EXHIBIT
2(b).11.1
  
 National Grid plc
 (incorporated with limited liability in England and Wales on 11 July 2000 under registered number 4031152)
 National Grid Electricity Transmission plc
 (incorporated with limited liability in England and Wales on 1 April 1989 under registered number 2366977))
 Euro 15,000,000,000
Euro Medium Term Note Programme
 Programme Prospectus National Grid NGET Issuer Issuers Instruments
 U.K. Listing Authority FSMA Official List London Stock Exchange Market listed
 temporary Global Instrument permanent Global Instrument Global Instruments NGN Common Safekeeper Euroclear société anonyme Clearstream, Luxembourg Common Depositary Classic Global Notes CGNs
  Prospectus Directive 
 Programme Arranger and Dealer
 HSBC
 Dealers
 Barclays Capital
    
    BofA Merrill LynchCiti
    
    Commerzbank Corporates & MarketsDeutsche Bank
    
    HSBCMitsubishi UFJ Securities International plc
    
    Morgan StanleyNational Australia Bank Limited
    
    RBC Capital Markets
 The Royal Bank of Scotland




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IMPORTANT NOTICES
 Base Prospectus National Grid Group National Grid
Prospectus NGET Group NGET Prospectus Prospectuses Prospectus
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Euro Japanese yen £ Sterling U.S. dollars U.S.$ Canadian dollars Australian dollars New
Zealand dollars Swedish krona Danish krone Hong
Kong dollars Swiss francs
 In connection with the issue of any Tranche (as defined in Overview of the Programme  Method
of Issue), the Dealer or Dealers (if any) named as the stabilising manager(s) (the
Stabilising Manager(s)) in the applicable Final Terms (or any person acting on behalf of any
Stabilising Manager(s)) may over-allot Instruments or effect transactions with a view to
supporting the market price of the Instruments at a level higher than that which might
otherwise prevail. However, there is no assurance that the Stabilising Manager(s) (or any
person acting on behalf of any Stabilising Manager) will undertake stabilisation action. Any
stabilisation action may begin on or after the date on which adequate public disclosure of the
final terms of the offer of the relevant Tranche is made and, if begun, may be ended at any
time, but it must end no later than the earlier of 30 days after the issue date of the relevant
Tranche and 60 days after the date of the allotment of the relevant Tranche. Any stabilisation
action or over-allotment must be conducted by the relevant Stabilising Manager(s) or person(s)
acting on behalf of any Stabilising Manager(s) in accordance with all applicable laws and
rules.
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TABLE OF CONTENTS
 PageIMPORTANT NOTICES
    
    
    2DOCUMENTS INCORPORATED BY REFERENCE
    
    
    5SUPPLEMENTAL PROSPECTUS
    
    
    6OVERVIEW OF THE PROGRAMME
    
    
    7RISK FACTORS
    
    
    14TERMS AND CONDITIONS OF THE INSTRUMENTS
    
    
    27SUMMARY OF PROVISIONS RELATING TO THE INSTRUMENTS WHILE IN GLOBAL FORM
    
    
    67USE OF PROCEEDS
    
    
    73DESCRIPTION OF NATIONAL GRID PLC
    
    
    74DESCRIPTION OF NATIONAL GRID ELECTRICITY TRANSMISSION PLC
    
    
    84UNITED KINGDOM TAXATION
    
    
    89PLAN OF DISTRIBUTION
    
    
    92FORM OF FINAL TERMS
    
    
    95GENERAL INFORMATION
    
    
    111
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DOCUMENTS INCORPORATED BY REFERENCE
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SUPPLEMENTAL PROSPECTUS
 Supplemental Prospectus
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OVERVIEW OF THE PROGRAMME
  Issuers
    
    National Grid plcNational Grid Electricity Transmission plcDescription
    
    Euro Medium Term Note ProgrammeSize
    
    Up to Euro 15,000,000,000 (or the equivalent in
other currencies at the date of issue) aggregate
nominal amount of Instruments outstanding at any
one time.Arranger
    
    HSBC Bank plcPrincipal Dealers
    
    Barclays Bank PLCCitigroup Global Markets LimitedCommerzbank AktiengesellschaftDeutsche Bank AG, London BranchHSBC Bank plcMerrill Lynch InternationalMitsubishi UFJ Securities International plcMorgan Stanley & Co. International plcNational Australia Bank LimitedRoyal Bank of Canada Europe LimitedThe Royal Bank of Scotland plcThe Issuers may from time to time terminate the
appointment of any dealer under the Programme or
appoint additional dealers either in respect of one
or more Tranches or in respect of the whole
Programme. References in this Prospectus to
Permanent Dealers are to the persons listed above
as Dealers and to such additional persons that are
appointed as dealers in respect of the whole
Programme (and whose appointment has not been
terminated) and references to Dealers are to all
Permanent Dealers and all persons appointed as a
dealer in respect of one or more Tranches.Trustee
    
    The Law Debenture Trust Corporation p.l.c.Issuing and Paying Agent
    
    The Bank of New York MellonOther Paying Agent
    
    KBL European Private Bankers S.A.Method of Issue
    
    The Instruments will be issued on a syndicated or
non-syndicated basis. The Instruments will be
issued in series (each a Series) having one or
more issue dates and on terms otherwise identical
(or identical other than in respect of the first
payment of interest), the Instruments of
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each
Series being intended to be interchangeable with
all other Instruments of that Series. Each Series
may be issued in tranches (each a Tranche) on the
same or different issue dates. The specific terms
of each Tranche (which will be completed, where
necessary, with supplemental terms and conditions
and, save in respect of the issue date, issue
price, first payment of interest and nominal amount
of the Tranche, will be identical to the terms of
other Tranches of the same Series) will be
completed in the final terms document (the Final
Terms).Issue Price
    
    Instruments may be issued at their nominal amount
or at a discount or premium to their nominal
amount. Partly Paid Instruments may be issued, the
issue price of which will be payable in two or more
instalments.Form of Instruments
    
    The Instruments may be issued in bearer form only.
Each Tranche of Instruments will be represented on
issue by a temporary Global Instrument if (a)
definitive Instruments are to be made available to
Instrumentholders following the expiry of 40 days
after their issue date or (b) such Instruments have
an initial maturity of more than one year and are
being issued in compliance with the D Rules (as
defined in Selling Restrictions below), otherwise
such Tranche will be represented by a permanent
Global Instrument. Any permanent Global Instrument
shall only be exchanged for Instruments in
definitive form in the limited circumstances set
out in the permanent Global Instrument.Clearing Systems
    
    Clearstream, Luxembourg, Euroclear and, in relation
to any Tranche, such other clearing system as may
be agreed between the relevant Issuer, the Issuing
and Paying Agent, the Trustee and the relevant
Dealer.Initial Delivery of Instruments
    
    On or before the issue date for each Tranche, if
the relevant Global Instrument is intended to be a
NGN, the Global Instrument will be delivered to a
Common Safekeeper for Euroclear and Clearstream,
Luxembourg. On or before the issue date for each
Tranche, if the relevant Global Instrument is not
intended to be a NGN, the Global Instrument
representing the relevant Instruments may be
deposited with a common depositary for Euroclear
and Clearstream, Luxembourg. Global Instruments may
also be deposited with any other clearing system or
may be delivered outside any clearing system
provided that the method of such delivery has been
agreed in advance by the relevant Issuer, the
Issuing and Paying Agent, the Trustee and the
relevant Dealer.
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Currencies
    
    Subject to compliance with all relevant laws,
regulations and directives, Instruments may be
issued in Euro, Japanese yen, Sterling, U.S.
dollars, Canadian dollars, Australian dollars, New
Zealand dollars, Swedish krona, Danish krone, Hong
Kong dollars or Swiss francs or in other currencies
if the relevant Issuer and the relevant Dealer(s)
so agree. Instruments may, subject to compliance as
above, be issued as Dual Currency Instruments.Maturities
    
    Subject to compliance with all relevant laws,
regulations and directives, any maturity from one
month to perpetuity.Any Instruments having a maturity of less than one
year from their date of issue must (a) have a
minimum redemption value of £100,000 (or its
equivalent in other currencies) and be issued only
to persons whose ordinary activities involve them
in acquiring, holding, managing or disposing of
investments (as principal or agent) for the
purposes of their businesses or who it is
reasonable to expect will acquire, hold, manage or
dispose of investments (as principal or agent) for
the purposes of their businesses or (b) be issued
in other circumstances which do not constitute a
contravention of Section 19 of FSMA by the relevant
Issuer.Denominations
    
    Definitive Instruments will be in such
denominations as may be specified in the relevant
Final Terms, save that (i) in the case of any
Instruments which are to be admitted to trading on
a regulated market within the European Economic
Area or offered to the public in a Member State of
the European Economic Area in circumstances which
require the publication of a prospectus under the
Prospectus Directive, the minimum denomination
shall be 50,000 (or its equivalent in any other
currency as at the date of issue of the
Instruments); and (ii) unless otherwise permitted
by then current laws and regulations, Instruments
which have a maturity of less than one year will
have a minimum denomination of £100,000 (or its
equivalent in other currencies).Fixed Rate Instruments
    
    Fixed interest will be payable in arrear on the
date or dates in each year specified in the
relevant Final Terms and at maturity.Floating Rate Instruments
    
    Floating Rate Instruments will bear interest set
separately for each Series as follows:(a) on the same basis as the floating rate under a
notional interest rate swap transaction in the
relevant Specified Currency governed by an
agreement incorporating the 2006 ISDA Definitions
published by the International Swaps and
Derivatives Association, Inc.; or
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(b) by reference to LIBOR, LIBID, LIMEAN or EURIBOR
(or such other benchmark as may be specified in the
relevant Final Terms) as adjusted for any
applicable margin. Interest periods will be
selected by the relevant Issuer prior to issue and
specified in the relevant Final Terms. Floating
Rate Instruments may also have a maximum interest
rate, a minimum interest rate, or both.Zero Coupon Instruments
    
    Zero Coupon Instruments may be issued at their
nominal amount or at a discount to it and will not
bear interest.Dual Currency Instruments
    
    Payments (whether in respect of principal or
interest and whether at maturity or otherwise) in
respect of Dual Currency Instruments will be made
in such currencies, and based on such rates of
exchange as may be specified in the relevant Final
Terms.Index Linked Instruments
    
    Payments of principal in respect of Index Linked
Redemption Instruments or of interest in respect of
Index Linked Interest Instruments will be
calculated by reference to such index and/or
formula as may be specified in the relevant Final
Terms and (if applicable) the relevant Supplemental
Prospectus.Interest Periods and Rates of
Interest
    
    The length of the interest periods for the
Instruments and the applicable interest rate or its
method of calculation may differ from time to time
or be constant for any Series. Instruments may have
a maximum interest rate, a minimum interest rate,
or both. The use of interest accrual periods
permits the Instruments to bear interest at
different rates in the same interest period. All
such information will be set out in the relevant
Final Terms.Redemption
    
    The relevant Final Terms will specify the basis for
calculating the redemption amounts payable, which
may be by reference to a stock, index or formula or
as otherwise provided in the relevant Final Terms.Unless permitted by then current laws and
regulations, Instruments which have a maturity of
less than one year must have a minimum redemption
amount of £100,000 (or its equivalent in other
currencies).Redemption by Instalments
    
    The Final Terms issued in respect of each issue of
Instruments that are redeemable in two or more
instalments will set out the dates on which, and
the amounts in which, such Instruments may be
redeemed.Other Instruments
    
    Terms applicable to high interest Instruments, low
interest Instruments, step-up Instruments,
step-down Instruments, Dual Currency Instruments,
reverse Dual Currency
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Instruments, optional Dual
Currency Instruments, Partly-Paid Instruments and
any other type of Instrument that the relevant
Issuer, the Trustee and any Dealer(s) may agree to
issue under the Programme, subject to compliance
with all relevant laws, regulations and directives,
will be set out in the relevant Final Terms and (if
applicable) the relevant Supplemental Prospectus.Optional Redemption
    
    The Final Terms issued in respect of each issue of
Instruments will state whether such Instruments may
be redeemed prior to their stated maturity at the
option of the relevant Issuer (either in whole or
in part) and/or the Instrumentholders, and if so
the terms applicable to such redemption.The relevant Issuer may elect to redeem all, but
not some only, of the Instruments of any Series at
their Residual Holding Redemption Amount at any
time if the Residual Holding Percentage or more of
the aggregate nominal amount of such Instruments
originally issued shall have been redeemed or
purchased and cancelled.Redemption at the Option of
the Instrumentholders
following a National Grid
Restructuring Event, or as the
case may be, an NGET
Restructuring Event (each as
defined in Condition 5.6.2):
    
    Instruments issued by National Grid will be subject
to an optional redemption by Instrumentholders
following a Put Event (as defined in Condition
5.6.1). Instruments issued by NGET will, if so
specified in the relevant Final Terms, be subject
to an optional redemption by Instrumentholders
following a Put Event (as defined in Condition
5.6.1).If at any time while any relevant Instrument
remains outstanding, a Put Event occurs then (other
than in certain circumstances described in
Condition 5.6.1) the Instrumentholders will, upon
the giving of a Put Event Notice (as defined in
Condition 5.6.1), have the option to require the
relevant Issuer to redeem the relevant Instrument
on the Put Date (as defined in Condition 5.6.4) at
the principal amount of the Instrument together
with accrued interest to the Put Date.Status of Instruments
    
    The Instruments will constitute unsubordinated and
unsecured obligations of the relevant Issuer, all
as described in Terms and Conditions of the
Instruments  Status.Negative Pledge
    
    Instruments issued by National Grid will have the
benefit of a negative pledge as described in Terms
and Conditions of the Instruments  Status and
Negative Pledge.Instruments issued by NGET will not have the
benefit of a negative pledge.Cross Acceleration
    
    The Instruments will have the benefit of a cross
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acceleration provision as described in Terms and
Conditions of the Instruments  Events of Default.Events of Default
    
    The events of default under the Instruments are as
specified below under Terms and Conditions of the
Instruments  Events of Default.Early Redemption
    
    Except as provided in Optional Redemption and
Redemption above, Instruments will be redeemable
at the option of the relevant Issuer prior to
maturity only for tax reasons and in the case of
Index Linked Instruments only, for index reasons.
See Terms and Conditions of the Instruments 
Redemption, Purchase and Options and Terms and
Conditions of the Instruments  Indexation.Withholding Tax
    
    All payments of principal and interest in respect
of the Instruments, Receipts and Coupons will be
made free and clear of withholding taxes of the
United Kingdom unless compelled by law. In that
event, the Issuer will, subject to customary
exceptions (including the standard EU exceptions),
pay such additional amounts as will result in the
payment to the Instrumentholders, Receiptholders or
Couponholders of the amounts which would otherwise
have been received in respect of the Instruments,
Receipts and Coupons had no withholding or
deduction been made, all as described in Terms and
Conditions of the Instruments  Taxation.Governing Law
    
    EnglishListing
    
    Each Series may be admitted to the Official List
and admitted to trading on the Market and/or
admitted to listing, trading and/or quotation by
any other listing authority, stock exchange and/or
quotation system as may be agreed between the
relevant Issuer and the relevant Dealer(s) and
specified in the relevant Final Terms or may be
unlisted.Ratings
    
    Tranches of Instruments (as defined in Overview of
the Programme) may be rated or unrated. Where a
Tranche of Instruments is rated, such rating will
be specified in the relevant Final Terms. A rating
is not a recommendation to buy, sell or hold
securities and may be subject to suspension,
reduction or withdrawal at any time by the
assigning rating agency.Selling Restrictions
    
    United States, United Kingdom, Public Offer Selling
Restriction under the Prospectus Directive (in the
case of unlisted Instruments) and Japan. See Plan
of Distribution.Category 2 selling restrictions will apply to the
Instruments for the purposes of Regulation S under
the Securities Act.
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The Instruments will be issued in compliance with U.S.
Treas. Reg. §1.163-5(c)(2)(i)(D)
(the D Rules) unless (a) the
relevant Final Terms states that
Instruments are issued in
compliance with U.S. Treas. Reg.
§1.163-5(c)(2)(i)(C) (the C
Rules) or (b) the Instruments are
issued other than in compliance
with the D Rules or the C Rules but
in circumstances in which the
Instruments will not constitute
registration required obligations
under the United States Tax Equity
and Fiscal Responsibility Act of
1982 (TEFRA), which circumstances
will be referred to in the relevant
Final Terms as a transaction to
which TEFRA is not applicable.Terms and Conditions
    
    The Terms and Conditions applicable
to each Series will be as agreed
between the relevant Issuer, the
Trustee and the relevant Dealer(s)
or other subscriber at or prior to
the time of issuance of such Series
and will be specified in the
relevant Final Terms. The Terms and
Conditions applicable to each Series
will therefore be those as set out
in Terms and Conditions of the
Instruments below or those referred
to under Documents Incorporated by
Reference as supplemented, modified
or replaced by the relevant Final
Terms.
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RISK FACTORS
 The relevant Issuer believes that the following factors may affect its ability to fulfil
its obligations under Instruments issued under the Programme. All of these factors are
contingencies which may or may not occur and the relevant Issuer is not in a position to
express a view on the likelihood of any such contingency occurring.
 Factors which the relevant Issuer believes may be material for the purpose of assessing the
market risks associated with Instruments issued under the Programme are also described below.
 The relevant Issuer believes that the factors described below represent the principal risks
inherent in investing in Instruments issued under the Programme, but the relevant Issuer may be
unable to pay interest, principal or other amounts on or in connection with any Instruments for
other reasons. If this occurs, Prospective investors may lose the value of their entire
investment or part of it. Prospective investors should read the detailed information set out
elsewhere in this Prospectus (including any documents deemed to be incorporated by reference
herein) and reach their own views prior to making any investment decision.
 Factors that may affect National Grids ability to fulfil its obligations under
Instruments issued under the Programme
 Risks relating to National Grid and its businesses
 Changes in law or regulation could have an adverse effect on National Grids results of
operations.
  Breaches of or changes in environmental or health and safety laws or regulations could expose
National Grid to claims for financial compensation and adverse regulatory consequences, as well
as damaging National Grids reputation.
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Network failure, the inability to carry out critical non-network operations and damage to
infrastructure may have significant adverse impacts on both National Grids financial position
and its reputation.
  National Grids results of operations depend on a number of factors relating to business
performance including performance against regulatory targets 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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Changes to the regulatory treatment of commodity costs may have an adverse effect on the
results of operations.
  National Grids reputation may be harmed if consumers of energy suffer a disruption to their
supply.
  Fluctuations in exchange rates (in particular in the U.S. dollar), interest rates and commodity
price indices, could have a significant impact on National Grids results of operations.
  National Grids financial position may be adversely affected by a number of factors including
restrictions in borrowing and debt arrangements, changes to credit ratings, adverse changes and
volatility in the global credit markets.
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National Grids results of operations could be affected by deflation.
  Future funding requirements of National Grids pension schemes could adversely affect its
results of operations.
  New or revised accounting standards, rules and interpretations could have an adverse effect on
National Grids reported financial results. Changes in law and accounting standards could
increase National Grids effective tax rate.
 IFRS
 Customers and counterparties to National Grids transactions may fail to perform their
obligations, or arrangements it has may be terminated, which could harm its results of
operations.
 LIPA
 National Grids operating results may fluctuate on a seasonal and quarterly basis.
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Factors that may affect NGETs ability to fulfil its obligations under Instruments issued
under the Programme
 Risks relating to NGET and its business
 Changes in law or regulation could have an adverse effect on NGETs results of operations
  Breaches of or changes in environmental or health and safety laws or regulations could expose
NGET to claims for financial compensation and adverse regulatory consequences as well as
damaging NGETs reputation
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Network failure, the inability to carry out critical non-network operations and damage to
infrastructure may have significant adverse impacts on both NGETs financial position and its
reputation
  NGETs results of operations depend on a number of factors relating to business performance
including performance against regulatory targets and the delivery of anticipated costs and
efficiency savings
  NGETs reputation may be harmed if consumers of energy suffer a disruption to their supply even
if this disruption is outside of NGETs control
  The nature and extent of NGETs borrowings means that an increase in interest rates could have
an adverse impact on its financial position and business results
  NGETs financial position may be adversely affected by a number of factors including
restrictions in borrowing and debt arrangements, changes to credit rating, adverse changes and
volatility in the global credit markets
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Future funding requirements of pension schemes could adversely affect its results of
operations.
  New or revised accounting standards, rules and interpretations by the U.K or international
accounting standard setting boards and other relevant bodies could have an adverse effect on
NGETs reported financial results. Changes in law and accounting standards could increase
NGETs effective tax rate.
  NGETs results of operations could be affected by deflation.
  Factors which are material for the purpose of assessing the market risks associated with
Instruments issued under the Programme
 Instruments may not be a suitable investment for all investors
  (i)
    
    have sufficient knowledge and experience to make a meaningful evaluation of the
relevant Instruments, the merits and risks of investing in the relevant Instruments and
the information contained or incorporated by reference in this Prospectus or any
applicable supplement;(ii)
    
    have access to, and knowledge of, appropriate analytical tools to evaluate, in the
context of its particular financial situation, an investment in the relevant Instruments
and the impact such investment will have on its overall investment portfolio;(iii)
    
    have sufficient financial resources and liquidity to bear all of the risks of an
investment in the relevant Instruments, including where principal or interest is payable
in one or more
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currencies, or where the currency for principal or interest payments is different from
the potential investors currency;(iv)
    
    understand thoroughly the terms of the relevant Instruments and be familiar with the
behaviour of any relevant indices and financial markets; and(v)
    
    be able to evaluate (either alone or with the help of a financial adviser) possible
scenarios for economic, interest rate and other factors that may affect its investment and
its ability to bear the applicable risks.
  Risks related to the structure of a particular issue of Instruments
  Instruments subject to optional redemption by the Issuer
   Index Linked Instruments and Dual Currency Instruments
 Relevant Factor
 (i)
    
    the market price of such Instruments may be volatile;(ii)
    
    they may receive no interest;(iii)
    
    payment of principal or interest may occur at a different time or in a different
currency than expected;(iv)
    
    the amount of principal payable at redemption may be less than the nominal amount of
such Instruments or even zero;
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(v)
    
    a Relevant Factor may be subject to significant fluctuations that may not correlate
with changes in interest rates, currencies or other indices;(vi)
    
    if a Relevant Factor is applied to Instruments in conjunction with a multiplier
greater than one or contains some other leverage factor, the effect of changes in the
Relevant Factor on principal or interest payable likely will be magnified; and(vii)
    
    the timing of changes in a Relevant Factor may affect the actual yield to investors,
even if the average level is consistent with their expectations. In general, the earlier
the change in the Relevant Factor, the greater the effect on yield.
 Partly-paid Instruments
  Variable rate Instruments with a multiplier or other leverage factor
  Fixed/Floating Rate Instruments
  Instruments issued at a substantial discount or premium
  Risks related to Instruments generally
  Modification, waivers and substitution
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European Monetary Union
  EU Savings Directive
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If a payment in respect of an Instrument which is the subject of the Directive were to be
made or collected through a Member State which has opted for a withholding system and an amount
of, or in respect of, tax were to be withheld from that payment, neither the Issuer nor any
Paying Agent nor any other person would be obliged to pay additional amounts with respect to
such Instrument as a result of the imposition of such withholding tax. However, the Issuer is
required, save as provided in Condition 6.4 of the Instruments, to maintain a Paying Agent in a
Member State that will not be obliged to withhold or deduct tax pursuant to any law
implementing the Directive or any other Directive implementing the conclusions of the ECOFIN
Council meeting of 26-27 November 2000.
 Change of law
  Integral multiples of less than 50,000
   
 Risks related to the market generally
  The secondary market generally
  The Clearing Systems
 Euroclear société anonyme Clearstream, Luxembourg
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Exchange rate risks and exchange controls
 Investors
Currency
  Interest rate risks
  Credit ratings may not reflect all risks
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Legal investment considerations may restrict certain investments
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TERMS AND CONDITIONS OF THE INSTRUMENTS
 The following is the text of the terms and conditions which, save for the text in italics
and subject to completion and amendment and as supplemented or varied in accordance with the
provisions of Part A of the relevant Final Terms, will be endorsed on the Instruments in
definitive form (if any) issued in exchange for the Global Instrument(s) representing each
Series. Either (a) the full text of these terms and conditions together with the relevant
provisions of Part A of the Final Terms or (b) these terms and conditions as so completed,
amended, supplemented or varied (and subject to simplification by the deletion of
non-applicable provisions), shall be endorsed on such Instruments. All capitalised terms which
are not defined in these Conditions will have the meanings given to them in the Trust Deed or
Part A of the relevant Final Terms. Those definitions will be endorsed on the definitive
Instruments.References in these terms and conditions to Instruments (as defined below) are to the
Instruments of one Series only of the relevant Issuer (as defined below), not to all
Instruments that may be issued under the Programme.National Grid plc (National Grid) and National Grid Electricity Transmission plc (NGET)
(each an Issuer and together, the Issuers) have established a Euro Medium Term Note
Programme (the Programme) for the issuance of up to Euro 15,000,000,000 in aggregate
principal amount of debt instruments (the Instruments). The Instruments are constituted by a
Trust Deed (as amended or supplemented from time to time, the Trust Deed) dated 24 July 2009
between the Issuers and The Law Debenture Trust Corporation p.l.c. (the Trustee, which
expression shall include all persons for the time being the trustee or trustees under the Trust
Deed) as trustee for the Instrumentholders (as defined below). These terms and conditions
include summaries of, and are subject to, the detailed provisions of the Trust Deed, which
includes the form of the Definitive Instruments, Receipts, Coupons and Talons referred to
below. An Agency Agreement (as amended or supplemented from time to time, the Agency
Agreement) dated 24 July 2009 has been entered into in relation to the Instruments between the
Issuers, the Trustee, The Bank of New York Mellon as initial issuing and paying agent and the
other agent(s) named in it. The issuing and paying agent, the paying agent(s) and the
calculation agent(s) for the time being (if any) are referred to below respectively as the
Issuing and Paying Agent, the Paying Agents (which expression shall include the Issuing and
Paying Agent) and the Calculation Agent(s). Copies of the Trust Deed and the Agency Agreement
are available for inspection during usual business hours at the registered office of the
Trustee (as at 24 July 2009 at Fifth Floor, 100 Wood Street, London EC2V 7EX) and at the
specified offices of the Paying Agents.The Instrumentholders, the holders of the interest coupons (the Coupons) appertaining to
interest bearing Instruments and, where applicable in the case of such Instruments, talons for
further Coupons (the Talons) (the Couponholders) and the holders of the receipts for the
payment of instalments of principal (the Receipts) relating to Instruments of which the
principal is payable in instalments are entitled to the benefit of, are bound by, and are
deemed to have notice of, all the provisions of the Trust Deed and are deemed to have notice of
those provisions of the Agency Agreement applicable to them.1
    
