PROSPECTUS DATED 30 JULY 2008
    
    EXHIBIT 2(b).8.1
 
 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
 Banc of America Securities Limited
    
    Barclays CapitalCiti
    
    Deutsche BankDresdner Kleinwort
    
    Mitsubishi UFJ Securities International plcNational Australia Bank Limited
    
    RBC Capital Markets
 The Royal Bank of Scotland




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IMPORTANT NOTICES
 This Prospectus is comprised of a base prospectus (each a Base Prospectus) for the purposes
of Article 5.4 of the Prospectus Directive and relevant implementing measures in the United
Kingdom and for the purpose of giving information with regard to each of (i) National Grid and
each of its subsidiary undertakings, including NGET (together, the National Grid Group) (the
National Grid Prospectus) and (ii) with the exception of the information contained in the
section entitled Description of National Grid plc,
Risk Factors - Risks relating to National
Grid and its business, and the information contained in paragraphs 2, 4, 6, 9, 11, 13, 16(b)
and 16(d) in the section entitled General Information NGET and each of its subsidiary
undertakings (together, the NGET Group) (the NGET Prospectus, together with the National
Grid Prospectus, the Prospectuses and each a Prospectus) which, according to the particular
nature of each Issuer and the Instruments to be issued by it, is necessary to enable investors
to make an informed assessment of the assets and liabilities, financial position, profit and
losses and prospects of the relevant Issuer and the rights attaching to such Instruments.National Grid accepts responsibility for the information contained in the National Grid
Prospectus. To the best of the knowledge of National Grid (having taken all reasonable care to
ensure that such is the case) such information contained in the National Grid Prospectus is in
accordance with the facts and does not omit anything likely to affect the import of such
information.NGET accepts responsibility for the information contained in the NGET Prospectus. To the best
of the knowledge of NGET (having taken all reasonable care to ensure that such is the case)
such information contained in the NGET Prospectus is in accordance with the facts and does not
omit anything likely to affect the import of such information.This Prospectus should be read and construed together with any amendments or supplements hereto
and with any documents deemed to be incorporated herein (see Documents Incorporated By
Reference below) and, in relation to any Tranche (as defined herein) of Instruments, should be
read and construed together with the applicable Final Terms (as defined herein).No person has been authorised to give any information or to make any representation other than
as contained in this Prospectus in connection with the issue or sale of the Instruments and, if
given or made, any such information or representation must not be relied upon as having been
authorised by either of the Issuers or any of the Dealers or the Arranger (as defined in
Overview of the Programme).Neither the delivery of this Prospectus or any Final Terms nor the offering, sale or delivery
of any Instrument shall, under any circumstances, create any implication that the information
contained in this Prospectus is true subsequent to the date hereof, that there has been no
change (or any event reasonably likely to involve a change) in the affairs of either of the
Issuers since the date of this Prospectus or the date upon which this Prospectus has been most
recently amended or supplemented or that there has been no adverse change (or any event
reasonably likely to involve any adverse change) in the financial position of either of the
Issuers since the date of this Prospectus or the date upon which this Prospectus has been most
recently amended or supplemented or that any other information supplied in connection with the
Programme is correct as of any time subsequent to the date on which it is supplied or, if
different, the date indicated in the document containing the same.The distribution of this Prospectus and the offering, distribution or sale of the Instruments
in certain jurisdictions may be restricted by law. Persons into whose possession this
Prospectus or any Final Terms comes are required by the Issuers, the Dealers and the Arranger
to inform themselves about and to observe any such restriction. The Instruments have not been
and will not be registered under the United States Securities Act of 1933, as amended and will
be in bearer form and subject to U.S.
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tax law requirements. Subject to certain exceptions, Instruments may not be offered, sold or
delivered within the United States or to U.S. persons. For a description of certain
restrictions on offers and sales of Instruments and on distribution of this Prospectus or any
Final Terms, see Plan of Distribution.Neither this Prospectus nor any Final Terms constitutes an offer of, or an invitation by or on
behalf of the relevant Issuer or the Dealers to subscribe for, or purchase, any Instruments.None of the Dealers, the Arranger or the Trustee have independently verified the information
contained in this Prospectus. None of the Dealers, the Arranger or the Trustee makes any
representation, express or implied, or accepts any responsibility, with respect to the accuracy
or completeness of any of the information in this Prospectus. Neither this Prospectus nor any
other financial statement is intended to provide the basis of any credit or other evaluation
and should not be considered as a recommendation by either of the Issuers, the Trustee, the
Arranger or the Dealers that any recipient of this Prospectus or any other financial statements
should purchase the Instruments. Each potential purchaser of Instruments should determine for
itself the relevance of the information contained in this Prospectus and its purchase of
Instruments should be based upon such investigation as it deems necessary. None of the Dealers,
the Arranger or the Trustee undertakes to review the financial condition or affairs of either
of the Issuers during the life of the arrangements contemplated by this Prospectus or to advise
any investor or potential investor in the Instruments of any information coming to the
attention of any of the Dealers, the Arranger or the Trustee.In this Prospectus, unless otherwise specified or the context otherwise requires, references to
Euro are to the currency of those member states of the European Union which are participating
in European Economic and Monetary Union pursuant to the Treaty establishing the European
Community, as amended, to Japanese yen are to the lawful currency of Japan, to £ and
Sterling are to the lawful currency of the United Kingdom, to U.S. dollars and U.S.$ are
to the lawful currency of the United States of America, to Canadian dollars are to the lawful
currency of Canada, to Australian dollars are to the lawful currency of Australia, to New
Zealand dollars are to the lawful currency of New Zealand, to Swedish krona are to the
lawful currency of Sweden, to Danish krone are to the lawful currency of Denmark, to Hong
Kong dollars are to the lawful currency of Hong Kong and to Swiss francs are to the lawful
currency of Switzerland.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
    
