##### Table of Contents



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

Key InformationRisk factors

95-97Item 4.

Information on the CompanyOperating and Financial Review

14-73Note 37  Subsidiary, undertakings
    joint ventures and associates

172Definitions and glossary of terms

186-188Item 5.

Operating and Financial Review and ProspectsOperating and Financial Review

14-85Research and development

98Item 6.

Directors, Senior Management and EmployeesBoard of Directors

12-13Directors Remuneration Report

100-110Note 5  Pensions and other
    post-retirement benefits

132-133Note 31  Actuarial information on
    pensions and other
    post-retirement
    benefits

156-158Corporate Governance

88-97Employees

99Operating Costs 3(b) Number of Employees

129Note 25  Share Capital

149-150Item 7.

Major Shareholders and Related Party TransactionsNote 30  Related Party Transactions

155Item 8.

Financial InformationAccounting policies

114-120Adoption of new accounting standards

121Consolidated balance sheet

123Consolidated income statement

122Consolidated statement of recognised income and
    expense

124Consolidated cash flow statement

125Notes to the consolidated financial
    statements  analysis of items in the primary
    statements

126-152Notes to the financial statements 
    supplementary information

153-178Legal and related matters

23Shareholder returns

43Item 9.

The Offer and ListingNote 25  Share capital B shares

149Item 11.

Quantitative and Qualitative Disclosures about Market RiskTreasury policy

76Commodity contracts

78-79Note 32  Supplementary information on
    the derivative financials instruments

159Note 33  Financial risk

160-164Note 34  Commodity risk

165-166




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##### Table of Contents



PageItem 18.

Financial StatementsAccounting policies


114-120Adoption of new accounting standards


121Consolidated income statement


122Consolidated balance sheet


123Consolidated cash flow statement


125Consolidated statement of recognised income and
    expense


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


126-152Notes to the financial statements 
    supplementary information


153-178




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##### Table of Contents



EXTRACTED
    FORM OF THE ANNUAL REPORT AND ACCOUNTS 2007/08
  PageBusiness OverviewBoard of directors

12Operating and Financial ReviewPrincipal operations

14Vision, strategy and objectives

15Business drivers, risks and
    opportunities

16External market and regulatory
    environment

18Organisation and structure

20Current and future developments

22Performance summary and key
    performance indicators

24Performance against our objectives

26Transmission

44Gas Distribution

52Electricity Distribution &
    Generation

60Non-regulated businesses and other

68Discontinued operations

73Financial position and financial
    management

74Accounting policies

82Independent Corporate Responsibility
    Report

86Corporate GovernanceCorporate governance

88Directors ReportsDirectors report

98Directors remuneration
    report

100Financial StatementsContents to financial statements

111Statement of Directors
    responsibilities

112Independent auditors report

113Accounting policies

114Adoption of new accounting
    standards

121Consolidated income statement

122Consolidated balance sheet

123Consolidated statement of recognised
    income and expense

124Consolidated cash flow statement

125Notes to the consolidated financial
    statements  analysis of items in the primary
    statements

126Notes to the consolidated financial
    statements  supplementary information

153Company accounting policies

179Company balance sheet

181Notes to the Company financial
    statements

182Definition and glossary of terms

186Summary consolidated financial
    information

189Shareholder InformationShareholder Information

190     *
    
    The Independent Corporate Responsibility Report on page 86
    relates to the corporate responsibility elements of the full
    Annual Report and Accounts available on our website.




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##### Table of Contents



EXHIBIT 15.1
 12   Board of Directors
    
    National Grid plc
  Board of Directors
  Sir John Parker, Chairman
 Appointed October 2002, Age 66, N (ch)
 Sir John Parker became Chairman
following the merger of National
Grid Group plc and Lattice Group
plc having been Chairman of Lattice
Group plc since its demerger from
BG Group plc in 2000. Sir Johns
career has encompassed the
engineering, shipbuilding and
defence industries. He is Deputy
Chairman of DP World (Dubai), joint
Chairman of Mondi plc, a
Non-executive Director of Carnival
plc and Carnival Corporation, Inc.,
and the European Aeronautic Defence
and Space Company (EADS), Senior
Non-executive Director of the Court
of the Bank of England and
Chancellor of the University of
Southampton. Sir John is a former
Chairman of P&O Group and of RMC
Group plc, a former Chairman and
Chief Executive of Harland & Wolff
plc and Babcock International Group
PLC.
 Steve Holliday, Chief ExecutiveAppointed March 2001, Age 51, E (ch), F
 Bob Catell, Executive Director
& Deputy ChairmanAppointed September 2007, Age 71
  Steve Lucas, Finance DirectorAppointed October 2002, Age 54, E, F
 Nick Winser, Executive DirectorAppointed April 2003, Age 47, E
  Mark Fairbairn, Executive DirectorAppointed January 2007, Age 49, E
  Edward Astle, Executive Director




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##### Table of Contents



() Annual Report and Accounts 2007/08   13
  Tom King, Executive DirectorAppointed August 2007, Age 46, E
 Ken Harvey, Non-executive 
Director and Senior Independent Director
Appointed October 2002, Age 67, N, R, R&R
 Linda Adamany, Non-executive Director
Appointed November 2006, Age 56, A, R&R
 Philip Aiken, Non-executive Director
Appointed 15 May 2008, Age 59
 John Allan, Non-executive Director
Appointed May 2005, Age 59, A, R (ch)
 Stephen Pettit, Non-executive Director
Appointed October 2002, Age 56, F, R, R&R (ch)
 Maria Richter, Non-executive Director
Appointed October 2002, Age 53, A, F (ch), N
 George Rose, Non-executive Director
Appointed October 2002, Age 56, A (ch), N, R
 Helen Mahy, Company Secretary 
& General Counsel
Appointed October 2002, Age 47, E
 Committee membership
 A
    
    AuditE
    
    ExecutiveF
    
    FinanceN
    
    NominationsR
    
    RemunerationR&R
    
    Risk & Responsibility(ch)
    
    denotes Committee chairman




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##### Table of Contents



14   About National Grid
    
    National Grid plc
  Operating and Financial Review
  Contents to Operating
and Financial Review
 14
    
    Principal operations15
    
    Vision, strategy and objectives16
    
    Business drivers, risks and opportunities18
    
    External market and regulatory environment20
    
    Organisation and structure22
    
    Current and future developments24
    
    Performance summary and key performance indicators26
    
    Performance against our objectives44
    
    Transmission52
    
    Gas Distribution60
    
    Electricity Distribution & Generation68
    
    Non-regulated businesses and other73
    
    Discontinued operations74
    
    Financial position and financial management82
    
    Accounting policies86
    
    Independent Corporate Responsibility Report
 Principal operations
    Businesses and segments
    
    Description of principal activitiesTransmission
    
    UK
    
    The transmission of electricity and gas in the UK as owner and operator of
the high-voltage electricity transmission network in England and Wales, the
gas national transmission system in Great Britain, electricity interconnectors with
Scotland and with France and storage facilities for LNG. Operator of the electricity
transmission networks in Scotland.US
    
    The transmission of electricity in the northeastern US as owner of
high-voltage electricity transmission networks in upstate New York and in
New England.Gas Distribution
    
    UK
    
    The distribution of gas in England as owner and operator of four of the UKs eight
gas distribution networks.US
    
    The distribution of gas in the northeastern US as owner and operator of gas distribution
networks in upstate New York, New York City, Long Island,
Massachusetts, New Hampshire and Rhode Island.Electricity
Distribution
& Generation
    
    US
    
    The distribution and generation of electricity in the northeastern US as owner of electricity
distribution networks in upstate New York, Massachusetts, New Hampshire and Rhode
Island, as operator and manager of the electricity transmission and distribution network
in Long Island on behalf of the Long Island Power Authority, and as a
generator of electricity on Long Island.Non-regulated
businesses and other
    
    The
delivery of other services in markets related to our principal
operations, principally in the
UK where they comprise metering services, property management and our LNG
import terminal on the Isle of Grain. They do not constitute a segment in
their own right and so are reported together with other operations and corporate activities,
including business development, under the heading other activities.Discontinued
operations
    
    Businesses that we have exited or are committed to exit, including the
Ravenswood generation station in New York City that we have agreed to sell, our UK and US
wireless infrastructure operations, sold on 3 April and 15 August 2007 respectively, and
the Basslink electricity interconnector in Australia sold on 31 August 2007.




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##### Table of Contents



() Annual Report and Accounts 2007/08   15
  Vision, strategy and objectives
  Vision
  Strategy
  Focus
    
    We are focused on a clear business model, based
on the ownership and operation of large scale asset
intensive businesses within our principal growth
markets of electricity and gas delivery infrastructure
in the UK and US.Integration
    
    We aim to run our businesses in an integrated way 
organising our activities along lines of business,
supported by effective and efficient shared services
and information systems. This involves deploying
proven processes, common systems and best
practices within each business, supported by
common operating principles and safety and
environmental standards, seeking to maximise the
competitive advantages that come from being an
international organisation, balanced with the need
to provide excellent service to customers and to
maintain and build local relationships with other
key stakeholders.Discipline
    
    We aim to be disciplined in the application of best
practice, increasingly standardising our approach
to the way we operate and finance our activities.
Our aim is for rigorous financial discipline, ensuring
that we have the capital we need to grow, while
maintaining the investor confidence that comes
from a disciplined approach to our balance sheet.
 Objectives
  Delivering our
strategy
    
        Create lines of business
    Build operating model  common systems and
processes, sharing best practice

    Invest in new businesses where there is value
for our shareholders
    Exit businesses not in our core marketsOperatingperformance
    
        Improve safety
    Improve efficiency
    Improve reliability
    Improve customer service
    Deliver our capital investment plansTalent
    
        Identify and develop talent and skills
    Improve engagement and performance
    Enhance inclusion and diversityRelationships
    
        Help investors understand our value
    Improve relationships with customers, regulators
and governments
    Work effectively with suppliers
    Deepen our involvement with communitiesEnvironment
    
        Lead on climate change
    Manage and remediate contaminated land
    Protect the environment
    Be efficient in our use of natural resourcesFinancialperformance
    
       Increase profits and earnings per share
   Obtain appropriate returns on our investments
   Maintain financial discipline
   Increase dividends and shareholder returns
  Responsibility
    
       Operate to the highest standards of corporate
governance
   Conduct our business in a lawful and ethical
manner
   Live our core values of:
   Respect others and value diversity
   Take ownership for driving performance
   Demonstrate integrity and openness in all relationships
   Work together as one team
 ()
   Our vision is for National Grid to be the foremost international electricity and
gas company, delivering unparalleled safety, efficiency and reliability, vital to
the well-being of our customers and communities. We are committed to being
an innovative leader in energy management and to safeguarding our global
environment for future generations.









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##### Table of Contents



16   About National Grid continued
    
    National Grid plc
  
     Business drivers
   Price controls 
and rate plans
    
    The prices we charge for use of our electricity and
gas transmission and distribution networks are
determined in accordance with regulator approved
price controls in the UK and rate plans in the US.
The negotiation of these arrangements has a
significant impact on our revenues.Their duration is significant in providing stability
to our operations, allowing us to plan ahead
and invest with confidence that we will obtain
financial returns.Our price controls and rate plans contain incentive
and/or penalty arrangements that can affect us
financially based on agreed performance targets.Multi-year 
contracts
    
    Revenues in our Long Island electricity distribution
and generation operations are subject to long-term
contracts with the Long Island Power Authority.
In addition, revenues in our UK metering services
businesses and our Grain LNG import terminal are
determined by contractual arrangements, which
are long term and with blue chip customers.Safety, 
efficiency 
and reliability
    
    Our ability to operate safely and reliably is of
paramount importance to us, our employees, our
contractors, our customers, our regulators and the
communities we serve. Our financial performance
is affected by our performance in these areas.Our objective is to deliver services as efficiently
as possible. This allows us to limit price increases
or to reduce prices to our customers and improve
our own financial performance to the benefit of
our shareholders.Customer 
service
    
    The quality of the service we deliver to customers,
and the experiences that they have in dealing with
us, whether through routine interactions or when
problems arise, is important as it feeds through to
the attitudes of regulators and is also linked to our
financial performance.Capital 
investment
    
    Capital investment is a significant driver for
organic growth.In our regulated energy networks, the prices
we charge include an allowed return for capital
investment determined in accordance with our price
controls and rate plans. These provide incentives for
us to enhance the quality and reach of our networks
through capital improvements.
For other businesses, our capital investment in new
assets allows us to develop new revenue streams or
to increase revenues from existing assets.Other 
investment
    
    Investment in new businesses is also a significant
driver of growth, provided we can create value
through operational improvements, synergies
and financial benefits.Disposals can crystallise value for shareholders,
where we believe the price on offer is better than the
long-term return we can obtain ourselves or where
a business does not fit with our long-term strategy.Relationships 
and 
responsibility
    
    Our reputation is vitally important to us.
Delivering sustainable value depends on the trust
and confidence of our stakeholders and this can
only be earned by conducting our business in a
responsible manner.
 Weather and 
volumes
    
    Changes in the quantities of electricity and gas
delivered through our transmission and distribution
networks may result in an increase or decrease in
our revenues. Volumes are affected by weather,
consumer demand and network availability as well
as other factors. The impact of changing volumes
may sometimes be offset by changes in costs or
may sometimes result in an under- or over-recovery
against our allowable revenues, with a corresponding
increase or decrease in revenues in future periods.Seasonality
    
    Revenues from our gas distribution networks in the
US are weighted towards the end of the financial
year, as gas demand is typically higher during the
winter months. This has also been the case for our
gas transmission and distribution networks in the
UK, but our current price control arrangements are
less seasonal in nature. Otherwise, seasonality does
not have a significant impact on revenues.
With the exception of commodity and other volume-related costs passed through to customers, our
operating costs are generally not seasonal.Exchange rates
    
    The reported results, cash flows and financial
position of our US operations are affected by
movements in the US dollar to sterling exchange
rate. However, we hedge a proportion of this
exposure through the use of US dollar debt and
derivative financial instruments.Commodity 
and other 
pass-through 
costs
    
    We are allowed to recover commodity costs in the
US and certain other direct costs in both the UK and
the US, through charges to customers. The timing of
recovery of these costs can vary between financial
periods leading to an under- or over-recovery within
any particular financial period.We are affected by commodity prices to the extent
that they affect our own energy requirements, most
significantly gas purchases for the operation of our
gas transmission and gas distribution networks in
the UK.The discontinued Ravenswood generation station
was also affected by commodity prices, in particular
the spreads between prices for the electricity it
generates and the prices of the gas and oil it uses
as fuel.Certain US commodity contracts are recorded
in our balance sheet at their fair values. Although
remeasurements of their contract values are
reflected in our income statement, we expect to
recover the net costs incurred under these contracts
from customers in current or future periods.Inflation
    
    Without action to improve efficiency, our operating
costs increase each year as a result of wage
increases and inflation in external costs. In general,
our revenues also increase each year, although not
necessarily at the same rate, depending on our
regulatory or contractual arrangements. As a
consequence, our ability to control costs and
improve efficiency is important to our ability to
increase operating profits.Our price controls in the UK are linked to retail price
inflation, as is a proportion of our UK borrowings,
while certain of our electricity and gas regulatory
settlements in the US allow us to recover additional
distribution revenues from customers if there is a
significant change in the rate of inflation.Interest rates
    
    The costs of financing our operations are affected
by changes in prevailing interest rates, as some of
our debt is at floating rates. We hedge some of our
exposure to interest rates with fixed-rate debt and
derivative financial instruments to maintain a
proportion of our debt at fixed interest rates.




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##### Table of Contents



() Annual Report and Accounts 2007/08   17
  Risks and opportunities
 Risks and opportunities
   Delivering our 
strategy
    
    We believe that by implementing our strategy and
transforming National Grid, we will be able to deliver
increased value to our shareholders.Conversely, if we do not achieve this transformation,
or the benefits in efficiency and effectiveness are
not achieved, then shareholder value will not grow
as we hope or will diminish.Operating 
performance
    
    The operating profits and cash flows we generate
are dependent on our operating performance 
operating safely, efficiently and reliably and
providing a quality service to customers. Our future
growth is dependent on the delivery of our capital
investment plans.Talent
    
    The skills and talents of our employees, and their
motivation and dedication, are critical to the
achievement of our objectives. Failure to develop
our existing employees or to attract and recruit
talented new employees could hamper our ability
to deliver in the future.Relationships
    
    Our relationships with our stakeholders are
critical to our future success. Maintaining these
good relationships is dependent on focusing on
the areas that are important to them, such as the
quality of service we provide to customers, the
quality of information we provide to regulators
and the way we address the concerns of, and
interact with, all our stakeholders.Environment
    
    Safeguarding our global environment for future
generations is dependent on integrating
sustainability and climate change considerations
into our business decisions, influencing legislators
and regulators to reshape energy markets to meet
the climate change challenge and helping and
supporting our employees, customers and suppliers
in changing their behaviour to be more considerate
of the environment.Financial 
performance
    
    Strong financial performance and operating
cash flows are the basis for funding our future
capital investment programmes, for servicing our
borrowings and paying dividends, as well as for
increasing our value to shareholders.Responsibility
    
    Strong corporate governance is essential to
operating responsibly and the achievement of
all our objectives.Our reputation as a responsible business is
dependent on ensuring all our behaviours are
lawful and ethical, on complying with our policies
and licences and on living up to our core values.If we do not live up to these high standards we
could be exposed to adverse financial or other
consequences.
 Risk management
   Risk factors
 Through our risk management process, we have identified a number of significant risks and
uncertainties in achieving our objectives as follows:■
    
    changes in laws or regulations;■
    
    breaches of environmental or health and safety law or regulations;■
    
    network failure or inability to carry out critical non-network operations;■
    
    achievement of business performance objectives, including regulatory targets and delivering anticipated cost
and efficiency savings;■
    
    business development activity, including acquisitions and disposals;■
    
    regulatory treatment of commodity costs passed through to consumers;■
    
    reputation damage from disruptions to supply, even if outside our control;■
    
    fluctuations in exchange rates, interest rates and commodity prices and their impact on
borrowings, derivatives and commodity contracts;■
    
    restrictions in borrowings, adverse changes in the global credit markets and changes in credit ratings or in tax rates;■
    
    future funding requirements of our pension schemes;■
    
    changes in accounting standards;■
    
    consumers, suppliers or other counterparties failing to perform their obligations; and■
    
    impact of seasonal or weather-related fluctuations.




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##### Table of Contents



18   About National Grid continued
    
    National Grid plc
  External market and regulatory environment
 Global utility sector
  Markets in which we operate
   Energy delivery in the UK
 Energy delivery in the northeastern US




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##### Table of Contents



() Annual Report and Accounts 2007/08   19
  Other markets in which we operate
 Regulation
    UK
    
    In the UK, energy networks are regulated by the
Office of Gas and Electricity Markets (Ofgem).
Ofgem operates under the direction and governance
of the Gas and Electricity Markets Authority and has
established price control mechanisms that restrict
the amount of revenue that can be earned by
regulated businesses.
 US
    
    In the US, public utilities are regulated by the
Federal Energy Regulatory Commission (FERC)
and by utility commissions in each of the states,
including the New York Public Service Commission,
the Massachusetts Department of Public Utilities,
the Rhode Island Public Utilities Commission and
the New Hampshire Public Utilities Commission.
These US regulators set service standards and
determine allowable levels of return. FERC also
regulates public utility holding companies, including
mergers and acquisitions of public utilities.




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##### Table of Contents



20   
About National Grid continued
    
    National Grid plc
  Organisation and structure
 Organisation
 Business and geographic analysis




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##### Table of Contents



() Annual Report and Accounts 2007/08   21
  Corporate structure
 History
    Key milestones1986
    
    British Gas incorporated as a public limited company.1990
    
    Electricity transmission network in England
and Wales transferred to National Grid on
electricity privatisation.1995
    
    National Grid listed on the London Stock Exchange.1997
    
    British Gas (BG) demerged Centrica.1997
    
    National Grid demerged Energis.2000
    
    Lattice Group demerged from BG and listed separately.2000
    
    New England Electric System and Eastern
Utilities Associates acquired by National
Grid.2002
    
    Niagara Mohawk Power Corporation merged
with National Grids US operations.2002
    
    Merger of National Grid and Lattice
Group to form National Grid Transco.2004
    
    Acquisition of UK wireless
infrastructure network from Crown Castle
International Corp.2005
    
    Sales of four UK regional gas distribution networks.2005
    
    Adoption of National Grid as our name.2006
    
    Acquisition of Rhode Island gas distribution network.2006
    
    Announcement of new strategy, including our
decision to focus on core energy markets in the
UK and US.2007
    
    Sales of UK and US wireless infrastructure
operations
and of the Basslink electricity interconnector in Australia.2007
    
    Acquisition of KeySpan Corporation.2008
    
    Agreement reached to sell the Ravenswood generation station.
 ()
  History The history of the operations we now own dates back much further than the dates listed above. In
the UK, the first national electricity transmission network became operational in 1938, while the
first national gas company commenced operations in 1812. In the US, the first electricity
distribution operations in areas we now serve date back to 1896 in Buffalo, New York, while the
earliest gas distribution network started in 1823 in Boston, Massachusetts.




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22   About National Grid continued
    
    National Grid plc
  Current and future developments
 External market developments
 Market structure and ownership
   Energy market developments
 Regulatory developments
 UK and European regulatory developments
     US regulatory developments




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##### Table of Contents



() Annual Report and Accounts 2007/08   23
  Changes in price controls, rate plans and other
agreements
 UK price controls
   US rate plans
   Other agreements
 3
  Legal and related matters
 Metering competition investigation
  Environmental remediation
  KeySpan Department of Justice investigation




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##### Table of Contents



24   Performance summary and key performance indicators
    
    National Grid plc
  Performance summary and key performance indicators
   Delivering our strategy
    
    Lines of business
    
      Established Transmission, Gas Distribution and Electricity Distribution & Generation as lines of business, with common management teams, each with a responsible Executive Director
  Commenced process of separating out functions and processes that support multiple lines of business
  Previously separated UK and US functions combined  including IS, human resources and procurementOperating
model
    
      Established a shared services organisation, based in the UK and US to support the lines of business
  Commenced implementation of new back office systems, to provide a common platform in the future
  Commenced reviews within each line of business, shared services and information services to identify
best practices within different parts of our UK and US operations, so that they can be shared across
National GridNew
businesses
    
      Investment and integration of KeySpan Corporation acquired during 2007 for cash consideration of £3.8 billion, together with acquired debt of £2.2 billion
  Integration of Rhode Island gas distribution operations acquired during 2006/07 for cash consideration
of £269 millionExit non-core
businesses
    
      Sale of UK and US wireless infrastructure operations on 3 April and 15 August 2007 for £2.6 billion
  Sale of Basslink electricity interconnector on 31 August 2007 for proceeds of £485 million
  Entered into agreement on 31 March 2008 to sell the Ravenswood generation station for $2.9 billion
(£1.4 billion)Operating 
performance
    
    Safety
    
    Injuries to the public*
(number)Target: zero
    
    ()
    
    Employee lost time injury
frequency rate*°
(per 100,000 hours worked)Target: zero
    
    ()Employee sickness
absence rate* (%)Target: zero work-related
absences
    
    ()
    
    UK gas distribution
mains replacement(km)Target: 1,835 km
in 2007/08
    
    ()Efficiency
    
      Completed integration of Rhode Island gas operations acquired in the previous year
  Voluntary early retirement programme in the US accepted by 560 employees, as part of the integration of our
operations following the acquisition of KeySpan
  Cost reduction programmes undertaken in Transmission UK and Gas Distribution UKReliability
    
    Transmission UK
electricity system
reliability (%)Target: 99.9999%
    
    ()
    
    Transmission UK gas
reliability (%)Target: 100%
    
    ()Transmission US system
reliability(MWh)Target: less than
264 MWh of losses
    
    ()
    
    Gas Distribution UK
network reliability(%)Target: 99.999%
    
    ()Electricity Distribution US
network reliability*(mins)Target: less than 
110 to 120 mins
of outages
    
    ()Capital
investment
    
    Total capital investment
(£m)
    
    ()




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##### Table of Contents



() Annual Report and Accounts 2007/08   25
  Talent
    
    Talent, skills, 
engagement 
and 
performance
    
      Over 200 senior managers, led by the Executive Directors, have been through our Performance for Growth
programme, focusing on how to develop our employees, address skills gaps, increase employee
engagement and coach for better performance
  We have developed, and calibrated, a single set of performance measures for our senior managers
  We achieved an 83.6% response rate to our employee engagement survey conducted in February 2008
  We have upgraded and aligned our talent review process across National Grid, involving talent planning
sessions across our lines of business and covering both the UK and the USInclusion and
diversity
    
    Proportion of female 
employees(%)
    
    ()
    
    Proportion of black 
and minority ethnic 
employees(%)
    
    ()Relationships
    
    Stakeholder
relations and
community
involvement
    
      Over 350 equity investor roadshows in the year and presentations to debt investors in 17 countries
  Reliability programme in the US to address customer service
  Engaged independent experts to review our community investment activities
  First official partner of Special Olympics Great BritainEnvironment
    
    Climate
change
    
    Percentage reduction
against baseline*
Target: 80% by 2050
    
    ()
    
      We have increased our target for the reduction in
greenhouse gas emissions against our baseline
from a 60% reduction by 2050 to an 80% reduction by 2050Historically
contaminated
land
    
      Land contamination issues managed at 529 sites*
  Environmental work stages completed at 189 sites*
  Of these, 33 sites included remediation*Protecting the
environment
    