    Form, Denomination and TitleThe Instruments are issued in bearer form in the Specified Denomination(s) specified in
the relevant Final Terms and are serially numbered. Instruments of one Specified Denomination
are not exchangeable for Instruments of another Specified Denomination provided that in the
case of any
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Instruments which are to be admitted to trading on a regulated market within the European
Economic Area or offered to the public in a Member State of the European Economic Area in
circumstances which require the publication of a prospectus under the Prospectus Directive, the
minimum Specified Denomination shall be 50,000 (or its equivalent in any other currency as
at the date of issue of the relevant Instruments).This Instrument is a Fixed Rate Instrument, a Floating Rate Instrument, a Zero Coupon
Instrument, a Perpetual Instrument, an Index Linked Interest Instrument, an Index Linked
Redemption Instrument, an Instalment Instrument, a Dual Currency Instrument or a Partly Paid
Instrument, a combination of any of the preceding or any other kind of Instrument, depending
upon the Interest and Redemption/Payment Basis specified in the relevant Final Terms.Instruments are issued with Coupons (and, where appropriate, a Talon) attached, save in the
case of Zero Coupon Instruments in which case references to interest (other than in relation to
interest due after the Maturity Date), Coupons and Talons in these Conditions are not
applicable.Instalment Instruments are issued with one or more Receipts attached. Title to the Instruments
and the Receipts, Coupons and Talons shall pass by delivery and except as ordered by a court of
competent jurisdiction or as required by law, the Issuer and the Paying Agents shall be
entitled to treat the bearer of any Instrument, Receipt, Coupon or Talon as the absolute owner
of that Instrument, Receipt, Coupon or Talon, as the case may be, and shall not be required to
obtain any proof of ownership as to the identity of the bearer.In these Conditions, Instrumentholder means the bearer of any Instrument of one Series only
of an Issuer and the Receipts relating to it, holder (in relation to an Instrument, Receipt,
Coupon or Talon) means the bearer of any Instrument, Receipt, Coupon or Talon and capitalised
terms have the meanings given to them herein, the absence of any such meaning indicating that
such term is not applicable to the Instruments.2
    
    Status and Negative Pledge
 2.1
    
    StatusThe Instruments and the Receipts and Coupons relating to them constitute direct,
unconditional and unsecured obligations of the Issuer and rank pari passuwithout any
preference or priority among themselves. The payment obligations of the Issuer under the
Instruments, Receipts and Coupons shall, subject to such exceptions as are from time to
time applicable under the laws of England and, in relation to Instruments issued by
National Grid, as provided in Condition 2.2, rank equally with all other present and
future unsecured obligations (other than subordinated obligations, if any) of the Issuer.2.2
    
    Negative PledgeSo long as any Instrument, Receipt or Coupon of National Grid remains outstanding
(as defined in the Trust Deed) National Grid will not create or permit to subsist any
mortgage, charge, pledge, lien or other form of encumbrance or security interest
(Security) upon the whole or any part of its undertaking, assets or revenues present or
future to secure any Relevant Indebtedness, or any guarantee of or indemnity in respect
of any Relevant Indebtedness unless, at the same time or prior thereto, National Grids
obligations under the Instruments, the Receipts, the Coupons and the Trust Deed (a) are
secured equally and rateably therewith or benefit from a guarantee or indemnity in
substantially identical terms thereto, as the case may be, in each case to the
satisfaction of the Trustee, or (b) have the
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benefit of such other security, guarantee, indemnity or other arrangement as the Trustee
in its absolute discretion shall deem to be not materially less beneficial to the
Instrumentholders or as shall be approved by an Extraordinary Resolution (as defined in
the Trust Deed) of the Instrumentholders.For the purposes of these Conditions, Relevant Indebtedness means any present or future
indebtedness in the form of, or represented by, bonds, notes, debentures, loan stock or
other securities which are for the time being, or are intended, with the agreement of the
Issuer, to be quoted, listed or ordinarily dealt in on any stock exchange.
 3
    
    Interest
 3.1
    
    Interest on Fixed Rate InstrumentsEach Fixed Rate Instrument bears interest on its outstanding nominal amount from the
Interest Commencement Date at the rate per annum (expressed as a percentage) equal to the
Rate of Interest, payable in arrear on each Interest Payment Date. The amount of Interest
payable shall be determined in accordance with Condition 3.2.4(f).If a Fixed Coupon Amount or a Broken Amount is specified in the relevant Final Terms, the
amount of interest payable on each Interest Payment Date will amount to the Fixed Coupon
Amount, or, if applicable, the Broken Amount so specified and in the case of a Broken
Amount will be payable on the particular Interest Payment Date(s) specified in the
relevant Final Terms.3.2
    
    Interest on Floating Rate Instruments and Index Linked Interest Instruments
 3.2.1
    
    Interest Payment DatesEach Floating Rate Instrument and Index Linked Interest Instrument bears interest
on its outstanding nominal amount from the Interest Commencement Date at the rate
per annum (expressed as a percentage) equal to the Rate of Interest, such interest
being payable in arrear on each Interest Payment Date. The amount of Interest
payable shall be determined in accordance with Condition 3.2.4(f). Such Interest
Payment Date(s) is/are either specified in the relevant Final Terms as Specified
Interest Payment Dates or, if no Specified Interest Payment Date(s) is/are
specified in the relevant Final Terms, Interest Payment Date shall mean each date
which falls the number of months or other period shown on this Instrument as the
Interest Period after the preceding Interest Payment Date or, in the case of the
first Interest Payment Date, after the Interest Commencement Date.3.2.2
    
    Business Day ConventionIf any date which is specified to be subject to adjustment in accordance with a
Business Day Convention would otherwise fall on a day which is not a Business Day,
then, if the Business Day Convention specified is (a) the Floating Rate Convention,
such date shall be postponed to the next day which is a Business Day unless it
would then fall into the next calendar month, in which event (x) such date shall be
brought forward to the immediately preceding Business Day and (y) each subsequent
such date shall be the last Business Day of the month in which such date would have
fallen had it not been subject to adjustment, (b) the Following Business Day
Convention, such date shall be postponed to the next day which is a Business Day,
(c) the Modified
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Following Business Day Convention, such date shall be postponed to the next day
which is a Business Day unless it would then fall into the next calendar month, in
that event such date shall be brought forward to the immediately preceding Business
Day or (d) the Preceding Business Day Convention, such date shall be brought
forward to the immediately preceding Business Day.3.2.3
    
    Rate of Interest for Floating Rate InstrumentsThe Rate of Interest in respect of Floating Rate Instruments for each Interest
Accrual Period shall be determined in the manner specified in the relevant Final
Terms and the provisions below relating to either ISDA Determination or Screen Rate
Determination shall apply, depending upon which is specified on this Instrument.
 (a)
    
    ISDA Determination for Floating Rate Instruments: Where ISDA
Determination is specified in the relevant Final Terms as the manner in which
the Rate of Interest is to be determined, the Rate of Interest for each
Interest Accrual Period shall be determined by the Calculation Agent as a rate
equal to the relevant ISDA Rate. For the purposes of this sub-paragraph (a),
ISDA Rate for an Interest Accrual Period means a rate equal to the Floating
Rate which would be determined by the Calculation Agent under a Swap
Transaction under the terms of an agreement incorporating the ISDA Definitions
and under which:
 (i)
    
    the Floating Rate Option is as specified in the
relevant Final Terms;(ii)
    
    the Designated Maturity is a period specified in
the relevant Final Terms; and(iii)
    
    the relevant Reset Date is the first day of that
Interest Accrual Period unless otherwise specified in the relevant Final
Terms.
 For the purposes of this sub-paragraph (a), Floating Rate, Calculation
Agent, Floating Rate Option, Designated Maturity, Reset Date and Swap
Transaction have the meanings given to those terms in the ISDA Definitions.(b)
    
    Screen Rate Determination for Floating Rate Instruments:
 (i)
    
    Where Screen Rate Determination is specified in
the relevant Final Terms as the manner in which the Rate of Interest is
to be determined, the Rate of Interest for each Interest Accrual Period
will, subject as provided below, be either:
 (x)
    
    the offered quotation; or(y)
    
    the arithmetic mean of the offered
quotations,
 (expressed as a percentage rate per annum) for the Reference Rate
which appears or appear, as the case may be, on the Relevant Screen
Page as at either 11.00 a.m. (London time in the case of LIBOR or
Brussels time in the case of EURIBOR) on the Interest Determination
Date in question as determined by the Calculation Agent. If five or
more of such offered quotations are available on the Relevant Screen
Page, the highest (or, if there is more than one such highest
quotation, one only of such quotations) and the lowest (or, if there
is more than one such lowest
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quotation, one only of such quotations) shall be disregarded by the
Calculation Agent for the purpose of determining the arithmetic mean
of such offered quotations.If the Reference Rate from time to time in respect of Floating Rate
Instruments is specified hereon as being other than LIBOR or EURIBOR,
the Rate of Interest in respect of such Instruments will be determined
as provided hereon.(ii)
    
    if the Relevant Screen Page is not available or
if, sub-paragraph (i)(x) applies and no such offered quotation appears
on the Relevant Screen Page or if sub-paragraph (i)(y) above applies and
fewer than three such offered quotations appear on the Relevant Screen
Page in each case as at the time specified above, subject as provided
below, the Calculation Agent shall request, if the Reference Rate is
LIBOR, the principal London office of each of the Reference Banks or, if
the Reference Rate is EURIBOR, the principal Euro-zone office of each of
the Reference Banks, to provide the Calculation Agent with its offered
quotation (expressed as a percentage rate per annum) for the Reference
Rate if the Reference Rate is LIBOR, at approximately 11.00 a.m. (London
time), or if the Reference Rate is EURIBOR, at approximately 11.00 a.m.
(Brussels time) on the Interest Determination Date in question. If two
or more of the Reference Banks provide the Calculation Agent with such
offered quotations, the Rate of Interest for such Interest Period shall
be the arithmetic mean of such offered quotations as determined by the
Calculation Agent; and(iii)
    
    if paragraph (ii) above applies and the
Calculation Agent determines that fewer than two Reference Banks are
providing offered quotations, subject as provided below, the Rate of
Interest shall be the arithmetic mean of the rates per annum (expressed
as a percentage) as communicated to (and at the request of) the
Calculation Agent by the Reference Banks or any two or more of them, at
which such banks were offered, if the Reference Rate is LIBOR, at
approximately 11.00 a.m. (London time) or, if the Reference Rate is
EURIBOR, at approximately 11.00 a.m. (Brussels time) on the relevant
Interest Determination Date, deposits in the Specified Currency for a
period equal to that which would have been used for the Reference Rate
by leading banks in, if the Reference Rate is LIBOR, the London
inter-bank market or, if the Reference Rate is EURIBOR, the Euro-zone
inter-bank market, as the case may be, or, if fewer than two of the
Reference Banks provide the Calculation Agent with such offered rates,
the offered rate for deposits in the Specified Currency for a period
equal to that which would have been used for the Reference Rate, or the
arithmetic mean of the offered rates for deposits in the Specified
Currency for a period equal to that which would have been used for the
Reference Rate, at which, if the Reference Rate is LIBOR, at
approximately 11.00 a.m. (London time) or, if the Reference Rate is
EURIBOR, at approximately 11.00 a.m. (Brussels time), on the relevant
Interest Determination Date, any one or more banks (which bank or banks
is or are in the opinion of the Trustee and the Issuer suitable for such
purpose) informs the Calculation Agent it is quoting to leading banks
in, if the
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Reference Rate is LIBOR, the London inter-bank market or, if the
Reference Rate is EURIBOR, the Euro-zone inter-bank market, as the
case may be, provided that, if the Rate of Interest cannot be
determined in accordance with the foregoing provisions of this
paragraph, the Rate of Interest shall be determined as at the last
preceding Interest Determination Date (though substituting, where a
different Margin or Maximum or Minimum Rate of Interest is to be
applied to the relevant Interest Accrual Period from that which
applied to the last preceding Interest Accrual Period, the Margin or
Maximum or Minimum Rate of Interest relating to the relevant Interest
Accrual Period, in place of the Margin or Maximum or Minimum Rate of
Interest relating to that last preceding Interest Accrual Period).
 3.2.4
    
    Rate of Interest for Index Linked Interest InstrumentsThe Rate of Interest in respect of Index Linked Interest Instruments for each
Interest Accrual Period shall be determined in the manner specified in the relevant
Final Terms and interest will accrue by reference to an Index or Formula as
specified in the relevant Final Terms.
 (a)
    
    Zero Coupon InstrumentsWhere an Instrument, the Interest Basis of which is specified to be Zero
Coupon, is repayable prior to the Maturity Date and is not paid when due, the
amount due and payable prior to the Maturity Date shall be the Early
Redemption Amount of such Instrument. As from the Maturity Date, the Rate of
Interest for any overdue principal of such an Instrument shall be a rate per
annum (expressed as a percentage) equal to the Amortisation Yield (as defined
in Condition 5.4.1(b)).(b)
    
    Dual Currency InstrumentsIn the case of Dual Currency Instruments, if the rate or amount of interest
falls to be determined by reference to a Rate of Exchange or a method of
calculating a Rate of Exchange, the rate or amount of interest payable shall
be determined in the manner specified in the relevant Final Terms.(c)
    
    Partly Paid InstrumentsIn the case of Partly Paid Instruments (other than Partly Paid Instruments
which are Zero Coupon Instruments), interest will accrue as previously stated
on the paid-up nominal amount of such Instruments and otherwise as specified
in the relevant Final Terms.(d)
    
    Accrual of InterestInterest shall cease to accrue on each Instrument on the due date for
redemption unless, upon due presentation, payment is improperly withheld or
refused, in which event interest shall continue to accrue (as well after as
before judgment) at the Rate of Interest in the manner provided in this
Condition 3 to the Relevant Date (as defined in Condition 7).
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(e)
    
    Margin, Maximum/Minimum Rates of Interest, Instalment Amounts
and Redemption Amounts and Rounding
 (i)
    
    If any Margin is specified in the relevant Final
Terms (either (x) generally, or (y) in relation to one or more Interest
Accrual Periods), an adjustment shall be made to all Rates of Interest,
in the case of (x), or the Rates of Interest for the specified Interest
Accrual Periods, in the case of (y), calculated in accordance with
Condition 3.2.3(b) above, by adding (if a positive number) or
subtracting (if a negative number) the absolute value of such Margin,
subject always to the next paragraph.(ii)
    
    If any Maximum or Minimum Rate of Interest,
Instalment Amount or Redemption Amount is specified in the relevant
Final Terms, then any Rate of Interest, Instalment Amount or Redemption
Amount shall be subject to such maximum or minimum, as the case may be.(iii)
    
    For the purposes of any calculations required
pursuant to these Conditions (unless otherwise specified), (x) all
percentages resulting from such calculations shall be rounded, if
necessary, to the nearest one hundred thousandth of a percentage point
(with halves being rounded up), (y) all figures shall be rounded to
seven significant figures (with halves being rounded up) and (z) all
currency amounts that fall due and payable shall be rounded to the
nearest unit of such currency (with halves being rounded up), save in
the case of yen, which shall be rounded down to the nearest yen. For
these purposes unit means the lowest amount of such currency which is
available as legal tender in the country of such currency.
 (f)
    
    CalculationsThe amount of interest payable per Calculation Amount in respect of any
Instrument for any Interest Accrual Period shall be equal to the product of
the Rate of Interest, the Calculation Amount as specified in the relevant
Final Terms, and the Day Count Fraction for such Interest Accrual Period,
unless an Interest Amount (or a formula for its calculation) is applicable to
such Interest Accrual Period, in which case the amount of interest payable
per Calculation Amount in respect of such Instrument for such Interest
Accrual Period shall equal such Interest Amount (or be calculated in
accordance with such formula). Where any Interest Period comprises two or
more Interest Accrual Periods, the amount of interest payable per Calculation
Amount in respect of such Interest Period shall be the sum of the Interest
Amounts payable in respect of each of those Interest Accrual Periods. In
respect of any other period for which interest is required to be calculated,
the provisions above shall apply save that the Day Count Fraction shall be
for the period for which interest is required to be calculated.(g)
    
    Determination and Publication of Rates of Interest, Interest
Amounts, Final Redemption Amounts, Early Redemption Amounts, Optional
Redemption Amounts and Instalment AmountsThe Calculation Agent shall as soon as practicable on each Interest
Determination Date or such other time on such date as the Calculation Agent
may be required to calculate any rate or amount, obtain any quotation or make
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any determination or calculation, determine such rate and calculate the
Interest Amounts for the relevant Interest Accrual Period, calculate the
Redemption Amount or Instalment Amount, obtain such quote or make such
determination or calculation, as the case may be, and cause the Rate of
Interest and the Interest Amounts for each Interest Accrual Period and the
relevant Interest Payment Date and, if required to be calculated, the Final
Redemption Amount, Early Redemption Amount, Optional Redemption Amount or any
Instalment Amount to be notified to the Trustee, the Issuer, each of the
Paying Agents, the Instrumentholders, any other Calculation Agent appointed
in respect of the Instruments that is to make a further calculation upon
receipt of such information and, if the Instruments are listed on a stock
exchange and the rules of such exchange so require, such exchange as soon as
possible after their determination but in no event later than (i) the
commencement of the relevant Interest Period, if determined prior to such
time, in the case of notification to such exchange of a Rate of Interest and
Interest Amount, or (ii) in all other cases, the fourth Business Day after
such determination. Where any Interest Payment Date or Interest Period Date
is subject to adjustment pursuant to Condition 3.2.3(b)(ii), the Interest
Amounts and the Interest Payment Date so published may subsequently be
amended (or appropriate alternative arrangements made with the consent of the
Trustee by way of adjustment) without notice in the event of an extension or
shortening of the Interest Period. If the Instruments become due and payable
under Condition 9, the accrued interest and the Rate of Interest payable in
respect of the Instruments shall nevertheless continue to be calculated as
previously in accordance with this Condition but no publication of the Rate
of Interest or the Interest Amount so calculated need be made unless the
Trustee otherwise requires. The determination of any rate or amount, the
obtaining of each quotation and the making of each determination or
calculation by the Calculation Agent(s) shall (in the absence of manifest
error) be final and binding upon all parties.(h)
    
    Determination or Calculation by TrusteeIf the Calculation Agent does not at any time for any reason determine or
calculate the Rate of Interest for an Interest Accrual Period or any Interest
Amount, Instalment Amount, Final Redemption Amount, Early Redemption Amount
or Optional Redemption Amount the Trustee shall do so (or shall appoint an
agent on its behalf to do so) and such determination or calculation shall be
deemed to have been made by the Calculation Agent. In doing so, the Trustee
shall apply the preceding provisions of this Condition, with any necessary
consequential amendments, to the extent that, in its opinion, it can do so,
and, in all other respects it shall do so in such manner as it shall deem
fair and reasonable in all the circumstances.
 3.2.5
    
    DefinitionsIn these Conditions, unless the context otherwise requires, the following defined
terms shall have the meanings set out below:Business Day means:
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(a)
    
    in the case of a currency other than Euro, a day (other than
a Saturday or Sunday) on which commercial banks and foreign exchange markets
settle payments in the principal financial centre for such currency; and/or(b)
    
    in the case of Euro, a day on which the TARGET System is
operating (a TARGET Business Day); and/or(c)
    
    in the case of a currency and/or one or more Business Centres
as specified in the relevant Final Terms, a day (other than a Saturday or a
Sunday) on which commercial banks and foreign exchange markets settle payments
in such currency or, if no currency is indicated, generally in each of the
Business Centres.
 Day Count Fraction means, in respect of the calculation of an amount of interest
on any Instrument for any period of time (from and including the first day of such
period to but excluding the last) (whether or not constituting an Interest Period
or Interest Accrual Period, the Calculation Period):
 (a)
    
    if Actual/Actual or Actual/Actual-ISDA is specified in
the relevant Final Terms, the actual number of days in the Calculation Period
divided by 365 (or, if any portion of that Calculation Period falls in a leap
year, the sum of (i) the actual number of days in that portion of the
Calculation Period falling in a leap year divided by 366 and (ii) the actual
number of days in that portion of the Calculation Period falling in a non-leap
year divided by 365);(b)
    
    if Actual/365 (Fixed) is specified in the relevant Final
Terms, the actual number of days in the Calculation Period divided by 365;(c)
    
    if Actual/360 is specified in the relevant Final Terms, the
actual number of days in the Calculation Period divided by 360;(d)
    
    if 30/360, 360/360 or Bond Basis is specified in the
relevant Final Terms, the number of days in the Calculation Period divided by
360 calculated on a formula basis as follows:
 
 where:Y1 is the year, expressed as a number, in which the first day of
the Calculation Period falls;Y2 is the year, expressed as a number, in which the day
immediately following the last day included in the Calculation Period falls;M1 is the calendar month, expressed as a number, in which the
first day of the Calculation Period falls;M2 is the calendar month, expressed as a number, in which the
day immediately following the last day included in the Calculation Period
falls;D1 is the first calendar day, expressed as a number, of the
Calculation Period, unless such number would be 31, in which case
D1 will be 30; and
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D2 is the calendar day, expressed as a number, immediately
following the last day included in the Calculation Period, unless such number
would be 31 and D1 is greater than 29, in which case D2
will be 30;(e)
    
    if 30E/360 or Eurobond Basis is specified in the
relevant Final Terms, the number of days in the Calculation Period divided by
360 calculated on a formula basis as follows:
 
 where:Y1 is the year, expressed as a number, in which the first day of
the Calculation Period falls;Y2 is the year, expressed as a number, in which the day
immediately following the last day included in the Calculation Period falls;M1 is the calendar month, expressed as a number, in which the
first day of the Calculation Period falls;M2 is the calendar month, expressed as a number, in which the
day immediately following the last day included in the Calculation Period
falls;D1 is the first calendar day, expressed as a number, of the
Calculation Period, unless such number would be 31, in which case
D1 will be 30; andD2 is the calendar day, expressed as a number, immediately
following the last day included in the Calculation Period, unless such number
would be 31, in which case D2 will be 30;(f)
    
    if 30E/360 (ISDA) is specified in the relevant Final
Terms, the number of days in the Calculation Period divided by 360, calculated
on a formula basis as follows:
 
 where:Y1 is the year, expressed as a number, in which the first day of
the Calculation Period falls;Y2 is the year, expressed as a number, in which the day
immediately following the last day included in the Calculation Period falls;M1 is the calendar month, expressed as a number, in which the
first day of the Calculation Period falls;M2 is the calendar month, expressed as a number, in which the
day immediately following the last day included in the Calculation Period
falls;
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D1 is the first calendar day, expressed as a number, of the
Calculation Period, unless (i) that day is the last day of February or (ii)
such number would be 31, in which case D1 will be 30; andD2 is the calendar day, expressed as a number, immediately
following the last day included in the Calculation Period, unless (i) that
day is the last day of February but not the Maturity Date or (ii) such number
would be 31, in which case D2 will be 30; and(g)
    
    if Actual/Actual-ICMA is specified in the relevant Final
Terms:
 (i)
    
    if the Calculation Period is equal to or shorter
than the Determination Period during which it falls, the actual number
of days in the Calculation Period divided by the product of (x) the
actual number of days in such Determination Period and (y) the number of
Determination Periods in any year; and(ii)
    
    if the Calculation Period is longer than one
Determination Period, the sum of:
 (1)
    
    the actual number of days in such
Calculation Period falling in the Determination Period in which
it begins divided by the product of (a) the actual number of days
in such Determination Period and (b) the number of Determination
Periods in any year; and(2)
    
    the actual number of days in such
Calculation Period falling in the next Determination Period
divided by the product of (a) the actual number of days in such
Determination Period and (b) the number of Determination Periods
in any year,where:Determination Period means the period from and including a
Determination Date in any year to but excluding the next
Determination Date; andDetermination Date means the date specified as such in the
relevant Final Terms or, if none is so specified, the Interest
Payment Date.
 Euro-zone means the region comprising of member states of the European Union that
adopt the single currency in accordance with the Treaty establishing the European
Community as amended.Interest Accrual Period means the period beginning on (and including) the
Interest Commencement Date and ending on (but excluding) the first Interest Period
Date and each successive period beginning on (and including) an Interest Period
Date and ending on (but excluding) the next succeeding Interest Period Date.Interest Amount means:
 (i)
    
    in respect of an Interest Accrual Period, the amount of
interest payable per Calculation Amount for that Interest Accrual Period and
which, in the case of Fixed Rate Instruments, and unless otherwise specified
in the relevant Final Terms, shall mean the Fixed Coupon Amount or Broken
Amount specified in the
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relevant Final Terms as being payable on the Interest Payment Date ending the
Interest Period of which such Interest Accrual Period forms part; and(ii)
    
    in respect of any other period, the amount of interest
payable per Calculation Amount for that period.
 Interest Commencement Date means the Issue Date or such other date as may be
specified in the relevant Final Terms.Interest Determination Date means, with respect to a Rate of Interest and
Interest Accrual Period, the date specified as such in the relevant Final Terms or,
if none is so specified, (a) the first day of such Interest Accrual Period if the
Specified Currency is Sterling or (b) the day falling two Business Days in London
prior to the first day of such Interest Accrual Period if the Specified Currency is
neither Sterling nor Euro or (c) the day falling two TARGET Business Days prior to
the first day of such Interest Accrual Period if the Specified Currency is Euro.Interest Payment Date means the date or dates specified as such in, or determined
in accordance with the provisions of, the relevant Final Terms and, if a Business
Day Convention is specified in the relevant Final Terms, as the same may be
adjusted in accordance with the relevant Business Day Convention.Interest Period means the period beginning on (and including) the Interest
Commencement Date and ending on (but excluding) the first Interest Payment Date and
each successive period beginning on (and including) an Interest Payment Date and
ending on (but excluding) the next succeeding Interest Payment Date.Interest Period Date means each Interest Payment Date unless otherwise specified
in the relevant Final Terms.ISDA Definitions means the 2006 ISDA Definitions as published by the
International Swaps and Derivatives Association, Inc., unless otherwise specified
in the relevant Final Terms.Rate of Interest means the rate of interest payable from time to time in respect
of this Instrument and that is either specified on, or calculated in accordance
with the provisions of, the relevant Final Terms.Redemption Amount means, as appropriate, the Final Redemption Amount, the Early
Redemption Amount (Tax), the Optional Redemption Amount (Call), the Optional
Redemption Amount (Put), the Early Termination Amount or such other amount in the
nature of a redemption amount as may be specified in, or determined in accordance
with the provisions of the relevant Final Terms.Reference Banks means, in the case of a determination of LIBOR, the principal
London office of four major banks in the London inter-bank market and, in the case
of a determination of EURIBOR, the principal Euro-zone office of four major banks
in the Euro-zone inter-bank market, in each case selected by the Calculation Agent
or as specified in the relevant Final Terms.Reference Rate means the rate specified as such in the relevant Final Terms.Relevant Screen Page means such page, section, caption, column or other part of a
particular information service as may be specified in the relevant Final Terms.
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Specified Currency means the currency specified as such in the relevant Final
Terms or, if none is specified, the currency in which the Instruments are
denominated.TARGET System means the Trans-European Automated Real-Time Gross Settlement
Express Transfer (known as TARGET2) System which was launched on 19 November 2007
or any successor to it.3.2.6
    
    Calculation AgentThe Issuer shall procure that there shall at all times be one or more Calculation
Agents if provision is made for them in the relevant Final Terms and for so long as
any Instrument is outstanding. Where more than one Calculation Agent is appointed
in respect of the Instruments, references in these Conditions to the Calculation
Agent shall be construed as each Calculation Agent performing its respective duties
under these Conditions. If the Calculation Agent is unable or unwilling to act as
such or if the Calculation Agent fails duly to establish the Rate of Interest for
an Interest Period or Interest Accrual Period or to calculate any Interest Amount,
Instalment Amount, Final Redemption Amount, Early Redemption Amount or Optional
Redemption Amount, as the case may be, or to comply with any other requirement, the
Issuer shall (with the prior approval of the Trustee) appoint a leading bank or
investment banking firm engaged in the interbank market (or, if appropriate, money,
swap or over-the-counter index options market) which is most closely connected with
the calculation or determination to be made by the Calculation Agent (acting
through its principal London office or any other office actively involved in such
market) to act as such in its place. The Calculation Agent may not resign its
duties without a successor having been appointed as specified in this paragraph.
 4
    
