting
was applied rather than merger accounting, with
Lattice Group plc considered to be the acquired entity.Unlike IFRS, our results under US GAAP include the
results of Lattice Group plc from 21 October 2002,
the date of the business combination, and not prior
to that date.The recognition of Lattice Group plcs assets and
liabilities at fair value under US GAAP resulted in
£3,824 million of goodwill being recognised. The
assets acquired included the four regional gas
distribution networks that were disposed of in
2005/06. The higher book value of these assets
under US GAAP resulted in a significantly lower
gain in 2005/06 (by some £2 billion) recognised on
disposal under US GAAP as compared with IFRS.Regulatoryassets
    
    These assets are recorded in the US GAAP balance
sheet in accordance with the principles of Statement
of Financial Accounting Standards (SFAS) 71
on accounting for the effects of certain types of
regulation. SFAS 71 provides that certain costs may
be deferred on the balance sheet (referred to as
regulatory assets) if it is probable that the costs will
be recovered through future increases in regulated
revenue rates. An entity applying SFAS 71 does not
need absolute assurance prior to capitalising a cost,
only reasonable assurance. If the principles of SFAS
71 were not applicable, it is likely that this would
result in the full or partial non-recognition of these
regulatory assets and thereby materially alter the
view given by the accounts.The total carrying value of regulatory assets,
under US GAAP, at 31 March 2007 amounted
to £2,880 million (2006: £3,051 million, 2005: £3,350 million).Derivatives
    
    Under US GAAP, all derivatives are recorded at fair
value except those that qualify for exemptions, such
as normal purchase rules for commodity contracts.
Changes in fair values of derivatives not designated
as a hedge under US GAAP are recorded through
earnings. We apply a hedging strategy in accordance
with IFRS requirements, however, many of these
hedges do not meet the requirements to achieve
hedge accounting under US GAAP. This results in
a much greater volatility in the US GAAP income
statements. Under IFRS, the Company did not adopt
IAS 39 until 1 April 2005 and, therefore, did not
record derivatives at fair value in the year ended
2004/05. Upon adoption of IAS 39, the Company
recorded its outstanding derivatives at fair value and
took advantage of certain transition accommodations
that allowed for hedge accounting. These transition
alternatives were not available under US GAAP.Pensions
    
    Differences exist in the measurement of pension
obligations, plan assets, and periodic pension
expense. The primary difference is that under US
GAAP, we include actuarial gains and losses as a
component of periodic pension expense while, under
IFRS, these items are recorded directly to equity
reserves and are not recycled through the income
statement. Differences in key assumptions used to
measure plan assets and obligations also create
differences.




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Annual Report and Accounts 2006/07 75
  New US accounting pronouncements adopted during 2006/07
  Pensions
    
    SFAS 158 on pensions accounting was adopted on
31 March 2007. It requires deferred actuarial gains
and losses in respect of defined benefit pension
plans and other post-retirement benefits previously
recorded in the balance sheet to instead be recorded
initially within accumulated other comprehensive
income within equity. Subsequently, actuarial gains
and losses are recycled out of other comprehensive
income and into the income statement using the
same basis as deferred gains and losses were
previously amortised from the balance sheet.On adoption on 31 March 2007, net assets under
US GAAP increased by £51 million, comprising an
increase in pension and other post-retirement benefit
obligations of £196 million, a derecognition of
intangibles of £41 million more than offset by the
recognition of regulatory assets of £274 million and
net tax of £14 million. As a consequence, the
differences reported between IFRS and US GAAP in
respect of these items reduced by the same amount.There was no change in the amounts reported in
the income statement under US GAAP, nor in the
amounts recorded within other comprehensive
income with respect to the accumulated minimum
pension obligation during 2006/07, 2005/06 and 2004/05.
  Share-basedpayments
    
    SFAS 123(R) was adopted on 1 April 2006. It
requires all share-based payments to employees,
including grants of employee stock options, to be
recognised in the income statement based on their
fair values. Pro forma disclosure is no longer an
alternative. SFAS 123(R) is similar to our existing
accounting treatment under IFRS in accordance
with IFRS 2, and to the method previously adopted
under SFAS 148.Carryingvalue ofinventories
    
    SFAS 151 was adopted on 1 April 2006, clarifying
that abnormal amounts of idle facility expense,
freight, handling costs and wasted materials
(spoilage) should be recognised as current period expense.Exchanges ofnon-monetaryassets
    
    SFAS 153 was adopted on 1 April 2006. It removed
an exemption which previously permitted exchanges
of similar productive assets to be accounted for at
the carrying value of the assets relinquished. All non-
monetary transactions subsequent to 1 April 2006
(apart from those without commercial substance)
must be recorded at fair value.Errors andchanges inaccountingpolicies
    
    SFAS 154 was adopted on 1 April 2006. It requires
retrospective application to comparative financial
statements for material errors and for changes in
accounting principle that occur subsequent to that
date, other than where (as in the case of SFAS 158
above) a new standard requires a different treatment.
 Forthcoming US pronouncements not yet adopted
  Uncertain taxpositions
    
    FASB Interpretation No. (FIN) 48 on uncertain tax
positions is an interpretation of SFAS 109 on
accounting for taxes and seeks to reduce the
diversity of the reporting of uncertain tax positions
so that these can be more easily compared. The
interpretation also requires qualitative and quantitative
disclosures, including discussion of reasonably
possible changes that might occur in unrecognised
tax benefits over the following 12 months, a
description of open tax years by major jurisdiction,
and a roll-forward of all unrecognised tax benefits.FIN 48 is effective for financial years beginning after
15 December 2006 and any impact of adopting it will
be reported as an adjustment to the opening balance
of retained earnings in the year of adoption. We are
currently evaluating the impact, if any, that FIN 48
will have on our results and financial position under
US GAAP.Hybridfinancialinstruments
    
    SFAS 155 provides a fair value measurement option
for certain hybrid financial instruments, which allows
the recording of an entire financial instrument at fair
value rather than accounting for the host instrument
and the embedded derivative separately. SFAS 155
is effective for financial years beginning after
15 September 2006.Fair valuemeasurement
    
    SFAS 157 seeks to increase the consistency and
comparability of fair value estimates. This statement
defines fair value, establishes a consistent
framework for measuring fair value where other
pronouncements require or permit it and also
expands disclosure about fair value measurements.
This statement does not require any new fair value
measurements.SFAS 157 is effective for financial years beginning
after 15 November 2007. We are currently evaluating
the impact, if any, that SFAS 157 will have on
our reported financial results and position under
US GAAP.Fair valueoption
    
    SFAS 159 permits an entity to choose to designate
certain financial instruments to be recorded at their
fair value through profit and loss and is effective for
financial years beginning after 15 November 2007.
This standard is similar to certain amendments to
IFRS adopted by National Grid in 2006/07 which did
not have a material impact on our financial results or
position as we have not chosen to use this option
under IFRS.




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76 National Grid plc
  Independent Verifiers Report onCorporate Responsibility
  1
   2
  1.
    
    Interviews with a selection of National Grid executives
and senior managersto understand the current status of
Corporate Responsibility (CR) activities and progress made
during the reporting period.2.
    
    Visits to National Grid offices in the US and the UK and
operations at the Isle of Grain, Milford Haven and Landulph
site, Cornwallto review the systems and processes in place
for managing and reporting on CR activities and to review
evidence in support of claims made in the Report regarding
National Grids CR performance.3.
    
    Review of selected corporate level documentsto assess
management awareness of performance against non-financial
policy commitments and test the coverage of the Report.4.
    
    Review of stakeholder engagement activities,including
engagement with the socially responsible investment
community, regulators and communities.5.
    
    Review of a selection of external media reportsrelating
to CR aspects of National Grids performance, as a check
on the scope and appropriateness of statements made in
the Report.6.
    
    Review of social investment, employee and health,
safety and environmental (HSE) data samples and
processesto assess whether they have been collected,
consolidated and reported appropriately at corporate level
and at the business level.7.
    
    Test the consistency of the claims made in the Report
regarding National Grids CR performance against the
evidence obtained through our work.
 1
    
    AA1000AS  AA1000 assurance standard from the Institute of Social and Ethical Accountability.2
    
    ISAE3000  International Federation of the Accountants International Standard for
Assurance Engagements Other Than Audits or Reviews of Historical Financial Information.
 Materiality
 Completeness
 n
    
    We are not aware of any material issues excluded from National Grids judgements on the content of the Report.n
    
    We are not aware of any misstatements in the assertions made by National Grid
management in the Report regarding CR activities.
 HSE, Social Investment and Employee Data
 n
    
    We are not aware of any material reporting units that have been excluded from the
Company wide data relating to the topics above.n
    
    Nothing has come to our attention that causes us to believe that the data relating
to the above topics has not been collated properly from information reported at operations level.n
    
    We are not aware of any errors that would materially affect the data as presented in the Report.
 Responsiveness
 n
    
    With the exception of the issue highlighted in relation to Materiality, we are not
aware of any additional issues of stakeholder interest that are not currently included in
the Reports scope and content.
     Ernst & Young LLP




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Annual Report and Accounts 2006/07 77
  Corporate Governance
  Name
    
    Attendance*ChairmanSir John Parker
    
    11 of 11Chief ExecutiveSteve Holliday (Chief Executive from 1 January 2007)
    
    11 of 11Roger Urwin (to 31 December 2006)
    
    9 of 9Executive DirectorsSteve Lucas
    
    11 of 11Nick Winser
    
    11 of 11Mark Fairbairn (from 1 January 2007)
    
    2 of 2Edward Astle
    
    11 of 11Mike Jesanis (to 31 December 2006)
    
    5 of 9Non-executive DirectorsKen Harvey (Senior Independent Director)
    
    10 of 11Linda Adamany (from 1 November 2006)
    
    5 of 5John Allan
    
    7 of 11John Grant (to 31 July 2006)
    
    3 of 3Paul Joskow
    
    10 of 11Stephen Pettit
    
    10 of 11Maria Richter
    
    11 of 11George Rose
    
    10 of 11
 *
    
    Attendance is expressed as number of meetings attended out of number eligible to
attend




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78 National Grid plc
  
 Board performance
    
    Committees' performancen
    
    Chairman
    
    n
    
    Membership and attendancen
    
    Chief Executive*
    
    
    
    (including internal attendance,n
    
    Non-executive Directors
    
    
    
    external advice)n
    
    Board size, composition,
induction and training
    
    n
    
    Chairmanshipn
    
    Board governance
    
    n
    
    Terms of reference(including interactions with
other Committees)n
    
    Board performance (including
contribution to, participation in
and communication of strategy)
    
    n
    
    Role and structure
(including fulfilment of role)n
    
    Operation (including papers,
presentations, meeting
    
    n
    
    Operations (including meeting
scheduling, frequency)scheduling, frequency)
    
    n
    
    Papers and presentationsn
    
    Performance evaluation
(effectiveness of process)
 *
    
    This section of the Board survey was not completed to allow time for the Board to
assess the performance of the new Chief Executive during 2007 given his appointment in
January 2007
  n
    
    considering additional development areas for Directors as appropriate;




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##### Table of Contents



Annual Report and Accounts 2006/07 79
  n
    
    producing templates and guidance for Board and Committee papers and presentations
to ensure information presented is clear and relevant; andn
    
    devoting additional time to debating long term succession plans, particularly in
relation to the Non-executive Directors (a number of whom, in two to three years time,
approach the nine year independence service limit outlined in the Combined Code), as a
result of recent appointments to and resignations from the Board and the
planned acquisition of KeySpan.
  n
    
    reviewing and revising the Companys core values;n
    
    reviewing and revising the structure of Executive Committee meetings and relevant paperwork; andn
    
    arranging additional site visits for Non-executive Directors between scheduled Board meetings.
    n
    
    corporate governance;n
    
    strategy and finance, such as the proposal to acquire KeySpan, and approval of the budget and business plan;n
    
    Director and employee issues such as Director succession planning (with input and
recommendations from the Nominations Committee); andn
    
    listing requirements such as dividend approval and recommendation and approval of
results announcements and the Annual Report and Accounts.
  n
    
    safety, health and the environment;n
    
    financial status of the Company;n
    
    operational headlines from the Companys businesses plus a detailed update from
one of the lines of business on a rotating basis;n
    
    update on business development and strategy implementation;n
    
    update on external matters affecting the Company; andn
    
    report from the Company Secretary & General Counsel including an update on the
administration and governance of the Company and its businesses.
 The Board has delegated authority to its Committees to carry
out certain tasks as defined in the Committees terms of
reference, which have been agreed by the Board and are
available on our website. These comprise the Audit, Executive,
Finance, Nominations, Remuneration and Risk & Responsibility
Committees. By delegating authority for the consideration of
policy and oversight of specific items to these Committees, the
Board ensures these items are given appropriate attention in
terms of both time and priority. To keep the Board appraised of
Committee activities, Committee chairmen provide a summary of
the issues discussed and decisions taken at the Board meeting
immediately following a Committee meeting. Draft minutes of
Committee meetings are circulated to Directors once available.
 Audit Committee
 Name
    
    Attendance*George Rose (chairman)
    
    4 of 4Linda Adamany (from 1 November 2006)
    
    2 of 2John Allan
    
    3 of 4John Grant (to 31 July 2006)
    
    1 of 1Ken Harvey (1 August to 31 October 2006)
    
    1 of 1Maria Richter
    
    4 of 4
 *
    
    Attendance is expressed as number of meetings attended out of number eligible
to attend
    n
    
    monitoring and reviewing the effectiveness of internal audit
activities and the appointment of the Corporate Director
of Audit;n
    
    making recommendations to the Board regarding the
appointment of the external auditors and oversight of
the external auditors;n
    
    reviewing the effectiveness of the Companys financial
reporting and internal control policies;n
    
    monitoring Sarbanes-Oxley compliance;n
    
    whistleblowing and complaints procedures;n
    
    monitoring risk and compliance management and reviewing
specific risks such as those associated with the acquisition
of KeySpan;n
    
    receiving reports from the Business Separation Compliance Officer, as required
under National Grid Gas plcs gas transporter licences; andn
    
    reviewing results statements and the Companys Annual Report and Accounts before
publication and making appropriate recommendations to the Board following review.




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80 National Grid plc
  Executive Committee
 Name
    
    Attendance*Steve Holliday (chairman from 1 September 2006)
    
    11 of 11Edward Astle
    
    11 of 11Mark Fairbairn (from 19 October 2006)
    
    5 of 5Steve Lucas
    
    11 of 11Nick Winser
    
    10 of 11Roger Urwin (to 31 December 2006, chairmanto 31 August 2006**)
    
    5 of 8Mike Jesanis (to 31 December 2006)
    
    6 of 8Helen Mahy, Company Secretary & General Counsel
    
    11 of 11
 *
    
    Attendance is expressed as number of meetings attended out of number eligible to
attend**
    
    In accordance with the handover of responsibilities plan
   n
    
    reviewing reports of the financial, operational, safety and environmental
performance of the Company and its businesses;n
    
    developing and implementing strategy, subject to Board approval;n
    
    monitoring the Companys businesses through the receipt and consideration of regular reports;n
    
    approving expenditure under the specific authority delegated to it by the Board; andn
    
    approving changes to the Non-executive Directors remuneration after taking appropriate external advice.
 Finance Committee
 Name
    
    Attendance*Paul Joskow (chairman)
    
    6 of 6Steve Holliday (from 1 January 2007)
    
    1 of 2Steve Lucas
    
    6 of 6Stephen Pettit
    
    6 of 6Maria Richter
    
    6 of 6Roger Urwin (to 31 December 2006)
    
    4 of 4
 *
    
    Attendance is expressed as number of meetings attended out of number eligible to
attend
 n
    
    granting authority for investment and funding decisions, including the funding of
the planned acquisition of KeySpan;n
    
    setting and reviewing treasury management guidelines and policy;n
    
    granting authority for parent and subsidiary companies to enter into guarantees
and indemnities under the specific authority delegated to it by the Board;n
    
    receiving updates on taxation;n
    
    insurance renewal strategy; andn
    
    receiving updates on pension schemes and recommending action to the Board as appropriate.
 Nominations Committee
 Name
    
    Attendance*Sir John Parker (chairman)
    
    6 of 6John Grant (to 31 July 2006)
    
    1 of 1Ken Harvey
    
    6 of 6Paul Joskow
    
    5 of 6George Rose
    
    5 of 6
 *
    
    Attendance is expressed as number of meetings attended out of number eligible to
attend
   n
    
    recommending individuals for appointment to the Board following the procedures
laid down by the Board in conjunction with the Nominations Committee, including the
appointments during the year of Linda Adamany (Non-executive Director) and Mark Fairbairn
(Executive Director);n
    
    reviewing the size of the Board, its structure and composition, including
considering Board members independence (where appropriate), skills and experience to
ensure these remain relevant to National Grid;n
    
    considering the external commitments of all Directors, to ensure it is satisfied
that these do not conflict or interfere with their duties as Directors of the Company;n
    
    reviewing and refreshing the membership of Board Committees, particularly
following the appointment of new Directors to the Board;n
    
    considering succession planning for Board members, noting that during the year
this focused on the smooth transition of responsibilities to the new Chief Executive;n
    
    development and succession plans for senior management, as developed by the Chief
Executive and the Group Human Resources Director; andn
    
    Board and Committee performance evaluation.




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Annual Report and Accounts 2006/07 81
  Remuneration Committee
 Name
    
    Attendance*John Allan (chairman)
    
    8 of 9**John Grant (to 31 July 2006)
    
    3 of 3Ken Harvey
    
    9 of 9Stephen Pettit
    
    9 of 9George Rose
    
    6 of 9
 *
    
    Attendance is expressed as number of meetings attended out of number eligible to
attend**
    
    John Grant acted as chairman for the meeting that John Allan was unable to attend
   n
    
    development of policy on Executive Director remuneration;n
    
    determination of remuneration, including bonuses and personal targets, for
Executive Directors and certain senior management personnel; andn
    
    establishment of employee share schemes, including the introduction of the
Deferred Share Plan.
   Risk & Responsibility Committee
 Name
    
    Attendance*Stephen Pettit (chairman)
    
    3 of 4**Linda Adamany (from 1 November 2006)
    
    2 of 2Ken Harvey
    
    4 of 4Maria Richter
    
    4 of 4
 *
    
    Attendance is expressed as number of meetings attended out of number eligible to
attend**
    
    Ken Harvey acted as chairman for the meeting that Stephen Pettit was unable to
attend
 n
    
    the environmental impact of the Company, including climate change;n
    
    non-financial risks to the Company, including pandemic planning;n
    
    regular updates on the safety, health and environmental performance of the Company and its businesses;n
    
    inclusion and diversity initiative updates;n
    
    reviewing safety, health and environmental audit plans and the outcome of such audits; andn
    
    regular updates on business conduct issues raised in the businesses and the
outcome of any subsequent investigations.
  n
    
    an investment recovery facility in Syracuse; andn
    
    a gas repair site in London.
    n
    
    the design, establishment, monitoring and review of disclosure
controls and other procedures to ensure information
required to be disclosed is recorded, processed,
summarised and reported accurately and on a timely
basis and that information is accumulated and
communicated to management in such a way as to allow
timely decisions regarding such disclosures;n
    
    reviewing and considering the preparation of key disclosure statements including
but not limited to the Companys Annual Report and Accounts, Annual Review, Regulatory
News Service announcements in the UK (and US equivalents), press releases containing
financial information, information about material acquisitions or dispositions such as the
acquisition of KeySpan, presentations to holders of debt and equity securities, analysts,
rating agencies and lenders; andn
    
    reporting as necessary to the Board, the Audit Committee and the Executive
Committee all relevant information with respect to the preparation of disclosure
statements and the evaluation of the effectiveness of National Grids disclosure controls.




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82 National Grid plc
  
 n
    
    the receipt of a Letter of Assurance from the Chief Executive, which consolidates
key matters of interest raised through the year-end assurance process;n
    
    assurance from its Committees as appropriate, with particular reference to the
reports received from the Audit and Risk & Responsibility Committees on the reviews
undertaken by them at their respective Committee meetings; andn
    
    assurances in relation to the Companys Sarbanes-Oxley certifications, required as
a result of the Companys New York Stock Exchange listing.
  Sarbanes-Oxley




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##### Table of Contents



Annual Report and Accounts 2006/07 83
  n
    
    different tests of independence for Board members are applied under the Combined
Code and Section 303A;n
    
    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; andn
    
    while the Company reports compliance with the Combined Code in each Annual Report
and Accounts, there is no requirement to adopt and disclose separate corporate governance
guidelines.




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##### Table of Contents



84 National Grid plc
 
  Our risk management process has identified the
following risk factors that could have a material
adverse effect on our business, financial condition,
results of operations and reputation, as well as the
value and liquidity of our securities. Not all of
these factors are within our control. In addition,
other factors besides those listed below may have an
adverse effect on National Grid. Any investment
decision regarding our securities and any
forward-looking statements made by us should be
considered in the light of these risk factors and the
cautionary statement set out on the inside back cover. Changes in law or regulation in the geographies
in which we operate could have an adverse effect
on our results of operations.
  Breaches of, or changes in, environmental or health
and safety laws or regulations could expose us to
claims for financial compensation and
adverse regulatory consequences, as well as damaging
our reputation.
  Network failure or the inability to carry out critical
non-network operations may have significant adverse
impacts on both our financial position and our
reputation.
 Our results of operations depend on a number of
factors relating to business performance including
performance against regulatory targets, recovery of
incurred expenditure and the delivery of
anticipated cost and efficiency savings.
  Business development activity, including
acquisitions and disposals, may be based on
incorrect assumptions or conclusions; significant
liabilities may be overlooked or there may be
other unanticipated or unintended effects.




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##### Table of Contents



Annual Report and Accounts 2006/07 85
  Changes to the regulatory treatment of commodity
costs may have an adverse effect on the results
of operations.
  Our reputation may be harmed if consumers of energy
suffer a disruption to their supply even if this
disruption is outside our control.
  Fluctuations in exchange rates, interest rates and
commodity price indices, in particular in the US
dollar, could have a significant impact on our
results of operations because we have substantial
business interests in the US and because of the
significant proportion of our borrowings, derivative
financial instruments and commodity
contracts that may potentially be affected by such
fluctuations.
  The nature and extent of our borrowings means that
an increase in interest rates could have an adverse
impact on our financial position and business
results.
 Our financial position may be adversely
affected by a number of factors including
restrictions in borrowing and debt arrangements,
changes to credit ratings and effective tax rates.
  Future funding requirements of our pension schemes
could adversely affect our results of operations.
  New or revised accounting standards, rules and
interpretations by the UK, US or international
accounting standard setting boards and other relevant
bodies could have an adverse effect on our reported
financial results.




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##### Table of Contents



86 National Grid plc
  Directors Report
 for the year ended 31 March 2007
  
 Research and development     17 43




---



##### Table of Contents



Annual
Report and Accounts
2006/07 87
  Employees
 % ofissuedsharecapitalLegal and General Investment Management Ltd
    
    
    4.12Fidelity International Limited
    
    
    3.06
     Helen Mahy




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##### Table of Contents



88 National Grid plc
  Directors Remuneration Report
  John Allan
 n
    
    Deloitte & Touche LLP, independent remuneration advisors. They also provide
taxation and financial advice to the Company;n
    
    Alithos Limited, provision of Total Shareholder Return calculations for the
Performance Share Plan and Executive Share Option Plan;n
    
    Linklaters, advice relating to Directors service contracts as well as providing
other legal advice to the Company; andn
    
    Mercer Human Resource Consulting Limited, advice relating to pension taxation
legislation. They also provide general advice with respect to human resource issues across
the Company.
   n
    
    total rewards should be set at levels that are competitive in the relevant market;n
    
    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 personal 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;n
    
    for higher levels of performance, rewards should be substantial but not excessive;
andn
    
    incentive plans, performance measures and targets should be stretching and aligned
as closely as possible with shareholders interests.




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##### Table of Contents



Annual Report and Accounts 2006/07 89
  Executive Directors remuneration
 n
    
    salary;n
    
    annual bonus including the Deferred Share Plan;n
    
    long-term incentive, the Performance Share Plan;n
    
    all-employee share plans;n
    
    pension contributions; andn
    
    non-cash benefits.
 Salary
 Annual bonus including the Deferred Share Plan (DSP)
  Level of performance achieved in 2006/07Financial measures
    
    as determined by the Remuneration CommitteeCompany targets
    
    Divisional targetsAdjusted EPS
    
    StretchCash flow
    
    StretchOperating profit
    
    
    
    Between Target
and Stretch (i)Cash flow
    
    
    
    Stretch (ii)Earnings
    
    
    
    Between Threshold
and Target (iii)
 (i)
    
    Except Transmission, where Stretch performance was achieved.(ii)
    
    Except Transmission, where between Target and Stretch performance was achieved.(iii)
    
    US Distribution financial measure only.
 Long-term incentive  Performance Share Plan (PSP)




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##### Table of Contents



90 National Grid plc
  Ameren Corporation
    
    Iberdrola SAAWG plc
    
    International Power plcCentrica plc
    
    Kelda Group plcConsolidated Edison, Inc.
    
    Pennon Group plcDominion Resources, Inc.
    
    RWE AGE.ON AG
    
    Scottish Power plcElectrabel SA
    
    Scottish & Southern Energy plcEndesa SA
    
    Severn Trent plcEnel SpA
    
    The Southern Company, Inc.Exelon Corporation
    
    Suez SAFirstEnergy Corporation
    
    United Utilities plcFPL Group, Inc.
    
    Viridian Group plcGas Natural SDG SA
 Executive Directors remuneration package




---



##### Table of Contents



Annual Report and Accounts 2006/07 91
  All-employee share plans
 n
    
    Sharesave: Employees resident in the UK, including UK-based Executive Directors,
are eligible to participate in HM Revenue and 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 the scheme.n
    
    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
taken 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.n
    
    US Incentive Thrift Plans: Employees resident in the US, (including US-based
Executive Directors), are eligible to participate in the Thrift Plans, tax-advantaged
savings plans (commonly referred to as 401(k) plans) provided for employees of National
Grids US companies. These are defined contribution pension plans that give participants
the opportunity to invest a maximum of 50% of salary (pre-tax) and/or up to 15% of salary
(post-tax) up to applicable Federal salary limits (US$220,000 for calendar year 2006 and
US$225,000 for 2007). The Company then matches 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. Employees may invest their own and Company contributions in
National Grid shares or various mutual fund options.
 Pensions
 Non-cash benefits
 Flexible Benefits Plan
  Share ownership guidelines
 Share dilution through the operation of share-basedincentive plans




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##### Table of Contents



92 National Grid plc
  Executive Directors service contracts
 Date of contract
    
    Notice periodExecutive DirectorsSteve Holliday
    
    1 April 2006
    
    12 monthsRoger Urwin (i)
    
    17 November 1995
    
    12 monthsSteve Lucas
    
    13 June 2002
    
    12 monthsNick Winser
    
    28 April 2003
    
    12 monthsMark Fairbairn (ii)
    
    23 January 2007
    
    12 monthsEdward Astle
    
    27 July 2001
    
    12 monthsMike Jesanis (iii)
    
    8 July 2004
    
    12 months
 (i)
    
    Roger Urwin left the Board on 31 December 2006.(ii)
    
    Mark Fairbairn was appointed to the Board on 1 January 2007.(iii)
    
    Mike Jesanis left the Board on 31 December 2006.
 External appointments and retention of fees
 Company
    
    Retained fees (£)Executive DirectorsSteve Holliday
    
    Marks and Spencer Group plc
    
    
    
    60,000Roger Urwin
    
    Utilico Investment Trust plc (i)
    
    
    
    16,500Alfred McAlpine plc (ii)
    
    
    
    17,000Steve Lucas
    
    Compass Group PLC
    
    
    
    70,000
 (i)
    
    Fees paid for the period 1 April 2006 to 31 December 2006.(ii)
    
    Fees paid for the period 1 September 2006 to 31 December 2006.
 Non-executive Directors remuneration
 Non-executive Directors letters of appointment
 Date of letter
    
    End of periodof appointment
    
    of appointmentNon-executive DirectorsSir John Parker
    
    27 March 2007
    
    2009 AGMKen Harvey
    
    27 March 2007
    
    2009 AGMLinda Adamany (i)
    
    20 October 2006
    
    2007 AGMJohn Allan
    
    3 November 2005
    
    2008 AGMPaul Joskow
    
    3 November 2005
    
    2008 AGMStephen Pettit
    
    27 March 2007
    
    2009 AGMMaria Richter
    
    30 September 2003
    
    2007 AGMGeorge Rose
    
    27 March 2007
    
    2009 AGM
 (i)
    
    Linda Adamany was appointed to the Board on 1 November 2006.




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##### Table of Contents



Annual Report and Accounts 2006/07 93
  Remuneration outcomes during the year ended 31 March 2007
  1.
Directors emoluments
 Year endedTable 1A
    Year ended 31 March 2007
    
    
    31 March2006Benefits
    
    
    BenefitsAnnual
    
    
    in kind (i)
    
    
    in kind (i)
    
    
    TerminationSalary
    
    
    bonus
    
    
    (cash)
    
    
    (non-cash)
    
    
    payments
    
    
    Total
    
    
    Total£000s
    
    
    £000s
    
    
    £000s
    
    
    £000s
    
    
    £000s
    
    
    £000s
    
    
    £000sExecutive DirectorsSteve Holliday (ii)
    
    
    656
    
    
    
    617
    
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    1,292
    
    
    
    870Roger Urwin (iii)
    
    
    648
    
    
    
    716
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    1,387
    
    
    
    1,518Steve Lucas (iv)
    
    
    472
    
    
    
    426
    
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    928
    
    
    
    848Nick Winser
    
    
    420
    
    
    
    372
    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    806
    
    
    
    771Mark Fairbairn (iv) (v)
    
    
    100
    
    
    
    84
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    189
    
    
    
    Edward Astle (iv)
    
    
    420
    
    
    
    406
    
    
    
    12
    
    
    
    9
    
    
    
    
    
    
    
    847
    
    
    
    759Mike Jesanis (vi)
    
    
    411
    
    
    
    276
    
    
    
    7
    
    
    
    11
    
    
    
    1,377
    
    
    
    2,082
    
    
    
    874Total
    
    
    3,127
    
    
    
    2,897
    
    
    
    19
    
    
    
    111
    
    
    
    1,377
    
    
    
    7,531
    
    
    
    5,640
 (i)
    
    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.(ii)
    
    Steve Hollidays salary was £600,000 from 1 April 2006 to 31 December 2006 while in the role of
Deputy Chief Executive and was increased to £825,000 with effect from 1 January 2007 on appointment to Chief Executive.(iii)
    
    Roger Urwins annual salary on leaving was £820,000. The figure above is a pro-rated salary
for nine months and includes £33,000 in lieu of outstanding annual leave entitlement. He did not
receive additional severance payments.(iv)
    
    These Executive Directors participate in the 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:
Steve Lucas £7,944, Mark Fairbairn £12.51 and Edward Astle £16.68.(v)
    
    Mark Fairbairn was appointed to the Board on 1 January 2007.(vi)
    
    Mike Jesanis ceased employment on 31 December 2006. On leaving, he received £65,000 (included
in the salary figure above) in lieu of outstanding annual leave entitlement. He received a
pro-rated bonus of £276,000 on leaving and £1,377,000 with respect to termination payments (which
includes legal costs). In addition, he received £340,000 with respect to a consultancy arrangement.
This arrangement will cease on 30 June 2007. The exchange rate averaged over the year 1 April 2006
to 31 March 2007 used for Mike Jesaniss values is US$1.91:£1. The exchange rate for the previous
year was US$1.79:£1.
 Year endedTable 1B
    Year ended 31 March 2007
    
    
    31 March2006OtherFees
    
    
    Emoluments
    
    
    Total
    
    
    Total£000s
    
    
    £000s
    
    
    £000s
    
    
    £000sNon-executive DirectorsSir John Parker (i)
    
    
    500
    
    
    
    53
    
    
    
    553
    
    
    
    445Ken Harvey
    
    
    68
    
    
    
    
    
    
    
    68
    
    
    
    67Linda Adamany (ii)
    
    
    25
    
    
    
    
    
    
    
    25
    
    
    
    John Allan
    
    
    62
    
    
    
    
    
    
    
    62
    
    
    
    45Paul Joskow
    
    
    80
    
    
    
    
    
    
    
    80
    
    
    
    74Stephen Pettit
    
    
    68
    
    
    
    
    
    
    
    68
    
    
    
    68Maria Richter
    
    
    71
    
    
    
    
    
    
    
    71
    
    
    
    61George Rose
    
    
    71
    
    
    
    
    
    
    
    71
    
    
    
    67John Grant (iii)
    
    
    18
    
    
    
    
    
    
    
    18
    
    
    
    67Total
    
    
    963
    
    
    
    53
    
    
    
    1,016
    
    
    
    894
 (i)
    
    Sir John Parkers other emoluments comprise a fully expensed
car, private medical insurance and life assurance.(ii)
    
    Linda
Adamany was appointed to the Board on 1 November 2006.(iii)
    
    John Grant retired from the Board on 31 July 2006.