    Significant direct
environmental incidents*
(number)Target: zero
    
    ()
    
    Total value of fines 
from prosecutions 
and citations*($)Target: zero
    
    ()Financial 
performance
    
    Profit and cash
flow
    
    Adjusted operating
profit+(£m)
    
    ()
    
    Adjusted earnings
per share+(pence)
    
    ()Cash generated by
continuing operations(£m)
    
    ()
    
    Synergy savings
  Rhode Island $18 million target achieved
  $38 million of KeySpan target of $200 million achievedReturns from
investment
    
    Return on equity^(%  three year average)
    
    ()Financial
discipline
    
    Interest coverLong-term target: 
range 3.0-3.5
    
    ()
    
    Share repurchases
(£bn)
    
    ()Shareholder
returns
    
    Dividend growth(%)Target: 
7% to 31 March 2008
(8% to 31 March 2012)
    
    ()
    
    Total shareholder return
(%  three year cumulative)
    
    ()
 
  * Excludes KeySpan  will be included in key performance indicators from 1 April 2008 onwards
and reported in the Annual Report and Accounts 2008/09 Includes operations acquired with KeySpan for the period from 24 August 2007 to 31 March 2008 or as at 31 March 2008+ Adjusted operating profit and adjusted earnings per share exclude exceptional items, remeasurements and stranded cost recoveries (see page 36)° Employee lost time injury frequency rate for 2006/07 has been restated to align UK and US definitions of a lost time injury (see page 29)^ Includes KeySpan operations on a pro forma financial performance basis assuming the acquisition occurred on 1 April 2007




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##### Table of Contents



26   Performance against our objectives
    
    National Grid plc
  Performance against our objectives
   Responsibility
      £3.8bn
    
    £3.1bn
    
    £1.5bn
    
    £3.1bnKeySpan acquisition completed for £3.8 billion consideration
    
    Wireless and Basslink sold for  £3.1billion proceeds
    
    Share repurchases
    
    Capital expenditure




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##### Table of Contents



() Annual Report and Accounts 2007/08   27
  Delivering our strategy
   Operating 
model
    
    Our operating model is based on ensuring that 
activities are carried out at the most appropriate 
level, either locally, within lines of business or 
across National Grid.
   n
    
    a significantly improved customer experience;n
    
    a high performance culture;n
    
    common front office and back office systems across National Grid;n
    
    structural changes in the way we operate;n
    
    long-term labour agreements that enable us to deliver improved operational performance and
rewarding work for our employees;n
    
    rationalised locations from which we operate;n
    
    refreshed system operation technology;n
    
    improved productivity; andn
    
    advanced decision support tools and analytic capabilities.
 Activities during the year
 Lines of business
 Common functions
   Common systems and processes
  Identification of best practice
  Safety, health and environmental management
   Lines of business
    
    Integration
    
    Transformation
    
    Performance for
growthEstablished and focused
on delivering
improvements
    
    Integration of KeySpan
to deliver synergies to
benefit customers and
our shareholders
    
    Programme started to
deliver common systems
and processes
    
    Talent development
for our managers




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##### Table of Contents



28   Performance against our objectives continued
    
    National Grid plc
  New 
businesses
    
    We will consider acquiring new businesses in our
core markets of electricity and gas delivery in the
UK and the US. This may include generation assets
where our exposure to commodity price fluctuations
is limited.
 We use the aggregate of consideration paid and
debt assumed to monitor our investment in
acquisitions. There is no numerical target as each
investment is different and is considered on its
own merits.
 As part of our monitoring of financial performance
we monitor synergy savings generated following an
acquisition (see page 25).
 Exit non-core businesses
    
    Our decision to focus on our energy delivery
markets in the UK and the US resulted in a
commitment to exit from our wireless infrastructure
operations in the UK and US and from the Basslink
electricity interconnector in Australia.We are also required to dispose of the Ravenswood
generation station in New York City as a condition
of our acquisition of KeySpan.
 Our principal objective on exiting a business is to
maximise the proceeds we can generate from each sale.
 
   n
    
    on 3 April 2007, we completed the sale of our UK wireless
infrastructure business for proceeds of £2.5 billion;n
    
    on 15 August 2007, we completed the sale of our US wireless
infrastructure operations for £147 million;n
    
    on 31August 2007, we completed the sale of the Basslink electricity
interconnector in Australia for £485 million; andn
    
    on 31March 2008, we entered into an agreement to sell the Ravenswood
generation station for $2.9 billion (£1.4 billion), subject to
regulatory approval.




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##### Table of Contents



() Annual Report and Accounts 2007/08   29
  Operating performance
  Safety
    
    Safety is paramount.

Our most important goals are: to ensure that
members of the public are not injured as a direct
result of our operations; to deliver a working
environment where there are zero work-related
injuries and illnesses; to reduce gas leaks on our
distribution networks; and to improve the health
of our employees so they are fit for work every day.
 We use a range of lagging and leading indicators to
monitor our performance against our safety
objectives including members of the public injured
as a direct result of our operations; employee lost
time injury frequency rate; kilometres of gas
distribution mains replaced in the UK; and employee
sickness absence rate.
 
   Public safety
 *
    
    Includes fatalities, injuries requiring the
person to attend hospital and, in the UK, any
other injuries reportable under the Reporting of
Injuries, Diseases and Dangerous Occurrences
Regulations (RIDDOR)**
    
    Excludes operations acquired with KeySpan.
These will be included from 2008/09 onwards
 Gas safety
  Employee safety
      
 *
    
    2006/07 restated to align UK and US reporting of lost time injuries**
    
    Excludes operations acquired with KeySpan.
These will be included from 2008/09 onwards




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##### Table of Contents



30   Performance against our objectives continued
    
    National Grid plc
  *
    
    2006/07 restated to align UK and US reporting of lost time injuries**
    
    Excludes operations acquired with KeySpan.
These will be included from 2008/09 onwards
   
 *
    
    Excludes operations acquired with KeySpan. These will be included from 2008/09 onwards
    Contractor safety
 Efficiency
    
    By improving efficiency, we can constrain the cost of
our operations borne by customers and improve
returns to shareholders. We review our operations
continually to identify opportunities to improve the
operational productivity of our assets and our
employees, and to identify areas in which we can
reduce costs or restrict cost increases. Planning
ahead is essential in our approach to maintaining
and improving efficiency.
 Our primary method of measuring improvements in
efficiency is through our financial performance.
 
   Reliability
    
    Our principal operations are critical to the
functioning of the economies we serve. The
reliability of our energy networks is one of our
highest priorities after safety.
 We use business specific reliability performance
indicators to measure our reliability performance.
 
    Customer 
service
    
    Our objective is to impress our customers with
the quality of the services we provide, with our
responsiveness when things go wrong and with
our dedication to continued improvement.
 We use business specific service quality
performance measures to measure our performance
in this area.




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##### Table of Contents



() Annual Report and Accounts 2007/08   31
  Capital
investment
    
    Capital investment is one of the principal drivers
to future growth, as the majority of the capital
investment we make enables us to earn an
increased financial return.The principal measure we use to monitor organic
investment is capital expenditure, which includes
investment in property, plant & equipment as well as
in internally created intangible assets such as
software.
 Talent
  Talent and
skills
    
    Identifying, recruiting and developing talented
people is critical to our future success. We aim
to support all our employees so that they can
operate to the best of their abilities by creating
an environment that allows them to realise their
full potential.




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##### Table of Contents



32   Performance against our objectives continued
    
    National Grid plc
  Engagement
andperformance
    
    To succeed, we need to engage our employees
to strive for continued improvement. For that
purpose our aim is to implement a world-class
performance management process.
  Employee engagement
   Performance management
 Inclusion and
diversity
    
    In order to develop, recruit and retain talented
people, we aim to achieve a more inclusive and diverse workforce,
reflecting the composition of the communities in which we operate, and to be seen as an employer of
choice across diverse communities.Performance measures we use to monitor our objective
of promoting inclusion and diversity include the
percentage of female employees
and the percentage of black and minority ethnic
employees.




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##### Table of Contents



() Annual Report and Accounts 2007/08   33
  Relationships
  Investor
relations
    
    Our aim is to ensure that the value of our business
is reflected in our share price. We aim to make
National Grid attractive to debt investors so that we
can finance our operations as effectively as possible.
     Customers,
regulators andgovernments
    
    The primary concern of our customers, regulators
and governments is that we deliver a safe, efficient
and reliable service, now and into the future.
Hence our relationships reflect the quality
of our operational performance.
    Suppliers
    
    We aim to work in partnership with our suppliers,
developing constructive relationships and working
together effectively. Our objective is to develop
contractual arrangements with our suppliers that
align their interests with our own as far as possible
and share financial risks appropriately.
 Community
involvement
    
    National Grids role as a good corporate citizen
supports our ambitions, and is delivered through
a sustained and consistent approach.




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##### Table of Contents



34   Performance against our objectives continued
    
    National Grid plc
  Environment
  Climate change
    
    Climate change is possibly one of the greatest
challenges facing society in the 21st century.


Our objective is to reduce National Grids emissions
of greenhouse gases by 80% against our baseline.
 Our key performance indicator to monitor our
performance in this area is the percentage reduction
in our greenhouse gas emissions against our
baseline. We also measure absolute emissions.
    n
    
    fully integrating sustainability and climate change considerations into our business
decisions, including the setting of carbon budgets within each of our lines of business;n
    
    influencing legislators and regulators to reshape energy markets to meet the climate change
challenge; andn
    
    helping and supporting our customers, employees and suppliers in changing their behaviours so
as to be more considerate of the environment.
   2
 *
    Excludes operations acquired with KeySpan. These
will be included from 2008/09 onwards. Totals are
approximate and prepared where possible on a
combination of fiscal and calendar year data
 
 
    Tonnes per £m revenue excludes emissions and revenue from KeySpan*
    Excludes operations acquired with KeySpan. These
will be included from 2008/09 onwards. Totals are
approximate and prepared where possible on a
combination of fiscal and calendar year data
 2
  2




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##### Table of Contents



Annual Report and Accounts 2007/08   35
  Historically 
contaminated 
land
    
    We manage an inherited portfolio of historically
contaminated land including former manufactured
gas plants, industrial landfills, former gas holders
and older substations on our transmission and
distribution networks. Sites can sometimes have
a complex mix of contamination dating back over
100 years.
    Protecting the environment
    
    Our objective is to help protect the environment
for future generations and so we are committed
to continuous improvement in our environmental performance by:
 
    
    efficient use of natural resources;
    
    keeping our waste to minimum and increasing the economic value of any waste we produce;
    
    acting to prevent environmental incidents; and
    
    improving, where we can, the environmental status of the land on which we operate.
 Key performance indicators that we monitor in this
area comprise the number of significant direct
environmental incidents and the total value of fines
from prosecutions and citations.
 *
    
    Excludes operations acquired with KeySpan.
These will be included from 2008/09 onwards
 
 *
    
    Excludes operations acquired with KeySpan.
These will be included from 2008/09 onwards




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##### Table of Contents



36   Performance against our objectives continued
    
    National Grid plc
  Financial performance
  Profit and cash flow
    
    If we achieve our objectives we should be able
to deliver continued improvements in financial
performance, so that we deliver on our commitment
to growing our dividend each year.
 The principal measures we use to monitor our
financial performance are adjusted operating profit,
adjusted earnings per share and operating cash
flows. Adjusted operating profit and adjusted
earnings per share are operating profit and basic
earnings per share before exceptional items,
remeasurements and stranded cost recoveries.
 In addition, we monitor the amount of synergy
savings we generate following an acquisition.
  Continuing and discontinued operations
 Measurement of financial performance and use of adjusted profit measures
 £11,423m
    
    £3,265m
    
    £2,595m
    
    £2,964mRevenue
    
    Cash generated from
continuing operations
    
    Adjusted operating profit
    
    Operating profit




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##### Table of Contents



() Annual Report and Accounts 2007/08   37
  Exchange rates
 Operating financial performance
  48.0p
    
    60.5p
    
    15%
    
    11.8%Adjusted earnings
per share
    
    Earnings per share
    
    Growth in ordinary
dividends
    
    Return on equity average
over three years




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##### Table of Contents



38   Performance against our objectives continued
    
    National Grid plc
  Years ended 31 March2008
    
    
    2007
    
    
    2006Continuing operations
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    11,423
    
    
    
    8,695
    
    
    
    8,868Other operating income
    
    
    75
    
    
    
    83
    
    
    
    80Operating costs
    
    
    (8,534
    )
    
    
    (6,265
    )
    
    
    (6,574
    )Total operating profit
    
    
    2,964
    
    
    
    2,513
    
    
    
    2,374Analysed as:Adjusted operating profit
    
    
    2,595
    
    
    
    2,031
    
    
    
    1,968Exceptional items
    
    
    (242
    )
    
    
    (22
    )
    
    
    (34
    )Remeasurements
    
    
    232
    
    
    
    81
    
    
    
    (49
    )Stranded cost recoveries
    
    
    379
    
    
    
    423
    
    
    
    489Total operating profit
    
    
    2,964
    
    
    
    2,513
    
    
    
    2,374
  Revenue by business segment
 Years ended 31 March2008
    
    
    2007
    
    
    2006Continuing operations
    
    £m
    
    
    £m
    
    
    £mTransmission UK
    
    
    2,956
    
    
    
    2,816
    
    
    
    2,710Transmission US
    
    
    299
    
    
    
    270
    
    
    
    310Gas Distribution UK
    
    
    1,383
    
    
    
    1,193
    
    
    
    1,222Gas Distribution US
    
    
    2,845
    
    
    
    638
    
    
    
    571Electricity Distribution & Generation US
    
    
    3,508
    
    
    
    3,430
    
    
    
    3,651Other activities
    
    
    642
    
    
    
    567
    
    
    
    701Total segmental revenues
    
    
    11,633
    
    
    
    8,914
    
    
    
    9,165Less: sales between business segments
    
    
    (210
    )
    
    
    (219
    )
    
    
    (297
    )Total
    
    
    11,423
    
    
    
    8,695
    
    
    
    8,868
 Segmental operating profit before exceptional
items, remeasurements and stranded cost
recoveries
 Years ended 31 March2008
    
    
    2007
    
    
    2006Continuing operations
    
    £m
    
    
    £m
    
    
    £mTransmission UK
    
    
    1,021
    
    
    
    946
    
    
    
    844Transmission US
    
    
    128
    
    
    
    108
    
    
    
    127Gas Distribution UK
    
    
    595
    
    
    
    409
    
    
    
    483Gas Distribution US
    
    
    392
    
    
    
    71
    
    
    
    47Electricity Distribution & Generation US
    
    
    330
    
    
    
    364
    
    
    
    317Other activities
    
    
    129
    
    
    
    133
    
    
    
    150Adjusted operating profit
    
    
    2,595
    
    
    
    2,031
    
    
    
    1,968
 Segmental total operating profit
 Years ended 31 March2008
    
    
    2007
    
    
    2006Continuing operations
    
    £m
    
    
    £m
    
    
    £mTransmission UK
    
    
    1,013
    
    
    
    936
    
    
    
    843Transmission US
    
    
    122
    
    
    
    107
    
    
    
    127Gas Distribution UK
    
    
    574
    
    
    
    412
    
    
    
    432Gas Distribution US
    
    
    487
    
    
    
    67
    
    
    
    47Electricity Distribution & Generation US
    
    
    696
    
    
    
    859
    
    
    
    757Other activities
    
    
    72
    
    
    
    132
    
    
    
    168Total operating profit
    
    
    2,964
    
    
    
    2,513
    
    
    
    2,374
 2007/08 compared with 2006/07
  Revenueand otheroperating
    
    
    Operating
    
    
    Operatingincome
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2006/07 results
    
    
    8,778
    
    
    
    (6,265
    )
    
    
    2,513Add back exceptional items and
remeasurements
    
    
    
    
    
    
    (59
    )
    
    
    (59
    )Deduct stranded cost recoveries
    
    
    (426
    )
    
    
    3
    
    
    
    (423
    )2006/07 adjusted results
    
    
    8,352
    
    
    
    (6,321
    )
    
    
    2,031Exchange on US operations
    
    
    (193
    )
    
    
    167
    
    
    
    (26
    )2006/07 constant currency results
    
    
    8,159
    
    
    
    (6,154
    )
    
    
    2,005Transmission UK
    
    
    134
    
    
    
    (59
    )
    
    
    75Transmission US
    
    
    42
    
    
    
    (17
    )
    
    
    25Gas Distribution UK
    
    
    192
    
    
    
    (6
    )
    
    
    186Gas Distribution US
    
    
    2,239
    
    
    
    (1,915
    )
    
    
    324Electricity Distribution & Generation US
    
    
    272
    
    
    
    (288
    )
    
    
    (16
    )Other activities
    
    
    71
    
    
    
    (75
    )
    
    
    (4
    )Sales between businesses
    
    
    7
    
    
    
    (7
    )
    
    
    2007/08 adjusted results
    
    
    11,116
    
    
    
    (8,521
    )
    
    
    2,5952007/08 exceptional items
and remeasurements
    
    
    
    
    
    
    (10
    )
    
    
    (10
    )2007/08 stranded cost recoveries
    
    
    382
    
    
    
    (3
    )
    
    
    3792007/08 results
    
    
    11,498
    
    
    
    (8,534
    )
    
    
    2,964




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##### Table of Contents



() Annual Report and Accounts 2007/08   39
  2006/07 compared to 2005/06
 Revenueand otheroperating
    
    
    Operating
    
    
    Operatingincome
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2005/06 results
    
    
    8,948
    
    
    
    (6,574
    )
    
    
    2,374Add back exceptional items
and remeasurements
    
    
    
    
    
    
    83
    
    
    
    83Deduct stranded cost recoveries
    
    
    (517
    )
    
    
    28
    
    
    
    (489
    )2005/06 adjusted results
    
    
    8,431
    
    
    
    (6,463
    )
    
    
    1,968Exchange on US operations
    
    
    (250
    )
    
    
    219
    
    
    
    (31
    )2005/06 constant currency results
    
    
    8,181
    
    
    
    (6,244
    )
    
    
    1,937Transmission UK
    
    
    112
    
    
    
    (10
    )
    
    
    102Transmission US
    
    
    (21
    )
    
    
    10
    
    
    
    (11
    )Gas Distribution UK
    
    
    (27
    )
    
    
    (47
    )
    
    
    (74
    )Gas Distribution US
    
    
    103
    
    
    
    (76
    )
    
    
    27Electricity Distribution & Generation US
    
    
    65
    
    
    
    2
    
    
    
    67Other activities
    
    
    (137
    )
    
    
    120
    
    
    
    (17
    )Sales between businesses
    
    
    76
    
    
    
    (76
    )
    
    
    2006/07 adjusted results
    
    
    8,352
    
    
    
    (6,321
    )
    
    
    2,0312006/07 exceptional items
and remeasurements
    
    
    
    
    
    
    59
    
    
    
    592006/07 stranded cost recoveries
    
    
    426
    
    
    
    (3
    )
    
    
    4232006/07 results
    
    
    8,778
    
    
    
    (6,265
    )
    
    
    2,513
 Net finance costs
  Exceptional finance costs and remeasurements




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##### Table of Contents



40   Performance against our objectives continued
    
    National Grid plc
  Taxation
  Profit for the year from continuing operations
 Earnings from continuing operations
 Adjusted earnings
 Years ended 31 March2008
    
    
    2007
    
    
    2006Continuing operations
    
    £m
    
    
    £m
    
    
    £mAdjusted operating profit
    
    
    2,595
    
    
    
    2,031
    
    
    
    1,968Net finance costs excluding
exceptional items and remeasurements
    
    
    (760
    )
    
    
    (547
    )
    
    
    (602
    )Share of post-tax results of joint ventures
    
    
    4
    
    
    
    2
    
    
    
    3Adjusted profit before taxation
    
    
    1,839
    
    
    
    1,486
    
    
    
    1,369Taxation excluding tax on
exceptional items, remeasurements and
stranded cost recoveries
    
    
    (583
    )
    
    
    (442
    )
    
    
    (369
    )Adjusted profit from continuing operations
    
    
    1,256
    
    
    
    1,044
    
    
    
    1,000pence
    
    
    pence
    
    
    penceAdjusted earnings per share
from continuing operations
    
    
    48.0
    
    
    
    38.3
    
    
    
    35.2
 Earnings
 Years ended 31 March2008
    
    
    2007
    
    
    2006Continuing operations
    
    £m
    
    
    £m
    
    
    £mTotal operating profit
    
    
    2,964
    
    
    
    2,513
    
    
    
    2,374Net finance costs
    
    
    (776
    )
    
    
    (764
    )
    
    
    (659
    )Share of post-tax results of joint ventures
    
    
    4
    
    
    
    2
    
    
    
    3Profit before taxation
    
    
    2,192
    
    
    
    1,751
    
    
    
    1,718Taxation
    
    
    (611
    )
    
    
    (441
    )
    
    
    (535
    )Profit from continuing operations
    
    
    1,581
    
    
    
    1,310
    
    
    
    1,183pence
    
    
    pence
    
    
    penceEarnings per share from
continuing operations
    
    
    60.5
    
    
    
    48.1
    
    
    
    41.6
 Earnings per share from continuing operations
 Years ended 31 March2008
    
    
    2007
    
    
    2006Continuing operations
    
    pence
    
    
    pence
    
    
    penceAdjusted earnings per share
    
    
    48.0
    
    
    
    38.3
    
    
    
    35.2Exceptional items
    
    
    (0.1
    )
    
    
    (1.5
    )
    
    
    (2.2
    )Commodity cost remeasurements
    
    
    5.1
    
    
    
    1.3
    
    
    
    (1.3
    )Derivative financial instruments remeasurements
    
    
    (1.3
    )
    
    
    0.6
    
    
    
    (0.4
    )Stranded cost recoveries
    
    
    8.8
    
    
    
    9.4
    
    
    
    10.3Earnings per share  continuing operations
    
    
    60.5
    
    
    
    48.1
    
    
    
    41.6




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##### Table of Contents



() Annual Report and Accounts 2007/08   41
  Adjusted profit measures
 a) Reconciliation of adjusted operating
profit to total operating profit
 Years ended 31 March2008
    
    
    2007
    
    
    2006Continuing operations
    
    £m
    
    
    £m
    
    
    £mAdjusted operating profit
    
    
    2,595
    
    
    
    2,031
    
    
    
    1,968Exceptional items
    
    
    (242
    )
    
    
    (22
    )
    
    
    (34
    )Commodity contract remeasurements
    
    
    232
    
    
    
    81
    
    
    
    (49
    )Stranded cost recoveries
    
    
    379
    
    
    
    423
    
    
    
    489Total operating profit
    
    
    2,964
    
    
    
    2,513
    
    
    
    2,374
  b) Reconciliation of adjusted profit before
taxation to profit before taxation
 Years ended 31 March2008
    
    
    2007
    
    
    2006Continuing operations
    
    £m
    
    
    £m
    
    
    £mAdjusted profit before taxation
    
    
    1,839
    
    
    
    1,486
    
    
    
    1,369Exceptional items
    
    
    (242
    )
    
    
    (67
    )
    
    
    (83
    )Commodity contract remeasurements
    
    
    223
    
    
    
    62
    
    
    
    (63
    )Derivative financial remeasurements
    
    
    (7
    )
    
    
    (153
    )
    
    
    6Stranded cost recoveries
    
    
    379
    
    
    
    423
    
    
    
    489Total profit before taxation
    
    
    2,192
    
    
    
    1,751
    
    
    
    1,718
  c) Reconciliation of adjusted earnings to earnings
(profit for the year from continuing operations
attributable to equity shareholders of the parent)
 Years ended 31 March2008
    
    
    2007
    
    
    2006Continuing operations
    
    £m
    
    
    £m
    
    
    £mAdjusted earnings
    
    
    1,253
    
    
    
    1,042
    
    
    
    998Exceptional items
    
    
    (2
    )
    
    
    (41
    )
    
    
    (61
    )Commodity contract remeasurements
    
    
    133
    
    
    
    37
    
    
    
    (38
    )Derivative financial remeasurements
    
    
    (35
    )
    
    
    16
    
    
    
    (11
    )Stranded cost recoveries
    
    
    229
    
    
    
    254
    
    
    
    293Earnings
    
    
    1,578
    
    
    
    1,308
    
    
    
    1,181
 Discontinued operations
 Years ended 31 March2008
    
    
    2007
    
    
    2006Discontinued operations
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    201
    
    
    
    383
    
    
    
    493Operating costs before exceptional items
    
    
    (166
    )
    
    
    (266
    )
    
    
    (362
    )Adjusted operating profit
    
    
    35
    
    
    
    117
    
    
    
    131Exceptional items
    
    
    
    
    
    
    (55
    )
    
    
    (20
    )Operating profit
    
    
    35
    
    
    
    62
    
    
    
    111Remeasurement finance income
    
    
    8
    
    
    
    37
    
    
    
    Net finance costs
    
    
    
    
    
    
    (2
    )
    
    
    (4
    )Profit from discontinued operations before tax
    43
    
    
    
    97
    
    
    
    107Taxation
    
    
    (7
    )
    
    
    (11
    )
    
    
    (45
    )Profit from discontinued operations
    
    
    36
    
    
    
    86
    
    
    
    62Gain on disposal of discontinued operations
    
    
    1,582
    
    
    
    
    
    
    
    2,605Profit for the year
    
    
    1,618
    
    
    
    86
    
    
    
    2,667
      Net profit and total earnings per share for the year




---



##### Table of Contents



42   Performance against our objectives continued
    
    National Grid plc
  Cash flows
 
 Cash flows from operating activities
   Cash flows from investing activities
  Cash flows from financing activities
 Returns on our
investments
    
    We aim to generate value from our investments
by improving the operating performance of our
networks, by selecting investments that will provide
the best return or, in the case of acquisitions,
by selecting businesses where we can obtain
synergies for the benefit of our customers and
our shareholders.Measures we use to monitor the value we generate from
our investments include the returns generated by our
regulated businesses and our consolidated return on
equity.
   Financial
discipline
    
    In order to deliver sustainable growth we must
be disciplined in the way we manage our balance
sheet. This means that we will return cash to
shareholders to the extent it is not required for
our investment objectives.The principal measure we use to monitor financial
discipline is interest cover, being the ratio
between the profits we generate and the net interest
cost of servicing our borrowings. We also measure
our progress against our promise to return cash to
shareholders.