    IndexationThis Condition 4 is applicable only if the relevant Final Terms specifies the Instruments as
Index Linked Instruments.
 4.1
    
    DefinitionsBase Index Figure means (subject to Condition 4.3(i)) the base index figure as
specified in the relevant Final Terms;Index or Index Figure means, subject as provided in Condition 4.3(i), the U.K. Retail
Price Index (RPI) (for all items) published by the Office for National Statistics
(January 1987 = 100) or any comparable index which may replace the U.K. Retail Price
Index for the purpose of calculating the amount payable on repayment of the Reference
Gilt. Any reference to the Index Figure which is specified in the relevant Final Terms
as:
 (i)
    
    applicable to a particular month, shall, subject as provided in
Conditions 4.3 and 4.5, be construed as a reference to the Index Figure published in
the seventh month prior to that particular month and relating to the month before
that of publication; or(ii)
    
    applicable to the first calendar day of any month shall, subject as
provided in Conditions 4.3 and 4.5, be construed as a reference to the Index Figure
published in the second month prior to that particular month and relating to the
month before that of publication; or(iii)
    
    applicable to any other day in any month shall, subject as provided in
Conditions 4.3 and 4.5, be calculated by linear interpolation between (x) the Index
Figure applicable to
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the first calendar day of the month in which the day falls, calculated as specified
in sub-paragraph (ii) above and (y) the Index Figure applicable to the first
calendar day of the month following, calculated as specified in sub-paragraph (ii)
above and rounded to the nearest fifth decimal place.
 If the Index is replaced, the Issuer will describe the replacement Index in a supplement
to the Prospectus;Index Ratio applicable to any month or date, as the case may be, means the Index Figure
applicable to such month or date, as the case may be, divided by the Base Index Figure
and rounded to the nearest fifth decimal place;Limited Index Ratio means (a) in respect of any month or date, as the case may be,
prior to the relevant Issue Date, the Index Ratio for that month or date, as the case may
be, (b) in respect of any Limited Indexation Date after the relevant Issue Date, the
product of the Limited Indexation Factor for that month or date, as the case may be, and
the Limited Index Ratio as previously calculated in respect of the month or date, as the
case may be, twelve months prior thereto; and (c) in respect of any other month, the
Limited Index Ratio as previously calculated in respect of the most recent Limited
Indexation Month;Limited Indexation Date means any date falling during the period specified in the
relevant Final Terms for which a Limited Indexation Factor is to be calculated;Limited Indexation Factor means, in respect of a Limited Indexation Month or Limited
Indexation Date, as the case may be, the ratio of the Index Figure applicable to that
month or date, as the case may be, divided by the Index Figure applicable to the month or
date, as the case may be, twelve months prior thereto, provided that (a) if such ratio is
greater than the Maximum Indexation Factor specified in the relevant Final Terms, it
shall be deemed to be equal to such Maximum Indexation Factor and (b) if such ratio is
less than the Minimum Indexation Factor specified in the relevant Final Terms, it shall
be deemed to be equal to such Minimum Indexation Factor;Limited Indexation Month means any month specified in the relevant Final Terms for
which a Limited Indexation Factor is to be calculated;Limited Index Linked Instruments means Index Linked Instruments to which a Maximum
Indexation Factor and/or a Minimum Indexation Factor (as specified in the relevant Final
Terms) applies; andReference Gilt means the Treasury Stock specified as such in the relevant Final Terms
for so long as such stock is in issue, and thereafter such issue of index-linked Treasury
Stock determined to be appropriate by a gilt-edged market maker or other adviser selected
by the Issuer (an Indexation Adviser).4.2
    
    Application of the Index RatioEach payment of interest and principal in respect of the Instruments shall be the
amount provided in, or determined in accordance with, these Conditions, multiplied by the
Index Ratio or Limited Index Ratio in the case of Limited Index Linked Instruments
applicable to the month or date, as the case may be, on which such payment falls to be
made and rounded in accordance with Condition 3.2.4(e).4.3
    
    Changes in Circumstances Affecting the Index
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(i)
    
    Change in base: If at any time and from time to time the Index is changed by the
substitution of a new base therefor, then with effect from the month from and including
that in which such substitution takes effect or the first date from and including
that on which such substitution takes effect, as the case may be, (1) the definition
of Index and Index Figure in Condition 4.1 shall be deemed to refer to the new
date or month in substitution for January 1987 (or, as the case may be, to such
other date or month as may have been substituted therefor), and (2) the new Base
Index Figure shall be the product of the existing Base Index Figure and the Index
Figure for the date on which such substitution takes effect, divided by the Index
Figure for the date immediately preceding the date on which such substitution takes
effect.(ii)
    
    Delay in publication of Index if sub-paragraph (i) of the definition of
Index Figure is applicable: If the Index Figure which is normally published in the
seventh month and which relates to the eighth month (the relevant month) before
the month in which a payment is due to be made is not published on or before the
fourteenth business day before the date on which such payment is due (the date for
payment), the Index Figure applicable to the month in which the date for payment
falls shall be (1) such substitute index figure (if any) as the Trustee considers
(acting solely on the advice of the Indexation Adviser) to have been published by
the United Kingdom Debt Management Office or the Bank of England, as the case may
be, for the purposes of indexation of payments on the Reference Gilt or, failing
such publication, on any one or more issues of index-linked Treasury Stock selected
by an Indexation Adviser (and approved by the Trustee (acting solely on the advice
of the Indexation Adviser)) or (2) if no such determination is made by such
Indexation Adviser within seven days, the Index Figure last published (or, if later,
the substitute index figure last determined pursuant to Condition 4.3(i)) before the
date for payment.(iii)
    
    Delay in publication of Index if sub-paragraph (ii) and/or (iii) of the
definition of Index Figure is applicable: If the Index Figure relating to any month
(the calculation month) which is required to be taken into account for the
purposes of the determination of the Index Figure for any date is not published on
or before the fourteenth business day before the date on which such payment is due
(the date for payment), the Index Figure applicable for the relevant calculation
month shall be (1) such substitute index figure (if any) as the Trustee considers
(acting solely on the advice of the Indexation Adviser) to have been published by
the United Kingdom Debt Management Office or the Bank of England, as the case may
be, for the purposes of indexation of payments on the Reference Gilt or, failing
such publication, on any one or more issues of index-linked Treasury Stock selected
by an Indexation Adviser (and approved by the Trustee (acting solely on the advice
of the Indexation Adviser)) or (2) if no such determination is made by such
Indexation Adviser within seven days, the Index Figure last published (or, if later,
the substitute index figure last determined pursuant to Condition 4.3(i)) before the
date for payment.
 4.4
    
    Application of ChangesWhere the provisions of Condition 4.3(ii) or Condition 4.3(iii) apply, the
determination of the Indexation Adviser as to the Index Figure applicable to the month in
which the date for payment falls or the date for payment, as the case may be, shall be
conclusive and binding. If, an Index Figure having been applied pursuant to Condition
4.3(ii)(2) or Condition 4.3(iii)(2),
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the Index Figure relating to the relevant month or relevant calculation month, as the
case may be, is subsequently published while an Instrument is still outstanding, then:
 (i)
    
    in relation to a payment of principal or interest in respect of such
Instrument other than upon final redemption of such Instrument, the principal or
interest (as the case may be) next payable after the date of such subsequent
publication shall be increased or reduced, as the case may be, by an amount equal to
the shortfall or excess, as the case may be, of the amount of the relevant payment
made on the basis of the Index Figure applicable by virtue of Condition 4.3(ii)(2)
or Condition 4.3(iii)(2) below or above the amount of the relevant payment that
would have been due if the Index Figure subsequently published had been published on
or before the fourteenth business day before the date for payment; and(ii)
    
    in relation to a payment of principal or interest upon final redemption,
no subsequent adjustment to amounts paid will be made.
 4.5
    
    Cessation of or Fundamental Changes to the Index
 (i)
    
    If (1) the Trustee has been notified by the Calculation Agent that the Index has
ceased to be published or (2) any change is made to the coverage or the basic
calculation of the Index which constitutes a fundamental change which would, in the
opinion of (A) the Issuer be materially prejudicial to the interests of the Issuer,
or (B) the Trustee (acting solely on the advice of the Indexation Adviser), be
materially prejudicial to the interests of the Instrumentholders, the Trustee will
give written notice of such occurrence to the Issuer in the case of (B), and the
Issuer and the Trustee (acting solely on the advice of the Indexation Adviser)
together shall seek to agree for the purpose of the Instruments one or more
adjustments to the Index or a substitute index (with or without adjustments) with
the intention that the same should leave the Issuer and the Instrumentholders in no
better and no worse position than they would have been had the Index not ceased to
be published or the relevant fundamental change not been made.(ii)
    
    If the Issuer and the Trustee (acting solely on the advice of the
Indexation Adviser) fail to reach agreement as mentioned above within 20 business
days following the giving of notice as mentioned in paragraph (i), a bank or other
person in London shall be appointed by the Issuer and the Trustee or, failing
agreement on and the making of such appointment within 20 business days following
the expiry of the 20 day period referred to above, by the Trustee (acting solely on
the advice of the Indexation Adviser) (in each case, such bank or other person so
appointed being referred to as the Expert), to determine for the purpose of the
Instruments one or more adjustments to the Index or a substitute index (with or
without adjustments) with the intention that the same should leave the Issuer and
the Instrumentholders in no better and no worse position than they would have been
had the Index not ceased to be published or the relevant fundamental change not been
made. Any Expert so appointed shall act as an expert and not as an arbitrator and
all fees, costs and expenses of the Expert and of any Indexation Adviser and of any
of the Issuer and the Trustee in connection with such appointment shall be borne by
the Issuer.(iii)
    
    The Index shall be adjusted or replaced by a substitute index as agreed
by the Issuer and the Trustee (acting solely on the advice of the Indexation
Adviser) or as determined by the Expert pursuant to the foregoing paragraphs, as the
case may be,
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and references in these Conditions to the Index and to any Index Figure shall be
deemed amended in such manner as the Trustee (acting solely on the advice of the
Indexation Adviser) and the Issuer agree are appropriate to give effect to such
adjustment or replacement. Such amendments shall be effective from the date of such
notification and binding upon the Issuer, the Trustee and the Instrumentholders,
and the Issuer shall give notice to the Instrumentholders in accordance with
Condition 14 of such amendments as promptly as practicable following such
notification.
 4.6
    
    Redemption for Index ReasonsIf either (i) the Index Figure for three consecutive months is required to be
determined on the basis of an Index Figure previously published as provided in Condition
4.3(ii)(2) and the Trustee has been notified by the Calculation Agent that publication of
the Index has ceased or (ii) notice is published by Her Majestys Treasury, or on its
behalf, following a change in relation to the Index, offering a right of redemption to
the holders of the Reference Gilt, and (in either case) no amendment or substitution of
the Index shall have been advised by the Indexation Adviser to the Issuer and such
circumstances are continuing, the Issuer may, upon giving not more than 60 nor less than
30 days notice to the Instrumentholders in accordance with Condition 14, redeem all, but
not some only, of the Instruments at their principal amount together with interest
accrued but unpaid up to and including the date of redemption (in each case adjusted in
accordance with Condition 4.2).
  4.7
    
    DefinitionsBase Index Level means the base index level as specified in the relevant Final
Terms;Index or Index Level means (subject as provided in Condition 4.9) the Non-revised
Index of Consumer Prices excluding tobacco or relevant Successor Index (as defined in
Condition 4.9 (i)), measuring the rate of inflation in the European Monetary Union
excluding tobacco, expressed as an index and published by Eurostat (the HICP). The
first publication or announcement of a level of such index for a calculation month (as
defined in Condition 4.9 (i)) shall be final and conclusive and later revisions to the
level for such calculation month will not be used in any calculations. Any reference to
the Index Level which is specified in these Conditions as applicable to any day (d) in
any month (m) shall, subject as provided in Condition 4.9, be calculated as follows:(EQUATION)where:Id is the Index Level for the day dHICPm-2 is the level of HICP for month m-2HICPm-3 is the level of HICP for month m-3nbdis the actual number of days from and excluding the first day of month m to but
including day d; andqm is the actual number of days in month m,
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provided that if Condition 4.9 applies, the Index Level shall be the Substitute Index
Level determined in accordance with such Condition.If the Index is replaced, the Issuer will describe the replacement Index in a supplement
to the Prospectus;Index Business Day means a day on which the TARGET System is operating;Index Determination Date means in respect of any date for which the Index Level is
required to be determined, the fifth Index Business Day prior to such date;Index Ratio applicable to any date means the Index Level applicable to the relevant
Index Determination Date divided by the Base Index Level and rounded to the nearest fifth
decimal place, 0.000005 being rounded upwards;Related Instrument means an inflation-linked bond selected by the Calculation Agent
that is a debt obligation of one of the governments (but not any government agency) of
France, Italy, Germany or Spain and which pays a coupon or redemption amount which is
calculated by reference to the level of inflation in the European Monetary Union with a
maturity date which falls on (a) the same day as the Maturity Date, (b) the next longest
maturity date after the Maturity Date if there is no such bond maturing on the Maturity
Date, or (c) the next shortest maturity before the Maturity Date if no bond defined in
(a) or (b) is selected by the Calculation Agent. The Calculation Agent will select the
Related Instrument from such of those inflation-linked bonds issued on or before the
relevant Issue Date and, if there is more than one such inflation-linked bond maturing on
the same date, the Related Instrument shall be selected by the Calculation Agent from
such of those bonds. If the Related Instrument is redeemed the Calculation Agent will
select a new Related Instrument on the same basis, but selected from all eligible bonds
in issue at the time the originally selected Related Instrument is redeemed (including
any bond for which the redeemed originally selected Related Instrument is exchanged).4.8
    
    Application of the Index RatioEach payment of interest and principal in respect of the Instruments shall be the
amount provided in, or determined in accordance with, these Conditions, multiplied by the
Index Ratio applicable to the date on which such payment falls to be made and rounded in
accordance with Condition 3.2.4(e).4.9
    
    Changes in Circumstances Affecting the Index
 (i)
    
    Delay in publication of Index
 (a)
    
    If the Index Level relating to any month (the calculation
month) which is required to be taken into account for the purposes of the
determination of the Index Level for any date (the Relevant Level) has not
been published or announced by the day that is five Business Days before the
date on which such payment is due (the Affected Payment Date), the
Calculation Agent shall determine a Substitute Index Level (as defined below)
(in place of such Relevant Level) by using the following methodology:
 (1)
    
    if applicable, the Calculation Agent will take
the same action to determine the Substitute Index Level for the
Affected Payment Date as that taken by the calculation agent (or any
other party performing the function of a
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calculation agent (whatever such partys title)) pursuant to the terms
and conditions of the Related Instrument;
 (2)
    
    if (1) above does not result in a Substitute
Index Level for the Affected Payment Date for any reason, then the
Calculation Agent shall determine the Substitute Index Level as
follows:Substitute Index Level = Base Level x (Latest Level / Reference Level)Where:Base Level means the level of the Index (excluding any flash
estimates) published or announced by Eurostat (or any successor entity
which publishes such index) in respect of the month which is 12
calendar months prior to the month for which the Substitute Index
Level is being determined;Latest Level means the latest level of the Index (excluding any
flash estimates) published or announced by Eurostat (or any successor
entity which publishes such index) prior to the month in respect of
which the Substitute Index Level is being calculated; andReference Level means the level of the Index (excluding any flash
estimates) published or announced by Eurostat (or any successor entity
which publishes such index) in respect of the month that is 12
calendar months prior to the month referred to in Latest Level
above.
 (b)
    
    If a Relevant Level is published or announced at any time
after the day that is five Business Days prior to the next Interest Payment
Date, such Relevant Level will not be used in any calculations. The Substitute
Index Level so determined pursuant to this Condition 4.9(i) will be the
definitive level for that calculation month.
 (ii)
    
    Cessation of publication: If the Index Level has not been published or
announced for two consecutive months or Eurostat announces that it will no longer
continue to publish or announce the Index then the Calculation Agent shall determine
a successor index in lieu of any previously applicable Index (the Successor Index)
by using the following methodology:
 (a)
    
    if at any time (other than after an Early Termination Event
(as defined below) has been designated by the Calculation Agent pursuant to
paragraph (e) below) a successor index has been designated by the calculation
agent (or any other party performing the function of a calculation agent
(whatever such partys title)) pursuant to the terms and conditions of the
Related Instrument, such successor index shall be designated the Successor
Index for the purposes of all subsequent Interest Payment Dates,
notwithstanding that any other Successor Index may previously have been
determined under paragraphs (b), (c) or (d) below; or(b)
    
    if a Successor Index has not been determined under paragraph
(a) above (and there has been no designation of an Early Termination Event
pursuant to paragraph (e) below), and a notice has been given or an
announcement has been made by Eurostat (or any successor entity which
publishes such index)
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specifying that the Index will be superseded by a replacement index specified
by Eurostat (or any such successor), and the Calculation Agent determines
that such replacement index is calculated using the same or substantially
similar formula or method of calculation as used in the calculation of the
previously applicable Index, such replacement index shall be the Index from
the date that such replacement index comes into effect; or(c)
    
    if a Successor Index has not been determined under paragraphs
(a) or (b) above (and there has been no designation of an Early Termination
Event pursuant to paragraph (e) below), the Calculation Agent shall ask five
leading independent dealers to state what the replacement index for the Index
should be. If between four and five responses are received, and of those four
or five responses, three or more leading independent dealers state the same
index, this index will be deemed the Successor Index. If three responses are
received, and two or more leading independent dealers state the same index,
this index will be deemed the Successor Index. If fewer than three responses
are received, the Calculation Agent will proceed to paragraph (d) below;(d)
    
    if no Successor Index has been determined under paragraphs
(a), (b) or (c) above on or before the fifth Index Business Day prior to the
next Affected Payment Date the Calculation Agent will determine an appropriate
alternative index for such Affected Payment Date, and such index will be
deemed the Successor Index;(e)
    
    if the Calculation Agent determines that there is no
appropriate alternative index, the Issuer and the Instrumentholders shall, in
conjunction with the Calculation Agent, determine an appropriate alternative
index. If the Issuer and the Instrumentholders, in conjunction with the
Calculation Agent, do not reach agreement on an appropriate alternative index
within a period of ten Business Days, then an Early Termination Event will be
deemed to have occurred and the Issuer will redeem the Instruments pursuant to
Condition 4.10.
 (iii)
    
    Rebasing of the Index: If the Calculation Agent determines that the
Index has been or will be rebased at any time, the Index as so rebased (the Rebased
Index) will be used for the purposes of determining each relevant Index Level from
the date of such rebasing; provided, however, that the Calculation Agent shall make
such adjustments as are made by the calculation agent (or any other party performing
the function of a calculation agent (whatever such partys title)) pursuant to the
terms and conditions of the Related Instrument to the levels of the Rebased Index so
that the Rebased Index levels reflect the same rate of inflation as the Index before
it was rebased. Any such rebasing shall not affect any prior payments made.(iv)
    
    Material Modification Prior to Interest Payment Date: If, on or prior to
the day that is five Business Days before an Interest Payment Date, Eurostat
announces that it will make a material change to the Index then the Calculation
Agent shall make any such adjustments to the Index consistent with adjustments made
to the Related Instrument.(v)
    
    Manifest Error in Publication: If, within thirty days of publication, the
Calculation Agent determines that Eurostat (or any successor entity which publishes
such index) has corrected the level of the Index to remedy a manifest error in its
original publication, the Calculation Agent will notify the parties of (A) that
correction, (B) the amount that is
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payable as a result of that correction and (C) take such other action as it may
deem necessary to give effect to such correction.
 4.10
    
    Redemption for Index ReasonsIf an Early Termination Event as described under Condition 4.9(ii)(e) is deemed to have
occurred, the Issuer will, upon giving not more than 60 nor less than 30 days notice to
the Instrumentholders in accordance with Condition 14, redeem all, but not some only, of
the Instruments at their principal amount together with interest accrued but unpaid up to
and including the date of redemption (in each case adjusted in accordance with Condition
4.8).
 5
    
    Redemption, Purchase and Options
 5.1
    
    Final RedemptionUnless previously redeemed, purchased and cancelled as provided below, this
Instrument will be redeemed at its Final Redemption Amount (which, unless otherwise
provided, is its nominal amount) on the Maturity Date specified in the relevant Final
Terms provided, however, that if this Instrument is a Perpetual Instrument it will only
be redeemable and repayable in accordance with the following provisions of this Condition
5.5.2
    
    Redemption for Taxation ReasonsIf, on the occasion of the next payment in respect of the Instruments the Issuer
satisfies the Trustee immediately before the giving of the notice referred to below that
it would be unable to make such payment without having to pay additional amounts as
described in Condition 7, and such requirement to pay such additional amounts arises by
reason of a change in the laws of the United Kingdom or any political sub-division of the
United Kingdom or taxing authority in the United Kingdom or any political sub-division of
the United Kingdom or in the interpretation or application of the laws of the United
Kingdom or any political sub-division of the United Kingdom or in any applicable double
taxation treaty or convention, which change becomes effective on or after the date on
which agreement is reached to issue the first Tranche of the Instruments, and such
requirement cannot be avoided by the Issuer taking reasonable measures (such measures not
involving any material additional payments by, or expense for, the Issuer), the Issuer
may, at its option, at any time, having given not less than 30 nor more than 45 days
notice to the Instrumentholders in accordance with Condition 14, redeem all, but not some
only, of the Instruments at their Early Redemption Amount together with interest accrued
to the date of redemption provided that the date fixed for redemption shall not be
earlier than 90 days prior to the earliest date on which the Issuer would be obliged to
pay such additional amounts or make such withholding or deduction, as the case may be,
were a payment in respect of the Instruments then due. Prior to the publication of any
notice of redemption pursuant to this Condition 5.2, the Issuer shall deliver to the
Trustee a certificate signed by two Directors of the Issuer stating that the requirement
referred to above cannot be avoided by the Issuer taking reasonable measures available to
it and the Trustee shall be entitled to accept such certificate as sufficient evidence of
the satisfaction of the condition precedent set out above in which event it shall be
conclusive and binding on Instrumentholders and Couponholders.
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5.3
    
    PurchasesThe Issuer and any of its subsidiary undertakings may at any time purchase
Instruments (provided that all unmatured Receipts and Coupons and unexchanged Talons
appertaining to them are attached or surrendered with them) in the open market or
otherwise at any price.5.4
    
    Early Redemption
 5.4.1
    
    Zero Coupon Instruments
 (a)
    
    The Early Redemption Amount payable in respect of any Zero
Coupon Instrument, the Early Redemption Amount of which is not linked to an
index and/or a formula, upon redemption of such Instrument pursuant to
Condition 5.2 or upon it becoming due and payable as provided in Condition 9
shall be the Amortised Face Amount (calculated as provided below) of such
Instrument unless otherwise specified in the relevant Final Terms.(b)
    
    Subject to the provisions of sub-paragraph (c) below, the
Amortised Face Amount of any such Instrument shall be the scheduled Final
Redemption Amount of such Instrument on the Maturity Date discounted at a rate
per annum (expressed as a percentage) equal to the Amortisation Yield (which,
if none is specified in the relevant Final Terms, shall be such rate as would
produce an Amortised Face Amount equal to the issue price of the Instruments
if they were discounted back to their issue price on the Issue Date)
compounded annually.(c)
    
    If the Early Redemption Amount payable in respect of any such
Instrument upon its redemption pursuant to Condition 5.2 or, if applicable,
Condition 5.5 or 5.6 or upon it becoming due and payable as provided in
Condition 9, is not paid when due, the Early Redemption Amount due and payable
in respect of such Instrument shall be the Amortised Face Amount of such
Instrument as defined in sub-paragraph (b) above, except that such
sub-paragraph shall have effect as though the reference in that sub-paragraph
to the date on which the Instrument becomes due and payable was replaced by a
reference to the Relevant Date as defined in Condition 7. The calculation of
the Amortised Face Amount in accordance with this sub-paragraph shall continue
to be made (both before and after judgment) until the Relevant Date, unless
the Relevant Date falls on or after the Maturity Date, in which case the
amount due and payable shall be the scheduled Final Redemption Amount of such
Instrument on the Maturity Date together with any interest that may accrue in
accordance with Condition 3.2.
 Where such calculation is to be made for a period of less than one year, it shall
be made on the basis of the Day Count Fraction specified in the relevant Final
Terms.5.4.2
    
    Other InstrumentsThe Early Redemption Amount payable in respect of any Instrument (other than
Instruments described in Condition 5.4.1), upon redemption of such Instrument
pursuant to this Condition 5.4 or upon it becoming due and payable as provided in
Condition 9, shall be the Final Redemption Amount unless otherwise specified in the
relevant Final Terms.
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5.5
    
    Redemption at the Option of the Issuer and Exercise of Issuers Options
 5.5.1
    
    If (i) Residual Holding Call Option is specified in the relevant Final
Terms, and (ii) if at any time the Residual Holding Percentage or more of the
aggregate nominal amount of Instruments originally issued shall have been redeemed
or purchased and cancelled, the Issuer shall have the option to redeem such
outstanding Instruments in whole, but not in part, at their Residual Holding
Redemption Amount. Unless otherwise specified in the relevant Final Terms, the
Residual Holding Redemption Amount will be calculated by the Calculation Agent by
discounting the outstanding nominal amount of the Instruments and the remaining
interest payments (if applicable) to the Maturity Date by a rate per annum
(expressed as a percentage to the nearest one hundred thousandth of a percentage
point (with halves being rounded up)) equal to the Benchmark Yield, being the yield
on the Benchmark Security at the close of business on the third Business Day prior
to the date fixed for such redemption, plus the Benchmark Spread. Where the
specified calculation is to be made for a period of less than one year, it shall be
calculated using the Benchmark Day Count Fraction. The Issuer will give not less
than 15 nor more than 30 days irrevocable notice to the Instrumentholders and the
Trustee of any such redemption pursuant to this Condition 5.5.1.5.5.2
    
    If Call Option is specified in the relevant Final Terms, the Issuer may,
on giving not less than 15 nor more than 30 days irrevocable notice to the
Instrumentholders (or such other notice period as may be specified in the relevant
Final Terms), redeem, or exercise any Issuers option in relation to, all or, if so
provided, some of such Instruments on any Optional Redemption Date or Option
Exercise Date, as the case may be. Any such redemption of Instruments shall be at
their Optional Redemption Amount together with interest accrued to the date fixed
for redemption. Any such redemption or exercise must relate to Instruments of a
nominal amount at least equal to the minimum nominal amount (if any) permitted to be
redeemed specified hereon and no greater than the maximum nominal amount (if any)
permitted to be redeemed specified on this Instrument.
 All Instruments in respect of which any such notice is given shall be redeemed, or the
Issuers option shall be exercised, on the date specified in such notice in accordance
with this Condition.In the case of a partial redemption or a partial exercise of an Issuers option, the
notice to Instrumentholders shall also contain the serial numbers of the Instruments to
be redeemed, which shall have been drawn in such place as the Trustee may approve and in
such manner as it deems appropriate, subject to compliance with any applicable laws,
listing authority and stock exchange requirements.5.6
    
    Redemption at the Option of Instrumentholders following a Restructuring Event
 5.6.1
    
    *[Redemption of Instruments issued by National Grid at the option of InstrumentholdersIf at any time whilst any of the Instruments issued by National Grid remains
outstanding, there occurs the National Grid Restructuring Event, a Public
 