    
    26SUMMARY OF PROVISIONS RELATING TO THE INSTRUMENTS WHILE IN GLOBAL FORM
    
    
    62USE OF PROCEEDS
    
    
    68DESCRIPTION OF NATIONAL GRID PLC
    
    
    69DESCRIPTION OF NATIONAL GRID ELECTRICITY TRANSMISSION PLC
    
    
    77UNITED KINGDOM TAXATION
    
    
    81PLAN OF DISTRIBUTION
    
    
    84FORM OF FINAL TERMS
    
    
    87GENERAL INFORMATION
    
    
    103
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DOCUMENTS INCORPORATED BY REFERENCE
 Each Base Prospectus should be read and construed in conjunction with (i) the audited consolidated
annual financial statements of each of NGET or National Grid, as the case may be, for the
financial years ended 31 March 2007 and 31 March 2008, together in each case with the audit
report thereon, and (ii) the Terms and Conditions set out on pages 24 to 56 of the prospectus
dated 18 August 2005 relating to the Programme, which have been previously published or are
published simultaneously with this Prospectus and which have been approved by the Financial
Services Authority or filed with it. Such documents shall be deemed to be incorporated in, and
form part of the relevant Base Prospectus, save that any statement contained in a document
which is deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for the purpose of the relevant Base Prospectus to the extent that a statement
contained herein modifies or supersedes such earlier statement (whether expressly, by
implication or otherwise). Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of the relevant Base Prospectus.The relevant Issuer will at its registered office and at the specified offices of the Paying
Agents, make available for inspection during normal business hours and free of charge, upon
oral or written request, a copy of this Base Prospectus and any document incorporated by
reference in this Base Prospectus. Any request for inspection of such documents should be
directed to the specified office of any Paying Agent.
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SUPPLEMENTAL PROSPECTUS
 If at any time an Issuer shall be required to prepare a supplemental prospectus pursuant to
Section 87G of FSMA (Supplemental Prospectus), such Issuer will prepare and make available
to the public an appropriate amendment or supplement to this Prospectus or a further
prospectus which, in respect of any subsequent issue of Instruments to be listed on the
Official List and admitted to trading on the Market, shall constitute a Supplemental
Prospectus as required by the U.K. Listing Authority and Section 87G of FSMA.
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OVERVIEW OF THE PROGRAMME
 The following overview is qualified in its entirety by the remainder of this Prospectus.
 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
    