---



##### Table of Contents



() Annual Report and Accounts 2007/08   43
  Shareholder returns
    
    We aim to increase our dividend each year to ensure
shareholders receive an appropriate level of return
on their investment in us. We also endeavour to
communicate with investors so that as much as
possible of the value that we create is reflected
in our share price to the benefit of shareholders.
 We measure our overall performance through dividend
growth and through total shareholder return, being
the increase in our share price over the course of
the financial year, assuming dividends are
reinvested.
 Dividends in respect of the financial year
 
 2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Dividends
    
    pence
    
    
    pence
    
    
    pence
    
    
    pence
    
    
    penceInterim
    
    
    11.7
    
    
    
    10.9
    
    
    
    10.2
    
    
    
    8.5
    
    
    
    7.91Final
    
    
    21.3
    
    
    
    17.8
    
    
    
    15.9
    
    
    
    15.2
    
    
    
    11.87Total
    
    
    33.0
    
    
    
    28.7
    
    
    
    26.1
    
    
    
    23.7
    
    
    
    19.78Dividends per ADS
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $Interim
    
    
    1.21
    
    
    
    1.03
    
    
    
    0.88
    
    
    
    0.79
    
    
    
    0.67Final
    
    
    2.05
    
    
    
    1.76
    
    
    
    1.51
    
    
    
    1.38
    
    
    
    1.05Total
    
    
    3.26
    
    
    
    2.79
    
    
    
    2.39
    
    
    
    2.17
    
    
    
    1.72




---



##### Table of Contents



44   Transmission
    
    National Grid plc
  We own and operate the electricity transmission network in England and Wales,
the gas transmission network in Great Britain, and electricity transmission
networks in the northeastern US. We are also responsible for the operation of
the electricity transmission networks in Scotland.
 Key Facts
 
    
    Over 20,800
kilometres of
electrical overhead
lines
    
    Over 800
kilometres of
electrical
underground cable
    
    303 TWh
electricity
transmitted in
the UK
    
    Nearly 7,400
kilometres of gas
pipeline
    
    1,134 TWh of
gas throughput
   
 £1,149m
    

£1,711m
    
    3,678
    
    1.5 PWhAdjusted operating profit
    
    Capital investment
    
    Employees
    
    Energy transmitted (1.5 trillion kWh)




---



##### Table of Contents



() Annual Report and Accounts 2007/08   45
  About Transmission
   Principal operations
   Electricity transmission owner
    
    We own the electricity transmission system in
England and Wales.Our electricity assets comprise approximately 7,200
kilometres of overhead line, about 675 kilometres of
underground cable and 337 substations at 244 sites.Gas transmission owner
    
    We own the gas national transmission system in
Great Britain. This comprises approximately 7,400
kilometres of high pressure pipe and 26 compressor
stations, connecting to 8 distribution networks and
to third party independent systems for onward
transportation of gas to end consumers.
 Electricity system operator
    
    We are the Great Britain System Operator,
responsible for managing the operations of both
the England and Wales transmission system that
we own and also the two high-voltage electricity
transmission networks in
Scotland.
Day-to-day operation of the Great Britain electricity
transmission system involves the continuous real-
time matching of demand and generation output,
ensuring the stability and security of the power
system and the maintenance of satisfactory voltage
and frequency.Gassystem operator
    
    We operate the gas national transmission system.
Day-to-day operation includes balancing supply and
demand, maintaining satisfactory system pressures
and ensuring gas quality standards are met.French interconnector
    
    We own and operate the UK assets, and a portion of the subsea cables, that comprise the electricity
interconnector between England and France as part
of a joint arrangement with the French transmission
operator.LNG storage
    
    We own and operate four liquefied natural gas (LNG)
storage facilities in Great Britain.
   838 and 26
    
    99.9999%
    
    100%
    
    98.6%Electricity substations and gas compressor stations
    

UK electrical system reliability
    
    UK gas system reliability
    
    US electrical system availability




---



##### Table of Contents



46   Transmission continued
    
    National Grid plc
  Transmission US
  Electricity
transmission owner
    
    We own and operate an electricity transmission network of approximately 13,800 kilometres spanning
upstate New York, Massachusetts, Rhode Island, New Hampshire and Vermont. Our US electricity
transmission facilities operate at voltages ranging from 69 kV to 345 kV, utilising nearly 13,700
kilometres of overhead line, nearly 160 kilometres of underground cable and 501 substations.We are the largest electricity transmission service provider in New England and New York by
reference to the length of these high-voltage transmission lines.Canadian
interconnector
    
    We own and operate a 224 kilometre direct current transmission line rated at 450 kV that is a key section of an
interconnector between New England and Canada.
 Regulation  Transmission UK




---



##### Table of Contents



() Annual Report and Accounts 2007/08   47
  6 6 6
    Transmission US
 Current and future developments
  UK price controls
    Other UK developments




---



##### Table of Contents



48   Transmission continued
    
    National Grid plc
   US regulatory developments
    Performance against our objectives
  Delivering our strategy
 Key areas
of focus
    
    Key areas of focus for our Transmission business
for 2007/08 have been to improve safety performance
and to improve processes for network operations,
within-year planning, transmission construction and
asset management.
 Operating performance
 Safety
    
    Our aim is for zero lost time injuries.
   Efficiency
    
    Our objective is to be more efficient in the delivery of services, in the context of higher
expectations from our customers and cost pressures.
  Reliability
    
    Our aim is to meet or exceed network reliability and availability objectives.




---



##### Table of Contents



Annual Report and Accounts 2007/08   49
  Years ended 31 MarchMeasure
    
    2008
    
    2007
    
    2006UK electricity transmission network
reliability  target 99.9999%
    
    
    99.9999%
    
    
    99.9999%
    
    
    99.9999%UK gas transmission network
reliability  target 100%
    
    
    100%
    
    
    100
    
    
    100US electricity transmission network
reliability  target < 264 MWh
    
    437 MWh
    
    259 MWh
    
    348 MWhUK average annual availability for
electricity transmission network
    
    
    95.09%
    
    
    95.02%
    
    
    95.09%UK electricity system availability
at winter peak demand
    
    
    98.0%
    
    
    98.2%
    
    
    97.9%UK gas
compressor fleet performance  mean time between failures
    
    259 hours
    
    430 hours
    
    n/a(changeddefinition)US annual network availability
    
    
    98.6%
    
    
    98.1%
    
    
    98.5%
    Customer 
service
    
    Our aim is to support generators and distribution
network customers, including our own networks
operated by Gas Distribution in the UK and Electricity
Distribution & Generation in the US, in delivering
energy efficiently and effectively to consumers, in
particular in connecting new sources of supply to
our transmission networks.
  Capital 
investment
    
    Our aim is to deliver our planned capital investment
programme involving approximately £7 billion of
capital expenditure between 1 April 2007 and
31 March 2012.
 UK investment
 US investment
  Financial performance
 Profit
    
    Our objective is to drive continuous profit growth.
  Returns on 
investment
    
    Our objective is to deliver strong financial returns
compared to the regulatory allowances within our
UK price controls and US rate plans and agreements.




---



##### Table of Contents



50   Transmissioncontinued
    
    National Grid plc
  Financial results  Transmission UK
 Years ended 31 March2008
    
    
    2007
    
    
    2006Continuing operations
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    2,956
    
    
    
    2,816
    
    
    
    2,710Other operating income
    
    
    
    
    
    
    6
    
    
    
    Operating costs excluding exceptional items
    
    
    (1,935
    )
    
    
    (1,876
    )
    
    
    (1,866
    )Adjusted operating profit
    
    
    1,021
    
    
    
    946
    
    
    
    844Exceptional items
    
    
    (8
    )
    
    
    (10
    )
    
    
    (1
    )Operating profit
    
    
    1,013
    
    
    
    936
    
    
    
    8432007/08 compared with 2006/07
The principal movements between 2006/07 and 2007/08
can be summarised as follows:Revenueand otheroperating
    
    
    Operating
    
    
    Operatingincome
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2006/07 results
    
    
    2,822
    
    
    
    (1,886
    )
    
    
    936Add back 2006/07 exceptional items
    
    
    
    
    
    
    10
    
    
    
    102006/07 adjusted results
    
    
    2,822
    
    
    
    (1,876
    )
    
    
    946Allowed revenues
    
    
    176
    
    
    
    
    
    
    
    176Timing on recoveries
    
    
    10
    
    
    
    
    
    
    
    10Lower French interconnector
and LNG storage auctions
    
    
    (62
    )
    
    
    
    
    
    
    (62
    )Depreciation and amortisation
    
    
    
    
    
    
    (20
    )
    
    
    (20
    )Other
    
    
    10
    
    
    
    (39
    )
    
    
    (29
    )2007/08 adjusted results
    
    
    2,956
    
    
    
    (1,935
    )
    
    
    1,0212007/08 exceptional items
    
    
    
    
    
    
    (8
    )
    
    
    (8
    )2007/08 results
    
    
    2,956
    
    
    
    (1,943
    )
    
    
    1,013
 2006/07 compared with 2005/06
 Revenueand otheroperating
    
    
    Operating
    
    
    Operatingincome
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2005/06 results
    
    
    2,710
    
    
    
    (1,867
    )
    
    
    843Add back 2005/06 exceptional items
    
    
    
    
    
    
    1
    
    
    
    12005/06 adjusted results
    
    
    2,710
    
    
    
    (1,866
    )
    
    
    844Allowed revenues
    
    
    106
    
    
    
    (3
    )
    
    
    103Timing on recoveries
    
    
    (64
    )
    
    
    
    
    
    
    (64
    )Transmission owner depreciation
    
    
    
    
    
    
    27
    
    
    
    27Other
    
    
    70
    
    
    
    (34
    )
    
    
    362006/07 adjusted results
    
    
    2,822
    
    
    
    (1,876
    )
    
    
    9462006/07 exceptional items
    
    
    
    
    
    
    (10
    )
    
    
    (10
    )2006/07 results
    
    
    2,822
    
    
    
    (1,886
    )
    
    
    936
   £2,956m
    
    £299m
    
    £1,600m
    
    £111mTransmission UK revenue
    
    Transmission US revenue
    
    Transmission UK capital expenditure
    
    Transmission US capital expenditure




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##### Table of Contents



() Annual Report and Accounts 2007/08   51
  Financial results  Transmission US
 Years ended 31 March2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £mRevenue
    
    
    299
    
    
    
    270
    
    
    
    310Operating costs excluding exceptional items
    
    
    (171
    )
    
    
    (162
    )
    
    
    (183
    )Adjusted operating profit
    
    
    128
    
    
    
    108
    
    
    
    127Exceptional items
    
    
    (6
    )
    
    
    (1
    )
    
    
    Operating profit
    
    
    122
    
    
    
    107
    
    
    
    127
 2007/08 compared with 2006/07
 Operating
    
    
    OperatingRevenue
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2006/07 results
    
    
    270
    
    
    
    (163
    )
    
    
    107Add back exceptional items
    
    
    
    
    
    
    1
    
    
    
    12006/07 adjusted results
    
    
    270
    
    
    
    (162
    )
    
    
    108Exchange movements
    
    
    (13
    )
    
    
    8
    
    
    
    (5
    )2006/07 constant currency results
    
    
    257
    
    
    
    (154
    )
    
    
    103Allowed revenues
    
    
    27
    
    
    
    
    
    
    
    27Timing of recoveries
    
    
    15
    
    
    
    
    
    
    
    15Other
    
    
    
    
    
    
    (17
    )
    
    
    (17
    )2007/08 adjusted results
    
    
    299
    
    
    
    (171
    )
    
    
    128Exceptional items
    
    
    
    
    
    
    (6
    )
    
    
    (6
    )2007/08 results
    
    
    299
    
    
    
    (177
    )
    
    
    122
 2006/07 compared with 2005/06
 Operating
    
    
    OperatingRevenue
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2005/06 results and adjusted results
    
    
    310
    
    
    
    (183
    )
    
    
    127Exchange movements
    
    
    (19
    )
    
    
    11
    
    
    
    (8
    )2005/06 constant currency results
    
    
    291
    
    
    
    (172
    )
    
    
    119Tariff adjustment not repeated
    
    
    (7
    )
    
    
    7
    
    
    
    GridAmerica
    
    
    (4
    )
    
    
    3
    
    
    
    (1
    )Other changes
    
    
    (10
    )
    
    
    
    
    
    
    (10
    )2006/07 adjusted results
    
    
    270
    
    
    
    (162
    )
    
    
    108Exceptional items
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )2006/07 results
    
    
    270
    
    
    
    (163
    )
    
    
    107
   £1,021m
    
    £128m
    
    8%
    
    24%Transmission UKadjusted operating profit
    
    Transmission USadjusted operating profit
    
    Transmission UKincrease in adjustedoperating profit
    

Transmission USincrease in adjustedoperating profit atconstant currency




---



##### Table of Contents



52   Gas Distribution
    
    National Grid plc
  Gas Distribution
  We own and operate gas distribution systems in the UK and the northeastern US.
 Key Facts
 
    
    Around 190,000 kilometres of gas pipe
    
    Over 14.3 million consumers
    
    Around 13,000 pressure reduction sites, including district governors
    
    Over 9.2 million cubic metres of gas storage capacity
     
 
     £987m
    
    £702m
    
    9,136
    
    455 TWhAdjusted operating profit
    
    Capital investment
    
    Employees
    
    Gas delivered




---



##### Table of Contents



() Annual Report and Accounts 2007/08   53
  About Gas Distribution
   Principal operations Gas Distribution UK
 Gas Distribution US
   1,850km
    
    Safety
    
    3.5m
    
    14.3mGas pipe replaced
under our UK gas mainsreplacement programme
    
    UK and US targets met
to attend gas escapes
    
    Calls handled by the
national emergency
number in the UK
    
    Gas consumers served
in the UK and the US




---



##### Table of Contents



54   Gas Distributioncontinued
    
    National Grid plc
  Regulation  Gas Distribution UK
 Gas Distribution US




---



##### Table of Contents



() Annual Report and Accounts 2007/08   55
  Equity
    
    Equity to
    
    SharingRate plan
    
    return
    
    debt ratio
    
    arrangementsNew York City
    
    
    9.8
    %
    
    45/55
    
    100% to 10.5%, 50% toand Long Island
    
    
    
    
    
    
    
    12.5%, 35% to 13.5%,nil above 13.5%Upstate New York
    
    
    10.6
    %
    
    42/58
    
    100% to 10.6%,
50% above 10.6%Boston, MA
    
    
    10.2
    %
    
    50/50
    
    100% up to 14.2%,
75% above 14.2%Essex, MA
    
    
    11.2
    %
    
    55/45
    
    NoneColonial, MA
    
    
    11.2
    %
    
    46/54
    
    NoneRhode Island
    
    
    11.3
    %
    
    44/56
    
    NoneNew Hampshire
    
    
    10.4
    %
    
    49/51
    
    None
  Current and future developments
  Acquisition of KeySpan
  UK regulatory price control reviews
   Rhode Island gas rate plan filing
 Upstate New York gas rate plan filing
  New Hampshire gas rate plan filing
  Performance against our objectives
  Delivering our strategy
 Key areas
of focus
    
    Our objective is to utilise the scale and breadth of our enlarged Gas Distribution operations,
together with the benefits of common support services, to drive improvements in our operating and
financial performance. In particular, we aim to adopt best practices across Gas Distribution.




---



##### Table of Contents



56   Gas Distribution continued
    
    National Grid plc
  Operating performance
 Safety
    
    Our objective is to reduce employee lost time
injuries to zero.
   Gas escapes
    
    Time
    
    Target
    
    ActualUK  uncontrolled
    
    One hour
    
    
    97
    %
    
    
    98
    %UK  controlled
    
    Two hours
    
    
    97
    %
    
    
    99
    %Upstate New York
    
    30 minutes
    
    
    75
    %
    
    
    83
    %45 minutes
    
    
    90
    %
    
    
    96
    %60 minutes
    
    
    95
    %
    
    
    99
    %Rhode Island
    
    30 minutes
    
    
    91
    %
    
    
    95
    %45 minutes
    
    
    93
    %
    
    
    97
    %
 Efficiency
    
    Our objective is to increase the efficiency
 of Gas Distribution operations.
    Reliability
    
    Our objective is to meet regulatory targets

and to have zero loss of supply incidents.
    Customer
service
    
    In addition to meeting customer service objectives
agreed with our regulators, our objective is to be
within the upper quartile of customer satisfaction

in the territories we operate in.




---



##### Table of Contents



() Annual Report and Accounts 2007/08   57
  Capital investment
    
    Our aim is to deliver around £4 billion of


capital investment by 2012 in line with


our price control allowance.
  UK capital investment
   US capital investment
 Financial performance
 Profits
    
    Our objective is to increase profits each year.
  Returns oninvestment
    
    Our aim is to meet or exceed the base financial

returns in our price controls in the UK and our
rate plans in the US.
   Financial results  Gas Distribution UK
 Years ended 31 March2008
    
    
    2007
    
    
    2006Continuing operations
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    1,383
    
    
    
    1,193
    
    
    
    1,222Other operating income
    
    
    8
    
    
    
    6
    
    
    
    4Operating costs excluding exceptional
items and remeasurements
    
    
    (796
    )
    
    
    (790
    )
    
    
    (743
    )Adjusted operating profit
    
    
    595
    
    
    
    409
    
    
    
    483Exceptional items
    
    
    (21
    )
    
    
    3
    
    
    
    (51
    )Operating profit
    
    
    574
    
    
    
    412
    
    
    
    4322007/08 compared with 2006/07The principal
movements between
2006/07 and 2007/08
can be
summarised as follows:Revenueand otheroperating
    
    
    Operating
    
    
    Operatingincome
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2006/07 results
    
    
    1,199
    
    
    
    (787
    )
    
    
    412Add back 2006/07 exceptional items
    
    
    
    
    
    
    (3
    )
    
    
    (3
    )2006/07 adjusted results
    
    
    1,199
    
    
    
    (790
    )
    
    
    409Allowed revenues
    
    
    146
    
    
    
    
    
    
    
    146Timing on recoveries
    
    
    59
    
    
    
    
    
    
    
    59Depreciation and amortisation
    
    
    
    
    
    
    (11
    )
    
    
    (11
    )Pass-through costs
    
    
    
    
    
    
    (18
    )
    
    
    (18
    )Other revenue and costs
    
    
    (13
    )
    
    
    23
    
    
    
    102007/08 adjusted results
    
    
    1,391
    
    
    
    (796
    )
    
    
    5952007/08 exceptional items
    
    
    
    
    
    
    (21
    )
    
    
    (21
    )2007/08 results
    
    
    1,391
    
    
    
    (817
    )
    
    
    574




---



##### Table of Contents



58   Gas Distribution continued
    
    National Grid plc
  2006/07 compared with 2005/06
 Revenueand otheroperating
    
    
    Operating
    
    
    Operatingincome
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2005/06 results
    
    
    1,226
    
    
    
    (794
    )
    
    
    432Add back 2005/06 exceptional items
    
    
    
    
    
    
    51
    
    
    
    512005/06 adjusted results
    
    
    1,226
    
    
    
    (743
    )
    
    
    483Price changes
    
    
    73
    
    
    
    
    
    
    
    73Weather and volumes
    
    
    (69
    )
    
    
    
    
    
    
    (69
    )Timing on recoveries
    
    
    (32
    )
    
    
    
    
    
    
    (32
    )Depreciation and amortisation
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )Business rates
    
    
    
    
    
    
    (23
    )
    
    
    (23
    )Other revenues and costs
    
    
    1
    
    
    
    (15
    )
    
    
    (14
    )2006/07 adjusted results
    
    
    1,199
    
    
    
    (790
    )
    
    
    4092006/07 exceptional items
    
    
    
    
    
    
    3
    
    
    
    32006/07 results
    
    
    1,199
    
    
    
    (787
    )
    
    
    412
   £1,383m
    
    £2,845m
    
    £514m
    
    £188mGas Distribution UK revenue
    
    Gas Distribution US revenue
    
    Gas Distribution UK capital expenditure
    
    Gas Distribution US capital expenditure




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##### Table of Contents



() Annual Report and Accounts 2007/08   59
  Financial results  Gas Distribution US
 Years ended 31 March2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £mRevenue
    
    
    2,845
    
    
    
    638
    
    
    
    571Operating costs excluding exceptional
items and remeasurements
    
    
    (2,453
    )
    
    
    (567
    )
    
    
    (524
    )Adjusted operating profit
    
    
    392
    
    
    
    71
    
    
    
    47Exceptional items and remeasurements
    
    
    95
    
    
    
    (4
    )
    
    
    Operating profit
    
    
    487
    
    
    
    67
    
    
    
    472007/08 compared with 2006/07The principal movements between 2006/07 and 2007/08 can be
summarised as follows:Operating
    
    
    OperatingRevenue
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2006/07 results
    
    
    638
    
    
    
    (571
    )
    
    
    67Add back exceptional items
    
    
    
    
    
    
    4
    
    
    
    42006/07 adjusted results
    
    
    638
    
    
    
    (567
    )
    
    
    71Exchange movements
    
    
    (32
    )
    
    
    29
    
    
    
    (3
    )2006/07 constant currency results
    
    
    606
    
    
    
    (538
    )
    
    
    68KeySpan
    
    
    2,181
    
    
    
    (1,832
    )
    
    
    349Rhode Island gas operations
    
    
    61
    
    
    
    (74
    )
    
    
    (13
    )Bad debt expense
    
    
    
    
    
    
    (3
    )
    
    
    (3
    )Pension and benefit costs
    
    
    
    
    
    
    (3
    )
    
    
    (3
    )Other
    
    
    (3
    )
    
    
    (3
    )
    
    
    (6
    )2007/08 adjusted results
    
    
    2,845
    
    
    
    (2,453
    )
    
    
    3922007/08 exceptional items
    
    
    
    
    
    
    (46
    )
    
    
    (46
    )2007/08 remeasurements
    
    
    
    
    
    
    141
    
    
    
    1412007/08 results
    
    
    2,845
    
    
    
    (2,358
    )
    
    
    487
 2006/07 compared with 2005/06
 Operating
    
    
    OperatingRevenue
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2005/06 results and adjusted results
    
    
    571
    
    
    
    (524
    )
    
    
    47Exchange movements
    
    
    (36
    )
    
    
    33
    
    
    
    (3
    )2005/06 constant currency results
    
    
    535
    
    
    
    (491
    )
    
    
    44Purchased gas
    
    
    (77
    )
    
    
    79
    
    
    
    2Rhode Island gas operations
    
    
    176
    
    
    
    (159
    )
    
    
    17Bad debts
    
    
    
    
    
    
    (3
    )
    
    
    (3
    )Pension and benefit costs
    
    
    
    
    
    
    5
    
    
    
    5Other
    
    
    4
    
    
    
    2
    
    
    
    62006/07 adjusted results
    
    
    638
    
    
    
    (567
    )
    
    
    71Exceptional items
    
    
    
    
    
    
    (4
    )
    
    
    (4
    )2006/07 results
    
    
    638
    
    
    
    (571
    )
    
    
    67
   £595m
    
    £392m
    
    45%
    
    476%Gas Distribution UK 
adjusted operating profit
    
    Gas Distribution US 
adjusted operating profit
    
    Gas Distribution UK 
increase in
adjusted operating profit
    
    Gas Distribution US 
increase in
adjusted operating profit
at
constant currency




---



##### Table of Contents



60   Electricity Distribution & Generation
    
    National Grid plc
  Electricity Distribution & Generation
  We supply electricity to approximately 3.4 million customers in the northeastern US through our
distribution systems and own generation plants capable of generating 4.1GW.
 Key Facts
 
    
    Over 116,000 kilometres
of circuit
    
    3.4 million customers
    
    31 TWh of electricity delivered
    
    680 substations
    
    57 generation plants at 13 locations across Long Island
    
    LIPA network serving 1.1 million customers over 21,000 kilometres of circuit and 170 substations,
delivering 20 TWh of electricity
     
   £330m
    
    £257m
    
    5,543
    
    266 GWhAdjusted operating profit
    
    Capital investment
    
    Employees
    
    Energy saved through energy efficiency measures  $38 million saved by our customers




---



##### Table of Contents



() Annual Report and Accounts 2007/08   61
  About Electricity Distribution & Generation
  Principal operations
Electricity Distribution
 
   4.1 GW
    
    $930m
    
    11 minutes
    
    $28mGeneration facilities on Long Island
    
    Planned spend on reliability enhancement programme over next five years
    
    Reduction in system average interruption duration
    
    Investment in energy efficiency measures in 2007/08




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##### Table of Contents



62   Electricity
Distribution &
 Generation continued
    
    National Grid plc
  Generation
  Stranded cost recoveries
   Regulation
 Equity
    
    Equity to
    
    SharingRate plan
    
    return
    
    debt ratio
    
    arrangementsUpstate New York
    
    10.6%
    
    47/53
    
    100% to 11.75%,
50% to 14%,
25% to 16%,
10% above 16%Massachusetts
    
    *
    
    *
    
    Not specifiedRhode Island
    
    10.5%
    
    50/50
    
    50% from 10.5-11.5%,
25% above 11.5%New Hampshire
    
    9.67%
    
    50/50
    
    50% above 11%
 *
    
    Massachusetts returns are based on the average of a peer group of utilities until
31 December 2009




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##### Table of Contents



() Annual Report and Accounts 2007/08   63
  Current and future developments
 Acquisition of KeySpan
  Upstate New York capital expenditure rate filing
 New Hampshire rate plan
 Performance against our objectives
 Delivering our strategy
 Key areas of focus
    
    Key areas of focus for Electricity Distribution &
Generation are: addressing the challenges of an
ageing asset base in our upstate New York and
New England operations; increased customer
expectations; heightened regulatory pressures;
improving reliability and safety performance and
getting the best out of our employees.
 Regulatory stability
 Transform operations
 Customer experience




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##### Table of Contents



64   Electricity
Distribution & Generation continued
    

National Grid plc
  Operating performance
 Safety
    
    Our objective is to reduce employee lost time
injuries to zero.
  n
    
    supervisor safety
days were introduced to promote the importance of safety leadership and personal responsibility
for safety;n
    
    training programmes including one on human error elimination and one on safe and
unsafe acts were implemented to promote safe behaviours and improve communication skills;n
    
    a soft
tissue injury prevention programme was developed to improve our approach to preventing soft tissue
or muscular skeletal injuries, which comprise 60% of our injuries.
Implementation of the programme will continue in 2008/09;n
    
    as part of our trusted to work
responsibly strategy, we implemented golden rules of safety that address the most critical areas
of safety and set clear expectations of the workforce;n
    
    a new safety recognition programme was
developed to ensure we emphasise and reward good safety performance; andn
    
    National Grid and KeySpan policies and
practices are being integrated to promote one,
positive safety culture.
 Efficiency
    
    Our objective is to be more efficient in the delivery
of services, in the context of higher expectations
from our customers and cost pressures.