 *
    
    Only applicable where National Grid is the Issuer. 49




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Announcement shall be made and if, within the National Grid Restructuring Period,
either:
 (a)
    
    (if at the time that the National Grid Restructuring Event
occurs there are Rated Securities) a Rating Downgrade in respect of the
National Grid Restructuring Event occurs; or(b)
    
    (if at the time that the National Grid Restructuring Event
occurs there are no Rated Securities) a Negative Rating Event in respect of
the National Grid Restructuring Event occurs,
 (the National Grid Restructuring Event and Rating Downgrade or the National Grid
Restructuring Event and Negative Rating Event, as the case may be, occurring within
the National Grid Restructuring Period, together called a Put Event),then the holder of each Instrument issued by National Grid will have the option
upon the giving of a Put Notice (as defined in Condition 5.6.4) to require National
Grid to redeem or, at the option of National Grid, purchase (or procure the
purchase of) such Instrument on the Put Date (as defined in Condition 5.6.4) at its
principal amount together with accrued interest to the Put Date.Promptly upon National Grid becoming aware that a Put Event has occurred, National
Grid shall, or at any time upon the Trustee becoming similarly so aware the Trustee
may, and if so requested in writing by the holders of at least one-quarter in
principal amount of the Instruments then outstanding or if so directed by an
Extraordinary Resolution of the Instrumentholders, the Trustee shall, give notice
(a Put Event Notice) to the Instrumentholders in accordance with Condition 14
specifying the nature of the Put Event and the procedure (as set out in Condition
5.6.4) for exercising the option contained in this Condition 5.6.1.National Grid shall, forthwith upon becoming aware of the occurrence of the
National Grid Restructuring Event (a) provide the Trustee with the relevant
Directors Report and (b) provide or procure that the Reporting Accountants provide
the Trustee with the Accountants Report. The Directors Report and the
Accountants Report shall, in the absence of manifest error, be conclusive and
binding on all concerned, including the Trustee and the Instrumentholders. The
Trustee shall be entitled to act, or not act, and rely on without being expected to
verify the accuracy of the same (and shall have no liability to Instrumentholders
for doing so) any Directors Report and/or any Accountants Report (whether or not
addressed to it).5.6.2
    
    For the purposes of this ConditionAccountants Report means a report of the Reporting Accountants stating whether
the amounts included in the calculation of the Operating Profit and the amount for
Consolidated Operating Profit as included in the Directors Report have been
accurately extracted from the accounting records of National Grid and its
Subsidiaries and whether the Disposal Percentage included in the Directors Report
has been correctly calculated which will be prepared pursuant to an engagement
letter to be entered into by the Reporting Accountants, National Grid and the
Trustee.National Grid shall use reasonable endeavours to procure that there shall at the
relevant time be Reporting Accountants who have (a) entered into an engagement
letter with National Grid and the Trustee which shall (i) not limit the liability
of the
 50




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Reporting Accountants to the Trustee by reference to a monetary cap and (ii) be
available for inspection by Instrumentholders at the principal office of the
Trustee or (b) agreed to provide Accountants Reports on such other terms as
National Grid and the Trustee shall approve. If National Grid, having used
reasonable endeavours, is unable to procure that there shall at the relevant time
be Reporting Accountants who have entered into an engagement letter complying with
(i) above, the Trustee may rely on an Accountants Report which contains a limit on
the liability of the Reporting Accountants by reference to a monetary cap or
otherwise.Investors should be aware that the engagement letter may contain a limit on the
liability of the Reporting Accountants which may impact on the interests of
Instrumentholders.National Grid shall give notice to the Trustee of the identity of the Reporting
Accountants;Consolidated Operating Profit means the consolidated operating profit on ordinary
activities before tax and interest and before taking account of depreciation and
amortisation of goodwill and regulatory assets (for the avoidance of doubt,
exceptional items, as reflected in the Relevant Accounts shall not be included) of
National Grid and its subsidiaries (including any share of operating profit of
associates and joint ventures) determined in accordance with International
Financial Reporting Standards (IFRS) by reference to the Relevant Accounts;Directors Report means a report prepared and signed by two directors of National
Grid addressed to the Trustee setting out the Operating Profit, the Consolidated
Operating Profit and the Disposal Percentage and stating any assumptions which the
Directors of National Grid have employed in determining the Operating Profit;Disposal Percentage means, in relation to a sale, transfer, lease or other
disposal or dispossession of any Disposed Assets, the ratio of (a) the aggregate
Operating Profit to (b) the Consolidated Operating Profit, expressed as a
percentage;Disposed Assets means, where National Grid and/or any of its Subsidiaries sells,
transfers, leases or otherwise disposes of or is dispossessed by any means (but
excluding sales, transfers, leases, disposals or dispossessions which, when taken
together with any related lease back or similar arrangements entered into in the
ordinary course of business, have the result that Operating Profit directly
attributable to any such undertaking, property or assets continues to accrue to
National Grid or, as the case may be, such Subsidiary), otherwise than to a
wholly-owned Subsidiary of National Grid or to National Grid, of the whole or any
part (whether by a single transaction or by a number of transactions whether
related or not) of its undertaking or (except in the ordinary course of business of
National Grid or any such Subsidiary) property or assets, the undertaking, property
or assets sold, transferred, leased or otherwise disposed of or of which it is so
dispossessed;Negative Rating Event shall be deemed to have occurred if either (a) National
Grid does not, either prior to or not later than 21 days after the relevant
National Grid Restructuring Event, seek, and thereupon use all reasonable
endeavours to obtain, a rating of the Instruments or any other unsecured and
unsubordinated debt of National Grid having an initial maturity of five years or
more (Rateable Debt) from a Rating Agency or (b) if National Grid does so seek
and use such endeavours, it is unable, as
 51




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a result of such National Grid Restructuring Event, to obtain such a rating of at
least investment grade (BBB- or Baa3 or their respective equivalents for the time
being), provided that a Negative Rating Event shall not be deemed to have occurred
in respect of a particular National Grid Restructuring Event if the Rating Agency
declining to assign a rating of at least investment grade (as described above) does
not announce or publicly confirm that its declining to assign a rating of at least
investment grade was the result, in whole or in part, of any event or circumstance
comprised in or arising as a result of, or in respect of, the applicable National
Grid Restructuring Event (whether or not the National Grid Restructuring Event
shall have occurred at the time such investment grade rating is declined);National Grid Restructuring Event shall be deemed to have occurred at any time
(whether or not approved by the Board of Directors of National Grid) that the sum
of Disposal Percentages for National Grid within any period of 36 months commencing
on or after the issue date of the first Tranche of the Instruments is greater than
50 per cent.;National Grid Restructuring Period means the period ending 90 days after a Public
Announcement (or such longer period in which the Rated Securities or Rateable Debt,
as the case may be, is or are under consideration (announced publicly within the
first mentioned period) for rating review or, as the case may be, rating by a
Rating Agency);Operating Profit, in relation to any Disposed Assets, means the operating profits
on ordinary activities before tax and interest and before taking account of
depreciation and amortisation of goodwill and regulatory assets (for the avoidance
of doubt, exceptional items, as reflected in the Relevant Accounts, shall not be
included) of National Grid and its Subsidiaries directly attributable to such
Disposed Assets as determined in accordance with IFRS by reference to the Relevant
Accounts and, if Relevant Accounts do not yet exist, determined in a manner
consistent with the assumptions upon which the Directors Report is to be based.
Where the Directors of National Grid have employed assumptions in determining the
Operating Profit, those assumptions should be clearly stated in the Directors
Report;Public Announcement means an announcement by National Grid or the Trustee, of the
occurrence of the National Grid Restructuring Event published in a leading national
newspaper having general circulation in the United Kingdom (which is expected to be
the Financial Times);Rated Securities means the Instruments, if and for so long as they shall have an
effective rating from a Rating Agency and otherwise any Rateable Debt which is
rated by a Rating Agency; provided thatif there shall be no such Rateable Debt
outstanding prior to the maturity of the Instruments, the holders of not less than
one-quarter in principal amount of outstanding Instruments may require National
Grid to obtain and thereafter update on an annual basis a rating of the Instruments
from a Rating Agency. In addition, National Grid may at any time obtain and
thereafter update on an annual basis a rating of the Instruments from a Rating
Agency, provided that, except as provided above, National Grid shall not have any
obligation to obtain such a rating of the Instruments;Rating Agency means Standard & Poors Ratings Services, a division of The
McGraw-Hill Companies, Inc. and its successors or Moodys Investors Service, Inc.
 52




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and its successors or any rating agency substituted for either of them (or any
permitted substitute of them) by National Grid from time to time with the prior
written approval of the Trustee;Rating Downgrade shall be deemed to have occurred in respect of the National Grid
Restructuring Event if the then current rating whether provided by a Rating Agency
at the invitation of National Grid or by its own volition assigned to the Rated
Securities by any Rating Agency is withdrawn or reduced from an investment grade
rating (BBB- or Baa3 or their respective equivalents for the time being or better)
to a non-investment grade rating (BB+ or Ba1 or their respective equivalents for
the time being or worse) or, if a Rating Agency shall already have rated the Rated
Securities below investment grade (as described above), the rating is lowered one
full rating category; provided that a Rating Downgrade otherwise arising by virtue
of a particular reduction in rating shall not be deemed to have occurred in respect
of a particular National Grid Restructuring Event if the Rating Agency making the
reduction in rating to which this definition would otherwise apply does not
announce or publicly confirm that the reduction was the result, in whole or part,
of any event or circumstance comprised in or arising as a result of, or in respect
of, the applicable National Grid Restructuring Event (whether or not the applicable
National Grid Restructuring Event shall have occurred at the time of the Rating
Downgrade);Relevant Accounts means the most recent annual audited consolidated financial
accounts of National Grid and its Subsidiaries preceding the relevant sale,
transfer, lease or other disposal or dispossession of any Disposed Asset;Reporting Accountants means the auditors of National Grid (but not acting in
their capacity as auditors) or such other firm of accountants as may be nominated
by National Grid and approved in writing by the Trustee for the purpose or, failing
which, as may be selected by the Trustee for the purpose; andSubsidiary means a subsidiary within the meaning of Section 736 of the Companies
Act 1985 and Subsidiaries shall be construed accordingly.5.6.3
    
    The Trustee shall not be responsible for ascertaining or monitoring
whether or not the National Grid Restructuring Event, a Negative Rating Event or a
Rating Downgrade in relation to National Grid has occurred and, unless and until it
has actual knowledge to the contrary, shall be entitled to assume that no such event
has occurred.5.6.4
    
    To exercise the option of redemption of an Instrument under Condition
5.6.1 the Instrumentholder must deliver each Instrument to be redeemed accompanied
by a duly signed and completed notice of exercise in the form (for the time being
current) obtainable from the specified office of any Paying Agent (a Put Notice)
and, in which the Instrumentholder may specify an account to which payment is to be
made under this Condition 5.6 to the specified office of any Paying Agent on any
business day falling within the period (the Put Period) of 45 days after a Put
Event Notice is given. The Instrument should be delivered together with all Receipts
and Coupons (and Talons) appertaining thereto maturing after the date (the Put
Date) falling seven days after the expiry of the Put Period, failing which (unless
Condition 6.5.2 applies) the Paying Agent will require payment of an amount equal to
the face value of any such missing Receipt, Coupon and/or Talon. Any amount so paid
will be reimbursed in the manner provided in Condition 6 against presentation and
surrender of the relevant
 53




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missing Receipt, Coupon and/or Talon, subject to Condition 8. The Paying Agent to
which such Instrument and Put Notice are delivered will issue to the
Instrumentholder concerned a non-transferable receipt in respect of the Instrument
so delivered. Payment in respect of any Instrument so delivered will be made, if
the Instrumentholder duly specified a bank account in the Put Notice to which
payment is to be made, on the Put Date by transfer to that bank account and, in
every other case, on or after the Put Date in the manner provided in Condition 6
against presentation and surrender (or, in the case of part payment, endorsement)
of such receipt at the specified office of any Paying Agent. A Put Notice, once
given, shall be irrevocable. For the purposes of the Conditions and the Trust Deed,
receipts issued pursuant to this Condition 5.6 shall be treated as if they were
Instruments. National Grid shall redeem the relevant Instruments on the Put Date
unless previously redeemed or purchased.]5.6.1
    
    *[Redemption of Instruments issued by NGET at the option of
InstrumentholdersIf NGET Restructuring Put Option is specified in the relevant Final Terms and at
any time whilst any of the Instruments issued by NGET remains outstanding there
occurs an NGET Restructuring Event and in relation to that NGET Restructuring
Event, a Negative Certification is made and, within the NGET Restructuring Period
either:
 (a)
    
    (if at the time that an NGET Restructuring Event occurs there
are Rated Securities) a Rating Downgrade in respect of the relevant NGET
Restructuring Event occurs; or(b)
    
    (if at the time that an NGET Restructuring Event occurs there
are no Rated Securities) a Negative Rating Event in respect of the relevant
NGET Restructuring Event occurs,
 (the NGET Restructuring Event and Rating Downgrade or the NGET Restructuring Event
and Negative Rating Event, as the case may be, occurring within the NGET
Restructuring Period, together with a Negative Certification, shall be called a
Put Event),then the holder of each Instrument of NGET will have the option upon the giving of
a Put Notice (as defined in Condition 5.6.4) to require NGET to redeem or, at the
option of NGET, purchase (or procure the purchase of) such Instrument on the Put
Date (as defined in Condition 5.6.4) at its principal amount together with accrued
interest to the Put Date.Promptly upon NGET becoming aware that a Put Event has occurred, and in any event
no later than 14 days after the occurrence of a Put Event, NGET shall, or at any
time upon the Trustee becoming similarly so aware the Trustee may, and if so
requested in writing by the holders of at least one-quarter in principal amount of
the Instruments then outstanding or if so directed by an Extraordinary Resolution
of the Instrumentholders, the Trustee shall, give notice (a Put Event Notice) to
the Instrumentholders in accordance with Condition 14 specifying the nature of the
Put Event and the procedure (as set out in Condition 5.6.4) for exercising the
option contained in this Condition 5.6.1.
 
 *
    
    Only applicable where NGET is the Issuer. 54




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5.6.2
    
    For the purposes of this ConditionElectricity Act means the Electricity Act 1989 as amended or re-enacted from time
to time and all subordinate legislation made pursuant thereto;Electricity Transmission Licence means the transmission licence, as subsequently
amended from time to time, originally granted by the Secretary of State for Energy
to NGET under the Electricity Act;Negative Certification means, on the occurrence of an NGET Restructuring Event,
such event or events being certified in writing by an independent financial adviser
appointed by NGET and approved by the Trustee (or, if NGET shall not have appointed
such an adviser within 21 days after becoming aware of the occurrence of such NGET
Restructuring Event, appointed by the Trustee (following consultation with NGET))
as being in its opinion materially prejudicial to the interests of the
Instrumentholders. Any Negative Certification by an independent financial adviser
as to whether or not, in its opinion, any event defined as an NGET Restructuring
Event is materially prejudicial to the interests of the Instrumentholders shall, in
the absence of manifest error, be conclusive and binding upon NGET, the Trustee,
the Instrumentholders and the Couponholders;Negative Rating Event shall be deemed to have occurred if NGET is unable as a
result of an NGET Restructuring Event to obtain a rating of the Instruments or of
any other comparable unsecured and unsubordinated debt of NGET (or of any
Subsidiary of NGET and which is guaranteed on an unsecured and unsubordinated basis
by NGET) having an initial maturity of five years or more (Rateable Debt) from a
Rating Agency of at least investment grade (BBB-/Baa3, or their respective
equivalents for the time being), which rating NGET shall use all reasonable
endeavours to obtain, provided that a Negative Rating Event shall not be deemed to
have occurred in respect of a particular NGET Restructuring Event if the Rating
Agency making the relevant reduction or declining to assign a rating of at least
investment grade (as described above) does not announce or publicly confirm or
otherwise inform the Trustee that the reduction or its declining to assign a rating
of at least investment grade was the result, in whole or in part, of any event or
circumstance comprised in or arising as a result of, or in respect of, the
applicable NGET Restructuring Event;NGET Restructuring Event means the occurrence of any one or more of the following
events:
 (a)
    
    the Secretary of State for Trade and Industry or any official
succeeding to his functions gives NGET written notice of revocation of the
Electricity Transmission Licence in accordance with the terms as to revocation
set out in Schedule 2 of the Electricity Transmission Licence, such revocation
to become effective not later than the Maturity Date of the Instruments or
NGET agrees in writing with the Secretary of State for Trade and Industry or
any official succeeding to his functions to any revocation or surrender of the
Electricity Transmission Licence or any legislation (whether primary or
subordinate) is enacted terminating or revoking the Electricity Transmission
Licence; or(b)
    
    any modification is made to the terms and conditions of the
Electricity Transmission Licence other than such a modification which the
Trustee, in its
 55




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opinion, considers to be not materially prejudicial to the interests of the
Instrumentholders and has so confirmed in writing to NGET; or(c)
    
    any legislation (whether primary or subordinate) is enacted
removing, reducing or qualifying the duties or powers of the Secretary of
State for Trade and Industry or any official succeeding to his functions
and/or the Gas and Electricity Markets Authority under Section 3A of the
Electricity Act as compared with those in effect on the issue date of the
first Tranche of the Instruments other than such legislation which the
Trustee, in its opinion, considers to be not materially prejudicial to the
interests of the Instrumentholders and has so confirmed in writing to NGET;
 NGET Restructuring Period
 (a)
    
    if at the time at which the NGET Restructuring Event occurs
there are Rated Securities, the period of 90 days starting from and including
the day on which an NGET Restructuring Event occurs or such longer period in
which the Rated Securities are under consideration (announced publicly within
such 90 day period) for rating review by a Rating Agency; or(b)
    
    if at the time at which an NGET Restructuring Event occurs
there are no Rated Securities, the period starting from and including the day
on which an NGET Restructuring Event occurs and ending on the day 90 days
following the date on which a Negative Certification shall have been given to
NGET in respect of that NGET Restructuring Event;
 Rated Securities means (a) the Instruments or (b) such other comparable unsecured
and unsubordinated debt of NGET (or of any Subsidiary of NGET and which is
guaranteed on an unsecured and unsubordinated basis by NGET) having an initial
maturity of five years or more selected by NGET from time to time for the purpose
of this definition with the approval of the Trustee and which possesses an
investment grade rating (BBB-/Baa3, or their respective equivalents for the time
being, or better) by any Rating Agency (whether at the invitation of NGET or by its
own volition);Rating Agency means Standard & Poors Ratings Services, a division of The
McGraw-Hill Companies, Inc., or any of its Subsidiaries and their successors or
Moodys Investors Service, Inc., or any of its Subsidiaries and their successors or
any rating agency substituted for either of them (or any permitted substitute of
them) by NGET from time to time with the prior written approval of the Trustee;Rating Downgrade shall be deemed to have occurred in respect of an NGET
Restructuring Event if the rating assigned to the Rated Securities by any Rating
Agency which is current immediately prior to the occurrence of an NGET
Restructuring Event (whether provided by a Rating Agency at the invitation of NGET
or by its own volition) is withdrawn or reduced from an investment grade rating
(BBB-/Baa3, or their respective equivalents for the time being, or better) to a
non-investment grade rating (BB+/Ba1, or their respective equivalents for the time
being, or worse) or, if the Rating Agency shall have already rated the Rated
Securities below investment grade (as described above), the rating is lowered one
full rating category (from BB+/Ba1 to BB/Ba2 or such similar lowering) provided
that a Rating Downgrade shall not be deemed to have occurred in respect of or as a
result of a particular NGET Restructuring Event if the Rating Agency making the
relevant reduction in rating or
 56




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declining to assign a rating of at least investment grade as provided in these
Conditions does not announce or publicly confirm, or otherwise inform the Trustee,
that the reduction or declining was the result, in whole or part, of any event or
circumstance comprised in or arising as a result of, or in respect of, the
applicable NGET Restructuring Event;Subsidiary means a subsidiary within the meaning of Section 736 of the Companies
Act 1985 and Subsidiaries shall be construed accordingly.
 5.6.3
    
    The Trustee shall not be responsible for ascertaining whether or not an
NGET Restructuring Event, a Negative Rating Event or a Rating Downgrade in relation
to NGET has occurred and, unless and until it has actual knowledge to the contrary,
shall be entitled to assume that no such event has occurred.5.6.4
    
    To exercise the option of redemption of an Instrument under Condition
5.6.1 the Instrumentholder must deliver each Instrument to be redeemed accompanied
by a duly signed and completed notice of exercise in the form (for the time being
current) obtainable from the specified office of any Paying Agent (a Put Notice)
and, in which the Instrumentholder may specify an account to which payment is to be
made under this Condition 5.6 to the specified office of any Paying Agent on any
business day falling within the period (the Put Period) of 45 days after a Put
Event Notice is given. The Instrument should be delivered together with all Receipts
and Coupons (and Talons) appertaining thereto maturing after the date (the Put
Date) falling seven days after the expiry of the Put Period, failing which (unless
Condition 6.5.2 applies) the Paying Agent will require payment of an amount equal to
the face value of any such missing Receipt, Coupon and/or Talon.Any amount so paid will be reimbursed in the manner provided in Condition 6 against
presentation and surrender of the relevant missing Receipt, Coupon and/or Talon,
subject to Condition 8. The Paying Agent to which such Instrument and Put Notice
are delivered will issue to the Instrumentholder concerned a non-transferable
receipt in respect of the Instrument so delivered.Payment in respect of any Instrument so delivered will be made, if the
Instrumentholder duly specified a bank account in the Put Notice to which payment
is to be made, on the Put Date by transfer to that bank account and, in every other
case, on or after the Put Date in the manner provided in Condition 6 against
presentation and surrender (or, in the case of part payment, endorsement) of such
receipt at the specified office of any Paying Agent. A Put Notice, once given,
shall be irrevocable. For the purposes of the Conditions and the Trust Deed,
receipts issued pursuant to this Condition 5.6 shall be treated as if they were
Instruments. NGET shall redeem the relevant Instruments on the Put Date unless
previously redeemed or purchased.]
 5.7
    
    Redemption at the Option of InstrumentholdersIf Put Option is specified in the relevant Final Terms, the Issuer shall, at the
option of any Instrumentholder, upon such Instrumentholder giving not less than 15 nor
more than 30 days notice to the Issuer (or such other notice period as may be specified
on this Instrument) redeem such Instrument on the Optional Redemption Date(s) (as
specified in the Final Terms) at its Optional Redemption Amount (as specified in the
Final Terms) together with interest accrued to the date fixed for redemption.
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To exercise such option (which must be exercised on an Option Exercise Date) the holder
must deposit such Instrument with any Paying Agent at its specified office, together with
a duly completed option exercise notice (Exercise Notice) in the form obtainable from
any Paying Agent within the Instrumentholders Option Period (as specified in the Final
Terms). No Instrument so deposited and option exercised may be withdrawn (except as
provided in the Agency Agreement) without the prior consent of the Issuer.5.8
    
    Partly Paid InstrumentsPartly Paid Instruments will be redeemed, whether at maturity, early redemption or
otherwise, in accordance with the provisions of this Condition and the provisions
specified in the relevant Final Terms.5.9
    
    Redemption by InstalmentsUnless previously redeemed, purchased and cancelled as provided in this Condition 5,
each Instrument which provides for Instalment Dates and Instalment Amounts will be
partially redeemed on each Instalment Date at the Instalment Amount specified in the
relevant Final Terms. The outstanding nominal amount of each such Instrument shall be
reduced by the Instalment Amount (or, if such Instalment Amount is calculated by
reference to a proportion of the nominal amount of such Instrument, such proportion) for
all purposes with effect from the related Instalment Date, unless payment of the
Instalment Amount is improperly withheld or refused on presentation of the related
Receipt, in which case, such amount shall remain outstanding until the Relevant Date
relating to such Instalment Amount.5.10
    
    CancellationAll Instruments redeemed pursuant to any of the foregoing provisions will be
cancelled forthwith together with all unmatured Receipts and Coupons and unexchanged
Talons attached thereto. All Instruments purchased by or on behalf of the Issuer or any
of its Subsidiaries may, at the option of the Issuer be held by or may be surrendered
together with all unmatured Receipts and Coupons and all unexchanged Talons attached to
them to a Paying Agent for cancellation, but may not be resold and when held by the
Issuer or any of its respective Subsidiaries shall not entitle the holder to vote at any
meeting of Instrumentholders and shall not be deemed to be outstanding for the purposes
of calculating quorums at meetings of Instrumentholders or for the purposes of Condition
11.
 6
    
    Payments and Talons
 6.1
    
    PaymentsPayments of principal and interest in respect of Instruments will, subject as
mentioned below, be made against presentation and surrender of the relevant Receipts (in
the case of payments of Instalment Amounts other than on the due date for redemption and
provided that the Receipt is presented for payment together with its relative
Instrument), Instruments (in the case of all other payments of principal and, in the case
of interest, as specified in Condition 6.5.6) or Coupons (in the case of interest, save
as specified in Condition 6.5.6), as the case may be, at the specified office of any
Paying Agent outside the United States by a cheque payable in the currency in which such
payment is due drawn on, or, at the option of the holder, by transfer to an account
denominated in that currency with, a bank in the principal
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financial centre for that currency; provided that in the case of Euro, the transfer shall
be in a city in which banks have access to the TARGET System.6.2
    
    Payments in the United StatesNotwithstanding the above, if any Instruments are denominated in U.S. dollars,
payments in respect of them may be made at the specified office of any Paying Agent in
New York City in the same manner as specified above if (a) the Issuer shall have
appointed Paying Agents with specified offices outside the United States with the
reasonable expectation that such Paying Agents would be able to make payment of the
amounts on the Instruments in the manner provided above when due, (b) payment in full of
such amounts at all such offices is illegal or effectively precluded by exchange controls
or other similar restrictions on payment or receipt of such amounts and (c) such payment
is then permitted by United States law, without involving, in the opinion of the Issuer,
any adverse tax consequence to the Issuer.6.3
    
    Payments subject to Fiscal Laws etc.All payments are subject in all cases to any applicable fiscal or other laws,
regulations and directives, but without prejudice to the provisions of Condition 7. No
commission or expenses shall be charged to the Instrumentholders or Couponholders in
respect of such payments.6.4
    
    Appointment of AgentsThe Issuing and Paying Agent, the Paying Agents and the Calculation Agent initially
appointed by the Issuer and their respective specified offices are listed below. The
Issuing and Paying Agent, the Paying Agents and the Calculation Agent act solely as
agents of the Issuer and do not assume any obligation or relationship of agency or trust
for or with any holder. The Issuer reserves the right at any time with the approval of
the Trustee to vary or terminate the appointment of the Issuing and Paying Agent, any
other Paying Agent or the Calculation Agent and to appoint additional or other Paying
Agents, provided that the Issuer shall at all times maintain (a) an Issuing and Paying
Agent, (b) a Paying Agent having its specified office in a major European city, which
shall be London so long as the Instruments are admitted to the Official List of the
Financial Services Authority in its capacity as competent authority under the Financial
Services and Markets Act 2000 and admitted to trading on the London Stock Exchanges Gilt
Edged and Fixed Interest Market, (c) a Calculation Agent where the Conditions so require
one, (d) so long as the Instruments are listed on any stock exchange or admitted to
listing by any other relevant authority, a Paying Agent having a specified office in such
place as may be required by the rules and regulations of any other relevant stock
exchange or other relevant authority and (e) to the extent that the Issuer is able to do
so and not provided for by the foregoing provisions of this Condition 6.4, a Paying Agent
with a specified office in a European Union member state that will not be obliged to
withhold or deduct tax pursuant to any law implementing European Council Directive
2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council
meeting of 26-27 November 2000. As used in these Conditions, the terms Issuing and
Paying Agent, Calculation Agent, and Paying Agent include any additional or
replacement Issuing and Paying Agent, Calculation Agent or Paying Agent appointed under
this Condition.In addition, the Issuer shall forthwith appoint a Paying Agent in New York City in
respect of any Instruments denominated in U.S. dollars in the circumstances described in
Condition 6.2.
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Notice of any such change or any change of any specified office shall promptly be given
to the Instrumentholders in accordance with Condition 14.6.5
    