    Banc of America Securities LimitedBarclays Bank PLCCitigroup Global Markets LimitedDeutsche Bank AG, London BranchDresdner Bank AG London BranchHSBC Bank plcMitsubishi UFJ Securities 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 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 each Series being intended to be interchangeable with all other Instruments of that Series.
Each Series may be
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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 eligible
collateral for Eurosystem
monetary policy and intra-day
credit operations, 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 eligible collateral for
Eurosystem monetary policy and
intra-day credit operations,
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
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the
International Swaps and
Derivatives Association, Inc. or(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 ProgrammeRisks relating to National Grid and its businessesChanges in law or regulation could have an adverse effect on National Grids results of
operations.Many of National Grids businesses are utilities or networks that are subject to regulation by
governments and other authorities. Consequently, changes in law or regulation in the countries
or states in which National Grid operates could adversely affect the Group. Regulatory
decisions concerning, for example, whether licences or approvals to operate are granted or
renewed, whether there has been any breach of the terms of a licence or approval, recovery of
incurred expenditure, the level of permitted revenues and dividend distributions for National
Grids businesses and proposed business development activities, could have an adverse impact on
National Grids results of operations, cash flows, the financial condition of its businesses
and the ability to develop those businesses in the future.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.Aspects of National Grids activities are potentially dangerous, such as the operation and
maintenance of electricity generation facilities and electricity lines and the transmission and
distribution of gas. Electricity and gas utilities also typically use and generate in their
operations hazardous and potentially hazardous products and by-products. In addition, there may
be other aspects of National Grids operations that are not currently regarded or proved to
have adverse effects but could become so, for example, the effects of electric and magnetic
fields. National Grid is subject to laws and regulations relating to pollution, the protection
of the environment, and how National Grid uses and disposes of hazardous substances and waste
materials. These expose National Grid to costs and liabilities relating to its operations and
its properties whether current, including those inherited from predecessor bodies, or formerly
owned by the Group. National Grid is
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also subject to laws and regulations governing health and safety matters, protecting both the
public and its employees. National Grid commits significant expenditure towards complying with
these laws and regulations and to meeting its obligations under negotiated settlements. If
additional requirements are imposed or National Grids ability to recover these costs changes,
this could have a material impact on National Grids businesses and its results of operations
and financial position. Any breach of these obligations, or even incidents that do not amount
to a breach, could adversely affect the results of operations and National Grids reputation.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 may suffer a major network failure or may not be able to carry out critical
non-network operations. Operational performance could be adversely affected by a failure to
maintain the health of the system or network, inadequate forecasting of demand or inadequate
record keeping. This could cause National Grid to fail to meet agreed standards of service or
to be in breach of a licence or approval. Even incidents that do not amount to a breach could
result in adverse regulatory action and financial consequences, as well as harming National
Grids reputation. In addition to these risks, National Grid may be affected by other potential
events that are largely outside of its control such as the impact of weather or unlawful acts
of third parties. Weather conditions can affect financial performance and severe weather that
causes outages or damages infrastructure will adversely affect operational and potentially
business performance and National Grids reputation. Terrorist attack, sabotage or other
intentional acts may also damage National Grids assets or otherwise significantly affect
corporate activities and as a consequence adversely impact the results of operations.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.Earnings maintenance and growth from National Grids regulated gas and electricity businesses
will be affected by its ability to meet or better regulatory efficiency targets set by, or
agreed with, its regulators. In addition, from time to time, National Grid publishes cost and
efficiency savings targets for its businesses. National Grid has also substantially completed
reorganising its operations along lines of business. To meet these targets and standards,
National Grid must continue to improve operational performance, service reliability and
customer service. If National Grid does not meet these targets and standards, or does not
complete implementation of this reorganisation as envisaged, it may not achieve the expected
benefits, its business may be adversely affected and its performance, results of operations and
its reputation may be harmed.Business development activity, including acquisitions and disposals, may be based on incorrect
assumptions or conclusions.There is no certainty that planned levels of synergy and efficiency savings from acquisitions,
such as the acquisition of KeySpan Corporation (KeySpan), will be achieved. This could impact
National Grids ability to enter into other transactions. In addition, significant liabilities
may be overlooked or there may be other unanticipated or unintended effects.Changes to the regulatory treatment of commodity costs may have an adverse effect on the
results of operations.
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Changes in commodity prices could potentially impact National Grids energy delivery
businesses. Current regulatory arrangements in the U.K. and U.S. provide the ability to pass
through virtually all of the increased costs related to commodity prices to consumers. However,
if regulators in the U.K. or the U.S. were to restrict this ability, it could have an adverse
effect on National Grids operating results.National Grids reputation may be harmed if consumers of energy suffer a disruption to their
supply.National Grids energy delivery businesses are responsible for transporting available
electricity and gas. National Grid consults with and provides information to regulators,
governments and industry participants about future demand and the availability of supply.
However, where there is insufficient supply, National Grids role is to manage the relevant
network safely, which, in extreme circumstances, may require National Grid to disconnect
consumers, which may damage its reputation.Fluctuations in exchange rates, interest rates and commodity price indices, in particular in
the U.S. dollar, could have a significant impact on National Grids results of operations
because National Grid has substantial business interests in the U.S. and because of the
significant proportion of National Grids borrowings, derivative financial instruments and
commodity contracts that may potentially be affected by such fluctuations.National Grid has significant operations in the U.S. and is therefore subject to the risks
normally associated with non-domestic operations, including the need to translate U.S. assets
and liabilities, and income and expenses into Sterling, National Grids primary reporting
currency. In addition, National Grids results of operations may be affected because a
significant proportion of its borrowings, derivative financial instruments and commodity
contracts are affected by changes in exchange rates, interest rates and commodity price
indices, in particular, the U.S. dollar to Sterling exchange rate.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 in
the global credit markets and effective tax rates.National Grid is subject to certain covenants and restrictions in relation to its listed debt
securities and its bank lending facilities. National Grid is also subject to restrictions on
financing that have been imposed by regulators. These restrictions may hinder National Grid in
servicing the financial requirements of its current businesses or the financing of newly
acquired or developing businesses. Some of National Grids debt is rated by credit rating
agencies and changes to these ratings may affect both its borrowing capacity and the cost of
those borrowings. National Grids borrowing capacity and cost of borrowing could also be
affected by adverse changes in the global credit markets. The effective rate of tax National
Grid pays may be influenced by a number of factors including changes in law and accounting
standards, the results of which could increase that rate.Future funding requirements of National Grids pension schemes could adversely affect its
results of operations.National Grid participates in a number of pension schemes which together cover substantially
all of its employees. In both the U.K. and the U.S., the principal schemes are defined benefit
schemes where the scheme assets are held independently of National Grids own financial
resources. Estimates of the amount and timing of future funding for these schemes are based on
various actuarial assumptions and other factors including, among other things, the actual and
projected
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market performance of the scheme assets, future long-term bond yields, average life
expectancies and relevant legal requirements. The impact of these assumptions and other factors
may require National Grid to make additional contributions to these pension schemes which, to
the extent they are not recoverable under its price controls or state rate plans, could
adversely affect National Grids results of operations.New or revised accounting standards, rules and interpretations could have an adverse effect on
National Grids reported financial results.The accounting treatment under International Financial Reporting Standards (IFRS), as adopted
by the European Union, of replacement expenditure, regulatory assets, pension and
post-retirement benefits, derivative financial instruments and commodity contracts
significantly affect the way National Grid reports its financial position and results of
operations. As a body of practice develops for IFRS, the application and interpretation of
accounting principles to National Grids circumstances, and to those areas above in particular,
could result in changes in the financial results and financial position that it reports. In
addition, new standards, rules or interpretations may be issued that could also have
significant effects.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.National Grids operations are exposed to the risk that customers and counterparties to its
transactions that owe it money or commodities will not perform their obligations, which could
cause National Grid to incur additional costs. This risk is most significant where its
subsidiaries have concentrations of receivables from gas and electricity utilities and their
affiliates, as well as industrial customers and other purchasers and may also arise where
customers are unable to pay National Grid as a result of increasing commodity prices. A
substantial portion of National Grids KeySpan businesses revenues are derived from a series
of agreements with the Long Island Power Authority (LIPA) pursuant to which National Grid
manages LIPAs transmission and distribution system and supplies the majority of LIPAs
customers electricity needs. These operating agreements provide LIPA with the right to
terminate the agreements for poor performance or upon the occurrence of certain other limited
events of default.National Grids operating results may fluctuate on a seasonal and quarterly basis.National Grids electricity and gas businesses are seasonal businesses and are subject to
weather conditions. In particular, revenues from its gas distribution networks in the U.S. are
weighted towards the end of its financial year, when demand for gas increases due to colder
weather conditions. As a result, National Grid is subject to seasonal variations in working