---



##### Table of Contents



() Annual Report and Accounts 2007/08   65
  Reliability
    
    In addition to meeting reliability performance targets agreed with our regulators, our objective
is to improve reliability.
      n
    
    vegetation management  incremental tree trimming to address an increase in customer outages
related to contacts with tree branches;n
    
    feeder hardening  upgrading our worst performing overhead electricity circuits by replacing
aged and deteriorated components and protecting against lightning strikes and animal contacts;n
    
    asset replacement  replacing ageing distribution equipment before its expected end of life,
including poles, underground cable, and substation equipment; andn
    
    inspection and maintenance  increasing our preventative maintenance and repair activities
to find potential faults before they occur to improve reliability and public safety.
 Customer
service
    
    In addition to meeting customer service objectives
agreed with our regulators, our objective is to be
within the upper quartile of customer satisfaction
in the territories we operate in.
   Capital
 investment
    
    Our objective is to deliver our capital investment
plans over the next five years, including our $930 million (£470 million) reliability enhancement
programme.




---



##### Table of Contents



66   Electricity Distribution & Generation continued
    
    National Grid plc
  Financial performance
 Profit
    
    Our objective is to increase profits each year.
   Returns on investment
    
    We measure our return on investment using
our defined regulatory return on equity under
the terms of each rate plan.
 Financial results
  Years ended 31 March2008
    
    
    2007
    
    
    2006Continuing operations
    
    £m
    
    
    £m
    
    
    £mRevenue excluding stranded cost recoveries
    
    
    3,126
    
    
    
    3,004
    
    
    
    3,134Other operating income
    
    
    
    
    
    
    
    
    
    
    3Operating costs excluding exceptional items
and remeasurements
    
    
    (2,796
    )
    
    
    (2,640
    )
    
    
    (2,820
    )Adjusted operating profit
    
    
    330
    
    
    
    364
    
    
    
    317Exceptional items
    
    
    (104
    )
    
    
    (9
    )
    
    
    Remeasurements
    
    
    91
    
    
    
    81
    
    
    
    (49
    )Stranded cost recoveries
    
    
    379
    
    
    
    423
    
    
    
    489Operating profit
    
    
    696
    
    
    
    859
    
    
    
    757
 2007/08 compared with 2006/07
  Revenueand otheroperating
    
    
    Operating
    
    
    Operatingincome
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2006/07 results
    
    
    3,430
    
    
    
    (2,571
    )
    
    
    859Add back exceptional items
    
    
    
    
    
    
    9
    
    
    
    9Add back remeasurements
    
    
    
    
    
    
    (81
    )
    
    
    (81
    )Add back stranded cost recoveries
    
    
    (426
    )
    
    
    3
    
    
    
    (423
    )2006/07 adjusted results
    
    
    3,004
    
    
    
    (2,640
    )
    
    
    364Exchange movements
    
    
    (150
    )
    
    
    132
    
    
    
    (18
    )2006/07 adjusted results at constant currency
    
    
    2,854
    
    
    
    (2,508
    )
    
    
    346Purchased electricity
    
    
    (47
    )
    
    
    20
    
    
    
    (27
    )Volumes, including weather
    
    
    17
    
    
    
    
    
    
    
    17Depreciation and amortisation
    
    
    
    
    
    
    (7
    )
    
    
    (7
    )Reliability enhancement
    
    
    
    
    
    
    (13
    )
    
    
    (13
    )Bad debts
    
    
    
    
    
    
    (17
    )
    
    
    (17
    )Storms
    
    
    
    
    
    
    33
    
    
    
    33KeySpan acquisition
    
    
    293
    
    
    
    (268
    )
    
    
    25Other
    
    
    9
    
    
    
    (36
    )
    
    
    (27
    )2007/08 adjusted results
    
    
    3,126
    
    
    
    (2,796
    )
    
    
    3302007/08 exceptional items
    
    
    
    
    
    
    (104
    )
    
    
    (104
    )2007/08 remeasurements
    
    
    
    
    
    
    91
    
    
    
    912007/08 stranded cost recoveries
    
    
    382
    
    
    
    (3
    )
    
    
    3792007/08 results
    
    
    3,508
    
    
    
    (2,812
    )
    
    
    696
   £3,508m
    
    £330m
    
    £379m
    
    £257mRevenue
    
    Adjusted operating profit
    
    Stranded cost recoveries
    
    Capital investment




---



##### Table of Contents



() Annual Report and Accounts 2007/08   67
  2006/07 compared with 2005/06
  Revenueand otheroperating
    
    
    Operating
    
    
    Operatingincome
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2005/06 results
    
    
    3,654
    
    
    
    (2,897
    )
    
    
    757Less stranded cost recoveries
    
    
    (517
    )
    
    
    28
    
    
    
    (489
    )Add back remeasurements
    
    
    
    
    
    
    49
    
    
    
    492005/06 adjusted results
    
    
    3,137
    
    
    
    (2,820
    )
    
    
    317Exchange movements
    
    
    (198
    )
    
    
    178
    
    
    
    (20
    )2005/06 adjusted results at
constant currency
    
    
    2,939
    
    
    
    (2,642
    )
    
    
    297Purchased electricity
    
    
    (16
    )
    
    
    39
    
    
    
    23Deferral account
    
    
    72
    
    
    
    
    
    
    
    72Depreciation and amortisation
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )Reliability enhancement
    
    
    
    
    
    
    (8
    )
    
    
    (8
    )Bad debts
    
    
    
    
    
    
    (11
    )
    
    
    (11
    )Pension and benefit costs
    
    
    
    
    
    
    28
    
    
    
    28Storm costs
    
    
    
    
    
    
    (43
    )
    
    
    (43
    )Other
    
    
    9
    
    
    
    6
    
    
    
    152006/07 adjusted results
    
    
    3,004
    
    
    
    (2,640
    )
    
    
    3642006/07 exceptional items
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )2006/07 remeasurements
    
    
    
    
    
    
    81
    
    
    
    812006/07 stranded cost recoveries
    
    
    426
    
    
    
    (3
    )
    
    
    4232006/07 results
    
    
    3,430
    
    
    
    (2,571
    )
    
    
    859
 
   9.5%
    
    8.4%
    
    (5)%
    
    18%Regulatory return on equity in Massachusetts for 2007/08
    
    Regulatory return on equity in New York for 2007/08, excluding one-off items
    
    Decline in adjusted operating profit on a constant currency basis
    
    Increase in capital investment




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##### Table of Contents



68   Non-regulated businesses and other
    
    National Grid plc  Non-regulated businesses and other
 We own National Grid Metering,
OnStream, National Grid Grain LNG
and National Grid Property.
    
    Key Facts   Metering
and meter reading services
for around 20 million meters in the UK   Property portfolio of around 800
sites comprising buildings and land
of around 1,600 hectares   Grain LNG planned total investment
of approximately £830 millionThis year has seen further expansion
activity at our liquefied natural
gas (LNG) import terminal on the Isle
of Grain, which is currently capable
of processing 3.3 million tonnes of
LNG a year. We are continuing to
invest in Grain, and by 2010 it
should have the capacity to import
14.8 million tonnes per annum,
around 20% of the UKs forecast gas
demand.During the year approximately
810,000 new meters were installed by
OnStream, our competitive metering
business, comprising approximately
420,000 gas and 390,000 electricity
meters.We are undergoing a programme of
land remediation at many of our
brownfield sites, including legacy
gas sites.In the US, our non-regulated
activities include LNG storage, LNG
transportation, unregulated
transmission pipelines, West
Virginia gas fields and home energy
services.
 
 £129m
Adjusted operating profit
    
    £383m
Capital investment
    
    3,166
Employees
    
    590,000 tonnes
LNG imported to the UK
through Isle of
Grain




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##### Table of Contents



() Annual Report and Accounts 2007/0869
  About non-regulated businesses and other
   Principal operations
 Metering
    
    National Grid Metering and OnStream provide
installation, maintenance and meter reading services
to gas and electricity suppliers in the regulated and
unregulated markets respectively.
Our metering businesses provide services on behalf
of gas suppliers for an asset base of approximately
20 million domestic, industrial and commercial meters.Grain LNG
    
    National Grid Grain LNG is the first new LNG import
terminal constructed in the UK for some 30 years,
involving planned investment of approximately
£830 million for Phases I, II and III.
 UK Property
    
    National Grid Property is responsible for managing
all our major occupied properties in the UK, and for
the management, clean up and disposal of surplus
properties, largely comprising former gas works.BritNed
    
    BritNed is a joint venture between National Grid and
TenneT, the Dutch transmission system operator, to
build and operate a 260 kilometre 1,000 MW subsea
electricity link between the Netherlands and the UK.US 
non-regulated
businesses
    
    Includes LNG storage, LNG road transportation,
unregulated transmission pipelines, West Virginia
gas fields and home energy service activities that
were acquired as part of the KeySpan acquisition.
  xoserve
    
    xoserve delivers transportation transactional
services on behalf of all the major gas network
transportation companies in Great Britain,
including National Grid.Fulcrum
    
    Fulcrum is the leading provider of gas connections
and associated design services operating across
the whole of the mainland UK. As an independent
gas transporter, Fulcrum owns and operates gas
distribution networks. Fulcrum also operates as
an installer of electricity and water distribution
infrastructure.Corporate 
activities
    
    Corporate activities comprise central overheads,
insurance and expenditure incurred on business
development.
   £830m
    
    Property
    
    BritNed
    
    USTotal planned investment
in Grain LNG
    
    UK Property business
retained  obtain better
value as part of National
Grid than through selling
    
    Construction started on
electricity interconnector
with the Netherlands
    
    US non-regulated
activities acquired
with KeySpan




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##### Table of Contents



70   Non-regulated businesses and other continued
    
    National Grid plc
  Business drivers
  Multi-year 
contractual 
arrangements
    
    The majority of National Grid Meterings domestic meters are covered by long-term contracts with gas suppliers.
OnStream has a seven year contract with Centrica for the provision of gas and electricity meters.Phase I of Grain LNG is underpinned by a long-term contract with BP/Sonatrach. Similarly, Phase II, anticipated for completion in 2008, is underpinned by long-term contracts signed with Centrica, Gaz de France and Sonatrach.Phase III, for which construction began in June 2007, also has long-term contracts for capacity with E.ON, Iberdrola and Centrica.Competition
    
    OnStream and Fulcrum operate in competitive
 markets and their revenues are therefore determined by how successful they are in obtaining
 business from customers.Capital 
investment
    
    We are investing in
 technology such as smart metering and automated meter reading systems to grow our
 metering businesses and in infrastructure projects such as Grain LNG and BritNed.Efficiency
    
    Efficiency in delivering capital programmes
 and in operating our businesses and corporate activities result in driving improved financial performance.
 External market and regulatory environment
    Current and future developments
Metering competition investigation
 Property and environmental matters
  Performance against our objectives
  Delivering our strategy
 Key areas
    
    Our objectives during 2007/08 have been:to evaluate whether we can generate more value
from our UK Property business through a sale or
through retaining the business; to integrate US
non-regulated activities acquired with KeySpan;
and to benefit from the creation of common
processes and systems.




---



##### Table of Contents



() Annual Report
and Accounts 2007/08   71
  Operating performance
 Safety, 
efficiency,
reliability and
customer
service
    
    Our objectives include zero employee lost time injuries,
to operate efficiently and to operate reliably. We also
aim to improve the quality of service to our customers.
    Capitalinvestment
    
    Our objective is to deliver on our capital investment programme
for non-regulated businesses and other operations.
   3
 Financial performance
 Years ended 31 March2008
    
    
    2007
    
    
    2006Continuing operations
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    642
    
    
    
    567
    
    
    
    701Other operating income
    
    
    67
    
    
    
    71
    
    
    
    74Operating costs excluding exceptional
items
    
    
    (580
    )
    
    
    (505
    )
    
    
    (625
    )Adjusted operating profit
    
    
    129
    
    
    
    133
    
    
    
    150Exceptional items
    
    
    (57
    )
    
    
    (1
    )
    
    
    18Operating profit
    
    
    72
    
    
    
    132
    
    
    
    168
 2007/08 compared with 2006/07
 Revenueand otheroperating
    
    
    Operating
    
    
    Operatingincome
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2006/07 results
    
    
    638
    
    
    
    (506
    )
    
    
    132Add back exceptional items
    
    
    
    
    
    
    1
    
    
    
    12006/07 adjusted results
    
    
    638
    
    
    
    (505
    )
    
    
    133Metering
    
    
    14
    
    
    
    (13
    )
    
    
    1Property
    
    
    
    
    
    
    7
    
    
    
    7Grain LNG
    
    
    3
    
    
    
    
    
    
    
    3Advantica
    
    
    (37
    )
    
    
    34
    
    
    
    (3
    )US non-regulated business
    
    
    49
    
    
    
    (51
    )
    
    
    (2
    )Fulcrum and other activities
    
    
    42
    
    
    
    (52
    )
    
    
    (10
    )2007/08 adjusted results
    
    
    709
    
    
    
    (580
    )
    
    
    1292007/08 exceptional items
    
    
    
    
    
    
    (57
    )
    
    
    (57
    )2007/08 results
    
    
    709
    
    
    
    (637
    )
    
    
    72




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##### Table of Contents



72   Non-regulated businesses and other continued
    
    National Grid plc
  2006/07 compared with 2005/06
 Revenueand otheroperating
    
    
    Operating
    
    
    Operatingincome
    
    
    costs
    
    
    profit£m
    
    
    £m
    
    
    £m2005/06 results
    
    
    775
    
    
    
    (607
    )
    
    
    168Add back exceptional items
    
    
    
    
    
    
    (18
    )
    
    
    (18
    )2005/06 adjusted results
    
    
    775
    
    
    
    (625
    )
    
    
    150Metering
    
    
    19
    
    
    
    (13
    )
    
    
    6Property
    
    
    (20
    )
    
    
    18
    
    
    
    (2
    )Grain LNG
    
    
    11
    
    
    
    (8
    )
    
    
    3Fulcrum
    
    
    (134
    )
    
    
    125
    
    
    
    (9
    )Insurance and other
    
    
    (13
    )
    
    
    (2
    )
    
    
    (15
    )2006/07 adjusted results
    
    
    638
    
    
    
    (505
    )
    
    
    1332006/07 exceptional items
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )2006/07 results
    
    
    638
    
    
    
    (506
    )
    
    
    132
 
   £104m
    
    £93m
    
    £12m
    
    £(2)mMetering adjusted 
operating profit
    
    UK Property adjusted
operating profit
    
    Grain LNG adjusted
operating profit
    
    US non-regulated
businesses adjusted
operating loss




---



##### Table of Contents



() Annual Report
and Accounts 2007/08   73
  Discontinued operations
 About discontinued operationsPrincipal operations
  Ravenswood
  KeySpan
Communications and KeySpan Engineering Associates
 Performance against our objectivesDelivering our strategy
 Operating performance
  Financial performance
 Years ended 31 March2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £mRevenue
    
    
    201
    
    
    
    383
    
    
    
    325Operating costs excluding exceptional
items and remeasurements
    
    
    (166
    )
    
    
    (266
    )
    
    
    (255
    )Adjusted operating profit
    
    
    35
    
    
    
    117
    
    
    
    70Exceptional items
    
    
    
    
    
    
    (55
    )
    
    
    (5
    )Operating profit
    
    
    35
    
    
    
    62
    
    
    
    65
   Wireless
    
    Basslink
    
    Ravenswood
    
    £4.6bnSold
    
    Sold
    
    Agreed to sell
    
    Total proceeds from sales
and expected sales




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##### Table of Contents



74   Financial position and financial management
    
    National Grid plc
  Financial
position and financial management
 Going concern
 Financial positionBalance sheet
 NetAssets
    
    
    Liabilities
    
    
    assets£m
    
    
    £m
    
    
    £mProperty, plant & equipment and
non-current intangible assets
    
    
    24,605
    
    
    
    
    
    
    
    24,605Goodwill and non-current investments
    
    
    4,089
    
    
    
    
    
    
    
    4,089Current assets and liabilities
    
    
    2,724
    
    
    
    (3,126
    )
    
    
    (402
    )Other non-current assets and liabilities
    
    
    255
    
    
    
    (2,664
    )
    
    
    (2,409
    )Post-retirement obligations
    
    
    846
    
    
    
    (1,746
    )
    
    
    (900
    )Deferred tax
    
    
    
    
    
    
    (3,407
    )
    
    
    (3,407
    )Assets and liabilities held for sale
    
    
    1,508
    
    
    
    (63
    )
    
    
    1,445Total before net debt
    
    
    34,027
    
    
    
    (11,006
    )
    
    
    23,021Net debt
    
    
    3,795
    
    
    
    (21,436
    )
    
    
    (17,641
    )Total as at 31 March 2008
    
    
    37,822
    
    
    
    (32,442
    )
    
    
    5,380Total as at 31 March 2007
    
    
    28,389
    
    
    
    (24,253
    )
    
    
    4,136
  Net debt
 Gearing and interest cover
   £37.8bn
    
    £5.4bn
    
    £17.6bn
    
    3.2Total assets
    
    Net assets
    
    Net debt
    
    Interest cover




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##### Table of Contents



() Annual Report
and Accounts 2007/08   75
  Equity shareholders funds
  Liquidity and treasury management
Cash flow
 Cash flow forecasting
 Credit facilities and unutilised
Commercial Paper and Medium Term Note
Programmes
 Programme
    
    Amount
    
    StatusNational Grid plcUS commercial paper programme
    
    $3.0 billion
    
    UnutilisedEuro commercial paper programme
    
    $1.5 billion
    
    UnutilisedNational Grid Electricity Transmission plcUS commercial paper programme
    
    $1.0 billion
    
    UnutilisedEuro commercial paper programme
    
    $1.0 billion
    
    UnutilisedNational Grid plc and National Grid Electricity Transmission plcEuro medium term note programme
    
    15.0 billion
    
    6.3 billionunissuedNational Grid Gas plcUS commercial paper programme
    
    $2.5 billion
    
    UnutilisedEuro commercial paper programme
    
    $1.25 billion
    
    UnutilisedEuro medium term note programme
    
    10.0 billion
    
    5.3 billionunissuedNational Grid USAUS commercial paper programme
    
    $2.0 billion
    
    $1.2 billionunissuedEuro medium term note programme
    
    4.0 billion
    
    3.9 billionunissuedKeySpan CorporationUS commercial paper programme
    
    $1.5 billion
    
    $1.2 billionunissuedWe have both committed and uncommitted borrowing
facilities that are available for general corporate
purposes. At 31 March 2008, we had the following
committed and uncommitted facilities:Facility
    
    Amount
    
    StatusNational Grid plcShort-term committed facilities
    
    $1.5 billion
    
    UndrawnNational Grid Gas plcLong-term committed facilities
    
    £0.8 billion
    
    UndrawnNational Grid Electricity Transmission plcLong-term committed facilities
    
    £0.4 billion
    
    UndrawnNational Grids US subsidiariesCommitted facilities
    
    $1.7 billion
    
    UndrawnNational Grid plc and certain UK subsidiariesUncommitted borrowing facilities
    
    £0.8 billion
    
    Undrawn
   48 years
    
    62%
    
    55%
    
    £17.3bnLongest maturity of our 
borrowings
    
    Proportion of net debt
in US dollars
    
    Proportion of net debt
at fixed rates
    
    Pension plan assets




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##### Table of Contents



76   Financial position and financial management continued
    
    National Grid plc
  Regulatory restrictions
  Treasury policy
 Facility
    
    Moodys
    
    
    S&P
    
    
    FitchNational Grid plc
    
    Baa1/P2
    
    BBB+/A2
    
    BBB+/F2National Grid Holdings One plc
    
    
    
    
    
    BBB+/A2
    
    
    National Grid Electricity
Transmission plc
    
    
    A3/P2
    
    
    
    A-/A2
    
    
    
    A/F2National Grid Gas plc
    
    
    A3/P2
    
    
    
    A-/A2
    
    
    
    A/F2National Grid Gas Holdings plc
    
    
    A3
    
    
    BBB+
    
    
    ANational Grid USA
    
    
    A3/P2
    
    
    BBB+/A2
    
    
    Niagara Mohawk Power Corp.
    
    
    A3
    
    
    BBB+/A2
    
    
    Massachusetts Electric Co.
    
    
    A3/P2
    
    
    
    A-/A2
    
    
    
    New England Power Co.
    
    
    A3/P2
    
    
    
    A-/A2
    
    
    
    The Narrangansett Electric Co.
    