    Unmatured Coupons and Receipts and unexchanged Talons
 6.5.1
    
    Unless the Instrument provides that the relevant Coupons are to become
void upon the due date for redemption of those Instruments, Instruments should be
surrendered for payment together with all unmatured Coupons (if any) appertaining to
them, failing which an amount equal to the face value of each missing unmatured
Coupon (or, in the case of payment not being made in full, that proportion of the
amount of such missing unmatured Coupon that the sum of principal so paid bears to
the total principal due) will be deducted from the Final Redemption Amount, Early
Redemption Amount or Optional Redemption Amount, as the case may be, due for
payment. Any amount so deducted shall be paid in the manner mentioned above against
surrender of such missing Coupon within a period of 10 years from the Relevant Date
for the payment of such principal (whether or not such Coupon has become void
pursuant to Condition 8).6.5.2
    
    If the relevant Instrument so provides, upon the due date for redemption
of any Instrument, unmatured Coupons relating to such Instrument (whether or not
attached) shall become void and no payment shall be made in respect of them.6.5.3
    
    If the relevant Instrument so provides, upon the due date for redemption
of any Instrument, any unexchanged Talon relating to such Instrument (whether or not
attached) shall become void and no Coupon shall be delivered in respect of such
Talon.6.5.4
    
    Upon the due date for redemption of any Instrument which is redeemable
in instalments, all Receipts relating to such Instrument having an Instalment Date
falling on or after such due date (whether or not attached) shall become void and no
payment shall be made in respect of them.6.5.5
    
    Where any Instrument which provides that the relevant Coupons are to
become void upon the due date for redemption of those Instruments is presented for
redemption without all unmatured Coupons and any unexchanged Talon relating to it,
and where any Instrument is presented for redemption without any unexchanged Talon
relating to it, redemption shall be made only against the provision of such
indemnity as the Issuer may require.6.5.6
    
    If the due date for redemption of any Instrument is not a due date for
payment of interest, interest accrued from the preceding due date for payment of
interest or the Interest Commencement Date, as the case may be, shall only be
payable against presentation (and surrender if appropriate) of the relevant
Instrument. Interest accrued on an Instrument that only bears interest after its
Maturity Date shall be payable on redemption of that Instrument against presentation
of that Instrument.
 6.6
    
    Non-business DaysIf any date for payment in respect of any Instrument, Receipt or Coupon is not a
business day, the holder shall not be entitled to payment until the next following
business day nor to any interest or other sum in respect of such postponed payment. In
this paragraph, business day means a day (other than a Saturday or a Sunday) on which
banks and
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foreign exchange markets are open for business in the relevant place of presentation, in
such jurisdictions as shall be specified as Financial Centres in the relevant Final
Terms and:
 6.6.1
    
    (in the case of a payment in a currency other than Euro) where payment
is to be made by transfer to an account maintained with a bank in the relevant
currency, on which foreign exchange transactions may be carried on in the relevant
currency in the principal financial centre of the country of such currency; or6.6.2
    
    (in the case of a payment in Euro) which is a TARGET Business Day.
 6.7
    
    TalonsOn or after the Interest Payment Date for the final Coupon forming part of a Coupon
sheet issued in respect of any Instrument, the Talon forming part of such Coupon sheet
may be surrendered at the specified office of the Issuing and Paying Agent in exchange
for a further Coupon sheet (but excluding any Coupons which may have become void pursuant
to Condition 8).
 7
    
    TaxationAll payments of principal and interest by or on behalf of the Issuer in respect of the
Instruments, the Receipts and the Coupons will be made without withholding or deduction for or
on account of, any present or future taxes or duties of whatever nature imposed or levied by or
on behalf of the United Kingdom or any political sub-division of the United Kingdom or any
authority in or of the United Kingdom having power to tax, unless such withholding or deduction
is compelled by law. In that event, the Issuer will pay such additional amounts of principal
and interest as will result in the payment to the Instrumentholders, Receiptholders or, as the
case may be, the Couponholders of the amounts which would otherwise have been receivable in
respect of the Instruments, Receipts or Coupons had no withholding or deduction been made,
except that no such additional amounts shall be payable in respect of any Instrument, Receipt
or Coupon presented for payment:
 (a)
    
    by or on behalf of, a person who is liable to such taxes or duties in respect of such
Instrument, Receipt or Coupon by reason of his having some connection with the United
Kingdom other than the mere holding of such Instrument, Receipt or Coupon; or(b)
    
    by or on behalf of a person who would not be liable or subject to such deduction or
withholding by making a declaration of non-residence or other claim for exemption to a tax
authority; or(c)
    
    more than 30 days after the Relevant Date except to the extent that the holder would
have been entitled to such additional amounts on presenting the same for payment on such
30th day; or(d)
    
    where such withholding or deduction is imposed on a payment to an individual and is
required to be made pursuant to any law implementing European Council Directive 2003/48/EC
or any other Directive implementing the conclusions of the ECOFIN Council meeting of 26-27
November 2000; or(e)
    
    by or on behalf of a holder who would have been able to avoid such withholding or
deduction (i) by presenting the relevant Instrument, Receipt or Coupon to another Paying
Agent in a Member State of the European Union; or (ii) by satisfying any statutory or
procedural requirements (including, without limitation, the provision of information).
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As used in these Conditions, Relevant Date in respect of any Instrument, Receipt or Coupon
means the date on which payment in respect of it first becomes due or (if any amount of the
money payable is improperly withheld or refused) the date on which payment in full of the
amount outstanding is made or (if earlier) the date on which notice is duly given to the
Instrumentholders in accordance with Condition 14 that, upon further presentation of the
Instrument, Receipt or Coupon being made in accordance with the Conditions, such payment will
be made, provided that payment is in fact made upon such presentation. References in these
Conditions to (a) principal shall be deemed to include any premium payable in respect of the
Instruments, all Instalment Amounts, Final Redemption Amounts, Early Redemption Amounts,
Optional Redemption Amounts, Amortised Face Amounts and all other amounts in the nature of
principal payable pursuant to Condition 5 or any amendment or supplement to it, (b) interest
shall be deemed to include all Interest Amounts and all other amounts payable pursuant to
Condition 3 or any amendment or supplement to it and (c) principal and/or interest shall be
deemed to include any additional amounts which may be payable under this Condition or any
undertaking given in addition to or in substitution for it under the Trust Deed.8
    
    PrescriptionInstruments, Receipts and Coupons (which, for this purpose, shall not include Talons)
shall be prescribed and become void unless presented for payment within 10 years (in the case
of principal) or five years (in the case of interest) from the appropriate Relevant Date in
respect of them.9
    
    Events of DefaultIf any of the following events (each an Event of Default) occurs and is continuing, the
Trustee at its discretion may, and if so requested by the holders of at least one-quarter in
nominal amount of the Instruments then outstanding or if so directed by an Extraordinary
Resolution shall, give notice to the Issuer at its registered office that the Instruments are,
and they shall accordingly immediately become due and repayable at their Redemption Amount
together with accrued interest (if any) to the date of payment:
 (a)
    
    Non-Payment:there is default for more than 30 days in the payment of any principal
or interest due in respect of the Instruments; or(b)
    
    Breach of Other Obligations:there is default in the performance or observance by the
Issuer of any other obligation or provision under the Trust Deed or the Instruments (other
than any obligation for the payment of any principal or interest in respect of the
Instruments) which default is incapable of remedy or, if in the opinion of the Trustee
capable of remedy, is not remedied within 90 days after notice of such default shall have
been given to the Issuer by the Trustee; or(c)
    
    Cross-Acceleration:if (i) any other present or future Relevant Indebtedness of the
Issuer [(or a Principal Subsidiary)]* becomes due and payable prior to its
stated maturity by reason of any actual event of default or (ii) any amount in respect of
such Relevant Indebtedness is not paid when due or, as the case may be, within any
applicable grace period, provided that the aggregate amount of the Relevant Indebtedness
in respect of which one or more of the events mentioned above in this paragraph (c) have
occurred equals or exceeds £50,000,000, for the period up to 31 March 2017, and
thereafter, £100,000,000.
 
 *
    
    Only applicable where National Grid is the Issuer. 62




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[For the purposes of this Condition 9, Principal Subsidiary means National Grid Gas
plc, NGET and National Grid USA, and includes any successor entity thereto or any member
of the group of companies comprising National Grid and each of its subsidiary
undertakings (the National Grid Group) which the Auditors have certified to the Trustee
as being a company to which all or substantially all of the assets of a Principal
Subsidiary are transferred. In the event that all or substantially all of the assets of a
Principal Subsidiary are transferred to a member of the National Grid Group as described
above, the transferor of such assets shall cease to be deemed to be a Principal
Subsidiary for the purposes of this Condition.]*; or(d)
    
    Winding-up:a resolution is passed, or a final order of a court in the United Kingdom
is made and, where possible, not discharged or stayed within a period of 90 days, that the
Issuer be wound up or dissolved; or(e)
    
    Enforcement Proceedings:attachment is made of the whole or substantially the whole
of the assets or undertakings of the Issuer and such attachment is not released or
cancelled within 90 days or an encumbrancer takes possession or an administrative or other
receiver or similar officer is appointed of the whole or substantially the whole of the
assets or undertaking of the Issuer or an administration or similar order is made in
relation to the Issuer and such taking of possession, appointment or order is not
released, discharged or cancelled within 90 days; or(f)
    
    Insolvency:the Issuer ceases to carry on all or substantially all of its business or
is unable to pay its debts within the meaning of Section 123(1)(e) or Section 123(2) of
the Insolvency Act 1986; or(g)
    
    Bankruptcy:the Issuer is adjudged bankrupt or insolvent by a court of competent
jurisdiction in its country of incorporation,
 provided that in the case of paragraph (b) the Trustee shall have certified that in its opinion
such event is materially prejudicial to the interests of the Instrumentholders.10
    
    EnforcementThe Trustee may, at its discretion and without further notice, institute such proceedings
against the Issuer as it may think fit to enforce any obligation, condition or provision
binding on the Issuer under the Instruments or under the Trust Deed, but shall not be bound to
do so unless:
 (a)
    
    it has been so directed by an Extraordinary Resolution or in writing by the holders
of at least one-quarter of the principal amount of the Instruments outstanding; and(b)
    
    it has been indemnified to its satisfaction.
 No Instrumentholder, Receiptholder or Couponholder shall be entitled to institute proceedings
directly against the Issuer unless the Trustee, having become bound to proceed as specified
above, fails to do so within a reasonable time and such failure is continuing.
 11
    
    Meetings of Instrumentholders, Modifications and Substitution
 11.1
    
    Meetings of InstrumentholdersThe Trust Deed contains provisions for convening meetings of Instrumentholders to
consider any matter affecting their interests, including the sanctioning by Extraordinary
Resolution (as defined in the Trust Deed) of a modification of any of these Conditions or
any provisions of
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the Trust Deed. An Extraordinary Resolution duly passed at any such meeting shall be
binding on Instrumentholders (whether or not they were present at the meeting at which
such resolution was passed) and on all Couponholders, except that any Extraordinary
Resolution proposed, inter alia, (a) to amend the dates of maturity or redemption of the
Instruments, any Instalment Date or any date for payment of interest on the Instruments,
(b) to reduce or cancel the nominal amount of, or any Instalment Amount of, or any
premium payable on redemption of, the Instruments, (c) to reduce the rate or rates of
interest in respect of the Instruments or to vary the method or basis of calculating the
rate or rates or amount of interest or the basis for calculating any Interest Amount in
respect of the Instruments, (d) if a Minimum and/or a Maximum Rate of Interest is shown
on the face of the Instrument, to reduce any such Minimum and/or Maximum Rate of
Interest, (e) to vary any method of calculating the Final Redemption Amount, the Early
Redemption Amount or the Optional Redemption Amount, (f) to take any steps that as
specified in this Instrument may only be taken following approval by an Extraordinary
Resolution to which the special quorum provisions apply, and (g) to modify the provisions
concerning the quorum required at any meeting of Instrumentholders or the majority
required to pass the Extraordinary Resolution will only be binding if passed at a meeting
of the Instrumentholders (or at any adjournment of that meeting) at which a special
quorum (as defined in the Trust Deed) is present. A resolution in writing signed by the
holders of not less than 95 per cent. in nominal amount of the Instruments will be
binding on all Instrumentholders and Couponholders. The Issuer may convene a meeting of
Instrumentholders jointly with the holders of all other instruments issued pursuant to
the Agency Agreement and not forming a single series with the Instruments to which
meeting the provisions referred to above apply as if all such instruments formed part of
the same series, provided that the proposals to be considered at such meeting affect the
rights of the holders of the instruments of each series attending the meeting in
identical respects (save insofar as the Conditions applicable to each such series are not
identical).11.2
    
    Modification of the Trust DeedThe Trustee may agree, without the consent of the Instrumentholders or
Couponholders, to (a) any modification of any of the provisions of the Trust Deed that is
of a formal, minor or technical nature or is made to correct a manifest error, and (b)
any other modification (except as mentioned in the Trust Deed), and any waiver or
authorisation of any breach or proposed breach, of any of the provisions of the Trust
Deed that is in the opinion of the Trustee not materially prejudicial to the interests of
the Instrumentholders. Any such modification, authorisation or waiver shall be binding on
the Instrumentholders and the Couponholders and, if the Trustee so requires, such
modification shall be notified to the Instrumentholders as soon as practicable.11.3
    
    SubstitutionThe Trust Deed contains provisions permitting the Trustee to agree, subject to such
amendment of the Trust Deed and such other conditions as the Trustee may require, but
without the consent of the Instrumentholders or the Couponholders, to the substitution of
any other company in place of the Issuer or of any previous substituted company, as
principal debtor under the Trust Deed and the Instruments. In the case of such a
substitution the Trustee may agree, without the consent of the Instrumentholders or the
Couponholders, to a change of the law governing the Instruments, the Receipts, the
Coupons, the Talons and/or
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the Trust Deed provided that such change would not in the opinion of the Trustee be
materially prejudicial to the interests of the Instrumentholders.11.4
    
    Entitlement of the TrusteeIn connection with the exercise of its functions (including but not limited to those
referred to in this Condition) the Trustee shall have regard to the interests of the
Instrumentholders as a class and shall not have regard to the consequences of such
exercise for individual Instrumentholders or Couponholders and the Trustee shall not be
entitled to require, nor shall any Instrumentholder or Couponholder be entitled to claim,
from the Issuer any indemnification or payment in respect of any tax consequence of any
such exercise upon individual Instrumentholders or Couponholders.
 12
    
    Replacement of Instruments, Receipts, Coupons and TalonsIf an Instrument, Receipt, Coupon or Talon is lost, stolen, mutilated, defaced or
destroyed, it may be replaced, subject to applicable laws, listing authority and stock exchange
regulations, at the specified office of such other Paying Agent as may from time to time be
designated by the Issuer for the purpose and notice of whose designation is given to
Instrumentholders in accordance with Condition 14 on payment by the claimant of the fees and
costs incurred in connection with that replacement and on such terms as to evidence, security
and indemnity (which may provide, inter alia, that if the allegedly lost, stolen or destroyed
Instrument, Receipt, Coupon or Talon is subsequently presented for payment or, as the case may
be, for exchange for further Coupons, there shall be paid to the Issuer on demand the amount
payable by the Issuer in respect of such Instruments, Receipts, Coupons or further Coupons) and
otherwise as the Issuer may require. Mutilated or defaced Instruments, Receipts, Coupons or
Talons must be surrendered before replacements will be issued.13
    
    Further IssuesThe Issuer may from time to time without the consent of the Instrumentholders or
Couponholders create and issue further instruments having the same terms and conditions as the
Instruments and so that such further issue shall be consolidated and form a single series with
such Instruments.References in these Conditions to the Instruments include (unless the context requires
otherwise) any other instruments issued pursuant to this Condition and forming a single series
with the Instruments. Any such further instruments forming a single series with Instruments
constituted by the Trust Deed or any deed supplemental to it shall, and any other instruments
may (with the consent of the Trustee), be constituted by the Trust Deed.The Trust Deed contains provisions for convening a single meeting of the Instrumentholders and
the holders of instruments of other series if the Trustee so decides.14
    
    NoticesAll notices to the Instrumentholders will be valid if published in a daily English
language newspaper of general circulation in the United Kingdom (which is expected to be the
Financial Times). If in the opinion of the Trustee any such publication is not practicable,
notice shall be validly given if published in another leading daily English language newspaper
with general circulation in Europe. Any such notice shall be deemed to have been given on the
date of such publication or, if published
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more than once or on different dates, on the first date on which publication is made, as
provided above.Couponholders shall be deemed for all purposes to have notice of the contents of any notice
given to the holders of Instruments in accordance with this Condition.15
    
    Indemnification of TrusteeThe Trust Deed contains provisions for the indemnification of the Trustee and for its
relief from responsibility, including but not limited to provisions relieving it from any
obligation to (a) appoint an independent financial adviser and (b) take proceedings to enforce
repayment unless indemnified to its satisfaction. The Trustee is entitled to enter into
business transactions with the Issuer or any of its subsidiary undertakings, parent
undertakings, joint ventures or associated undertakings without accounting for any profit
resulting from these transactions and to act as trustee for the holders of any other securities
issued by the Issuer or any of its subsidiary undertakings, parent undertakings, joint ventures
or associated undertakings.16
    
    Contracts (Rights of Third Parties) Act 1999No person shall have any right to enforce any term or condition of the Instruments under
the Contracts (Rights of Third Parties) Act 1999.17
    
    Governing Law and Jurisdiction
 17.1
    
    The Instruments and any non-contractual obligations arising out of or
connected with them are governed by, and shall be construed in accordance with, English
law.17.2
    
    The courts of England have exclusive jurisdiction to settle any dispute (a
Dispute), arising from or connected with the Instruments.17.3
    
    The Issuer agrees that the courts of England are the most appropriate and
convenient courts to settle any Dispute and, accordingly, that it will not argue to the
contrary.17.4
    
    Nothing in this Condition 17 prevents the Trustee or any Instrumentholder from
taking proceedings relating to a Dispute (Proceedings) in any other courts with
jurisdiction. To the extent allowed by law, the Trustee or Instrumentholders may take
concurrent Proceedings in any number of jurisdictions.
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SUMMARY OF PROVISIONS RELATING TO THE INSTRUMENTS
WHILE IN GLOBAL FORM
 Initial Issue of Instruments
 Upon the initial deposit of a Global Instrument with a common depositary for Euroclear and
Clearstream, Luxembourg (the Common Depositary), Euroclear or Clearstream, Luxembourg will
credit each subscriber with a nominal amount of Instruments equal to the nominal amount of
those Instruments for which it has subscribed and paid.
 If the Global Instruments are stated in the applicable Final Terms to be issued in NGN form,
the Global Instruments will be delivered on or prior to the original issue date of the Tranche
to a Common Safekeeper. Depositing the Global Instruments with the Common Safekeeper does not
necessarily mean that the Instruments will be recognised as eligible collateral for Eurosystem
monetary policy and intra-day credit operations by the Eurosystem either upon issue, or at any
or all times during their life. Such recognition will depend upon satisfaction of the
Eurosystem eligibility criteria.
 Global Instruments which are issued in CGN form may be delivered on or prior to the original
issue date of the Tranche to a Common Depositary.
 If the Global Instrument is a CGN, upon the initial deposit of a Global Instrument with the
Common Depositary, Euroclear or Clearstream, Luxembourg will credit each subscriber with a
nominal amount of Instruments equal to the nominal amount of those Instruments for which it has
subscribed and paid. If the Global Instrument is an NGN, the nominal amount of the Instruments
shall be the aggregate amount from time to time entered in the records of Euroclear or
Clearstream, Luxembourg. The records of such clearing system shall be conclusive evidence of
the nominal amount of Instruments represented by the Global Instrument and a statement issued
by such clearing system at any time shall be conclusive evidence of the records of the relevant
clearing system at that time.
 Instruments which are initially deposited with the Common Depositary may also be credited to
the accounts of subscribers with (if indicated in the relevant Final Terms) other clearing
systems through direct or indirect accounts with Euroclear and Clearstream, Luxembourg held by
such other clearing systems. Conversely, Instruments that are initially deposited with another
clearing system may similarly be credited to the accounts of subscribers with Euroclear,
Clearstream, Luxembourg or other clearing systems.
 Relationship of Accountholders with Clearing Systems
 Each of the persons shown in the records of Euroclear, Clearstream, Luxembourg or any
other clearing system as the holder of an Instrument represented by a Global Instrument must
look solely to Euroclear, Clearstream, Luxembourg or such clearing system (as the case may be)
for his share of each payment made by an Issuer or the Issuers to the bearer of such Global
Instrument and in relation to all other rights arising under the Global Instruments, subject to
and in accordance with the respective rules and procedures of Euroclear, Clearstream,
Luxembourg or such clearing systems (as the case may be). Such persons shall have no claim
directly against either of the Issuers in respect of payments due on the Instruments for so
long as the Instruments are
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represented by such Global Instrument and such obligations of such Issuer or Issuers will be
discharged by payment to the bearer of such Global Instrument in respect of each amount so
paid.
 The Trustee may call for any certificate or other document to be issued by Euroclear,
Clearstream, Luxembourg or any other clearing system as to the principal amount of Instruments
represented by a Global Instrument standing to the account of any person. Any such certificate
or other document shall, in the absence of manifest error, be conclusive and binding for all
purposes. Any such certificate or other document may comprise any form of statement or print
out of electronic records provided by the relevant clearing system (including Euroclears
EUCLID or Clearstream, Luxembourgs Cedcom system) in accordance with its usual procedures and
in which the holder of a particular principal amount of any other clearing system is clearly
identified together with the amount of such holding. The Trustee shall not be liable to any
person by reason of having accepted as valid or not having rejected any certificate or other
document to such effect purporting to be issued by Euroclear, Clearstream, Luxembourg or any
other clearing system and subsequently found to be forged or not authentic.
 Exchange1
    
    Temporary Global Instruments
 Each temporary Global Instrument will be exchangeable, free of charge to the holder, on or
after its Exchange Date:
 1.1
    
    if the relevant Final Terms indicates that such Global Instrument is issued in
compliance with the C Rules or in a transaction to which TEFRA is not applicable (as to
which, see Summary of the Programme  Selling Restrictions), in whole, but not in part,
for the Definitive Instruments defined and described below; and
 1.2
    
    otherwise, in whole or in part upon certification as to non-U.S. beneficial
ownership in the form set out in the Agency Agreement for interests in a permanent Global
Instrument or, if so provided in the relevant Final Terms, for Definitive Instruments.
 2
    
    Permanent Global Instruments
 Each permanent Global Instrument will be exchangeable, free of charge to the holder, on or
after its Exchange Date in whole but not, except as provided under Partial Exchange of
Permanent Global Instruments, in part for Definitive Instruments if the permanent Global
Instrument is held on behalf of Euroclear or Clearstream, Luxembourg or any other clearing
system (an Alternative Clearing System) and any such clearing system is closed for business
for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise)
or announces an intention permanently to cease business or in fact does so.
 In the event that a Global Instrument is exchanged for Definitive Instruments, such Definitive
Instruments shall be issued in Specified Denomination(s) only. An Instrumentholder who holds a
principal amount of less than the minimum Specified Denomination will not receive a definitive
Instrument in respect of such holding and would need to purchase a principal amount of
Instruments such that it holds an amount equal to one or more Specified Denominations.
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3
    
    Partial Exchange of Permanent Global Instruments
 For so long as a permanent Global Instrument is held on behalf of a clearing system and
the rules of that clearing system permit, such permanent Global Instrument will be exchangeable
in part on
one or more occasions for Definitive Instruments (a) if principal in respect of any Instruments
is not paid when due or (b) if so provided in, and in accordance with, the Conditions (which
will be set out in the relevant Final Terms) relating to Partly Paid Instruments.
 4
    
    Delivery of Instruments
 If the Global Instrument is a CGN, on or after any due date for exchange the holder of a
Global Instrument may surrender such Global Instrument or, in the case of a partial exchange,
present it for endorsement to or to the order of the Issuing and Paying Agent. In exchange for
any Global Instrument, or the part of that Global Instrument to be exchanged, the relevant
Issuer will (a) in the case of a temporary Global Instrument exchangeable for a permanent
Global Instrument, deliver, or procure the delivery of, a permanent Global Instrument in an
aggregate nominal amount equal to that of the whole or that part of a temporary Global
Instrument that is being exchanged or, in the case of a subsequent exchange, endorse, or
procure the endorsement of, a permanent Global Instrument to reflect such exchange or (b) in
the case of a Global Instrument exchangeable for Definitive Instruments, deliver, or procure
the delivery of, an equal aggregate nominal amount of duly executed and authenticated
Definitive Instruments or if the Global Instrument is a NGN, the Issuer will procure that
details of such exchange be entered pro ratain the records of the relevant clearing system. In
this Prospectus, Definitive Instruments means, in relation to any Global Instrument, the
Definitive Instruments for which such Global Instrument may be exchanged (if appropriate,
having attached to them all Coupons and Receipts in respect of interest or Instalment Amounts
that have not already been paid on the Global Instrument and a Talon). Definitive Instruments
will be security printed in accordance with any applicable legal and stock exchange
requirements in or substantially in the form set out in the Schedules to the Trust Deed. On
exchange in full of each permanent Global Instrument, the relevant Issuer will, if the holder
so requests, procure that it is cancelled and returned to the holder together with the relevant
Definitive Instruments.
 5
    
    Exchange Date
 Exchange Date means, in relation to a temporary Global Instrument, the day falling after
the expiry of 40 days after its issue date and, in relation to a permanent Global Instrument, a
day falling not less than 60 days, or in the case of failure to pay principal in respect of any
Instruments when due 30 days, after that on which the notice requiring exchange is given and on
which banks are open for business in the city in which the specified office of the Issuing and
Paying Agent is located and in the city in which the relevant clearing system is located.
 6
    
    Amendment to Conditions
 The temporary Global Instruments and permanent Global Instruments contain provisions that
apply to the Instruments which they represent, some of which modify the effect of the terms and
conditions of the Instruments set out in this Prospectus. The following is a summary of certain
of those provisions:
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7
    
    Payments
 No payment falling due after the Exchange Date will be made on any Global Instrument
unless exchange for an interest in a permanent Global Instrument or for Definitive Instruments
is improperly withheld or refused. Payments on any temporary Global Instrument issued in
compliance with the D Rules before the Exchange Date will only be made against presentation of
certification as to non-U.S. beneficial ownership in the form set out in the Agency Agreement.
All payments in respect of Instruments represented by a Global Instrument will be made against
presentation for endorsement and, if no further payment falls to be made in respect of the
Instruments, surrender of that Global Instrument to or to the order of the Issuing and Paying
Agent or such other Paying Agent as shall have been notified to the Instrumentholders for such
purpose. If the Global Instrument is a CGN, a record of each payment so made will be endorsed
on each Global Instrument, which endorsement will be prima facieevidence that such payment has
been made in respect of the Instruments. If the Global Instrument is a NGN, the Issuer shall
procure that details of each such payment shall be entered pro ratain the records of the
relevant clearing system and in the case of payments of principal, the nominal amount of the
Instruments recorded in the records of the relevant clearing system and represented by the
Global Instrument will be reduced accordingly. Payments under the NGN will be made to its
holder. Each payment so made will discharge the Issuers obligations in respect thereof. Any
failure to make the entries in the records of the relevant clearing system shall not affect
such discharge.
 8
    