capital because it purchases gas supplies for storage in the first and second quarters of its
financial year and must finance these purchases. Accordingly, the results of operations for
this business fluctuate substantially on a seasonal basis. In addition, portions of National
Grids electricity businesses are seasonal and subject to weather and related market
conditions. Sales of electricity to customers are influenced by temperature changes.
Significant changes in heating or cooling requirements, for example, could have a substantial
effect. As a result, fluctuations in weather and competitive supply between years may have a
significant effect on National Grids results of operations for both gas and electricity
businesses.
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Factors that may affect NGETs ability to fulfil its obligations under Instruments issued under
the ProgrammeRisks relating to NGET and its businessChanges in law or regulation could have an adverse effect on NGETs results of operationsNGETs principal businesses are subject to regulation by the UK government and other
authorities such as Ofgem. Consequently, changes in law or regulation could adversely affect
the company. Regulatory decisions concerning, for example, whether licences or approvals to
operate are granted or renewed, whether market developments have been satisfactorily
implemented, whether there has been any breach of the terms of a licence or approval, recovery
of incurred expenditure and the level of permitted revenues for NGETs businesses could have an
adverse impact on NGETs results of operations, cash flows, the financial condition of its
businesses and the ability to develop those businesses in the future.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 reputationThe operation and maintenance of electricity transmission lines is potentially dangerous. NGET
also uses and generates in its operations hazardous and potentially hazardous products and
by-products. In addition, there may be other aspects of NGETs operations that are not
currently regarded or proved to have adverse effects but could become so, for example, the
effects of electric and magnetic fields. NGET is subject to laws and regulations relating to
pollution, the protection of the environment, and how NGET uses and disposes of hazardous
substances and waste materials. These expose NGET to costs and liabilities relating to its
operations and its properties whether current, including those inherited from predecessor
bodies, or formerly owned by it. NGET is also subject to laws and regulations governing health
and safety matters, protecting both the public and its employees.NGET commits significant expenditure towards complying with these laws and regulations. If
additional requirements are imposed or NGETs ability to recover these costs changes, this
could have a material impact on NGETs businesses and its results of operations and financial
position. Any breach of these obligations, or even incidents that do not amount to a breach,
could adversely affect the results of operations and NGETs reputation.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
reputationNGET may suffer a major network failure or may not be able to carry out critical non-network
operations. Operational performance could be adversely affected by a failure to maintain the
health of the network, inadequate forecasting of demand or inadequate record keeping. This
could cause NGET to fail to meet agreed standards of service or to be in breach of a licence or
approval. Even incidents that do not amount to a breach could result in adverse regulatory
action and financial consequences, as well as harming NGETs reputation. In addition to these
risks, NGET may be affected by other potential events that are largely outside of its control
such as the impact of weather or unlawful acts of third parties. Weather conditions can affect
financial performance and severe weather that causes outages or damages infrastructure will
adversely affect operational and, potentially, business performance. Terrorist attack, sabotage
or other intentional acts may also
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damage NGETs assets or otherwise significantly affect corporate activities and as a
consequence adversely impact the results of operations.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 savingsEarnings maintenance and growth from NGETs regulated electricity businesses will be affected
by its ability to meet or exceed regulatory efficiency targets set by or agreed with Ofgem. In
addition, from time to time, NGET also publishes cost and efficiency savings targets for its
businesses. NGET has also substantially completed reorganising its operations along lines of
business. To meet these targets, NGET must continue to improve operational performance and
service reliability. If NGET does not meet these targets and standards or does not complete
implementation of this reorganisation as envisaged, its business may be adversely affected and
its performance, results of operations and its reputation may be harmed.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 controlNGETs electricity transmission businesses are responsible for transporting available
electricity. NGET consults with and provides information to regulators, governments and
industry participants about future demand and the availability of supply. However, where there
is insufficient supply, NGETs role is to manage the relevant system safely, which, in extreme
circumstances, may require NGET to disconnect consumers, which may damage its reputation.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 resultsNGETs results of operations may be affected because a significant proportion of its borrowings
and derivative financial instruments are affected by changes in interest rates.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 in
the global credit markets and effective tax ratesNGET is subject to certain covenants and restrictions in relation to its listed debt securities
and its bank lending facilities. NGET is also subject to restrictions on financing that have
been imposed by regulators. These restrictions may hinder NGET in servicing the financial
requirements of its current businesses or the financing of newly acquired or developing
businesses. Some of NGETs debt is rated by credit rating agencies and changes to these ratings
may affect both its borrowing capacity and the cost of those borrowings. NGETs borrowing
capacity and cost of borrowing could also be affected by adverse changes in the global credit
markets. The effective rate of tax that NGET pays may be influenced by a number of factors
including changes in law and accounting standards, the results of which could increase that
rate.Future funding requirements of pension schemes could adversely affect its results of
operations.Substantially all of NGETs employees are members of a defined benefit scheme where the scheme
assets are held independently of NGETs own financial resources. Estimates of the amount and
timing of future funding for the scheme are based on various actuarial assumptions and other
factors including, among other things, the actual and projected market performance of the
scheme assets, future long-term bond yields, average life expectancies and relevant legal
requirements. The impact of these assumptions and other factors may require NGET to make
additional
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contributions to the pension scheme which, to the extent they are not recoverable under its
price control, could adversely affect NGETs 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 resultsThe accounting treatment under IFRS, as adopted by the European Union, of replacement
expenditure, pension and post-retirement benefits, derivative financial instruments and
commodity contracts significantly affect the way NGET reports its financial position and
results of operations. As a body of practice develops for IFRS, the application and
interpretation of accounting principles to NGETs particular circumstances, and to those areas
in particular, could result in changes in the financial results and financial position that
NGET reports. In addition, new standards, rules or interpretations may be issued that could
also have significant effects.Factors which are material for the purpose of assessing the market risks associated with
Instruments issued under the ProgrammeInstruments may not be a suitable investment for all investorsEach potential investor in any Instruments must determine the suitability of that investment in
light of its own circumstances. In particular, each potential investor should:
 (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 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.
 Some Instruments are complex financial instruments and such instruments may be purchased as a
way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk
to their overall portfolios. A potential investor should not invest in Instruments which are
complex financial instruments unless it has the expertise (either alone or with the help of a
financial adviser) to evaluate how the Instruments will perform under changing conditions, the
resulting effects on the value of such Instruments and the impact this investment will have on
the potential investors overall investment portfolio.
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Risks related to the structure of a particular issue of InstrumentsA wide range of Instruments may be issued under the Programme. A number of these Instruments
may have features which contain particular risks for potential investors. Set out below is a
description of certain such features:Instruments subject to optional redemption by the IssuerAn optional redemption feature is likely to limit the market value of Instruments. During any
period when the Issuer may elect to redeem Instruments, the market value of those Instruments
generally will not rise substantially above the price at which they can be redeemed. This also
may be true prior to any redemption period.The Issuer may be expected to redeem Instruments when its cost of borrowing is lower than the
interest rate on the Instruments. At those times, an investor generally would not be able to
reinvest the redemption proceeds at an effective interest rate as high as the interest rate on
the Instruments being redeemed and may only be able to do so at a significantly lower rate.
Potential investors should consider reinvestment risk in light of other investments available
at that time.Index Linked Instruments and Dual Currency InstrumentsThe Issuer may issue Instruments with principal or interest determined by reference to an index
or formula, to changes in the prices of securities or commodities, to movements in currency
exchange rates or other factors (each, a Relevant Factor). In addition, the Issuer may issue
Instruments with principal or interest payable in one or more currencies which may be different
from the currency in which the Instruments are denominated. Potential investors should be aware
that:
 (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;(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 InstrumentsThe Issuer may issue Instruments where the issue price is payable in more than one instalment.
Failure to pay any subsequent instalment could result in an investor losing all of its
investment.Variable rate Instruments with a multiplier or other leverage factorInstruments with variable interest rates can be volatile investments. If they are structured to
include multipliers or other leverage factors, or caps or floors, or any combination of those
features or other similar related features, their market values may be even more volatile than
those for securities that do not include those features.
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Fixed/Floating Rate InstrumentsFixed/Floating Rate Instruments may bear interest at a rate that the Issuer may elect to
convert from a fixed rate to a floating rate, or from a floating rate to a fixed rate. The
Issuers ability to convert the interest rate will affect the secondary market and the market
value of such Instruments since the Issuer may be expected to convert the rate when it is
likely to produce a lower overall cost of borrowing. If the Issuer converts from a fixed rate
to a floating rate, the spread on the Fixed/Floating Rate Instruments may be less favourable
than the prevailing spreads on comparable Floating Rate Instruments tied to the same reference
rate. In addition, the new floating rate at any time may be lower than the rates on other
Instruments. If the Issuer converts from a floating rate to a fixed rate, the fixed rate may be