    
    A3
    ^
    
    
    A-*/A2
    
    
    
    KeySpan Corporation
    
    Baa1/P2
    
    
    A-/A2
    
    
    
    A-The Brooklyn Union Gas Company
    
    
    
    
    
    
    A
    
    
    
    A+KeySpan Gas East Corporation
    
    
    A3
    
    
    
    A
    
    
    
    ABoston Gas Company
    
    Baa1
    
    
    A-
    
    
    
    Colonial Gas Company
    
    
    A3
    
    
    
    A-
    *
    
    
    National Grid Generation LLC
    
    Baa1
    
    
    A-
    *
    
    
    
 ^
   Refinancing risk management
   Interest rate risk management




---



##### Table of Contents



() Annual Report and Accounts 2007/08   77




---



##### Table of Contents



78   Financial position and financial management continued
    
    National Grid plc
   2007/08
    
    
    
    
    
    
    2006/07Other
    
    
    
    
    
    
    OtherIncome
    
    
    equity
    
    
    Income
    
    
    equitystatement
    
    
    reserves
    
    
    statement
    
    
    reserves£m
    
    
    £m
    
    
    £m
    
    
    £mUK retail price index ±0.50%
    
    
    16
    
    
    
    
    
    
    
    13
    
    
    
    UK interest rates ±0.50%
    
    
    46
    
    
    
    57
    
    
    
    35
    
    
    
    43US interest rates ±0.50%
    
    
    31
    
    
    
    7
    
    
    
    26
    
    
    
    8US dollar exchange rate ±10%
    
    
    18
    
    
    
    590
    
    
    
    36
    
    
    
    194
  Commodity contracts
 Energy purchase contracts
  Commodity purchase contracts accounted for as
derivative contracts




---



##### Table of Contents



() Annual Report and Accounts 2007/08   79
  Derivative financial instruments linked to commodity prices
 Sensitivity analysis
  2007/08
    
    
    
    
    

    
    2006/07Other
    
    
    
    
    
    
    OtherIncome
    
    
    equity
    
    
    Income
    
    
    equitystatement
    
    
    reserves
    
    
    statement
    
    
    reserves£m
    
    
    £m
    
    
    £m
    
    
    £m10% increase in commodity prices
    
    
    25
    
    
    
    (1
    )
    
    
    10
    
    
    
    -10% decrease in commodity prices
    
    
    (22
    )
    
    
    1
    
    
    
    (10
    )
    
    
    -
 Commitments and contingencies
  2008
    
    
    2007£m
    
    
    £mFuture capital expenditure contracted
but not provided for
    
    
    1,097
    
    
    
    1,554Total operating lease commitments
    
    
    737
    
    
    
    800Power commitments
    
    
    4,753
    
    
    
    3,731Other commitments, contingencies and guarantees
    
    
    1,387
    
    
    
    537




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##### Table of Contents



80   Financial position and financial management continued
    
    National Grid plc
  Contractual obligations at 31 March 2008
  Less than
    
    
    1-3
    
    
    3-5
    
    
    More than1 year
    
    
    years
    
    
    years
    
    
    5 years
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mFinancial liabilitiesBorrowings
    
    
    (3,379
    )
    
    
    (2,725
    )
    
    
    (4,732
    )
    
    
    (9,894
    )
    
    
    (20,730
    )Interest payments on
borrowings
    
    
    (822
    )
    
    
    (1,391
    )
    
    
    (2,136
    )
    
    
    (5,810
    )
    
    
    (10,159
    )Finance lease liabilities
    
    
    (266
    )
    
    
    (72
    )
    
    
    (128
    )
    
    
    (19
    )
    
    
    (485
    )Other non-interest
bearing liabilities
    
    
    (2,190
    )
    
    
    (347
    )
    
    
    
    
    
    
    
    
    
    
    (2,537
    )Derivatives payments
    
    
    (647
    )
    
    
    (951
    )
    
    
    (1,498
    )
    
    
    (4,040
    )
    
    
    (7,136
    )Derivatives receipts
    
    
    990
    
    
    
    1,205
    
    
    
    1,779
    
    
    
    3,550
    
    
    
    7,524Commodity contracts
    
    
    (490
    )
    
    
    (445
    )
    
    
    (247
    )
    
    
    (32
    )
    
    
    (1,214
    )Other contractual
obligationsCapital commitments
    
    
    (956
    )
    
    
    (135
    )
    
    
    (6
    )
    
    
    
    
    
    
    (1,097
    )Operating leases
    
    
    (83
    )
    
    
    (163
    )
    
    
    (135
    )
    
    
    (356
    )
    
    
    (737
    )Energy commitments
    
    
    (1,790
    )
    
    
    (1,375
    )
    
    
    (425
    )
    
    
    (1,163
    )
    
    
    (4,753
    )Total at 31 March 2008
    
    
    (9,633
    )
    
    
    (6,399
    )
    
    
    (7,528
    )
    
    
    (17,764
    )
    
    
    (41,324
    )
  Off balance sheet arrangements
  Details of material litigation as at 31 March 2008
 Related party transactions
   Retirement arrangements
     Net pension and other post-retirement obligations
  UK
    
    
    US
    
    
    TotalNet plan asset/(liability)
    
    £m
    
    
    £m
    
    
    £mAs at 1 April 2007
    
    
    (451
    )
    
    
    (794
    )
    
    
    (1,245
    )Acquisition of KeySpan
    
    
    
    
    
    
    (440
    )
    
    
    (440
    )Exchange movements
    
    
    
    
    
    
    6
    
    
    
    6Pension service cost
    
    
    (81
    )
    
    
    (68
    )
    
    
    (149
    )Expected return less interest
    
    
    75
    
    
    
    (12
    )
    
    
    63Curtailments and settlements
    
    
    3
    
    
    
    (81
    )
    
    
    (78
    )Actuarial gains and losses on plan assets
    
    
    (631
    )
    
    
    (280
    )
    
    
    (911
    ) on plan liabilities
    
    
    1,252
    
    
    
    91
    
    
    
    1,343Contributions ordinary contributions
    
    
    93
    
    
    
    83
    
    
    
    176 additional contributions
    
    
    155
    
    
    
    180
    
    
    
    335As at 31 March 2008
    
    
    415
    
    
    
    (1,315
    )
    
    
    (900
    )Plan assets
    
    
    13,981
    
    
    
    3,292
    
    
    
    17,273Plan liabilities
    
    
    (13,566
    )
    
    
    (4,607
    )
    
    
    (18,173
    )Net plan asset/(liability)
    
    
    415
    
    
    
    (1,315
    )
    
    
    (900
    )




---



##### Table of Contents



() Annual Report and Accounts 2007/08   81
  Actuarial position
   Contributions
  n
    
    National Grid UK Pension Scheme: The
actuarial valuation as at 31 March 2007 is
currently in progress but has not yet been
concluded. In advance of finalising the
valuation we have made deficit contributions
of £115 million during 2007/08 and £250
million in April 2008. We and the trustees are
currently in the process of agreeing a
recovery plan in respect of the deficit
expected to be included in the valuation; andn
    
    National Grid Electricity Supply Pension
Scheme: we have made deficit contributions of
£40 million during 2007/08 and £60 million in
April 2008. Further deficit payments of £2.5
million will be paid monthly from 1 April 2008
to 31 March 2009, in line with the agreed scheme
recovery plan. We expect to pay £90.5 million in
early 2009/10, with the remaining deficit
payable monthly from April 2012 to March 2017.
 Plan assets




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##### Table of Contents



82   Accounting policies
    
    National Grid plc
  Accounting policies
  Basis of accounting
    Choices permitted under IFRS
   Transition
date
    
    Our opening IFRS balance sheet was established as at 1 April 2004. As a consequence goodwill
amortisation ceased on this date and we used certain balances in our previous UK GAAP financial
statements as the basis for our opening IFRS balance sheet.Business
combinations
    
    Business combinations prior to 1 April 2004
were not changed retrospectively. In particular,
we retained the use of merger accounting for
the business combination with Lattice Group.Financial
instruments
    
    We adopted IAS 39 on 1 April 2005. We chose to apply IAS 39 prospectively from that date and
accordingly did not restate prior periods. As a consequence, the accounting for financial
instruments differs from that which would have been presented had we always applied IAS 39.Carrying value
of assets attransition
    
    In most cases, we used brought forward depreciated cost, as adjusted for changes in accounting
policies to conform with IFRS, to be the opening carrying value under IFRS.Share-based
payments
    
    We recognised all active share option grants retrospectively.Cumulative
translation differences
    
    We chose to measure and present cumulative translation differences arising since 1 April 2004 only.
 Presentation
formats
    
    We use the nature of expense method for our income statement and total our balance sheet to net
assets and total equity.
In the income statement, we present subtotals of total
operating profit, profit before tax and profit from
continuing operations, together with additional
subtotals excluding exceptional items, remeasurements
and stranded cost recoveries. Exceptional items,
remeasurements and stranded cost recoveries are
presented on the face of the income statement.Pensions
    
    We recognise actuarial gains and losses each year in
the statement of recognised income and expense.Joint ventures
    
    We use equity accounting for jointly controlled
entities instead of the alternative proportional
consolidation method.Capitalised
interest
    
    We capitalise interest into the cost of assets that we construct, where conditions of IAS 23 are
met.Capital
contributions
    
    Contributions received towards capital expenditure are recorded as deferred income and amortised in
line with the depreciation on the associated asset.Timing of
goodwillimpairmentreviews
    
    Goodwill impairment reviews are carried out annually
in the final quarter of the financial year.Financial
Instruments
    
    We normally opt to apply hedge accounting in most circumstances where this is permitted. For net
investment hedges, we have chosen to use the spot
rate method, rather than the alternative forward rate method.Individual
accounts
    
    We have chosen to continue to use UK GAAP, rather than
IFRS, in the individual financial statements of
National Grid plc and of UK subsidiary companies.
 Accounting standards and interpretations
adopted in 2007/08
  New
interpretations
    
    IFRIC 8, IFRIC 9, IFRIC 10 and IFRIC 11 contain guidance on accounting for share-based exchange
transactions, embedded derivatives, impairments in half yearly reports and share-based payments.
Implementation of these interpretations did not have a material impact on our results, assets or
liabilities.




---



##### Table of Contents



() Annual Report and Accounts 2007/08   83
  Segmental reporting
 Critical accounting policies
    Estimatedeconomiclives ofproperty,

plant andequipment
    
    The reported amounts for depreciation of property,
plant and equipment and amortisation of non-
current intangible assets can be materially affected
by the judgements exercised in determining their
estimated economic lives.Depreciation and amortisation in 2007/08 for
continuing operations amounted to £940 million and
£54 million respectively (2006/07: £830 million and
£41 million, 2005/06: £844 million and £44 million).Carrying valueof assets andpotential forimpairments
    
    The carrying value of assets recorded in the
consolidated balance sheet could be materially
reduced if an impairment were to be assessed as
being required. Our total assets at 31 March 2008
were £37,822 million, including £24,333 million of
property, plant and equipment, £3,838 million of
goodwill and £272 million of other intangible assets
(31 March 2007: £28,389 million including £18,895
million, £1,480 million and £144 million respectively).
Impairment reviews are carried out either when a
change in circumstance is identified that indicates an
asset might be impaired or, in the case of goodwill,
annually. An impairment review involves calculating
either or both of the fair value or the value in use of
an asset or group of assets and comparing with the
carrying value in the balance sheet.These calculations involve the use of assumptions
as to the price that could be obtained for, or the
future cash flows that will be generated by, an asset
or group of assets, together with an appropriate
discount rate to apply to those cash flows.Revenue
    
    Revenue includes an assessment of energy and accruals for transportation services, supplied
to customers between the date of the last meter
reading and the year end. Changes to the estimate
of the energy or transportation services supplied
during this period would have an impact on our
reported results.Our estimates of unbilled revenues at 31 March
2008 amounted to £511 million in the US and
£243 million in the UK compared with £200 million
and £246 million respectively at 31 March 2007.




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##### Table of Contents



84   Accounting policies continued
    
    National Grid plc
   Assets andliabilitiescarried atfair value
    
    Certain assets and liabilities, principally financial
investments, derivative financial instruments and
certain commodity contracts are carried in the
balance sheet at their fair value rather than
historical cost.The fair value of financial investments is based on
market prices, as are those of derivative financial
instruments where market prices exist. Other
derivative financial instruments and those commodity
contracts carried at fair value are valued using
financial models, which include judgements on, in
particular, future movements in exchange and interest
rates as well as equity and commodity prices.Hedgeaccounting
    
    We use derivative financial instruments to hedge
certain economic exposures arising from movements
in exchange and interest rates or other factors that
could affect either the value of our assets or
liabilities or our future cash flows.
Movements in the fair values of derivative
financial instruments may be accounted for using
hedge accounting where we meet the relevant
eligibility, documentation and effectiveness testing
requirements. If a hedge does not meet the strict
criteria for hedge accounting, or where there is
ineffectiveness or partial ineffectiveness, then
the movements will be recorded in the income
statement immediately instead of being recognised
in the statement of recognised income and expense
or by being offset by adjustments to the carrying
value of debt.Pensions andother post-retirementobligations
    
    Pensions and other post-retirement benefits
recorded in the balance sheet benefit plans are
calculated actuarially using a number of assumptions
about the future, including inflation, salary increases,
length of service and pension and investment
returns, together with the use of a discount rate
based on corporate bond yields to calculate the
present value of the obligation.
The selection of these assumptions can have a
significant impact on both the pension obligation
recorded in the balance sheet and on the net
charge recorded in the income statement.Businessesheld for sale
    
    At 31 March 2008, the planned disposal of
the Ravenswood generation station, KeySpan
Communications and KeySpan Engineering
Associates in the US are considered operations
that meet the criteria to be classified as assets
held for sale.
At 31 March 2007, the planned exits of our wireless
infrastructure operations in the UK and the US and
our interconnector in Australia were considered
to meet the criteria to be classified as assets held
for sale.
On 1 May 2005 four of our regional gas distribution
networks met the criteria to be classified as held
for sale, and the assets and liabilities of these
businesses were classified accordingly and
depreciation ceased from that date until their
disposal on 1 June 2005.
The results of these operations have been classified
as discontinued operations for all years presented.
The determination of the date that the planned sales
met the criteria to be classified as businesses held for
sale is a matter of judgement by management, with
consequential impact on balance sheet presentation
and the amount recorded for depreciation in the
results of the discontinued operations.
 Exceptionalitems,remeasure-ments andstranded costrecoveries
    
    Exceptional items, remeasurements and stranded
cost recoveries are items of income and expenditure
that, in the judgement of management, should be
disclosed separately on the basis that they are
material, either by their nature or their size, to an
understanding of our financial performance and
distort the comparability of our financial
performance between periods.
Items of income or expense that are considered by
management for designation as exceptional items
include such items as significant restructurings,
write-downs or impairments of non-current
assets, material changes in environmental or
decommissioning provisions, integration of acquired
businesses and gains or losses on disposals of
businesses or investments.
Remeasurements comprise gains or losses recorded
in the income statement arising from changes in the
fair value of commodity contracts and of derivative
financial instruments. These fair values increase or
decrease as a consequence of changes in
commodity and financial indices and prices over
which we have no control.
Stranded cost recoveries relate to the recovery,
through charges to electricity customers in upstate
New York and in New England of costs mainly
incurred prior to divestiture of electricity generation.
These are expected to expire in 2011.Provisions
    
    Provisions are made for liabilities that are uncertain
in estimate. These include provisions for the cost
of environmental restoration and remediation, the
decommissioning of nuclear facilities that we no
longer own but still have a responsibility to contribute
towards, restructuring and employer and public
liability claims.
Calculations of these provisions are based on
estimated cash flows relating to these costs,
discounted at an appropriate rate where the
impact of discounting is significant. The total costs
and timing of cash flows relating to environmental
and decommissioning liabilities are based on
management estimates supported by the use
of external consultants.
At 31 March 2008, we have recorded provisions totalling £1,332 million (2007: £594 million), including
£781 million and £87 million (2007: £372 million and
£70 million) in respect of environmental liabilities
and decommissioning respectively.Tax estimates
    
    Our tax charge is based on the profit for the
year and tax rates in effect. The determination
of appropriate provisions for taxation requires us
to take into account anticipated decisions of tax
authorities and estimate our ability to utilise tax
benefits through future earnings and tax planning.
Our estimates and assumptions may differ from
future events.Energycommitments
    
    Our energy commitments relate to contractual
commitments to purchase electricity or gas to
satisfy physical delivery requirements to our
customers or for energy that we use ourselves.
In managements judgement these commitments
meet the normal purchase, sale or usage exemption
in IAS 39 and therefore are not recognised in the
financial statements.
If these commitments were deemed not to meet
the exemption under IAS 39 they would have to
be carried on the balance sheet at fair value as
derivative instruments, with movements in their
fair value shown in the income statement under
remeasurements.




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##### Table of Contents



() Annual Report and Accounts 2007/08   85
  Asset usefullives
    
    An increase in the useful economic lives of assets
of one year on average would reduce our annual
depreciation charge on property, plant and
equipment by £37 million (pre-tax) and our annual
amortisation charge on intangible assets by
£9 million (pre-tax).Revenueaccruals
    
    A 10% change in our estimate of unbilled revenues
at 31 March 2008 would result in an increase or
decrease in our recorded net assets and profit for
the year by approximately £48 million net of tax.Assetscarried atfair value
    
    A 10% change in assets and liabilities carried at fair
value would result in an increase or decrease in the
carrying value of derivative financial instruments
and commodity contract liabilities of £109 million
and £1 million respectively.Hedgeaccounting
    
    If the gains and losses arising on derivative financial
instruments during the year ended 31 March 2008
had not achieved hedge accounting then the profit
for the year would have been £21 million higher than
that reported net of tax and net assets would have
been £21 million lower.Pensions andother post-retirementobligations
    
    Our pension and post-retirement obligations
are sensitive to the actuarial assumptions used.
A 0.1% increase in the discount rate, a 0.5%
increase in the rate of salary increases or an
increase of one year in life expectancy would
result in a change in the net obligation of
£251 million, £131 million and £588 million
and a change in the annual pension cost of
£4 million, £5 million and £4 million respectively.Provisions
    
    A 10% change in the estimates of future cash
flows estimated in respect of provisions for liabilities
would result in an increase or decrease in net assets
of approximately £133 million.
 Accounting developments
 Forthcoming changes in IFRS
  Segmentreporting
    
    IFRS 8 changes the reporting requirements for
segmental reporting and will apply with effect from
1 April 2009. If IFRS 8 had been adopted in 2007/08,
there would have been no change in business
segments reported. However, we would not have
had to report on geographical segments.Borrowing costs
    
    An amendment to IAS 23 on borrowing costs will
require interest to be capitalised into the cost of
assets under construction. We already follow this
policy and so this will have no impact.Serviceconcessions
    
    IFRIC 12 on service concessions, to be adopted
from 1 April 2008, requires assets operated on
behalf of a public authority as a concession, where
the asset reverts back to the public authority at the
conclusion of the arrangement, to be recognised as
a financial or intangible asset depending on whether
income is recovered from the public authority or
from users.
We do not operate any significant concessions of
this type and so this is expected to have no impact.Customerloyaltyprogrammes
    
    IFRIC 13, effective from 1 April 2008, requires the
sale of goods or services and associated loyalty
programmes to be accounted for as multi-element
transactions. The separate elements will have
to be fair valued and consideration allocated
accordingly, which would defer recognition of
an element of revenue.
We do not have any material loyalty programmes
of this nature and so this will have no impact.
 Pensionassets andminimumfunding
    
    IFRIC 14 on when net pension assets can be
recognised in the balance sheet and on how to
account for minimum funding requirements will
apply with effect from 1 April 2008. In certain
circumstances the recognition of an accounting
surplus in a pension plan as an asset on the
balance sheet may be restricted, or provision
may be required for minimum funding requirements
in excess of pension obligations recognised in the
balance sheet.
This is not expected to have a significant effect
on National Grid as the accounting surpluses that
could arise in the majority of our current pension
plan arrangements would not be restricted.Presentationof financialstatements
    
    Amendment to IAS 1, effective 1 April 2009, changes
the presentation of financial information but does
not affect the amount of reported earnings or
assets and liabilities. The principal changes are:
the statement of recognised income and expense
must immediately follow the income statement and
must include separate tax disclosure on each gain
or loss recognised outside the income statement;
the statement of changes in equity will be presented
as a primary statement; and there will be an option
to rename the primary statements.
This will have a significant impact on the presentation
of the 2009/10 financial statements as described
above. However, there will be no impact on our
results, assets or liabilities.Businesscombinations
    
    IFRS 3R, expected to be adopted 1 April 2010,
makes a number of changes to business combination
accounting including: consideration payments fair
valued at acquisition date; subsequent consideration
payments at fair value through the income statement;
changes to calculation of goodwill; and all transaction
costs expensed.
IFRS 3R will be implemented prospectively and
so will affect future acquisitions, possibly materially
compared with how they would be accounted for
under current standards. However, this change
will have no impact on our current results, assets
or liabilities.Non-controllinginterests
    
    IAS 27R, expected to be adopted in 2010, requires
transactions with non-controlling (minority) interests to be recorder
in equity:
We do not have any material minority interests and
so this change will have no material impact.Share-basedpayments
    
    This amendment to IFRS 2, expected to be adopted
1 April 2009, clarifies the definition of vesting
conditions and changes the accounting for
cancellations. For cancellation, rather than reversing
the previous expense any remaining expense will
be accelerated.
This will affect the way we account for our Save as
You Earn share schemes, however, due to the low
levels of cancellations by employees in the past, we
do not anticipate that this is likely to have a material
impact on future results.Financialinstrumentpresentation
    
    Amendments to IAS 32 and IAS 1 require certain
puttable financial instruments that impose an
obligation to deliver a pro rata share of net assets
on liquidation to be classified as liabilities.
We currently have no such instruments and so
this will have no impact.




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##### Table of Contents



86   Independent Corporate Responsibility Report
    
    National Grid plc
  Independent Corporate Responsibility Report
 Independent Accountants Report on Corporate
Responsibility to National Grid plc
   n
    
    Operating performance: Safety (including Health);n
    
    Talent: Talent and skills, Engagement and
performance, and Inclusion and diversity;n
    
    Relationships: Suppliers and Community involvement; andn
    
    Environment: Climate change, Historically
contaminated land, and Protecting the
environment.
  n
    
    The design of processes for reporting by
operational management to the Directors on
material safety, health and environmental
issues for the National Grid group;n
    
    The collation of the 2007/08 greenhouse gas
emissions data (Scope 1 and 2) reported under
the heading Climate change in the OFR; andn
    
    The Companys verification procedures over
the Corporate Responsibility Information.
  Respective responsibilities of the Directors 
and PricewaterhouseCoopers LLP
 Inherent limitations
  Assurance work performed
 n
    
    Making enquiries of relevant management of the Company;n
    
    Evaluating the design and implementation of
processes for collating and reporting
material safety, health and environmental
information;n
    
    Testing, on a selective basis, the collation
of the greenhouse gas emission data by the
Company;n
    
    Reviewing a sample of relevant information
including Board reports, reports to the
Executive Committee and risk and compliance
reports prepared and used within the
Company; andn
    
    Testing that managements internal
verification processes with respect to the
Corporate Responsibility Information have
been completed.
  Conclusion
  n
    
    the Companys processes are not designed to
report material safety, health and environmental issues for National Grid group, as identified by
operational management, to the Directors;n
    
    the greenhouse gas emissions data (Scope 1 and 2)
reported under the heading Climate change in the OFR has not been prepared in accordance with the
Companys Principles; andn
    
    the Corporate Responsibility Information is materially inconsistent
with the Companys underlying records.
 PricewaterhouseCoopers LLP,
Chartered Accountants, London




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() Annual Report and Accounts 2007/08   87




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##### Table of Contents



88   Corporate Governance
    
    National Grid plc
  Corporate Governance
 Governance
framework
      Name
    
    Attendance*ChairmanSir John Parker
    
    12 of 12Chief ExecutiveSteve Holliday
    
    12 of 12Executive DirectorsBob Catell (from 25 September 2007) (Deputy Chairman)
    
    7 of 7Steve Lucas
    
    11 of 12Nick Winser
    
    12 of 12Tom King (from 13 August 2007)
    
    7 of 7Mark Fairbairn
    
    12 of 12Edward Astle
    
    12 of 12Non-executive DirectorsKen Harvey (Senior Independent Director)
    
    12 of 12Linda Adamany
    
    12 of 12John Allan
    
    10 of 12Stephen Pettit
    
    12 of 12Maria Richter
    
    12 of 12George Rose
    
    9 of 12Paul Joskow (to 31 July 2007)
    
    5 of 6
 *
    Attendance is expressed as number of meetings attended out of number possible or
applicable for the individual Director
 Non-executive Director independence
 Roles of the Chairman, Chief Executive and Senior
Independent Director




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##### Table of Contents



() Annual Report and Accounts 2007/08   89
  Director development
   n
    
    informing Directors at each Board meeting of the
latest training courses which may be of interest to them;n
    
    attendance at key site visits; andn
    
    management presentations.
  n
    
    internal and external mentoring;n
    
    attendance at external courses and business schools; andn
    
    experience of other boardrooms through
non-executive appointments.
 Performance evaluation
     n
    
    a review of the rolling business agenda to include a greater emphasis on strategic
external factors such as climate change;n
    
    increasing the number of informal meetings of Board
members; andn
    
    consideration of the interaction between Committees.
 
  n
    
    informing Directors at each Board meeting of the latest training courses which may be
of interest to them;n
    
    providing a programme of shareholder communications in a Shareholder
Issues update to the Board;n
    
    devoting additional time to long term succession plans;n
    
    in depth
operational review sessions were held during the year where more time was assigned for certain key
areas;n
    
    producing more detailed guidance for Board and Committee papers and presentations to
ensure information presented is clear and relevant; andn
    
    new sub-committees of the Executive
Committee were established to consider Social Policy and Global Retirement Plans respectively.




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##### Table of Contents



90   Corporate Governance continued
    
    National Grid plc
  The Board and its Committees
  n
    
    corporate governance;n
    
    strategy, finance and approval of the budget and business plan;n
    
    Director/employee issues such as Director succession planning (with input and recommendations
from the Nominations Committee); andn
    
    stock exchange and listing requirements such as dividend
approval/recommendation and approval of results announcements and the Annual Report and Accounts.
  n
    
    safety, health and the environment;n
    
    the financial status of the Company;n
    
    operational headlines from the Companys businesses together with a detailed update from one of the
lines of business on a rotating basis;n
    
    updates on business development and strategy
implementation;n
    
    updates on external matters affecting the Company; andn
    
    reports from the Company
Secretary & General Counsel including an update on the administration and governance of the Company
and its businesses.
 Audit Committee
    Name
    
    Attendance*George Rose (chairman)
    
    6 of 6Linda Adamany
    
    6 of 6John Allan
    
    4 of 6Maria Richter
    
    6 of 6
 
 *
    Attendance is expressed as number of meetings
attended out of number possible or applicable for
the individual Director




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##### Table of Contents



() Annual Report and Accounts 2007/08   91
  Auditors
 n
    
    non-audit fees and consultancy spend undertaken by the external auditor, with the auditor not
present;n
    
    the independence and objectivity of the external auditor;n
    
    an evaluation of the external audit process;n
    
    reviewing audit related matters following the KeySpan acquisition; andn
    
    monitoring and reviewing the effectiveness of internal audit activities.
 Financial
 n
    
    reviewing the effectiveness of the Companys financial reporting, internal controls and
compliance with Sarbanes-Oxley Act requirements;n
    
    monitoring risk and compliance management procedures across the Company and reviewing
specific risks;n
    
    receiving reports from the Business Separation Compliance Officer, as required
under National Grid Gas plcs gas transporter licences;n
    
    receiving reports from the Director of Tax and Treasury;n
    
    reviewing the Companys results statements and Annual Report and Accounts before publication and
making appropriate recommendations to the Board following review;n
    
    reviewing the content of Interim Management Statements;n
    
    receiving reports on business conduct issues; andn
    
    reviewing accounting policies.
 Governance
 n
    
    reviewing the Committees own performance and constitution following the annual performance
evaluation; andn
    
    reviewing the Committees forward business schedule.
 Executive Committee
   Name
    
    Attendance*Steve Holliday (chairman)
    
    12 of 12Bob Catell (from 25 September 2007)
    
    6 of 6Edward Astle
    
    11 of 12Mark Fairbairn
    
    12 of 12Steve Lucas
    
    10 of 12Tom King (from 13 August 2007)
    
    8 of 8Nick Winser
    
    11 of 12Helen Mahy, Company Secretary & General Counsel
    
    12 of 12
 *
    Attendance is expressed as number of meetings attended out of number possible
or applicable for the individual Director
   n
    
    the financial, operational and safety performance of the Company and its businesses;n
    
    strategic business development and implementation including the integration of the KeySpan
businesses acquired during year and the retention of the UK property business;n
    
    approving capital and operational expenditure under the specific authorities delegated to it by
the Board;n
    
    reviewing governance issues;n
    
    global human resource leadership; andn
    
    global IS strategic issues.