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##### Table of Contents



94  National Grid plc
 2.
Directors pensions
 Transfer valueof increase inAdditional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    accrued benefitPersonal
    
    
    benefit earned
    
    
    
    
    
    
    Transfer value of
    
    
    Increase in
    
    
    benefit earned in
    
    
    in the year endedcontributions
    
    
    during year
    
    
    Accrued
    
    
    accrued benefits
    
    
    transfer
    
    
    the year ended
    
    
    31 March 2007made to the
    
    
    ended
    
    
    entitlement as at
    
    
    as at 31 March (i)
    
    
    value less
    
    
    31 March 2007
    
    
    (excluding inflationscheme
    
    
    31 March 2007
    
    
    31 March 2007
    
    
    
    
    
    
    
    
    
    
    Directors
    
    
    (excluding
    
    
    & DirectorTable 2
    
    during the year£000s
    
    
    pension£000s
    
    
    pension£000s
    
    
    2007£000s
    
    
    2006£000s
    
    
    contributions£000s
    
    
    inflation) pension£000s
    
    
    contributions)£000sSteve Holliday (ii)
    
    
    16
    
    
    
    69
    
    
    
    157
    
    
    
    2,745
    
    
    
    1,485
    
    
    
    1,244
    
    
    
    66
    
    
    
    1,134Roger Urwin (iii)
    
    
    37
    
    
    
    27
    
    
    
    564
    
    
    
    12,714
    
    
    
    11,291
    
    
    
    1,386
    
    
    
    13
    
    
    
    224Steve Lucas
    
    
    29
    
    
    
    39
    
    
    
    199
    
    
    
    3,535
    
    
    
    2,725
    
    
    
    781
    
    
    
    34
    
    
    
    585Nick Winser (iv)
    
    
    25
    
    
    
    21
    
    
    
    152
    
    
    
    2,406
    
    
    
    2,000
    
    
    
    381
    
    
    
    16
    
    
    
    213Mark Fairbairn (v)
    
    
    19
    
    
    
    27
    
    
    
    116
    
    
    
    2,014
    
    
    
    1,483
    
    
    
    512
    
    
    
    24
    
    
    
    388Edward Astle
    
    
    16
    
    
    
    17
    
    
    
    78
    
    
    
    1,416
    
    
    
    1,086
    
    
    
    314
    
    
    
    15
    
    
    
    253Mike Jesanis (vi)
    
    
    0
    
    
    
    13
    
    
    
    292
    
    
    
    2,828
    
    
    
    2,497
    
    
    
    331
    
    
    
    13
    
    
    
    429
 (i)
    
    The transfer values shown at 31 March 2006 and 2007 represent the value of each Executive
Directors accrued benefits based on total service completed to the relevant date.The transfer
values for the UK Executive Directors have been calculated in accordance with guidance note GN11
issued by the Institute of Actuaries and the Faculty of Actuaries.
The transfer values for the US Director have been calculated using discount rates based on high
yield US corporate bonds and associated yields at the relevant dates.(ii)
    
    The above information takes into account a lump sum benefit related to a previous transfer-in.
This means that as well as the pension quoted above, there is an accrued lump sum entitlement of
£77,000 as at 31 March 2007. The increase to the accumulated lump sum including inflation was
£27,000 and excluding inflation was £25,000 in the year to 31 March 2007. The transfer value
information above includes the value of the lump sum.(iii)
    
    The accrued entitlement is calculated as at 31 December 2006, the date Roger Urwin retired
from the Board. The value of the pension as at 31 March 2007, which has increased by an additional
£21,000 per annum, reflects the compensation for the late payment of the benefits to which he was
entitled at the start of the year. The transfer value at 31 March 2007 is calculated on the
transfer basis used for pensioners, as Roger Urwin had retired from the Board. The comparative
figure for 31 March 2006 is calculated on the transfer basis for non-pensioner members. The change
in methodology accounts for £1,043,000 of the increase in transfer value.(iv)
    
    The above information allows for the accrual of a pension benefit of two thirds of salary at
age 60 taking into account standard benefits earned prior to 1 September 1998. This means that, as
well as the pension above, there is an accrued lump sum entitlement of £236,000 as at 31 March 2007. The increase to the accumulated lump sum including inflation was £20,000 and excluding
inflation was £12,000 in the year to 31 March 2007. The transfer value information above includes
the value of the lump sum.(v)
    
    Mark Fairbairn joined the Board on 1 January 2007. The above information takes into account a
lump sum benefit relating to a previous transfer-in. This means that, as well as the pension above,
there is an accrued lump sum entitlement of £197,000 as at 31 March 2007. The increase to the
accumulated lump sum including inflation was £36,000 and excluding inflation was £30,000 in the
year to 31 March 2007. The transfer value information above includes the value of the lump sum.(vi)
    
    The accrued entitlement is calculated as at 31 December 2006, the date Mike Jesanis ceased
employment. Through participation in a Thrift Plan in the US, the Company also made contributions
worth £4,230.12 to a defined contribution pension arrangement. The exchange rates as at 31 March
2007 and 31 December 2006, which have been used to convert the figures from US dollars to pounds
sterling, are US$1.97:£1 and US$1.96:£1. The exchange rate as at 31 March 2006 was US$1.74:£1.
 3. Directors interests in share options
 Options held at
    
    
    Options
    
    
    Market price
    
    
    
    
    
    
    Options held at1 April 2006
    
    
    exercised or
    
    
    at date of
    
    
    
    
    
    31 March 2007
    
    
    Exercise priceTable 3
    
    or, if later, onappointment*
    
    
    lapsed duringthe year
    
    
    exercise(pence)
    
    
    Options grantedduring the year
    
    
    or, if later, onretirement
    
    
    per share(pence)
    
    
    Normal exercise periodSteve
HollidayESOP
    
    
    67,497
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,497
    
    
    
    481.5
    
    
    June 2005 to June 2012Share Match
    
    
    10,350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,350
    
    
    100 in total
    
    
    June 2005 to June 201214,083
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,083
    
    
    100 in total
    
    
    June 2006 to June 201318,713
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,713
    
    
    nil
    
    
    May 2007 to May 20149,983
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,983
    
    
    nil
    
    
    June 2008 to June 2015Sharesave
    
    
    4,692
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,692
    
    
    
    350
    
    
    Mar 2008 to Aug 2008Total
    
    
    125,318
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125,318Roger
UrwinESOP
    
    
    169,340
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    169,340
    
    
    
    280.5
    
    
    Jan 2007 to Sep 200791,656
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    91,656
    
    
    
    375.75
    
    
    Jan 2007 to Dec 200722,098
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,098
    
    
    
    455.25
    
    
    Jan 2007 to Dec 200733,867
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,867
    
    
    
    531.5
    
    
    Jan 2007 to Dec 2008124,610
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124,610
    
    
    
    481.5
    
    
    Jan 2007 to Dec 2008Share Match
    
    
    18,644
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,644
    
    
    100 in total
    
    
    Jan 2007 to Jun 200725,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,000
    
    
    100 in total
    
    
    Jan 2007 to Dec 200830,762
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,762
    
    
    nil
    
    
    Jan 2007 to Dec 200825,570
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,570
    
    
    nil
    
    
    Jan 2007 to Dec 2008Sharesave
    
    
    2,910
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,910
    (i)
    
    
    317
    
    
    Apr 2007 to Sep 2007Total
    
    
    544,457
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    544,457
    




---



##### Table of Contents



Annual Report and Accounts 2006/07 95
 3.
Directors interests in share options (continued)
 Options held at
    
    
    Options
    
    
    Market price
    
    
    
    
    
    
    Options held at1 April 2006
    
    
    exercised or
    
    
    at date of
    
    
    
    
    
    31 March 2007
    
    
    Exercise priceTable 3(continued)
    
    or, if later, onappointment*
    
    
    lapsed duringthe year
    
    
    exercise(pence)
    
    
    Options grantedduring the year
    
    
    or, if later, onretirement
    
    
    per share(pence)
    
    
    Normal exercise periodSteve LucasESOP
    
    
    54,404
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54,404
    
    
    
    434.25
    
    
    Dec 2005 to Dec 2012Share Match
    
    
    16,909
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,909
    
    
    nil
    
    
    May 2007 to May 201414,778
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,778
    
    
    nil
    
    
    June 2008 to June 2015Sharesave
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,693
    
    
    
    1,693
    
    
    
    558
    
    
    Apr 2010 to Sep 2010Total
    
    
    86,091
    
    
    
    
    
    
    
    
    
    
    
    1,693
    
    
    
    87,784Nick WinserESOP
    
    
    19,755
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,755
    
    
    
    531.5
    
    
    June 2003 to June 2010Share Match
    
    
    3,937
    
    
    3,937
    (ii)
    
    592.5
    
    
    
    
    
    
    
    
    
    
    100 in total
    
    
    June 2006 to June 201314,059
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,059
    
    
    nil
    
    
    May 2007 to May 201411,581
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,581
    
    
    nil
    
    
    June 2008 to June 2015Total
    
    
    49,332
    
    
    
    3,937
    
    
    
    
    
    
    
    
    
    
    
    45,395Mark FairbairnESOP
    
    
    8,649
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,649
    
    
    
    375.75
    
    
    June 2001 to June 20082,180
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,180
    
    
    
    435.75
    
    
    July 2002 to July 200933,489
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,489
    
    
    
    531.5
    
    
    June 2003 to June 201031,152
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,152
    
    
    
    481.5
    
    
    June 2005 to June 2012Share Match
    
    
    4,897
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,897
    
    
    nil
    
    
    May 2007 to May 20142,134
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,134
    
    
    nil
    
    
    June 2008 to June 2015Sharesave
    
    
    833
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    833
    
    
    
    397
    
    
    Sep 2007 to Feb 2008862
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    862
    
    
    
    383
    
    
    Apr 2010 to Sep 20101,760
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,760
    
    
    
    558
    
    
    Apr 2012 to Sep 2012Total
    
    
    85,956
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85,956Edward AstleESOP
    
    
    67,497
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,497
    
    
    
    481.5
    
    
    June 2005 to June 2012131,086
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    131,086
    
    
    
    400.5
    
    
    June 2006 to June 2013Share Match
    
    
    6,553
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,553
    
    
    100 in total
    
    
    June 2005 to June 201213,812
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,812
    
    
    100 in total
    
    
    June 2006 to June 201315,716
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,716
    
    
    nil
    
    
    May 2007 to May 201414,637
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,637
    
    
    nil
    
    
    June 2008 to June 2015Total
    
    
    249,301
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    249,301Mike JesanisESOP
    
    
    77,861
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77,861
    (iii)
    
    566.5
    
    
    Jan 2007 to Dec 200766,099
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66,099
    (iii)
    
    481.5
    
    
    Jan 2007 to Dec 2007Total
    
    
    143,960
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    143,960
    Phantom ADSs (iv)
    
    
    699
    
    
    
    717
    
    
    
    $54.34
    
    
    
    18
    
    
    
    
    
    
    
    $39.5903,000
    
    
    
    3,076
    
    
    
    $54.34
    
    
    
    76
    
    
    
    
    
    
    
    $34.2703,452
    
    
    
    3,539
    
    
    
    $54.34
    
    
    
    87
    
    
    
    
    
    
    
    $32.3203,039
    
    
    
    3,116
    
    
    
    $54.34
    
    
    
    77
    
    
    
    
    
    
    
    $39.3764,730
    
    
    
    4,850
    
    
    
    $54.34
    
    
    
    120
    
    
    
    
    
    
    
    $47.762Total (Phantom ADSs)
    
    
    14,920
    
    
    
    15,298
    
    
    
    
    
    
    
    378
    
    
    
    
 (i)
    
    In accordance with the Rules of the scheme, the option had been granted three years prior
to Roger Urwins leave date and he was therefore able to complete the contract and exercise his
option during the normal exercise period.(ii)
    
    Nick Winser exercised a Share Match award over 3,937 shares. The market price at the date of
exercise was 592.5p and he was required to pay 100p to exercise the award. He also received £2,348
in respect of a cash payment in lieu of dividends on the exercise of the Share Match award.(iii)
    
    Mike Jesanis exercised his options over 143,960 shares in January 2007 at a market price of
721p, after he ceased employment on 31 December 2006.(iv)
    
    In place of participation in the Share Matching Plan, Mike Jesanis elected to defer the ADS
component of his bonuses between 2001 and 2005 inclusively into a deferred compensation plan. For a
Phantom award under the deferred compensation plan, the ADS market value is tracked, additional
value is accrued for dividends and the value is delivered, net of normal US deductions, depending
on the participants election ie in 10 years, on a specified age date from 55 to 75, or on leaving,
including retirement. The closing market price of ADSs at
30 March 2007, the last business day for the year ended 31 March 2007, was US$78.81. The range
during the year was $78.81 (high) and $48.83 (low). Each ADS represents five ordinary shares.




---



##### Table of Contents



96  National Grid plc
 3.
Directors interests in share options (continued)  Executive Share Option Plan (ESOP)
  Grants made in 2000
  Allegheny Energy, Inc.
    
    Energy East Corporation
    
    NSTAR
    
    Scottish Power plcBG Group plc
    
    FPL Group, Inc.
    
    Powergen plc
    
    The Southern Company, Inc.British Energy plc
    
    GPU, Inc.
    
    Progress Energy, Inc.
    
    TXU, CorpCentral & South West Corporation
    
    Innogy Holdings plc
    
    Public Service Enterprise
    
    United Utilities plcConsolidated Edison, Inc.
    
    International Power plc
    
    Group, Inc.
    
    Xcel Energy, Inc.Duke Energy Corporation
    
    Niagara Mohawk Holdings, Inc.
    
    Scottish & Southern Energy plc
 Grants made in 2003




---



##### Table of Contents



Annual Report and Accounts 2006/07  97
 4.
Directors interests in the PSP and DSP
 PSP and DSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ConditionalConditional awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    awards atat 31 March 2006
    
    
    Awards
    
    
    Awards
    
    
    Awards
    
    
    Market price
    
    
    
    
    
    
    31 March 2007Type of
    
    or, if later, on
    
    
    lapsed
    
    
    vested
    
    
    granted
    
    
    at award
    
    
    Date of
    
    or, if earlier, on
    
    
    Releaseaward
    
    appointment*
    
    
    during year
    
    
    in year
    
    
    during year
    
    
    (pence except#)
    
    
    award
    
    retirement
    
    
    dateSteve Holliday
    
    PSP
    
    
    115,669
    
    
    
    115,669
    (i)
    
    
    
    
    
    
    
    
    
    
    405.25
    
    
    June 2003
    
    
    
    
    
    
    PSP
    
    
    117,681
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    424.875
    
    
    June 2004
    
    
    117,681
    
    
    June 2008PSP
    
    
    100,801
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    527.03
    
    
    June 2005
    
    
    100,801
    
    
    June 2009PSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    126,788
    
    
    
    591.5382
    
    
    June 2006
    
    
    126,788
    
    
    June 2010DSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,389
    
    
    
    583.96
    
    
    June 2006
    
    
    36,389
    
    
    June 2009Total
    
    
    
    
    
    
    334,151
    
    
    
    115,669
    
    
    
    
    
    
    
    163,177
    
    
    
    
    
    
    
    
    
    
    
    381,659Roger Urwin
    
    PSP
    
    
    195,866
    
    
    
    195,866
    (i)
    
    
    
    
    
    
    
    
    
    
    405.25
    
    
    June 2003
    
    
    
    
    
    
    PSP
    
    198,587
    (ii)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    424.875
    
    
    June 2004
    
    
    198,587
    
    
    June 2008PSP
    
    181,442
    (ii)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    527.03
    
    
    June 2005
    
    
    181,442
    
    
    June 2009DSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,881
    
    
    
    583.96
    
    
    June 2006
    
    
    62,881
    
    
    July 2007Total
    
    
    
    
    
    
    575,895
    
    
    
    195,866
    
    
    
    
    
    
    
    62,881
    
    
    
    
    
    
    
    
    
    
    
    442,910
    Steve Lucas
    
    PSP
    
    
    115,669
    
    
    
    115,669
    (i)
    
    
    
    
    
    
    
    
    
    
    405.25
    
    
    June 2003
    
    
    
    
    
    
    PSP
    
    
    116,210
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    424.875
    
    
    June 2004
    
    
    116,210
    
    
    June 2008PSP
    
    
    99,615
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    527.03
    
    
    June 2005
    
    
    99,615
    
    
    June 2009PSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101,430
    
    
    
    591.5382
    
    
    June 2006
    
    
    101,430
    
    
    June 2010DSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,882
    
    
    
    583.96
    
    
    June 2006
    
    
    34,882
    
    
    June 2009Total
    
    
    
    
    
    
    331,494
    
    
    
    115,669
    
    
    
    
    
    
    
    136,312
    
    
    
    
    
    
    
    
    
    
    
    352,137Nick Winser
    
    PSP
    
    
    92,535
    
    
    
    92,535
    (i)
    
    
    
    
    
    
    
    
    
    
    405.25
    
    
    June 2003
    
    
    
    
    
    
    PSP
    
    
    98,558
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    424.875
    
    
    June 2004
    
    
    98,558
    
    
    June 2008PSP
    
    
    91,314
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    527.03
    
    
    June 2005
    
    
    91,314
    
    
    June 2009PSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88,751
    
    
    
    591.5382
    
    
    June 2006
    
    
    88,751
    
    
    June 2010DSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,316
    
    
    
    583.96
    
    
    June 2006
    
    
    31,316
    
    
    June 2009Total
    
    
    
    
    
    
    282,407
    
    
    
    92,535
    
    
    
    
    
    
    
    120,067
    
    
    
    
    
    
    
    
    
    
    
    309,939Mark Fairbairn
    
    PSP
    
    
    47,072
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    424.875
    
    
    June 2004
    
    
    47,072
    
    
    June 2008PSP
    
    
    40,225
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    527.03
    
    
    June 2005
    
    
    40,225
    
    
    June 2009PSP
    
    
    40,572
    *
    
    
    
    
    
    
    
    
    
    
    40,572
    
    
    
    591.5382
    
    
    June 2006
    
    
    40,572
    
    
    June 2010DSP
    
    
    10,800
    *
    
    
    
    
    
    
    
    
    
    
    10,800
    
    
    
    583.96
    
    
    June 2006
    
    
    10,800
    
    
    June 2009Total
    
    
    
    
    
    
    138,669
    *
    
    
    
    
    
    
    
    
    
    
    51,372
    
    
    
    
    
    
    
    
    
    
    
    138,669Edward Astle
    
    PSP
    
    
    107,958
    
    
    
    107,958
    (i)
    
    
    
    
    
    
    
    
    
    
    405.25
    
    
    June 2003
    
    
    
    
    
    
    PSP
    
    
    110,326
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    424.875
    
    
    June 2004
    
    
    110,326
    
    
    June 2008PSP
    
    
    94,872
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    527.03
    
    
    June 2005
    
    
    94,872
    
    
    June 2009PSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88,751
    
    
    
    591.5382
    
    
    June 2006
    
    
    88,751
    
    
    June 2010DSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,769
    
    
    
    583.96
    
    
    June 2006
    
    
    28,769
    
    
    June 2009Total
    
    
    
    
    
    
    313,156
    
    
    
    107,958
    
    
    
    
    
    
    
    117,520
    
    
    
    
    
    
    
    
    
    
    
    322,718Mike Jesanis
    
    PSP
    
    
    41,871
    
    
    
    41,871
    (i)
    
    
    
    
    
    
    
    
    
    
    405.25
    
    
    June 2003
    
    
    
    
    
    
    PSP
    
    
    ADSs 19,987
    (iii,iv)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $39.4
    #
    
    June 2004
    
    
    ADSs 19,987
    
    
    June 2007PSP
    
    
    ADSs 21,634
    (iii,iv)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $48.5
    #
    
    June 2005
    
    
    ADSs 21,634
    
    
    June 2007PSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ADSs 20,435
    (iii,iv)
    
    
    $53.8284
    #
    
    June 2006
    
    
    ADSs 20,435
    
    
    June 2007DSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ADSs   6,203
    (iii)
    
    
    $54.0483
    #
    
    June 2006
    
    
    ADSs   6,203
    
    
    June 2007Totals
    
    Shares
    
    
    41,871
    
    
    
    41,871
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ADSs
    
    
    41,621
    
    
    
    
    
    
    
    
    
    
    
    26,638
    
    
    
    
    
    
    
    
    
    
    
    68,259
    
 (i)
    
    For PSP awards granted in 2003, the performance condition was not satisfied at the end of
the three year performance period. As a result, the award has lapsed in full.(ii)
    
    For PSP awards granted in 2004 and 2005 to Roger Urwin, these awards will not vest until,
subject to performance criteria being met, the original vesting date three years after the dates of
grant. If the performance criteria is met, Roger Urwin will receive his awards pro-rated on the
basis of the performance criteria having been achieved and time pro-rated from the date of grant to
his retirement date.(iii)
    
    Mike Jesanis received awards over ADSs for all awards from 2004 onwards. Each ADS represents
five ordinary shares.(iv)
    
    On ceasing employment, Mike Jesaniss June 2004 award lapsed. Partial vesting of the 2005
award occurred resulting in 3,261 ADSs vesting representing the TSR element of the award and 5,408
ADSs vesting with respect to the EPS element of the award. For the 2006 award 1,702 ADSs vested
representing the TSR element of the award and all the ADSs lapsed with respect to EPS, as the
performance criteria was not met.




---



##### Table of Contents



98  National Grid plc
 3.
Directors beneficial interests  17 43
 Options/awards over
    
    
    Options/awards overOrdinary shares at
    
    
    Ordinary shares at
    
    
    ordinary shares at
    
    
    ordinary shares at31 March 2007
    
    
    1 April 2006
    
    
    31 March 2007
    
    
    1 April 2006or, if earlier, on
    
    
    or, if later, on
    
    
    or, if earlier, on
    
    
    or, if later, onretirement(i)
    
    
    appointment*
    
    
    retirement
    
    
    appointment*Sir John Parker
    
    
    63,994
    
    
    
    55,832
    
    
    
    
    
    
    
    Steve Holliday (ii) (iii)
    
    
    28,293
    
    
    
    28,063
    
    
    
    506,977
    
    
    
    531,405Roger Urwin (iv)
    
    
    247,810
    
    
    
    247,630
    
    
    
    987,367
    
    
    
    1,253,566Steve Lucas (ii) (iv) (v)
    
    
    69,412
    
    
    
    159,379
    
    
    
    439,921
    
    
    
    417,585Nick Winser (ii)
    
    
    60,624
    
    
    
    56,687
    
    
    
    355,334
    
    
    
    355,895Mark Fairbairn (ii) (iii) (iv)
    
    
    20,838
    
    
    
    20,495
    *
    
    
    224,625
    
    
    
    224,625
    *Edward Astle (ii)
    
    
    28,428
    
    
    
    28,428
    
    
    
    572,019
    
    
    
    756,409Mike Jesanis
    
    
    3,362
    
    
    
    3,281
    
    
    
    485,255
    
    
    
    445,105Ken Harvey (iv)
    
    
    3,399
    
    
    
    3,399
    
    
    
    
    
    
    
    Linda Adamany
    
    
    
    
    
    
    
    *
    
    
    
    
    
    
    John Allan
    
    
    2,000
    
    
    
    2,000
    
    
    
    
    
    
    
    Paul Joskow
    
    
    4,385
    
    
    
    4,385
    
    
    
    
    
    
    
    Stephen Pettit
    
    
    2,632
    
    
    
    2,632
    
    
    
    
    
    
    
    Maria Richter
    
    
    1,755
    
    
    
    1,755
    
    
    
    
    
    
    
    George Rose (iv)
    
    
    4,409
    
    
    
    4,409
    
    
    
    
    
    
    
    John Grant
    
    
    8,775
    
    
    
    8,775
    
    
    
    
    
    
    
    
 (i)
    
    There has been no other change in the beneficial interests of the Directors in ordinary
shares between 1 April 2007 and 16 May 2007, except in respect of routine monthly purchases under
the SIP (see note (iii) below).(ii)
    
    Each of the Executive Directors, with the exception of Roger Urwin and Mike Jesanis, was for
Companies Act purposes deemed to be a potential beneficiary under the National Grid 1996 Employee
Benefit Trust and the National Grid plc Employee Share Trust and thereby to have an interest in
54,695 ordinary shares and 24,409 B shares held by the National Grid 1996 Employee Benefit Trust
and 293,838 ordinary shares and 14,855 B shares held by the National Grid Group Employee Share
Trust as at 31 March 2007.(iii)
    
    Beneficial interest includes shares purchased under the monthly operation of the SIP in the
year to 31 March 2007. In April and May 2007 a further 31 shares were purchased on behalf of each
of Steve Holliday and Mark Fairbairn.(iv)
    
    Following the Return of Cash and the issue of B shares in 2005, the following Directors held B
shares as at 31 March 2007: Roger Urwin 58,397; Steve Lucas 318; Mark Fairbairn 6,132; Ken Harvey
3,874 and George Rose 5,025.(v)
    
    Steve Lucas was for Companies Act purposes deemed to be a potential beneficiary in 24,834
ordinary shares and 23,948 B shares held by Lattice Group Trustees Limited as trustee of the
Lattice Group Employee Share Ownership Trust as at 31 March 2007.
 6. National Grid share price range
  Helen Mahy




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##### Table of Contents



Annual Report and Accounts 2006/07  99
  Contents to financial statements
  100
    
    Statement of Directors responsibilities101
    
    Independent Auditors report to the Members of National Grid plc102
    
    Accounting policies108
    
    Consolidated income statement109
    
    Consolidated balance sheet110
    
    Consolidated statement of recognised income and expense111
    
    Consolidated cash flow statement112
    
    Notes to the accounts112
    
    Note 1  Adoption of new accounting standards113
    
    Note 2  Segmental analysis116
    
    Note 3  Other operating income116
    
    Note 4  Operating costs117
    
    Note 5  Exceptional items and remeasurements118
    
    Note 6  Payroll costs and employees118
    
    Note 7  Directors emoluments119
    
    Note 8  Pensions and other post-retirement benefits123
    
    Note 9  Finance income and costs124
    
    Note 10  Taxation125
    
    Note 11  Discontinued operations126
    
    Note 12  Dividends126
    
    Note 13  Earnings per share127
    
    Note 14  Goodwill128
    
    Note 15  Acquisitions129
    
    Note 16  Other intangible assets130
    

   Note 17  Property, plant and equipment130
    
    Note 18  Investments in joint ventures131
    
    Note 19  Deferred tax assets and liabilities132
    
    Note 20  Other non-current receivables132
    
    Note 21  Financial and other investments133
    
    Note 22  Derivative financial instruments135
    
    Note 23  Financial risk factors138
    
    Note 24  Inventories
 139
    
    Note 25  Trade and other receivables140
    
    Note 26  Cash and cash equivalents140
    
    Note 27  Borrowings143
    
    Note 28  Trade and other payables143
    
    Note 29  Other non-current liabilities144
    
    Note 30  Provisions145
    
    Note 31  Share capital149
    
    Note 32  Reconciliation of movements in total equity150
    
    Note 33  Consolidated cash flow statement151
    
    Note 34  Related party transactions151
    
    Note 35  Commitments and contingencies152
    
    Note 36  Subsidiary undertakings and joint ventures153
    
    Note 37  Subsequent events153
    
    Note 38  Differences between IFRS and US generally accepted accounting principles163
    
    Note 39  Condensed US GAAP financial information167
    
    Note 40  National Grid Gas plc additional US GAAP disclosures173
    
    Company accounting policies175
    
    Company balance sheet176
    
    Notes to the Company accounts176
    
    Note 1  Adoption of new accounting standards177
    
    Note 2  Fixed asset investments177
    
    Note 3  Debtors177
    
    Note 4  Creditors (amounts falling due within one year)177
    
    Note 5  Borrowings178
    
    Note 6  Provisions for liabilities and charges178
    
    Note 7  Share capital178
    
    Note 8  Reserves179
    
    Note 9  Reconciliation of movements in equity shareholders funds179
    
    Note 10  Commitments and contingencies179
    
    Note 11  Directors and employees




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##### Table of Contents



100  National Grid plc
  Statement of Directors responsibilities
  n
    
    select suitable accounting policies and
then apply them consistently;n
    
    make
judgements and estimates that are reasonable and
prudent;n
    
    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; andn
    
    prepare the consolidated financial
statements and Company financial statements on a
going concern basis unless it is inappropriate to
presume that the Company will continue in business,
in which case there should be supporting assumptions
or qualifications as necessary.




---



##### Table of Contents



Annual Report and Accounts 2006/07  101
 
 Independent Auditors report to the Members of National Grid plc
  Respective responsibilities of Directors and auditors
 Basis of audit opinion
  Opinion
 n
    
    the consolidated financial statements give
a true and fair view, in accordance with IFRSs as
adopted by the European Union, of the state of the
Groups affairs as at 31 March 2007 and of its profit
and cash flows for the year then ended;n
    
    the consolidated financial statements have been
properly prepared in accordance with the Companies Act
1985 and Article 4 of the IAS Regulation;n
    
    the Company financial statements give a true and
fair view, in accordance with United Kingdom Generally
Accepted Accounting Practice, of the state of the
parent companys affairs as at 31 March 2007;n
    
    the Company financial statements and
the part of the Directors remuneration report to
be audited have been properly prepared in
accordance with the Companies Act 1985; andn
    
    the information given in the Directors
report is consistent with the financial
statements.
 PricewaterhouseCoopers LLP




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##### Table of Contents



102  National Grid plc
 Accounting policies for the year ended 31 March 2007
  (a) Basis of preparation of consolidated financial statements
      (b) Basis of consolidation
 (c) Foreign currencies
    (d) Goodwill




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##### Table of Contents



Annual Report and Accounts 2006/07  103
  (e) Intangible assets other than goodwill
    Amortisation periods
    
    YearsSoftware
    
    3 to 5Acquired customer relationships
    
    10 to 25Other
    
     telecommunication licences
    
    10 to 25 other 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 60Interconnector plant
    
    15 to 60Gas plant  mains, services and regulating equipment
    
    30 to 100Gas plant  storage
    
    40Gas plant  meters
    
    10 to 33Wireless infrastructure
    
    20 to 55Motor vehicles and office equipment
    
    up to 10
 (g) Impairment of assets
     (h) Taxation
Current tax
 Deferred tax and investment tax credits




---



##### Table of Contents



104  National Grid plc
  (i) Discontinued operations, assets and
businesses held for sale
 (j) Inventories
 (k) Decommissioning and environmental costs
   (l) Revenue
    (m) Pensions and other post-retirement benefits




---



##### Table of Contents



Annual Report and Accounts 2006/07  105
  (n) Leases
  (o) Financial instruments
 (p) Hedge accounting and derivative financial instruments




---



##### Table of Contents



106  National Grid plc
  
 (q) Share-based payments
  (r) Business performance, exceptional
items and remeasurements
  (s) Restructuring costs
 (t) Other operating income




---



##### Table of Contents



Annual Report and Accounts 2006/07  107
  (u) Emission allowances
  (v) Cash and cash equivalents
 (w) Other reserves
  (x) Dividends
 (y) Key sources of estimation uncertainty
  n
    
    The categorisation of certain items as
exceptional and the definition of adjusted
earnings  notes 5 and 13.
 n
    
    The exemptions adopted under IFRS
including, in particular, those relating to
business combinations  Accounting policies (a)
Basis of preparation of consolidated financial
statements.
 n
    
    Classification of business activities as
held for sale and discontinued operations 
Accounting policies (i) Discontinued operations,
assets and businesses held for sale.
 n
    
    Impairment of goodwill  Accounting
policies (d) Goodwill and note 14.
 n
    
    Review of residual lives, carrying
values and impairment charges for other
intangible assets and property, plant and
equipment  Accounting policies (e)
Intangible assets other than goodwill, (f)
Property, plant and equipment and (g) Impairment of assets.
 n
    
    Estimation of liabilities for pension
and other post-retirement benefits  note 8.
 n
    
    Valuation of financial
instruments and derivatives  notes 22
and 23.
 n
    
    Revenue recognition and assessment of
unbilled revenue Accounting policies (l)
Revenue.
 n
    
    Recoverability of deferred tax assets
  Accounting policies (h) Taxation and note
19.n
    
    Environmental and decommissioning liabilities  note 30.
 n
    
    Hedge accounting and derivative
financial instruments Accounting polices
(p) Hedge accounting and derivative
financial instruments.




---



##### Table of Contents



108  National Grid plc
  Consolidated income statement
 for the years ended 31 March
 2007
    
    
    2006*
    
    
    2005*Notes
    
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    2(a
    )
    
    
    8,695
    
    
    
    8,868
    
    
    
    7,174Other operating income
    
    
    3
    
    
    
    83
    
    
    
    80
    
    
    
    67Operating costs
    
    
    4
    
    
    
    (6,265
    )
    
    
    (6,574
    )
    
    
    (5,128
    )Operating profitBefore exceptional items and remeasurements
    
    
    2(b
    )
    
    
    2,454
    
    
    
    2,457
    
    
    
    2,401Exceptional items and remeasurements
    
    
    5
    
    
    
    59
    
    
    
    (83
    )
    
    
    (288
    )Total operating profit
    
    
    2(b
    )
    
    
    2,513
    
    
    
    2,374
    
    
    
    2,113Interest income and similar income
    
    
    9
    
    
    
    1,144
    
    
    
    1,036
    
    
    
    945Interest expense and other finance costsBefore exceptional items and remeasurements
    
    
    9
    
    
    
    (1,691
    )
    
    
    (1,638
    )
    
    
    (1,649
    )Exceptional items and remeasurements
    
    
    5,9
    
    
    
    (217
    )
    
    
    (57
    )
    
    
    9
    
    
    
    (1,908
    )
    
    
    (1,695
    )
    
    
    (1,649
    )Share of post-tax results of joint ventures
    
    
    2(c
    )
    
    
    2
    
    
    
    3
    
    
    
    3Profit before taxationBefore exceptional items and remeasurements
    
    
    
    
    
    
    1,909
    
    
    
    1,858
    
    
    
    1,700Exceptional items and remeasurements
    
    
    5
    
    
    
    (158
    )
    
    
    (140
    )
    
    
    (288
    )Total profit before taxation
    
    
    
    
    
    
    1,751
    
    
    
    1,718
    
    
    
    1,412TaxationBefore exceptional items and remeasurements
    
    
    10
    
    
    
    (611
    )
    
    
    (565
    )
    
    
    (424
    )Exceptional items and remeasurements
    
    
    5,10
    
    
    
    170
    
    
    
    30
    
    
    
    118Total taxation
    
    
    10
    
    
    
    (441
    )
    
    
    (535
    )
    
    
    (306
    )Profit from continuing operations after taxationBefore exceptional items and remeasurements
    
    
    
    
    
    
    1,298
    
    
    
    1,293
    
    
    
    1,276Exceptional items and remeasurements
    
    
    5
    
    
    
    12
    
    
    
    (110
    )
    
    
    (170
    )Profit for the year from continuing operations
    
    
    
    
    
    
    1,310
    
    
    
    1,183
    
    
    
    1,106Profit for the year from discontinued operationsBefore exceptional items and remeasurements
    
    
    11
    
    
    
    104
    
    
    
    77
    
    
    
    379Exceptional items and remeasurements
    
    
    11
    
    
    
    (18
    )
    
    
    2,590
    
    
    
    (61
    )11
    
    
    
    86
    
    
    
    2,667
    
    
    
    318Profit for the year
    
    
    
    
    
    
    1,396
    
    
    
    3,850
    
    
    
    1,424Attributable to:Equity shareholders of the parent
    
    
    
    
    
    
    1,394
    
    
    
    3,848
    
    
    
    1,424Minority interests
    
    
    
    
    
    
    2
    
    
    
    2
    
    
    
    1,396
    
    
    
    3,850
    
    
    
    1,424Earnings per share from continuing operationsBasic
    
    
    13
    
    
    
    48.1p
    
    
    
    41.6p
    
    
    
    35.9pDiluted
    
    
    13
    
    
    
    47.8p
    
    
    
    41.4p
    
    
    
    35.7pEarnings per shareBasic
    
    
    13
    
    
    
    51.3p
    
    
    
    135.6p
    
    
    
    46.2pDiluted
    
    
    13
    
    
    
    50.9p
    
    
    
    135.0p
    
    
    
    46.0p




---



##### Table of Contents



Annual Report and Accounts 2006/07  109
  Consolidated balance sheet
 at 31 March
 2007
    
    
    2006Notes
    
    
    £m
    
    
    £mNon-current assetsGoodwill
    
    
    14
    
    
    
    1,480
    
    
    
    2,142Other intangible assets
    
    
    16
    
    
    
    144
    
    
    
    321Property, plant and equipment
    
    
    17
    
    
    
    18,895
    
    
    
    18,935Investments in joint ventures
    
    
    18
    
    
    
    5
    
    
    
    12Deferred tax assets
    
    
    19
    
    
    
    
    
    
    
    159Other receivables
    
    
    20
    
    
    
    73
    
    
    
    38Financial and other investments
    
    
    21
    
    
    
    132
    
    
    
    148Derivative financial assets
    
    
    22
    
    
    
    380
    
    
    
    351Total non-current assets
    
    
    
    
    
    
    21,109
    
    
    
    22,106Current assetsOther intangible assets
    
    
    16
    
    
    
    2
    
    
    
    41Inventories
    
    
    24
    
    
    
    106
    
    
    
    108Trade and other receivables
    
    
    25
    
    
    
    1,236
    
    
    
    1,519Financial and other investments
    
    
    21
    
    
    
    2,098
    
    
    
    384Derivative financial assets
    
    
    22
    
    
    
    277
    
    
    
    314Cash and cash equivalents
    
    
    26
    
    
    
    1,593
    
    
    
    1,452Total current assets
    
    
    
    
    
    
    5,312
    
    
    
    3,818Assets of businesses held for sale
    
    
    11
    
    
    
    1,968
    
    
    
    Total assets
    
    
    2(d
    )
    
    
    28,389
    
    
    
    25,924Current liabilitiesBank overdrafts
    
    
    26
    
    
    
    (6
    )
    
    
    (3
    )Borrowings
    
    
    27
    
    
    
    (1,025
    )
    
    
    (2,839
    )Derivative financial liabilities
    
    
    22
    
    
    
    (235
    )
    
    
    (92
    )Trade and other payables
    
    
    28
    
    
    
    (1,852
    )
    
    
    (2,095
    )Current tax liabilities
    
    
    
    
    
    
    (75
    )
    
    
    (419
    )Provisions
    
    
    30
    
    
    
    (167
    )
    
    
    (235
    )Total current liabilities
    
    
    
    
    
    
    (3,360
    )
    
    
    (5,683
    )Non-current liabilitiesBorrowings
    
    
    27
    
    
    
    (14,686
    )
    
    
    (10,287
    )Derivative financial liabilities
    
    
    22
    
    
    
    (184
    )
    
    
    (130
    )Other non-current liabilities
    
    
    29
    
    
    
    (1,475
    )
    
    
    (1,719
    )Deferred tax liabilities
    
    
    19
    
    
    
    (2,389
    )
    
    
    (2,161
    )Pensions and other post-retirement benefit obligations
    
    
    8
    
    
    
    (1,282
    )
    
    
    (1,915
    )Provisions
    
    
    30
    
    
    
    (427
    )
    
    
    (536
    )Total non-current liabilities
    
    
    
    
    
    
    (20,443
    )
    
    
    (16,748
    )Liabilities of businesses held for sale
    
    
    11
    
    
    
    (450
    )
    
    
    Total liabilities
    
    
    2(d
    )
    
    
    (24,253
    )
    
    
    (22,431
    )Net assets
    
    
    
    
    
    
    4,136
    
    
    
    3,493EquityCalled up share capital
    
    
    31
    
    
    
    308
    
    
    
    310Share premium account
    
    
    32
    
    
    
    1,332
    
    
    
    1,316Retained earnings
    
    
    32
    
    
    
    7,635
    
    
    
    6,817Translation reserve
    
    
    32
    
    
    
    (48
    )
    
    
    127Cash flow hedge reserve
    
    
    32
    
    
    
    26
    
    
    
    37Available-for-sale investment reserve
    
    
    32
    
    
    
    1
    
    
    
    6Other reserves
    
    
    32
    
    
    
    (5,129
    )
    
    
    (5,131
    )Total parent company shareholders equity
    
    
    
    
    
    
    4,125
    
    
    
    3,482Minority interests
    
    
    32
    
    
    
    11
    
    
    
    11Total equity
    
    
    
    
    
    
    4,136
    
    
    
    3,493
 
  Sir John Parker  Steve Lucas




---



##### Table of Contents



110  National Grid plc
  Consolidated statement of recognised income and expense
 for the years ended 31 March
 2007
    
    
    2006
    
    
    2005Notes
    
    
    £m
    
    
    £m
    
    
    £mExchange adjustments
    
    
    
    
    
    
    (179
    )
    
    
    141
    
    
    
    (6
    )Actuarial net gain
    
    
    8
    
    
    
    365
    
    
    
    181
    
    
    
    253Net gains/(losses) taken to equity in respect of cash flow hedges
    
    
    
    
    
    
    47
    
    
    
    (12
    )
    
    
    Transferred to profit or loss on cash flow hedges
    
    
    
    
    
    
    (45
    )
    
    
    (20
    )
    
    
    Net (losses)/gains taken to equity on available-for-sale investments
    
    
    
    
    
    
    (3
    )
    
    
    4
    
    
    
    Transferred to profit or loss on sale of available-for-sale investments
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    Tax on items taken directly to or transferred from equity
    
    
    10
    
    
    
    (81
    )
    
    
    (43
    )
    
    
    (66
    )Net income recognised directly in equity
    
    
    
    
    
    
    103
    
    
    
    250
    
    
    
    181Profit for the year
    
    
    
    
    
    
    1,396
    
    
    
    3,850
    
    
    
    1,424Total recognised income and expense for the year
    
    
    
    
    
    
    1,499
    
    
    
    4,100
    
    
    
    1,605Attributable to:Equity shareholders of the parent
    
    
    
    
    
    
    1,498
    
    
    
    4,097
    
    
    
    1,605Minority interests
    
    
    
    
    
    
    1
    
    
    
    3
    
    
    
    1,499
    
    
    
    4,100
    
    
    
    1,605Effect of change in accounting policy  IAS 39 (i)
    
    
    
    
    
    
    
    
    
    
    (43
    )
    
    
    
 (i)
    
    IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial
Instruments: Recognition and Measurement were adopted prospectively with effect from 1 April 2005,
in accordance with the transition provisions of IFRS 1. The impact of IAS 39 attributable to
minority interests was £nil.