lower than the prevailing rates on its Instruments.Instruments issued at a substantial discount or premiumThe market values of securities issued at a substantial discount or premium to their nominal
amount tend to fluctuate more in relation to general changes in interest rates than do prices
for conventional interest-bearing securities. Generally, the longer the remaining term of the
securities, the greater the price volatility as compared to conventional interest-bearing
securities with comparable maturities.Risks related to Instruments generallySet out below is a brief description of certain risks relating to the Instruments generally:Modification, waivers and substitutionThe Terms and Conditions of the Instruments contain provisions for calling meetings of
Instrumentholders to consider matters affecting their interests generally. These provisions
permit defined majorities to bind all Instrumentholders including Instrumentholders who did not
attend and vote at the relevant meeting and Instrumentholders who voted in a manner contrary to
the majority.The Terms and Conditions of the Instruments also provide that the Trustee may, without the
consent of Instrumentholders, agree 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, (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 or (c) the substitution of another company as principal debtor under any
Instruments in place of the Issuer, in the circumstances described in Condition 11 of the Terms
and Conditions of the Instruments.European Monetary UnionIf the United Kingdom joins the European Monetary Union prior to the maturity of the
Instruments, there is no assurance that this would not adversely affect investors in the
Instruments. It is possible that prior to the maturity of the Instruments the United Kingdom
may become a participating Member State and that the Euro may become the lawful currency of the
United Kingdom. In that event (i) all amounts payable in respect of any Instruments denominated
in Sterling may become payable in Euro (ii) the law may allow or require such Instruments to be
re-denominated into Euro and additional measures to be taken in respect of such Instruments;
and (iii) there may no longer be available published or displayed rates for deposits in
Sterling used to determine the rates of interest on such Instruments or changes in the way
those rates are calculated, quoted and published or displayed. The introduction of the Euro
could also be accompanied by a volatile interest rate environment, which could adversely affect
investors in the Instruments.
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EU Savings DirectiveUnder EU Council Directive 2003/48/EC on the taxation of savings income, 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 or certain other persons resident 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 countries to the exchange of information relating to such
payments.Also, a number of non-EU countries 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. In addition, the
Member States have entered into 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.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 lawThe Terms and Conditions of the Instruments are based on English law in effect as at the date
of issue of the relevant Instruments. No assurance can be given as to the impact of any
possible judicial decision or change to English law or administrative practice after the date
of issue of the relevant Instruments.Integral multiples of less than 50,000In relation to any issue of Instruments which have a denomination consisting of the minimum
Specified Denomination of 50,000 plus a higher integral multiple of another smaller amount,
it is possible that the Instruments may be traded in amounts in excess of 50,000 (or its
equivalent) that are not integral multiples of 50,000 (or its equivalent). In such a case a
holder who, as a result of trading such amounts, holds a principal amount of less than the
minimum Specified Denomination will not receive a Definitive Instrument in respect of such
holding (should Definitive Instruments be printed) and would need to purchase a principal
amount of Instruments such that it holds an amount equal to one or more Specified
Denominations. Except in circumstances set out in the relevant Global Instrument, investors
will not be entitled to receive Definitive Instruments.Risks related to the market generallySet out below is a brief description of certain market risks, including liquidity risk,
exchange rate risk, interest rate risk and credit risk:
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The secondary market generallyInstruments may have no established trading market when issued, and one may never develop. If a
market does develop, it may not be liquid. Therefore, investors may not be able to sell their
Instruments easily or at prices that will provide them with a yield comparable to similar
investments that have a developed secondary market. This is particularly the case for
Instruments that are especially sensitive to interest rate, currency or market risks, are
designed for specific investment objectives or strategies or have been structured to meet the
investment requirements of limited categories of investors. These types of Instruments
generally would have a more limited secondary market and more price volatility than
conventional debt securities. Illiquidity may have a severely adverse effect on the market
value of Instruments.The Clearing SystemsBecause the Global Instruments may be held by or on behalf of Euroclear Bank S.A./N.V.
(Euroclear) and Clearstream Banking, société anonyme (Clearstream, Luxembourg) investors
will have to rely on their procedures for transfer, payment and communication with the Issuer.Instruments issued under the Programme may be represented by one or more temporary Global
Instruments or permanent Global Instruments. Such Global Instruments may be deposited with a
common depositary for Euroclear and Clearstream, Luxembourg. Except in the circumstances
described in the relevant Global Instrument, investors will not be entitled to receive
definitive Instruments. Euroclear and Clearstream, Luxembourg will maintain records of the
interests in the Global Instruments. While the Instruments are represented by one or more
Global Instruments, investors will be able to trade their interests only through Euroclear or
Clearstream, Luxembourg.While Instruments are represented by one or more Global Instruments, the Issuer will discharge
its payment obligations under such Instruments by making payments to the common depositary for
Euroclear and Clearstream, Luxembourg for distribution to their account holders. A holder of
an interest in a Global Instrument must rely on the procedures of Euroclear and Clearstream,
Luxembourg to receive payments under the relevant Instruments. The Issuer has no
responsibility or liability for the records relating to, or payments made in respect of,
interests in the Global Instruments.Holders of interests in the Global Instruments will not have a direct right to vote in respect
of the relevant Instruments. Instead, such holders will be permitted to act only to the extent
that they are enabled by Euroclear or Clearstream, Luxembourg.Exchange rate risks and exchange controlsThe Issuer will pay principal and interest on the Instruments in the Specified Currency. This
presents certain risks relating to currency conversions if an investors financial activities
are denominated principally in a currency or currency unit (the Investors Currency) other
than the Specified Currency. These include the risk that exchange rates may significantly
change (including changes due to devaluation of the Specified Currency or revaluation of the
Investors Currency) and the risk that authorities with jurisdiction over the Investors
Currency may impose or modify exchange controls. An appreciation in the value of the Investors
Currency relative to the Specified Currency would decrease (1) the Investors
Currency-equivalent yield on the Instruments, (2) the Investors Currency equivalent value of
the principal payable on the Instruments and (3) the Investors Currency equivalent market
value of the Instruments.Government and monetary authorities may impose (as some have done in the past) exchange
controls that could adversely affect an applicable exchange rate. As a result, investors may
receive less interest or principal than expected, or no interest or principal.
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Interest rate risksInvestment in Fixed Rate Instruments involves the risk that subsequent changes in market
interest rates may adversely affect the value of Fixed Rate Instruments.Credit ratings may not reflect all risksOne or more independent credit rating agencies may assign credit ratings to an issue of
Instruments. The ratings may not reflect the potential impact of all risks related to
structure, market, additional factors discussed above, and other factors that may affect the
value of the Instruments. A credit rating is not a recommendation to buy, sell or hold
securities and may be revised or withdrawn by the rating agency at any time.Legal investment considerations may restrict certain investmentsThe investment activities of certain investors are subject to legal investment laws and
regulations, or review or regulation by certain authorities. Each potential investor should
consult its legal advisers to determine whether and to what extent (1) Instruments are legal
investments for it, (2) Instruments can be used as collateral for various types of borrowing
and (3) other restrictions apply to its purchase or pledge of any Instruments. Financial
institutions should consult their legal advisers or the appropriate regulators to determine the
appropriate treatment of Instruments under any applicable risk-based capital or similar rules.
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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 2 August 2007
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 2 August 2007 has been entered into in relation to the Instruments between
the Issuers, the Trustee, The Bank of New York 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 2 August 2007 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 Instruments which are to be admitted to trading on a regulated market within the European
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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 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
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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 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
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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 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.
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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 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
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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).(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
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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
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
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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:
 (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
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(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:(FORMULA)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 and D1 is greater than 29, in which case D2
will be 30;
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(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:(FORMULA)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:(FORMULA)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 (i) that day is the last day of February or (ii)
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 (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 relevant Final Terms as being payable on the Interest
Payment Date ending the Interest Period of which such Interest Accrual Period
forms part; and
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(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.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.
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TARGET System means the Trans-European Automated Real-Time Gross Settlement
Express Transfer (TARGET) System 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 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
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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
 (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
 39