    Prescription
 Claims against an Issuer in respect of Instruments which are represented by a permanent
Global Instrument will become void unless it is presented for payment within a period of 10
years (in the case of principal) and five years (in the case of interest) from the appropriate
Relevant Date (as defined in Condition 7).
 9
    
    Meetings
 The holder of a permanent Global Instrument shall (unless such permanent Global Instrument
represents only one Instrument) be treated as being two persons for the purposes of any quorum
requirements of a meeting of Instrumentholders and, at any such meeting, as having one vote in
respect of each integral currency unit of the Specified Currency of the Instruments for which
it may be exchanged in accordance with its terms.
 10
    
    Cancellation
 Cancellation of any Instrument represented by a permanent Global Instrument which is
required by the Conditions to be cancelled (other than upon its redemption) will be effected by
reduction in the nominal amount of the relevant permanent Global Instrument.
 11
    
    Purchase
 Instruments represented by a permanent Global Instrument may only be purchased by an
Issuer or any of its subsidiary undertakings if they are purchased together with the right to
receive all future payments of interest and Instalment Amounts (if any) on those Instruments.
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12
    
    Issuers Option
 Any option of an Issuer provided for in the Conditions of any Instruments while such
Instruments are represented by a permanent Global Instrument shall be exercised by such Issuer
giving notice to the Instrumentholders within the time limits set out in and containing the
information required by the Conditions, except that the notice shall not be required to contain
the serial numbers of Instruments drawn in the case of a partial exercise of an option and
accordingly no drawing of Instruments shall be required. In the event that any option of such
Issuer is exercised in respect of some but not all of the Instruments of any Series, the rights
of accountholders with a clearing system or Approved
Intermediary in respect of the Instruments will be governed by the standard procedures of
Euroclear and/or Clearstream, Luxembourg (to be reflected in the records of Euroclear and
Clearstream, Luxembourg as either a pool factor or a reduction in nominal amount, at their
discretion) or any other Alternative Clearing System (as the case may be).
 13
    
    Instrumentholders Options
 Any option of the Instrumentholders provided for in the Conditions of any Instruments
while such Instruments are represented by a permanent Global Instrument may be exercised by the
holder of the permanent Global Instrument giving notice to the Issuing and Paying Agent within
the time limits relating to the deposit of Instruments with a Paying Agent set out in the
Conditions substantially in the form of the notice available from any Paying Agent stating the
nominal amount of Instruments in respect of which the option is exercised and at the same time,
where the permanent Global Instrument is a CGN, presenting the permanent Global Instrument for
notation. Where the Global Instrument is an NGN, the Issuer shall procure that details of such
exercise shall be entered pro ratain the records of the relevant clearing system and the
nominal amount of the Instruments recorded in those records will be reduced accordingly.
 14
    
    NGN nominal amount
 Where the Global Note is a NGN, the Issuer shall procure that any exchange, payment,
cancellation, exercise of any option or any right under the Instruments, as the case may be, in
addition to the circumstances set out above shall be entered in the records of the relevant
clearing systems and upon any such entry being made, in respect of payments of principal, the
nominal amount of the Instruments represented by such Global Instrument shall be adjusted
accordingly.
 15
    
    Trustees Powers
 In considering the interests of Instrumentholders while any Global Instrument is held on
behalf of a clearing system, the Trustee may have regard to any information provided to it by
such clearing system or its operator as to the identity (either individually or by category) of
its accountholders with entitlements to such Global Instrument and may consider such interests
as if such accountholders were the holders of the Instruments represented by such Global
Instrument.
 16
    
    Events of Default
 Each Global Instrument provides that the Trustee, at its discretion, may, and if so
requested by holders of at least one-quarter in nominal amount of the Instruments then
outstanding or if so directed by an Extraordinary Resolution, shall cause such Global
Instrument to become due and repayable in the circumstances described in Condition 9 by stating
in the notice to the relevant Issuer the principal amount of such Global Instrument which is
becoming due and repayable. If
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principal in respect of any Instrument is not paid when due,
only the Trustee may enforce the rights of the Instrumentholders against such Issuer under the
terms of the Trust Deed unless the Trustee, having become bound to proceed, fails to do so
within a reasonable time and such failure is continuing.
 17
    
    Notices
 So long as any Instruments are represented by a Global Instrument and such Global
Instrument is held on behalf of a clearing system, notices to the holders of Instruments of
that Series may be given by delivery of the relevant notice to that clearing system for
communication by it to entitled
accountholders in substitution for publication as required by the Conditions or by delivery of
the relevant notice to the holder of the Global Instrument.
 18
    
    Partly Paid Instruments
 The provisions relating to Partly Paid Instruments are not set out in this Prospectus, but
will be contained in the relevant Final Terms and so in the Global Instruments. While any
instalments of the subscription moneys due from the holder of Partly Paid Instruments are
overdue, no interest in a Global Instrument representing such Instruments may be exchanged for
an interest in a permanent Global Instrument or for Definitive Instruments (as the case may
be). If any Instrumentholder fails to pay any instalment due on any Partly Paid Instruments
within the time specified, the relevant Issuer may forfeit such Instruments and shall have no
further obligation to their holder in respect of them.
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USE OF PROCEEDS
 The net proceeds of the issue of each Series of Instruments will be used by the relevant
Issuer for
its general corporate purposes. If in respect of any particular issue of Instruments, there is
a particular identified use of proceeds, this will be stated in the applicable Final Terms.
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DESCRIPTION OF NATIONAL GRID PLC
 Overview
 National Grid plc (National Grid) is the name of the holding company of the group of
companies (the National Grid Group) which was the product of a recommended merger between
National Grid Group plc (NGG) and Lattice Group plc (Lattice). This merger was implemented
by way of a court sanctioned scheme of arrangement under the Companies Act 1985 between Lattice
and its shareholders and was completed on 21 October 2002. Following the closing of the merger,
NGG was renamed National Grid Transco plc and on 26 July 2005 it changed its name to National
Grid plc.
 National Grid was incorporated in England and Wales on 11 July 2000 as a public company limited
by shares under the Companies Act 1985. The address of National Grids registered office is 1-3
Strand, London, WC2N 5EH and the telephone number of the registered office is +44 20 7004 3000.
 National Grid is, directly or indirectly, the ultimate holding company of all the companies in
the National Grid Group and its assets are substantially comprised of shares in such companies.
National Grid does not conduct any other business and is accordingly dependent on the other
members of the National Grid Group and revenues received from them.
 Introduction
 National Grids principal operations are ownership and operation of regulated electricity
and gas infrastructure networks in the U.K. and the U.S. serving around 19 million customers
directly and many more indirectly. National Grid also has interests in related markets,
including electricity interconnectors, metering services, liquefied natural gas storage (LNG)
and importation facilities and property in the U.K., LNG storage and transportation and
non-regulated gas transmission pipelines in the U.S. and a generator of electricity on Long
Island New York.
 Business overview
 Principal activities and markets
 National Grids principal businesses are:
 
    
    Gas and electricity transmission;
    
    Gas distribution;
    
    Electricity distribution and generation; and
    
    Non-regulated businesses.
 The performance of these businesses are reported by National Grid by segment reflecting the
management responsibilities and economic characteristics of each activity. These segments are:
 
    
    Transmission  U.K.;
    
    Transmission  U.S.;
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
    
    Gas Distribution  U.K.;
    
    Gas Distribution  U.S.; and
    
    Electricity Distribution & Generation  U.S.
 Its remaining non-regulated businesses are not treated as a segment but are instead classified
and reported as non-regulated and other operations. Further information about each of these
segments and other operations is set out below.
 National Grids principal subsidiaries are: National Grid Electricity Transmission plc, which
owns its U.K. electricity transmission business; National Grid Gas plc, which owns its U.K. gas
transmission and U.K. gas distribution businesses; and National Grid USA, the holding company
for its U.S. electricity transmission, electricity distribution and generation and gas
distribution businesses. National Grids U.S. more significant subsidiary companies include
KeySpan Corporation, The Brooklyn Union Gas Company, KeySpan Gas East Corp., Niagara Mohawk
Power Corporation, Massachusetts Electric Company, Narragansett Electric Company, Granite State
Electric Company, Energy North Natural Gas, Essex Gas Company and New England Power Company.
 Transmission
 National Grids transmission business operates in both the U.K. and the U.S. As a consequence
of the respective economic and regulatory environments, National Grid reports the results of
its transmission business as two segments; Transmission  U.K. and Transmission  U.S.
 Transmission  U.K.
 National Grid owns the electricity transmission system in England and Wales. Its electricity
assets comprise approximately 7,200 kilometres of overhead line, about 690 kilometres of
underground cable and 337 substations at 241 sites. National Grid is the Great Britain System
Operator responsible for managing the operation of both the England and Wales transmission
system that it owns 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.
National Grid is also designated as system operator for the new offshore electricity regime.
 National Grid also owns the gas national transmission system in Great Britain. This comprises
7,600 kilometres of high pressure pipe and 26 compressor stations, connecting to eight regional
distribution networks, large consumers and third party independent systems for onward
transportation of gas to end consumers. National Grid operates the gas transmission network,
which includes balancing supply and demand, maintaining satisfactory system pressures and
ensuring gas quality standards are met.
 National Grid owns and operates the U.K. assets of, and a portion of the sub-sea cables that
comprise the electricity connector between England and France, as part of a joint arrangement
with the French transmission operator. National Grid also owns and operates three liquefied
natural gas storage facilities in the U.K.
 Transmission  U.S.
 In the U.S., National Grid owns and operates an electricity transmission network of
approximately 13,800 kilometres spanning upstate New York, Massachusetts, Rhode Island, New
Hampshire and Vermont. Its U.S. transmission facilities operate at voltages ranging from 69 kV
to 345kV, utilising
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nearly 13,700 kilometres of overhead lines, nearly 140 kilometres of underground cable and 524
substations. National Grid is the largest electricity transmission service provider in New
England and New York by reference to the length of these high-voltage transmission lines. In
addition, it owns and operates a 224 kilometre direct current transmission line rated at 450 kV
that is a key section of an interconnector between New England and Canada.
 Gas Distribution
 National Grids gas distribution business operates in the U.K. and the U.S. As with its
transmission business, as a consequence of the differences in the respective economic and
regulatory environments, National Grid reports the results of this business as two segments;
Gas Distribution  U.K. and Gas Distribution  U.S.
 Gas Distribution  U.K.
 National Grids U.K. gas distribution segment comprises four of Great Britains eight
regional gas distribution networks, consisting of approximately 132,000 kilometres of
distribution pipelines. National Grid transports gas on behalf of approximately 25 active gas
shippers from the national gas transmission network through its four regional gas distribution
networks to around 10.8 million consumers. National Grid also manages the national emergency
number for all of Great Britains gas distribution networks and any other gas transporters in
the UK.
 Gas Distribution  U.S.
 National Grids U.S. gas distribution segment comprises gas distribution networks
providing services to 3.5 million consumers across the northeastern U.S., located in service
territories in upstate New York, New York City, Long Island, Massachusetts, New Hampshire and
Rhode Island. Its network of approximately 58,000 kilometres of gas pipelines covers an area of
approximately 26,400 square kilometres.
 Electricity Distribution & Generation U.S.
 National Grids electricity distribution and generation business operates in the northeastern
U.S. It is reported as a single segment in National Grids financial statements as Electricity
Distribution & Generation U.S.
 National Grid is one of the leading electricity distribution service providers in the
northeastern U.S., as measured by energy delivered, and one of the largest utilities in the
U.S., as measured by the number of electricity distribution customers. Its U.S. electricity
distribution business serves approximately 3.4 million electricity customers over a network of
116,700 circuit kilometres in New England and New York. National Grids electricity
distribution system spans upstate New York, Massachusetts, Rhode Island and New Hampshire,
which, with the system on Long Island owned by the Long Island Power Authority (LIPA),
provides energy to customers that include domestic homes, small and large commercial and
industrial enterprises.
 National Grid owns 57 electricity generation plants on Long Island that together provide 4.1 GW
of power under contract to LIPA. It also manages the fuel supplies for LIPA to fuel its plants
and purchases energy, capacity and ancillary services in the open market on LIPAs behalf.
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Non-regulated businesses and other activities
 National Grid Metering Limited and Utility Metering Services Limited (Onstream) provide
installation, maintenance and meter reading services to gas and electricity suppliers in the
regulated and unregulated markets respectively. These businesses provide services for an asset
base of around 20 million domestic, industrial and commercial gas meters. National Grid Grain
LNG Limited (Grain LNG) is an LNG import terminal constructed and operated in the U.K.
National Grid Property is responsible for the management of all National Grids major occupied
property in the U.K. and the management, clean-up and disposal of surplus properties (largely
comprising former gas works). Britned is a joint venture between National Grid and the Dutch
transmission system operator, to build and operate a 260km 1,000 MW subsea electricity link
between the Netherlands and the U.K. U.S. non-regulated businesses include LNG storage, LNG
road transportation, unregulated transmission pipelines, West Virginia gas fields and home
energy services activities that were acquired as part of the KeySpan acquisition.
 In addition to these non-regulated activities, other activities comprise the following:
 
    
    xoserve delivers transportation transactional services on behalf of the major gas
network transportation companies in Great Britain, including National Grid;
    
    Fulcrum Connections Limited provides gas connections and associated design services on
behalf of gas distribution networks in the U.K.; and
    
    Blue- NG is a joint venture between National Grid and 20C Ltd to construct and operate
a new type of highly efficient power station that reduces the gas pressure in the grid as
required and simultaneously generates renewable power and heat.
 Regulatory environment
 National Grids securities are listed on the London Stock Exchange and on the New York
Stock Exchange and, as a consequence, National Grid is subject to regulation by the Financial
Services Authority in the U.K., and by the U.S. Securities and Exchange Commission (SEC) and
the exchanges themselves.
 National Grid operates in a highly regulated environment, which means that good relationships
with economic and safety regulators, in addition to its other stakeholders, are essential
because they set the frameworks within which its businesses operate.
 Transmission
 U.K. electricity and gas transmission
 In the U.K., electricity transmission is regulated under the Electricity Act 1989 (the
Electricity Act), under which NGET is licensed to participate in the transmission of
electricity. This licence permits NGET to act both as an owner of electricity transmission
assets in England and Wales, and to act as the Great Britain System Operator (separate and
unrelated companies are licensed to own electricity transmission assets in Scotland).
 Gas transportation is regulated under the Gas Act 1986 (the Gas Act), under which National
Grid Gas plc (NGG), a subsidiary of National Grid, is licensed to transport gas. NGG holds
two gas transporter licences, one in respect of its national transmission system and one in
respect of the four gas distribution networks which it owns and operates.
 National Grids interest in the Anglo-French electricity interconnector is also regulated by an
interconnector licence granted under the Electricity Act.
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Supervision of NGETs and NGGs compliance with these Acts and licences is conducted by the Gas
and Electricity Markets Authority (GEMA), through its executive arm, the Office of Gas and
Electricity Markets (Ofgem).
 U.S. electricity transmission
 The transmission activities of each of National Grids U.S. public utilities are regulated by
the relevant state utility commission in the states in which it operates (including New York,
Massachusetts, Rhode Island, Vermont, and New Hampshire) and by the Federal Energy Regulatory
Commission (FERC).
 In relation to electricity transmission, the FERC, amongst other things, sets service standards
for the transmission business of these U.S. public utilities, approves reliability standards
set by the North American Electric Reliability Council (NERC) (an industry self regulatory
body), determines the potential levels of return on regulated transmission service and approves
wholesale electricity market rules. Although FERC has siting authority over transmission lines
in certain limited circumstances, the siting of transmission lines, as well as the ultimate
recovery of transmission rates from retail customers is principally regulated by the relevant
state utility commission (in addition to the other matters regulated by these commissions).
 Gas Distribution
 U.K. gas distribution
 As stated above in relation to electricity and gas transmission, in the U.K., gas
distribution is regulated under the Gas Act, under which NGG is licensed to transport gas. One
of NGGs gas distribution transporter licences authorises it to operate the four distribution
networks which it owns. This licence sets out the revenue restriction applicable to each such
network.
 As with its U.K. electricity and gas transmission activities, supervision of National Grids
compliance with the relevant legislation and the gas transporter licence applicable to the
distribution networks which it owns is the responsibility of GEMA acting through Ofgem.
 U.S. gas distribution
 The gas distribution activities of each of National Grids U.S. public utilities operate
under various franchise agreements that provide certain rights and obligations regarding gas
facilities and the provision of gas service within each state that they operate. The gas
distribution activities are regulated by the relevant state utility commission in the states in
which they operate (including New York, Massachusetts, Rhode Island and New Hampshire.) In
addition, there are federal and state laws and regulations covering both general business
practices and the gas business in particular, especially with respect to safety, energy
transactions, customer sales and service, levels of performance, rates, finances and
environmental concerns.
 Electricity Distribution & Generation
 The U.S. electricity distribution activities of each of National Grids U.S. public utilities
are regulated by the relevant state utility commission in the states in which these operate
(including New York, Massachusetts, Rhode Island and New Hampshire).
 As with gas distribution, the U.S. state utility commissions, amongst other things, set
distribution service standards, retail rates for end use customers and determine the potential
levels of return on distribution service. However, FERC regulates wholesale electricity sales
by National Grids U.S. public utilities, to the extent that any sales are made.
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With respect to the wholesale generation activities of National Grid, the FERC regulates
wholesale generation, including pricing. However, relevant state authorities retain authority
over issues relating to siting, expansion of facilities and certain environmental matters.
 Other
 National Grid Metering Limited is indirectly subject to the metering price controls
imposed through National Grids gas transporter licences. Grain LNG has been granted exemptions
by Ofgem from the provisions of the Gas Act which would otherwise regulate the terms on which
it would have had to offer third parties access to phases 1, 2 and 3 of the project. Generally,
however, National Grids other businesses tend to be affected to a lesser extent or only
indirectly by related regulatory regimes.
 Regulatory developments
 Transmission
 U.K. electricity and gas transmission
 National Grids U.K. electricity and gas transmission businesses are subject to regulation of
their revenues (otherwise known as price controls) under their respective transmission
licences. The present price control arrangements for these businesses cover the period from 1
April 2007 to 31 March 2012. The key elements of the current price controls for gas and
electricity transmission are a 4.4 per cent. post-tax real rate of return on the regulatory
asset values, a £4.4 billion baseline five year capital expenditure allowance and a £1.2
billion five year operating expenditure allowance.
 National Grid has also accepted Ofgems final proposals for the system operator schemes for
both gas and electricity transmission:
 (i)
    
    covering the external costs of its system operation roles to apply for one year from
1 April 2009; and(ii)
    
    the internal costs of system operation to apply for the five years from 1 April 2007.
 These proposals have been implemented through licence changes to the relevant licences.
 For electricity transmission, National Grid also has a balancing services incentive scheme that
covers the external costs incurred in balancing the system. For 2009/10, National Grid has
accepted an incentive scheme with a cost target between £600 million and £630 million, such
that National Grid retains 25% (up to a cap of £15 million) of any savings below £600 million,
and National Grid lose 15% (down to a collar of £15 million) of any costs in excess of £630
million.
 U.S. electricity transmission
 Incentives applicable to transmission investments in service after 31 December 2008 require a
separate petition filing with the FERC. On 17 September 2008, National Grid and Northeast
Utilities jointly filed a petition with the FERC to recover financial incentives for the New
England East-West Solution (NEEWS) project, a series of interrelated transmission upgrades in
the tri-state area of Connecticut, Massachusetts and Rhode Island, in which National Grid will
invest approximately $0.6 billion (approximately £0.4 billion). The FERC granted incentives
returns for NEEWS in November 2008.
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National Grid has been pursuing improvements to the New York regional planning process, and
working with the New York Independent System Operator (NYISO) and the New York Public Service
Commission (NYPSC) to achieve this. The New York transmission owners are conducting a joint
study to identify improvements needed to address ageing transmission infrastructure and the
integration of renewables. As permitted under National Grids rate plan, in December 2007 it
petitioned the NYPSC for deferred recovery of necessary investment on major capital programmes
for calendar year 2008 that are incremental to the capital programmes reflected in current
rates. The NYPSC issued its order on National Grids deferral petition in September 2008 that
recognised that the total programme of investment is a major program or expenditure that
satisfies the NYPSCs materiaility requirement for deferrals. National Grid was required to
file an additional petition based upon its actual 2008 investments after the end of the
calendar year addressing the NYPSCs remaining requirements for deferrals, including whether
the spending is incremental to the existing rate plan. This supplemental petition was filed on
21 April 2009. National Grid anticipates that it will also petition for deferred recovery of
qualifying incremental investment for calendar years 2009 and 2010.
 Gas distribution
 U.K. gas distribution
 The price controls that apply to National Grids UK gas distribution networks for the period
from 1 April 2008 to 31 March 2013 allows for capital expenditure of £0.7 billion and mains
replacement expenditure of £2.2 billion over that period, together with an allowed rate of
return of 4.3 per cent. on a post-tax real basis. These allowances are expected to grow the
asset base by almost 25 per cent. over the next five years.
 Electricity Distribution and Generation
 As permitted under National Grids rate plan, in December 2007 it petitioned the NYPSC for
deferred recovery of necessary investment on major capital programmes for calendar year 2008
that are incremental to the capital programmes reflected in current rates. The NYPSC issued its
order on National Grids deferral petition in September 2008 that recognised that the total
programme of investment is a major program or expenditure that satisfies the NYPSCs
materiaility requirement for deferrals. National Grid was required to file an additional
petition based upon its actual 2008 investments after the end of the calendar year addressing
the NYPSCs remaining requirements for deferrals, including whether the spending is incremental
to the existing rate plan. This supplemental petition was filed on 21 April 2009. National Grid
anticipates that it will also petition for deferred recovery of qualifying incremental
investment for calendar years 2009 and 2010.
 National Grid filed a rate case with the NYPSC on 23 May 2009 for an $84 million rate increase
in natural gas delivery rates for its upstate New York utility. National Grid filed a
settlement proposal on 13 February 2009, which included a two year rate plan, a $39.4 million
rate increase in year one resulting in an overall 5.1% increase on customer bills. The
settlement contains a 10.2% return on equity, revenue decoupling, a new rate for low income
customers, recovery of commodity related bad debt expense, a full recovery of New York State
Energy Research and Development Authority (NYSERDA) auction rate debt, and full or partial
recovery of new long-term debt, depending upon the interest rate. The NYPSC approved the
settlement and the new rates became effective on 20 May 2009.
 In both the Massachusetts and Rhode Island rate plans, National Grid filed rate applications to
increase electricity distribution rates. In Massachusetts, National Grid requested a $111.3
million
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increase effective for rates beginning January 1, 2010. In Rhode Island, National Grid
requested a $75.3 million increase effective for rates January 1, 2010. Based on a request from
the Rhode Island Division of Public Utilities and Carriers, which was agreed to by National
Grid and approved by the Rhode Island Public Utilities Commission, new rates will be suspended
until March 1, 2010, National Grid may recover lost revenues for the period January 1, 2010
through February 28, 2010.
 On 30 January 2009, National Grid generation filed with the FERC for a rate increase for the
electricity generated and supplied to Long Island Power Authority (LIPA) under the Power Supply
Agreement (PSA). The PSA is a 15 year agreement with rates initially set in 1998 and reset
every five years. Rates were last reset in 2004. The filing seeks to reset the rate for the
final five-year term of the PSA. The PSA also allows for certain annual rate adjustments such
as property tax increases and certain inflationary increases. The filing seeks an increase of
$92 million, rates would have increased $60 million under the existing formula without a
filing. On 31 March 2009, the FERC accepted National Grids proposed tariff effective from 1
February 2009, subject to refund. The order also encourages a negotiated settlement. Absent a
settlement, the issues would be litigated before the FERC.
 Other
 In February 2008, the Gas and Electricity Markets Authority (GEMA) issued a decision to
fine National Grid £41.6 million for a breach of the UK Competition Act 1998 in respect of term
contracts with gas suppliers entered into by its UK metering services business in 2004.
National Grid subsequently appealed this decision to the Competition Appeal Tribunal (the
Tribunal). On 29 April 2009 the Tribunal overturned the decision in part and reduced the fine
to £30 million but also upheld the original decision in part. National Grid applied to the
Court of Appeal for leave to appeal against the Tribunals judgment on 14 July 2009.
 In October 2008, National Grid informed Ofgem that its mains replacement activity carried out
within the UKs West Midlands Alliance partnership may have been misreported. National Grid and
Ofgem have jointly appointed Ernst & Young to carry out a full investigation to determine the
extent of the issue. At present it is too early to determine the likely outcome of the
investigation and any potential consequences.
 In May 2007, KeySpan received a civil investigative demand from the Antitrust Division of the
United States Department of Justice, requesting the production of documents and information
relating to its investigation of competitive issues in the New York City electricity capacity
market prior to National Grids acquisition of KeySpan. The civil investigative demand is a
request for information in the course of an investigation and does not constitute the
commencement of legal proceedings, and no specific allegations have been made against KeySpan.
In April 2008, National Grid received a second civil investigative demand in connection with
this matter. National Grid believes that KeySpans activity in the capacity market has been
consistent with all applicable laws and regulations. The investigation is ongoing and National
Grid is continuing to cooperate fully.
 Board of Directors
 The Directors of National Grid and their functions and principal activities outside the
National Grid Group, are as follows:
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Principal activities outsideName
    
    Title
    
    the National Grid GroupSir John Parker
    
    Chairman
(Non-Executive)
    
    Non-executive director of
Anglo American plc on 10
July 2009 becoming Chairman
on 1 September 2009,
Non-Executive Director of
Carnival plc and Carnival
Corporation Inc., (US) and
of the European Aeronautic
Defence and Space Company
(EADS), Joint Non-Executive
Chairman of Mondi plc (UK)
and Mondi Ltd (S. Africa)
Deputy Chairman. Director of
D.P. World (Dubai) and
Chancellor of the University
of Southampton.Steven Holliday
    
    Chief Executive
    
    Non-Executive Director of
Marks and Spencer Group plc.Bob Catell
    
    Non-Executive Director
& Deputy Chairman
    
    Co-chair of the Board of the
Downtown Brooklyn
Partnership, Ex officio
Director and Chairman
Emeritus of the Partnership
for New York City Inc., Vice
Chairman of the US National
Petroleum Councils Natural
Gas Committee and Board
member of the Business
Council of New York, Keyera
Energy Management Ltd,
Sovereign Bankcorp Inc
Advisory Board, and J.P.M
Chase Inc., Metropolitan
Advisory Board.Steve Lucas
    
    Finance Director
    
    Non-Executive Director of
Compass Group PLC.Mark Fairbairn
    
    Executive Director,
Gas Distribution
    
    NoneTom King
    
    Executive Director
Electricity
Distribution and
Generation
    
    NoneNick Winser
    
    Executive Director,
Transmission
    
    Non-Executive Director of
Kier Group plc, co-Chair of
the Energy Research
PartnershipLinda Adamany
    