---



##### Table of Contents



Annual Report and Accounts 2006/07  111
  Consolidated cash flow statement
 for the years ended 31 March
 2007
    
    
    2006
    *
    
    2005
    *Notes
    
    
    £m
    
    
    £m
    
    
    £mCash flows from operating activitiesTotal operating profit
    
    
    
    
    
    
    2,513
    
    
    
    2,374
    
    
    
    2,113Adjustments for:Exceptional items and remeasurements
    
    
    
    
    
    
    (59
    )
    
    
    83
    
    
    
    288Depreciation and amortisation
    
    
    
    
    
    
    871
    
    
    
    888
    
    
    
    782Share-based payment charge
    
    
    
    
    
    
    15
    
    
    
    14
    
    
    
    12Changes in working capital
    
    
    
    
    
    
    18
    
    
    
    (206
    )
    
    
    (117
    )Changes in provisions
    
    
    
    
    
    
    (57
    )
    
    
    (25
    )
    
    
    (126
    )Changes in pensions and other post-retirement benefit obligations
    
    
    
    
    
    
    (125
    )
    
    
    (40
    )
    
    
    (19
    )Cash flows relating to exceptional items
    
    
    
    
    
    
    (86
    )
    
    
    (115
    )
    
    
    (113
    )Cash flows generated from continuing operations
    
    
    
    
    
    
    3,090
    
    
    
    2,973
    
    
    
    2,820Cash flows relating to discontinued operations
    
    
    33(a
    )
    
    
    181
    
    
    
    138
    
    
    
    638Cash generated from operations
    
    
    
    
    
    
    3,271
    
    
    
    3,111
    
    
    
    3,458Tax paid  continuing operations
    
    
    
    
    
    
    (310
    )
    
    
    (103
    )
    
    
    (52
    )Tax paid  discontinued operations
    
    
    
    
    
    
    (3
    )
    
    
    (37
    )
    
    
    (98
    )Net cash inflow from operating activities
    
    
    
    
    
    
    2,958
    
    
    
    2,971
    
    
    
    3,308Cash flows from investing activitiesAcquisition of subsidiaries, net of cash acquired
    
    
    15
    
    
    
    (269
    )
    
    
    
    
    
    
    Sale of investments in joint ventures and other investments
    
    
    
    
    
    
    19
    
    
    
    8
    
    
    
    8Purchases of intangible assets
    
    
    
    
    
    
    (33
    )
    
    
    (15
    )
    
    
    (79
    )Purchases of property, plant and equipment
    
    
    
    
    
    
    (2,185
    )
    
    
    (1,657
    )
    
    
    (1,300
    )Disposals of property, plant and equipment
    
    
    
    
    
    
    21
    
    
    
    18
    
    
    
    22Purchases of financial investments
    
    
    
    
    
    
    (3,699
    )
    
    
    (2,870
    )
    
    
    (113
    )Sales of financial investments
    
    
    
    
    
    
    1,974
    
    
    
    2,895
    
    
    
    54Dividends received from joint ventures
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    5Cash flows used in continuing operations  investing activities
    
    
    
    
    
    
    (4,172
    )
    
    
    (1,619
    )
    
    
    (1,403
    )Cash flows relating to discontinued operations  disposal proceeds
    
    
    
    
    
    
    27
    
    
    
    5,750
    
    
    
    Cash flows relating to discontinued operations  acquisition of
subsidiaries, net of cash acquired
    
    
    15
    
    
    
    (85
    )
    
    
    
    
    
    
    (1,122
    )Cash flows relating to discontinued operations  other investing activities
    
    
    
    
    
    
    (47
    )
    
    
    (209
    )
    
    
    (450
    )Net cash flow (used in)/from investing activities
    
    
    
    
    
    
    (4,277
    )
    
    
    3,922
    
    
    
    (2,975
    )Cash flows from financing activitiesProceeds from issue of share capital
    
    
    
    
    
    
    16
    
    
    
    54
    
    
    
    13Proceeds from loans received
    
    
    
    
    
    
    5,519
    
    
    
    1,026
    
    
    
    998Repayment of loans
    
    
    
    
    
    
    (2,311
    )
    
    
    (1,714
    )
    
    
    (868
    )Net movements in short-term borrowings and derivatives
    
    
    
    
    
    
    (163
    )
    
    
    (1,616
    )
    
    
    922Interest received
    
    
    
    
    
    
    216
    
    
    
    130
    
    
    
    75Interest paid
    
    
    
    
    
    
    (813
    )
    
    
    (834
    )
    
    
    (837
    )Exceptional finance costs on the repayment of debt
    
    
    
    
    
    
    (45
    )
    
    
    (49
    )
    
    
    Dividends paid to shareholders
    
    
    
    
    
    
    (730
    )
    
    
    (745
    )
    
    
    (628
    )Cash paid to shareholders under B share scheme
    
    
    
    
    
    
    (26
    )
    
    
    (1,957
    )
    
    
    Repurchase of share capital
    
    
    
    
    
    
    (169
    )
    
    
    
    
    
    
    Purchase of treasury shares
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    Net cash flow from/(used in) financing activities
    
    
    
    
    
    
    1,494
    
    
    
    (5,712
    )
    
    
    (325
    )Net increase in cash and cash equivalents
    
    
    
    
    
    
    175
    
    
    
    1,181
    
    
    
    8Exchange movements
    
    
    
    
    
    
    (14
    )
    
    
    14
    
    
    
    (1
    )Amounts reclassified as assets of businesses held for sale
    
    
    
    
    
    
    (23
    )
    
    
    
    
    
    
    Net cash and cash equivalents at start of year (i)
    
    
    
    
    
    
    1,449
    
    
    
    254
    
    
    
    247Net cash and cash equivalents at end of year (i)
    
    
    26
    
    
    
    1,587
    
    
    
    1,449
    
    
    
    254
  (i)
    
    Net of bank overdrafts.




---



##### Table of Contents



112 National Grid plc
  Notes to the accounts
  1. Adoption of new accounting standards
New IFRS accounting standards and interpretations adopted in 2006/07
        New IFRS accounting standards and interpretations not yet adopted




---



##### Table of Contents



Annual Report and Accounts 2006/07 113
 1. Adoption of new accounting standards (continued)
New IFRS accounting standards and interpretations not yet endorsed by the EU
    
 2. Segmental analysis
  Transmission  UK
    
    High-voltage electricity transmission networks, the gas transmission network in the UK,
the UK liquefied natural gas (LNG) storage activities and the French electricity interconnectorTransmission  US
    
    High-voltage electricity transmission networks in New York and New EnglandGas Distribution  UK
    
    Four of the eight regional networks of Great Britains gas distribution systemGas Distribution  US
    
    Gas distribution in New York and New EnglandElectricity Distribution  US
    
    Electricity distribution in New York and New EnglandUS stranded cost recoveries
    
    The recovery of stranded costs from US electricity distribution customers as permitted
by regulatory agreements




---



##### Table of Contents



114 National Grid plc
 2. Segmental analysis (continued)
a) Revenue
 Sales
    
    
    Sales
    
    
    
    
    
    
    Sales
    
    
    Sales
    
    
    
    
    
    
    Sales
    
    
    SalesTotal
    
    
    between
    
    
    to third
    
    
    Total
    
    
    between
    
    
    to third
    
    
    Total
    
    
    between
    
    
    to thirdsales
    
    
    businesses
    
    
    parties
    
    
    sales
    
    
    businesses
    
    
    parties
    
    
    sales
    
    
    businesses
    
    
    parties2007
    
    
    2007
    
    
    2007
    
    
    2006*
    
    
    2006*
    
    
    2006*
    
    
    2005*
    
    
    2005*
    
    
    2005*£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mBusiness segments continuing operationsTransmission  UK
    
    
    2,816
    
    
    
    18
    
    
    
    2,798
    
    
    
    2,710
    
    
    
    15
    
    
    
    2,695
    
    
    
    1,995
    
    
    
    10
    
    
    
    1,985Transmission  US
    
    
    270
    
    
    
    47
    
    
    
    223
    
    
    
    310
    
    
    
    48
    
    
    
    262
    
    
    
    284
    
    
    
    45
    
    
    
    239Gas Distribution  UK
    
    
    1,193
    
    
    
    92
    
    
    
    1,101
    
    
    
    1,222
    
    
    
    86
    
    
    
    1,136
    
    
    
    1,113
    
    
    
    135
    
    
    
    978Gas Distribution  US
    
    
    638
    
    
    
    
    
    
    
    638
    
    
    
    571
    
    
    
    
    
    
    
    571
    
    
    
    427
    
    
    
    
    
    
    
    427Electricity Distribution  US
    
    
    3,004
    
    
    
    2
    
    
    
    3,002
    
    
    
    3,134
    
    
    
    2
    
    
    
    3,132
    
    
    
    2,633
    
    
    
    2
    
    
    
    2,631US stranded cost recoveries
    
    
    426
    
    
    
    
    
    
    
    426
    
    
    
    517
    
    
    
    
    
    
    
    517
    
    
    
    436
    
    
    
    
    
    
    
    436Other activities
    
    
    567
    
    
    
    60
    
    
    
    507
    
    
    
    701
    
    
    
    146
    
    
    
    555
    
    
    
    734
    
    
    
    256
    
    
    
    4788,914
    
    
    
    219
    
    
    
    8,695
    
    
    
    9,165
    
    
    
    297
    
    
    
    8,868
    
    
    
    7,622
    
    
    
    448
    
    
    
    7,174Total excluding US stranded cost recoveries
    
    
    
    
    
    
    
    
    
    8,269
    
    
    
    
    
    
    
    
    
    
    
    8,351
    
    
    
    
    
    
    
    
    
    
    
    6,738US stranded cost recoveries
    
    
    
    
    
    
    
    
    
    
    426
    
    
    
    
    
    
    
    
    
    
    
    517
    
    
    
    
    
    
    
    
    
    
    
    4368,695
    
    
    
    
    
    
    
    
    
    
    
    8,868
    
    
    
    
    
    
    
    
    
    
    
    7,174Geographical segmentsUK
    
    
    
    
    
    
    
    
    
    
    4,397
    
    
    
    
    
    
    
    
    
    
    
    4,374
    
    
    
    
    
    
    
    
    
    
    
    3,428US
    
    
    
    
    
    
    
    
    
    
    4,298
    
    
    
    
    
    
    
    
    
    
    
    4,494
    
    
    
    
    
    
    
    
    
    
    
    3,7468,695
    
    
    
    
    
    
    
    
    
    
    
    8,868
    
    
    
    
    
    
    
    
    
    
    
    7,174
 * Comparatives have been adjusted to reclassify amounts relating to discontinued operations
    b)
Operating profit
 Before exceptional items
    
    
    After exceptional itemsand remeasurements
    
    
    and remeasurements2007
    
    
    2006*
    
    
    2005*
    
    
    2007
    
    
    2006*
    
    
    2005*£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mBusiness segments  continuing operationsTransmission  UK
    
    
    946
    
    
    
    844
    
    
    
    859
    
    
    
    936
    
    
    
    843
    
    
    
    857Transmission  US
    
    
    108
    
    
    
    127
    
    
    
    126
    
    
    
    107
    
    
    
    127
    
    
    
    119Gas Distribution  UK
    
    
    409
    
    
    
    483
    
    
    
    424
    
    
    
    412
    
    
    
    432
    
    
    
    333Gas Distribution  US
    
    
    71
    
    
    
    47
    
    
    
    33
    
    
    
    67
    
    
    
    47
    
    
    
    17Electricity Distribution  US
    
    
    364
    
    
    
    317
    
    
    
    342
    
    
    
    355
    
    
    
    317
    
    
    
    241US stranded cost recoveries
    
    
    423
    
    
    
    489
    
    
    
    465
    
    
    
    504
    
    
    
    440
    
    
    
    427Other activities
    
    
    133
    
    
    
    150
    
    
    
    152
    
    
    
    132
    
    
    
    168
    
    
    
    1192,454
    
    
    
    2,457
    
    
    
    2,401
    
    
    
    2,513
    
    
    
    2,374
    
    
    
    2,113Total excluding US stranded cost recoveries
    
    
    2,031
    
    
    
    1,968
    
    
    
    1,936
    
    
    
    2,009
    
    
    
    1,934
    
    
    
    1,686US stranded cost recoveries
    
    
    423
    
    
    
    489
    
    
    
    465
    
    
    
    504
    
    
    
    440
    
    
    
    4272,454
    
    
    
    2,457
    
    
    
    2,401
    
    
    
    2,513
    
    
    
    2,374
    
    
    
    2,113Geographical segmentsUK
    
    
    1,491
    
    
    
    1,478
    
    
    
    1,435
    
    
    
    1,482
    
    
    
    1,423
    
    
    
    1,310US
    
    
    963
    
    
    
    979
    
    
    
    966
    
    
    
    1,031
    
    
    
    930
    
    
    
    803Rest of the world
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    2,454
    
    
    
    2,457
    
    
    
    2,401
    
    
    
    2,513
    
    
    
    2,374
    
    
    
    2,113
 * Comparatives have been adjusted to reclassify amounts relating to discontinued operations




---



##### Table of Contents



Annual Report and Accounts 2006/07 115
 2. Segmental analysis (continued)
c) Share of post-tax results of joint ventures
  d) Total assets and total liabilities
 Total assets
    
    Total liabilities2007
    
    
    2006*
    
    
    2007
    
    
    2006*£m
    
    
    £m
    
    
    £m
    
    
    £mBusiness segments  continuing operationsTransmission  UK
    
    
    8,060
    
    
    
    7,181
    
    
    
    (946
    )
    
    
    (1,447
    )Transmission  US
    
    
    1,481
    
    
    
    1,653
    
    
    
    (19
    )
    
    
    (48
    )Gas Distribution  UK
    
    
    5,404
    
    
    
    5,091
    
    
    
    (1,192
    )
    
    
    (1,154
    )Gas Distribution  US
    
    
    1,109
    
    
    
    867
    
    
    
    (231
    )
    
    
    (230
    )Electricity Distribution  US
    
    
    4,471
    
    
    
    4,889
    
    
    
    (1,320
    )
    
    
    (1,557
    )US stranded cost recoveries
    
    
    65
    
    
    
    104
    
    
    
    (377
    )
    
    
    (665
    )Other activities
    
    
    1,478
    
    
    
    1,543
    
    
    
    (1,091
    )
    
    
    (1,076
    )22,068
    
    
    
    21,328
    
    
    
    (5,176
    )
    
    
    (6,177
    )Discontinued operations
    
    
    1,968
    
    
    
    1,924
    
    
    
    (477
    )
    
    
    (323
    )24,036
    
    
    
    23,252
    
    
    
    (5,653
    )
    
    
    (6,500
    )Joint ventures  continuing operations (electricity activities)
    
    
    5
    
    
    
    12
    
    
    
    
    
    
    
    Unallocated
    
    
    4,348
    
    
    
    2,660
    
    
    
    (18,600
    )
    
    
    (15,931
    )28,389
    
    
    
    25,924
    
    
    
    (24,253
    )
    
    
    (22,431
    )Geographical segmentsUK
    
    
    16,405
    
    
    
    15,227
    
    
    
    (3,683
    )
    
    
    (3,948
    )US
    
    
    7,288
    
    
    
    7,659
    
    
    
    (1,966
    )
    
    
    (2,522
    )Rest of the World
    
    
    348
    
    
    
    378
    
    
    
    (4
    )
    
    
    (30
    )Unallocated
    
    
    4,348
    
    
    
    2,660
    
    
    
    (18,600
    )
    
    
    (15,931
    )28,389
    
    
    
    25,924
    
    
    
    (24,253
    )
    
    
    (22,431
    )
 * Comparatives have been adjusted to reclassify amounts relating to discontinued operations
  e) Other segmental information
 Capital expenditure
    
    Depreciation and amortisation2007
    
    
    2006
    *
    
    2005
    *
    
    2007
    
    
    2006
    *
    
    2005
    *£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mBusiness segments  continuing operationsTransmission  UK
    
    
    1,235
    
    
    
    849
    
    
    
    529
    
    
    
    352
    
    
    
    377
    
    
    
    296Transmission  US
    
    
    108
    
    
    
    91
    
    
    
    74
    
    
    
    41
    
    
    
    45
    
    
    
    41Gas Distribution  UK
    
    
    490
    
    
    
    444
    
    
    
    359
    
    
    
    170
    
    
    
    161
    
    
    
    163Gas Distribution  US
    
    
    36
    
    
    
    25
    
    
    
    30
    
    
    
    24
    
    
    
    19
    
    
    
    18Electricity Distribution  US
    
    
    218
    
    
    
    219
    
    
    
    204
    
    
    
    127
    
    
    
    126
    
    
    
    117Other activities
    
    
    258
    
    
    
    279
    
    
    
    165
    
    
    
    157
    
    
    
    160
    
    
    
    1472,345
    
    
    
    1,907
    
    
    
    1,361
    
    
    
    871
    
    
    
    888
    
    
    
    782Discontinued operations
    
    
    30
    
    
    
    201
    
    
    
    544
    
    
    
    72
    
    
    
    77
    
    
    
    2132,375
    
    
    
    2,108
    
    
    
    1,905
    
    
    
    943
    
    
    
    965
    
    
    
    995Geographical segmentsUK
    
    
    2,007
    
    
    
    1,697
    
    
    
    1,455
    
    
    
    739
    
    
    
    771
    
    
    
    816US
    
    
    365
    
    
    
    340
    
    
    
    312
    
    
    
    196
    
    
    
    194
    
    
    
    179Rest of the World
    
    
    3
    
    
    
    71
    
    
    
    138
    
    
    
    8
    
    
    
    
    
    
    
    2,375
    
    
    
    2,108
    
    
    
    1,905
    
    
    
    943
    
    
    
    965
    
    
    
    995
 * Comparatives have been adjusted to reclassify amounts relating to discontinued operations




---



##### Table of Contents



116 National Grid plc
 
 3. Other operating income
 
 4. Operating costs
 Before exceptional items
    
    
    Exceptional itemsand remeasurements
    
    
    and remeasurements
    
    
    Total2007
    
    
    2006*
    
    
    2005*
    
    
    2007
    
    
    2006*
    
    
    2005*
    
    
    2007
    
    
    2006*
    
    
    2005*£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mDepreciation of property, plant
and equipment
    
    
    830
    
    
    
    844
    
    
    
    743
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    830
    
    
    
    844
    
    
    
    743Amortisation of intangible assets
    
    
    41
    
    
    
    44
    
    
    
    39
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    44
    
    
    
    39Payroll costs (note 6(a))
    
    
    794
    
    
    
    807
    
    
    
    795
    
    
    
    26
    
    
    
    47
    
    
    
    91
    
    
    
    820
    
    
    
    854
    
    
    
    886Other operating charges:Purchases of electricity
    
    
    1,674
    
    
    
    1,928
    
    
    
    1,451
    
    
    
    (81
    )
    
    
    49
    
    
    
    38
    
    
    
    1,593
    
    
    
    1,977
    
    
    
    1,489Purchases of gas
    
    
    544
    
    
    
    566
    
    
    
    357
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    544
    
    
    
    566
    
    
    
    357Rates and property taxes
    
    
    472
    
    
    
    437
    
    
    
    403
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    472
    
    
    
    437
    
    
    
    403Electricity transmission services
scheme direct costs
    
    
    558
    
    
    
    536
    
    
    
    301
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    558
    
    
    
    536
    
    
    
    301Payments to Scottish electricity
transmission network owners
    
    
    237
    
    
    
    259
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    237
    
    
    
    259
    
    
    
    Other operating charges
    
    
    1,174
    
    
    
    1,070
    
    
    
    751
    
    
    
    (4
    )
    
    
    (13
    )
    
    
    159
    
    
    
    1,170
    
    
    
    1,057
    
    
    
    9104,659
    
    
    
    4,796
    
    
    
    3,263
    
    
    
    (85
    )
    
    
    36
    
    
    
    197
    
    
    
    4,574
    
    
    
    4,832
    
    
    
    3,4606,324
    
    
    
    6,491
    
    
    
    4,840
    
    
    
    (59
    )
    
    
    83
    
    
    
    288
    
    
    
    6,265
    
    
    
    6,574
    
    
    
    5,128Operating costs include:Research expenditure
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    7
    
    
    
    9Operating lease rentalsPlant and machinery
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    23
    
    
    
    20Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63
    
    
    
    53
    
    
    
    36* Comparatives have been adjusted to reclassify amounts relating to discontinued operationsAuditors
remunerationAudit servicesAudit of parent company and consolidated financial statements
    
    1.2
    
    
    
    1.4
    
    
    
    1.1Other servicesAudit of subsidiary financial statements pursuant to legislation
    
    2.8
    
    
    
    2.0
    
    
    
    2.6Other services supplied pursuant to legislation
    
    2.2
    
    
    
    0.8
    
    
    
    1.1Services relating to tax compliance
    
    0.6
    
    
    
    0.5
    
    
    
    0.5Services relating to tax advisory
    
    0.7
    
    
    
    0.9
    
    
    
    0.8Services relating to corporate finance transactions
    
    1.4
    
    
    
    0.4
    
    
    
    0.3All other services
    
    1.3
    
    
    
    0.8
    
    
    
    1.3Fees paid by associated pension schemesAudit of pension schemes of the company pursuant to legislation
    
    0.2
    
    
    
    0.1
    
    
    
    0.110.4
    
    
    
    6.9
    
    
    
    7.8Total services pursuant to legislation
    
    6.4
    
    
    
    4.3
    
    
    
    4.9Total other services
    
    4.0
    
    
    
    2.6
    
    
    
    2.910.4
    
    
    
    6.9
    
    
    
    7.8




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##### Table of Contents



Annual Report and Accounts 2006/07 117
 
 5. Exceptional items and remeasurements
 2007
    
    
    2006*
    
    
    2005*£m
    
    
    £m
    
    
    £mExceptional items  restructuring costs (i)
    
    
    22
    
    
    
    55
    
    
    
    108Exceptional items  past service pension costs (ii)
    
    
    
    
    
    
    
    
    
    
    41Exceptional items  environmental related provisions (iii)
    
    
    
    
    
    
    
    
    
    
    101Exceptional items  profit on sale and reversal of impairment (iv)
    
    
    
    
    
    
    (21
    )
    
    
    Remeasurements  commodity contracts (v)
    
    
    (81
    )
    
    
    49
    
    
    
    38Total exceptional items and remeasurements included within operating profit
    
    
    (59
    )
    
    
    83
    
    
    
    288Exceptional finance costs (vi)
    
    
    45
    
    
    
    49
    
    
    
    Remeasurements  commodity contracts (v)
    
    
    19
    
    
    
    14
    
    
    
    Remeasurements  net losses/(gains) on derivative financial instruments (vii)
    
    
    153
    
    
    
    (6
    )
    
    
    Total exceptional items and remeasurements included within finance costs
    
    
    217
    
    
    
    57
    
    
    
    Total exceptional items and remeasurements before taxation
    
    
    158
    
    
    
    140
    
    
    
    288Tax on restructuring costs (i)
    
    
    (12
    )
    
    
    (7
    )
    
    
    (34
    )Tax on exceptional past service pension costs (ii)
    
    
    
    
    
    
    
    
    
    
    (17
    )Tax on environmental related provisions (iii)
    
    
    
    
    
    
    
    
    
    
    (39
    )Tax on commodity contract remeasurements (v)
    
    
    25
    
    
    
    (25
    )
    
    
    (15
    )Tax on exceptional finance costs (vi)
    
    
    (14
    )
    
    
    (15
    )
    
    
    Tax on derivative financial instrument remeasurements (vii)
    
    
    (169
    )
    
    
    17
    
    
    
    Other exceptional tax credits (viii)
    
    
    
    
    
    
    
    
    
    
    (13
    )Tax on exceptional items and remeasurements
    
    
    (170
    )
    
    
    (30
    )
    
    
    (118
    )Total exceptional items and remeasurements
    
    
    (12
    )
    
    
    110
    
    
    
    170Total exceptional items after taxation
    
    
    41
    
    
    
    61
    
    
    
    147Total commodity contract remeasurements after taxation
    
    
    (37
    )
    
    
    38
    
    
    
    23Total derivative financial instrument remeasurements after taxation
    
    
    (16
    )
    
    
    11
    
    
    
    Total exceptional items and remeasurements after taxation
    
    
    (12
    )
    
    
    110
    
    
    
    170
 * Comparatives have been adjusted to reclassify amounts relating to discontinued operations (i)
    
    Restructuring costs relate to planned cost reduction programmes in the UK and US
(2006: UK only) businesses. For the year ended 31 March 2007, restructuring costs included
pension related costs of £10m arising as a result of redundancies (2006: £25m; 2005:
£22m).(ii)
    
    Past service pension costs arose from the renegotiation of terms and conditions
of service with certain employees in the US.(iii)
    
    During the year ended 31 March 2005, a review of the environmental provisions
was undertaken to take into account the impact of changes to UK regulations on waste
disposal. This review, together with related revisions to the expected UK expenditure
profile, resulted in a charge of £41m in 2005. Following a similar review in the US of
environmental provisions, an additional exceptional charge of £60m was made for site
restoration, which reflected experience of restoring similar sites.(iv)
    
    Reversal of a prior year impairment of £13m related to National Grids investment
in Copperbelt Energy Corporation (CEC) and a gain on disposal of an investment in Energis
Polska of £8m.(v)
    
    Remeasurements  commodity contracts represent mark-to-market movements on
certain commodity contract obligations, primarily indexed-linked swap contracts, in the
US. Under the existing rate plans in the US, commodity costs are fully recovered from
customers, although the pattern of recovery may differ from the pattern of costs incurred.
These movements are comprised of those impacting operating profit which are based on the
change in the commodity contract liability and those impacting finance costs as a result
of changing discount rates due to market fluctuations.(v)
    
    Exceptional finance costs for the year ended 31 March 2007 represent debt
redemption costs related to the restructuring of our debt portfolio. For 2006 these
related to costs incurred on the early redemption of debt following the disposal of four
gas distribution networks (£39m), together with issue costs associated with the B share
scheme (£10m).(vii)
    
    Remeasurements  net losses/(gains) on derivative financial instruments
comprise losses and gains 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 equity or offset by adjustments to the
carrying value of debt.These remeasurements include a loss of £126m (2006: £nil; 2005: £nil) relating to pre-tax
losses on investment related derivative financial instruments that offset on a post-tax
basis. The tax credit includes a £56m adjustment in respect of prior years (2006: £nil; 2005:
£nil).(viii)
    
    The exceptional tax credit in 2005 includes: a credit of £22m associated with
the prior period disposal of Energis, a former associate company; a £3m credit associated
with the prior period write-down of investments; and a £12m charge relating to the
settlement of the liabilities arising from operating National Grids Qualifying Employee
Share Ownership Trust.




---



##### Table of Contents



118 National Grid plc
 
 6. Payroll costs and employees
a) Payroll costs
 2007
    
    
    2006*
    
    
    2005*£m
    
    
    £m
    
    
    £mWages and salaries
    
    
    819
    
    
    
    857
    
    
    
    876Social security costs
    
    
    65
    
    
    
    59
    
    
    
    55Other pension costs
    
    
    132
    
    
    
    140
    
    
    
    146Share-based payments
    
    
    15
    
    
    
    14
    
    
    
    12Severance costs
    
    
    14
    
    
    
    23
    
    
    
    121,045
    
    
    
    1,093
    
    
    
    1,101Less: payroll costs capitalised
    
    
    (225
    )
    
    
    (239
    )
    
    
    (215
    )820
    
    
    
    854
    
    
    
    886
 * Comparatives have been adjusted to reclassify amounts relating to discontinued operations
  b)
Number of employees
 31 March
    
    
    Average
    
    
    Average*
    
    
    Average*2007
    
    
    2007
    
    
    2006
    
    
    2005Number
    
    
    Number
    
    
    Number
    
    
    NumberUK
    
    
    10,015
    
    
    
    10,356
    
    
    
    10,722
    
    
    
    11,131US
    
    
    8,753
    
    
    
    8,618
    
    
    
    8,400
    
    
    
    8,649Rest of the world
    
    
    8
    
    
    
    8
    
    
    
    4
    
    
    
    9Continuing operations
    
    
    18,776
    
    
    
    18,982
    
    
    
    19,126
    
    
    
    19,789Discontinued operations
    
    
    735
    
    
    
    730
    
    
    
    1,403
    
    
    
    4,81819,511
    
    
    
    19,712
    
    
    
    20,529
    
    
    
    24,607
 * Comparatives have been adjusted to reclassify amounts relating to discontinued operations
  
    
    the US are either directly or indirectly employed in the transmission and
distribution of electricity or the distribution of gas.
    
    the UK are either directly or indirectly employed in the transmission and
distribution of gas or the transmission of electricity.
  c)
Key management compensation
 2007
    
    
    2006
    
    
    2005£m
    
    
    £m
    
    
    £mSalaries and short-term employee benefits
    
    
    8
    
    
    
    7
    
    
    
    6Post-employment benefits
    
    
    5
    
    
    
    5
    
    
    
    4Termination benefits
    
    
    1
    
    
    
    
    
    
    
    Share-based payments
    
    
    3
    
    
    
    2
    
    
    
    217
    
    
    
    14
    
    
    
    12
  
 7.
Directors emoluments




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##### Table of Contents



Annual Report and Accounts 2006/07 119
 8. Pensions and other post-retirement benefits
Substantially all National Grids employees are members of either defined benefit or defined
contribution pension plans.  National Grid UK Pension Scheme
   Electricity Supply Pension Scheme
    National Grid Wireless Pension Scheme




---



##### Table of Contents



120 National Grid plc
 8. Pensions and other post-retirement benefits (continued)
US defined benefit pension plans
   US retiree healthcare and life insurance
   Pensions
    
    US other post-retirement benefits2007
    
    
    2006*
    
    
    2005*
    
    
    2007
    
    
    2006
    
    
    2005£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mThe amounts recognised in the income statement are as follows:Defined contribution scheme costs
    
    
    3
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Defined benefit scheme costsCurrent service cost
    
    
    113
    
    
    
    112
    
    
    
    106
    
    
    
    15
    
    
    
    16
    
    
    
    11Past service cost
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    7
    
    
    
    6
    
    
    
    25Curtailment (gain)/loss on redundancies
    
    
    (10
    )
    
    
    (24
    )
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    Special termination benefits on redundancies
    
    
    23
    
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Curtailment cost  augmentations
    
    
    3
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total in payroll costs  continuing
    
    
    132
    
    
    
    140
    
    
    
    146
    
    
    
    22
    
    
    
    22
    
    
    
    36Interest cost
    
    
    806
    
    
    
    826
    
    
    
    824
    
    
    
    63
    
    
    
    63
    
    
    
    56Expected return on plan assets
    
    
    (885
    )
    
    
    (860
    )
    
    
    (842
    )
    
    
    (41
    )
    
    
    (41
    )
    
    
    (39
    )Total in finance costs  continuing
    
    
    (79
    )
    
    
    (34
    )
    
    
    (18
    )
    
    
    22
    
    
    
    22
    
    
    
    17Current service costs
    
    
    2
    
    
    
    7
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    Interest cost
    
    
    2
    
    
    
    2
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Expected return on plan assets
    
    
    (2
    )
    
    
    (2
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    Curtailment/settlement gain on sale of distribution networks
    
    
    
    
    
    
    (168
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total in discontinued operations
    
    
    2
    
    
    
    (161
    )
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    
 * Comparatives have been adjusted to reclassify amounts relating to discontinued operations




---



##### Table of Contents



Annual Report and Accounts 2006/07 121
 8. Pensions and other post-retirement benefits (continued)
 Pensions
    
    US other post-retirement benefits2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mThe amounts recognised in the balance sheet are as follows:Present value of funded obligations
    
    
    (16,044
    )
    
    
    (16,520
    )
    
    
    (15,679
    )
    
    
    (1,126
    )
    
    
    (1,223
    )
    
    
    (1,068
    )Fair value of plan assets
    
    
    15,468
    
    
    
    15,341
    
    
    
    14,077
    
    
    
    531
    
    
    
    568
    
    
    
    488(576
    )
    
    
    (1,179
    )
    
    
    (1,602
    )
    
    
    (595
    )
    
    
    (655
    )
    
    
    (580
    )Present value of unfunded obligations
    
    
    (83
    )
    
    
    (96
    )
    
    
    (90
    )
    
    
    
    
    
    
    
    
    
    
    Other post-employment liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33
    )
    
    
    (34
    )
    
    
    (34
    )Unrecognised past service cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42
    
    
    
    49
    
    
    
    50Net liability in the balance sheet
    
    
    (659
    )
    
    
    (1,275
    )
    
    
    (1,692
    )
    
    
    (586
    )
    
    
    (640
    )
    
    
    (564
    )Liabilities
    
    
    (696
    )
    
    
    (1,275
    )
    
    
    (1,718
    )
    
    
    (586
    )
    
    
    (640
    )
    
    
    (564
    )Assets
    
    
    37
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    Net liability
    
    
    (659
    )
    
    
    (1,275
    )
    
    
    (1,692
    )
    
    
    (586
    )
    
    
    (640
    )
    
    
    (564
    )Changes in the present value of the defined benefit obligationOpening defined benefit obligation (including unfunded obligations)
    
    
    16,616
    
    
    
    15,769
    
    
    
    15,403
    
    
    
    1,223
    
    
    
    1,068
    
    
    
    1,002Current service cost
    
    
    115
    
    
    
    119
    
    
    
    134
    
    
    
    15
    
    
    
    16
    
    
    
    11Interest cost
    
    
    808
    
    
    
    828
    
    
    
    825
    
    
    
    63
    
    
    
    63
    
    
    
    56Actuarial (gains)/losses
    
    
    (450
    )
    
    
    1,300
    
    
    
    147
    
    
    
    4
    
    
    
    40
    
    
    
    5Curtailment (gain)/loss on redundancies
    
    
    (10
    )
    
    
    (24
    )
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    Curtailment gain on sale of distribution networks
    
    
    
    
    
    
    (168
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Settlement on sale of distribution networks
    
    
    
    
    
    
    (589
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net transfers and disposals
    
    
    1
    
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gains on settlements
    
    
    
    
    
    
    (20
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    Special termination benefits
    
    
    23
    
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Curtailment cost  augmentations
    
    
    3
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Acquisition of subsidiary undertakings
    
    
    89
    
    
    
    
    
    
    
    31
    
    
    
    19
    
    
    
    
    
    
    
    Plan amendment
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    6
    
    
    
    
    
    
    
    79Employee contributions
    
    
    14
    
    
    
    14
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    Benefits paid (including unfunded obligations)
    
    
    (845
    )
    
    
    (775
    )
    
    
    (783
    )
    
    
    (62
    )
    
    
    (59
    )
    
    
    (52
    )Transferred to liabilities of businesses held for sale
    
    
    (48
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exchange adjustments
    
    
    (189
    )
    
    
    127
    
    
    
    (43
    )
    
    
    (142
    )
    
    
    95
    
    
    
    (33
    )Closing defined benefit obligation (including unfunded obligations)
    
    
    16,127
    
    
    
    16,616
    
    
    
    15,769
    
    
    
    1,126
    
    
    
    1,223
    
    
    
    1,068Changes in the fair value of plan assetsOpening fair value of plan assets
    
    
    15,341
    
    
    
    14,077
    
    
    
    13,411
    
    
    
    568
    
    
    
    488
    
    
    
    496Expected return on plan assets
    
    
    887
    
    
    
    862
    
    
    
    843
    
    
    
    41
    
    
    
    41
    
    
    
    39Actuarial (losses)/gains
    
    
    (93
    )
    
    
    1,497
    
    
    
    418
    
    
    
    12
    
    
    
    24
    
    
    
    (13
    )Assets distributed on settlements and transfers
    
    
    
    
    
    
    (623
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Transfers in
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Employer contributions
    
    
    276
    
    
    
    191
    
    
    
    184
    
    
    
    28
    
    
    
    30
    
    
    
    32Employee contributions
    
    
    14
    
    
    
    14
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    Acquisition of subsidiary undertakings
    
    
    82
    
    
    
    
    
    
    
    21
    
    
    
    7
    
    
    
    
    
    
    
    Benefits paid
    
    
    (845
    )
    
    
    (774
    )
    
    
    (783
    )
    
    
    (58
    )
    
    
    (59
    )
    
    
    (52
    )Transferred to liabilities of businesses held for sale
    
    
    (46
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exchange adjustments
    
    
    (149
    )
    
    
    97
    
    
    
    (34
    )
    
    
    (67
    )
    
    
    44
    
    
    
    (14
    )Closing fair value of plan assets
    
    
    15,468
    
    
    
    15,341
    
    
    
    14,077
    
    
    
    531
    
    
    
    568
    
    
    
    488Actual return on plan assets
    
    
    794
    
    
    
    2,359
    
    
    
    1,261
    
    
    
    53
    
    
    
    65
    
    
    
    26Expected contributions to defined benefit plans in the following year
    
    
    307
    
    
    
    153
    
    
    
    164
    
    
    
    27
    
    
    
    50
    
    
    
    50Amounts recognised in statement of recognised income and expenseActuarial net gain/(loss) during the year
    
    
    357
    
    
    
    197
    
    
    
    271
    
    
    
    8
    
    
    
    (16
    )
    
    
    (18
    )Exchange differences
    
    
    40
    
    
    
    (30
    )
    
    
    9
    
    
    
    75
    
    
    
    (51
    )
    
    
    19Total recognised for the year
    
    
    397
    
    
    
    167
    
    
    
    280
    
    
    
    83
    
    
    
    (67
    )
    
    
    1Cumulative actuarial gain/(loss)
    
    
    825
    
    
    
    468
    
    
    
    271
    
    
    
    (26
    )
    
    
    (34
    )
    
    
    (18
    )




---



##### Table of Contents



122 National Grid plc
 8. Pensions and other post-retirement benefits (continued)
 UK pensions
    
    US pensions
    
    US other post-retirement benefits2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005%
    
    
    %
    
    
    %
    
    
    %
    
    
    %
    
    
    %
    
    
    %
    
    
    %
    
    
    %Equities (i)
    
    
    35.8
    
    
    
    40.7
    
    
    
    41.5
    
    
    
    63.7
    
    
    
    66.4
    
    
    
    64.5
    
    
    
    68.5
    
    
    
    69.0
    
    
    
    65.0Corporate bonds
    
    
    18.6
    
    
    
    19.2
    
    
    
    17.3
    
    
    
    33.5
    
    
    
    32.0
    
    
    
    34.0
    
    
    
    31.1
    
    
    
    30.6
    
    
    
    33.8Gilts
    
    
    33.9
    
    
    
    30.1
    
    
    
    31.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Property
    
    
    8.5
    
    
    
    8.5
    
    
    
    8.0
    
    
    
    
    
    
    
    0.2
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    3.2
    
    
    
    1.5
    
    
    
    1.3
    
    
    
    2.8
    
    
    
    1.4
    
    
    
    1.2
    
    
    
    0.4
    
    
    
    0.4
    
    
    
    1.2Total
    
    
    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 2007 were ordinary shares of National Grid
plc with a value of £24m (2006: £25m). No other financial instrument issued by National
Grid plc was held (2006: £nil).
 The principal actuarial assumptions used were:Discount rate (i)
    
    
    5.4
    
    
    
    4.9
    
    
    
    5.4
    
    
    
    5.8
    
    
    
    6.0
    
    
    
    5.8
    
    
    
    5.8
    
    
    
    6.0
    
    
    
    5.8Expected return on plan assets
    
    
    6.1
    
    
    
    5.8
    
    
    
    6.2
    
    
    
    8.3
    
    
    
    8.3
    
    
    
    8.3
    
    
    
    8.3
    
    
    
    8.3
    
    
    
    8.3Rate of increase in salaries (ii)
    
    
    4.2
    
    
    
    3.9
    
    
    
    3.9
    
    
    
    4.1
    
    
    
    4.1
    
    
    
    4.1
    
    
    
    4.1
    
    
    
    4.1
    
    
    
    4.1Rate of increase in pensions in payment
and deferred pensions
    
    
    3.3
    
    
    
    3.0
    
    
    
    3.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aRate of increase in Retail Price Index
or equivalent
    
    
    3.2
    
    
    
    2.9
    
    
    
    2.9
    
    
    
    2.5
    
    
    
    3.0
    
    
    
    3.0
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aInitial healthcare cost trend rate
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    10.0
    
    
    
    10.0
    
    
    
    10.0Ultimate 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 prevailing in the UK and US debt markets at the balance sheet date.(ii)
    
    A promotional age-related scale has also been used where appropriate.(iii)
    
    The pensions and other post-retirement benefit assumptions allow for future
improvements in mortality.
  UK
    
    
    USyears
    
    
    yearsToday:Males
    
    
    20.1
    
    
    
    17.6Females
    
    
    22.5
    
    
    
    20.2In 20 years:Males
    
    
    21.2
    
    
    
    17.6Females
    
    
    23.6
    
    
    
    20.2
  n
    
    a 0.1% reduction in the discount rate would lead to an increase in the pension and
other post-retirement obligation of £260m and an increase in the annual pension cost of
£4m.n
    
    a 0.5% increase in the long-term rate of increase in salaries would lead to an
increase in the pension and other post-retirement obligation of £139m and an increase in
the annual pension cost of £8m.n
    
    an increase of one year to life expectations at age 60 would lead to an increase
in the pension and other post-retirement obligation of £557m and to an increase in the
annual pension cost of £4m.