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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), 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:
 40




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(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, 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
 41




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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).
 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
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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.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 (as well after as before 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.
 43




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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
Announcement shall be made and if, within the National Grid Restructuring Period,
either:
 
 *
    
    Only applicable where National Grid is the Issuer. 44




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(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 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)
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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 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),
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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.
and its successors or any rating agency substituted for either of them (or any
permitted
 47




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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 missing Receipt, Coupon and/or Talon, subject to Condition
8. The Paying Agent to
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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. 49




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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
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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 means:
 (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
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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 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.
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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.Notice of any such change or any change of any specified office shall promptly be given
to the Instrumentholders in accordance with Condition 14.
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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 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
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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).
 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
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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.[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
 
 *
    
    Only applicable where National Grid is the Issuer. 57




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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 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
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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 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
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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 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
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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 all matters arising from or connected with the Instruments 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 InstrumentsUpon 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,
they are intended to be eligible collateral for Eurosystem monetary policy and 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 SystemsEach 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 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.
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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 InstrumentsEach 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; and1.2
    
    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 InstrumentsEach 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.3
    
    Partial Exchange of Permanent Global InstrumentsFor 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.
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4
    
    Delivery of InstrumentsIf 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 ConditionsThe 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:7
    
    PaymentsNo 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
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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
    
    PrescriptionClaims 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
    
    MeetingsThe 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
    
    CancellationCancellation 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
    
    PurchaseInstruments 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.12
    
    Issuers OptionAny 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 OptionsAny 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
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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 amountWhere 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 PowersIn 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 DefaultEach 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 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
    
    NoticesSo 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 InstrumentsThe 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
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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
 OverviewNational 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.IntroductionNational Grids principal operations are in regulated networks and comprise the transmission and
distribution of electricity and gas and generation of electricity based mainly in the U.K.
and the U.S. National Grid also has interests in related markets, including metering services,
liquefied natural gas storage and importation facilities and property in the U.K., as well as
electricity interconnectors in the U.K. and U.S.Business overviewPrincipal activities and marketsNational 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.;
    
    Gas Distribution  U.K.;
    
    Gas Distribution  U.S.; and
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
    
    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. subsidiary companies include KeySpan
Corporation, The Brooklyn Union Gas Company, KeySpan Gas East Corp., Niagara Mohawk Power
Corporation, Massachusetts Electric Company and New England Power Company.TransmissionNational 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 675 kilometres of
underground cable and 337 substations at 244 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 also owns the gas national transmission system in Great Britain. This comprises
7,400 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 four 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 nearly 13,700 kilometres of overhead lines, nearly 160 kilometres of
underground cable and 501 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
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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 DistributionNational 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 33 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.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
28,800 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
116,000 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.Non-regulated businesses and other activitiesNational Grid Metering Limited and Utility Metering Services Limited (Onstream) provide
installation, maintenance and meter reading services to gas and electricity suppliers in the
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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; and
    
    Fulcrum Connections Limited provides gas connections and associated design services on
behalf of gas distribution networks in the U.K.
 Regulatory environmentNational 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 Securities and Exchange Commission (SEC) in the
U.S.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.TransmissionU.K. electricity and gas transmissionIn 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 license 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.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).
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U.S. electricity transmissionThe 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 DistributionU.K. gas distributionAs 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
separately.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 distributionThe gas 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 they operate (including New
York, Massachusetts, Rhode Island, Vermont 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 & GenerationThe 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, Vermont 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.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.
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OtherNational 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 developmentsTransmissionU.K. electricity and gas transmissionNational 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 2008; 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.U.S. electricity transmissionIn the U.S., consistent with FERCs transmission pricing policy, National Grid applied for an
increased rate of return on its investment in transmission assets in New England. FERC approved
this application in October 2006. In March 2008 FERC also approved incentive returns for new
transmission investment completed and in service between 1 January 2004 and 31 December 2008.
Incentives applicable to transmission investments in service after 31 December 2008 require a
separate petition filing with the FERC. Opposing parties may seek appeal of these FERC
determinations.National Grid has been pursuing a regional planning process with the New York Independent
System Operator (ISO) to identify regional reliability and economic transmission needs.
Progress has been made and the New York ISO is in the third year of its reliability planning
process implementation. National Grid has proposed a regulated transmission solution to
reliability needs identified by the New York ISO. In addition, as part of FERCs recent open
access transmission tariff reform, the New York ISO has made a filing to address economic
planning.In New York, the relevant rates allow for capital expenditure on National Grids transmission
network based on historic levels, which are significantly lower than required to maintain a
safe and reliable network. On 21 December 2007 National Grid petitioned the New York Public
Service Commission for deferred recovery of incremental investment on major capital programmes
for calendar year 2008, as permitted under the relevant rate plan. National Grid anticipates
that it will also petition for deferred recovery of qualifying incremental investment for
calendar years 2009 to 2011.
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Gas distributionU.K. gas distributionThe price controls that applied to National Grids UK gas distribution networks during the year
ended 31 March 2008 were an extension of its previous price controls, based on an allowed rate
of return at a real pre-tax rate of 6.25 per cent. on its regulatory asset value. The next full
price control period came into force on 1 April 2008 and covers the period up to 31 March 2013.
This review 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 basis. These allowances are expected to grow the asset base by almost 25 per cent.
over the next five years.Electricity DistributionIn New York, capital expenditure in the rate plan for electricity distribution was set at
historic levels, which are significantly lower than required to maintain a safe and reliable
network. On 21 December 2007 National Grid petitioned the New York Public Service Commission
for deferred recovery of incremental investment on major capital programmes for calendar year
2008, as permitted under its rate plan.OtherOn 25 February 2008, Ofgem announced a decision that National Grid Metering had infringed
the Competition Act in relation to development of term contracts entered into with gas
suppliers in 2004. A fine of £41.6 million was imposed, but has been suspended pending appeal.
National Grid has lodged an appeal with the Competition Appeal Tribunal.Board of DirectorsThe Directors of National Grid and their functions and principal activities outside the
National Grid Group, are as follows:
 Principal activities outsideName
    