    Non-Executive Director
    
    NonePhilip Aiken
    
    Non-Executive Director
    
    Chairman of Robert Walters
plc, Non-Executive Director
and Senior Independent
Director of Kazakhmys plc
and senior advisor to
Macquarie Capital (Europe)
LimitedJohn Allan
    
    Non-Executive Director
    
    Non-executive Director and
Chairman elect of DSG
International plc. Non
Executive Director of ISS.
Member of the
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Principal activities outsideName
    
    Title
    
    the National Grid GroupSupervisory
Boards of both Lufthansa AG
and Deutsche Postbank.
Member of the University of
Edinburgh Campaign Board.Kenneth Harvey
    
    Non-Executive Director
(Senior Independent
Director)
    
    Non-Executive Chairman of
Pennon Group plc.Stephen Pettit
    
    Non-Executive Director
    
    Non-Executive Director of
Halma plc. and Chairman of
ROK plc. Member of BT plcs
Equality of Access Board.Maria Richter
    
    Non-Executive Director
    
    Director of Pro Mujer
International, The Pantry
Inc., The Vitec Group plc
and the Bessemer Group Inc.George Rose
    
    Non-Executive Director
    
    Finance Director of BAe
Systems plc, Non-Executive
Director of SAAB AB and a
member of the Financial
Reporting Review Panel.
 The business address of each of the above is 1-3 Strand, London WC2N 5EH.
 There are no potential conflicts of interest between the duties to National Grid of the
Directors listed above and their private interests or other duties the Directors.
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DESCRIPTION OF NATIONAL GRID ELECTRICITY TRANSMISSION PLC
 Overview
 National Grid Electricity Transmission plc (National Grid Electricity Transmission or
NGET), a wholly-owned subsidiary of National Grid, is the owner of the electricity
transmission system in England and Wales and operator of the electricity transmission system
throughout Great Britain.
 NGET is the holder of an electricity transmission licence (the Transmission Licence) under
the Electricity Act. The Electricity Act requires all persons who participate in the
transmission of the electricity to hold a licence to do so (if not exempted from such
requirement)
 The Transmission Licence permits NGET to:
 
    
    own electricity transmission assets in England and Wales (there are separate licences
in respect of transmission assets in Scotland); and
    
    operate the electricity transmission system throughout Great Britain (that is,
including the transmission systems owned by the electricity transmission licences in
Scotland) as well as being system operator designate in relation to offshore transmission
systems.
 NGET was incorporated in England and Wales on 1 April 1989 as a public company limited by
shares under the Companies Act 1985. The address of NGETs registered office is 1-3 Strand,
London, WC2N 5EH and the telephone number of the main switchboard at the registered office is
+44 20 7004 3000.
 Business of NGET
 NGET derives the vast majority of its turnover and profits from charges for services
provided by its transmission business (the Transmission Business) to, inter alia, generators,
interconnector owners and users, distributors, suppliers and directly-connected customers.
 As the electricity transmission asset owner in England and Wales, NGET:
 
    
    owns and maintains assets comprising approximately 7,200 kilometres of high-voltage
overhead lines, about 690 kilometres of underground cables and 337 substations at 241
sites;
    
    develops the network to accommodate new connections and disconnections; and
    
    manages a programme of asset replacement and investment to ensure the long term
reliability of the system.
 Revenue from charges for using the transmission network and charges for connections made before
March 1990 is controlled by revenue restriction conditions set out in the Transmission Licence.
This revenue restriction, known as a price control, takes into account, among other factors,
operating expenditure, capital expenditure and cost of capital (which for the current five-year
price control which commenced on 1 April 2007, is at a post-tax real rate of 4.4 per cent. on
its regulatory asset value). In addition, the costs of non-domestic rates and the fees payable
by NGET to the Gas and Electricity Markets Authority (GEMA) under the Transmission Licence
are passed directly through to NGETs customers through its charges.
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NGET is permitted to set charges for connections to the transmission system in Great Britain
made since March 1990 to recover the costs directly or indirectly incurred in providing
connections, together with a reasonable rate of return on such costs.
 As Great Britain System Operator (GBSO), NGET is responsible for the residual balancing of
generation and demand in the Great Britain electricity market and ensuring the secure, reliable
and efficient delivery of electricity in real-time. As GBSO, NGET is the counterparty for all
connection and use of system agreements in Great Britain with generators, suppliers,
distributors and interconnector owners and users. It levies charges to fund balancing
activities and transmission services which are provided by NGET in England and Wales and by the
transmission system owners in Scotland.
 Revenue from charges for provision of balancing services is usually regulated under an annual
incentive scheme, where benefits of external cost savings in system operation compared to
targets are shared with customers. NGET is also incentivised over the five years of the price
control in relation to its internal costs of providing balancing services and is subject to
wider statutory and licence obligations in relation to the external costs of providing those
services.
 National Grid Electricity Transmission has four wholly-owned subsidiaries, NG Leasing Limited,
NGET Finance (No 1) plc, NGC Employee Shares Trustee Limited (dormant) and Elexon Limited
(solely as nominee shareholder).
 Board of Directors
 The Directors of NGET and their principal activities outside the NGET Group are as follows:
 Name
    
    Title
    
    Principal Activities outside NGET GroupNick Winser
    
    Chief Executive
    
    Executive Director of National Grid
plc. Director of National Grid Gas
plc, National Grid Grain LNG Limited.Stuart Humphreys
    
    Finance Director
    
    Director of National Grid Gas plc,
National Grid Interconnectors Ltd,
National Grid Grain LNG Ltd and
Britned Development Ltd.Malcolm Cooper
    
    Director
    
    Group Tax and Treasury Director of
National Grid plc, Director of British
Transco Capital Inc., British Transco
Finance Inc, National Grid Commercial
Holdings Ltd, National Grid Gas plc,
National Grid Holdings One plc,
National Grid International Limited,
Lattice Group plc, National Grid
Insurance Company (Isle of Man) Ltd,
The Association of Corporate
Treasurers, Chief Financial Officer
and Treasurer of KeySpan Corporation
and Treasurer of National Grid USA.Mark Fairbairn
    
    Director
    
    Executive Director of National Grid
plc, Director of National Grid Gas
Holdings Ltd and National Grid Gas
plc.
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Name
    
    Title
    
    Principal Activities outside NGET GroupPaul Whittaker
    
    Director
    
    UK Director of Regulation for National
Grid plc, Director of National Grid
Gas plc and Fulcrum Connections
Limited.
 The business address of the Directors of NGET is 1-3 Strand, London WC2N 5EH.
 There are no potential conflicts of interest between the duties to NGET of any of the Directors
listed above and their private interests or other duties.
 Regulation
 The electricity industry in Great Britain is regulated under the Electricity Act, as
modified by the Utilities Act 2000 and Energy Act 2004. This legislation establishes the GEMA
as the specialist economic sectoral regulator with responsibility for both the electricity
industry and the onshore gas industry and provides that various activities may not be conducted
unless the person carrying on those activities is either exempted from the requirement to hold
a licence, or holds the relevant licence. The licensable activities established under the
Electricity Act are the generation, participation in transmission, distribution and supply of
electricity together with participation in the operation of an electricity interconnector.
 The Electricity Act (together with the Transmission Licence) requires NGET to:
 
    
    develop, operate and maintain an efficient, co-ordinated and economical system of
electricity transmission; and
    
    facilitate competition in the supply and generation of electricity.
 GEMA is responsible for the supervision and enforcement of the licensing regime (although the
Secretary of State does retain some limited functions). Under the Electricity Act, GEMAs (and
the Secretary of States) principal objective in carrying out its functions is to protect the
interests of consumers in relation to electricity conveyed by distribution systems or
transmission systems, wherever appropriate by promoting effective competition between persons
engaged in, or in commercial activities connected with, the generation, transmission,
distribution or supply of electricity or the provisions or use of electricity interconnectors.
 GEMA must, in carrying out its functions, have regard to:
 
    
    the need to secure that all reasonable demands for electricity are met; and
    
    the need to secure that licence holders are able to finance their activities.
 The Transmission Licence can only be amended in accordance with the Electricity Act. The
Transmission Licence came into effect on privatisation and, unless revoked, will continue in
force until determined by not less than 25 years notice by the Secretary of State. The
Transmission Licence may also be revoked by the Secretary of State on shorter notice
(immediately or not less than 30 days) in specified circumstances, including non-payment of
fees or penalties, insolvency, cessation of the Transmission Business and non-compliance with
enforcement orders made by GEMA and non-compliance with orders issued under certain provisions
of general competition legislation.
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The Transmission Licence contains conditions which have the effect of ring fencing NGETs
business. These include:
 
    
    prohibiting NGET from carrying on activities other than those permitted by the
Transmission Licence;
    
    requiring that the business has sufficient managerial and financial resources available
to it to conduct its licensed activities;
    
    requiring NGET to maintain an investment grade issuer credit rating;
    
    prohibiting NGET from creating indebtedness (except in limited circumstances) other
than on an arms length basis on normal commercial terms for one of its permitted
purposes;
    
    prohibiting the creation of cross-default obligations; and
    
    prohibiting NGET from giving or receiving any cross-subsidy to or from any other group
business.
 If NGET is in default of any of the ring fence obligations, it is prohibited from declaring
and paying a dividend.
 NGET is prohibited by the Transmission Licence from purchasing or otherwise acquiring
electricity on its own account for the purpose of sale to third parties. Since the introduction
of the New Electricity Trading Arrangements (NETA) in April 2001, the exceptions to the
prohibition have changed so that NGET may purchase electricity where required as part of the
activity of procuring balancing services in its role as GBSO or where the purchase or
acquisition has the consent of GEMA.
 Recent Developments
 The present price control arrangements for NGETs electricity network cover the period
from 1 April 2007 to 31 March 2012. The key elements of these proposals are a 4.4 per cent.
post-tax real rate of return on its regulatory asset value, a £3.5 billion baseline five year
capital expenditure allowance and a £0.9 billion five year operating expenditure allowance.
NGET has also accepted Ofgems final proposals for the system operator schemes:
 (i)
    
    covering the external costs of its system operation role to apply for one year from 1
April 2008 with a system operation cost target between £529 million and £544 million, such
that it retains 25% (up to a cap of £15 million) of any savings below £529 million, and it
loses 25% (down to a collar of £15 million) of any costs in excess of £544 million; and(ii)
    
    the internal costs of system operation to apply for the five years from 1 April 2007.
 These proposals have been implemented through licence changes to NGETs Transmission Licence.
 The decline of the UKs North Sea gas reserves and the transition to a low carbon economy, are
the two long-term security of supply and environmental challenges on which National Grid is
focused. National Grid is working with the UK electricity generators and Ofgem to ensure that
the connection of renewable generation to the transmission network can be facilitated quickly
and within National Grids current licencing framework.
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The price controls contain allowances for transmission reinforcement works to accommodate the
growing impact of renewable energy from Scotland. Works to upgrade the two double circuits
connecting Scotland and England are underway and due for completion in 2010 at a total cost of
around £110 million. Further works are being carried out to increase the capability of the
transmission system in the northeast and northwest of England so that increased transfers from
Scotland can be transported to demand centres in England and Wales. The further works will be
completed in 2011 at a total cost of around £230 million.
 As at 31 March 2009, network access is being sought by approximately 9 GW of renewable
generation projects in Scotland consisting of just over 100 projects, each with connection
agreements with National Grid. For England and Wales, connection offers have been made to an
additional 8 GW of renewable generation projects. National Grid has continued to work closely
with the Scottish transmission companies to find innovative solutions to advancing new
generation projects in Scotland. National Grid has introduced measures to allow generators who
are ready and able to connect to do so before wider reinforcement works. Importantly, on 8 May
2009, Ofgem confirmed that they will agree derogations from the GB Security and Quality
Standards of Supply to advance the connection of 450 MW of Scottish renewable generation.
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UNITED KINGDOM TAXATION
 The following is a summary of the United Kingdom withholding taxation treatment at the
date hereof in relation to payments of principal and interest in respect of the Instruments.
The comments do not deal with other United Kingdom tax aspects of acquiring, holding or
disposing of Instruments. The comments relate only to the position of persons who are absolute
beneficial owners of the Instruments. Prospective Instrumentholders should be aware that the
particular terms of issue of any series of Instruments as specified in the relevant Final Terms
may affect the tax treatment of that and other series of Instruments. The following is a
general guide and should be treated with appropriate caution. Instrumentholders who are in any
doubt as to their tax position should consult their professional advisers. Instrumentholders
who may be liable to taxation in jurisdictions other than the United Kingdom in respect of
their acquisition, holding or disposal of the Instruments are particularly advised to consult
their professional advisers as to whether they are so liable (and if so under the laws of which
jurisdictions), since the following comments relate only to certain United Kingdom taxation
aspects of payments in respect of the Instruments. In particular, Instrumentholders should be
aware that they may be liable to taxation under the laws of other jurisdictions in relation to
payments in respect of the Instruments even if such payments may be made without withholding or
deduction for or on account of taxation under the laws of the United Kingdom.
 1
    
    U.K. Withholding Tax on U.K. Source Interest
 The Instruments issued by an Issuer which carry a right to interest will constitute
quoted Eurobonds provided they are and continue to be listed on a recognised stock exchange
within the meaning of section 1005 of the Income Tax Act 2007. The London Stock Exchange is a
recognised stock exchange for these purposes. Section 1005 Income Tax Act 2007 provides that
securities will be treated as listed on the London Stock Exchange if they are included in the
Official List by the United Kingdom Listing Authority and are admitted to trading on the London
Stock Exchange. Whilst the Instruments are and continue to be quoted Eurobonds, payments of
interest by the Issuer on the Instruments may be made without withholding or deduction for or
on account of United Kingdom income tax.
 In all cases falling outside the exemption described above, interest on the Instruments may
fall to be paid by the Issuer under deduction of United Kingdom income tax at the basic rate
(currently 20 per cent.) subject to such relief as may be available under the provisions of any
applicable double taxation treaty or to any other exemption which may apply. However, this
withholding will not apply if the relevant interest is paid on Instruments with a maturity date
of less than one year from the date of issue and which are not issued under arrangements the
effect of which is to render such Instruments part of a borrowing with a total term of a year
or more.
 2
    
    Provision of Information
 Instrumentholders should note that where any interest on Instruments or amounts due on
redemption of any Instruments which constitute deeply discounted securities as defined in
Chapter 8 of Part 4 of the Income Tax (Trading and Other Income) Act 2005 is paid to them (or
to any person acting on their behalf) by the relevant Issuer or any person in the United
Kingdom acting on behalf of such Issuer (a paying agent), or is received by any person in the
United Kingdom acting on behalf of the relevant Instrumentholder (other than interest only
collected passively, for
 89




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example solely by clearing a cheque for foreign interest or arranging the clearing of such a cheque) (a
collecting agent), then the relevant Issuer, the paying agent or the collecting agent (as the
case may be) may, in certain cases, be required to supply to HM Revenue & Customs details of
the payment and certain details relating to the Instrumentholder (including the
Instrumentholders name and address). These provisions will apply whether or not the interest
has been paid subject to withholding or deduction for or on account of United Kingdom income
tax and whether or not the Instrumentholder is resident in the United Kingdom for United
Kingdom taxation purposes. Such details provided to HM Revenue & Customs may, in certain cases,
be passed by HM Revenue & Customs to the tax authorities of other jurisdictions. However, in
relation to amounts payable on the redemption of such Instruments, HM Revenue & Customs
published practice indicates that HM Revenue & Customs will not exercise its power to obtain
information where such amounts are paid or received on or before 5 April 2010.
 3
    
    Other Rules Relating to United Kingdom Withholding Tax
 
    
    Instruments may be issued at an issue price of less than 100 per cent. of their
principal amount. Any discount element on any such Instruments will not generally be
subject to any United Kingdom withholding tax pursuant to the provisions mentioned above,
but may be subject to reporting requirements as outlined above.
    
    Where Instruments are to be, or may fall to be, redeemed at a premium, as opposed to
being issued at a discount, then any such element of premium may constitute a payment of
interest. Payments of interest are subject to United Kingdom withholding tax and reporting
requirements as outlined above.
    
    Where interest has been paid under deduction of United Kingdom income tax,
Instrumentholders who are not resident in the United Kingdom may be able to recover all or
part of the tax deducted if there is an appropriate provision in any applicable double
taxation treaty and an appropriate claim is submitted to HM Revenue & Customs by the
recipient of the interest.
    
    The references to interest above mean interest as understood in United Kingdom tax
law. The statements above do not take any account of any different definitions of
interest or principal which may prevail under any other law or which may be created by
the terms and conditions of the Instruments or any related documentation.
    
    The above description of the United Kingdom withholding tax position assumes that there
will be no substitution of an Issuer and does not consider the tax consequences of any
such substitution.
 4
    
    EU Savings Directive
 Under EU Council Directive 2003/48/EC on the taxation of savings income (the Directive),
each Member State is required to provide to the tax authorities of another Member State details
of payments of interest or other similar income paid by a person within its jurisdiction to, or
collected by such a person for, an individual resident in that other Member State or to certain
other limited types of entity established in that other Member State; however, for a
transitional period, Austria, Belgium and Luxembourg may instead apply a withholding system in
relation to such payments, deducting tax at rates rising over time to 35 per cent. The
transitional period is to terminate at the end of the first full fiscal year following
agreement by certain non-EU territories to the exchange of information relating to such
payments.
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Also, a number of non-EU territories, and certain dependent or associated territories of
certain Member States, have agreed to adopt similar measures (either provision of information
or transitional withholding) in relation to payments made by a person within its jurisdiction
to, or collected by such a person for, an individual resident in a Member State or certain
limited types of entity established in a Member State. In addition, the Member States have
entered into reciprocal provision of information or transitional withholding arrangements with
certain of those dependent or associated territories in relation to payments made by a person
in a Member State to, or collected by such a person for, an individual resident in one of those
territories or certain limited types of entity established in one of those territories.
 On 15 September 2008, the European Commission issued a report to the Council of the European
Union on the operation of the Directive, which included the Commissions advice on the need for
changes to the Directive. On 13 November 2008, the European Commission published a more
detailed proposal for amendments to the Directive, which included a number of suggested
changes. The European Parliament approved an amended version of this proposal on 24 April 2009.
If any of those proposed changes are made in relation to the Directive, they may amend or
broaden the scope of the requirements described above. Investors who are in any doubt as to
their position should consult their professional advisers.
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PLAN OF DISTRIBUTION
 Summary of Agreement
 Subject to the terms and on the conditions contained in a dealer agreement dated 24 July
2009 (as amended or supplemented from time to time), between the Issuers, the Permanent Dealers
and the Arranger (the Dealer Agreement), the Instruments will be offered on a continuous
basis by each of the Issuers to the Permanent Dealers. However, the Issuers have reserved the
right to issue Instruments directly on their own behalf to dealers which are not Permanent
Dealers. The Instruments may also be issued by each of the Issuers through the Dealers, acting
as agents of the Issuers. The Dealer Agreement also provides for Instruments to be issued in
syndicated Tranches which are jointly and severally underwritten by two or more Dealers. The
commissions in respect of an issue of Instruments on a syndicated basis will be stated in the
relevant Final Terms. Each of the Issuers have agreed to indemnify the Dealers against certain
liabilities in connection with the offer and sale of the Instruments.
 Selling Restrictions
 United States
 The Instruments have not been and will not be registered under the United States
Securities Act of 1933 as amended (the Securities Act) and may not be offered or sold within
the United States or to, or for the account or benefit of, U.S. persons except in certain
transactions exempt from the registration requirements of the Securities Act. Terms used in
this paragraph have the meanings given to them by Regulation S under the Securities Act.
 Instruments in bearer form having a maturity of more than one year are subject to U.S. tax law
requirements and may not be offered, sold or delivered within the United States or its
possessions or to a U.S. person, except in certain transactions permitted by U.S. tax
regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal
Revenue Code and regulations under it.
 Each Dealer has agreed and each further Dealer appointed under the Programme will be required
to agree that, except as permitted by the Dealer Agreement, it will not offer, sell or deliver
the Instruments of any identifiable Tranche, (a) as part of their distribution at any time or
(b) otherwise until 40 days after completion of the distribution of such Tranche as determined,
and certified to the relevant Issuer, by the Issuing and Paying Agent, or in the case of
Instruments issued on a syndicated basis, the Lead Manager, within the United States or to, or
for the account or benefit of, U.S. persons, and it will have sent to each dealer to which it
sells Instruments during the distribution compliance period a confirmation or other notice
setting forth the restrictions on offers and sales of the Instruments within the United States
or to, or for the account or benefit of, U.S. persons.
 In addition, until 40 days after the commencement of the offering, an offer or sale of
Instruments within the United States by any dealer (whether or not participating in the
offering) may violate the registration requirements of the Securities Act.
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Public Offer Selling Restriction under the Prospectus Directive
 In relation to each Member State of the European Economic Area which has implemented the
Prospectus Directive (each, a Relevant Member State), each Dealer has represented, warranted
and agreed that with effect from and including the date on which the Prospectus Directive is
implemented in that Relevant Member State (the Relevant Implementation Date) it has not made
and will not make an offer of Instruments which are the subject of the offering contemplated by
the Prospectus as completed by the final terms in relation thereto to the public in that
Relevant Member State except that it may, with effect from and including the Relevant
Implementation Date, make an offer of Instruments to the public in that Relevant Member State:
 (a)
    
    at any time to legal entities which are authorised or regulated to operate in the
financial markets or, if not so authorised or regulated, whose corporate purpose is solely
to invest in securities;(b)
    
    at any time to any legal entity which has two or more of (1) an average of at least
250 employees during the last financial year; (2) a total balance sheet of more than
43,000,000 and (3) an annual net turnover of more than 50,000,000, as shown in its last
annual or consolidated accounts;(c)
    
    at any time to fewer than 100 natural or legal persons (other than qualified
investors as defined in the Prospectus Directive) subject to obtaining the prior consent
of the relevant Dealer or Dealers nominated by the Issuer for any such offer;(d)
    
    at any time if the denomination per Instrument being offered amounts to at least
50,000; or(e)
    
    at any time in any other circumstances falling within Article 3(2) of the Prospectus
Directive,
 provided that no such offer of Instruments referred to in (a) to (e) above shall require the
Issuer or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive
or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.
 For the purposes of this provision, the expression an offer of Instruments to the public in
relation to any Instruments in any Relevant Member State means the communication in any form
and by any means of sufficient information on the terms of the offer and the Instruments to be
offered so as to enable an investor to decide to purchase or subscribe the Instruments, as the
same may be varied in that Member State by any measure implementing the Prospectus Directive in
that Member State.
 United Kingdom
 Each Dealer has represented, warranted and agreed that:
 (a)
    
    in relation to any Instruments which have a maturity of less than one year, (i) it is
a person whose ordinary activities involve it in acquiring, holding, managing or disposing
of investments (as principal or agent) for the purposes of its business and (ii) it has
not offered or sold and will not offer or sell any Instruments other than to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or as agent) for the purposes of their businesses or who it is
reasonable to expect will acquire, hold, manage or dispose of investments (as principal or
agent) for the purposes of their businesses where the issue of the Instruments would
otherwise constitute a contravention of Section 19 of the FSMA by the relevant Issuer;(b)
    
    it has only communicated or caused to be communicated and will only communicate or
cause to be communicated an invitation or inducement to engage in investment activity
(within the
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meaning of Section 21 of the FSMA) received by it in connection with the issue
or sale of any Instruments in circumstances in which Section 21(1) of the FSMA does not
apply to the relevant Issuer; and(c)
    
    it has complied and will comply with all applicable provisions of the FSMA with
respect to anything done by it in relation to any Instruments in, from or otherwise
involving the United Kingdom.
 Japan
 The Instruments have not been and will not be registered under Financial Instruments and
Exchange Law of Japan (the Financial Instruments and Exchange Law). Accordingly, each of the
Dealers has represented, warranted and agreed that it has not, directly or indirectly, offered
or sold and will not, directly or indirectly, offer or sell any Instruments in Japan or to, or
for the benefit of, any resident of Japan or to others for re-offering or re-sale, directly or
indirectly, in Japan or to, or for the benefit of, any resident of Japan except pursuant to an
exemption from the registration requirements of, and otherwise in compliance with the Financial
Instruments and Exchange Law and other relevant laws and regulations of Japan. As used in this
paragraph, resident of Japan means any person resident in Japan, including any corporation or
other entity organised under the laws of Japan.
 General
 These selling restrictions may be modified by the agreement of the relevant Issuer and the
Dealers following a change in a relevant law, regulation or directive. Any such modification
will be set out in the Final Terms issued in respect of the issue of Instruments to which it
relates or in a supplement to this Prospectus.
 No action has been or will be taken in any country or jurisdiction by the Issuers or the
Dealers that would permit a public offering of Instruments, or possession or distribution of
any offering material in relation thereto, in any country or jurisdiction where action for that
purpose is required. Persons into whose hands this Prospectus or any Final Terms comes are
required by the Issuers and the Dealers to comply with all applicable laws and regulations in
each country or jurisdiction in or from which they purchase, offer, sell or deliver Instruments
or have in their possession or distribute such offering material, in all cases at their own
expense.
 Each Dealer has agreed that it will comply with all relevant laws, regulations and directives
in each jurisdiction in which it purchases, offers, sells or delivers Instruments or has in its
possession or distributes this Prospectus, any other offering material or any Final Terms and
neither the Issuers nor any other Dealer shall have responsibility for such material.
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FORM OF FINAL TERMS
 The Final Terms in respect of each Tranche of Instruments will be substantially in the
following form, duly supplemented (if necessary), amended (if necessary) and completed to reflect
the particular terms of the relevant Instruments and their issue. Text in this section appearing in
italics does not form part of the form of the Final Terms but denotes directions for completing the
Final Terms.
 Final Terms dated []
 [NATIONAL GRID PLC/NATIONAL GRID ELECTRICITY TRANSMISSION PLC] *
 PART A  CONTRACTUAL TERMS
  Prospectus Directive www.londonstockexchange.com/en-gb/pricesnews/marketnews
 The following alternative language applies if the first tranche of an issue which is being
increased was issued under a Prospectus with an earlier date.
 Conditions  Prospectus Directive  www.londonstockexchange.com/en-gb/pricesnews/marketnews
 
 *
    
    Delete as applicable. 95




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[Include whichever of the following apply or specify as Not Applicable (N/A). Note that the
numbering should remain as set out below, even if Not Applicable is indicated for individual
paragraphs or sub-paragraphs. Italics denote guidance for completing the Final Terms.]
 [When completing final terms or adding any other final terms or information consideration should be
given as to whether such terms or information constitute significant new factors and consequently
trigger the need for a supplement to the Prospectus under Article 16 of the Prospectus Directive.]
 1.
    
    (i) Issuer:
    
    [National Grid plc/National
Grid Electricity Transmission plc]*2.
    
    (i) Series Number:
    
    [](ii) Tranche Number:
    
    [](If fungible with
an existing Series,
details of that
Series, including
the date on which
the Instruments
become fungible).]3.
    
    Specified Currency or
Currencies:
    
    []4.
    
    Aggregate Nominal
Amount:
    
    [][(i)] Series:
    
    [][(ii) Tranche:
    
    []5.
    
    Issue Price:
    
    [ ] per cent of the Aggregate Nominal Amount [plus accrued
interest from [insert date] ( if applicable)]6.
    