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##### Table of Contents



Annual Report and Accounts 2006/07 123
 8. Pensions and other post-retirement benefits (continued)
  2007
    
    
    2006
    
    
    2005£m
    
    
    £m
    
    
    £mIncreaseEffect on the aggregate of the service cost and interest cost
    
    
    14
    
    
    
    15
    
    
    
    12Effect on defined benefit obligation
    
    
    170
    
    
    
    186
    
    
    
    156DecreaseEffect on the aggregate of the service cost and interest cost
    
    
    (12
    )
    
    
    (12
    )
    
    
    (10
    )Effect on defined benefit obligation
    
    
    (147
    )
    
    
    (161
    )
    
    
    (136
    )Experience gains on liabilities
    
    
    9
    
    
    
    192
    
    
    
    42Experience (losses)/gains on assets
    
    
    (81
    )
    
    
    1,521
    
    
    
    405
 
 9. Finance income and costs
 2007
    
    
    2006
    *
    
    2005
    *£m
    
    
    £m
    
    
    £mPensions  expected return on scheme assets
    
    
    926
    
    
    
    901
    
    
    
    881Interest income on financial instruments
    
    
    218
    
    
    
    135
    
    
    
    64Interest income and similar income
    
    
    1,144
    
    
    
    1,036
    
    
    
    945Pensions  interest on scheme liabilities
    
    
    (869
    )
    
    
    (889
    )
    
    
    (880
    )Interest expense on financial liabilities held at amortised cost
    
    
    (817
    )
    
    
    (742
    )
    
    
    (818
    )Exceptional debt redemption and B share issue costs
    
    
    (45
    )
    
    
    (49
    )
    
    
    Interest on derivatives
    
    
    (54
    )
    
    
    (49
    )
    
    
    Unwinding of discounts on provisions
    
    
    (21
    )
    
    
    (18
    )
    
    
    (14
    )Less: interest capitalised
    
    
    70
    
    
    
    60
    
    
    
    63Interest expense
    
    
    (1,736
    )
    
    
    (1,687
    )
    
    
    (1,649
    )Net gains/(losses) on derivative financial instruments:Ineffectiveness on derivatives designated as fair value hedges
    
    
    18
    
    
    
    (10
    )
    
    
    Ineffectiveness on derivatives designated as cash flow hedges
    
    
    
    
    
    
    17
    
    
    
    Ineffectiveness on derivatives designated as net investment hedges
    
    
    25
    
    
    
    (25
    )
    
    
    On undesignated forward rate risk relating to derivatives designated as net investment hedges
    
    
    (82
    )
    
    
    36
    
    
    
    On derivatives not designated as hedges or ineligible for hedge accounting
    
    
    (114
    )
    
    
    (12
    )
    
    
    Financial element of remeasurements on commodity contracts
    
    
    (19
    )
    
    
    (14
    )
    
    
    Net losses on derivative financial instruments and commodity contracts
    
    
    (172
    )
    
    
    (8
    )
    
    
    Interest expense and other finance costs
    
    
    (1,908
    )
    
    
    (1,695
    )
    
    
    (1,649
    )Net finance costs
    
    
    (764
    )
    
    
    (659
    )
    
    
    (704
    )Comprising:Interest income and similar income
    
    
    1,144
    
    
    
    1,036
    
    
    
    945Interest expense and other finance costsBefore exceptional items and remeasurements
    
    
    (1,691
    )
    
    
    (1,638
    )
    
    
    (1,649
    )Exceptional items and remeasurements
    
    
    (217
    )
    
    
    (57
    )
    
    
    (764
    )
    
    
    (659
    )
    
    
    (704
    )




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##### Table of Contents



124 National Grid plc
 
 10. Taxation
 Taxation on items charged/(credited) to the income statement
 2007
    
    
    2006
    *
    
    2005
    *£m
    
    
    £m
    
    
    £mUnited KingdomCorporation tax at 30%
    
    
    66
    
    
    
    269
    
    
    
    22Adjustment in respect of prior years (i)
    
    
    (28
    )
    
    
    (8
    )
    
    
    (19
    )Deferred tax (ii)
    
    
    177
    
    
    
    
    
    
    
    80215
    
    
    
    261
    
    
    
    83OverseasCorporate tax
    
    
    109
    
    
    
    122
    
    
    
    33Adjustment in respect of prior years
    
    
    (149
    )
    
    
    23
    
    
    
    (22
    )Deferred tax (ii)
    
    
    266
    
    
    
    129
    
    
    
    212226
    
    
    
    274
    
    
    
    223Taxation
    
    
    441
    
    
    
    535
    
    
    
    306Comprising:Taxation excluding exceptional items and remeasurements
    
    
    611
    
    
    
    565
    
    
    
    424Taxation on exceptional items and remeasurements (note 5)
    
    
    (170
    )
    
    
    (30
    )
    
    
    (118
    )441
    
    
    
    535
    
    
    
    306
  (i)
    
    The UK corporation tax adjustment in respect of prior years includes £51m (2006: £nil; 2005:
£10m) that relates to exceptional items and remeasurements.(ii)
    
    Included within the deferred tax charge is an amount relating to prior years of £73m (2006:
£35m tax credit; 2005: £11m tax credit) before exceptional items and remeasurements and £68m (2006:
£35m tax credit; 2005: £14m tax credit) after exceptional items and remeasurements respectively.
 Taxation on items charged/(credited) to equity
 2007
    
    
    2006
    
    
    2005£m
    
    
    £m
    
    
    £mCorporation tax credit on employee share schemes
    
    
    (2
    )
    
    
    
    
    
    
    Deferred tax charge on available-for-sale investments
    
    
    1
    
    
    
    1
    
    
    
    Deferred tax charge/(credit) on revaluation of cash flow hedges
    
    
    10
    
    
    
    (20
    )
    
    
    Deferred tax credit on employee share schemes
    
    
    (11
    )
    
    
    (7
    )
    
    
    (4
    )Deferred tax charge on actuarial gains
    
    
    70
    
    
    
    62
    
    
    
    6668
    
    
    
    36
    
    
    
    62Total tax charge recognised in consolidated statement of recognised income and expense
    
    
    81
    
    
    
    43
    
    
    
    66Total tax credit recognised directly in equity (note 32)
    
    
    (13
    )
    
    
    (7
    )
    
    
    (4
    )68
    
    
    
    36
    
    
    
    62
  Before
    
    
    After
    
    
    Before
    
    
    After
    
    
    Before
    
    
    Afterexceptional
    
    
    exceptional
    
    
    exceptional
    
    
    exceptional
    
    
    exceptional
    
    
    exceptionalitems and
    
    
    items and
    
    
    items and
    
    
    items and
    
    
    items and
    
    
    items andremeasure-
    
    
    remeasure-
    
    
    remeasure-
    
    
    remeasure-
    
    
    remeasure-
    
    
    remeasure-ments
    
    
    ments
    
    
    ments
    
    
    ments
    
    
    ments
    
    
    ments2007
    
    
    2007
    
    
    2006
    *
    
    2006
    *
    
    2005
    *
    
    2005
    *£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mProfit before taxationBefore exceptional items and remeasurements
    
    
    1,909
    
    
    
    1,909
    
    
    
    1,858
    
    
    
    1,858
    
    
    
    1,700
    
    
    
    1,700Exceptional items and remeasurements
    
    
    
    
    
    
    (158
    )
    
    
    
    
    
    
    (140
    )
    
    
    
    
    
    
    (288
    )Profit before taxation from continuing operations
    
    
    1,909
    
    
    
    1,751
    
    
    
    1,858
    
    
    
    1,718
    
    
    
    1,700
    
    
    
    1,412Profit on continuing operations multiplied by rate of corporation
tax in the UK of 30% (2006: 30%; 2005: 30%)
    
    
    573
    
    
    
    525
    
    
    
    557
    
    
    
    515
    
    
    
    510
    
    
    
    424Effects of:Adjustments in respect of previous years
    
    
    (53
    )
    
    
    (109
    )
    
    
    (16
    )
    
    
    (12
    )
    
    
    (41
    )
    
    
    (54
    )Expenses not deductible for tax purposes
    
    
    44
    
    
    
    111
    
    
    
    84
    
    
    
    108
    
    
    
    85
    
    
    
    47Non-taxable income
    
    
    (61
    )
    
    
    (154
    )
    
    
    (178
    )
    
    
    (180
    )
    
    
    (170
    )
    
    
    (120
    )Adjustment in respect of foreign tax rates
    
    
    64
    
    
    
    70
    
    
    
    68
    
    
    
    58
    
    
    
    37
    
    
    
    22Impact of employee share schemes
    
    
    9
    
    
    
    9
    
    
    
    (5
    )
    
    
    (5
    )
    
    
    (2
    )
    
    
    (2
    )Other
    
    
    35
    
    
    
    (11
    )
    
    
    55
    
    
    
    51
    
    
    
    5
    
    
    
    (11
    )Total taxation from continuing operations
    
    
    611
    
    
    
    441
    
    
    
    565
    
    
    
    535
    
    
    
    424
    
    
    
    306%
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %At the effective income tax rate
    
    
    32.0
    
    
    
    25.2
    
    
    
    30.4
    
    
    
    31.1
    
    
    
    24.9
    
    
    
    21.7
  Factors that may affect future tax charges




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##### Table of Contents



Annual Report and Accounts 2006/07 125
 
 11. Discontinued operations
  Results of discontinued operations
 2007
    
    
    2006
    
    
    2005£m
    
    
    £m
    
    
    £mRevenue
    
    
    383
    
    
    
    493
    
    
    
    1,313Operating costs
    
    
    (321
    )
    
    
    (382
    )
    
    
    (848
    )Operating profit before exceptional items
    
    
    117
    
    
    
    131
    
    
    
    552Exceptional items (i)
    
    
    (55
    )
    
    
    (20
    )
    
    
    (87
    )Total operating profit from discontinued operations
    
    
    62
    
    
    
    111
    
    
    
    465Net finance costs before remeasurement finance income
    
    
    (2
    )
    
    
    (4
    )
    
    
    (2
    )Remeasurement finance income (ii)
    
    
    37
    
    
    
    
    
    
    
    Share of post-tax results of joint venture
    
    
    
    
    
    
    
    
    
    
    (5
    )Profit before tax from discontinued operations
    
    
    97
    
    
    
    107
    
    
    
    458Taxation
    
    
    (11
    )
    
    
    (45
    )
    
    
    (153
    )Profit after tax from discontinued operations
    
    
    86
    
    
    
    62
    
    
    
    305Gain on disposal of gas distribution networks
    
    
    
    
    
    
    2,636
    
    
    
    Gain on disposal of joint venture
    
    
    
    
    
    
    
    
    
    
    13Gain on disposal of discontinued operations before tax
    
    
    
    
    
    
    2,636
    
    
    
    13Taxation
    
    
    
    
    
    
    (31
    )
    
    
    Gain on disposal of discontinued operations
    
    
    
    
    
    
    2,605
    
    
    
    13Total profit for the year from discontinued operationsBefore exceptional items and remeasurements
    
    
    104
    
    
    
    77
    
    
    
    379Exceptional items and remeasurements
    
    
    (18
    )
    
    
    2,590
    
    
    
    (61
    )86
    
    
    
    2,667
    
    
    
    318
 (i)
    
    The operating exceptional item for the year ended 31 March 2007 related to an impairment of
goodwill within US wireless infrastructure operations. Operating exceptional items for the year
ended 31 March 2006 related to a fine (£15m) incurred in respect of a breach of health and safety
laws in 1999 and to restructuring costs (£5m). Operating exceptional items for the year ended 31
March 2005 related to restructuring costs (£83m) and to environmental costs (£4m).(ii)
    
    Remeasurement finance income for the year ended 31 March 2007 comprised £24m relating to the
recognition of gains on the termination of a hedging arrangement and to £13m of subsequent
mark-to-market gains.
 
 2007£mNon-current assetsGoodwill
    
    
    573Other intangible assets
    
    
    206Property, plant and equipment
    
    
    1,003Other receivables
    
    
    9Non-current assets
    
    
    1,791Current assetsInventories
    
    
    3Derivative financial assets
    
    
    39Trade and other receivables
    
    
    112Cash and cash equivalents
    
    
    23Current assets
    
    
    177Assets of businesses held for sale
    
    
    1,968Current liabilitiesTrade and other payables
    
    
    (198
    )Current tax liabilities
    
    
    (1
    )Provisions
    
    
    (1
    )Total current liabilities
    
    
    (200
    )Non-current liabilitiesBorrowings
    
    
    (20
    )Other non-current liabilities
    
    
    (78
    )Deferred tax liabilities
    
    
    (124
    )Pensions and post-retirement obligations
    
    
    (2
    )Provisions
    
    
    (26
    )Non-current liabilities
    
    
    (250
    )Liabilities of businesses held for sale
    
    
    (450
    )




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##### Table of Contents



126 National Grid plc
 
 12. Dividends
  2007
    
    
    
    
    
    
    2006
    
    
    
    
    
    
    2005pence
    
    
    
    
    
    
    pence
    
    
    
    
    
    
    pence(per ordinary
    
    
    2007
    
    
    (per ordinary
    
    
    2006
    
    
    (per ordinary
    
    
    2005share
    )
    
    £m
    
    
    share
    )
    
    £m
    
    
    share
    )
    
    £mOrdinary dividendsInterim dividend for the year ended 31 March 2007
    
    
    10.9
    
    
    
    297
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Final dividend for the year ended 31 March 2006
    
    
    15.9
    
    
    
    433
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interim dividend for the year ended 31 March 2006
    
    
    
    
    
    
    
    
    
    
    10.2
    
    
    
    276
    
    
    
    
    
    
    
    Final dividend for the year ended 31 March 2005
    
    
    
    
    
    
    
    
    
    
    15.2
    
    
    
    469
    
    
    
    
    
    
    
    Interim dividend for the year ended 31 March 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.5
    
    
    
    262Final dividend for the year ended 31 March 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11.9
    
    
    
    36626.8
    
    
    
    730
    
    
    
    25.4
    
    
    
    745
    
    
    
    20.4
    
    
    
    628
  
 13. Earnings per share
   a) Basic earnings per share
 Earnings
    
    
    
    
    
    
    Earnings
    
    
    
    
    
    
    EarningsEarnings
    
    
    per share
    
    
    Earnings
    
    
    per share
    
    
    Earnings
    
    
    per share2007
    
    
    2007
    
    
    2006
    *
    
    2006
    *
    
    2005
    *
    
    2005
    *£m
    
    
    pence
    
    
    £m
    
    
    pence
    
    
    £m
    
    
    penceAdjusted earnings  continuing operations
    
    
    1,296
    
    
    
    47.7
    
    
    
    1,291
    
    
    
    45.5
    
    
    
    1,276
    
    
    
    41.4Exceptional items after taxation
    
    
    (41
    )
    
    
    (1.5
    )
    
    
    (61
    )
    
    
    (2.2
    )
    
    
    (147
    )
    
    
    (4.8
    )Commodity contract remeasurements after taxation
    
    
    37
    
    
    
    1.3
    
    
    
    (38
    )
    
    
    (1.3
    )
    
    
    (23
    )
    
    
    (0.7
    )Derivative financial instruments remeasurements after taxation
    
    
    16
    
    
    
    0.6
    
    
    
    (11
    )
    
    
    (0.4
    )
    
    
    
    
    
    
    Earnings  continuing operations
    
    
    1,308
    
    
    
    48.1
    
    
    
    1,181
    
    
    
    41.6
    
    
    
    1,106
    
    
    
    35.9Adjusted earnings  discontinued operations
    
    
    104
    
    
    
    3.8
    
    
    
    77
    
    
    
    2.7
    
    
    
    379
    
    
    
    12.3Gain on disposal of gas distribution networks after taxation
    
    
    
    
    
    
    
    
    
    
    2,605
    
    
    
    91.8
    
    
    
    
    
    
    
    Other exceptional items after taxation
    
    
    (18
    )
    
    
    (0.6
    )
    
    
    (15
    )
    
    
    (0.5
    )
    
    
    (61
    )
    
    
    (2.0
    )Earnings  discontinued operations
    
    
    86
    
    
    
    3.2
    
    
    
    2,667
    
    
    
    94.0
    
    
    
    318
    
    
    
    10.3Basic earnings
    
    
    1,394
    
    
    
    51.3
    
    
    
    3,848
    
    
    
    135.6
    
    
    
    1,424
    
    
    
    46.22007
    
    
    
    
    
    
    2006
    
    
    
    
    
    
    2005millions
    
    
    
    
    
    
    millions
    
    
    
    
    
    
    millionsWeighted average number of shares  basic
    
    
    
    
    
    
    2,719
    
    
    
    
    
    
    
    2,837
    
    
    
    
    
    
    
    3,082
  b) Diluted earnings per share
 Earnings
    
    
    
    
    
    
    Earnings
    
    
    
    
    
    
    EarningsEarnings
    
    
    per share
    
    
    Earnings
    
    
    per share
    
    
    Earnings
    
    
    per share2007
    
    
    2007
    
    
    2006
    *
    
    2006
    *
    
    2005
    *
    
    2005
    *£m
    
    
    pence
    
    
    £m
    
    
    pence
    
    
    £m
    
    
    penceAdjusted diluted earnings  continuing operations
    
    
    1,296
    
    
    
    47.4
    
    
    
    1,291
    
    
    
    45.3
    
    
    
    1,276
    
    
    
    41.2Exceptional items after taxation
    
    
    (41
    )
    
    
    (1.5
    )
    
    
    (61
    )
    
    
    (2.2
    )
    
    
    (147
    )
    
    
    (4.8
    )Commodity contract remeasurements after taxation
    
    
    37
    
    
    
    1.3
    
    
    
    (38
    )
    
    
    (1.3
    )
    
    
    (23
    )
    
    
    (0.7
    )Derivative financial instruments remeasurements after taxation
    
    
    16
    
    
    
    0.6
    
    
    
    (11
    )
    
    
    (0.4
    )
    
    
    
    
    
    
    Diluted earnings  continuing operations
    
    
    1,308
    
    
    
    47.8
    
    
    
    1,181
    
    
    
    41.4
    
    
    
    1,106
    
    
    
    35.7Adjusted diluted earnings  discontinued operations
    
    
    104
    
    
    
    3.8
    
    
    
    77
    
    
    
    2.7
    
    
    
    379
    
    
    
    12.3Gain on disposal of gas distribution networks after taxation
    
    
    
    
    
    
    
    
    
    
    2,605
    
    
    
    91.4
    
    
    
    
    
    
    
    Other exceptional items after taxation
    
    
    (18
    )
    
    
    (0.7
    )
    
    
    (15
    )
    
    
    (0.5
    )
    
    
    (61
    )
    
    
    (2.0
    )Diluted earnings  discontinued operations
    
    
    86
    
    
    
    3.1
    
    
    
    2,667
    
    
    
    93.6
    
    
    
    318
    
    
    
    10.3Diluted earnings
    
    
    1,394
    
    
    
    50.9
    
    
    
    3,848
    
    
    
    135.0
    
    
    
    1,424
    
    
    
    46.02007
    
    
    
    
    
    
    2006
    
    
    
    
    
    
    2005millions
    
    
    
    
    
    
    millions
    
    
    
    
    
    
    millionsWeighted average number of shares  diluted
    
    
    
    
    
    
    2,737
    
    
    
    
    
    
    
    2,851
    
    
    
    
    
    
    
    3,096




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##### Table of Contents



Annual Report and Accounts 2006/07 127
 
 14. Goodwill
 £mCost at 1 April 2005
    
    
    2,045Exchange adjustments
    
    
    111Cost at 31 March 2006
    
    
    2,156Exchange adjustments
    
    
    (192
    )Acquisition of subsidiary undertakings
    
    
    157Reclassification to assets of businesses held for sale
    
    
    (641
    )Cost at 31 March 2007
    
    
    1,480Accumulated impairment losses at 1 April 2005 and 1 April 2006
    
    
    14Exchange adjustments
    
    
    (1
    )Impairment charge
    
    
    55Reclassification to assets of businesses held for sale
    
    
    (68
    )Accumulated impairment losses at 31 March 2007
    
    
    Net book value at 31 March 2007
    
    
    1,480Net book value at 31 March 2006
    
    
    2,142




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##### Table of Contents



128 National Grid plc
 
 15. Acquisitions
    OtherRhode Island gas acquisition
    
    
    acquisitionsBookvalue atacquisition
    
    
    Fair value
    
    
    Final
    
    
    Book and
    
    
    Totalunder IFRS
    
    
    adjustments
    
    
    fair value
    
    
    fair value
    
    
    fair value£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mIntangible assets
    
    
    9
    
    
    
    
    
    
    
    9
    
    
    
    46
    
    
    
    55Property, plant and equipment
    
    
    141
    
    
    
    1
    
    
    
    142
    
    
    
    28
    
    
    
    170Inventories
    
    
    19
    
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    19Trade and other receivables
    
    
    39
    
    
    
    
    
    
    
    39
    
    
    
    1
    
    
    
    40Deferred tax assets
    
    
    4
    
    
    
    7
    
    
    
    11
    
    
    
    
    
    
    
    11Current liabilities
    
    
    (20
    )
    
    
    
    
    
    
    (20
    )
    
    
    (3
    )
    
    
    (23
    )Borrowings
    
    
    (41
    )
    
    
    (7
    )
    
    
    (48
    )
    
    
    
    
    
    
    (48
    )Pensions and other post-retirement benefit obligations
    
    
    (25
    )
    
    
    6
    
    
    
    (19
    )
    
    
    
    
    
    
    (19
    )Provisions
    
    
    (2
    )
    
    
    (6
    )
    
    
    (8
    )
    
    
    
    
    
    
    (8
    )Net assets acquired
    
    
    124
    
    
    
    1
    
    
    
    125
    
    
    
    72
    
    
    
    197Goodwill arising on acquisition
    
    
    
    
    
    
    
    
    
    
    144
    
    
    
    13
    
    
    
    157Total consideration
    
    
    
    
    
    
    
    
    
    
    269
    
    
    
    85
    
    
    
    354
   Rhode Island
    
    
    Othergas
    
    
    acquisitions
    
    
    Total£m
    
    
    £m
    
    
    £mCash consideration
    
    
    269
    
    
    
    85
    
    
    
    354




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##### Table of Contents



Annual Report and Accounts 2006/07 129
 
 16. Other intangible assets
 CustomerSoftware
    
    
    relationships
    
    
    Other
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £mNon-currentCost at 1 April 2005
    
    
    273
    
    
    
    164
    
    
    
    32
    
    
    
    469Exchange adjustments
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8Additions
    
    
    14
    
    
    
    
    
    
    
    1
    
    
    
    15Disposals
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    (3
    )Cost at 31 March 2006
    
    
    292
    
    
    
    164
    
    
    
    33
    
    
    
    489Exchange adjustments
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )
    
    
    (10
    )Acquisition of subsidiary undertakings
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    55Additions
    
    
    20
    
    
    
    
    
    
    
    12
    
    
    
    32Reclassification to assets of businesses held for sale
    
    
    (21
    )
    
    
    (164
    )
    
    
    (71
    )
    
    
    (256
    )Cost at 31 March 2007
    
    
    286
    
    
    
    
    
    
    
    24
    
    
    
    310Amortisation at 1 April 2005
    
    
    97
    
    
    
    6
    
    
    
    8
    
    
    
    111Exchange adjustments
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3Amortisation charge for the year (i)
    
    
    45
    
    
    
    11
    
    
    
    1
    
    
    
    57Disposals
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    (3
    )Amortisation at 31 March 2006
    
    
    142
    
    
    
    17
    
    
    
    9
    
    
    
    168Exchange adjustments
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )
    
    
    (6
    )Amortisation charge for the year (i)
    
    
    38
    
    
    
    11
    
    
    
    5
    
    
    
    54Reclassification to assets of businesses held for sale
    
    
    (12
    )
    
    
    (28
    )
    
    
    (10
    )
    
    
    (50
    )Amortisation at 31 March 2007
    
    
    165
    
    
    
    
    
    
    
    1
    
    
    
    166Net book value at 31 March 2007
    
    
    121
    
    
    
    
    
    
    
    23
    
    
    
    144Net book value at 31 March 2006
    
    
    150
    
    
    
    147
    
    
    
    24
    
    
    
    321
 (i)
    
    Includes amounts in respect of discontinued operations of £13m (2006: £13m).
 Expected amortisation of intangible assets for the next five years ending 31 March is:
    
    £m2008
    
    
    472009
    
    
    492010
    
    
    252011
    
    
    152012
    
    
    8




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##### Table of Contents



130 National Grid plc
 
 17. Property, plant and equipment
 Assets
    
    
    MotorPlant
    
    
    in the
    
    
    vehiclesLand and
    
    
    and
    
    
    course of
    
    
    and officebuildings
    
    
    machinery
    
    
    construction
    
    
    equipment
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mCost at 1 April 2005
    
    
    911
    
    
    
    30,816
    
    
    
    1,269
    
    
    
    809
    
    
    
    33,805Exchange adjustments
    
    
    35
    
    
    
    562
    
    
    
    12
    
    
    
    1
    
    
    
    610Additions
    
    
    65
    
    
    
    588
    
    
    
    1,339
    
    
    
    101
    
    
    
    2,093Disposal of subsidiary undertakings
    
    
    (30
    )
    
    
    (6,976
    )
    
    
    (9
    )
    
    
    (253
    )
    
    
    (7,268
    )Other disposals
    
    
    (25
    )
    
    
    (128
    )
    
    
    
    
    
    
    (18
    )
    
    
    (171
    )Reclassifications
    
    
    18
    
    
    
    840
    
    
    
    (895
    )
    
    
    37
    
    
    
    Cost at 31 March 2006
    
    
    974
    
    
    
    25,702
    
    
    
    1,716
    
    
    
    677
    
    
    
    29,069Exchange adjustments
    
    
    (53
    )
    
    
    (841
    )
    
    
    (27
    )
    
    
    (1
    )
    
    
    (922
    )Additions
    
    
    16
    
    
    
    604
    
    
    
    1,611
    
    
    
    112
    
    
    
    2,343Acquisition of subsidiary undertakings
    
    
    12
    
    
    
    157
    
    
    
    1
    
    
    
    
    
    
    
    170Reclassification to assets of businesses held for sale
    
    
    (152
    )
    
    
    (1,292
    )
    
    
    (2
    )
    
    
    (22
    )
    
    
    (1,468
    )Other disposals
    
    
    (57
    )
    
    
    (112
    )
    
    
    
    
    
    
    (36
    )
    
    
    (205
    )Other reclassifications
    
    
    38
    
    
    
    1,248
    
    
    
    (1,327
    )
    
    
    41
    
    
    
    Cost at 31 March 2007
    
    
    778
    
    
    
    25,466
    
    
    
    1,972
    
    
    
    771
    
    
    
    28,987Depreciation at 1 April 2005
    
    
    282
    
    
    
    10,286
    
    
    
    
    
    
    
    592
    
    
    
    11,160Exchange adjustments
    
    
    7
    
    
    
    200
    
    
    
    
    
    
    
    
    
    
    
    207Depreciation charge for the year (i)
    
    
    17
    
    
    
    816
    
    
    
    
    
    
    
    75
    
    
    
    908Disposal of subsidiary undertakings
    
    
    (13
    )
    
    
    (1,781
    )
    
    
    
    
    
    
    (200
    )
    
    
    (1,994
    )Other disposals
    
    
    (9
    )
    
    
    (121
    )
    
    
    
    
    
    
    (17
    )
    
    
    (147
    )Depreciation at 31 March 2006
    
    
    284
    
    
    
    9,400
    
    
    
    
    
    
    
    450
    
    
    
    10,134Exchange adjustments
    
    
    (10
    )
    
    
    (311
    )
    
    
    
    
    
    
    (1
    )
    
    
    (322
    )Depreciation charge for the year (i)
    
    
    18
    
    
    
    801
    
    
    
    
    
    
    
    70
    
    
    
    889Reclassification to assets of businesses held for sale
    
    
    (97
    )
    
    
    (350
    )
    
    
    
    
    
    
    (18
    )
    
    
    (465
    )Other disposals
    
    
    (3
    )
    
    
    (107
    )
    
    
    
    
    
    
    (34
    )
    
    
    (144
    )Depreciation at 31 March 2007
    
    
    192
    
    
    
    9,433
    
    
    
    
    
    
    
    467
    
    
    
    10,092Net book value at 31 March 2007
    
    
    586
    
    
    
    16,033
    
    
    
    1,972
    
    
    
    304
    
    
    
    18,895Net book value at 31 March 2006
    
    
    690
    
    
    
    16,302
    
    
    
    1,716
    
    
    
    227
    
    
    
    18,935
 (i)
    
    Includes amounts in respect of discontinued operations of £59m (2006: £64m).
  2007
    
    
    2006£m
    
    
    £mFreehold
    
    
    540
    
    
    
    649Long leasehold (over 50 years)
    
    
    13
    
    
    
    13Short leasehold (under 50 years)
    
    
    33
    
    
    
    28586
    
    
    
    690
    
 18. Investments in joint ventures
 £mAt 1 April 2005
    
    
    17Exchange adjustments
    
    
    2Disposals
    
    
    (2
    )Share of retained profit
    
    
    3Dividends received
    
    
    (2
    )Impairment provision written back (i)
    
    
    13Reclassification
    
    
    (19
    )At 31 March 2006
    
    
    12Exchange adjustments
    
    
    (1
    )Disposals
    
    
    (8
    )Share of retained profit
    
    
    2At 31 March 2007
    
    
    5
 (i)
    
    For the year ended 31 March 2006, a £13m reversal of impairment in the investment in
National Grids joint venture, Copperbelt Energy Corporation (CEC) was recorded. As at 31 March
2006, National Grid had agreed, but not completed, the sale of its interest in CEC at a price that
was £13m higher than the net carrying value of the investment after prior year impairments. As the
sales process was at an advanced stage and there was a strong indication of an increase in the
investments external market value, a reversal of impairment was recognised in accordance with IAS
36 and IFRS 5. CEC was disposed of on 27 October 2006.