    Title
    
    the National Grid GroupSir John Parker
    
    Chairman
(Non-Executive)
    
    Non-Executive Director of
Carnival plc and Carnival
Corporation (US) and of the
European Aeronautic Defence
and Space Company, Joint
Non-Executive Chairman of
Mondi plc (UK) and Mondi Ltd
(S. Africa). Director of
D.P. World (Dubai) and
Senior Non-Executive
Director of the Court of the
Bank of England, Member of
the Business Council for
Britain and Chancellor of
the University of
Southampton.Steven Holliday
    
    Chief Executive
    
    Non-Executive Director of
Marks and Spencer Group plc.Bob Catell
    
    Executive Director &
Deputy Chairman
    
    Co-chair of the Board of the
Downtown Brooklyn
Partnership and Chairman of the
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Principal activities outsideName
    
    Title
    
    the National Grid GroupLong Island Association.Steve Lucas
    
    Finance Director
    
    Non-Executive Director of
Compass Group PLC. Director
of American European
Business Association Ltd.Mark Fairbairn
    
    Executive Director
    
    NoneTom King
    
    Executive Director
    
    Director of Edison Electric
Institute, Alliance to Save
Energy, Energy Association
of New York State and Jobs
for Massachusetts.Nick Winser
    
    Executive Director
    
    NoneLinda Adamany
    
    Non-Executive Director
    
    NonePhilip Aiken
    
    Non-Executive Director
    
    Chairman of Robert Walters
plc, Non-Executive Director
of Kazakhmys plc and senior
advisor to Macquarie Capital
(Europe) LimitedJohn Allan
    
    Non-Executive Director
    
    CFO of Deutsche Post. Member
of the Supervisory Boards of
both Lufthansa AG and
Deutsche Postbank. Member of
the CBI Presidents
Committee, Member of the
International Advisory
Council of the Singapore
Economic Development Board
and 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
    
    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.
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DESCRIPTION OF NATIONAL GRID ELECTRICITY TRANSMISSION PLC
 OverviewNational 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 licensees
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 licensees in
Scotland).
 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 NGETNGET 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 675 kilometres of underground cables and 337 substations at 244
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 DirectorsThe 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.Stuart Humphreys
    
    Finance Director
    
    Director of National Grid Gas plc,
National Grid Interconnectors Ltd and
National Grid Grain LNG 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
and The Association of Corporate
Treasurers.Mark Fairbairn
    
    Director
    
    Executive Director of National Grid
plc, Director of National Grid Gas
Holdings plc and National Grid Gas
plc.Paul Whittaker
    
    Director
    
    UK Director of Regulation for National
Grid plc, and Director of National
Grid Gas plc.
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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.RegulationThe 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 licenseable 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.The Transmission Licence [also] 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;
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
    
    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 DevelopmentsThe 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.Following the price control allowances of approximately £350 million for transmission
reinforcement works to accommodate the growing impact of renewable energy from Scotland, works
are underway. In particular, the upgrade of the two double circuits connecting Scotland and
England and associated works will be undertaken over the price control period. As at 31 March
2008, access is being sought by approximately 10 GW of renewable generation consisting of over
100 projects, each with connection agreements in Scotland. For England and Wales, connection
offers have been made to an additional 7 GW of 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 InterestThe 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 InformationInstrumentholders 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 example solely by clearing a cheque for foreign interest or arranging
the clearing of such a cheque)
 81




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##### 



(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 and 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 and Customs may, in certain
cases, be passed by HM Revenue and 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 2009.3
    
    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 DirectiveUnder EU Council Directive 2003/48/EC on the taxation of savings income, 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 or to certain other persons resident 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
 
 *
    
    See paragraph 4.5 of HM Revenue & Customs Section 18
Guidance Notes. 82




---



##### 



terminate at the end of the first full fiscal year following agreement by certain non-EU
countries to the exchange of information relating to such payments.Also, a number of non-EU countries, 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. 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.
 83




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##### 



PLAN OF DISTRIBUTION
 Summary of AgreementSubject to the terms and on the conditions contained in a dealer agreement dated 30 July 2008
(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 RestrictionsUnited StatesThe 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.Public Offer Selling Restriction under the Prospectus DirectiveIn 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
 84




---



##### 



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)
    
    if the final terms in relation to the Instruments specify that an offer of those
Instruments may be made other than pursuant to Article 3(2) of the Prospectus Directive in
that Relevant Member State (a Non-Exempt Offer), following the date of publication of a
prospectus in relation to those Instruments which has been approved by the competent
authority in that Relevant Member State or, where appropriate, approved in another
Relevant Member State and notified to the competent authority in that Relevant Member
State, provided that any such prospectus has subsequently been completed by the final
terms contemplating such Non-exempt offer, in accordance with the Prospectus Directive, in
the period beginning and ending on the dates specified in such prospectus or final terms,
as applicable;(b)
    
    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;(c)
    
    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;(d)
    
    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;(e)
    
    at any time if the denomination per Instrument being offered amounts to at least
50,000; or(f)
    
    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 (b) to (f) 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 KingdomEach Dealer has represented and agreed, and each further Dealer appointed under the Programme
will be required to represent and agree, 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
 85




---



##### 



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 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.
 JapanThe 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 and each further Dealer appointed under the
Programme will be required to represent, warrant and agree 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.GeneralThese 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.
 86




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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
 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 
 [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.]
 