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##### Table of Contents



92   Corporate Goverance continued
    
    National Grid plc
   Finance Committee
   Name
    
    Attendance*Maria Richter (chairman from 31 July 2007)
    
    4 of 4Steve Holliday
    
    4 of 4Steve Lucas
    
    4 of 4Stephen Pettit
    
    4 of 4Paul Joskow (chairman to 31 July 2007)
    
    2 of 2
 *
    Attendance is expressed as number of meetings
attended out of number possible or applicable for
the individual Director
   n
    
    long-term funding requirements;n
    
    setting and reviewing treasury management guidelines and policy in light of market conditions;n
    
    funding the acquisition of KeySpan;n
    
    the progress of the ordinary share buyback programme;n
    
    taxation issues for the Company;n
    
    treasury performance updates;n
    
    the repurchase and cancellation of the B shares;n
    
    insurance updates;n
    
    effects on the Company of the credit crunch in the banking sector;n
    
    pensions updates; andn
    
    granting authority for parent and subsidiary companies to enter into guarantees and indemnities
under the Committees delegated authority.
 Nominations Committee
    Name
    
    Attendance*Sir John Parker (chairman)
    
    9 of 9Ken Harvey
    
    9 of 9Maria Richter (from 31 July 2007)
    
    6 of 6George Rose
    
    7 of 9Paul Joskow (to 31 July 2007)
    
    3 of 3
 *
    Attendance is expressed as number of meetings attended out of number possible or
applicable for the individual Director
 n
    
    reviewed the size of the Board, its structure and composition;n
    
    reviewed and recommended changes to the composition of Board Committees;n
    
    recommended individuals for appointment to the Board, including the appointments of Tom King and
Philip Aiken;n
    
    considered succession planning for Board members; andn
    
    reviewed development and succession plans for senior management, as developed by the Chief
Executive and the Global Director of Human Resources.
 Remuneration Committee
     Name
    
    Attendance*John Allan (chairman)
    
    6 of 7Ken Harvey
    
    7 of 7Stephen Pettit
    
    7 of 7George Rose
    
    7 of 7
 *
    
    Attendance is expressed as number of meetings attended out of number possible or
applicable for the individual Director




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() Annual Report and Accounts 2007/08   93
  Risk & Responsibility Committee
   Name
    
    Attendance*Stephen Pettit (chairman)
    
    4 of 4Linda Adamany
    
    4 of 4Ken Harvey
    
    4 of 4Bob Catell (from 25 September 2007)
    
    2 of 2Maria Richter (to 1 September 2007)
    
    1 of 1
 *
    
    Attendance is expressed as number of meetings attended out of number possible or
applicable for the individual Director
   n
    
    considered the current and projected environmental impact of the Company, including climate
change;n
    
    considered specific identified future risks and plans for minimising such risks;n
    
    reviewed safety, health and environment audit plans and the outcome of such audits;n
    
    reviewed serious incident reports;n
    
    reviewed reports on business conduct issues;n
    
    reviewed progress in embedding a process safety culture; andn
    
    considered reports and updates from external advisors.
  n
    
    a key London substation; andn
    
    the London 2012 Olympics site powerlines undergrounding project.
 Disclosure Committee
 Shareholders
     Change of control provisions
    Corporate governance practices: differences from New
York Stock Exchange 
(NYSE) listing standards
  n
    
    different tests of independence for Board members are applied under the Combined Code and Section
303A;n
    
    there is no requirement for a separate corporate governance committee in the UK; all
Directors on the Board discuss and decide upon governance issues and the Nominations Committee
makes recommendations to the Board with regard to certain of the responsibilities of a corporate
governance committee;




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##### Table of Contents



94   Corporate Governance continued
    
    National Grid plc
   n
    
    while the Company reports compliance with the Combined Code in each Annual Report and Accounts,
there is no requirement to adopt and disclose separate corporate governance guidelines; andn
    
    while the Audit Committee, having a membership of four independent Non-executive Directors,
exceeds the minimum membership requirements under Section 303A of three independent Non-executive
Directors, it should be noted that the quorum for a meeting of the Audit Committee, of two
independent Non-executive Directors, is less than the minimum membership requirements under Section
303A.
 Internal control
      n
    
    the receipt of a Letter of Assurance from the Chief Executive, which consolidates key matters of
interest raised through the year-end assurance process;n
    
    assurance from its Committees as appropriate, with particular reference to the reports received
from the Audit and Risk & Responsibility Committees on the reviews undertaken by them at their
respective Committee meetings; andn
    
    assurances in relation to the Companys Sarbanes-Oxley certifications, required as a result of its NYSE listing.
 Internal control  information assurance
  Internal control over financial reporting  Sarbanes-Oxley
  Risk management




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##### Table of Contents



() Annual Report and Accounts 2007/08   95
  Compliance management
 Risk factors
 Changes in law or regulation could have an adverse
effect on our results of operations.




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##### Table of Contents



96   Corporate Governance continued
    
    National Grid plc
   Breaches of, or changes in, environmental or health
and safety laws or regulations could expose us to
claims for financial compensation and adverse
regulatory consequences, as well as damaging our
reputation.
  Network failure, the inability to carry out critical
non-network operations and damage to infrastructure
may have significant adverse impacts on both our
financial position and reputation.
 Our results of operations depend on a number of
factors relating to business performance
including performance against regulatory targets
and the delivery of anticipated cost and
efficiency savings.
 Business development activity, including
acquisitions and disposals, may be based on
incorrect assumptions or conclusions; significant
liabilities may be overlooked or
there may be other unanticipated or unintended
effects.
  Changes to the regulatory treatment of commodity
costs may have an adverse effect on the results
of operations.
 Our reputation may be harmed if consumers of
energy suffer a disruption to their supply.




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##### Table of Contents



() Annual Report and Accounts 2007/08   97
  Fluctuations in exchange rates, interest rates and
commodity price indices, in particular in the US
dollar, could have a significant impact on our results
of operations because we have substantial business
interests in the US and because of the significant
proportion of our borrowings, derivative financial
instruments and commodity contracts that may
potentially be affected by such fluctuations.
  Our 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.
 Future funding requirements of our pension schemes
could adversely affect our results of operations.
 New or revised accounting standards, rules and
interpretations could have an adverse effect on our
reported financial results.
 Customers and counterparties to our transactions
may fail to perform their obligations, or
arrangements we have may be terminated, which
could harm our results of operations.
  Our operating results may fluctuate on a
seasonal and quarterly basis.




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##### Table of Contents



98   Directors Report
    
    National Grid plc
  Directors Report  for the year ended 31 March 2008
  Directors
  Code of ethics
 Principal activities and business review
 Dividends
 Political donations and expenditure
 Charitable donations
 Financial instruments
 Post-balance sheet events
 Change of control provisions
 Future developments
  Research and development
 Share capital




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##### Table of Contents



() Annual Report and Accounts 2007/08   99
  17 43
    Employees
 Policy and practice on payment of creditors
  Audit information
 Articles of Association
 Material interests in shares
 % of voting rightsLegal and General Investment Management Ltd
    
    
    5.69Fidelity International Limited
    
    
    3.06
  Annual General Meeting
  Helen Mahy




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##### Table of Contents



100   Directors Remuneration Report
    
    National Grid plc
   Directors Remuneration Report
   John Allan
 Remuneration Committee
       n
    
    Deloitte & Touche LLP, independent
remuneration advisors. They also provide
taxation and financial advice to the Company;
 n
    
    Alithos Limited, provision of Total
Shareholder Return calculations for the
Performance Share Plan and Executive Share
Option Plan;
 n
    
    Linklaters LLP, advice relating to Directors
service contracts as well as providing other
legal advice to the Company; and
 n
    
    Mercer Human Resource Consulting Limited, advice
relating to pension taxation legislation. They
also provide general advice with respect to human
resource issues across the Company.
 Remuneration policy




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##### Table of Contents



() Annual Report and Accounts 2007/08   101
   n
    
    total rewards should be set at levels that are competitive in
the relevant market. For UK-based Executive Directors, the
primary focus is placed on companies ranked (in terms of
market capitalisation) 11-40 in the FTSE 100. This peer group
is therefore weighted towards companies smaller than
National Grid and positioning the package slightly below
median against this group is considered to be appropriate for
a large, international but predominately regulated business.
For US-based Executive Directors, the primary focus is placed
on US utility companies;n
    
    a significant proportion of the Executive Directors total reward
should be performance based. Performance based incentives
will be earned through the achievement of demanding targets
for short-term business and individual performance as well
as long-term shareholder value creation, consistent with our
Framework for Responsible Business which can be found at:
www.nationalgrid.com/corporate/About+Us/Corporate
Governance/Other;n
    
    for higher levels of performance, rewards should be
substantial but not excessive; andn
    
    incentive plans, performance measures and targets should
be stretching and aligned as closely as possible with
shareholders interests.
  Executive Directors remuneration
 n
    
    salary;n
    
    annual bonus including the Deferred Share Plan;n
    
    long-term incentive, the Performance Share Plan;n
    
    all-employee share plans;n
    
    pension contributions; andn
    
    non-cash benefits.
 Salary
 Annual bonus including the Deferred Share Plan (DSP)
 Level of performance achieved in 2007/08as determined by the Remuneration CommitteeFinancial measures
    
    
    Company targets
    
    Divisional targetsAdjusted EPS
    
    
    StretchCash flow
    
    
    StretchOperating profit
    
    
    
    
    
    Below threshold (i), between target and stretch (ii) and at stretch (iii)
 (i)
    
    Electricity Distribution & Generation.(ii)
    
    Transmission.(iii)
    
    Gas Distribution and non-regulated businesses.
   Long-term
incentive  Performance Share Plan (PSP)




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##### Table of Contents



102   Directors
Remuneration Report continued
    
    National Grid plc
   n
    
    Sharesave: Employees resident in the UK,
including UK-based Executive Directors, are
eligible to participate in HM Revenue & Customs
approved all-employee Sharesave schemes. Under
these schemes, participants may contribute
between £5 and £250 in total each month, for a
fixed period of three years, five years or both.
Contributions are taken from net




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() Annual Report and Accounts 2007/08   103
  salary. At the end of the savings period, these contributions can be used to purchase ordinary
shares in National Grid at a discount capped at 20% of the market price set at the launch of the
scheme.n
    
    Share Incentive Plan (SIP): Employees resident
in the UK, including UK-based Executive
Directors, are eligible to participate in the
SIP. Contributions up to £125 are deducted from
participants gross salary and used to purchase
ordinary shares in National Grid each month. The
shares are placed in trust and if they are left
in trust for at least five years, they can be
removed free of UK income tax and National
Insurance Contributions.n
    
    US Incentive Thrift Plans: Employees of National
Grids US companies (including US-based Executive
Directors) are eligible to participate in the
Thrift Plans, tax-advantaged savings plans
(commonly referred to as 401(k) plans). These are
defined contribution pension plans that give
participants the opportunity to invest a maximum
of 50% of salary (pre-tax) and/or up to 15% of
salary (post-tax) up to applicable Federal salary
limits (US$225,000 for calendar year 2007 and
US$230,000 for 2008). The Company matches 100% of
the first 2% and 75% of the next 4% of salary
contributed, resulting in a maximum matching
contribution of 5% of salary up to the Federal
salary cap. For employees in legacy KeySpan
plans, the Company matches 50% of employees
contributions up to a maximum Company
contribution of 3%. Employees may
invest their own and Company contributions in
National Grid shares or various mutual fund
options.
 Pensions
 Non-cash benefits
 Flexible benefits plan
  Share ownership guidelines
 Share dilution through the operation of
share-based incentive plans
 Executive Directors service contracts




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##### Table of Contents



104   Directors Remuneration Reportcontinued
    
    National Grid plc
   Date of contract
    
    Notice periodExecutive DirectorsSteve Holliday
    
    1 April 2006
    
    12 monthsBob Catell (i)
    
    26 October 2007
    
    12 monthsSteve Lucas
    
    13 June 2002
    
    12 monthsNick Winser
    
    28 April 2003
    
    12 monthsMark Fairbairn
    
    23 January 2007
    
    12 monthsTom King (ii)
    
    11 July 2007
    
    12 monthsEdward Astle (iii)
    
    27 July 2007
    
    12 months
 (i)
    Bob Catell was appointed to the Board on 25
September 2007. His fixed-term contract ends on
24 August 2009 therefore termination after August
2008 will result in a reducing notice period.(ii)
    Tom King was appointed to the
Board on 13 August 2007.(iii)
    Edward Astle left the Board on
30 April 2008.
 External appointments and retention of fees
  Company
    
    Retained fees (£)Executive DirectorsSteve Holliday
    
    Marks and Spencer Group plc
    
    67,000Bob Catell (i)

    Keyera Energy Management Ltd (a),
Sovereign Bancorp Inc Advisory
    
    39,800Steve Lucas

    Board (b) and JP Morgan Chase Inc 
Metropolitan Advisory Board (c) 
Compass Group PLC
    
    75,000
 (i)
    Bob Catells paid external appointments were
those taken up prior to joining the Board on 25
September 2007. The retained fees are the amounts
for the period 25 September 2007 to 31 March 2008
and comprise the following: (a) £18,900, (b)
£19,400 and (c) £1,500. The exchange rate used for
(a) is Canadian$2.06:£1 and US$2.01:£1 for (b) and
(c).
 Non-executive Directors remuneration
 Non-executive Directors letters of appointment
  Date of letter
    
    End of periodof appointment (i)
    
    of appointmentNon-executive DirectorsSir John Parker
    
    12 January 2004
    
    2009 AGMKen Harvey
    
    4 November 2004
    
    2009 AGMLinda Adamany
    
    20 October 2006
    
    2010 AGMJohn Allan
    
    27 April 2005
    
    2008 AGMStephen Pettit
    
    22 November 2004
    
    2009 AGMMaria Richter
    
    25 June 2007
    
    2010 AGMGeorge Rose
    
    5 June 2003
    
    2009 AGMPaul Joskow (ii)
    
    3 November 2005
    
    N/A
 (i)
    Date of original
appointment or most recent
Non-executive role.(ii)
    Paul Joskow left the
Board on 31 July 2007.
 Performance graph




---



##### Table of Contents



() Annual Report and Accounts 2007/08   105
  Remuneration outcomes during the year ended 31 March 2008
  1. Directors emoluments
  Year ended31 MarchTable 1A
    
    

    
    
    
    
    
    
    
    Year ended 31 March 2008
    
    
    
    
    
    
    
    
    
    
    2007Benefits
    
    
    BenefitsAnnual
    
    
    in kind(i)
    
    
    in kind(i)
    
    
    OtherSalary
    
    
    bonus
    
    
    (cash)
    
    
    (non-cash)
    
    
    emoluments
    
    
    Total
    
    
    Total£000s
    
    
    £000s
    
    
    £000s
    
    
    £000s
    
    
    £000s
    
    
    £000s
    
    
    £000sExecutive
DirectorsSteve Holliday (ii)
    
    
    850
    
    
    
    1,190
    
    
    
    6
    
    
    
    16
    
    
    
    
    
    
    
    2,062
    
    
    
    1,292Bob Catell (iii) (iv)
    
    
    314
    
    
    
    490
    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    818
    
    
    
    Steve Lucas (v)
    
    
    498
    
    
    
    659
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    1,183
    
    
    
    928Nick Winser
    
    
    445
    
    
    
    502
    
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    963
    
    
    
    806Mark Fairbairn (ii)
(v)
    
    
    420
    
    
    
    567
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    1,010
    
    
    
    189Tom King (iv) (vi)
    
    
    316
    
    
    
    328
    
    
    
    264
    
    
    
    100
    
    
    
    141
    
    
    
    1,149
    
    
    
    Edward Astle (v)
    
    
    440
    
    
    
    607
    
    
    
    12
    
    
    
    11
    
    
    
    
    
    
    
    1,070
    
    
    
    847Total
    
    
    3,283
    
    
    
    4,343
    
    
    
    282
    
    
    
    206
    
    
    
    141
    
    
    
    8,255
    
    
    
    4,062
 (i)
    
    Benefits in kind comprise benefits such as private medical insurance, life assurance, either a
fully expensed car or cash in lieu of a car and the use of a driver when required.(ii)
    
    With effect from October 2007, Steve Hollidays salary was increased to £875,000 per annum and
Mark Fairbairns salary was increased to £440,000 per annum.(iii)
    
    Bob Catells maximum potential bonus and long term incentive arrangements were significantly
reduced from those applicable at KeySpan. Due to this contractual change, a buy out of Bobs
contractual severance arrangements was paid equating to £6,277,547 (including excise tax of
£2,022,290). Bob now has a National Grid contract which aligns his arrangements to our other
Executive Directors.(iv)
    
    For US-based Executive Directors, the exchange rate averaged over the year 1 April 2007 to 31
March 2008 to convert US dollars to UK pounds sterling is US$2.01:£1.(v)
    
    These Executive Directors participate in the UK flexible benefits plan which operates by way of
salary sacrifice, therefore, their salaries are reduced by the benefits they have purchased.The value of these benefits is included in the Benefits in kind (non-cash) figure. The values
are: Steve Lucas £5,532, Mark Fairbairn £293.88 and Edward Astle £53.88.(vi)
    
    On appointment to the Board, Tom King received a sign-on payment of £141,169 which is shown in
the Other emoluments figure above. He also received a relocation cash payment of £260,147 which is
included in the Benefits in kind (cash) figure and relocation expenses of £96,045 included in the
Benefits in kind (non-cash) figure.
 Additional note:
 Year ended31 MarchTable 1B
    
    
    
    
    
    
    
    
    
    
    
    
    
    Year ended 31 March 2008
    
    
    2007OtherFees
    
    
    emoluments
    
    
    Total
    
    
    Total£000s
    
    
    £000s
    
    
    £000s
    
    
    £000sNon-executive
DirectorsSir John Parker (i)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500
    
    
    
    59
    
    
    
    559
    
    
    
    553Ken Harvey
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79
    
    
    
    
    
    
    
    79
    
    
    
    68Linda Adamany
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    
    
    
    
    77
    
    
    
    25John Allan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    
    
    
    
    71
    
    
    
    62Stephen Pettit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79
    
    
    
    
    
    
    
    79
    
    
    
    68Maria Richter
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92
    
    
    
    
    
    
    
    92
    
    
    
    71George Rose
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82
    
    
    
    
    
    
    
    82
    
    
    
    71Paul Joskow (ii)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    33
    
    
    
    80Total
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    1,013
    
    
    
    59
    
    
    
    1,072
    
    
    
    998
 (i)
    
    Sir John Parkers other emoluments comprise a fully expensed car,
private medical insurance and life assurance.(ii)
    
    Paul Joskow left
the Board on 31 July 2007.




---



##### Table of Contents



106   Directors Remuneration Reportcontinued
    
    National Grid plc
   2.
    
    Directors pensionsThe table below gives details of the Executive Directors pension benefits in accordance with both
Schedule 7A of the Companies Act 1985 and the UK Listing Authoritys Listing Rules.
 Transfer valueof increase inAdditional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    accrued benefitPersonal
    
    
    benefit earned
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Increase in
    
    
    benefit earned in
    
    
    in the year endedcontributions
    
    
    during year
    
    
    Accrued
    
    
    Transfer value of accrued
    
    
    transfer
    
    
    the year ended
    
    
    31 March 2008made to the
    
    
    ended
    
    
    entitlement as at
    
    
    benefits as at 31 March (i)
    
    
    value less
    
    
    31 March 2008
    
    
    (excluding inflationscheme
    
    
    31 March 2008
    
    
    31 March 2008
    
    
    
    
    
    
    
    
    
    
    Director's
    
    
    (excluding
    
    
    & Directorduring the year
    
    
    pension
    
    
    pension
    
    
    2008
    
    
    2007
    
    
    contributions
    
    
    inflation) pension
    
    
    contributions)Table 2
    
    £000s
    
    
    £000s
    
    
    £000s
    
    
    £000s
    
    
    £000s
    
    
    £000s
    
    
    £000s
    
    
    £000sSteve Holliday (ii)
    
    
    17
    
    
    
    75
    
    
    
    232
    
    
    
    4,730
    
    
    
    2,745
    
    
    
    1,967
    
    
    
    69
    
    
    
    1,374Bob Catell (iii)
    
    
    
    
    
    
    147
    
    
    
    1,087
    
    
    
    12,774
    
    
    
    11,807
    
    
    
    967
    
    
    
    147
    
    
    
    1,730Steve Lucas
    
    
    30
    
    
    
    26
    
    
    
    225
    
    
    
    3,680
    
    
    
    3,535
    
    
    
    115
    
    
    
    19
    
    
    
    286Nick Winser (iv)
    
    
    27
    
    
    
    18
    
    
    
    170
    
    
    
    3,237
    
    
    
    2,406
    
    
    
    805
    
    
    
    12
    
    
    
    187Mark Fairbairn (v)
    
    
    25
    
    
    
    44
    
    
    
    160
    
    
    
    3,340
    
    
    
    2,014
    
    
    
    1,300
    
    
    
    40
    
    
    
    783Tom King (vi)
    
    
    
    
    
    
    55
    
    
    
    55
    
    
    
    207
    
    
    
    
    
    
    
    207
    
    
    
    55
    
    
    
    207Edward Astle
    
    
    17
    
    
    
    18
    
    
    
    97
    
    
    
    1,997
    
    
    
    1,416
    
    
    
    562
    
    
    
    15
    
    
    
    301
 (i)
    
    The transfer values shown at 31 March 2007 and 31 March 2008 respectively represent the value
of each Executive Directors accrued benefits based on total service compared to the relevant date.
The transfer values for the UK Executive Directors have been calculated in accordance with guidance
note GN11 as adopted and amended by the Board of Actuarial Standards. The transfer values for the
US-based Executive Directors have been calculated using discount rates based on high yield US
corporate bonds and associated yields at the relevant dates.(ii)
    
    The above information takes into account a lump sum benefit related to a previous transfer in.
This means that as well as the pension quoted above, there is an accrued lump sum entitlement of
£100,000 as at 31 March 2008. The increase to the accumulated lump sum including inflation was
£23,000 and excluding inflation was £20,000 in the year to 31 March 2008. The transfer value
information above includes the value of the lump sum.(iii)
    
    Bob Catell joined the Board on 25 September 2007. In accordance with the buy out of Bob
Catells contractual severance arrangements, a payment of £4,769,306 (£3,232,670 net of excise tax)
was made on 10 January 2008. This amount reflected the present value of the change in Bobs SERP
benefit and is additional to the benefits shown in the table. The exchange rate as at 10 January
2008 used to convert the figures from US dollars to pounds sterling was US$1.96:£1. Through
participation in the Thrift Plan in the US, the Company also made contributions worth £3,355 to a
defined contribution pension arrangement. The exchange rate as at 31 March 2008 was US$1.98: £1 and
as at 31 March 2007 was US$1.97:£1.(iv)
    
    The above information allows for the accrual of a pension benefit of two thirds at age 60
taking into account standard benefits earned prior to 1 September 1998. This means that, as well as
the pension above, there is an accrued lump sum entitlement of £250,000 as at 31 March 2008. The
increase to the accumulated lump sum including inflation was £14,000 and excluding inflation was
£5,000 in the year to 31 March 2008. The transfer value information above includes the value of the
lump sum.(v)
    
    The above information takes into account a lump sum benefit relating to a previous transfer-in.
This means that, as well as the pension above, there is an accrued lump sum entitlement of £255,000
as at 31 March 2008. The increase to the accumulated lump sum including inflation was £58,000 and
excluding inflation was £50,000 in the year to 31 March 2008. The transfer value information above
includes the value of the lump sum.(vi)
    
    Tom King joined the Board on 13 August 2007. The above information takes into account a
service credit of 9 years and 1 month. The exchange rate as at 31 March 2008 was US$1.98: £1 and as
at 31 March 2007 was US$1.97:£1.