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##### Table of Contents



Annual Report and Accounts 2006/07 131
 
 19. Deferred tax assets and liabilities
  Deferred tax (assets)/liabilities
 Pensionsand otherAccelerated
    
    
    Employee
    
    
    post-
    
    
    
    
    
    
    Other nettax
    
    
    share
    
    
    retirement
    
    
    Financial
    
    
    temporarydepreciation
    
    
    options
    
    
    benefits
    
    
    instruments
    
    
    differences
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mDeferred tax assets at 31 March 2005
    
    
    
    
    
    
    (18
    )
    
    
    (462
    )
    
    
    
    
    
    
    (931
    )
    
    
    (1,411
    )Deferred tax liabilities at 31 March 2005
    
    
    4,098
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    184
    
    
    
    4,282At 31 March 2005
    
    
    4,098
    
    
    
    (18
    )
    
    
    (462
    )
    
    
    
    
    
    
    (747
    )
    
    
    2,871First time adoption of IAS 39
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38
    
    
    
    (54
    )
    
    
    (16
    )At 1 April 2005
    
    
    4,098
    
    
    
    (18
    )
    
    
    (462
    )
    
    
    38
    
    
    
    (801
    )
    
    
    2,855Exchange adjustments
    
    
    60
    
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    (72
    )
    
    
    (22
    )Charged/(credited) to income statement
    
    
    31
    
    
    
    (3
    )
    
    
    25
    
    
    
    (4
    )
    
    
    130
    
    
    
    179(Credited)/charged to equity
    
    
    
    
    
    
    (7
    )
    
    
    62
    
    
    
    (20
    )
    
    
    1
    
    
    
    36Disposal of subsidiary undertakings
    
    
    (1,068
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    (1,059
    )Other
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    
    
    
    
    25
    
    
    
    13At 31 March 2006
    
    
    3,121
    
    
    
    (28
    )
    
    
    (397
    )
    
    
    14
    
    
    
    (708
    )
    
    
    2,002Deferred tax assets at 31 March 2006
    
    
    (5
    )
    
    
    (28
    )
    
    
    (397
    )
    
    
    (6
    )
    
    
    (835
    )
    
    
    (1,271
    )Deferred tax liabilities at 31 March 2006
    
    
    3,126
    
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    127
    
    
    
    3,273At 1 April 2006
    
    
    3,121
    
    
    
    (28
    )
    
    
    (397
    )
    
    
    14
    
    
    
    (708
    )
    
    
    2,002Exchange adjustments
    
    
    (90
    )
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    91
    
    
    
    14Charged/(credited) to income statement
    
    
    321
    
    
    
    9
    
    
    
    82
    
    
    
    (9
    )
    
    
    54
    
    
    
    457(Credited)/charged to equity
    
    
    
    
    
    
    (11
    )
    
    
    70
    
    
    
    11
    
    
    
    
    
    
    
    70Acquisition of subsidiary undertakings
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    (13
    )
    
    
    (11
    )Reclassification to liabilities of businesses held for sale
    
    
    (129
    )
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    3
    
    
    
    (124
    )Other
    
    
    63
    
    
    
    
    
    
    
    (238
    )
    
    
    5
    
    
    
    151
    
    
    
    (19
    )At 31 March 2007
    
    
    3,286
    
    
    
    (29
    )
    
    
    (467
    )
    
    
    21
    
    
    
    (422
    )
    
    
    2,389Deferred tax assets at 31 March 2007
    
    
    (4
    )
    
    
    (29
    )
    
    
    (532
    )
    
    
    (9
    )
    
    
    (452
    )
    
    
    (1,026
    )Deferred tax liabilities at 31 March 2007
    
    
    3,290
    
    
    
    
    
    
    
    65
    
    
    
    30
    
    
    
    30
    
    
    
    3,4153,286
    
    
    
    (29
    )
    
    
    (467
    )
    
    
    21
    
    
    
    (422
    )
    
    
    2,389
   2007
    
    
    2006£m
    
    
    £mDeferred tax liabilities
    
    
    2,389
    
    
    
    2,161Deferred tax assets
    
    
    
    
    
    
    (159
    )2,389
    
    
    
    2,002
   2007
    
    
    2006£m
    
    
    £mCapital losses
    
    
    216
    
    
    
    338Non-trade deficits
    
    
    203
    
    
    
    166Trading losses
    
    
    3
    
    
    
    17Pre-trading expenditure
    
    
    
    
    
    
    9




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##### Table of Contents



132 National Grid plc
 
 20. Other non-current receivables
 2007
    
    
    2006£m
    
    
    £mLease debtors
    
    
    15
    
    
    
    23Prepayments
    
    
    6
    
    
    
    7Other debtors
    
    
    15
    
    
    
    8Pension asset
    
    
    37
    
    
    
    73
    
    
    
    38
  
 21. Financial and other investments
 2007
    
    
    2006£m
    
    
    £mNon-currentAvailable-for-sale investments
    
    
    132
    
    
    
    142Loans and receivables
    
    
    
    
    
    
    6132
    
    
    
    148
 2007
    
    
    2006£m
    
    
    £mCurrentAvailable-for-sale investments
    
    
    1,800
    
    
    
    254Loans and receivables
    
    
    298
    
    
    
    1302,098
    
    
    
    384Total financial and other investments
    
    
    2,230
    
    
    
    532
  2007
    
    
    2006£m
    
    
    £mInvestments in short-term UK money funds
    
    
    1,591
    
    
    
    30UK managed investments in equity and bonds
    
    
    213
    
    
    
    254US managed investments in equity and bonds
    
    
    74
    
    
    
    79Bank deposits
    
    
    250
    
    
    
    Restricted cash balances
    
    
    44
    
    
    
    100Cash surrender value of life insurance policies
    
    
    53
    
    
    
    59Other investments
    
    
    5
    
    
    
    102,230
    
    
    
    532
      2007
    
    
    2006£m
    
    
    £mNon-currentUS dollar
    
    
    132
    
    
    
    148132
    
    
    
    148CurrentSterling
    
    
    1,663
    
    
    
    338US dollar
    
    
    345
    
    
    
    46Euro
    
    
    61
    
    
    
    Other
    
    
    29
    
    
    
    2,098
    
    
    
    384




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##### Table of Contents



Annual Report and Accounts 2006/07 133
 
 22. Derivative financial instruments
   Treasury financial instruments
   Fair value hedges
 Cash flow hedges
    Net investment hedges
  Derivatives not in a formal hedge relationship
  Operational financial instruments




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##### Table of Contents



134 National Grid plc
 22. Derivative financial instruments (continued)
  2007
    
    
    2006Asset
    
    
    Liability
    
    
    Asset
    
    
    LiabilityFair value
    
    
    Notional
    
    
    Fair value
    
    
    Notional
    
    
    Fair value
    
    
    Notional
    
    
    Fair value
    
    
    Notional£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mFair value hedgesInterest rate swaps
    
    
    16
    
    
    
    (555
    )
    
    
    (30
    )
    
    
    (1,208
    )
    
    
    92
    
    
    
    (1,408
    )
    
    
    (9
    )
    
    
    (908
    )Cross-currency interest rate swaps
    
    
    50
    
    
    
    (859
    )
    
    
    (137
    )
    
    
    (1,541
    )
    
    
    146
    
    
    
    (1,453
    )
    
    
    (72
    )
    
    
    (755
    )66
    
    
    
    (1,414
    )
    
    
    (167
    )
    
    
    (2,749
    )
    
    
    238
    
    
    
    (2,861
    )
    
    
    (81
    )
    
    
    (1,663
    )Cash flow hedgesInterest rate swaps
    
    
    15
    
    
    
    (996
    )
    
    
    (6
    )
    
    
    (305
    )
    
    
    80
    
    
    
    (436
    )
    
    
    (16
    )
    
    
    (685
    )Cross-currency interest rate swaps
    
    
    69
    
    
    
    (1,418
    )
    
    
    (25
    )
    
    
    (829
    )
    
    
    112
    
    
    
    (1,745
    )
    
    
    (22
    )
    
    
    (804
    )Foreign exchange forward contracts
    
    
    
    
    
    
    (45
    )
    
    
    
    
    
    
    (39
    )
    
    
    3
    
    
    
    (78
    )
    
    
    (3
    )
    
    
    2484
    
    
    
    (2,459
    )
    
    
    (31
    )
    
    
    (1,173
    )
    
    
    195
    
    
    
    (2,259
    )
    
    
    (41
    )
    
    
    (1,465
    )Net investment hedgesCross-currency interest rate swaps
    
    
    270
    
    
    
    (1,651
    )
    
    
    (32
    )
    
    
    (524
    )
    
    
    210
    
    
    
    (2,639
    )
    
    
    (56
    )
    
    
    (1,090
    )Foreign exchange forward contracts
    
    
    4
    
    
    
    (791
    )
    
    
    (13
    )
    
    
    (1,338
    )
    
    
    
    
    
    
    37
    
    
    
    
    
    
    
    27274
    
    
    
    (2,442
    )
    
    
    (45
    )
    
    
    (1,862
    )
    
    
    210
    
    
    
    (2,602
    )
    
    
    (56
    )
    
    
    (1,063
    )Derivatives not in a formal hedge relationshipInterest rate swaps
    
    
    17
    
    
    
    (2,088
    )
    
    
    (35
    )
    
    
    (1,874
    )
    
    
    22
    
    
    
    (949
    )
    
    
    (42
    )
    
    
    (1,337
    )Cross-currency interest rate swaps
    
    
    123
    
    
    
    (1,685
    )
    
    
    (4
    )
    
    
    (124
    )
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )
    
    
    (12
    )Foreign exchange forward contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24
    )
    
    
    
    
    
    
    27Equity index-linked (i)
    
    
    145
    
    
    
    (250
    )
    
    
    (189
    )
    
    
    (357
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    285
    
    
    
    (4,023
    )
    
    
    (228
    )
    
    
    (2,355
    )
    
    
    22
    
    
    
    (975
    )
    
    
    (44
    )
    
    
    (1,322
    )709
    
    
    
    (10,338
    )
    
    
    (471
    )
    
    
    (8,139
    )
    
    
    665
    
    
    
    (8,697
    )
    
    
    (222
    )
    
    
    (5,513
    )Hedge positions offset within derivative instruments
    
    
    (52
    )
    
    
    
    
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    657
    
    
    
    (10,338
    )
    
    
    (419
    )
    
    
    (8,139
    )
    
    
    665
    
    
    
    (8,697
    )
    
    
    (222
    )
    
    
    (5,513
    )
 (i)
    
    The equity index-linked derivatives are investment related derivative financial instruments that offset each other on a post-tax basis.
  2007
    
    
    2006Assets
    
    
    Liabilities
    
    
    Assets
    
    
    Liabilities£m
    
    
    £m
    
    
    £m
    
    
    £mIn one year or less
    
    
    277
    
    
    
    (235
    )
    
    
    314
    
    
    
    (92
    )Current
    
    
    277
    
    
    
    (235
    )
    
    
    314
    
    
    
    (92
    )In more than one year, but not more than two years
    
    
    26
    
    
    
    (10
    )
    
    
    3
    
    
    
    (1
    )In more than two years, but not more than three years
    
    
    12
    
    
    
    (7
    )
    
    
    56
    
    
    
    (6
    )In more than three years, but not more than four years
    
    
    5
    
    
    
    (3
    )
    
    
    18
    
    
    
    (6
    )In more than four years, but not more than five years
    
    
    173
    
    
    
    (22
    )
    
    
    1
    
    
    
    (1
    )In more than five years
    
    
    164
    
    
    
    (142
    )
    
    
    273
    
    
    
    (116
    )Non-current
    
    
    380
    
    
    
    (184
    )
    
    
    351
    
    
    
    (130
    )657
    
    
    
    (419
    )
    
    
    665
    
    
    
    (222
    )




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##### Table of Contents



Annual Report and Accounts 2006/07 135
 
 23. Financial risk factors
   (a) Market risk  (i) Foreign exchange risk
     2007
    
    
    2006Sterling
    
    
    Euro
    
    
    US dollar
    
    
    Other
    
    
    Total
    
    
    Sterling
    
    
    Euro
    
    
    US dollar
    
    
    Other
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mCash and cash equivalents
    
    
    733
    
    
    
    2
    
    
    
    858
    
    
    
    
    
    
    
    1,593
    
    
    
    1,090
    
    
    
    12
    
    
    
    350
    
    
    
    
    
    
    
    1,452Financial investments
    
    
    1,663
    
    
    
    61
    
    
    
    345
    
    
    
    29
    
    
    
    2,098
    
    
    
    338
    
    
    
    
    
    
    
    46
    
    
    
    
    
    
    
    384Bank overdrafts
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )Borrowings
    
    
    (8,024
    )
    
    
    (4,677
    )
    
    
    (2,443
    )
    
    
    (567
    )
    
    
    (15,711
    )
    
    
    (5,636
    )
    
    
    (4,023
    )
    
    
    (2,477
    )
    
    
    (990
    )
    
    
    (13,126
    )Pre-derivative position
    
    
    (5,634
    )
    
    
    (4,614
    )
    
    
    (1,240
    )
    
    
    (538
    )
    
    
    (12,026
    )
    
    
    (4,211
    )
    
    
    (4,011
    )
    
    
    (2,081
    )
    
    
    (990
    )
    
    
    (11,293
    )Derivative effect
    
    
    (1,709
    )
    
    
    4,693
    
    
    
    (2,972
    )
    
    
    226
    
    
    
    238
    
    
    
    (2,113
    )
    
    
    3,946
    
    
    
    (2,151
    )
    
    
    761
    
    
    
    443Net debt position
    
    
    (7,343
    )
    
    
    79
    
    
    
    (4,212
    )
    
    
    (312
    )
    
    
    (11,788
    )
    
    
    (6,324
    )
    
    
    (65
    )
    
    
    (4,232
    )
    
    
    (229
    )
    
    
    (10,850
    )
  (ii) Cash flow and fair value interest rate risk




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##### Table of Contents



136 National Grid plc
 23. Financial risk factors (continued)  (a) Market risk (continued)  (ii) Cash flow and fair value interest rate risk (continued)
  2007
    
    
    2006£m
    
    
    £mFixed interest rate borrowingsIn one year or less
    
    
    (619
    )
    
    
    (2,028
    )In more than one year, but not more than two years
    
    
    (1,525
    )
    
    
    (364
    )In more than two years, but not more than three years
    
    
    (569
    )
    
    
    (1,232
    )In more than three years, but not more than four years
    
    
    (263
    )
    
    
    (870
    )In more than four years, but not more than five years
    
    
    (901
    )
    
    
    (261
    )In more than five years
    
    
    (4,886
    )
    
    
    (4,573
    )(8,763
    )
    
    
    (9,328
    )Floating interest rate borrowings (including RPI)
    
    
    (6,948
    )
    
    
    (3,798
    )Total borrowings
    
    
    (15,711
    )
    
    
    (13,126
    )
  2007
    
    
    2006Fixed-
    
    
    Floating-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fixed-
    
    
    Floating-rate
    
    
    rate
    
    
    RPI
    (i)
    
    Other
    (ii)
    
    Total
    
    
    rate
    
    
    rate
    
    
    RPI
    (i)
    
    Other
    (ii)
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mCash and cash equivalents
    
    
    
    
    
    
    1,593
    
    
    
    
    
    
    
    
    
    
    
    1,593
    
    
    
    
    
    
    
    1,452
    
    
    
    
    
    
    
    
    
    
    
    1,452Financial investments
    
    
    
    
    
    
    1,872
    
    
    
    
    
    
    
    226
    
    
    
    2,098
    
    
    
    
    
    
    
    100
    
    
    
    
    
    
    
    284
    
    
    
    384Bank overdrafts
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    (3
    )Borrowings
    
    
    (8,763
    )
    
    
    (3,301
    )
    
    
    (3,647
    )
    
    
    
    
    
    
    (15,711
    )
    
    
    (9,328
    )
    
    
    (2,396
    )
    
    
    (1,402
    )
    
    
    
    
    
    
    (13,126
    )Pre-derivative position
    
    
    (8,763
    )
    
    
    158
    
    
    
    (3,647
    )
    
    
    226
    
    
    
    (12,026
    )
    
    
    (9,328
    )
    
    
    (847
    )
    
    
    (1,402
    )
    
    
    284
    
    
    
    (11,293
    )Derivative effect
    
    
    2,747
    
    
    
    (2,501
    )
    
    
    
    
    
    
    (8
    )
    
    
    238
    
    
    
    4,162
    
    
    
    (3,742
    )
    
    
    
    
    
    
    23
    
    
    
    443Net debt position
    
    
    (6,016
    )
    
    
    (2,343
    )
    
    
    (3,647
    )
    
    
    218
    
    
    
    (11,788
    )
    
    
    (5,166
    )
    
    
    (4,589
    )
    
    
    (1,402
    )
    
    
    307
    
    
    
    (10,850
    )
 (i)
    
    Represents financial instruments which are linked to the UK retail price index.(ii)
    
    Represents financial instruments which are not directly affected by interest rate risk,
such as investments in equity or other similar financial instruments.
 (b) Credit risk
  Treasury related credit risk
  Maximum limit
    
    
    Long-term limit£m
    
    
    £mRatingAAA rated G8 sovereign entities
    
    
    Unlimited
    
    
    
    UnlimitedTriple A vehicles
    
    
    140
    
    
    
    140Triple A range institutions (AAA)
    
    
    620 to 965
    
    
    
    310 to 505Double A range institutions (AA)
    
    
    345 to 450
    
    
    
    175 to 225Single A range institutions (A)
    
    
    80 to 140
    
    
    
    40 to 70
   Wholesale and retail credit risk




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##### Table of Contents



Annual Report and Accounts 2006/07 137
 23. Financial risk factors (continued)  (c) Liquidity analysis
   Due
    
    
    Due
    
    
    DueDue
    
    
    between
    
    
    between
    
    
    3 yearswithin
    
    
    1 and 2
    
    
    2 and 3
    
    
    andAt 31 March 2007
    
    1 year
    
    
    years
    
    
    years
    
    
    beyond
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mNon derivative financial liabilitiesBorrowings, excluding finance lease liabilities
    
    
    (776
    )
    
    
    (1,865
    )
    
    
    (1,013
    )
    
    
    (12,283
    )
    
    
    (15,937
    )Interest payments on borrowings (i)
    
    
    (686
    )
    
    
    (612
    )
    
    
    (548
    )
    
    
    (6,489
    )
    
    
    (8,335
    )Finance lease liabilities
    
    
    (17
    )
    
    
    (17
    )
    
    
    (12
    )
    
    
    (113
    )
    
    
    (159
    )Other non interest-bearing liabilities
    
    
    (1,525
    )
    
    
    (214
    )
    
    
    
    
    
    
    
    
    
    
    (1,739
    )Derivative financial liabilitiesDerivative contracts  receipts
    
    
    382
    
    
    
    608
    
    
    
    299
    
    
    
    2,116
    
    
    
    3,405Derivative contracts  payments
    
    
    (443
    )
    
    
    (571
    )
    
    
    (318
    )
    
    
    (1,910
    )
    
    
    (3,242
    )Commodity contracts
    
    
    (56
    )
    
    
    (55
    )
    
    
    (38
    )
    
    
    (240
    )
    
    
    (389
    )Total at 31 March 2007
    
    
    (3,121
    )
    
    
    (2,726
    )
    
    
    (1,630
    )
    
    
    (18,919
    )
    
    
    (26,396
    )
 Due
    
    
    Due
    
    
    DueDue
    
    
    between
    
    
    between
    
    
    3 yearswithin
    
    
    1 and 2
    
    
    2 and 3
    
    
    andAt 31 March 2006
    
    1 year
    
    
    years
    
    
    years
    
    
    beyond
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mNon derivative financial liabilitiesBorrowings, excluding finance lease liabilities
    
    
    (2,569
    )
    
    
    (404
    )
    
    
    (1,317
    )
    
    
    (8,948
    )
    
    
    (13,238
    )Interest payments on borrowings (i)
    
    
    (572
    )
    
    
    (488
    )
    
    
    (439
    )
    
    
    (3,982
    )
    
    
    (5,481
    )Finance lease liabilities
    
    
    (20
    )
    
    
    (26
    )
    
    
    (22
    )
    
    
    (124
    )
    
    
    (192
    )Other non interest-bearing liabilities
    
    
    (1,582
    )
    
    
    (324
    )
    
    
    
    
    
    
    
    
    
    
    (1,906
    )Derivative financial liabilitiesDerivative contracts  receipts
    
    
    1,170
    
    
    
    87
    
    
    
    248
    
    
    
    1,225
    
    
    
    2,730Derivative contracts  payments
    
    
    (1,046
    )
    
    
    (122
    )
    
    
    (209
    )
    
    
    (1,011
    )
    
    
    (2,388
    )Commodity contracts
    
    
    (113
    )
    
    
    (114
    )
    
    
    (112
    )
    
    
    (439
    )
    
    
    (778
    )Total at 31 March 2006
    
    
    (4,732
    )
    
    
    (1,391
    )
    
    
    (1,851
    )
    
    
    (13,279
    )
    
    
    (21,253
    )
 (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 future interest
rate curve as at 31 March.




---



##### Table of Contents



138 National Grid plc
 23. Financial risk factors (continued)
 (d) Sensitivity analysis
    n
    
    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;n
    
    the sensitivity of accrued interest to movements in interest rates is calculated on net floating rate exposures on debt, deposits and derivative instruments;n
    
    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;n
    
    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 US dollar to sterling exchange rate are recorded directly in equity;n
    
    changes in the carrying value of derivative financial instruments not in hedging relationships only affect the income statement;n
    
    all other changes in the carrying value of derivative financial instruments designated as hedges are fully effective with no impact on the income statement;n
    
    debt with a maturity below one year is floating rate for the accrued interest part of the calculation;n
    
    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; andn
    
    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.
  2007
    
    2006Income
    
    
    
    
    
    
    Incomestatement
    
    
    Equity
    
    
    statement
    
    
    Equity-/+ £m
    
    
    -/+ £m
    
    
    -/+ £m
    
    
    -/+ £mUK retail price index +/- 0.50%
    
    
    18
    
    
    
    
    
    
    
    7
    
    
    
    UK interest rates +/- 0.50%
    
    
    50
    
    
    
    62
    
    
    
    63
    
    
    
    70US interest rates +/- 0.50%
    
    
    37
    
    
    
    11
    
    
    
    30
    
    
    
    10US dollar exchange rate +/- 10%
    
    
    52
    
    
    
    194
    
    
    
    52
    
    
    
    228
 
 24. Inventories
 2007
    
    
    2006£m
    
    
    £mRaw materials and consumables
    
    
    69
    
    
    
    62Work in progress
    
    
    17
    
    
    
    22Fuel stocks
    
    
    20
    
    
    
    24106
    
    
    
    108




---



##### Table of Contents



Annual Report and Accounts 2006/07 139
 
 25. Trade and other receivables
 2007
    
    
    2006£m
    
    
    £mTrade receivables
    
    
    638
    
    
    
    838Other receivables
    
    
    60
    
    
    
    137Prepayments and accrued income
    
    
    538
    
    
    
    525Asset held for sale
    
    
    
    
    
    
    191,236
    
    
    
    1,519
    2007
    
    
    2006£m
    
    
    £mSterling
    
    
    465
    
    
    
    687US dollar
    
    
    771
    
    
    
    8321,236
    
    
    
    1,519
 Provision for impairment of receivables
 £mAt 1 April 2005
    
    
    133Exchange adjustments
    
    
    (9
    )Charge for the year
    
    
    24Uncollectable amounts written off, net of recoveries
    
    
    (41
    )At 31 March 2006
    
    
    107Exchange adjustments
    
    
    (12
    )Charge for the year
    
    
    63Uncollectable amounts written off, net of recoveries
    
    
    (51
    )Reclassification to assets held for sale
    
    
    (5
    )At 31 March 2007
    
    
    102
  2007
    
    
    2006£m
    
    
    £mUp to 3 months past due
    
    
    10
    
    
    
    93 to 6 months past due
    
    
    2
    
    
    
    3Over 6 months past due
    
    
    6
    
    
    
    1618
    
    
    
    28
  
 26. Cash and cash equivalents
 2007
    
    
    2006£m
    
    
    £mCash at bank
    
    
    50
    
    
    
    46Short-term deposits
    
    
    1,543
    
    
    
    1,406Cash and cash equivalents
    
    
    1,593
    
    
    
    1,452Bank overdrafts
    
    
    (6
    )
    
    
    (3
    )Net cash and cash equivalents
    
    
    1,587
    
    
    
    1,449




---



##### Table of Contents



140 National Grid plc
 26. Cash and cash equivalents (continued)
  2007
    
    
    2006£m
    
    
    £mSterling
    
    
    727
    
    
    
    1,087Euro
    
    
    2
    
    
    
    12US dollar
    
    
    858
    
    
    
    3501,587
    
    
    
    1,449
  
 27. Borrowings
  2007
    
    
    2006£m
    
    
    £mCurrentBank loans
    
    
    136
    
    
    
    717Bonds
    
    
    849
    
    
    
    1,982Finance leases
    
    
    10
    
    
    
    14Other loans
    
    
    30
    
    
    
    1261,025
    
    
    
    2,839Non-currentBank loans
    
    
    930
    
    
    
    550Bonds
    
    
    13,544
    
    
    
    9,485Finance leases
    
    
    92
    
    
    
    115Other loans
    
    
    120
    
    
    
    13714,686
    
    
    
    10,287Total borrowings
    
    
    15,711
    
    
    
    13,126
  2007
    
    
    2006£m
    
    
    £mIn one year or less
    
    
    1,025
    
    
    
    2,839In more than one year, but not more than two years
    
    
    1,869
    
    
    
    404In more than two years, but not more than three years
    
    
    1,011
    
    
    
    1,288In more than three years, but not more than four years
    
    
    748
    
    
    
    1,090In more than four years, but not more than five years
    
    
    1,411
    
    
    
    294In more than five years:by instalments
    
    
    116
    
    
    
    131other than by instalments
    
    
    9,531
    
    
    
    7,08015,711
    
    
    
    13,126
  2007
    
    
    2006£m
    
    
    £mSterling
    
    
    8,024
    
    
    
    5,636US dollar
    
    
    2,443
    
    
    
    2,477Euro
    
    
    4,677
    
    
    
    4,023Other currencies
    
    
    567
    
    
    
    99015,711
    
    
    
    13,126




---



##### Table of Contents



Annual Report and Accounts 2006/07 141
 27. Borrowings (continued)
   2007
    
    
    2006£m
    
    
    £mGross finance lease liabilities repayable as follows:In one year or less
    
    
    17
    
    
    
    20In more than one year, but not more than five years
    
    
    48
    
    
    
    47In more than five years
    
    
    94
    
    
    
    125159
    
    
    
    192Less: finance charges allocated to future periods
    
    
    (57
    )
    
    
    (63
    )102
    
    
    
    129The present value of finance lease liabilities is as follows:In one year or less
    
    
    9
    
    
    
    14In more than one year, but not more than five years
    
    
    21
    
    
    
    26In more than five years
    
    
    72
    
    
    
    89102
    
    
    
    129
  Issuer
    
    Description of instrumentBritish Transco Finance Inc.
    
    USD 300 million 6.625% Fixed Rate Instruments due 2018British Transco International Finance BV (i)
    
    USD 350 million 7.0% Fixed Rate Instruments due 2006British Transco International Finance BV
    
    FRF 2,000 million 5.125% Fixed Rate Instruments due 2009British Transco International Finance BV
    
    USD 1,500 million Zero Coupon Bond due 2021National Grid Electricity Transmission plc
    
    EUR 600 million 4.125% Fixed Rate Instruments due 2008National Grid Electricity Transmission plc
    
    GBP 250 million 4.75% Fixed Rate Instruments due 2010National Grid Electricity Transmission plc
    
    GBP 300 million 2.983% Guaranteed Retail Price Index-Linked Instruments due 2018National Grid Electricity Transmission plc
    
    GBP 220 million 3.806% Retail Price Index-Linked Instruments due 2020National Grid Electricity Transmission plc
    
    GBP 450 million 5.875% Fixed Rate Instruments due 2024National Grid Electricity Transmission plc
    
    GBP 360 million 6.5% Fixed Rate Instruments due 2028National Grid Electricity Transmission plc
    
    GBP 70 million 3.589% Limited Retail Price Index-Linked Instruments due 2030National Grid Electricity Transmission plc
    
    GBP 50 million 2.817% Guaranteed Limited Retail Price Index-Linked Instruments due 2032National Grid Electricity Transmission plc
    
    GBP 75 million 5.0% Fixed Rate Instruments due 2035National Grid Electricity Transmission plc
    
    GBP 50 million 2.2280% Retail Price Index-Linked Instruments due 2035National Grid Electricity Transmission plc
    
    GBP 75 million 2.0353% Retail Price Index-Linked Instruments due 2035National Grid Electricity Transmission plc
    
    GBP 50 million 1.8204% Retail Price Index-Linked Instruments due 2035National Grid Electricity Transmission plc
    
    JPY 10,000 million Callable Fixed Rate Notes due 2035National Grid Electricity Transmission plc (ii)
    
    GBP 200 million 1.6449% RPI-Linked Instruments due 2036National Grid Electricity Transmission plc (ii)
    
    GBP 50 million 1.6747% RPI-Linked Instruments due 2036National Grid Electricity Transmission plc (ii)
    
    GBP 50 million 1.819% RPI-Linked Instruments due 2056National Grid Electricity Transmission plc (ii)
    
    GBP 150 million 1.823% RPI-Linked Instruments due 2056National Grid Electricity Transmission plc (ii)
    
    GBP 50 million 1.797% RPI-Linked Instruments due 2056National Grid Electricity Transmission plc (ii)
    
    GBP 50 million 1.6574% RPI-Linked Instruments due 2056National Grid plc (ii)
    
    CAD 200 million 4.98% Fixed Rate Instruments due 2011National Grid plc
    
    EUR 500 million 3.75% Fixed Rate Instruments due 2008National Grid plc (ii)
    
    EUR 1,000 million 4.125% Fixed Rate Instruments due 2013National Grid plc
    
    EUR 600 million 5.0% Fixed Rate Instruments due 2018National Grid plc
    
    EUR 500 million 4.375% Fixed Rate Instruments due 2020National Grid plc (ii)
    
    EUR 600 million Floating Rate Instruments due 2010National Grid plc (ii)
    
    EUR 300 million Floating Rate Instruments due 2008National Grid plc (ii)
    
    EUR 750 million Floating Rate Instruments due 2012National Grid plc (ii)
    
    EUR 300 million Floating Rate Instruments due 2009National Grid plc (ii)
    
    EUR 450 million Floating Rate Instruments due 2008National Grid plc (ii)
    
    EUR 100 million 3.25% Fixed Rate Instruments due 2009National Grid plc (ii)
    
    GBP 300 million 5.25% Fixed Rate Instruments due 2011National Grid plc (ii)
    
    GBP 250 million 5.5% Fixed Rate Instruments due 2013National Grid plc (ii)
    
    USD 1,000 million 6.3% Notes due 2016National Grid plc (ii)
    
    USD 100 million Floating Rate Instruments due 2011




---



##### Table of Contents



142 National Grid plc
 27. Borrowings (continued)
 Issuer
    
    Description of instrumentNew England Power Company
    
    USD 135.85 million Tax Exempt Pollution Control Revenue Bonds, Variable Rate due 2020New England Power Company
    
    USD 106.15 million Tax Exempt Pollution Control Revenue Bonds, Variable Rate due 2022NGG Finance plc (i)
    
    EUR 1,250 million 5.25% Fixed Rate Instruments due 2006NGG Finance plc
    
    EUR 750 million 6.125% Fixed Rate Instruments due 2011Niagara Mohawk Power Corporation (i)
    
    USD 275 million 7.75% Taxable First Mortgage Bonds due 2006Niagara Mohawk Power Corporation
    
    USD 200 million 8.875% Senior Notes due 2007Niagara Mohawk Power Corporation
    
    USD 600 million 7.75% Senior Notes due 2008Niagara Mohawk Power Corporation (iii)
    
    USD 115.71 million 7.2% Tax-Exempt First Mortgage Bonds due 2029National Grid Gas Holdings plc
    
    GBP 503.078 million Floating Rate Instruments due 2009National Grid Gas Holdings plc
    
    GBP 503.078 million 4.1875% Index-Linked Instruments due 2022National Grid Gas Holdings plc
    
    GBP 503.078 million 7.0% Fixed Rate Instruments due 2024National Grid Gas plc (i)
    
    EUR 650 million 5.25% Fixed Rate Instruments due 2006National Grid Gas plc (i)
    
    GBP 250 million 6.125% Fixed Rate Instruments due 2006National Grid Gas plc
    
    GBP 300 million 5.625% Fixed Rate Instruments due 2007National Grid Gas plc
    
    GBP 250 million 8.875% Fixed Rate Instruments due 2008National Grid Gas plc
    
    AUD 500 million 7.0% Fixed Rate Instruments due 2008National Grid Gas plc
    
    GBP 300 million 5.375% Fixed Rate Instruments due 2009National Grid Gas plc
    
    GBP 300 million 6.0% Fixed Rate Instruments due 2017National Grid Gas plc
    
    GBP 275 million 8.75% Fixed Rate Instruments due 2025National Grid Gas plc
    
    GBP 50 million 6.2% Fixed Rate Instruments due 2028National Grid Gas plc (ii)
    
    GBP 100 million 1.6747% RPI-Linked Instruments due 2036National Grid Gas plc (ii)
    
    GBP 115 million 1.7298% RPI-Linked Instruments due 2046National Grid Gas plc (ii)
    
    GBP 100 million 1.6298% RPI-Linked Instruments due 2048National Grid Gas plc (ii)
    
    GBP 100 million 1.5522% RPI-Linked Instruments due 2048National Grid Gas plc (ii)
    
    GBP 300 million 1.754% RPI-Linked Instruments due 2036National Grid Gas plc (ii)
    
    GBP 140 million 1.7864% Index-Linked Instruments due 2037National Grid Gas plc (ii)
    
    GBP 50 million 1.7552% Index-Linked Instruments due 2037National Grid Gas plc (ii)
    
    GBP 50 million 1.6783% Index-Linked Instruments due 2037National Grid Gas plc (ii)
    
    GBP 100 million 1.9158% Index-Linked Instruments due 2037National Grid Gas plc (ii)
    
    GBP 50 million 1.8928% Index-Linked Instruments due 2037National Grid Gas plc (ii)
    
    GBP 65 million 1.9211% Index-Linked Instruments due 2037National Grid Gas plc (ii)
    
    GBP 50 million 1.7642% Index-Linked Instruments due 2037National Grid Gas plc (ii)
    
    GBP 100 million 1.7762% Index-Linked Instruments due 2037
 (i)
    
    Matured during the year ended 31 March 2007.(ii)
    
    Issued during the year ended 31 March 2007.(iii)
    
    Secured against the assets of Niagara Mohawk Power Corporation.
 