    (i) Specified Denominations:
    

[][][Note  where multiple denominations above 50,000 (or
equivalent) are being used the following sample wording
should be followed:[50,000] and integral multiples of [1,000] in excess
thereof [up to and including [99,000]. No Instruments in
definitive form will be issued with a denomination above
[99,000]].](ii) Calculation Amount:
    
    [If only one Specified Denomination, insert the Specified
Denomination. If more than one Specified Denomination,
insert the highest common factor] [Note: There must be a
common factor in the case of two or more Specified
Denominations]
 
 *
    
    Delete as applicable
    
    Instruments which have a maturity of less than
one year must have a minimum denomination of £100,000 (or it equivalent in
other currencies) 96




---



##### 



7.
    
    [(i)] Issue Date:
    
    [][(ii)] Interest Commencement Date
    
    [Specify/Issue Date/Not Applicable]8.
    
    Maturity Date:
    
    [specify date or (for Floating Rate Instruments) Interest
Payment Date falling in or nearest to the relevant month
and year]9.
    
    Interest Basis:
    
    [[] per cent. Fixed Rate][[specify reference
rate] +/ [] per cent. Floating Rate][Zero Coupon][Index Linked Interest][Other (specify)](further particulars specified below)10.
    
    Redemption/Payment Basis:
    
    [Redemption at par][Index Linked Redemption][Dual Currency][Partly Paid][Instalment][Other (specify)]11.
    

Change of Interest or
Redemption/Payment Basis:
    
    [Specify details of any provision for convertibility of
Instruments into another interest or redemption/ payment
basis]12.
    
    Put/Call Options:
    
    [Investor Put][Issuer Call][(further particulars specified below)]13.
    
    (i) Status of the Instruments:
    
    Senior(ii) Date [Board] approval for
issuance of Instruments
obtained:
    
    [] [and [], respectively]](N.B Only relevant where Board (or similar) authorisation
is required for the particular tranche of Instruments)]14.
    
    Method of distribution:
    
    [Syndicated/Non-syndicated]PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE15.
    
    Fixed Rate Instrument
Provisions
    
    [Applicable/Not Applicable](If not applicable, delete the remaining sub-paragraphs of
this paragraph)(i) Rate[(s)] of Interest:
    
    [] per cent. per annum [payable
[annually/semi-annually/quarterly/monthly] in arrear](ii) Interest Payment Date(s):
    
    [] in each year(iii) Fixed Coupon Amount[(s)]:
    
    [] per Calculation Amount
 
 
    
    If Instruments are issued by National Grid,
only insert any additional put/call option other than the National Grid
Restructuring Put contained in Condition 5.6 and the call option contained in
Condition 5.5.1. This does not include the National Grid or NGET Restructuring
Put in Condition 5.6. 97




---



##### 



(iv) Broken Amount(s):
    
    [] per Calculation Amount, payable on the Interest Payment
Date falling [in/on] [ ](v) Day Count Fraction
(Condition 3.2.5):
    
    [30/360 / Actual/Actual ([ICMA]/ISDA)/other](vi) Determination Dates
(Condition 3.2.5):
    
    [] in each year (insert regular interest payment dates,
ignoring issue date or maturity date in the case of a long
or short first or last coupon. N.B. only relevant where Day
Count Fraction is Actual/Actual (ICMA))(vii) Other terms relating to
the method of calculating
interest for Fixed Rate
Instruments:
    
    [Not Applicable/give details]16.
    
    Floating Rate Instrument Provisions
    
    [Applicable/Not Applicable]

(If not applicable, delete the remaining sub-paragraphs of
this paragraph)(i) Interest Period(s):
    
    [](ii) Specified Interest Payment
Dates:
    
    [](iii) Business Day Convention:
    
    [Floating Rate Convention/ Following Business Day
Convention/ Modified Following Business Day Convention/Preceding
Business Day Convention/ other (give details)](iv) First Interest Payment
Date:
    
    [](v) Business Centre(s)
(Condition 3.2.5):
    
    [](vi) Manner in which the
Rate(s) of Interest is/are to
be determined:
    
    [Screen Rate
Determination/ISDA
Determination/other (give details)](vii) Interest Period Date(s):
    
    (Not Applicable unless different from Interest Payment Date)(viii) Party responsible for
calculating the Rate(s) of
Interest and Interest Amount(s)
(if not the Calculation Agent):
    
    [](ix) Screen Rate Determination
(Condition 3.2.3(b)): Reference Rate:
    
    [] Interest
Determination Date(s):
    
    [[    ][TARGET] Business Days in [specify city] for
[specify currency] prior to [the first day in each Interest
Accrual
 98




---



##### 



Period/each Interest Payment Date]] Relevant Screen Page:
    
    []- Reference Banks (if
Primary Source is
Reference Banks):
    
    [Specify five](x) ISDA Determination
(Condition 3.2.3(a)): Floating Rate Option:
    
    [] Designated Maturity:
    
    [] Reset Date:
    
    []- [ISDA Definitions:
(if different from
those set out in the
Conditions)
    
    [2000/2006]](xi) Margin(s):
    
    [+/-][] per cent. per annum(xii) Minimum Rate of Interest:
    
    [] per cent. per annum(xiii) Maximum Rate of Interest:
    
    [] per cent. per annum(xiv) Day Count Fraction
(Condition 3.2.5):
    
    [](xv) Fall back provisions,
rounding provisions,
denominator and any other terms
relating to the method of
calculating interest on
Floating Rate Instruments, if
different from those set out in
the Conditions:
    
    []17.
    
    Zero Coupon Instrument Provisions
    
    [Applicable/Not Applicable]

(If not applicable, delete the remaining sub-paragraphs of
this paragraph)(i) Amortisation Yield

(Condition 5.4):
    
    [] per cent. per annum(ii) Day Count Fraction
(Condition 3.2.5):
    
    [](iii) Any other formula/basis
of determining amount payable:
    
    []
 99




---



##### 



18.
    
    Index-Linked Interest Instrument
    
    [Applicable/Not Applicable]

(If not applicable, delete the remaining sub-paragraphs of
this paragraph)(i) Index/Formula/other
variable:
    
    [give or annex details](ii) Interest Rate:
    
    [](iii) Party responsible for
calculating the Rate(s) of
Interest, Interest Amount and
Redemption Amount(s) (if not
the Calculation Agent):
    
    []

[](iv) Provisions for
determining Coupon calculated
by reference to Index and/or
Formula and/or other variable:(v) Interest Determination
Date(s)
    
    [](vi) Provisions for
determining Coupon where
calculation by reference to
Index and/or Formula is
impossible or impracticable or
otherwise disrupted
    
    []
[Include a description of market disruption or settlement
disruption events and adjustment provisions if appropriate](vii) Interest Payment Dates:
    
    [](viii) First Interest Payment
Date:
    
    [](ix) Interest Period(s):
    
    [](x) Business Day Convention:
    
    [Following Business Day Convention/Modified Following
Business Day Convention/Preceding Business Day
Convention/other (give details)](xi) Minimum Indexation Factor:
    
    [Not Applicable/specify](xii) Business Centre(s)
(Condition 3.2.5):
    
    [](xiii) Maximum Indexation
Factor:
    
    [Not Applicable/specify](xiv) Limited Indexation
    
    [] per cent per annum
 100




---



##### 



Month(s) or Period for
calculation of Limited
Indexation Factor:(xv) Base Index Figure:
    
    [](xvi) Day Count Fraction
(Condition 3.2.5):
    
    [](xvii) Index or Index
Figure (Condition 4.1):
    
    Sub-paragraph [(i)/(ii)/(iii)] of the definition of Index
or Index Figure as set out in Condition 4.1 shall apply(xviii)Reference Gilt:
    
    []
 19.
    
    Dual Currency Instrument Provisions
    
    [Applicable/Not Applicable](If not applicable, delete the remaining sub-paragraphs of
this paragraph)(i) Rate of Exchange/method of
calculating Rate of Exchange:
    
    [give details](ii) Calculation Agent, if any,
responsible for calculating the
principal and/or interest due:
    
    [](iii) Provisions applicable
where calculation by reference
to Rate of Exchange impossible
or impracticable:
    
    []


[Include a description of market disruption or settlement
disruption events and adjustment provisions if appropriate](iv) Person at whose option
Specified Currency(ies) is/are
payable:
    
    [](v) Day Count Fraction
(Condition 3.2.5):
    
    []PROVISIONS RELATING TO REDEMPTION20.
    
    Residual Holding Call Option
    
    [Applicable/Not Applicable](If not applicable, delete the remaining sub-paragraphs of
this paragraph)(i) Residual Holding Percentage:
    
    per cent.(ii) Party responsible for
calculating the Residual
Holding Redemption Amount (if
not the Calculation Agent):
    
    []
 101




---



##### 



(iii) Benchmark Security:
    
    [Specify Government Security/swap benchmark](iv) Benchmark Spread:
    
    [] per cent. per annum(v) Benchmark Day Count
Fraction:
    
    [][(vi) Other relevant provisions:
    
    []]21.
    
    Call Option§
    
    [Applicable/Not Applicable](If not applicable, delete the remaining sub-paragraphs of
this paragraph)(i) Optional Redemption Date(s):
    
    [](ii) Optional Redemption
Amount(s) of each Instrument
and method, if any, of
calculation of such amount(s):
    
    [] per Calculation Amount(iii) If redeemable in part:(a) Minimum nominal
amount to be redeemed:
    
    [] per Calculation Amount(b) Maximum nominal
amount to be redeemed:
    
    [] per Calculation Amount(iv) Option Exercise Date(s):
    
    [](v) Notice period (if other
than as set out in the
Conditions)
    
    []


[Include a description of market disruption or settlement
disruption events and adjustment provisions if appropriate]22.
    
    Put
Option**
    
    [Applicable/Not Applicable]

(If not applicable, delete the remaining sub-paragraphs of
this paragraph)(i) Optional Redemption Date(s):
    
    [](ii) Optional Redemption
Amount(s) of each Instrument
and method, if any, of
calculation of such amount(s):
    
    [] per Calculation Amount(iii) Option Exercise Date(s):
    
    []
 
 §
    
    This does not include the tax call in
Condition 5.2 or the call option contained in Condition 5.5.1**
    
    This does not include the National Grid or
NGET Restructuring Put in Condition 5.6. 102




---



##### 



(iii) Notice period (if
other than as set out in the
Conditions)
    
    []23.
    
    NGET Restructuring Put Option:
    
    [Applicable/Not Applicable]24.
    
    Final Redemption Amount of each
Instrument:
    
    [] per Calculation Amount(i)  Index/Formula:
    
    [give or annex details](ii)  Calculation Agent
responsible for calculating the
Final Redemption Amount:
    
    [](iii) Provisions for determining
Final Redemption Amount where
calculated by reference to Index
and/or Formula and/or other
variable:
    
    [give or annex details](iv) Determination Date(s):
    
    [](v) Provisions for determining
Final Redemption Amount where
calculation by reference to
Index and/or Formula and/or
other variable is impossible or
impracticable or otherwise
disrupted:
    
    [](vi) Payment Date:
    
    [Include a description of market
disruption or settlement
disruption events and adjustment
provisions if appropriate](vii) Minimum Final Redemption
Amount:
    
    [] per Calculation Amount(viii) Maximum Final Redemption
Amount:
    
    [] per Calculation Amount25.
    
    Early Redemption Amount(i)   Early Redemption
Amount(s) of each
Instrument payable on
redemption for taxation
reasons (Condition 5.2) or
on Event of Default
    
    []
 103




---



##### 



(Condition 9) or other
early redemption and/or the
method of calculating the
same (if required or if
different from that set out
in the Conditions):(ii)  Redemption for
taxation reasons permitted
on days other than Interest
Payment Dates (Condition
5.2)
    
    [Yes/No](iii) Unmatured Coupons to
become void upon early
redemption (Condition 6.5)
    
    [Yes/No/Not Applicable]GENERAL PROVISIONS APPLICABLE TO THE INSTRUMENTS26.
    
    Form of Instruments:
    
    Bearer Instruments:[temporary Global Instrument
exchangeable for a permanent Global
Instrument which is exchangeable for
Definitive Instruments in the limited
circumstances specified in the
permanent Global Instrument][temporary Global Instrument
exchangeable for Definitive
Instruments in the limited
circumstances specified in the
temporary Global Instrument][permanent Global Instrument
exchangeable for Definitive
Instruments in the limited
circumstances specified in the
permanent Global Instrument]27.
    
    New Global Note
    
    [Yes] [No]28.
    
    Financial Centre(s) or other
special provisions relating to
Payment Dates (Condition 6.6):
    
    [Not Applicable/give details. Note
that this item relates to the date
and place of payment, and not
interest period end dates, to which
items 16(iv) and 18(vii) relate]29.
    
    Talons for future Coupons or
Receipts to be attached to
Definitive Instruments (and dates
on which such Talons mature):
    
    [Yes/No. If yes, give details]30.
    
    Details relating to Partly
Paid Instruments: amount of each
payment comprising the Issue Price
and date on which each payment is
to be made and
    
    [Not Applicable/give details]
 
 
    
    You should only elect yes opposite New
Global Note if you have elected yes to the Section in Part B under the
heading Operational Information entitled Intended to be held in a manner
which would allow Eurosystem eligibility. 104




---



##### 



consequences (if
any) of failure to pay, including
any right of the Issuer to forfeit
the Instruments and interest due
on late payment:31.
    
    Details relating to Instalment
Instruments:
    
    [Not Applicable/give details]-     Amount of each
instalment:
    
    []-      Date on which each
payment is to be made:
    
    []-     Maximum Instalment
Amount:
    
    []-     Minimum Instalment
Amount:
    
    []32.
    
    Redenomination,
renominalisation and
reconventioning provisions:
    
    [Not Applicable/ give details]33.
    
    Consolidation provisions:
    
    [Not Applicable/ give details]34.
    
    Other final terms:
    
    [Not Applicable/give details]
(When adding any other final terms
consideration should be given as to
whether such terms constitute a
significant new factor and
consequently trigger the need for a
supplement to the Prospectus under
Article 16 of the Prospectus
Directive.)DISTRIBUTION35.
    

(i) If syndicated, names of
Managers:
    
    [Not Applicable/give names](ii) Stabilising Manager(s) (if
any):
    
    [Not Applicable/give name(s)]36.
    
    If non-syndicated, name of Dealer:
    
    [Not Applicable/give name]37.
    
    U.S Selling Restrictions:
    
    Reg. S Compliance Category 2;
[TEFRA C]/[TEFRA D]/[TEFRA not
applicable]38.
    
    Additional selling restrictions:
    
    [Not Applicable/give details]
 105




---



##### 



[PURPOSE OF FINAL TERMS
  RESPONSIBILITY
   
  By:Duly authorised
 106




---



##### 



PART B  OTHER INFORMATION *
 1.
    
    LISTING(i)
    
    Listing:
    
    [London/other (specify)/None](ii)
    
    Admission to trading:
    
    [Application has been made by the
Issuer (or on its behalf) for the
Instruments to be admitted to trading
on [] with effect from [].]
[Application is expected to be made by
the Issuer (or on its behalf) for the
Instruments to be admitted to trading
on [] with effect from [].] [Not
Applicable.](Where documenting a fungible issue
need to indicate that original
Instruments are already admitted to
trading.)(iii)
    
    Estimate of total
expenses
related to admission
to trading:
    
    []2.
    
    RATINGSRatings:
  The Instruments to be issued have been rated:[S & P: []]
[Moodys: []]
[[Fitch: []]
[[Other]: []](The above disclosure should reflect the rating allocated to
Instruments of the type being issued under the Programme
generally or, where the issue has been specifically rated, that
rating.)3.
    
    [INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUENeed to include a description of any interest, including conflicting ones, that is material to
the issue/offer, detailing the persons involved and the nature of the interest. May be
satisfied by the inclusion of the following statement:So far as the Issuer is aware, no person involved in the offer of the Instruments has an
interest material to the offer.][(When adding any other description, consideration should be given as to whether such
matters described constitute significant new factors and consequently trigger the need for
a supplement to the Prospectus under Article 16 of the Prospectus Directive.)]
 
 *
    
    If an issue of Instruments is (i) NOT admitted
to trading on a regulated market within the European Economic Area and (ii)
only offered in the European Economic Area in circumstances where a prospectus
is not required to be published under the Prospectus Directive the Issuer may
elect to amend and/or delete certain of the above paragraphs of Part B. 107




---



##### 



4.
    
    REASONS FOR THE OFFER, ESTIMATED NET PROCEEDS AND TOTAL EXPENSES[(i)
    
    Reasons for the offer
    
    [](See [Use of Proceeds] wording in
Prospectus  if reasons for offer
different fromgeneral corporate purposes
will need to include those reasons here.)][(ii)]
    
    Estimated net proceeds:
    
    [](If proceeds are intended for more than
one use will need to split out and present
in order of priority. If proceeds
insufficient to fund all proposed uses
state amount and sources of other
funding.)[(iii)
    
    Estimated total expenses:
    
    []
[Include breakdown of expenses.]
([If the Instruments are derivative
securities for which Annex XII of the
Prospectus Directive Regulation applies it
is] only necessary to include disclosure
of net proceeds and total expenses at (ii)
and (iii) above where disclosure is
included at (i) above.)]*5.
    
    [FixedRATEInstruments only YIELDIndication of yield:
    
    []The yield is calculated at the Issue Date on the
basis of the Issue Price. It is not an indication of
future yield. ]6.
    

[Index-Linked Instruments only PERFORMANCE OF INDEX/FORMULA/OTHER VARIABLE AND OTHER
INFORMATION CONCERNING THE UNDERLYINGNeed to include details of where past and future performance and volatility of the
index/formula/other variable can be obtained. Where the underlying is an index need to include
the name of the index and a description if composed by the Issuer and if the index is not
composed by the Issuer need to include details of where the information about the index can be
obtained. Where the underlying is not an index need to include equivalent information. Include
other information concerning the underlying required by Paragraph 4.2 of Annex XII of the
Prospectus Directive Regulation and a clear and comprehensive explanation of how the value of
the Notes is affected by the value of the underlying][(When completing this paragraph, consideration should be given as to whether such matters
described constitute significant new factors and consequently trigger the need for a
supplement to the Prospectus under Article 16 of the Prospectus Directive.)]The Issuer [intends to provide post-issuance information [specify what information will be
reported and where it can be obtained]] [does not intend to provide post-issuance
information]*.
 
 *
    
    Required for derivative securities to which
Annex XII to the Prospectus Directive Regulation applies. 108




---



##### 



7.
    
    [Dual Currency Instruments only PERFORMANCE OF RATE[S] OF EXCHANGENeed to include details of where past and future performance and volatility of the relevant
rate[s] can be obtained.]*[(When completing this paragraph, consideration should be given as to whether such matters
described constitute significant new factors and consequently trigger the need for a
supplement to the Prospectus under Article 16 of the Prospectus Directive.)]8.
    
    OPERATIONAL INFORMATIONISIN Code:
    
    []Common Code:
    
    []Any clearing
system(s) other
than Euroclear Bank
S.A./N.V. and
Clearstream
Banking, société
anonymeand the
relevant
identification
number(s):
    
    [Not Applicable/give name(s) and number(s) [and address(es)]]Delivery:
    
    Delivery [against/free of] paymentNames and addresses
of initial Paying
Agent(s):
    
    []Names and addresses
of additional
Paying Agent(s) (if
any):
    
    []Intended to be held
in a manner which
would allow
Eurosystem
eligibility:
    
    [Yes][No] [Note that the designation Yes simply means that
the Instruments are intended upon issue to be deposited with
Euroclear or Clearstream, Luxembourg as Common Safekeeper
and does not necessarily mean that the Instruments will be
recognised as eligible collateral for Eurosystem monetary
policy and intra-day credit operations by the Eurosystem
either upon issue or at any or all times during their life.
Such recognition will depend upon satisfaction of the
Eurosystem eligibility criteria.][Include this text if Yes
selected in which case the Instruments must be issued in NGN
form]9.
    
    GENERALThe aggregate principal
amount of
Instruments issued has been
translated into
Euro at the rate of [],
producing a sum of
(for Instruments not
denominated in Euro):
    
    [Not Applicable/[[Euro]][]]
 
 *
    
    Required for derivative securities to which
Annex XII to the Prospectus Directive Regulation applies. 109




---



##### 



Additional steps that may only be taken
following approval by an Extraordinary
Resolution in accordance with Condition
11.1:
    
    [Not Applicable/give details]
 110




---



##### 



GENERAL INFORMATION
 1.
    
    The admission of the Programme to listing on the Official List of the U.K. Listing
Authority and to trading on the Market is expected to take effect on or about 29 July
2009. The listing of the Instruments on the Official List will be expressed as a
percentage of their nominal amount (exclusive of accrued interest). Any Tranche of
Instruments intended to be admitted to listing on the Official List of the U.K. Listing
Authority and admitted to trading on the Market will be so admitted to listing and trading
upon submission to the U.K. Listing Authority and the Market (in accordance with their
rules and procedures) of the relevant Final Terms and any other information required by
the U.K. Listing Authority and the Market, subject in each case to the issue of the
relevant Instruments. Prior to official listing, dealings will be permitted by the Market
in accordance with its rules. Transactions will normally be effected for delivery on the
third working day in London after the day of the transaction.However, Instruments may be issued pursuant to the Programme which will not be admitted
to listing and/or trading by the U.K. Listing Authority or the Market or any other
listing authority, stock exchange and/or quotation system or which will be admitted to
listing, trading and/or quotation by such listing authority, stock exchange and/or
quotation system as the relevant Issuer and the relevant Dealer(s) may agree.2.
    
    National Grid has obtained all necessary consents, approvals and authorisations in
the United Kingdom in connection with the issue and performance of the Instruments.3.
    
    NGET has obtained all necessary consents, approvals and authorisations in the United
Kingdom in connection with the issue and performance of the Instruments.4.
    
    The establishment of the Programme was authorised by a resolution of the Finance
Committee of the Board of Directors of National Grid (which was established by a
resolution of the Board of Directors of National Grid passed on 21 October 2002) passed on
23 October 2002.5.
    
    The establishment of the Programme was authorised by resolutions of the Finance
Committee of the Board of Directors of NGET (which was established by a resolution of the
Board of Directors of NGET passed on 19 November 2002) passed on 19 November 2002.6.
    
    The update of the Programme was authorised by a resolution of the Finance Committee
of the Board of Directors of National Grid (which was established by a resolution of the
Board of Directors of National Grid passed on 21 October 2002) passed on 28 October 2004.7.
    
    The update of the Programme was authorised by a resolution of the Finance Committee
of the Board of Directors of NGET (which was established by a resolution of the Board of
Directors of NGET passed on 19 November 2002) passed on 28 October 2004.8.
    
    The Instruments have been accepted for clearance through the Euroclear and
Clearstream, Luxembourg. The appropriate common code and the International Securities
Identification Number in relation to the Instruments of each Series will be specified in
the Final Terms relating thereto. The relevant Final Terms shall specify any other
clearing system(s) as shall have accepted the relevant Instruments for clearance together
with any further appropriate information.9.
    
    Neither National Grid nor any of it subsidiaries is or has been involved in any
governmental, legal or arbitration proceedings (including any such proceedings which are
pending or
 111




---



##### 



threatened of which National Grid is aware) during the 12 months preceding the date of
this Prospectus which may have, or have in such period had, significant effects on the
financial position or profitability of National Grid or of the National Grid Group.10.
    
    Neither NGET nor any of its subsidiaries is or has been involved in any governmental,
legal or arbitration proceedings (including any such proceedings which are pending or
threatened of which NGET is aware) during the 12 months preceding the date of this
Prospectus which may have, or have in such period had, significant effects on the
financial position or profitability of NGET or of the NGET Group.11.
    
    There has been no significant change in the financial or trading position of National
Grid or the National Grid Group since 31 March 2009 and no material adverse change in the
prospects of National Grid since 31 March 2009.12.
    
    Save as disclosed in the section entitled Description of National Grid Electricity
Transmission plc  Recent Developments on page 87, there has been no significant change
in the financial or trading position of NGET or the NGET Group since 31 March 2009 and no
material adverse change in the prospects of NGET since 31 March 2009.13.
    
    Pricewaterhouse Coopers LLP, Chartered Accountants and Registered Auditors of
1 Embankment Place, London, WC2N 6RH (members of the Institute of Chartered Accountants in
England and Wales), have audited, and rendered unqualified audit reports on, the
consolidated financial statements prepared under IFRS of National Grid for the two years
ended 31 March 2009.14.
    
    Pricewaterhouse Coopers LLP, Chartered Accountants and Registered Auditors of 1 Embankment Place, London,
WC2N 6RH (members of the Institute of Chartered Accountants in
England and Wales), have audited, and rendered unqualified audit reports on, the
consolidated financial statements prepared under IFRS of NGET for the two years ended 31
March 2009.15.
    
    Each Instrument, Receipt, Coupon and Talon will bear the following legend: Any United
States person who holds this obligation will be subject to limitations under the United States
income tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the
Internal Revenue Code.16.
    
    For so long as the Programme remains in effect or any Instruments are outstanding,
copies of the following documents may be inspected during usual business hours on any
weekday (Saturdays, Sundays and public holidays excepted), at the registered offices of
the relevant Issuer and the specified office in London of the Issuing and Paying Agent:
 (a)
    
    a copy of this Prospectus together with any supplement to this Prospectus
or further Prospectus;(b)
    
    the Memorandum and Articles of Association of National Grid;(c)
    
    the Memorandum and Articles of Association of NGET;(d)
    
    the audited consolidated accounts of National Grid for the financial
years ended 31 March 2008 and 31 March 2009, respectively, together with the audit
report thereon and any consolidated interim accounts of National Grid published
subsequently to such accounts; and
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(e)
    
    the audited consolidated accounts of NGET for the two financial years
ended 31 March 2008 and 31 March 2009, respectively, together with the audit report
thereon.
 In addition, this Prospectus is and, in the case of Instruments to be admitted to the
Official List and admitted to trading on the Market, the relevant Final Terms will be,
available on the website of the Regulatory News Service operated by the London Stock
Exchange at www.londonstockexchange.com/en-gb/pricesnews/marketnews.
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REGISTERED OFFICE OF EACH OF THE ISSUERS
 
 THE ARRANGER
 HSBC Bank plc
 THE DEALERS
 Barclays Bank PLC
    
    Citigroup Global Markets Limited5 The North Colonnade
    
    Citigroup CentreCanary Wharf
    
    Canada SquareLondon E14 4BB
    
    Canary WharfLondon E14 5LBCommerzbank Aktiengsesllschaft
    
    Deutsche Bank AG, London BranchKaiserstraße 16
    
    Winchester House60311 Frankfurt am Main
    
    1 Great Winchester StreetFederal Republic of Germany
    
    London EC2N 2DBHSBC Bank plc
    
    Merrill Lynch International8 Canada Square
    
    Merrill Lynch Financial CentreLondon E14 5HQ
    
    2 King Edward StreetLondon EC1A 1HQMitsubishi UFJ Securities International plc
    
    Morgan Stanley & Co. International plc6 Broadgate
    
    25 Cabot SquareLondon EC2M 2AA
    
    Canary WarfLondon E14 4QANational Australia Bank Limited
    
    Royal Bank of Canada Europe Limited88 Wood Street
    
    71 Queen Victoria StreetLondon EC2V 7QQ
    
    London EC4V 4DE
 The Royal Bank of Scotland plc
 LEGAL ADVISERS
 To the Dealers
 Clifford Chance LLP
 To the Issuers
 Linklaters LLP
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THE TRUSTEE
 The Law Debenture Trust Corporation p.l.c.
 ISSUING AND PAYING AGENT
 The Bank of New York Mellon
 PAYING AGENT
 KBL European Private Bankers S.A.
 REGISTERED AUDITORS TO EACH OF THE ISSUERS
 PricewaterhouseCoopers LLP
 115