 *
    
    Delete as applicable. 87




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##### 



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]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]
 
 †
    
    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) 88




---



##### 



[[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)][N.B. If the Final Redemption
Amount is less than 100 per cent.
of the nominal value, the
Instruments will constitute
derivative securities for the
purposes of the Prospectus
Directive and the requirements of
Annex XII to the Prospectus
Directive Regulation No.809/2004
will apply and the Issuer will
prepare and publish a supplement
to the Prospectus.]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(iv)
    
    Broken Amount(s):
    
    [] per Calculation Amount, payable on the Interest Payment
 
 §
    
    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. 89




---



##### 



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 Period/each Interest Payment Date]]
 90




---



##### 



 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:
    
    [   ]
 91




---



##### 



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
    
    [   ](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
 92




---



##### 



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:
    
    [   ](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):
    
    [   ]
 93




---



##### 



(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)
    
    [   ]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. 94




---



##### 



(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:(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 (Condition 9)
or other
early
    
    [   ]
 95




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##### 



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.
    
    Applicable TEFRA exemption:
    
    [C Rules/D Rules/Not Applicable]30.
    
    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]31.
    
    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. 96




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##### 



consequences (if any) of
failure to pay, including any right
of the Issuer to forfeit the
Instruments and interest due on
late payment:32.
    
    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:
    
    [    ]33.
    
    Redenomination,
renominalisation and
reconventioning provisions:
    
    [Not Applicable/ give details]34.
    
    Consolidation provisions:
    
    [Not Applicable/ give details]35.
    
    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.)DISTRIBUTION36.
    
    (i)
    
    If syndicated, names
of Managers:
    
    [Not Applicable/give names](ii)
    
    Stabilising Manager(s)
(if any):
    
    [Not Applicable/give name]37.
    
    If non-syndicated, name of Dealer:
    
    [Not Applicable/give name]38.
    
    Additional selling restrictions:
    
    [Not Applicable/give details]
 [PURPOSE OF FINAL TERMS
  97




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##### 



RESPONSIBILITY
   
 
 98




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##### 



PART
B  OTHER INFORMATION *
 1.
    
    LISTING(i)
    
    Listing:
    
    [London/other (specify)/None](ii)
    
    Admission to
trading:
    
    [Application has been made for the Instruments
to be admitted to trading on the London Stock
Exchange plcs regulated market with effect from
[    ].]    [Not Applicable.](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.
    
    NOTIFICATIONThe Financial Services Authority [has been requested to provide/has provided  include first
alternative for an issue which is contemporaneous with the update of the Programme and the
second alternative for subsequent issues] the [include names of competent authorities of host
Member States] with a certificate of approval attesting that the Prospectus has been drawn up
in accordance with the Prospectus Directive.4.
    
    [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.]
 
 *
    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. 99




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##### 



[(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.)][5.
    
    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.)]*6.
    
    [Fixed Rate Instruments 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. ]7. [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][(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.)]
 
 *
    
    Required for derivative securities to which Annex XII to
the Prospectus Directive Regulation applies. 100




---



##### 



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]*.8.
    
    [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.)]9.
    
    OPERATIONAL INFORMATIONISIN Code:
    
    [   ]Common Code:
    
    [   ]Any clearing
system(s) other
than Euroclear Bank
S.A./N.V. and
Clearstream Banking
société anonyme
and 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 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]10
    
    GENERALThe aggregate principal amount of
Instruments issued has been
translated into
Euro at the rate of [],
producing a sum of (for
    
    [Not Applicable/[[Euro]][]]
 
 *
    Required for derivative securities to which Annex XII
to the Prospectus Directive Regulation applies. 101




---



##### 



Instruments not
denominated in Euro):Additional steps that may only be taken
following approval by an Extraordinary
Resolution in accordance with Condition
11.1:
    
    [Not Applicable/give details]
 102




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##### 



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 30 July 2008. 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
 103




---



##### 



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 2008 and no material adverse change in the
prospects of National Grid since 31 March 2008.12.
    
    Save as disclosed in the section entitled Description of National Grid Electricity
Transmission plc  Recent Developments on page 81, there has been no significant change
in the financial or trading position of NGET or the NGET Group since 31 March 2008 and no
material adverse change in the prospects of NGET since 31 March 2008.13.
    
    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 2008.14.
    
    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 2008.15.
    
    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 2007 and 31 March 2008, respectively, together with the audit
report thereon and any consolidated interim accounts of National Grid published
subsequently to such accounts; and
 104




---



##### 



(e)
    
    the audited consolidated accounts of NGET for the two financial years
ended 31 March 2007 and 31 March 2008, 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.
 105




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##### 



REGISTERED OFFICE OF EACH OF THE ISSUERS
 
 THE ARRANGER
 HSBC Bank plc
 THE DEALERS
 Barclays Bank PLCBanc of America Securities Limited
    
    5 The North Colonnade5 Canada Square
    
    Canary WharfLondon E14 5AQ
    
    London E14 4BBCitigroup Global Markets LimitedCitigroup Centre
    
    Deutsche Bank AG, London BranchCanada Square
    
    Winchester HouseCanary Wharf
    
    1 Great Winchester StreetLondon E14 5LB
    
    London EC2N 2DBDresdner Bank AG London Branch
    
    HSBC Bank plc30 Gresham Street
    
    8 Canada SquareLondon EC2P 2XY
    
    London E14 5HQNational Australia Bank Limited
    
    Royal Bank of Canada Europe Limited88 Wood Street
    
    71 Queen Victoria StreetLondon EC2V 7QQ
    
    London EC4V 4DEThe Royal Bank of Scotland plc
    
    Mitsubishi UFJ Securities International plc135 Bishopsgate
    
    6 BroadgateLondon EC2M 3UR
    
    London EC2M 2AA
 LEGAL ADVISERS
 To the Dealers and to the Trustee
 Clifford Chance LLP
 To the Issuers
 Linklaters LLP
 106




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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
 107