 Issuer
    
    Description of instrumentNational Grid Electricity Transmission plc
    
    GBP 50 million 1.8055% Index-Linked Instruments due 2039National Grid Electricity Transmission plc
    
    GBP 150 million 1.8575% Index-Linked Instruments due 2039National Grid Gas plc
    
    GBP 100 million 1.7744% Index-Linked Instruments due 2039National Grid Gas plc
    
    GBP 100 million 1.8625% Index-Linked Instruments due 2039
 Borrowing facilities
 Undrawn committed borrowing facilities
 2007
    
    
    2006£m
    
    
    £mExpiring:In one year or less
    
    
    762
    
    
    
    50In more than one year, but not more than two years
    
    
    
    
    
    
    891In more than two years
    
    
    1,407
    
    
    
    1,4942,169
    
    
    
    2,435




---



##### Table of Contents



Annual Report and Accounts 2006/07 143
 
 28. Trade and other payables
 2007
    
    
    2006£m
    
    
    £mTrade payables
    
    
    1,246
    
    
    
    1,313Commodity contract liabilities
    
    
    138
    
    
    
    174Social security and other taxes
    
    
    108
    
    
    
    147Other payables
    
    
    279
    
    
    
    269Deferred income
    
    
    81
    
    
    
    1921,852
    
    
    
    2,095
   2007
    
    
    2006£m
    
    
    £mSterling
    
    
    1,287
    
    
    
    1,449US dollar
    
    
    565
    
    
    
    6461,852
    
    
    
    2,095
 
 29. Other non-current liabilities
 2007
    
    
    2006£m
    
    
    £mCommodity contract liabilities
    
    
    130
    
    
    
    314Other payables
    
    
    214
    
    
    
    324Deferred income
    
    
    1,131
    
    
    
    1,0811,475
    
    
    
    1,719
   2007
    
    
    2006£m
    
    
    £mSterling
    
    
    1,140
    
    
    
    1,168US dollar
    
    
    335
    
    
    
    5511,475
    
    
    
    1,719
 Commodity contract liabilities
   2007
    
    
    2006£m
    
    
    £mIn one year or less
    
    
    138
    
    
    
    174Current
    
    
    138
    
    
    
    174In more than one year, but not more than two years
    
    
    42
    
    
    
    169In more than two years, but not more than three years
    
    
    11
    
    
    
    50In more than three years, but not more than four years
    
    
    12
    
    
    
    15In more than four years, but not more than five years
    
    
    12
    
    
    
    13In more than five years
    
    
    53
    
    
    
    67Non-current
    
    
    130
    
    
    
    314268
    
    
    
    488




---



##### Table of Contents



144 National Grid plc
 
 30. Provisions
 TotalDecommissioning
    
    
    Environmental
    
    
    Emissions
    
    
    Restructuring
    
    
    Other
    
    
    provisions£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mAt 1 April 2005
    
    
    105
    
    
    
    491
    
    
    
    4
    
    
    
    90
    
    
    
    101
    
    
    
    791Exchange adjustments
    
    
    9
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28Disposal of subsidiary undertakings
    
    
    
    
    
    
    (44
    )
    
    
    
    
    
    
    
    
    
    
    (22
    )
    
    
    (66
    )Additions
    
    
    18
    
    
    
    3
    
    
    
    19
    
    
    
    35
    
    
    
    70
    
    
    
    145Reclassification from working capital
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    29Unwinding of discount
    
    
    3
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18Utilised
    
    
    (32
    )
    
    
    (55
    )
    
    
    
    
    
    
    (50
    )
    
    
    (37
    )
    
    
    (174
    )At 31 March 2006
    
    
    127
    
    
    
    429
    
    
    
    23
    
    
    
    75
    
    
    
    117
    
    
    
    771Exchange adjustments
    
    
    (12
    )
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39
    )Acquisition of subsidiary undertakings
    
    
    1
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Additions
    
    
    
    
    
    
    14
    
    
    
    13
    
    
    
    14
    
    
    
    1
    
    
    
    42Unused amounts reversed
    
    
    (13
    )
    
    
    (11
    )
    
    
    (23
    )
    
    
    (1
    )
    
    
    (2
    )
    
    
    (50
    )Reclassification to working capital
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )Reclassification to assets of businesses held for sale
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15
    )
    
    
    (27
    )Unwinding of discount
    
    
    4
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    21Utilised
    
    
    (25
    )
    
    
    (51
    )
    
    
    (12
    )
    
    
    (32
    )
    
    
    (8
    )
    
    
    (128
    )At 31 March 2007
    
    
    70
    
    
    
    372
    
    
    
    1
    
    
    
    56
    
    
    
    95
    
    
    
    594
  2007
    
    
    2006£m
    
    
    £mCurrent
    
    
    167
    
    
    
    235Non-current
    
    
    427
    
    
    
    536594
    
    
    
    771
 Decommissioning provision
 Environmental provision




---



##### Table of Contents



Annual Report and Accounts 2006/07 145
 30. Provisions (continued)
 Emissions provision
 Restructuring provision
 Other provisions
 31. Share capital Allotted, called upand fully paidOrdinary shares
    
    millions
    
    
    £mAt 1 April 2004
    
    
    3,088
    
    
    
    309Issued during the year
    
    
    2
    
    
    
    At 31 March 2005
    
    
    3,090
    
    
    
    309Issued during the year
    
    
    8
    
    
    
    1Effect of share consolidation (i)
    
    
    (378
    )
    
    
    At 31 March 2006
    
    
    2,720
    
    
    
    310Issued during the year
    
    
    4
    
    
    
    Repurchased during the year (ii)
    
    
    (23
    )
    
    
    (2
    )At 31 March 2007
    
    
    2,701
    
    
    
    308
 (i)
    
    On 29 July 2005, the ordinary share capital was consolidated with 43 new ordinary shares of
1117/43 pence each issued for every 49 existing ordinary shares of 10
pence each cancelled.(ii)
    
    From 20 November 2006 to 22 March 2007, the Company repurchased, and
subsequently cancelled, under its share buy-back programme 22,388,381 ordinary shares for aggregate
consideration of £169m, including transaction costs. The shares repurchased have a nominal value of
1117/43 pence each and represented 1% of the ordinary shares in issue
as at 31 March 2007. The excess of the consideration over the nominal value has been charged
against retained earnings.
   17 43 17 43
 17 43




---



##### Table of Contents



146 National Grid plc
 31. Share capital (continued)
 Share option and award plans




---



##### Table of Contents



Annual Report and Accounts 2006/07 147
 31. Share capital (continued)
  Sharesave
    
    Executive Plan
    
    Totalscheme options
    
    options
    
    optionsWeighted
    
    
    
    
    
    
    Weightedaverage
    
    
    
    
    
    
    averageprice
    
    
    
    
    
    
    price£
    
    
    millions
    
    
    £
    
    
    millions
    
    
    millionsAt 31 March 2004
    
    
    3.32
    
    
    
    31.7
    
    
    
    4.84
    
    
    
    12.0
    
    
    
    43.7Granted
    
    
    3.83
    
    
    
    4.8
    
    
    
    
    
    
    
    
    
    
    
    4.8Lapsed  expired
    
    
    3.36
    
    
    
    (1.5
    )
    
    
    5.02
    
    
    
    (1.1
    )
    
    
    (2.6
    )Exercised
    
    
    3.37
    
    
    
    (3.8
    )
    
    
    3.90
    
    
    
    (0.5
    )
    
    
    (4.3
    )At 31 March 2005
    
    
    3.35
    
    
    
    31.2
    
    
    
    4.86
    
    
    
    10.4
    
    
    
    41.6Granted
    
    
    4.34
    
    
    
    5.6
    
    
    
    
    
    
    
    
    
    
    
    5.6Lapsed  expired
    
    
    3.33
    
    
    
    (4.1
    )
    
    
    4.32
    
    
    
    (0.9
    )
    
    
    (5.0
    )Exercised
    
    
    3.25
    
    
    
    (12.8
    )
    
    
    4.04
    
    
    
    (2.3
    )
    
    
    (15.1
    )At 31 March 2006
    
    
    3.68
    
    
    
    19.9
    
    
    
    5.01
    
    
    
    7.2
    
    
    
    27.1Granted
    
    
    5.58
    
    
    
    4.2
    
    
    
    
    
    
    
    
    
    
    
    4.2Lapsed  expired
    
    
    3.82
    
    
    
    (0.9
    )
    
    
    5.48
    
    
    
    (1.9
    )
    
    
    (2.8
    )Exercised
    
    
    3.43
    
    
    
    (1.9
    )
    
    
    5.00
    
    
    
    (2.1
    )
    
    
    (4.0
    )At 31 March 2007
    
    
    4.07
    
    
    
    21.3
    
    
    
    4.74
    
    
    
    3.2
    
    
    
    24.5
  At 31 March 2007
    
    
    3.17
    
    
    
    4.1
    
    
    
    4.63
    
    
    
    2.4
    
    
    
    6.5At 31 March 2006
    
    
    3.24
    
    
    
    0.5
    
    
    
    5.03
    
    
    
    7.1
    
    
    
    7.6At 31 March 2005
    
    
    3.25
    
    
    
    0.3
    
    
    
    4.99
    
    
    
    6.3
    
    
    
    6.6
   2007
    
    
    2006
    
    
    2005£
    
    
    £
    
    
    £Sharesave scheme options
    
    
    6.50
    
    
    
    5.89
    
    
    
    4.49Executive Plan options
    
    
    6.68
    
    
    
    5.50
    
    
    
    4.65
  Weighted average
    
    
    
    
    
    
    Weighted averageexercise price of
    
    
    Number
    
    
    exercise price of
    
    
    Number
    
    
    Exercise price
    
    
    Normal datesexercisable options
    
    
    exercisable
    
    
    outstanding options
    
    
    outstanding
    
    
    per share
    
    
    of exercise£
    
    
    millions
    
    
    £
    
    
    millions
    
    
    pence
    
    
    yearsExecutive Plan
    
    
    2.81
    
    
    
    0.2
    
    
    
    2.81
    
    
    
    0.2
    
    
    
    258.0 - 280.5
    
    
    
    2001 - 20083.82
    
    
    
    0.3
    
    
    
    3.82
    
    
    
    0.3
    
    
    
    375.8 - 490.0
    
    
    
    2002 - 20095.34
    
    
    
    0.4
    
    
    
    5.34
    
    
    
    0.4
    
    
    
    424.0 - 566.5
    
    
    
    2003 - 20105.28
    
    
    
    0.1
    
    
    
    5.31
    
    
    
    0.8
    
    
    
    526.0 - 623.0
    
    
    
    2004 - 20114.71
    
    
    
    1.4
    
    
    
    4.71
    
    
    
    1.4
    
    
    
    434.3 - 481.5
    
    
    
    2006 - 20134.05
    
    
    
    
    
    
    
    4.05
    
    
    
    0.1
    
    
    
    405.0
    
    
    
    2007 - 20144.63
    
    
    
    2.4
    
    
    
    4.74
    
    
    
    3.2
   Share-based payment charges




---



##### Table of Contents



148 National Grid plc
 31. Share capital (continued)
 Awards under share option plans
 2007
    
    
    2006
    
    
    2005Where the exercise price is less than the market price at the date of grant
    
    
    746.0p
    
    
    
    569.0p
    
    
    
    496.0p
  2007
    
    
    2006
    
    
    2005Where the exercise price is less than the market price at the date of grant
    
    
    558.0p
    
    
    
    434.0p
    
    
    
    383.0p
  2007
    
    
    2006
    
    
    2005Where the exercise price is less than the market price at the date of grant
    
    
    166.8p
    
    
    
    128.0p
    
    
    
    90.4p
  2007
    
    
    2006
    
    
    2005Dividend yield (%)
    
    
    4.5
    
    
    
    4.5
    
    
    
    5.5-5.8Volatility (%)
    
    
    15.6-18.9
    
    
    
    15.6-18.9
    
    
    
    15.4Risk-free investment rate (%)
    
    
    4.2
    
    
    
    4.2
    
    
    
    4.5Average life (years)
    
    
    3.9
    
    
    
    4.3
    
    
    
    4.0
   (i)
    
    implied volatility in traded options over the Companys shares;(ii)
    
    historical volatility of the Companys shares from October 2002 (the date of the business combination with Lattice Group plc); and(iii)
    
    implied volatility of comparator companies where options in their shares are traded.
  Awards under other share scheme plans
 2007
    
    
    2006
    
    
    2005Average share price
    
    
    594.0p
    
    
    
    535.6p
    
    
    
    431.7pAverage fair value
    
    
    403.1p
    
    
    
    358.0p
    
    
    
    210.6p
  2007
    
    
    2006
    
    
    2005Dividend yield (%)
    
    
    4.4
    
    
    
    4.4
    
    
    
    5.3-5.7Volatility (%)
    
    
    19.9
    
    
    
    19.9
    
    
    
    15.4Risk-free investment rate (%)
    
    
    4.1
    
    
    
    4.1
    
    
    
    4.5-5.2




---



##### Table of Contents



Annual Report and Accounts 2006/07 149
 
 32. Reconciliation of movements in total equity
 Available-Called-up
    
    
    Share
    
    
    
    
    
    
    
    
    
    
    Cash flow
    
    
    for-sale
    
    
    
    
    
    
    Totalshare
    
    
    premium
    
    
    Retained
    
    
    Translation
    
    
    hedge
    
    
    investment
    
    
    Other
    
    
    shareholders
    
    
    Minority
    
    
    Totalcapital
    
    
    account
    
    
    earnings
    
    
    reserve
    
    
    reserve
    
    
    reserve
    
    
    reserves
    
    
    equity
    
    
    interests
    
    
    equity£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mAt 1 April 2004
    
    
    309
    
    
    
    1,280
    
    
    
    4,642
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,131
    )
    
    
    1,100
    
    
    
    10
    
    
    
    1,110Net income/(expense) recognised
directly in equity
    
    
    
    
    
    
    
    
    
    
    187
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    181
    
    
    
    
    
    
    
    181Profit for the year
    
    
    
    
    
    
    
    
    
    
    1,424
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,424
    
    
    
    
    
    
    
    1,424Equity dividends
    
    
    
    
    
    
    
    
    
    
    (628
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (628
    )
    
    
    
    
    
    
    (628
    )Issue of ordinary share capital
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    9Movement in shares held by
employee share trusts
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5Share-based payment
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    16Tax on share-based payment
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4At 31 March 2005
    
    
    309
    
    
    
    1,289
    
    
    
    5,650
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    (5,131
    )
    
    
    2,111
    
    
    
    10
    
    
    
    2,121Adoption of IAS 39
    
    
    
    
    
    
    
    
    
    
    (91
    )
    
    
    (7
    )
    
    
    51
    
    
    
    4
    
    
    
    
    
    
    
    (43
    )
    
    
    
    
    
    
    (43
    )At 1 April 2005
    
    
    309
    
    
    
    1,289
    
    
    
    5,559
    
    
    
    (13
    )
    
    
    51
    
    
    
    4
    
    
    
    (5,131
    )
    
    
    2,068
    
    
    
    10
    
    
    
    2,078Net income/(expense) recognised
directly in equity
    
    
    
    
    
    
    
    
    
    
    121
    
    
    
    140
    
    
    
    (14
    )
    
    
    2
    
    
    
    
    
    
    
    249
    
    
    
    1
    
    
    
    250Profit for the year
    
    
    
    
    
    
    
    
    
    
    3,848
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,848
    
    
    
    2
    
    
    
    3,850Equity dividends
    
    
    
    
    
    
    
    
    
    
    (745
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (745
    )
    
    
    
    
    
    
    (745
    )Return of capital to shareholders
through B share scheme
    
    
    
    
    
    
    
    
    
    
    (2,009
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,009
    )
    
    
    
    
    
    
    (2,009
    )Issue of ordinary share capital
    
    
    1
    
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    28Other movements in minority
interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Movement in shares held in
employee share trusts
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    19Share-based payment
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    17Tax on share-based payment
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    7At 31 March 2006
    
    
    310
    
    
    
    1,316
    
    
    
    6,817
    
    
    
    127
    
    
    
    37
    
    
    
    6
    
    
    
    (5,131
    )
    
    
    3,482
    
    
    
    11
    
    
    
    3,493Net income/(expense) recognised
directly in equity
    
    
    
    
    
    
    
    
    
    
    295
    
    
    
    (175
    )
    
    
    (11
    )
    
    
    (5
    )
    
    
    
    
    
    
    104
    
    
    
    (1
    )
    
    
    103Profit for the year
    
    
    
    
    
    
    
    
    
    
    1,394
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,394
    
    
    
    2
    
    
    
    1,396Equity dividends
    
    
    
    
    
    
    
    
    
    
    (730
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (730
    )
    
    
    
    
    
    
    (730
    )Issue of ordinary share capital
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    16Repurchase of shares
    
    
    (2
    )
    
    
    
    
    
    
    (169
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    (169
    )
    
    
    
    
    
    
    (169
    )Other movements in minority
interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Share-based payment
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    15Tax on share-based payment
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    13At 31 March 2007
    
    
    308
    
    
    
    1,332
    
    
    
    7,635
    
    
    
    (48
    )
    
    
    26
    
    
    
    1
    
    
    
    (5,129
    )
    
    
    4,125
    
    
    
    11
    
    
    
    4,136




---



##### Table of Contents



150 National Grid plc
 
 33. Consolidated cash flow statement
 a) Cash flow from operating activities  discontinued operations
 2007
    
    
    2006
    
    
    2005£m
    
    
    £m
    
    
    £mOperating profit
    
    
    62
    
    
    
    111
    
    
    
    465Adjustments for:Exceptional items
    
    
    55
    
    
    
    20
    
    
    
    87Depreciation and amortisation
    
    
    72
    
    
    
    77
    
    
    
    213Share-based payment charge
    
    
    
    
    
    
    3
    
    
    
    4Changes in working capital, provisions and pensions
    
    
    (8
    )
    
    
    (47
    )
    
    
    (50
    )Cash flow relating to exceptional items
    
    
    
    
    
    
    (26
    )
    
    
    (81
    )Cash flow relating to discontinued operations
    
    
    181
    
    
    
    138
    
    
    
    638
 b) Reconciliation of net cash flow to movement in net debt
 2007
    
    
    2006
    
    
    2005£m
    
    
    £m
    
    
    £mMovement in cash and cash equivalents
    
    
    175
    
    
    
    1,181
    
    
    
    8Increase/(decrease) in financial investments
    
    
    1,725
    
    
    
    (25
    )
    
    
    59(Increase)/decrease in borrowings and derivatives
    
    
    (3,045
    )
    
    
    2,304
    
    
    
    (1,052
    )Cash paid to shareholders under B share scheme
    
    
    26
    
    
    
    1,957
    
    
    
    Net interest paid (i)
    
    
    597
    
    
    
    704
    
    
    
    n/aChange in net debt resulting from cash flows
    
    
    (522
    )
    
    
    6,121
    
    
    
    (985
    )Exchange adjustments (i)
    
    
    
    
    
    
    
    
    
    
    112Changes in fair value of financial assets and liabilities and exchange movements (i)
    
    
    331
    
    
    
    (299
    )
    
    
    n/aIssue of B shares
    
    
    
    
    
    
    (2,009
    )
    
    
    Net interest charge (i)
    
    
    (655
    )
    
    
    (660
    )
    
    
    n/aAcquisition of subsidiary undertaking
    
    
    (48
    )
    
    
    
    
    
    
    Amounts reclassified to businesses held for sale
    
    
    (42
    )
    
    
    
    
    
    
    Other non-cash movements
    
    
    (2
    )
    
    
    (17
    )
    
    
    (28
    )Movement in net debt (net of related derivative financial instruments) in the year
    
    
    (938
    )
    
    
    3,136
    
    
    
    (901
    )Net debt at start of year
    
    
    (10,850
    )
    
    
    (13,638
    )
    
    
    (12,737
    )Impact of adoption of IAS 32 and IAS 39 (i)
    
    
    
    
    
    
    (348
    )
    
    
    Net debt (net of related derivative financial instruments) at end of year
    
    
    (11,788
    )
    
    
    (10,850
    )
    
    
    (13,638
    )
 (i)
    
    The adoption of IAS 39 resulted in changes to the carrying value of borrowings and financial investments as at 1 April 2005.
 c) Analysis of changes in net debt
 OtherAt 1 April
    
    
    Cash
    
    
    Exchange
    
    
    non-cash
    
    
    At 31 March2004
    
    
    flow
    
    
    adjustments
    
    
    movements
    
    
    2005£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mCash and cash equivalents
    
    
    273
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    272Bank overdrafts
    
    
    (26
    )
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    (18
    )247
    
    
    
    8
    
    
    
    (1
    )
    
    
    
    
    
    
    254Financial investments
    
    
    343
    
    
    
    59
    
    
    
    (4
    )
    
    
    
    
    
    
    398Borrowings
    
    
    (13,327
    )
    
    
    (1,052
    )
    
    
    117
    
    
    
    (28
    )
    
    
    (14,290
    )(12,737
    )
    
    
    (985
    )
    
    
    112
    
    
    
    (28
    )
    
    
    (13,638
    )
 Impact ofadoption of
    
    
    
    
    
    
    Fair
    
    
    
    
    
    
    
    
    
    
    OtherAt 1 April
    
    
    IAS 32 and
    
    
    Cash
    
    
    value gains
    
    
    Issue of
    
    
    Interest
    
    
    non-cash
    
    
    At 31 March2005
    
    
    IAS 39 (i)
    
    
    flow
    
    
    and losses
    
    
    B shares
    
    
    charges
    
    
    movements
    
    
    2006£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mCash and cash equivalents
    
    
    272
    
    
    
    
    
    
    
    1,166
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,452Bank overdrafts
    
    
    (18
    )
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )254
    
    
    
    
    
    
    
    1,181
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,449Financial investments (ii)
    
    
    398
    
    
    
    3
    
    
    
    (155
    )
    
    
    3
    
    
    
    
    
    
    
    135
    
    
    
    
    
    
    
    384Borrowings (ii)
    
    
    (14,290
    )
    
    
    (894
    )
    
    
    5,037
    
    
    
    (207
    )
    
    
    (2,009
    )
    
    
    (746
    )
    
    
    (17
    )
    
    
    (13,126
    )Derivatives (ii)
    
    
    
    
    
    
    543
    
    
    
    58
    
    
    
    (109
    )
    
    
    
    
    
    
    (49
    )
    
    
    
    
    
    
    443(13,638
    )
    
    
    (348
    )
    
    
    6,121
    
    
    
    (299
    )
    
    
    (2,009
    )
    
    
    (660
    )
    
    
    (17
    )
    
    
    (10,850
    )
 Fair
    
    
    
    
    
    
    OtherAt 1 April
    
    
    Cash
    
    
    value gains
    
    
    Interest
    
    
    non-cash
    
    
    At 31 March2006
    
    
    flow
    
    
    and losses
    
    
    charges
    
    
    movements
    
    
    2007£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mCash and cash equivalents
    
    
    1,452
    
    
    
    178
    
    
    
    (14
    )
    
    
    
    
    
    
    (23
    )
    
    
    1,593Bank overdrafts
    
    
    (3
    )
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )1,449
    
    
    
    175
    
    
    
    (14
    )
    
    
    
    
    
    
    (23
    )
    
    
    1,587Financial investments (ii)
    
    
    384
    
    
    
    1,509
    
    
    
    (9
    )
    
    
    215
    
    
    
    (1
    )
    
    
    2,098Borrowings (ii)
    
    
    (13,126
    )
    
    
    (2,233
    )
    
    
    511
    
    
    
    (833
    )
    
    
    (30
    )
    
    
    (15,711
    )Derivatives (ii)
    
    
    443
    
    
    
    27
    
    
    
    (157
    )
    
    
    (37
    )
    
    
    (38
    )
    
    
    238(10,850
    )
    
    
    (522
    )
    
    
    331
    
    
    
    (655
    )
    
    
    (92
    )
    
    
    (11,788
    )
 (i)
    
    There are no comparatives for net debt-related derivative assets and liabilities at 31
March 2005 as National Grid adopted IAS 39 with effect from 1 April 2005 consistent with the
requirements of IFRS 1. The adoption of IAS 39 also resulted in changes to the carrying value of
borrowings and financial investments as at 1 April 2005.(ii)
    
    Includes interest.




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##### Table of Contents



Annual Report and Accounts 2006/07 151
 34. Related party transactions
 The following information is provided in accordance with IAS 24, Related Party Disclosures, as
being material transactions with related parties during the year. These transactions are with joint
ventures and a pension plan and were in the normal course of business and are summarised below: 2007
    
    
    2006
    
    
    2005£m
    
    
    £m
    
    
    £mSales: Services supplied to a pension plan
    
    
    4
    
    
    
    4
    
    
    
    4Purchases: Services received from joint ventures
    
    
    26
    
    
    
    32
    
    
    
    24
    35. Commitments and contingencies
 a) Future capital expenditure
 2007
    
    
    2006£m
    
    
    £mContracted for but not provided
    
    
    1,554
    
    
    
    1,343
 b) Lease commitments
 2007
    
    
    2006£m
    
    
    £mIn one year or less
    
    
    80
    
    
    
    87In more than one year, but not more than two years
    
    
    76
    
    
    
    80In more than two years, but not more than three years
    
    
    72
    
    
    
    75In more than three years, but not more than four years
    
    
    68
    
    
    
    71In more than four years, but not more than five years
    
    
    64
    
    
    
    67In more than five years
    
    
    440
    
    
    
    451800
    
    
    
    831
 c) Power commitments
 2007
    
    
    2006£m
    
    
    £mIn one year or less
    
    
    1,233
    
    
    
    1,391In more than one year, but not more than two years
    
    
    642
    
    
    
    821In more than two years, but not more than three years
    
    
    476
    
    
    
    641In more than three years, but not more than four years
    
    
    186
    
    
    
    494In more than four years, but not more than five years
    
    
    141
    
    
    
    14In more than five years
    
    
    1,053
    
    
    
    1,3143,731
    
    
    
    4,675
  d) KeySpan
 e) Other commitments, contingencies and guarantees
  (i)
    
    a guarantee of £50m of the obligations of a subsidiary undertaking to make payments in respect
of any liabilities under a meter operating contract that runs until May 2008;(ii)
    
    an uncapped guarantee, for which the maximum liability is estimated at £40m, to The Crown Estates in support of
the transfer of the interconnector between France and England to National Grid Interconnectors
Limited as part of the Licence to Assign Lease.
This is ongoing;(iii)
    
    a guarantee in support of the payment obligations of a subsidiary undertaking in respect of a
combined heat and power plant which will increase to approximately £40m in February 2010. This
reduces following commissioning, expected to be in February 2010, by £2m per annum until it expires
in 2027;




---



##### Table of Contents



152 National Grid plc
 35. Commitments and contingencies (continued)
 e) Other commitments, contingencies and guarantees (continued)
 (iv)
    
    guarantees of £20m relating to certain property obligations of subsidiary undertakings. The
bulk of these expire by December 2025;(v)
    
    guarantees in respect of a former associate amounting to
£14m, the bulk of which relates to its obligations to supply telecommunications services. These are
open-ended;(vi)
    
    a guarantee of the payment obligations of a subsidiary undertaking in respect of a
power connection agreement amounting to a maximum potential payout of £14m subject to a cap of £7m
per annum. This runs until December 2024;(vii)
    
    indemnities estimated to be up to a maximum of £14m
given to the trustees of a defined contribution pension scheme. These are open-ended;(viii)
    
    a guarantee of the payment obligations of a subsidiary undertaking in respect of a nitrogen supply
agreement amounting to a maximum potential payout of £12m subject to a cap of £1m per annum. This
runs until November 2019; and(ix)
    
    other guarantees amounting to £25m arising in the normal course
of business and entered into on normal commercial terms. These guarantees run for varying lengths
of time.  f) Amounts receivable under sublease arrangements
 g) Litigation and claims
    36. Subsidiary undertakings and joint ventures Principal subsidiary undertakings
 Principal activityNational Grid Gas plc (i)
    
    Gas transportationNational Grid Electricity Transmission plc (i)
    
    Transmission of electricity in England and WalesNew England Power Company (Incorporated in the US) (i)
    
    Transmission of electricityMassachusetts Electric Company (Incorporated in the US) (i)
    
    Distribution of electricityThe Narragansett Electric Company (Incorporated in the US) (i)
    
    Distribution of electricityNiagara Mohawk Power Corporation (Incorporated in the US) (i)
    
    Distribution and transmission of electricity and gasNational Grid Wireless No 2 Limited (i) (iii)
    
    Telecommunications infrastructureNational Grid Wireless Limited (i) (iii)
    
    Telecommunications and broadcast infrastructureNGG Finance plc (ii)
    
    FinancingBritish Transco International Finance B.V. (Incorporated in The Netherlands) (i)
    
    FinancingNational Grid Property Limited (i)
    
    PropertyNational Grid Holdings One plc (ii)
    
    Holding companyLattice Group plc (i)
    
    Holding companyNational Grid USA (Incorporated in the US) (i)
    
    Holding companyNiagara Mohawk Holdings Inc. (Incorporated in the US) (i)
    
    Holding companyNational Grid Commercial Holdings Limited (i)
    
    Holding companyNational Grid Gas Holdings plc (i)
    
    Holding companyNational Grid (US) Holdings Limited (ii)
    
    Holding companyNational Grid Holdings Limited (i)
    
    Holding company
 (i)
    
    Issued ordinary share capital held by subsidiary undertakings.(ii)
    
    Issued ordinary share capital held by National Grid plc.(iii)
    
    Included within wireless infrastructure operations in the UK which was sold on 3 April 2007.
 Principal joint venture




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##### Table of Contents



Annual Report and Accounts 2006/07 153
  37. Subsequent events
  38. Differences between IFRS and US generally accepted accounting principles
National Grid prepares its consolidated financial statements in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union, which differ in certain
respects from generally accepted accounting principles in the United States (US GAAP). IFRS as
adopted by the European Union is materially the same as IFRS published by the International
Accounting Standards Board (IASB).   Reconciliation of profit from IFRS to US GAAP
 2007
    
    
    2006
    *
    
    2005
    *Notes
    
    
    £m
    
    
    £m
    
    
    £mProfit for the year attributable to equity shareholders under IFRS
    
    
    
    
    
    
    1,394
    
    
    
    3,848
    
    
    
    1,424Adjustments to conform with US GAAPPurchase accounting
    
    
    (a
    )
    
    
    (124
    )
    
    
    (127
    )
    
    
    (176
    )US regulatory accounting
    
    
    (b
    )
    
    
    (474
    )
    
    
    (269
    )
    
    
    (246
    )Pensions and other post-retirement benefits
    
    
    (c
    )
    
    
    (94
    )
    
    
    (56
    )
    
    
    (21
    )Financial instruments
    
    
    (d
    )
    
    
    160
    
    
    
    (108
    )
    
    
    254Severance and onerous lease costs
    
    
    (e
    )
    
    
    2
    
    
    
    (63
    )
    
    
    62Revenue recognition
    
    
    (f
    )
    
    
    5
    
    
    
    (48
    )
    
    
    5Discounting of provisions
    
    
    (i
    )
    
    
    3
    
    
    
    (14
    )
    
    
    Sale and leaseback
    
    
    (k
    )
    
    
    (19
    )
    
    
    
    
    
    
    Current tax
    
    
    (l
    )
    
    
    15
    
    
    
    
    
    
    
    Deferred taxation
    
    
    (m
    )
    
    
    295
    
    
    
    208
    
    
    
    19Other
    
    
    (n
    )
    
    
    15
    
    
    
    (1
    )
    
    
    2Discontinued operations
    
    
    (a), (c), (d), (g), (h
    )
    
    
    (32
    )
    
    
    (2,349
    )
    
    
    (51
    )Discontinued operations  deferred taxation
    
    
    (m
    )
    
    
    
    
    
    
    286
    
    
    
    16(248
    )
    
    
    (2,541
    )
    
    
    (136
    )Net income under US GAAP
    
    
    
    
    
    
    1,146
    
    
    
    1,307
    
    
    
    1,288
 *
    
    Reclassified as a result of businesses qualifying as discontinued operations in 2006/07. The
2005 comparatives have been restated due to the change in methodology for calculating net periodic
pension charge, as described in note 38 (c)
 Reconciliation of shareholders equity from IFRS to US GAAP
 2007
    
    
    2006Notes
    
    
    £m
    
    
    £mTotal shareholders equity under IFRS
    
    
    
    
    
    
    4,125
    
    
    
    3,482Adjustments to conform with US GAAPPurchase accounting  property, plant and equipment
    
    
    (a
    )
    
    
    2,038
    
    
    
    2,162Purchase accounting  goodwill
    
    
    (g
    )
    
    
    2,648
    
    
    
    2,689US regulatory accounting
    
    
    (b
    )
    
    
    2,209
    
    
    
    2,702Pensions and other post-retirement benefits
    
    
    (c
    )
    
    
    
    
    
    
    886Financial instruments
    
    
    (d
    )
    
    
    10
    
    
    
    119Revenue recognition
    
    
    (f
    )
    
    
    (37
    )
    
    
    (42
    )Intangible assets
    
    
    (h
    )
    
    
    26
    
    
    
    28Provisions
    
    
    (i
    )
    
    
    (142
    )
    
    
    (154
    )Non-reversal of impairments
    
    
    (j
    )
    
    
    (23
    )
    
    
    (39
    )Sale and leaseback
    
    
    (k
    )
    
    
    (19
    )
    
    
    Deferred taxation
    
    
    (m
    )
    
    
    (1,477
    )
    
    
    (2,090
    )Other
    
    
    (n
    )
    
    
    (28
    )
    
    
    45,205
    
    
    
    6,265Shareholders equity under US GAAP
    
    
    
    
    
    
    9,330
    
    
    
    9,747




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##### Table of Contents



154 National Grid plc
 38. Differences between IFRS and US generally accepted accounting principles (continued)  a) Purchase accounting  property, plant and equipment
   b) US regulatory accounting
    Net impact ofUS regulatory accounting2007
    
    
    2006£m
    
    
    £mStranded costs and CTC (i) related
    
    
    1,092
    
    
    
    1,355Purchased power and deferrals
    
    
    67
    
    
    
    124Derivative instruments
    
    
    263
    
    
    
    478Environmental, remediation and decommissioning
    
    
    350
    
    
    
    418Pensions and post-retirement benefits
    
    
    499
    
    
    
    265Other
    
    
    (62
    )
    
    
    622,209
    
    
    
    2,702
 (i)
    
    Contract Termination Charge and Competitive Transmission Charge (collectively referred to as CTC).
 c) Pensions and other post-retirement benefits
  Before
    
    
    
    
    
    
    Afterapplication of
    
    
    
    
    
    
    application ofSFAS 158
    
    
    Adjustments
    
    
    SFAS 158£m
    
    
    £m
    
    
    £mIntangible assets
    
    
    41
    
    
    
    (41
    )
    
    
    Regulatory assets
    
    
    20
    
    
    
    274
    
    
    
    294Post-retirement benefits
    
    
    (1,026
    )
    
    
    (196
    )
    
    
    (1,222
    )Deferred tax
    
    
    339
    
    
    
    14
    
    
    
    353Accumulated comprehensive loss
    
    
    (626
    )
    
    
    51
    
    
    
    (575
    )




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##### Table of Contents



Annual Report and Accounts 2006/07 155
 38. Differences between IFRS and US generally accepted accounting principles (continued)
 
 c) Pensions and other post-retirement benefits (continued)
        Pensions
    
    Other post-retirement benefits2007
    
    
    2006
    *
    
    2005
    *
    
    2007
    
    
    2006
    
    
    2005£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mContinuing operationsDefined contribution scheme cost
    
    
    3
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Defined benefit schemesService cost
    
    
    113
    
    
    
    111
    
    
    
    107
    
    
    
    15
    
    
    
    16
    
    
    
    12Interest cost
    
    
    803
    
    
    
    802
    
    
    
    828
    
    
    
    63
    
    
    
    63
    
    
    
    56Expected return on plan assets
    
    
    (882
    )
    
    
    (847
    )
    
    
    (847
    )
    
    
    (41
    )
    
    
    (41
    )
    
    
    (40
    )Amortisation of prior service cost
    
    
    6
    
    
    
    5
    
    
    
    6
    
    
    
    7
    
    
    
    6
    
    
    
    3Amortisation of previously unrecognised actuarial losses
    
    
    54
    
    
    
    58
    
    
    
    55
    
    
    
    23
    
    
    
    
    
    
    
    2097
    
    
    
    131
    
    
    
    151
    
    
    
    67
    
    
    
    44
    
    
    
    51Release of pension provision
    
    
    (2
    )
    
    
    (2
    )
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    95
    
    
    
    129
    
    
    
    149
    
    
    
    67
    
    
    
    44
    
    
    
    51Discontinued operationsService cost
    
    
    2
    
    
    
    7
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    Interest cost
    
    
    2
    
    
    
    2
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Expected return on plan assets
    
    
    (2
    )
    
    
    (2
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    7
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    
   2007
    
    
    2006
    
    
    2005£m
    
    
    £m
    
    
    £mCost of termination benefits and curtailments  continuing operations
    
    
    42
    
    
    
    32
    
    
    
    30Gain on termination benefits and curtailments  discontinued operations
    
    
    
    
    
    
    (41
    )
    
    
    42
    
    
    
    (9
    )
    
    
    30




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##### Table of Contents



156 National Grid plc
 38. Differences between IFRS and US generally accepted accounting principles (continued)
 c) Pensions and other post-retirement benefits (continued)
 US
    
    UK2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005%
    
    
    %
    
    
    %
    
    
    %
    
    
    %
    
    
    %Discount rate
    
    
    6.0
    
    
    
    5.8
    
    
    
    5.8
    
    
    
    4.9
    
    
    
    5.1
    
    
    
    5.5Expected return on assets
    
    
    7.8-8.3
    
    
    
    7.0-8.3
    
    
    
    8.3
    
    
    
    5.8-6.4
    
    
    
    5.8-6.4
    
    
    
    6.2-6.7General salary increases
    
    
    3.9-4.3
    
    
    
    3.9-4.3
    
    
    
    3.3-5.3
    
    
    
    3.9
    
    
    
    3.9
    
    
    
    3.9Pension increases
    
    nil
    
    
    nil
    
    
    nil
    
    
    
    3.0
    
    
    
    3.0
    
    
    
    3.0
   OtherPensions
    
    post-retirement benefits2007
    
    
    2006
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £m
    
    
    £mProjected benefit obligation at 31 March (i)
    
    
    (16,113
    )
    
    
    (16,603
    )
    
    
    (1,126
    )
    
    
    (1,223
    )Fair value of plan assets at 31 March
    
    
    15,486
    
    
    
    15,358
    
    
    
    531
    
    
    
    568Excess of projected benefit obligation over plan assets
    
    
    (627
    )
    
    
    (1,245
    )
    
    
    (595
    )
    
    
    (655
    )Unrecognised net actuarial loss
    
    
    
    
    
    
    755
    
    
    
    
    
    
    
    335Unrecognised prior service cost
    
    
    
    
    
    
    56
    
    
    
    
    
    
    
    69Net accrued benefit liability  before minimum liability adjustment
    
    
    (627
    )
    
    
    (434
    )
    
    
    (595
    )
    
    
    (251
    )Additional minimum liability adjustment
    
    
    
    
    
    
    (396
    )
    
    
    
    
    
    
    Net accrued benefit liability
    
    
    (627
    )
    
    
    (830
    )
    
    
    (595
    )
    
    
    (251
    )
 (i)
    
    The projected benefit obligation of pensions at 31 March 2007 includes £83m (2006: £96m) in respect of unfunded obligations.
 Non-current liabilities (ii)
    
    
    (675
    )
    
    
    (1,026
    )
    
    
    (595
    )
    
    
    (251
    )Assets (pre-paid costs)
    
    
    48
    
    
    
    196
    
    
    
    
    
    
    
    Net accrued benefit liability (ii)
    
    
    (627
    )
    
    
    (830
    )
    
    
    (595
    )
    
    
    (251
    )
 (ii)
    
    The difference between pension and other post-retirement non-current liabilities shown
above and the amounts reflected in the balance sheet as Pensions and other post-retirement
obligations in note 39 primarily represents other post-employment benefits.
    US
    
    UK2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005%
    
    
    %
    
    
    %
    
    
    %
    
    
    %
    
    
    %Discount rate
    
    
    5.8
    
    
    
    6.0
    
    
    
    5.8
    
    
    
    5.4
    
    
    
    4.9
    
    
    
    5.4General salary increases
    
    
    3.9-4.3
    
    
    
    3.9-4.3
    
    
    
    3.9-4.3
    
    
    
    4.2
    
    
    
    3.9
    
    
    
    3.9Pension increases
    
    nil
    
    
    nil
    
    
    nil
    
    
    
    3.25
    
    
    
    2.95
    
    
    
    3.0




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##### Table of Contents



Annual Report and Accounts 2006/07 157
 38. Differences between IFRS and US generally accepted accounting principles (continued)
 c) Pensions and other post-retirement benefits (continued)
 OtherPensions
    
    post-retirement benefits2007
    
    
    2006
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £m
    
    
    £mProjected benefit obligation at start of year
    
    
    16,603
    
    
    
    15,758
    
    
    
    1,223
    
    
    
    1,068Service cost
    
    
    115
    
    
    
    118
    
    
    
    15
    
    
    
    16Interest cost
    
    
    805
    
    
    
    804
    
    
    
    63
    
    
    
    63Plan participants contributions
    
    
    14
    
    
    
    14
    
    
    
    
    
    
    
    Plan amendment  prior service cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Terminations
    
    
    23
    
    
    
    49
    
    
    
    
    
    
    
    Curtailments
    
    
    4
    
    
    
    (157
    )
    
    
    
    
    
    
    Actuarial (gain)/loss
    
    
    (464
    )
    
    
    1,301
    
    
    
    4
    
    
    
    40Benefits paid
    
    
    (758
    )
    
    
    (775
    )
    
    
    (62
    )
    
    
    (59
    )Settlements (i)
    
    
    (87
    )
    
    
    (619
    )
    
    
    
    
    
    
    Acquisition of subsidiary undertakings
    
    
    89
    
    
    
    
    
    
    
    25
    
    
    
    Transfers
    
    
    1
    
    
    
    (17
    )
    
    
    
    
    
    
    Reclassified as liabilities of businesses held for sale
    
    
    (48
    )
    
    
    
    
    
    
    
    
    
    
    Exchange adjustments
    
    
    (184
    )
    
    
    127
    
    
    
    (142
    )
    
    
    95Projected benefit obligation at end of year
    
    
    16,113
    
    
    
    16,603
    
    
    
    1,126
    
    
    
    1,223Fair value of plan assets at start of year
    
    
    15,358
    
    
    
    14,086
    
    
    
    568
    
    
    
    488Actual return on assets
    
    
    796
    
    
    
    2,370
    
    
    
    53
    
    
    
    65Employer contributions
    
    
    276
    
    
    
    191
    
    
    
    28
    
    
    
    30Plan participants contributions
    
    
    14
    
    
    
    14
    
    
    
    
    
    
    
    Benefits paid
    
    
    (758
    )
    
    
    (774
    )
    
    
    (58
    )
    
    
    (59
    )Settlements (i)
    
    
    (87
    )
    
    
    (609
    )
    
    
    
    
    
    
    Acquisition of subsidiary undertakings
    
    
    82
    
    
    
    
    
    
    
    7
    
    
    
    Transfers
    
    
    
    
    
    
    (15
    )
    
    
    
    
    
    
    Reclassified as liabilities of businesses held for sale
    
    
    (46
    )
    
    
    
    
    
    
    
    
    
    
    Exchange adjustments
    
    
    (149
    )
    
    
    95
    
    
    
    (67
    )
    
    
    44Fair value of plan assets at end of year
    
    
    15,486
    
    
    
    15,358
    
    
    
    531
    
    
    
    568
 (i)
    
    For the year ended 31 March 2007, settlements shown above of £87m were classified as benefits paid under IFRS (see note 8).
  Otherpost-retirementPensions
    
    
    benefitsYear ended 31 March
    
    £m
    
    
    £m2008
    
    
    765
    
    
    
    602009
    
    
    779
    
    
    
    652010
    
    
    795
    
    
    
    672011
    
    
    812
    
    
    
    702012
    
    
    831
    
    
    
    722013-2017
    
    
    4,643
    
    
    
    377
     £m2008
    
    
    42009
    
    
    42010
    
    
    42011
    
    
    42012
    
    
    52013-2017
    
    
    25




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##### Table of Contents



158 National Grid plc
 38. Differences between IFRS and US generally accepted accounting principles (continued)
 d) Financial instruments
     e) Severance and onerous lease costs
  f) Revenue recognition




---



##### Table of Contents



Annual Report and Accounts 2006/07 159
 38. Differences between IFRS and US generally accepted accounting principles (continued)  g) Goodwill
  h) Intangible assets
  i) Provisions
  j) Impairments
  k) Sale and leaseback
  l) Current tax
  m) Deferred taxation
   2007
    
    
    2006
    
    
    2005£m
    
    
    £m
    
    
    £mCurrent taxes (credit)/charge
    
    
    (17
    )
    
    
    406
    
    
    
    14Deferred taxes charge/(credit)
    
    
    149
    
    
    
    (85
    )
    
    
    285Tax charge
    
    
    132
    
    
    
    321
    
    
    
    299
  2007
    
    
    2006£m
    
    
    £mDeferred taxation liabilities:Excess of book value over taxation value of fixed assets
    
    
    3,906
    
    
    
    3,778Other temporary differences
    
    
    972
    
    
    
    1,4944,878
    
    
    
    5,272Deferred taxation assets:Other temporary differences (i)
    
    
    (1,018
    )
    
    
    (1,252
    )3,860
    
    
    
    4,020Analysed as follows:Current
    
    
    (60
    )
    
    
    (43
    )Non-current
    
    
    3,920
    
    
    
    4,0633,860
    
    
    
    4,020
 (i)
    
    Deferred taxation assets at 31 March 2007 were stated net of a £422m valuation allowance
adjustment in respect of capital losses, non-trade deficits, trading losses and pre-trading
expenditure (2006: £530m; 2005: £493m).