---



##### Table of Contents



() Annual Report and Accounts 2007/08   107
  3. Directors interests in share options
 Options
    
    
    Market priceexercised or
    
    
    at end of
    
    
    
    
    
    
    
    
    
    
    Exercise priceOptions held at
    
    
    lapsed during
    
    
    exercise
    
    
    Options granted
    
    
    Options held at
    
    
    per shareTable 3
    
    1 April 2007
    
    
    the year
    
    
    (pence)
    
    
    during the year
    
    
    31 March 2008
    
    
    (pence)
    
    
    Normal exercise periodSteve HollidayESOP
    
    
    67,497
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,497
    
    
    
    481.5
    
    
    June 2005 to June 2012Share Match
    
    
    10,350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,350
    
    
    100 in total
    
    
    June 2005 to June 201214,083
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,083
    
    
    100 in total
    
    
    June 2006 to June 201318,713
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,713
    
    
    nil
    
    
    May 2007 to May 20149,983
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,983
    
    
    nil
    
    
    June 2008 to June 2015Sharesave
    
    
    4,692
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,692
    
    
    
    350
    
    
    Mar 2008 to Aug 2008
    
    
    
    
    
    
    
    
    
    
    
    2,564
    
    
    
    2,564
    
    
    
    655
    
    
    Apr 2013 to Sep 2013Total
    
    
    125,318
    
    
    
    
    
    
    
    
    
    
    
    2,564
    
    
    
    127,882Steve LucasESOP
    
    
    54,404
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54,404
    
    
    
    434.25
    
    
    Dec 2005 to Dec 2012Share Match
    
    
    16,909
    
    
    
    16,909
    (i)
    
    
    742
    
    
    
    
    
    
    
    
    
    
    nil
    
    
    May 2007 to May 201414,778
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,778
    
    
    nil
    
    
    June 2008 to June 2015Sharesave
    
    
    1,693
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,693
    
    
    
    558
    
    
    Apr 2010 to Sep 2010Total
    
    
    87,784
    
    
    
    16,909
    
    
    
    
    
    
    
    
    
    
    
    70,875Nick WinserESOP
    
    
    19,755
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,755
    
    
    
    531.5
    
    
    June 2003 to June 2010Share Match
    
    
    14,059
    
    
    
    14,059
    (ii)
    
    
    751
    
    
    
    
    
    
    
    
    
    
    nil
    
    
    May 2007 to May 201411,581
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,581
    
    
    nil
    
    
    June 2008 to June 2015Total
    
    
    45,395
    
    
    
    14,059
    
    
    
    
    
    
    
    
    
    
    
    31,336Mark FairbairnESOP
    
    
    8,649
    
    
    
    8,649
    (iii)
    
    
    700.18
    
    
    
    
    
    
    
    
    
    
    
    375.75
    
    
    June 2001 to June 20082,180
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,180
    
    
    
    435.75
    
    
    July 2002 to July 200933,489
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,489
    
    
    
    531.5
    
    
    June 2003 to June 201031,152
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,152
    
    
    
    481.5
    
    
    June 2005 to June 2012Share Match
    
    
    4,897
    
    
    
    4,897
    (iii)
    
    
    743.5
    
    
    
    
    
    
    
    
    
    
    nil
    
    
    May 2007 to May 20142,134
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,134
    
    
    nil
    
    
    June 2008 to June 2015Sharesave
    
    
    833
    
    
    
    833
    
    
    
    739
    
    
    
    
    
    
    
    
    
    
    
    397
    
    
    Sep 2007 to Feb 2008862
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    862
    
    
    
    383
    
    
    Apr 2010 to Sep 20101,760
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,760
    
    
    
    558
    
    
    Apr 2012 to Sep 2012
    
    
    
    
    
    
    
    
    
    
    
    512
    
    
    
    512
    
    
    
    655
    
    
    Apr 2013 to Sep 2013Total
    
    
    85,956
    
    
    
    14,379
    
    
    
    
    
    
    
    512
    
    
    
    72,089Edward AstleESOP
    
    
    67,497
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,497
    
    
    
    481.5
    
    
    June 2005 to June 2012131,086
    
    
   
    131,086
    (iv)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    400.5
    
    
    June 2006 to June 2013Share Match
    
    
    6,553
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,553
    
    
    100 in total
    
    
    June 2005 to June 201213,812
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,812
    
    
    100 in total
    
    
    June 2006 to June 201315,716
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,716
    
    
    nil
    
    
    May 2007 to May 201414,637
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,637
    
    
    nil
    
    
    June 2008 to June 2015Total
    
    
    249,301
    
    
    
    131,086
    
    
    
    
    
    
    
    
    
    
    
    118,215
 (i)
    
    Steve Lucas exercised a Share Match award over 16,909 shares. The market price at the date of
exercise was 742p. He also received £13,634.91 in respect of a cash payment in lieu of dividends.(ii)
    
    Nick Winser exercised a Share Match award over 14,059 shares. The market price at the date of
exercise was 751p. He also received £12,031.79 in respect of a cash payment in lieu of dividends.(iii)
    
    Mark Fairbairn exercised an Executive Share Option over 8,649 shares. The market price at the
date of exercise was 700.18p. He also exercised a Share Match award over 4,897 shares, the market
price at the date of exercise for which was 743.5p. He received £4,379.13 in respect of a cash
payment in lieu of dividends for the Share Match award.(iv)
    
    The performance condition for the
Executive Share Option granted in 2003 to Edward Astle over 131,086 shares was not satisfied at the
end of the first three years of the performance period. It has subsequently been re-tested on 31
March 2007 and 31 March 2008; and the performance condition has not been satisfied. As a result the
option has lapsed in full.




---



##### Table of Contents



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




---



##### Table of Contents



() Annual Report and Accounts 2007/08   109
  4. Directors interests in the PSP, DSP and SRA
 PSP, DSP and SRA
    
    
    Awards
    
    
    Awards
    
    
    Awards
    
    
    Market price
    
    
    
    
    ConditionalType of
    
    conditional awards
    
    
    lapsed
    
    
    vested
    
    
    granted
    
    
    at award
    
    
    Date of
    
    awards at
    
    
    ReleaseTable 4
    
    award
    
    at 1 April 2007
    
    
    during year
    
    
    in year
    
    
    during year
    
    
    
    (pence except#)
    
    
    award
    
    31 March 2008
    
    
    dateSteve
Holliday
    
    PSP
    
    
    117,681
    
    
    
    117,681
    (i)
    
    
    
    
    
    
    
    
    
    
    424.875
    
    
    June 2004
    
    
    
    
    
    
    PSP
    
    
    100,801
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    527.03
    
    
    June 2005
    
    
    100,801
    
    
    June 2009PSP
    
    
    126,788
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    591.5382
    
    
    June 2006
    
    
    126,788
    
    
    June 2010PSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    139,217
    
    
    
    740.75
    
    
    June 2007
    
    
    139,217
    
    
    June 2011PSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    77,247
    (ii)
    
    
    800.9919
    
    
    Nov 2007
    
    
    77,247
    
    
    Nov 2011DSP
    
    
    36,389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    583.96
    
    
    June 2006
    
    
    36,389
    
    
    June 2009DSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,435
    
    
    
    726.87
    
    
    June 2007
    
    
    42,435
    
    
    June 2010Total
    
    
    
    
    381,659
    
    
    
    117,681
    
    
    
    
    
    
    
    258,899
    
    
    
    
    
    
    
    
    
    522,877Bob
Catell
    
    PSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ADSs 17,084
    (iii)
    
    
    $83.3121
    #
    
    Nov 2007
    
    
    ADSs 17,084
    
    
    Nov 2011Total ADSs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ADSs 17,084
    
    
    
    
    
    
    
    
    
    ADSs 17,084Steve
Lucas
    
    PSP
    
    
    116,210
    
    
    
    116,210
    (i)
    
    
    
    
    
    
    
    
    
    
    424.875
    
    
    June 2004
    
    
    
    
    
    
    PSP
    
    
    99,615
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    527.03
    
    
    June 2005
    
    
    99,615
    
    
    June 2009PSP
    
    
    101,430
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    591.5382
    
    
    June 2006
    
    
    101,430
    
    
    June 2010PSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84,930
    
    
    
    740.75
    
    
    June 2007
    
    
    84,930
    
    
    June 2011PSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,125
    (ii)
    
    
    800.9919
    
    
    Nov 2007
    
    
    47,125
    
    
    Nov 2011DSP
    
    
    34,882
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    583.96
    
    
    June 2006
    
    
    34,882
    
    
    June 2009DSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,276
    
    
    
    726.87
    
    
    June 2007
    
    
    29,276
    
    
    June 2010Total
    
    
    
    
    352,137
    
    
    
    116,210
    
    
    
    
    
    
    
    161,331
    
    
    
    
    
    
    
    
    
    397,258Nick
Winser
    
    PSP
    
    
    98,558
    
    
    
    98,558
    (i)
    
    
    
    
    
    
    
    
    
    
    424.875
    
    
    June 2004
    
    
    
    
    
    
    PSP
    
    
    91,314
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    527.03
    
    
    June 2005
    
    
    91,314
    
    
    June 2009PSP
    
    
    88,751
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    591.5382
    
    
    June 2006
    
    
    88,751
    
    
    June 2010PSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75,008
    
    
    
    740.75
    
    
    June 2007
    
    
    75,008
    
    
    June 2011PSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,620
    (ii)
    
    
    800.9919
    
    
    Nov 2007
    
    
    41,620
    
    
    Nov 2011DSP
    
    
    31,316
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    583.96
    
    
    June 2006
    
    
    31,316
    
    
    June 2009DSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,596
    
    
    
    726.87
    
    
    June 2007
    
    
    25,596
    
    
    June 2010Total
    
    
    
    
    309,939
    
    
    
    98,558
    
    
    
    
    
    
    
    142,224
    
    
    
    
    
    
    
    
    
    353,605Mark
Fairbairn
    
    PSP
    
    
    47,072
    
    
    
    47,072
    (i)
    
    
    
    
    
    
    
    
    
    
    424.875
    
    
    June 2004
    
    
    
    
    
    
    PSP
    
    
    40,225
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    527.03
    
    
    June 2005
    
    
    40,225
    
    
    June 2009PSP
    
    
    40,572
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    591.5382
    
    
    June 2006
    
    
    40,572
    
    
    June 2010PSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,499
    
    
    
    740.75
    
    
    June 2007
    
    
    67,499
    
    
    June 2011PSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,453
    (ii)
    
    
    800.9919
    
    
    Nov 2007
    
    
    37,453
    
    
    Nov 2011DSP
    
    
    10,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    583.96
    
    
    June 2006
    
    
    10,800
    
    
    June 2009DSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,867
    
    
    
    726.87
    
    
    June 2007
    
    
    13,867
    
    
    June 2010Total
    
    
    
    
    138,669
    
    
    
    47,072
    
    
    
    
    
    
    
    118,819
    
    
    
    
    
    
    
    
    
    210,416Tom
King
    
    PSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    ADSs 24,006
    (iii)
    
    
    $83.3121
    #
    
    Nov 2007
    
    ADSs 24,006
    
    
    Nov 2011SRA
    
    
    
    
    
    
    
    
    
    
    
    
    
    ADSs 35,487
    (iv)
    
    
    $84.5360
    #
    
    Nov 2007
    
    ADSs 35,487
    
    
    Nov 2008to Nov 2010Total ADSs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ADSs 59,493
    
    
    
    
    
    
    
    
    ADSs 59,493Edward
Astle
    
    PSP
    
    
    110,326
    
    
    
    110,326
    (i)
    
    
    
    
    
    
    
    
    
    
    424.875
    
    
    June 2004
    
    
    
    
    
    
    PSP
    
    
    94,872
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    527.03
    
    
    June 2005
    
    
    94,872
    
    
    June 2009PSP
    
    
    88,751
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    591.5382
    
    
    June 2006
    
    
    88,751
    
    
    June 2010PSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74,249
    
    
    
    740.75
    
    
    June 2007
    
    
    74,249
    
    
    June 2011PSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,198
    (ii)
    
    
    800.9919
    
    
    Nov 2007
    
    
    41,198
    
    
    Nov 2011DSP
    
    
    28,769
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    583.96
    
    
    June 2006
    
    
    28,769
    
    
    June 2009DSP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,927
    
    
    
    726.87
    
    
    June 2007
    
    
    27,927
    
    
    June 2010Total
    
    
    
    
    322,718
    
    
    
    110,326
    
    
    
    
    
    
    
    143,374
    
    
    
    
    
    
    
    
    
    355,766
 (i)
    
    The performance condition was not satisfied at the end of the three year performance
period for PSP awards granted in 2004. As a result, the awards have lapsed in full.(ii)
    
    Due to shareholder approval being required to increase the maximum PSP award to Executive
Directors, from 125% to 200% of salary, which could only be sought at the 2007 AGM, a top up PSP
award was made in November 2007.(iii)
    
    Bob Catell and Tom King were appointed after the main June 2007 PSP award, therefore, they
received full awards in November 2007. Awards were made over ADSs. Each ADS represents five
ordinary shares.(iv)
    
    Tom King received a Special Retention Award as part of a contractual commitment made at the
time of his recruitment. The award was made over ADSs. Each ADS represents five ordinary shares.
The award vests in equal parts over 3 years.




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##### Table of Contents



110   Directors Remuneration Report continued
    
    National Grid plc
  
 5. Directors beneficial interests  17 43
 Options/awards overOrdinary shares at
    
    
    Ordinary shares at
    
    
    
    
    
    
    ordinary shares at31 March 2008
    
    
    1 April 2007
    
    
    Options/awards over
    
    
    1 April 2007or, if earlier, on
    
    
    or, if later, on
    
    
    ordinary shares at
    
    
    or, if later, onTable 5
    
    retirement
    (i)
    
    appointment
    *
    
    31 March 2008
    
    
    appointment
    *Sir John Parker
    
    
    77,115
    
    
    
    63,994
    
    
    
    
    
    
    
    Steve Holliday (ii) (iii)
    
    
    28,488
    
    
    
    28,293
    
    
    
    650,759
    
    
    
    506,977Bob Catell
    
    
    15,000
    
    
    
    
    *
    
    
    85,420
    
    
    
    
    *Steve Lucas (ii) (iv)
    
    
    79,438
    
    
    
    69,412
    
    
    
    468,133
    
    
    
    439,921Nick Winser (ii)
    
    
    69,937
    
    
    
    60,624
    
    
    
    384,941
    
    
    
    355,334Mark Fairbairn (ii) (iii)
    
    
    28,584
    
    
    
    20,838
    
    
    
    282,505
    
    
    
    224,625Tom King
    
    
    
    
    
    
    
    *
    
    
    297,465
    
    
    
    
    *Edward Astle (ii)
    
    
    28,428
    
    
    
    28,428
    
    
    
    473,981
    
    
    
    572,019Ken Harvey
    
    
    3,740
    
    
    
    3,399
    
    
    
    
    
    
    
    Linda Adamany
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    John Allan
    
    
    2,000
    
    
    
    2,000
    
    
    
    
    
    
    
    Stephen Pettit
    
    
    2,632
    
    
    
    2,632
    
    
    
    
    
    
    
    Maria Richter
    
    
    3,255
    
    
    
    1,755
    
    
    
    
    
    
    
    George Rose
    
    
    4,852
    
    
    
    4,409
    
    
    
    
    
    
    
    Paul Joskow
    
    
    4,385
    
    
    
    4,385
    
    
    
    
    
    
    
    
 (i)
    
    There has been no other change in the beneficial interests of the Directors in ordinary
shares between 1 April 2008 and 14 May 2008, except in respect of routine monthly purchases under
the SIP (see note (iii) below).(ii)
    
    Each of the Executive Directors, with the exception of Bob Catell and Tom King, was for
Companies Act purposes deemed to be a potential beneficiary under the National Grid plc 1996
Employee Benefit Trust and the National Grid Employee Share Trust and thereby to have an interest
in 25,836 and 155,768 ordinary shares respectively, as at 31 March 2008.(iii)
    
    Beneficial interest includes shares purchased under the monthly operation of the SIP in the
year to 31 March 2008. In April and May 2008 a further 35 shares were purchased on behalf of Steve
Holliday and Mark Fairbairn respectively.(iv)
    
    Steve Lucas was for Companies Act purposes deemed to be a potential beneficiary in 8,880
ordinary shares held by Lattice Group Trustees Limited as trustee of the Lattice Group Employee
Share Ownership Trust as at 31 March 2008.
 6. National Grid share price range
  Helen Mahy




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##### Table of Contents



() Annual Report and Accounts 2007/08   111
 Contents of financial statements
  Directors statement and independent  Auditors report
 112
    
    Statement of Directors responsibilities113
    
    Independent Auditors report to the Membersof National Grid plc
 Consolidated financial statementsunder IFRS
 Basis of preparation
 114
    
    Accounting policies121
    
    Adoption of new accounting standards
 Primary statements
 122
    
    Consolidated income statement123
    
    Consolidated balance sheet124
    
    Consolidated statement of recognised income and expense125
    
    Consolidated cash flow statement
 Notes
to the consolidated financial statements analysis of items in the primary statements
 126
    
    Note 1
    
    
    
    Segmental analysis128
    
    Note 2
    
    
    
    Other operating income128
    
    Note 3
    
    
    
    Operating costs131
    
    Note 4
    
    
    
    Exceptional items, remeasurementsand stranded cost recoveries132
    
    Note 5
    
    
    
    Pensions and other post-retirement benefits134
    
    Note 6
    
    
    
    Finance income and costs135
    
    Note 7
    
    
    
    Taxation137
    
    Note 8
    
    
    
    Discontinued operations137
    
    Note 9
    
    
    
    Dividends138
    
    Note 10
    
    
    
    Earnings per share139
    
    Note 11
    
    
    
    Goodwill140
    
    Note 12
    
    
    
    Other intangible assets141
    
    Note 13
    
    
    
    Property, plant and equipment142
    
    Note 14
    
    
    
    Other non-current assets142
    
    Note 15
    
    
    
    Financial and other investments143
    
    Note 16
    
    
    
    Deferred tax assets and liabilities144
    
    Note 17
    
    
    
    Derivative financial instruments145
    
    Note 18
    
    
    
    Inventories and current intangible assets145
    
    Note 19
    
    
    
    Trade and other receivables146
    
    Note 20
    
    
    
    Cash and cash equivalents146
    
    Note 21
    
    
    
    Borrowings147
    
    Note 22
    
    
    
    Trade and other payables147
    
    Note 23
    
    
    
    Other non-current liabilities148
    
    Note 24
    
    
    
    Provisions149
    
    Note 25
    
    
    
    Share capital150
    
    Note 26
    
    
    
    Reconciliation of movements in total equity151
    
    Note 27
    
    
    
    Consolidated cash flow statement
 Notes to the consolidated financial statements   supplementary information
 153
    
    Note 28
    
    
    
    Acquisitions154
    
    Note 29
    
    
    
    Commitments and contingencies155
    
    Note 30
    
    
    
    Related party transactions156
    
    Note 31
    
    
    
    Actuarial information on pensionsand other post-retirement benefits159
    
    Note 32
    
    
    
    Supplementary information onderivative financial instruments160
    
    Note 33
    
    
    
    Financial risk165
    
    Note 34
    
    
    
    Commodity risk166
    
    Note 35
    
    
    
    Bonds and facilities168
    
    Note 36
    
    
    
    Share options and reward plans172
    
    Note 37
    
    
    
    Subsidiary undertakings, joint venturesand associates173
    
    Note 38
    
    
    
    National Grid Gas plc and Niagara MohawkPower Corporation additional disclosures
 Company financial statements  under UK GAAP
 Basis of preparation
 179
    
    Company accounting policies
 Primary statement
 181
    
    Company balance sheet
 Notes to the Company financial statements
 182
    
    Note 1
    
    
    
    Adoption of new accounting standards182
    
    Note 2
    
    
    
    Fixed asset investments183
    
    Note 3
    
    
    
    Debtors183
    
    Note 4
    
    
    
    Creditors (amounts falling due within one year)183
    
    Note 5
    
    
    
    Derivative financial instruments184
    
    Note 6
    
    
    
    Borrowings184
    
    Note 7
    
    
    
    Called up share capital185
    
    Note 8
    
    
    
    Reserves185
    
    Note 9
    
    
    
    Reconciliation of movements inshareholders funds185
    
    Note 10
    
    
    
    Commitments and contingencies185
    
    Note 11
    
    
    
    Directors and employees




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##### Table of Contents



112   Statement of Directors responsibilities
    
    National Grid plc
 Statement of Directors responsibilities
 n
    
    select suitable accounting policies and then
apply them consistently;n
    
    make judgements and estimates that are
reasonable and prudent;n
    
    state that the consolidated financial statements
comply with IFRS as adopted by the European Union
and with regard to the Company financial statements
that applicable UK Accounting Standards have been
followed, subject to any material departures
disclosed and explained in the financial statements;
andn
    
    prepare the consolidated financial statements and
Company financial statements on a going concern
basis unless it is inappropriate to presume that the
Company will continue in business, in which case
there should be supporting assumptions or
qualifications as necessary.
 Helen Mahy




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##### Table of Contents



() Annual Report and Accounts 2007/08   113
 Independent Auditors report to the Members of National Grid plc
  Respective responsibilities of Directors and auditors
 Basis of audit opinion
   Opinion
 n
    
    the consolidated financial statements give a true
and fair view, in accordance with IFRS as adopted by
the European Union, of the state of the groups
affairs as at 31 March 2008 and of its profit and cash
flows for the year then ended;n
    
    the consolidated financial statements have been
properly prepared in accordance with the Companies
Act 1985 and Article 4 of the IAS Regulation;n
    
    the Company financial statements give a true and
fair view, in accordance with United Kingdom
Generally Accepted Accounting Practice, of the state
of the Companys affairs as at 31 March 2008;n
    
    the Company financial statements and the part of the
Directors Remuneration Report to be audited have been
properly prepared in accordance with the Companies Act
1985; andn
    
    the information given in the Directors Report is
consistent with the financial statements.
 PricewaterhouseCoopers LLP




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##### Table of Contents



114   Accounting policies
    
    National Grid plc
 Accounting policies
 for the year ended 31 March 2008
  A. Basis of preparation of consolidated
financial statements under IFRS
 B. Basis of consolidation
       C. Foreign currencies




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##### Table of Contents



() Annual Report and Accounts 2007/08   115
 D. Goodwill
     E. Intangible assets other than goodwill
     Amortisation periods
    
    YearsSoftware
    
    
    3 to 5Acquisition-related intangibles
    
    
    10 to 25Other   telecommunication licences
    
    
    10 to 25 other licences and other intangibles
    
    
    3 to 5
 F. Property, plant and equipment
        Depreciation periods
    
    YearsFreehold and leasehold buildings
    
    up to 65Plant and machineryElectricity transmission plant
    
    
    15 to 60Electricity distribution plant
    
    
    15 to 60Electricity generation plant
    
    
    20 to 40Interconnector plant
    
    
    15 to 60Gas plant  mains, services and regulating equipment
    
    
    30 to 100Gas plant  storage
    
    
    40Gas plant  meters
    
    
    10 to 33Wireless infrastructure
    
    
    20 to 55Motor vehicles and office equipment
    
    up to 10




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##### Table of Contents



116   Accounting policies
continued
    
    National Grid plc
  G. Impairment of assets
     H. TaxationCurrent tax
 Deferred tax and investment tax credits
 I. Discontinued operations, assets and
businesses held for sale
    J. Inventories
 K. Decommissioning and
environmental costs




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##### Table of Contents



() Annual Report
and Accounts 2007/08   117
  L. Revenue
    M. Segmental information
 N. Pensions and other post-retirement benefits
 O. Leases
  P. Financial instruments




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##### Table of Contents



118   Accounting policies
continued
    
    National Grid plc
  Q. Commodity contracts
   R. Hedge accounting




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##### Table of Contents



() Annual Report
and Accounts 2007/08   119
  S. Share-based payments
  T. Business performance and exceptional
items, remeasurements and stranded cost
recoveries
 U. Other operating income
 V. Emission allowances




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##### Table of Contents



120   Accounting policies
continued
    
    National Grid plc
  W. Cash and cash equivalents
 X. Other equity reserves
  Y. Dividends
 Z. Areas of judgement and key sources of
estimation uncertainty
  n
    
    The categorisation of certain items as
exceptional items, remeasurements and
stranded cost recoveries and the definition
of adjusted earnings  notes 4 and 10.n
    
    The exemptions adopted on transition to IFRS on
1 April 2004 including, in particular, those
relating to business combinations.n
    
    Classification of business activities as
held for sale and discontinued operations
  accounting policy I.n
    
    Hedge accounting  accounting policy R.n
    
    Energy purchase contracts  classification as
being for normal purchase, sale or usage  accounting policy Q and note 29.
 n
    
    Impairment of goodwill  accounting policy D and note 11.n
    
    Review of residual lives, carrying values
and impairment charges for other intangible
assets and property, plant and equipment 
accounting policies E, F and G.n
    
    Estimation of liabilities for pension and
other post-retirement benefits  note 5.n
    
    Valuation of financial instruments and
derivatives  notes 17 and 32.n
    
    Revenue recognition and assessment of
unbilled revenue  accounting policy L.n
    
    Recoverability of deferred tax assets  accounting policy H and note 16.n
    
    Environmental and decommissioning provisions  note 24.n
    
    Fair values of acquired assets and liabilities  note 28.