---



##### Table of Contents



160 National Grid plc
 38. Differences between IFRS and US generally accepted accounting principles (continued)  n) Other
  Other US GAAP disclosures  Non-GAAP measures
  Other presentational differences between IFRS and US GAAP
          Restricted net assets




---



##### Table of Contents



Annual Report and Accounts 2006/07 161
 38. Differences between IFRS and US generally accepted accounting principles (continued)  n) Other (continued)  New US Accounting Standards adopted during 2006/07  SFAS 158
  SFAS 123(R)
    SFAS 151
  SFAS 153
  SFAS 154




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##### Table of Contents



162 National Grid plc
 38. Differences between IFRS and US generally accepted accounting principles (continued)  n) Other (continued)  Recent US pronouncements not yet adopted  SFAS 155
  SFAS 157
  SFAS 159
  FIN 48




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##### Table of Contents



Annual Report and Accounts 2006/07 163
 39. Condensed US GAAP financial information  Condensed consolidated US GAAP income statement
 2007
    
    
    
    
    
    
    2007National
    
    
    2007
    
    
    NationalGrid
    
    
    US GAAP
    
    
    Grid(IFRS
    )
    
    adjustments
    
    
    (US GAAP
    )£m
    
    
    £m
    
    
    £mRevenue
    
    
    8,695
    
    
    
    (9
    )
    
    
    8,686Other operating income
    
    
    83
    
    
    
    (14
    )
    
    
    69Operating costsDepreciation and amortisation
    
    
    (871
    )
    
    
    (145
    )
    
    
    (1,016
    )Payroll costs
    
    
    (820
    )
    
    
    4
    
    
    
    (816
    )Purchases of electricity
    
    
    (1,593
    )
    
    
    (294
    )
    
    
    (1,887
    )Purchases of gas
    
    
    (544
    )
    
    
    5
    
    
    
    (539
    )Rates and property taxes
    
    
    (472
    )
    
    
    1
    
    
    
    (471
    )Electricity transmission services scheme direct costs
    
    
    (558
    )
    
    
    (7
    )
    
    
    (565
    )Payments to Scottish electricity transmission network owners
    
    
    (237
    )
    
    
    
    
    
    
    (237
    )Expense relating to impairment of receivables
    
    
    (63
    )
    
    
    
    
    
    
    (63
    )Other operating charges
    
    
    (1,107
    )
    
    
    (192
    )
    
    
    (1,299
    )(6,265
    )
    
    
    (628
    )
    
    
    (6,893
    )Operating profit
    
    
    2,513
    
    
    
    (651
    )
    
    
    1,862Net finance costs
    
    
    (764
    )
    
    
    126
    
    
    
    (638
    )Share of post-tax results of joint ventures
    
    
    2
    
    
    
    (2
    )
    
    
    Profit before taxation
    
    
    1,751
    
    
    
    (527
    )
    
    
    1,224Taxation
    
    
    (441
    )
    
    
    309
    
    
    
    (132
    )Profit for the year
    
    
    1,310
    
    
    
    (218
    )
    
    
    1,092Minority interests
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )Interest in equity accounted affiliates (net of tax of £nil)
    
    
    
    
    
    
    2
    
    
    
    2Net income from continuing operations attributable to equity shareholders
    
    
    1,308
    
    
    
    (216
    )
    
    
    1,092Net income from discontinued operations (net of tax of £11m charge)
    
    
    86
    
    
    
    (32
    )
    
    
    54Net income for the year attributable to equity shareholders
    
    
    1,394
    
    
    
    (248
    )
    
    
    1,146Basic earnings per share under US GAAP (pence)  continuing operations
    
    
    
    
    
    
    
    
    
    
    40.2pDiluted earnings per share under US GAAP (pence)  continuing operations
    
    
    
    
    
    
    
    
    
    
    39.9pBasic earnings per ADS under US GAAP (pence)  continuing operations
    
    
    
    
    
    
    
    
    
    
    201.0pDiluted earnings per ADS under US GAAP (pence)  continuing operations
    
    
    
    
    
    
    
    
    
    
    199.5pBasic earnings per share under US GAAP (pence)  discontinued operations
    
    
    
    
    
    
    
    
    
    
    2.0pDiluted earnings per share under US GAAP (pence)  discontinued operations
    
    
    
    
    
    
    
    
    
    
    2.0pBasic earnings per ADS under US GAAP (pence)  discontinued operations
    
    
    
    
    
    
    
    
    
    
    10.0pDiluted earnings per ADS under US GAAP (pence)  discontinued operations
    
    
    
    
    
    
    
    
    
    
    10.0pBasic earnings per share under US GAAP (pence)
    
    
    
    
    
    
    
    
    
    
    42.2pDiluted earnings per share under US GAAP (pence)
    
    
    
    
    
    
    
    
    
    
    41.9pBasic earnings per ADS under US GAAP (pence)
    
    
    
    
    
    
    
    
    
    
    211.0pDiluted earnings per ADS under US GAAP (pence)
    
    
    
    
    
    
    
    
    
    
    209.5pWeighted average number of shares in issue (million)  for basic EPS
    
    
    
    
    
    
    
    
    
    
    2,719Weighted average number of shares in issue (million)  for diluted EPS
    
    
    
    
    
    
    
    
    
    
    2,737




---



##### Table of Contents



164 National Grid plc
 39. Condensed US GAAP financial information (continued)  Condensed consolidated US GAAP income statement (continued)
 2006
    
    
    
    
    
    
    2006National
    
    
    2006
    
    
    NationalGrid
    
    
    US GAAP
    
    
    Grid(IFRS
    )
    
    adjustments
    
    
    (US GAAP
    )£m
    *
    
    £m
    *
    
    £m
    *Revenue
    
    
    8,868
    
    
    
    23
    
    
    
    8,891Other operating income
    
    
    80
    
    
    
    (30
    )
    
    
    50Operating costsDepreciation and amortisation
    
    
    (888
    )
    
    
    (120
    )
    
    
    (1,008
    )Payroll costs
    
    
    (854
    )
    
    
    (41
    )
    
    
    (895
    )Purchases of electricity
    
    
    (1,977
    )
    
    
    (116
    )
    
    
    (2,093
    )Purchases of gas
    
    
    (566
    )
    
    
    3
    
    
    
    (563
    )Rates and property taxes
    
    
    (437
    )
    
    
    (2
    )
    
    
    (439
    )Electricity transmission services scheme direct costs
    
    
    (536
    )
    
    
    
    
    
    
    (536
    )Payments to Scottish electricity transmission network owners
    
    
    (259
    )
    
    
    
    
    
    
    (259
    )Expense relating to impairment of receivables
    
    
    (24
    )
    
    
    
    
    
    
    (24
    )Other operating charges
    
    
    (1,033
    )
    
    
    (342
    )
    
    
    (1,375
    )(6,574
    )
    
    
    (618
    )
    
    
    (7,192
    )Operating profit
    
    
    2,374
    
    
    
    (625
    )
    
    
    1,749Net finance costs
    
    
    (659
    )
    
    
    (66
    )
    
    
    (725
    )Share of post-tax results of joint ventures
    
    
    3
    
    
    
    (3
    )
    
    
    Profit before taxation
    
    
    1,718
    
    
    
    (694
    )
    
    
    1,024Taxation
    
    
    (535
    )
    
    
    214
    
    
    
    (321
    )Profit for the year
    
    
    1,183
    
    
    
    (480
    )
    
    
    703Minority interests
    
    
    (2
    )
    
    
    (1
    )
    
    
    (3
    )Interest in equity accounted affiliates (net of tax of £nil)
    
    
    
    
    
    
    3
    
    
    
    3Net income from continuing operations attributable to equity shareholders
    
    
    1,181
    
    
    
    (478
    )
    
    
    703Net income from discontinued operations (net of tax of £210m credit)
    
    
    2,667
    
    
    
    (2,063
    )
    
    
    604Net income for the year attributable to equity shareholders
    
    
    3,848
    
    
    
    (2,541
    )
    
    
    1,307Basic earnings per share under US GAAP (pence)  continuing operations
    
    
    
    
    
    
    
    
    
    
    25.9pDiluted earnings per share under US GAAP (pence)  continuing operations
    
    
    
    
    
    
    
    
    
    
    25.8pBasic earnings per ADS under US GAAP (pence)  continuing operations
    
    
    
    
    
    
    
    
    
    
    129.5pDiluted earnings per ADS under US GAAP (pence)  continuing operations
    
    
    
    
    
    
    
    
    
    
    129.0pBasic earnings per share under US GAAP (pence)  discontinued operations
    
    
    
    
    
    
    
    
    
    
    22.3pDiluted earnings per share under US GAAP (pence)  discontinued operations
    
    
    
    
    
    
    
    
    
    
    22.2pBasic earnings per ADS under US GAAP (pence)  discontinued operations
    
    
    
    
    
    
    
    
    
    
    111.5pDiluted earnings per ADS under US GAAP (pence)  discontinued operations
    
    
    
    
    
    
    
    
    
    
    111.0pBasic earnings per share under US GAAP (pence)
    
    
    
    
    
    
    
    
    
    
    48.2pDiluted earnings per share under US GAAP (pence)
    
    
    
    
    
    
    
    
    
    
    48.0pBasic earnings per ADS under US GAAP (pence)
    
    
    
    
    
    
    
    
    
    
    241.0pDiluted earnings per ADS under US GAAP (pence)
    
    
    
    
    
    
    
    
    
    
    240.0pWeighted average number of shares in issue (million)  for basic EPS
    
    
    
    
    
    
    
    
    
    
    2,710Weighted average number of shares in issue (million)  for diluted EPS
    
    
    
    
    
    
    
    
    
    
    2,724
 *Comparatives have been adjusted to reclassify amounts relating to discontinued operations




---



##### Table of Contents



Annual Report and Accounts 2006/07 165
 39. Condensed US GAAP financial information (continued)  Condensed consolidated US GAAP income statement (continued)
 2005
    
    
    
    
    
    
    2005National
    
    
    2005
    
    
    NationalGrid
    
    
    US GAAP
    
    
    Grid(IFRS
    )
    
    adjustments
    
    
    (US GAAP
    )£m
    *
    
    £m
    *
    
    £m
    *Revenue
    
    
    7,174
    
    
    
    34
    
    
    
    7,208Other operating income
    
    
    67
    
    
    
    (31
    )
    
    
    36Operating costsDepreciation and amortisation
    
    
    (782
    )
    
    
    (132
    )
    
    
    (914
    )Payroll costs
    
    
    (886
    )
    
    
    31
    
    
    
    (855
    )Purchases of electricity
    
    
    (1,489
    )
    
    
    (182
    )
    
    
    (1,671
    )Purchases of gas
    
    
    (357
    )
    
    
    
    
    
    
    (357
    )Rates and property taxes
    
    
    (403
    )
    
    
    
    
    
    
    (403
    )Electricity transmission services scheme direct costs
    
    
    (301
    )
    
    
    
    
    
    
    (301
    )Payments to Scottish electricity transmission network owners
    
    
    
    
    
    
    
    
    
    
    Expense relating to impairment of receivables
    
    
    (41
    )
    
    
    
    
    
    
    (41
    )Other operating charges
    
    
    (869
    )
    
    
    (30
    )
    
    
    (899
    )(5,128
    )
    
    
    (313
    )
    
    
    (5,441
    )Operating profit
    
    
    2,113
    
    
    
    (310
    )
    
    
    1,803Net finance costs
    
    
    (704
    )
    
    
    246
    
    
    
    (458
    )Share of post-tax results of joint ventures
    
    
    3
    
    
    
    (3
    )
    
    
    Profit before taxation
    
    
    1,412
    
    
    
    (67
    )
    
    
    1,345Taxation
    
    
    (306
    )
    
    
    7
    
    
    
    (299
    )Profit for the year
    
    
    1,106
    
    
    
    (60
    )
    
    
    1,046Minority interests
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Interest in equity accounted affiliates (net of tax of £2m)
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Net income from continuing operations attributable to equity shareholders
    
    
    1,106
    
    
    
    (64
    )
    
    
    1,042Net income from discontinued operations (net of tax of £137m charge)
    
    
    318
    
    
    
    (72
    )
    
    
    246Net income for the year attributable to equity shareholders
    
    
    1,424
    
    
    
    (136
    )
    
    
    1,288Basic earnings per share under US GAAP (pence)  continuing operations
    
    
    
    
    
    
    
    
    
    
    38.5pDiluted earnings per share under US GAAP (pence)  continuing operations
    
    
    
    
    
    
    
    
    
    
    38.3pBasic earnings per ADS under US GAAP (pence)  continuing operations
    
    
    
    
    
    
    
    
    
    
    192.5pDiluted earnings per ADS under US GAAP (pence)  continuing operations
    
    
    
    
    
    
    
    
    
    
    191.5pBasic earnings per share under US GAAP (pence)  discontinued operations
    
    
    
    
    
    
    
    
    
    
    9.1pDiluted earnings per share under US GAAP (pence)  discontinued operations
    
    
    
    
    
    
    
    
    
    
    9.0pBasic earnings per ADS under US GAAP (pence)  discontinued operations
    
    
    
    
    
    
    
    
    
    
    45.5pDiluted earnings per ADS under US GAAP (pence)  discontinued operations
    
    
    
    
    
    
    
    
    
    
    45.0pBasic earnings per share under US GAAP (pence)
    
    
    
    
    
    
    
    
    
    
    47.6pDiluted earnings per share under US GAAP (pence)
    
    
    
    
    
    
    
    
    
    
    47.3pBasic earnings per ADS under US GAAP (pence)
    
    
    
    
    
    
    
    
    
    
    238.0pDiluted earnings per ADS under US GAAP (pence)
    
    
    
    
    
    
    
    
    
    
    236.5pWeighted average number of shares in issue (million)  for basic EPS
    
    
    
    
    
    
    
    
    
    
    2,705Weighted average number of shares in issue (million)  for diluted EPS
    
    
    
    
    
    
    
    
    
    
    2,719
 *
    The method adopted to calculate the market related value of post-retirement plan assets has
been amended to achieve greater consistency between pension plans. Consequently, prior year
comparatives have been adjusted. Comparatives have also been adjusted to reclassify amounts
relating to discontinued operations
 Consolidated statement of comprehensive income and changes in shareholders equity under US GAAP
 2007
    
    
    2006
    
    
    2005£m
    
    
    £m
    
    
    £mNet income
    
    
    1,146
    
    
    
    1,307
    
    
    
    1,288Additional minimum pension liability (net of tax of £28m, £82m and £23m)
    
    
    (51
    )
    
    
    168
    
    
    
    49Exchange adjustments (i)
    
    
    (686
    )
    
    
    368
    
    
    
    (80
    )Mark-to-market of financial instruments (net of tax of £5m, £nil and £43m)
    
    
    5
    
    
    
    3
    
    
    
    111Comprehensive income
    
    
    414
    
    
    
    1,846
    
    
    
    1,368Dividends
    
    
    (730
    )
    
    
    (745
    )
    
    
    (628
    )Shares issued
    
    
    16
    
    
    
    28
    
    
    
    9Share-based payment (net of tax of £9m)
    
    
    1
    
    
    
    17
    
    
    
    16Return of capital to shareholders through B share scheme
    
    
    
    
    
    
    (2,009
    )
    
    
    Repurchase of shares
    
    
    (169
    )
    
    
    
    
    
    
    Movement in treasury stock
    
    
    
    
    
    
    19
    
    
    
    5Adjustment to initially apply SFAS 158 (including tax of £14m)
    
    
    51
    
    
    
    
    
    
    
    Shareholders equity at 1 April
    
    
    9,747
    
    
    
    10,591
    
    
    
    9,821Shareholders equity at 31 March
    
    
    9,330
    
    
    
    9,747
    
    
    
    10,591
 (i)
    
    Included within exchange adjustments is £37m relating to gains on net investment hedges
during the year (2006: £91m loss; 2005: £nil).




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##### Table of Contents



166 National Grid plc
 39. Condensed US GAAP financial information (continued)  Condensed consolidated US GAAP balance sheet
 2007
    
    
    2006£m
    
    
    £mAssetsCurrent assetsCash and cash equivalents
    
    
    1,606
    
    
    
    1,466Marketable securities
    
    
    2,098
    
    
    
    384Accounts and notes receivable
    
    
    638
    
    
    
    838Inventories
    
    
    106
    
    
    
    108Regulatory assets
    
    
    305
    
    
    
    246Prepaid expenses and other current assets
    
    
    879
    
    
    
    963Assets of businesses held for sale
    
    
    1,963
    
    
    
    Total current assets
    
    
    7,595
    
    
    
    4,005Property, plant and equipment
    
    
    20,068
    
    
    
    20,235Goodwill
    
    
    4,159
    
    
    
    4,831Other intangible assets
    
    
    127
    
    
    
    390Investments
    
    
    137
    
    
    
    160Regulatory assets
    
    
    2,575
    
    
    
    2,805Other receivables
    
    
    465
    
    
    
    526Total assets
    
    
    35,126
    
    
    
    32,952Liabilities and shareholders equityCurrent liabilitiesBank overdrafts
    
    
    6
    
    
    
    3Accounts payable
    
    
    2,180
    
    
    
    2,366Short-term borrowings (i)
    
    
    783
    
    
    
    2,565Accrued income taxes
    
    
    71
    
    
    
    419Other accrued liabilities (i)
    
    
    363
    
    
    
    257Liabilities of businesses held for sale
    
    
    458
    
    
    
    Total current liabilities
    
    
    3,861
    
    
    
    5,610Long-term borrowings
    
    
    14,586
    
    
    
    10,059Pensions and other post-retirement benefits
    
    
    1,329
    
    
    
    1,348Deferred income taxes
    
    
    3,920
    
    
    
    4,063Other liabilities
    
    
    2,063
    
    
    
    2,084Total liabilities
    
    
    25,759
    
    
    
    23,164Minority interest  equity
    
    
    11
    
    
    
    11Cumulative preference stock issued by subsidiary undertakings
    
    
    26
    
    
    
    30Shareholders equityCommon stock (par value £0.1139 per share; shares authorised 4,388m; shares issued 2007: 2,701m; 2006: 2,720m)
    
    
    308
    
    
    
    310Additional paid in capital
    
    
    7,863
    
    
    
    7,837Other reserves (ii)
    
    
    359
    
    
    
    359Retained earnings (iii)
    
    
    2,107
    
    
    
    1,867Accumulated comprehensive loss (iii)
    
    
    (1,307
    )
    
    
    (626
    )Shareholders equity
    
    
    9,330
    
    
    
    9,747Total liabilities and shareholders equity
    
    
    35,126
    
    
    
    32,952
  2007
    
    
    2006£m
    
    
    £mCumulative translation adjustment
    
    
    (1,139
    )
    
    
    (453
    )Additional minimum pension liability (iii)
    
    
    
    
    
    
    (294
    )Post-retirement benefit liabilities not yet recognised in net periodic pension cost (iv)
    
    
    (337
    )
    
    
    Unrealised gains on derivatives
    
    
    23
    
    
    
    9Unrealised gains on available-for-sale investments
    
    
    3
    
    
    
    7Taxation
    
    
    139
    
    
    
    101Other
    
    
    4
    
    
    
    4(1,307
    )
    
    
    (626
    )
 (i)
    
    Accrued interest of £269m at 31 March 2006 has been reclassified from short-term borrowings
to accounts payable. IFRS requires accrued interest to be presented within borrowings while US GAAP
requires accrued interest to be presented separately from borrowings.(ii)
    
    Other reserves relates to a group reconstruction, resulting in a difference between the
capital structure of the new parent company and the capital structure of the former holding
company.(iii)
    
    The method adopted to calculate the market related value of post-retirement plan
assets has been amended to achieve greater consistency between pension plans. Consequently, prior
year comparatives have been adjusted.(iv)
    
    Post-retirement benefit liabilities not yet recognised in net periodic pension cost comprises
prior service cost of £102m and unrecognised losses of £529m, offset by a regulatory asset of £294m.(v)
    
    Comparative amounts have been reclassified to present derivative financial instruments
separately from related borrowings.




---



##### Table of Contents



Annual Report and Accounts 2006/07 167
 39. Condensed US GAAP financial information (continued)  Segmental information under US GAAP
  Goodwill
 UK electricity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    US strandedand gas
    
    
    US electricity
    
    
    UK gas
    
    
    US gas
    
    
    US electricity
    
    
    cost
    
    
    Wireless
    
    
    Othertransmission
    
    
    transmission
    
    
    distribution
    
    
    distribution
    
    
    distribution
    
    
    recoveries
    
    
    infrastructure
    
    
    activities
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m1 April 2005
    
    
    756
    
    
    
    337
    
    
    
    2,990
    
    
    
    112
    
    
    
    1,198
    
    
    
    
    
    
    
    592
    
    
    
    74
    
    
    
    6,059Exchange adjustments
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    10
    
    
    
    106
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    150Disposals
    
    
    
    
    
    
    
    
    
    
    (1,369
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,369
    )Adjustments to provisional fair value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    
    
    
    
    (9
    )1 April 2006
    
    
    756
    
    
    
    366
    
    
    
    1,621
    
    
    
    122
    
    
    
    1,304
    
    
    
    
    
    
    
    588
    
    
    
    74
    
    
    
    4,831Exchange adjustments
    
    
    
    
    
    
    (43
    )
    
    
    
    
    
    
    (21
    )
    
    
    (162
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (226
    )Additions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    128
    
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    141Disposals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Adjustments to fair values
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    2
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14Impairment charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (63
    )
    
    
    
    
    
    
    (63
    )Reclassified as held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (538
    )
    
    
    
    
    
    
    (538
    )31 March 2007
    
    
    756
    
    
    
    327
    
    
    
    1,621
    
    
    
    231
    
    
    
    1,150
    
    
    
    
    
    
    
    
    
    
    
    74
    
    
    
    4,159
 
 40. National Grid Gas plc additional US GAAP disclosures




---



##### Table of Contents



168 National Grid plc
 40. National Grid Gas plc additional US GAAP disclosures (continued)  Summary income statement for the year ended 31 March 2007  US GAAP
 Parent
    
    
    Issuer of
    
    
    Subsidiaryguarantor
    
    
    notes
    
    
    guarantorNational
    
    
    British
    
    
    National
    
    
    
    
    
    
    
    
    
    
    NationalGrid
    
    
    Transco
    
    
    Grid Gas
    
    
    Other
    
    
    Consolidation
    
    
    Gridplc
    
    
    Finance Inc
    .
    
    plc
    
    
    subsidiaries
    
    
    adjustments
    
    
    consolidated£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    
    
    
    
    
    
    
    
    2,248
    
    
    
    6,756
    
    
    
    (318
    )
    
    
    8,686Other operating income
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    63
    
    
    
    
    
    
    
    69Operating costsDepreciation and amortisation
    
    
    
    
    
    
    
    
    
    
    (505
    )
    
    
    (511
    )
    
    
    
    
    
    
    (1,016
    )Payroll costs
    
    
    
    
    
    
    
    
    
    
    (226
    )
    
    
    (590
    )
    
    
    
    
    
    
    (816
    )Purchases of electricity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,887
    )
    
    
    
    
    
    
    (1,887
    )Purchases of gas
    
    
    
    
    
    
    
    
    
    
    (113
    )
    
    
    (426
    )
    
    
    
    
    
    
    (539
    )Rates and property taxes
    
    
    
    
    
    
    
    
    
    
    (211
    )
    
    
    (260
    )
    
    
    
    
    
    
    (471
    )Electricity transmission services scheme direct costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (565
    )
    
    
    
    
    
    
    (565
    )Payments to Scottish electricity transmission network owners
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (237
    )
    
    
    
    
    
    
    (237
    )Expense relating to impairment of receivables
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    (64
    )
    
    
    
    
    
    
    (63
    )Other operating charges
    
    
    (2
    )
    
    
    
    
    
    
    (532
    )
    
    
    (1,088
    )
    
    
    323
    
    
    
    (1,299
    )(2
    )
    
    
    
    
    
    
    (1,586
    )
    
    
    (5,628
    )
    
    
    323
    
    
    
    (6,893
    )Operating profit
    
    
    (2
    )
    
    
    
    
    
    
    668
    
    
    
    1,191
    
    
    
    5
    
    
    
    1,862Net finance costs
    
    
    15
    
    
    
    
    
    
    
    (304
    )
    
    
    (349
    )
    
    
    
    
    
    
    (638
    )Dividends receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,850
    
    
    
    (1,850
    )
    
    
    Profit before taxation
    
    
    13
    
    
    
    
    
    
    
    364
    
    
    
    2,692
    
    
    
    (1,845
    )
    
    
    1,224Taxation
    
    
    8
    
    
    
    
    
    
    
    (210
    )
    
    
    70
    
    
    
    
    
    
    
    (132
    )Profit for the year
    
    
    21
    
    
    
    
    
    
    
    154
    
    
    
    2,762
    
    
    
    (1,845
    )
    
    
    1,092Minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )Interest in equity accounted affiliates
    
    
    1,071
    
    
    
    
    
    
    
    12
    
    
    
    2
    
    
    
    (1,083
    )
    
    
    2Net income from continuing operations attributable to equity shareholders
    
    
    1,092
    
    
    
    
    
    
    
    166
    
    
    
    2,762
    
    
    
    (2,928
    )
    
    
    1,092Net income from discontinued operations
    
    
    54
    
    
    
    
    
    
    
    13
    
    
    
    32
    
    
    
    (45
    )
    
    
    54Net income for the year attributable to equity shareholders
    
    
    1,146
    
    
    
    
    (i)
    
    
    179
    
    
    
    2,794
    
    
    
    (2,973
    )
    
    
    1,146
 (i)
    
    Net income 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.
 Summary income statement for the year ended 31 March 2006  US GAAP
 Parent
    
    
    Issuer of
    
    
    Subsidiaryguarantor
    
    
    notes
    
    
    guarantorNational
    
    
    British
    
    
    National
    
    
    
    
    
    
    
    
    
    
    NationalGrid
    
    
    Transco
    
    
    Grid Gas
    
    
    Other
    
    
    Consolidation
    
    
    Gridplc
    
    
    Finance Inc.
    
    
    plc
    
    
    subsidiaries
    
    
    adjustments
    
    
    consolidated£m
    *
    
    £m
    *
    
    £m
    *
    
    £m
    *
    
    £m
    *
    
    £m
    *Revenue
    
    
    1
    
    
    
    
    
    
    
    2,261
    
    
    
    6,992
    
    
    
    (363
    )
    
    
    8,891Other operating income
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    46
    
    
    
    
    
    
    
    50Operating costsDepreciation and amortisation
    
    
    
    
    
    
    
    
    
    
    (492
    )
    
    
    (516
    )
    
    
    
    
    
    
    (1,008
    )Payroll costs
    
    
    
    
    
    
    
    
    
    
    (282
    )
    
    
    (613
    )
    
    
    
    
    
    
    (895
    )Purchases of electricity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,093
    )
    
    
    
    
    
    
    (2,093
    )Purchases of gas
    
    
    
    
    
    
    
    
    
    
    (148
    )
    
    
    (415
    )
    
    
    
    
    
    
    (563
    )Rates and property taxes
    
    
    
    
    
    
    
    
    
    
    (180
    )
    
    
    (259
    )
    
    
    
    
    
    
    (439
    )Electricity transmission services scheme direct costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (536
    )
    
    
    
    
    
    
    (536
    )Payments to Scottish electricity transmission network owners
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (259
    )
    
    
    
    
    
    
    (259
    )Expense relating to impairment of receivables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24
    )
    
    
    
    
    
    
    (24
    )Other operating charges
    
    
    
    
    
    
    
    
    
    
    (977
    )
    
    
    (1,193
    )
    
    
    795
    
    
    
    (1,375
    )
    
    
    
    
    
    
    
    (2,079
    )
    
    
    (5,908
    )
    
    
    795
    
    
    
    (7,192
    )Operating profit
    
    
    1
    
    
    
    
    
    
    
    186
    
    
    
    1,130
    
    
    
    432
    
    
    
    1,749Net finance costs
    
    
    (29
    )
    
    
    
    
    
    
    (215
    )
    
    
    (481
    )
    
    
    
    
    
    
    (725
    )Dividends receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    310
    
    
    
    (310
    )
    
    
    Profit before taxation
    
    
    (28
    )
    
    
    
    
    
    
    (29
    )
    
    
    959
    
    
    
    122
    
    
    
    1,024Taxation
    
    
    42
    
    
    
    
    
    
    
    (64
    )
    
    
    (299
    )
    
    
    
    
    
    
    (321
    )Profit for the year
    
    
    14
    
    
    
    
    
    
    
    (93
    )
    
    
    660
    
    
    
    122
    
    
    
    703Minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )Interest in equity accounted affiliates
    
    
    689
    
    
    
    
    
    
    
    452
    
    
    
    3
    
    
    
    (1,141
    )
    
    
    3Net income from continuing operations attributable to equity shareholders
    
    
    703
    
    
    
    
    
    
    
    359
    
    
    
    660
    
    
    
    (1,019
    )
    
    
    703Net income from discontinued operations
    
    
    604
    
    
    
    
    
    
    
    546
    
    
    
    70
    
    
    
    (616
    )
    
    
    604Net income for the year attributable to equity shareholders
    
    
    1,307
    
    
    
    
    (i)
    
    
    905
    
    
    
    730
    
    
    
    (1,635
    )
    
    
    1,307
 *
    Comparatives have been adjusted to reclassify amounts relating to discontinued operations
 (i)
    
    Net income 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.




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##### Table of Contents



Annual Report and Accounts 2006/07 169
 40. National Grid Gas plc additional US GAAP disclosures (continued)  Summary income statement for the year ended 31 March 2005  US GAAP
 Parent
    
    
    Issuer of
    
    
    Subsidiaryguarantor
    
    
    notes
    
    
    guarantorNational
    
    
    British
    
    
    National
    
    
    
    
    
    
    
    
    
    
    NationalGrid
    
    
    Transco
    
    
    Grid Gas
    
    
    Other
    
    
    Consolidation
    
    
    Gridplc
    
    
    Finance Inc.
    
    
    plc
    
    
    subsidiaries
    
    
    adjustments
    
    
    consolidated£m
    *
    
    £m
    *
    
    £m
    *
    
    £m
    *
    
    £m
    *
    
    £m
    *Revenue
    
    
    1
    
    
    
    
    
    
    
    2,041
    
    
    
    5,680
    
    
    
    (514
    )
    
    
    7,208Other operating income
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    34
    
    
    
    
    
    
    
    36Operating costsDepreciation and amortisation
    
    
    
    
    
    
    
    
    
    
    (497
    )
    
    
    (417
    )
    
    
    
    
    
    
    (914
    )Payroll costs
    
    
    (2
    )
    
    
    
    
    
    
    (276
    )
    
    
    (577
    )
    
    
    
    
    
    
    (855
    )Purchases of electricity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,671
    )
    
    
    
    
    
    
    (1,671
    )Purchases of gas
    
    
    
    
    
    
    
    
    
    
    (85
    )
    
    
    (272
    )
    
    
    
    
    
    
    (357
    )Rates and property taxes
    
    
    
    
    
    
    
    
    
    
    (160
    )
    
    
    (243
    )
    
    
    
    
    
    
    (403
    )Electricity transmission services scheme direct costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (301
    )
    
    
    
    
    
    
    (301
    )Payments to Scottish electricity transmission network owners
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expense relating to impairment of receivables
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    (45
    )
    
    
    
    
    
    
    (41
    )Other operating charges
    
    
    (29
    )
    
    
    
    
    
    
    (3,276
    )
    
    
    (944
    )
    
    
    3,350
    
    
    
    (899
    )(31
    )
    
    
    
    
    
    
    (4,290
    )
    
    
    (4,470
    )
    
    
    3,350
    
    
    
    (5,441
    )Operating profit
    
    
    (30
    )
    
    
    
    
    
    
    (2,247
    )
    
    
    1,244
    
    
    
    2,836
    
    
    
    1,803Net finance costs
    
    
    123
    
    
    
    
    
    
    
    (443
    )
    
    
    (144
    )
    
    
    6
    
    
    
    (458
    )Dividends receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500
    
    
    
    (500
    )
    
    
    Profit before taxation
    
    
    93
    
    
    
    
    
    
    
    (2,690
    )
    
    
    1,600
    
    
    
    2,342
    
    
    
    1,345Taxation
    
    
    (20
    )
    
    
    
    
    
    
    (32
    )
    
    
    (245
    )
    
    
    (2
    )
    
    
    (299
    )Profit for the year
    
    
    73
    
    
    
    
    
    
    
    (2,722
    )
    
    
    1,355
    
    
    
    2,340
    
    
    
    1,046Minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )Interest in equity accounted affiliates
    
    
    969
    
    
    
    
    
    
    
    2,930
    
    
    
    (2
    )
    
    
    (3,899
    )
    
    
    (2
    )Net income from continuing operations attributable to equity shareholders
    
    
    1,042
    
    
    
    
    
    
    
    208
    
    
    
    1,351
    
    
    
    (1,559
    )
    
    
    1,042Net income from discontinued operations
    
    
    246
    
    
    
    
    
    
    
    267
    
    
    
    (21
    )
    
    
    (246
    )
    
    
    246Net income for the year attributable to equity shareholders
    
    
    1,288
    
    
    
    
    (i)
    
    
    475
    
    
    
    1,330
    
    
    
    (1,805
    )
    
    
    1,288
 *
    The method adopted to calculate the market related value of post-retirement plan assets has
been amended to achieve greater consistency between pension plans. Consequently, prior year
comparatives have been adjusted. Comparatives have also been adjusted to reclassify amounts
relating to discontinued operations
 (i)
    
    Net income 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.




---



##### Table of Contents



170 National Grid plc
 40. National Grid Gas plc additional US GAAP disclosures (continued)  Balance sheet as at 31 March 2007  US GAAP
 Parent
    
    
    Issuer of
    
    
    Subsidiaryguarantor
    
    
    notes
    
    
    guarantorNational
    
    
    British
    
    
    National
    
    
    
    
    
    
    
    
    
    
    NationalGrid
    
    
    Transco
    
    
    Grid Gas
    
    
    Other
    
    
    Consolidation
    
    
    Gridplc
    
    
    Finance Inc
    .
    
    plc
    
    
    subsidiaries
    
    
    adjustments
    
    
    consolidated£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mAssetsCurrent assetsCash and cash equivalents
    
    
    748
    
    
    
    
    
    
    
    172
    
    
    
    686
    
    
    
    
    
    
    
    1,606Marketable securities
    
    
    282
    
    
    
    
    
    
    
    305
    
    
    
    1,511
    
    
    
    
    
    
    
    2,098Accounts and notes receivable
    
    
    3
    
    
    
    
    
    
    
    195
    
    
    
    440
    
    
    
    
    
    
    
    638Inventories
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    78
    
    
    
    
    
    
    
    106Amounts owed by subsidiary undertakings
    
    
    9,047
    
    
    
    
    
    
    
    5,703
    
    
    
    5,200
    
    
    
    (19,950
    )
    
    
    Regulatory assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    305
    
    
    
    
    
    
    
    305Prepaid expenses and other current assets
    
    
    119
    
    
    
    
    
    
    
    42
    
    
    
    718
    
    
    
    
    
    
    
    879Assets of businesses held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,963
    
    
    
    
    
    
    
    1,963Total current assets
    
    
    10,199
    
    
    
    
    
    
    
    6,445
    
    
    
    10,901
    
    
    
    (19,950
    )
    
    
    7,595Property, plant and equipment
    
    
    
    
    
    
    
    
    
    
    10,589
    
    
    
    9,509
    
    
    
    (30
    )
    
    
    20,068Goodwill
    
    
    
    
    
    
    
    
    
    
    2,451
    
    
    
    1,708
    
    
    
    
    
    
    
    4,159Intangible assets
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    86
    
    
    
    
    
    
    
    127Investments
    
    
    6,700
    
    
    
    
    
    
    
    67
    
    
    
    16,299
    
    
    
    (22,929
    )
    
    
    137Amounts owed by subsidiary undertakings
    
    
    
    
    
    
    156
    
    
    
    
    
    
    
    
    
    
    
    (156
    )
    
    
    Regulatory assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,575
    
    
    
    
    
    
    
    2,575Other receivables
    
    
    195
    
    
    
    
    
    
    
    67
    
    
    
    203
    
    
    
    
    
    
    
    465Total assets
    
    
    17,094
    
    
    
    156
    
    
    
    19,660
    
    
    
    41,281
    
    
    
    (43,065
    )
    
    
    35,126Liabilities and shareholders equityCurrent liabilitiesBank overdrafts
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    6Accounts payable
    
    
    
    
    
    
    
    
    
    
    587
    
    
    
    1,593
    
    
    
    
    
    
    
    2,180Short-term borrowings
    
    
    359
    
    
    
    3
    
    
    
    346
    
    
    
    75
    
    
    
    
    
    
    
    783Accrued income taxes
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    31
    
    
    
    
    
    
    
    71Amounts owed to subsidiary undertakings
    
    
    2,776
    
    
    
    
    
    
    
    2,424
    
    
    
    14,750
    
    
    
    (19,950
    )
    
    
    Other accrued liabilities
    
    
    52
    
    
    
    
    
    
    
    82
    
    
    
    306
    
    
    
    (77
    )
    
    
    363Liabilities of businesses held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    458
    
    
    
    
    
    
    
    458Total current liabilities
    
    
    3,187
    
    
    
    3
    
    
    
    3,485
    
    
    
    17,213
    
    
    
    (20,027
    )
    
    
    3,861Long-term borrowings
    
    
    4,513
    
    
    
    153
    
    
    
    3,214
    
    
    
    6,706
    
    
    
    
    
    
    
    14,586Amounts owed to subsidiary undertakings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    156
    
    
    
    (156
    )
    
    
    Post-retirement benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,338
    
    
    
    (9
    )
    
    
    1,329Deferred income taxes
    
    
    10
    
    
    
    
    
    
    
    2,153
    
    
    
    1,757
    
    
    
    
    
    
    
    3,920Other liabilities
    
    
    54
    
    
    
    
    
    
    
    1,169
    
    
    
    840
    
    
    
    
    
    
    
    2,063Total liabilities
    
    
    7,764
    
    
    
    156
    
    
    
    10,021
    
    
    
    28,010
    
    
    
    (20,192
    )
    
    
    25,759Minority interest  equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    11Cumulative preference stock issued by subsidiary undertakings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    26Shareholders equityCommon stock
    
    
    308
    
    
    
    
    
    
    
    45
    
    
    
    541
    
    
    
    (586
    )
    
    
    308Additional paid in capital
    
    
    7,863
    
    
    
    
    
    
    
    9,680
    
    
    
    9,336
    
    
    
    (19,016
    )
    
    
    7,863Other reserves
    
    
    359
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    359Retained earnings
    
    
    2,107
    
    
    
    
    
    
    
    (17
    )
    
    
    4,686
    
    
    
    (4,669
    )
    
    
    2,107Accumulated comprehensive loss
    
    
    (1,307
    )
    
    
    
    
    
    
    (69
    )
    
    
    (1,329
    )
    
    
    1,398
    
    
    
    (1,307
    )Shareholders equity
    
    
    9,330
    
    
    
    
    
    
    
    9,639
    
    
    
    13,234
    
    
    
    (22,873
    )
    
    
    9,330Total liabilities and shareholders equity
    
    
    17,094
    
    
    
    156
    
    
    
    19,660
    
    
    
    41,281
    
    
    
    (43,065
    )
    
    
    35,126




---



##### Table of Contents



Annual Report and Accounts 2006/07 171
 40. National Grid Gas plc additional US GAAP disclosures (continued)  Balance sheet as at 31 March 2006  US GAAP
 Parent
    
    
    Issuer of
    
    
    Subsidiaryguarantor
    
    
    notes
    
    
    guarantorNational
    
    
    British
    
    
    National
    
    
    
    
    
    
    
    
    
    
    NationalGrid
    
    
    Transco
    
    
    Grid Gas
    
    
    Other
    
    
    Consolidation
    
    
    Gridplc
    
    
    Finance Inc.
    
    
    plc
    
    
    subsidiaries
    
    
    adjustments
    
    
    consolidated£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mAssetsCurrent assetsCash and cash equivalents
    
    
    1,046
    
    
    
    1
    
    
    
    221
    
    
    
    212
    
    
    
    (14
    )
    
    
    1,466Marketable securities
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    349
    
    
    
    
    
    
    
    384Accounts and notes receivable
    
    
    16
    
    
    
    3
    
    
    
    171
    
    
    
    648
    
    
    
    
    
    
    
    838Inventories
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    85
    
    
    
    
    
    
    
    108Amounts owed by subsidiary undertakings
    
    
    7,093
    
    
    
    
    
    
    
    5,722
    
    
    
    4,529
    
    
    
    (17,344
    )
    
    
    Regulatory assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    246
    
    
    
    
    
    
    
    246Prepaid expenses and other current assets
    
    
    64
    
    
    
    
    
    
    
    101
    
    
    
    798
    
    
    
    
    
    
    
    963Total current assets
    
    
    8,219
    
    
    
    4
    
    
    
    6,273
    
    
    
    6,867
    
    
    
    (17,358
    )
    
    
    4,005Property, plant and equipment
    
    
    
    
    
    
    
    
    
    
    8,983
    
    
    
    11,287
    
    
    
    (35
    )
    
    
    20,235Goodwill
    
    
    
    
    
    
    
    
    
    
    2,377
    
    
    
    2,454
    
    
    
    
    
    
    
    4,831Intangible assets
    
    
    
    
    
    
    
    
    
    
    33
    
    
    
    357
    
    
    
    
    
    
    
    390Investments
    
    
    5,209
    
    
    
    
    
    
    
    52
    
    
    
    16,323
    
    
    
    (21,424
    )
    
    
    160Amounts owed by subsidiary undertakings
    
    
    
    
    
    
    157
    
    
    
    
    
    
    
    
    
    
    
    (157
    )
    
    
    Regulatory assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,805
    
    
    
    
    
    
    
    2,805Other receivables
    
    
    79
    
    
    
    
    
    
    
    91
    
    
    
    356
    
    
    
    
    
    
    
    526Total assets
    
    
    13,507
    
    
    
    161
    
    
    
    17,809
    
    
    
    40,449
    
    
    
    (38,974
    )
    
    
    32,952Liabilities and shareholders equityCurrent liabilitiesBank overdrafts
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    (14
    )
    
    
    3Accounts payable
    
    
    
    
    
    
    
    
    
    
    436
    
    
    
    1,930
    
    
    
    
    
    
    
    2,366Short-term borrowings
    
    
    114
    
    
    
    4
    
    
    
    689
    
    
    
    1,758
    
    
    
    
    
    
    
    2,565Accrued income taxes
    
    
    
    
    
    
    
    
    
    
    70
    
    
    
    349
    
    
    
    
    
    
    
    419Amounts owed to subsidiary undertakings
    
    
    1,813
    
    
    
    
    
    
    
    920
    
    
    
    14,611
    
    
    
    (17,344
    )
    
    
    Other accrued liabilities
    
    
    63
    
    
    
    
    
    
    
    111
    
    
    
    160
    
    
    
    (77
    )
    
    
    257Total current liabilities
    
    
    2,004
    
    
    
    4
    
    
    
    2,226
    
    
    
    18,811
    
    
    
    (17,435
    )
    
    
    5,610Long-term borrowings
    
    
    1,741
    
    
    
    157
    
    
    
    2,005
    
    
    
    6,156
    
    
    
    
    
    
    
    10,059Amounts owed to subsidiary undertakings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    157
    
    
    
    (157
    )
    
    
    Post-retirement benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,348
    
    
    
    
    
    
    
    1,348Deferred income taxes
    
    
    15
    
    
    
    
    
    
    
    2,151
    
    
    
    1,897
    
    
    
    
    
    
    
    4,063Other liabilities
    
    
    
    
    
    
    
    
    
    
    226
    
    
    
    1,858
    
    
    
    
    
    
    
    2,084Total liabilities
    
    
    3,760
    
    
    
    161
    
    
    
    6,608
    
    
    
    30,227
    
    
    
    (17,592
    )
    
    
    23,164Minority interest  equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    11Cumulative preference stock issued by subsidiary undertakings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    30Shareholders equityCommon stock
    
    
    310
    
    
    
    
    
    
    
    45
    
    
    
    541
    
    
    
    (586
    )
    
    
    310Additional paid in capital
    
    
    7,837
    
    
    
    
    
    
    
    9,680
    
    
    
    8,072
    
    
    
    (17,752
    )
    
    
    7,837Other reserves
    
    
    359
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    359Retained earnings
    
    
    1,867
    
    
    
    
    
    
    
    1,476
    
    
    
    2,194
    
    
    
    (3,670
    )
    
    
    1,867Accumulated comprehensive loss
    
    
    (626
    )
    
    
    
    
    
    
    
    
    
    
    (626
    )
    
    
    626
    
    
    
    (626
    )Treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shareholders equity
    
    
    9,747
    
    
    
    
    
    
    
    11,201
    
    
    
    10,181
    
    
    
    (21,382
    )
    
    
    9,747Total liabilities and shareholders equity
    
    
    13,507
    
    
    
    161
    
    
    
    17,809
    
    
    
    40,449
    
    
    
    (38,974
    )
    
    
    32,952




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##### Table of Contents



172 National Grid plc
 40. National Grid Gas plc additional US GAAP disclosures (continued)  Cash flow statements  US GAAP
 Parent
    
    
    Issuer of
    
    
    Subsidiaryguarantor
    
    
    notes
    
    
    guarantorNational
    
    
    British
    
    
    National
    
    
    
    
    
    
    
    
    
    
    NationalGrid
    
    
    Transco
    
    
    Grid Gas
    
    
    Other
    
    
    Consolidation
    
    
    Gridplc
    
    
    Finance Inc
    .
    
    plc
    
    
    subsidiaries
    
    
    adjustments
    
    
    consolidated£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mYear ended 31 March 2007Net cash provided by/(used in) operating activities  continuing operations
    
    
    221
    
    
    
    
    
    
    
    1,341
    
    
    
    3,288
    
    
    
    (2,071
    )
    
    
    2,779Net cash used in operating activities  discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    178
    
    
    
    
    
    
    
    178Net cash provided by/(used in) operating activities
    
    
    221
    
    
    
    
    
    
    
    1,341
    
    
    
    3,466
    
    
    
    (2,071
    )
    
    
    2,957Net cash used in investing activities  continuing operations
    
    
    (1,545
    )
    
    
    
    
    
    
    (1,429
    )
    
    
    (2,462
    )
    
    
    1,264
    
    
    
    (4,172
    )Net cash provided by/(used in) investing activities  discontinued operations
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    (132
    )
    
    
    
    
    
    
    (105
    )Net cash used in investing activities
    
    
    (1,545
    )
    
    
    
    
    
    
    (1,402
    )
    
    
    (2,594
    )
    
    
    1,264
    
    
    
    (4,277
    )Net cash provided by/(used in) financing activities
    
    
    1,040
    
    
    
    (1
    )
    
    
    6
    
    
    
    (358
    )
    
    
    807
    
    
    
    1,494(Decrease)/increase in cash and cash equivalents in the year
    
    
    (284
    )
    
    
    (1
    )
    
    
    (55
    )
    
    
    514
    
    
    
    
    
    
    
    174Year ended 31 March 2006*Net cash (used in)/provided by operating activities  continuing operations
    
    
    (9
    )
    
    
    1
    
    
    
    1,501
    
    
    
    1,428
    
    
    
    (802
    )
    
    
    2,119Net cash (used in)/provided by operating activities  discontinued operations
    
    
    
    
    
    
    
    
    
    
    (57
    )
    
    
    158
    
    
    
    
    
    
    
    101Net cash (used in)/provided by operating activities
    
    
    (9
    )
    
    
    1
    
    
    
    1,444
    
    
    
    1,586
    
    
    
    (802
    )
    
    
    2,220Net cash used in investing activities  continuing operations
    
    
    
    
    
    
    
    
    
    
    (681
    )
    
    
    (940
    )
    
    
    
    
    
    
    (1,621
    )Net cash provided by/(used in) investing activities  discontinued operations
    
    
    
    
    
    
    
    
    
    
    5,635
    
    
    
    (94
    )
    
    
    
    
    
    
    5,541Net cash provided by/(used in) investing activities
    
    
    
    
    
    
    
    
    
    
    4,954
    
    
    
    (1,034
    )
    
    
    
    
    
    
    3,920Net cash provided by/(used in) financing activities
    
    
    937
    
    
    
    
    
    
    
    (6,181
    )
    
    
    (517
    )
    
    
    788
    
    
    
    (4,973
    )Increase in cash and cash equivalents in the year
    
    
    928
    
    
    
    1
    
    
    
    217
    
    
    
    35
    
    
    
    (14
    )
    
    
    1,167Year ended 31 March 2005*Net cash provided by/(used in) operating activities  continuing operations
    
    
    1,108
    
    
    
    (1
    )
    
    
    3,594
    
    
    
    1,754
    
    
    
    (4,522
    )
    
    
    1,933Net cash provided by operating activities  discontinued operations
    
    
    
    
    
    
    
    
    
    
    449
    
    
    
    101
    
    
    
    
    
    
    
    550Net cash provided by/(used in) operating activities
    
    
    1,108
    
    
    
    (1
    )
    
    
    4,043
    
    
    
    1,855
    
    
    
    (4,522
    )
    
    
    2,483Net cash used in investing activities  continuing operations
    
    
    (273
    )
    
    
    
    
    
    
    (5,126
    )
    
    
    (717
    )
    
    
    4,763
    
    
    
    (1,353
    )Net cash used in investing activities  discontinued operations
    
    
    
    
    
    
    
    
    
    
    (323
    )
    
    
    (1,249
    )
    
    
    
    
    
    
    (1,572
    )Net cash used in investing activities
    
    
    (273
    )
    
    
    
    
    
    
    (5,449
    )
    
    
    (1,966
    )
    
    
    4,763
    
    
    
    (2,925
    )Net cash (used in)/provided by financing activities
    
    
    (723
    )
    
    
    
    
    
    
    1,336
    
    
    
    68
    
    
    
    (241
    )
    
    
    440Increase/(decrease) in cash and cash equivalents in the year
    
    
    112
    
    
    
    (1
    )
    
    
    (70
    )
    
    
    (43
    )
    
    
    
    
    
    
    (2
    )
 *Comparatives have been adjusted to reclassify amounts relating to discontinued operations




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##### Table of Contents



Annual Report and Accounts 2006/07 173
 
 Company accounting policies
  (a) Basis of preparation of individual financial statements
       (b) Fixed asset investments
  (c) Deferred taxation
 (d) Foreign currencies
   (e) Financial instruments
       (f) Hedge accounting and derivative financial instruments




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##### Table of Contents



174 National Grid plc
  
 (g) Parent Company guarantees
  (h) Share-based payments
   (i) Dividends




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##### Table of Contents



Annual Report and Accounts 2006/07 175
 
 Company balance sheet
 at 31 March
 2007
    
    
    2006Notes
    
    
    £m
    
    
    £mFixed assetsInvestments
    
    
    2
    
    
    
    3,707
    
    
    
    2,4283,707
    
    
    
    2,428Current assetsDebtors (amounts falling due within one year)
    
    
    3
    
    
    
    9,050
    
    
    
    7,109Debtors (amounts falling due after more than one year)
    
    
    3
    
    
    
    3
    
    
    
    Derivative financial instruments (amounts falling due within one year)
    
    
    
    
    
    
    119
    
    
    
    64Derivative financial instruments (amounts falling due after more than one year)
    
    
    
    
    
    
    192
    
    
    
    79Current asset investments
    
    
    
    
    
    
    1,030
    
    
    
    1,04610,394
    
    
    
    8,298Creditors (amounts falling due within one year)Borrowings
    
    
    5
    
    
    
    (360
    )
    
    
    (109
    )Derivative financial instruments
    
    
    
    
    
    
    (29
    )
    
    
    (21
    )Other creditors
    
    
    
    
    
    
    (2,799
    )
    
    
    (1,876
    )4
    
    
    
    (3,188
    )
    
    
    (2,006
    )Net current assets
    
    
    
    
    
    
    7,206
    
    
    
    6,292Total assets less current liabilities
    
    
    
    
    
    
    10,913
    
    
    
    8,720Creditors (amounts falling due after more than one year)Borrowings
    
    
    5
    
    
    
    (4,524
    )
    
    
    (1,715
    )Derivative financial instruments
    
    
    
    
    
    
    (54
    )
    
    
    (56
    )Provisions for liabilities and chargesDeferred taxation
    
    
    6
    
    
    
    
    
    
    
    (5
    )Net assets employed
    
    
    
    
    
    
    6,335
    
    
    
    6,944Capital and reservesCalled up share capital
    
    
    7
    
    
    
    308
    
    
    
    310Share premium account
    
    
    8
    
    
    
    1,332
    
    
    
    1,316Cash flow hedge reserve
    
    
    8
    
    
    
    22
    
    
    
    7Other reserves
    
    
    8
    
    
    
    91
    
    
    
    74Profit and loss account
    
    
    8
    
    
    
    4,582
    
    
    
    5,237Equity shareholders funds
    
    
    9
    
    
    
    6,335
    
    
    
    6,944
   Sir John Parker
 Steve Lucas




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##### Table of Contents



176 National Grid plc
 
 Notes to the Company accounts
 
 1. Adoption of new accounting standards  New financial reporting standards (FRS) and abstracts adopted in 2006/07
      New financial reporting standards (FRS) and abstracts not yet adopted




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##### Table of Contents



Annual Report and Accounts 2006/07 177
 
 2. Fixed asset investments
 Subsidiaryundertakings£mAt 1 April 2005
    
    
    2,428Additions
    
    
    6Disposals
    
    
    (6
    )At 31 March 2006
    
    
    2,428Additions
    
    
    1,279At 31 March 2007
    
    
    3,707
   
 3. Debtors
 2007
    
    
    2006£m
    
    
    £mAmounts falling due within one year:Amounts owed by subsidiary undertakings
    
    
    9,047
    
    
    
    7,105Prepayments and accrued income
    
    
    3
    
    
    
    49,050
    
    
    
    7,109Amounts falling due after more than one year:Deferred taxation (note 6)
    
    
    3
    
    
    
    
 
 4. Creditors (amounts falling due within one year)
 2007
    
    
    2006£m
    
    
    £mBorrowings (note 5)
    
    
    360
    
    
    
    109Derivative financial instruments
    
    
    29
    
    
    
    21Amounts owed to subsidiary undertakings
    
    
    2,776
    
    
    
    1,856Other creditors
    
    
    23
    
    
    
    203,188
    
    
    
    2,006
  
 5. Borrowings
  2007
    
    
    2006£m
    
    
    £mAmounts falling due within one year:Bank loans and overdrafts
    
    
    30
    
    
    
    27Bonds
    
    
    301
    
    
    
    27Other loans
    
    
    29
    
    
    
    55360
    
    
    
    109Amounts falling due after more than one year:Bonds
    
    
    4,524
    
    
    
    1,7154,524
    
    
    
    1,715Total borrowings
    
    
    4,884
    
    
    
    1,824
 2007
    
    
    2006£m
    
    
    £mTotal borrowings are repayable as follows:In one year or less
    
    
    360
    
    
    
    109In more than one year, but not more than two years
    
    
    642
    
    
    
    In more than two years, but not more than three years
    
    
    295
    
    
    
    348In more than three years, but not more than four years
    
    
    495
    
    
    
    In more than four years, but not more than five years
    
    
    897
    
    
    
    37In more than five years, other than by instalments
    
    
    2,195
    
    
    
    1,3304,884
    
    
    
    1,824




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##### Table of Contents



178 National Grid plc
 
 6. Provisions for liabilities and charges
 Deferredtaxation£mAt 31 March 2005
    
    
    First time adoption of FRS 26
    
    
    19At 1 April 2005
    
    
    19Credited to equity
    
    
    (14
    )At 31 March 2006
    
    
    5At 1 April 2006
    
    
    5Charged to equity
    
    
    4Credited to the profit and loss account (i)
    
    
    (12
    )Transferred to debtors (note 3) (ii)
    
    
    3At 31 March 2007
    
    
    
 (i)
    
    Included is a deferred tax credit of £13m in respect of prior years (2006: £nil).(ii)
    
    Included is a current deferred tax asset of £1m (2006: £nil).
 Factors that may affect future deferred tax charges
  
 7. Share capital
 Allotted and issued
    
    
    Called up and fully paidnumber
    
    
    £
    
    
    millions
    
    
    £mAt 1 April 2005
    
    
    3,090,202,955
    
    
    
    309,020,296
    
    
    
    3,090
    
    
    
    309Issued during the year
    
    
    8,016,297
    
    
    
    898,906
    
    
    
    8
    
    
    
    1Effect of share consolidation (i)
    
    
    (378,520,134
    )
    
    
    
    
    
    
    (378
    )
    
    
    At 31 March 2006
    
    
    2,719,699,118
    
    
    
    309,919,202
    
    
    
    2,720
    
    
    
    310Issued during the year
    
    
    3,748,135
    
    
    
    427,113
    
    
    
    4
    
    
    
    Repurchased during the year (ii)
    
    
    (22,388,381
    )
    
    
    (2,551,234
    )
    
    
    (23
    )
    
    
    (2
    )At 31 March 2007
    
    
    2,701,058,872
    
    
    
    307,795,081
    
    
    
    2,701
    
    
    
    308
 (i)
    
    On 29 July 2005, the ordinary share capital was consolidated, with 43 new ordinary
shares of
1117/43 pence each issued for every 49 existing ordinary shares of 10
pence each cancelled.(ii)
    
    From 20 November 2006 to 22 March 2007, the Company repurchased, and subsequently
cancelled, under its share buy-back programme 22,388,381 ordinary shares for aggregate
consideration of £169m, including transaction costs. The shares repurchased have a nominal
value of
1117/43 pence each and represented 1% of the ordinary shares in issue
as at 31 March 2007. The excess of the consideration over the nominal value has been
recharged against retained earnings.
  
 8. Reserves
 Share
    
    
    Cash flow
    
    
    
    
    
    
    Profitpremium
    
    
    hedge
    
    
    Other
    
    
    and lossaccount
    
    
    reserve
    
    
    reserves
    
    
    account£m
    
    
    £m
    
    
    £m
    
    
    £mAt 1 April 2005
    
    
    1,289
    
    
    
    39
    
    
    
    61
    
    
    
    7,957Exchange adjustments
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    Net loss transferred from equity in respect of cash flow hedges (net of tax)
    
    
    
    
    
    
    (32
    )
    
    
    
    
    
    
    Ordinary shares issued during the year
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    Share-based payment
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    Return of capital to shareholders through B share scheme
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,009
    )Retained loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (711
    )At 1 April 2006
    
    
    1,316
    
    
    
    7
    
    
    
    74
    
    
    
    5,237Net loss transferred from equity in respect of cash flow hedges (net of tax)
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    Ordinary shares issued during the year
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    Repurchase of shares
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    (169
    )Share-based payment
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    Retained loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (486
    )At 31 March 2007
    
    
    1,332
    
    
    
    22
    
    
    
    91
    
    
    
    4,582




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##### Table of Contents



Annual Report and Accounts 2006/07 179
 
 9. Reconciliation of movements in equity shareholders funds
 2007
    
    
    2006£m
    
    
    £mProfit for the year after taxation
    
    
    244
    
    
    
    34Dividends
    
    
    (730
    )
    
    
    (745
    )Retained loss for the financial year
    
    
    (486
    )
    
    
    (711
    )Net proceeds of issue of ordinary shares
    
    
    16
    
    
    
    28Return of capital to shareholders through B share scheme
    
    
    
    
    
    
    (2,009
    )Movement on cash flow hedge reserve (net of tax)
    
    
    15
    
    
    
    (32
    )Share-based payment
    
    
    15
    
    
    
    13Repurchase of ordinary shares
    
    
    (169
    )
    
    
    Net decrease in equity shareholders funds
    
    
    (609
    )
    
    
    (2,711
    )Opening equity shareholders funds
    
    
    6,944
    
    
    
    9,655Closing equity shareholders funds
    
    
    6,335
    
    
    
    6,944
 
 10. Commitments and contingencies
   
 11. Directors and employees




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##### Table of Contents



180 National Grid plc
 
 Glossary of Terms
  Term used in Annual Report
 US equivalent or brief description




---



##### Table of Contents



Annual Report and Accounts 2006/07 181
 
 Definitions
  American Depositary Shares, or ADSs
  B shares
  BETTA
  Board
  Combined Code
  Corporate Centre
  FERC
  FRS
  GAAP
  GW
 9
 GWh
  HSE
  IAS
  IFRS
  KeySpan
  kV
 3
 kW
 3
 kWh
 Lifetime Allowance
  LNG
  lost time injury
  mcm
  mcm/d
  MW
 6
 MWh
  National Grid Wireless
  Ofgem
  ordinary shares
 17 43
 Personal Lifetime Allowance
  Rhode Island gas
  SEC
  SFAS
  tonnes CO2 equivalent
  TW
 12
 TWh
  Way Ahead




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##### Table of Contents



182  National Grid plc
 
 Summary consolidated financial information
   Financial summary (unaudited)
  IFRS
    
    
    As previously measured under UK GAAP31 March
    
    
    31 March
    
    
    31 March
    
    
    31 March
    
    
    31 March
    
    
    31 MarchSummary income statement
    
    2007
    
    
    2006
    
    
    2005
    
    
    2005
    
    
    2004
    
    
    2003£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    8,695
    
    
    
    8,868
    
    
    
    7,174
    
    
    
    8,313
    
    
    
    9,019
    
    
    
    9,389Operating profitBefore exceptional items, remeasurements and goodwill
amortisation
    
    
    2,454
    
    
    
    2,457
    
    
    
    2,401
    
    
    
    2,166
    
    
    
    2,210
    
    
    
    2,146Exceptional items and remeasurements
    
    
    59
    
    
    
    (83
    )
    
    
    (288
    )
    
    
    (241
    )
    
    
    (271
    )
    
    
    (332
    )Goodwill amortisation
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    (85
    )
    
    
    (95
    )
    
    
    (98
    )2,513
    
    
    
    2,374
    
    
    
    2,113
    
    
    
    1,840
    
    
    
    1,844
    
    
    
    1,716Profit before taxationBefore exceptional items, remeasurements and goodwill
amortisation
    
    
    1,909
    
    
    
    1,858
    
    
    
    1,700
    
    
    
    1,420
    
    
    
    1,388
    
    
    
    1,207Exceptional items and remeasurements
    
    
    (158
    )
    
    
    (140
    )
    
    
    (288
    )
    
    
    (158
    )
    
    
    51
    
    
    
    (462
    )Goodwill amortisation
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    (85
    )
    
    
    (95
    )
    
    
    (98
    )1,751
    
    
    
    1,718
    
    
    
    1,412
    
    
    
    1,177
    
    
    
    1,344
    
    
    
    647Profit for the year attributable to equity shareholdersBefore exceptional items, remeasurements and goodwill
amortisation
    
    
    1,400
    
    
    
    1,368
    
    
    
    1,655
    
    
    
    1,100
    
    
    
    1,038
    
    
    
    824Exceptional items and remeasurements
    
    
    (6
    )
    
    
    2,480
    
    
    
    (231
    )
    
    
    (78
    )
    
    
    137
    
    
    
    (362
    )Goodwill amortisation
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    (85
    )
    
    
    (95
    )
    
    
    (98
    )1,394
    
    
    
    3,848
    
    
    
    1,424
    
    
    
    937
    
    
    
    1,080
    
    
    
    364Summary statement of net assetsNon-current assets
    
    
    21,109
    
    
    
    22,106
    
    
    
    25,596
    
    
    
    19,897
    
    
    
    18,394
    
    
    
    18,954Current assets
    
    
    5,312
    
    
    
    3,818
    
    
    
    1,964
    
    
    
    4,814
    
    
    
    5,003
    
    
    
    5,950Assets of businesses held for sale
    
    
    1,968
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total assets
    
    
    28,389
    
    
    
    25,924
    
    
    
    27,560
    
    
    
    24,711
    
    
    
    23,397
    
    
    
    24,904Current liabilities
    
    
    (3,360
    )
    
    
    (5,683
    )
    
    
    (5,974
    )
    
    
    (5,679
    )
    
    
    (4,147
    )
    
    
    (4,729
    )Non-current liabilities
    
    
    (20,443
    )
    
    
    (16,748
    )
    
    
    (19,465
    )
    
    
    (17,172
    )
    
    
    (17,613
    )
    
    
    (18,653
    )Liabilities of businesses held for sale
    
    
    (450
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total liabilities
    
    
    (24,253
    )
    
    
    (22,431
    )
    
    
    (25,439
    )
    
    
    (22,851
    )
    
    
    (21,760
    )
    
    
    (23,382
    )Net assets
    
    
    4,136
    
    
    
    3,493
    
    
    
    2,121
    
    
    
    1,860
    
    
    
    1,637
    
    
    
    1,522Summary cash flow statementCash generated from operationsContinuing operations
    
    
    3,090
    
    
    
    2,973
    
    
    
    2,820
    
    
    
    2,909
    
    
    
    2,810
    
    
    
    2,826Discontinued operations
    
    
    181
    
    
    
    138
    
    
    
    638
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a3,271
    
    
    
    3,111
    
    
    
    3,458
    
    
    
    2,909
    
    
    
    2,810
    
    
    
    2,826Tax paid  continuing and discontinued operations
    
    
    (313
    )
    
    
    (140
    )
    
    
    (150
    )
    
    
    (150
    )
    
    
    (18
    )
    
    
    (112
    )Net cash inflow from operating activities
    
    
    2,958
    
    
    
    2,971
    
    
    
    3,308
    
    
    
    2,759
    
    
    
    2,792
    
    
    
    2,714Net cash flows (used in)/from investing activities
    
    
    (4,277
    )
    
    
    3,922
    
    
    
    (2,975
    )
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aDividends received from joint ventures
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    5
    
    
    
    8
    
    
    
    11Net cash outflow for capital expenditure and financial
investment
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    (1,262
    )
    
    
    (1,254
    )
    
    
    (1,407
    )Net cash (outflow)/inflow for acquisitions and disposals
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    (1,130
    )
    
    
    7
    
    
    
    163Net cash (outflow)/inflow for the management of liquid
resources
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    (54
    )
    
    
    (48
    )
    
    
    (138
    )Net cash flows from/(used in) financing activities
    
    
    1,494
    
    
    
    (5,712
    )
    
    
    (325
    )
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aNet cash outflow for returns on investments and
servicing of finance
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    (758
    )
    
    
    (692
    )
    
    
    (912
    )Equity dividends paid
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    (628
    )
    
    
    (560
    )
    
    
    (571
    )Net cash inflow/(outflow) from financing activities
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    1,081
    
    
    
    (240
    )
    
    
    174Net increase in cash and cash equivalents (UK GAAP 
cash only)
    
    
    175
    
    
    
    1,181
    
    
    
    8
    
    
    
    13
    
    
    
    13
    
    
    
    34
 31 March
    
    
    31 March
    
    
    31 March
    
    
    31 March
    
    
    31 MarchAmounts in accordance with US GAAP
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003£m*
    
    
    £m*
    
    
    £m*
    
    
    £m*
    
    
    £m*Revenue
    
    
    8,686
    
    
    
    8,891
    
    
    
    7,208
    
    
    
    7,747
    
    
    
    6,730Net income
    
    
    1,146
    
    
    
    1,307
    
    
    
    1,288
    
    
    
    961
    
    
    
    738Earnings per ADSBasic
    
    
    211.0p
    
    
    
    241.0p
    
    
    
    238.0p
    
    
    
    178.4p
    
    
    
    179.1pDiluted
    
    
    209.5p
    
    
    
    240.0p
    
    
    
    236.5p
    
    
    
    177.9p
    
    
    
    174.3pTotal assets
    
    
    35,126
    
    
    
    32,952
    
    
    
    37,274
    
    
    
    35,347
    
    
    
    36,947Net assets employed/total shareholders funds
    
    
    9,367
    
    
    
    9,788
    
    
    
    10,629
    
    
    
    9,875
    
    
    
    9,515Equity shareholders funds
    
    
    9,330
    
    
    
    9,747
    
    
    
    10,591
    
    
    
    9,821
    
    
    
    9,426




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##### Table of Contents



Annual Report and Accounts 2006/07 183
 
 Shareholder Information
  Financial calendar
  6 June 2007
    
    Ordinary shares go ex-dividend8 June 2007
    
    Ordinary share dividend record date11 July 2007
    
    DRIP election deadline 2006/07 final dividend30 July 2007
    
    2007 Annual General Meeting22 August 2007
    
    2006/07 final dividend paid on ordinary shares15 November 2007
    
    2007/08 interim results28 November 2007
    
    Ordinary shares go ex-dividend30 November 2007
    
    Ordinary share dividend record date7 December 2007
    
    DRIP election deadline 2007/08 interim dividend23 January 2008
    
    2007/08 interim dividend paid on ordinary sharesMay 2008
    
    2007/08 preliminary resultsJune 2008
    
    Ordinary shares go ex-dividendJune 2008
    
    Ordinary share dividend record dateJuly 2008
    
    DRIP election deadline 2007/08 final dividendJuly 2008
    
    2008 Annual General MeetingAugust 2008
    
    2007/08 final dividend paid on ordinary shares
 Electronic communication
    Website
 Dividends
       Dividend reinvestment plan (DRIP)
  Share dealing




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##### Table of Contents



184  National Grid plc
  Shareholder Networking
    
  ShareGift
 Individual Savings Accounts (ISAs)
  Capital Gains Tax (CGT)
  Alternative formats
  Shareholders
  Size of
    
    Number of
    
    
    % of
    
    
    Number of
    
    
    % ofshareholding
    
    shareholders
    
    
    shareholders
    
    
    shares
    
    
    shares1-50
    
    
    232,565
    
    
    
    19.07
    
    
    
    7,252,130
    
    
    
    0.2751-100
    
    
    364,600
    
    
    
    29.90
    
    
    
    24,716,068
    
    
    
    0.91101-500
    
    
    523,832
    
    
    
    42.95
    
    
    
    103,793,487
    
    
    
    3.84501-1,000
    
    
    52,962
    
    
    
    4.34
    
    
    
    37,159,735
    
    
    
    1.381,001-10,000
    
    
    43,294
    
    
    
    3.55
    
    
    
    100,416,828
    
    
    
    3.7210,001-50,000
    
    
    1,203
    
    
    
    0.10
    
    
    
    24,430,715
    
    
    
    0.9050,001-100,000
    
    
    232
    
    
    
    0.02
    
    
    
    17,220,012
    
    
    
    0.64100,001-500,000
    
    
    484
    
    
    
    0.04
    
    
    
    117,414,426
    
    
    
    4.35500,001-1,000,000
    
    
    151
    
    
    
    0.01
    
    
    
    105,716,687
    
    
    
    3.911,000,001+
    
    
    288
    
    
    
    0.02
    
    
    
    2,162,938,784
    
    
    
    80.08Total
    
    
    1,219,611
    
    
    
    100
    
    
    
    2,701,058,872
    
    
    
    100
   Share price




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##### Table of Contents



Cautionary Statement
   National Grid plc
 Designed and produced by Corporate Edge
Printed by St Ives Westerham Press




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##### Table of Contents



National Grid plc
1-3 Strand, London WC2N 5EH, United Kingdom Registered in England and Wales No. 4031152
UK Shareholder enquiries: 0870 242 2379 US Shareholder enquiries: 1-800-466-7215
www.nationalgrid.com