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##### Table of Contents



() Annual Report
and Accounts 2007/08   121
  Adoption of new accounting standards
 New IFRS accounting standards and interpretations adopted in 2007/08
 IFRIC 8 on share-based payments
    
    Addresses the issue of whether IFRS 2 Share-Based Payment applies to transactions in which
the entity cannot identify specifically some or all of the goods or services received.IFRIC 9 on the reassessment 
of embedded derivatives
    
    Prohibits reassessment of the treatment of embedded derivatives subsequent to initial recognition
unless there is a change in the terms of the contract that significantly modifies the cash flows that
otherwise would be required under the contract, in which case reassessment is required.IFRIC 10 on interim financial reporting
and impairment
    
    States that any impairment losses on goodwill and certain financial assets recognised in an interim
financial statement may not be reversed in subsequent interim or annual financial statements.IFRIC 11 on group and treasury 
share transactions
    
    Provides guidance on whether share-based transactions involving treasury shares or involving
subsidiary undertakings (for instance, options over a parents shares) should be accounted for
as equity-settled or cash-settled, share-based payment transactions.
 New IFRS accounting standards and interpretations not yet adopted
 IFRS 8 on operating segments
    
    Sets out the requirements for the disclosure of information about an entitys operating segments
and about the entitys products and services, the geographical areas in which it operates and
its major customers. IFRS 8 achieves convergence with the US accounting standard, SFAS 131
Disclosures about Segments of an Enterprise and Related Information with minor differences.
IFRS 8 is required to be adopted on 1 April 2009.Amendment to IAS 23 on borrowing costs
    
    Removes the option of immediately recognising as an expense borrowing costs that relate to
assets that take a substantial period of time to get ready for use or sale. The amendment to
IAS 23 is required to be adopted on 1 April 2009.IFRIC 12 on service concession arrangements
    
    Applies to contractual arrangements whereby a private sector operator participates in the
development, financing, operation and maintenance of infrastructure for public sector services,
for example, under private finance initiative (PFI) contracts. IFRIC 12 will be adopted on
1 April 2008.IFRIC 13 on customer loyalty programmes
    
    Clarifies that the sale of goods or services together with customer award credits (for example,
loyalty points or the right to free products) is accounted for as a multiple-element transaction.
The consideration received from the customer is allocated between the components of the
arrangement based on their fair values, which will defer the recognition of some revenue.
IFRIC 13 will be adopted on 1 April 2008.IFRIC 14 on defined benefit assets and
minimum funding requirements
    
    Considers the limit on the measurement of a defined benefit asset to the present value of
economic benefits available in the form of refunds from the plan or reductions in future
contributions to the plan plus unrecognised gains and losses, as set out in IAS 19 Employee
Benefits. The interpretation considers when refunds or reductions in future contributions should
be considered available, particularly when a minimum funding requirement exists. IFRIC 14 will
be adopted on 1 April 2008.Amendment to IAS 1 on the presentation
of financial statements
    
    Requires changes to the presentation of financial statements and adopts revised titles for the
primary statements, although companies may continue to use the existing titles. It is expected
that the amendment to IAS 1 will be adopted on 1 April 2009.IFRS 3R on business combinations
    
    Makes a number of changes to the accounting for business combinations, including requirements
that all payments to purchase a business are to be recorded at fair value at the acquisition date,
with some contingent payments subsequently remeasured at fair value through income; an option
to calculate goodwill based on the parents share of net assets only or to include goodwill related
to the minority interest; and a requirement that all transaction costs be expensed. It is expected
that IFRS 3R will be adopted on 1 April 2010.IAS 27R on consolidated and
individual 
financial statements
    
    Requires the effects of all transactions with non-controlling interests to be recorded in equity if
there is no change in control. The revised standard also specifies the accounting when control
is lost. It is expected that IAS 27R will be adopted on 1 April 2010.Amendment to IFRS 2 on

share-based payments
    
    Clarifies the definition of vesting conditions and the accounting treatment of cancellations.
Vesting conditions are defined as either service conditions or performance conditions.
Cancellations by employees are accounted for in the same way as cancellations by the
Company. It is expected that the amendment to IFRS 2 will be adopted on 1 April 2009.Amendments to IAS 32 and IAS 1

on puttable financial instruments and
obligations arising on liquidation
    
    Addresses the classification as a liability or as equity certain puttable financial instruments and
instruments, or components thereof, which impose upon an entity an obligation to deliver a
pro rata share of net assets on liquidation. The amendments to IAS 32 and IAS 1 are required
to be adopted on 1 April 2009.




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##### Table of Contents



122   Consolidated income statement
    
    National Grid plc
  Consolidated income statement
 for the
years ended 31 March
 2008
    
    
    2008
    
    
    2007
    
    
    2007
    
    
    2006
    
    
    2006Notes
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    1(a
    )
    
    
    
    
    
    
    11,423
    
    
    
    
    
    
    
    8,695
    
    
    
    
    
    
    
    8,868Other operating income
    
    
    2
    
    
    
    
    
    
    
    75
    
    
    
    
    
    
    
    83
    
    
    
    
    
    
    
    80Operating costs
    
    
    3
    
    
    
    
    
    
    
    (8,534
    )
    
    
    
    
    
    
    (6,265
    )
    
    
    
    
    
    
    (6,574
    )Operating profitBefore exceptional items, remeasurements
and stranded cost recoveries*
    
    
    1(b
    )
    
    
    2,595
    
    
    
    
    
    
    
    2,031
    
    
    
    
    
    
    
    1,968Exceptional items, remeasurements and 

stranded cost recoveries*
    
    
    4
    
    
    
    369
    
    
    
    
    
    
    
    482
    
    
    
    
    
    
    
    406Total operating profit
    
    
    1(b
    )
    
    
    
    
    
    
    2,964
    
    
    
    
    
    
    
    2,513
    
    
    
    
    
    
    
    2,374Interest income and similar income
    
    
    6
    
    
    
    
    
    
    
    1,275
    
    
    
    
    
    
    
    1,144
    
    
    
    
    
    
    
    1,036Interest expense and other finance costsBefore exceptional items and remeasurements
    
    
    6
    
    
    
    (2,035
    )
    
    
    
    
    
    
    (1,691
    )
    
    
    
    
    
    
    (1,638
    )Exceptional items and remeasurements
    
    
    4,6
    
    
    
    (16
    )
    
    
    
    
    
    
    (217
    )
    
    
    
    
    
    
    (57
    )6
    
    
    
    
    
    
    
    (2,051
    )
    
    
    
    
    
    
    (1,908
    )
    
    
    
    
    
    
    (1,695
    )Share of post-tax results of joint ventures and associates
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    3Profit before taxationBefore exceptional items, remeasurements
and stranded cost recoveries*
    
    
    
    
    
    
    1,839
    
    
    
    
    
    
    
    1,486
    
    
    
    
    
    
    
    1,369Exceptional items, remeasurements and
stranded cost recoveries*
    
    
    4
    
    
    
    353
    
    
    
    
    
    
    
    265
    
    
    
    
    
    
    
    349Total profit before taxation
    
    
    
    
    
    
    
    
    
    
    2,192
    
    
    
    
    
    
    
    1,751
    
    
    
    
    
    
    
    1,718TaxationBefore exceptional items, remeasurements 
and stranded cost recoveries*
    
    
    7
    
    
    
    (583
    )
    
    
    
    
    
    
    (442
    )
    
    
    
    
    
    
    (369
    )Exceptional items, remeasurements and 

stranded cost recoveries*
    
    
    4,7
    
    
    
    (28
    )
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    (166
    )Total taxation
    
    
    7
    
    
    
    
    
    
    
    (611
    )
    
    
    
    
    
    
    (441
    )
    
    
    
    
    
    
    (535
    )Profit from continuing operations after taxationBefore exceptional items, remeasurements 

and stranded cost recoveries*
    
    
    
    
    
    
    1,256
    
    
    
    
    
    
    
    1,044
    
    
    
    
    
    
    
    1,000Exceptional items, remeasurements and 

stranded cost recoveries*
    
    
    4
    
    
    
    325
    
    
    
    
    
    
    
    266
    
    
    
    
    
    
    
    183Profit for the year from continuing operations
    
    
    
    
    
    
    
    
    
    
    1,581
    
    
    
    
    
    
    
    1,310
    
    
    
    
    
    
    
    1,183Profit for the year from discontinued operationsBefore exceptional items and remeasurements
    
    
    8
    
    
    
    28
    
    
    
    
    
    
    
    104
    
    
    
    
    
    
    
    77Exceptional items and remeasurements
    
    
    8
    
    
    
    1,590
    
    
    
    
    
    
    
    (18
    )
    
    
    
    
    
    
    2,5908
    
    
    
    
    
    
    
    1,618
    
    
    
    
    
    
    
    86
    
    
    
    
    
    
    
    2,667Profit for the year
    
    
    
    
    
    
    
    
    
    
    3,199
    
    
    
    
    
    
    
    1,396
    
    
    
    
    
    
    
    3,850Attributable to:Equity shareholders of the parent
    
    
    
    
    
    
    
    
    
    
    3,196
    
    
    
    
    
    
    
    1,394
    
    
    
    
    
    
    
    3,848Minority interests
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    23,199
    
    
    
    
    
    
    
    1,396
    
    
    
    
    
    
    
    3,850Earnings per share from continuing operationsBasic
    
    
    10
    
    
    
    
    
    
    
    60.5p
    
    
    
    
    
    
    
    48.1p
    
    
    
    
    
    
    
    41.6pDiluted
    
    
    10
    
    
    
    
    
    
    
    60.1p
    
    
    
    
    
    
    
    47.8p
    
    
    
    
    
    
    
    41.4pEarnings per shareBasic
    
    
    10
    
    
    
    
    
    
    
    122.5p
    
    
    
    
    
    
    
    51.3p
    
    
    
    
    
    
    
    135.6pDiluted
    
    
    10
    
    
    
    
    
    
    
    121.8p
    
    
    
    
    
    
    
    50.9p
    
    
    
    
    
    
    
    135.0p




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##### Table of Contents



() Annual Report and Accounts 2007/08   123
  Consolidated balance sheet
 at 31 March
 2008
    
    
    2007Notes
    
    
    £m
    
    
    £mNon-current assetsGoodwill
    
    
    11
    
    
    
    3,838
    
    
    
    1,480Other intangible assets
    
    
    12
    
    
    
    272
    
    
    
    144Property, plant and equipment
    
    
    13
    
    
    
    24,333
    
    
    
    18,895Pension asset
    
    
    5
    
    
    
    846
    
    
    
    37Other non-current assets
    
    
    14
    
    
    
    255
    
    
    
    36Financial and other investments
    
    
    15
    
    
    
    251
    
    
    
    137Derivative financial assets
    
    
    17
    
    
    
    1,063
    
    
    
    380Total non-current assets
    
    
    
    
    
    
    30,858
    
    
    
    21,109Current assetsInventories and current intangible assets
    
    
    18
    
    
    
    455
    
    
    
    108Trade and other receivables
    
    
    19
    
    
    
    2,269
    
    
    
    1,236Financial and other investments
    
    
    15
    
    
    
    2,095
    
    
    
    2,098Derivative financial assets
    
    
    17
    
    
    
    463
    
    
    
    277Cash and cash equivalents
    
    
    20
    
    
    
    174
    
    
    
    1,593Total current assets
    
    
    
    
    
    
    5,456
    
    
    
    5,312Assets of businesses held for sale
    
    
    
    
    
    
    1,508
    
    
    
    1,968Total assets
    
    
    1(d
    )
    
    
    37,822
    
    
    
    28,389Current liabilitiesBorrowings
    
    
    21
    
    
    
    (3,882
    )
    
    
    (1,031
    )Derivative financial liabilities
    
    
    17
    
    
    
    (114
    )
    
    
    (235
    )Trade and other payables
    
    
    22
    
    
    
    (2,439
    )
    
    
    (1,852
    )Current tax liabilities
    
    
    
    
    
    
    (298
    )
    
    
    (75
    )Provisions
    
    
    24
    
    
    
    (389
    )
    
    
    (167
    )Total current liabilities
    
    
    
    
    
    
    (7,122
    )
    
    
    (3,360
    )Non-current liabilitiesBorrowings
    
    
    21
    
    
    
    (17,121
    )
    
    
    (14,686
    )Derivative financial liabilities
    
    
    17
    
    
    
    (319
    )
    
    
    (184
    )Other non-current liabilities
    
    
    23
    
    
    
    (1,721
    )
    
    
    (1,475
    )Deferred tax liabilities
    
    
    16
    
    
    
    (3,407
    )
    
    
    (2,389
    )Pensions and other post-retirement benefit obligations
    
    
    5
    
    
    
    (1,746
    )
    
    
    (1,282
    )Provisions
    
    
    24
    
    
    
    (943
    )
    
    
    (427
    )Total non-current liabilities
    
    
    
    
    
    
    (25,257
    )
    
    
    (20,443
    )Liabilities of businesses held for sale
    
    
    
    
    
    
    (63
    )
    
    
    (450
    )Total liabilities
    
    
    1(d
    )
    
    
    (32,442
    )
    
    
    (24,253
    )Net assets
    
    
    
    
    
    
    5,380
    
    
    
    4,136EquityCalled up share capital
    
    
    25
    
    
    
    294
    
    
    
    308Share premium account
    
    
    26
    
    
    
    1,371
    
    
    
    1,332Retained earnings
    
    
    26
    
    
    
    8,949
    
    
    
    7,635Other equity reserves
    
    
    26
    
    
    
    (5,252
    )
    
    
    (5,150
    )Shareholders equity
    
    
    
    
    
    
    5,362
    
    
    
    4,125Minority interests
    
    
    26
    
    
    
    18
    
    
    
    11Total equity
    
    
    
    
    
    
    5,380
    
    
    
    4,136
  Sir John Parker  Steve Lucas




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##### Table of Contents



124   Consolidated statement of recognised income and expense
    
    National Grid plc
  Consolidated statement of recognised income and expense
 for the years ended 31 March
 2008
    
    
    2007
    
    
    2006Notes
    
    
    £m
    
    
    £m
    
    
    £mExchange adjustments
    
    
    
    
    
    
    (25
    )
    
    
    (179
    )
    
    
    141Actuarial net gain
    
    
    5
    
    
    
    432
    
    
    
    365
    
    
    
    181Net (losses)/gains taken to equity in respect of cash flow hedges
    
    
    
    
    
    
    (32
    )
    
    
    47
    
    
    
    (12
    )Transferred to profit or loss on cash flow hedges
    
    
    
    
    
    
    (7
    )
    
    
    (45
    )
    
    
    (20
    )Net gains/(losses) taken to equity on available-for-sale investments
    
    
    
    
    
    
    6
    
    
    
    (3
    )
    
    
    4Transferred to profit or loss on sale of available-for-sale investments
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Tax on items taken directly to or transferred from equity
    
    
    7
    
    
    
    (94
    )
    
    
    (81
    )
    
    
    (43
    )Net income recognised directly in equity
    
    
    
    
    
    
    280
    
    
    
    103
    
    
    
    250Profit for the year
    
    
    
    
    
    
    3,199
    
    
    
    1,396
    
    
    
    3,850Total recognised income and expense for the year
    
    
    
    
    
    
    3,479
    
    
    
    1,499
    
    
    
    4,100Attributable to:Equity shareholders of the parent
    
    
    
    
    
    
    3,476
    
    
    
    1,498
    
    
    
    4,097Minority interests
    
    
    
    
    
    
    3
    
    
    
    1
    
    
    
    33,479
    
    
    
    1,499
    
    
    
    4,100




---



##### Table of Contents



() Annual Report and Accounts 2007/08   125
  Consolidated cash flow statement
 for the years ended 31 March
 2008
    
    
    2007
    
    
    2006Notes
    
    
    £m
    
    
    £m
    
    
    £mCash flows from operating activitiesTotal operating profit
    
    
    
    
    
    
    2,964
    
    
    
    2,513
    
    
    
    2,374Adjustments for:Exceptional items, remeasurements and stranded cost recoveries*
    
    
    
    
    
    
    (369
    )
    
    
    (482
    )
    
    
    (406
    )Depreciation and amortisation
    
    
    
    
    
    
    994
    
    
    
    871
    
    
    
    888Share-based payment charge
    
    
    
    
    
    
    18
    
    
    
    15
    
    
    
    14Changes in working capital
    
    
    
    
    
    
    (150
    )
    
    
    127
    
    
    
    (181
    )Changes in provisions
    
    
    
    
    
    
    (5
    )
    
    
    (31
    )
    
    
    7Changes in pensions and other post-retirement benefit obligations
    
    
    
    
    
    
    (333
    )
    
    
    (125
    )
    
    
    (40
    )Cash flows relating to exceptional items
    
    
    
    
    
    
    (132
    )
    
    
    (86
    )
    
    
    (115
    )Cash flows relating to stranded cost recoveries*
    
    
    
    
    
    
    278
    
    
    
    288
    
    
    
    432Cash flows generated from continuing operations
    
    
    
    
    
    
    3,265
    
    
    
    3,090
    
    
    
    2,973Cash flows relating to discontinued operations
    
    
    27(a
    )
    
    
    10
    
    
    
    181
    
    
    
    138Cash generated from operations
    
    
    
    
    
    
    3,275
    
    
    
    3,271
    
    
    
    3,111Tax paid
 continuing operations
    
    
    
    
    
    
    (110
    )
    
    
    (310
    )
    
    
    (103
    )Tax paid
 discontinued operations
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    (37
    )Net cash inflow from operating activities
    
    
    
    
    
    
    3,165
    
    
    
    2,958
    
    
    
    2,971Cash flows from investing activitiesAcquisition of subsidiaries, net of cash acquired
    
    
    28
    
    
    
    (3,502
    )
    
    
    (269
    )
    
    
    Acquisition of other investments
    
    
    
    
    
    
    (26
    )
    
    
    
    
    
    
    Sale of investments in subsidiaries and other investments
    
    
    
    
    
    
    55
    
    
    
    19
    
    
    
    8Purchases of intangible assets
    
    
    
    
    
    
    (45
    )
    
    
    (33
    )
    
    
    (15
    )Purchases of property, plant and equipment
    
    
    
    
    
    
    (2,832
    )
    
    
    (2,185
    )
    
    
    (1,657
    )Disposals of property, plant and equipment
    
    
    
    
    
    
    26
    
    
    
    21
    
    
    
    18Interest received*
    
    
    
    
    
    
    206
    
    
    
    216
    
    
    
    130Purchases of financial investments
    
    
    
    
    
    
    (8,788
    )
    
    
    (3,699
    )
    
    
    (2,870
    )Sales of financial investments
    
    
    
    
    
    
    8,833
    
    
    
    1,974
    
    
    
    2,895Dividends received from joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Cash flows used in continuing operations  investing activities*
    
    
    
    
    
    
    (6,073
    )
    
    
    (3,956
    )
    
    
    (1,489
    )Cash flows relating to discontinued operations  investing activities
    
    
    27(b
    )
    
    
    3,050
    
    
    
    (105
    )
    
    
    5,541Net cash flow (used in)/from investing activities*
    
    
    
    
    
    
    (3,023
    )
    
    
    (4,061
    )
    
    
    4,052Cash flows from financing activitiesProceeds from issue of share capital and sale of treasury shares
    
    
    
    
    
    
    23
    
    
    
    16
    
    
    
    54Proceeds from loans received
    
    
    
    
    
    
    1,568
    
    
    
    5,519
    
    
    
    1,026Repayment of loans
    
    
    
    
    
    
    (650
    )
    
    
    (2,311
    )
    
    
    (1,714
    )Net movements in short-term borrowings and derivatives
    
    
    
    
    
    
    671
    
    
    
    (163
    )
    
    
    (1,616
    )Interest paid
    
    
    
    
    
    
    (900
    )
    
    
    (813
    )
    
    
    (834
    )Exceptional finance costs on the repayment of debt
    
    
    
    
    
    
    
    
    
    
    (45
    )
    
    
    (49
    )Dividends paid to shareholders
    
    
    
    
    
    
    (780
    )
    
    
    (730
    )
    
    
    (745
    )Cash paid to shareholders under B share scheme
    
    
    
    
    
    
    (26
    )
    
    
    (26
    )
    
    
    (1,957
    )Repurchase of share capital and purchase of treasury shares
    
    
    
    
    
    
    (1,498
    )
    
    
    (169
    )
    
    
    (7
    )Net cash flow (used in)/from financing activities*
    
    
    
    
    
    
    (1,592
    )
    
    
    1,278
    
    
    
    (5,842
    )Net (decrease)/increase in cash and cash equivalents
    
    
    
    
    
    
    (1,450
    )
    
    
    175
    
    
    
    1,181Exchange movements
    
    
    
    
    
    
    4
    
    
    
    (14
    )
    
    
    14Cash included within assets of businesses held for sale
    
    
    
    
    
    
    23
    
    
    
    (23
    )
    
    
    Net cash and cash equivalents at start of year (i)
    
    
    
    
    
    
    1,587
    
    
    
    1,449
    
    
    
    254Net cash and cash equivalents at end of year (i)
    
    
    20
    
    
    
    164
    
    
    
    1,587
    
    
    
    1,449
 *
Comparatives have been adjusted to present items on a basis consistent with the current year
classification for stranded cost recoveries and interest received(i)
    
    Net of bank overdrafts of £10m (2007: £6m; 2006: £3m).




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##### Table of Contents



126   Notes to the consolidated financial statements
    
    National Grid plc
 Notes to the consolidated financial statements analysis of items in the primary statements
 1. Segmental analysis
  Transmission UK
    
    High-voltage electricity transmission networks, the gas transmission network in the UK,
the UK liquefied natural gas (LNG) storage activities and the French electricity interconnector.Transmission US
    
    High-voltage electricity transmission networks in New York and New England.Gas Distribution UK
    
    Four of the eight regional networks of Great Britains gas distribution system.Gas Distribution US
    
    Gas distribution in New York and New England.Electricity Distribution & Generation US
    
    Electricity distribution in New York and New England, and electricity generation in New York.
     (a) Revenue
 Sales
    
    
    Sales
    
    
    
    
    
    
    Sales
    
    
    Sales
    
    
    
    
    
    
    Sales
    
    
    SalesTotal
    
    
    between
    
    
    to third
    
    
    Total
    
    
    between
    
    
    to third
    
    
    Total
    
    
    between
    
    
    to thirdsales
    
    
    businesses
    
    
    parties
    
    
    sales
    
    
    businesses
    
    
    parties
    
    
    sales
    
    
    businesses
    
    
    parties2008
    
    
    2008
    
    
    2008
    
    
    2007
    
    
    2007
    
    
    2007
    
    
    2006
    
    
    2006
    
    
    2006£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mBusiness
segments  continuing operationsTransmission UK
    
    
    2,956
    
    
    
    16
    
    
    
    2,940
    
    
    
    2,816
    
    
    
    18
    
    
    
    2,798
    
    
    
    2,710
    
    
    
    15
    
    
    
    2,695Transmission US
    
    
    299
    
    
    
    61
    
    
    
    238
    
    
    
    270
    
    
    
    47
    
    
    
    223
    
    
    
    310
    
    
    
    48
    
    
    
    262Gas Distribution UK
    
    
    1,383
    
    
    
    70
    
    
    
    1,313
    
    
    
    1,193
    
    
    
    92
    
    
    
    1,101
    
    
    
    1,222
    
    
    
    86
    
    
    
    1,136Gas Distribution US
    
    
    2,845
    
    
    
    2
    
    
    
    2,843
    
    
    
    638
    
    
    
    
    
    
    
    638
    
    
    
    571
    
    
    
    
    
    
    
    571Electricity Distribution & Generation US*
    
    
    3,508
    
    
    
    2
    
    
    
    3,506
    
    
    
    3,430
    
    
    
    2
    
    
    
    3,428
    
    
    
    3,651
    
    
    
    2
    
    
    
    3,649Other activities
    
    
    642
    
    
    
    59
    
    
    
    583
    
    
    
    567
    
    
    
    60
    
    
    
    507
    
    
    
    701
    
    
    
    146
    
    
    
    55511,633
    
    
    
    210
    
    
    
    11,423
    
    
    
    8,914
    
    
    
    219
    
    
    
    8,695
    
    
    
    9,165
    
    
    
    297
    
    
    
    8,868Total excluding stranded
cost recoveries
    
    
    
    
    
    
    
    
    
    
    11,041
    
    
    
    
    
    
    
    
    
    
    
    8,269
    
    
    
    
    
    
    
    
    
    
    
    8,351Stranded cost recoveries
    
    
    
    
    
    
    
    
    
    
    382
    
    
    
    
    
    
    
    
    
    
    
    426
    
    
    
    
    
    
    
    
    
    
    
    51711,423
    
    
    
    
    
    
    
    
    
    
    
    8,695
    
    
    
    
    
    
    
    
    
    
    
    8,868Geographical segmentsUK
    
    
    
    
    
    
    
    
    
    
    4,787
    
    
    
    
    
    
    
    
    
    
    
    4,397
    
    
    
    
    
    
    
    
    
    
    
    4,374US
    
    
    
    
    
    
    
    
    
    
    6,636
    
    
    
    
    
    
    
    
    
    
    
    4,298
    
    
    
    
    
    
    
    
    
    
    
    4,49411,423
    
    
    
    
    
    
    
    
    
    
    
    8,695
    
    
    
    
    
    
    
    
    
    
    
    8,868




---



##### Table of Contents



() Annual Report and Accounts 2007/08   127
 1. Segmental analysis continued
 (a) Revenue continued
   (b) Operating profit
 Before exceptional items,
    
    After exceptional items,remeasurements and stranded
    
    remeasurements and stranded2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mBusiness segments  continuing operationsTransmission UK
    
    
    1,021
    
    
    
    946
    
    
    
    844
    
    
    
    1,013
    
    
    
    936
    
    
    
    843Transmission US
    
    
    128
    
    
    
    108
    
    
    
    127
    
    
    
    122
    
    
    
    107
    
    
    
    127Gas Distribution UK
    
    
    595
    
    
    
    409
    
    
    
    483
    
    
    
    574
    
    
    
    412
    
    
    
    432Gas Distribution US
    
    
    392
    
    
    
    71
    
    
    
    47
    
    
    
    487
    
    
    
    67
    
    
    
    47Electricity Distribution & Generation US*
    
    
    330
    
    
    
    364
    
    
    
    317
    
    
    
    696
    
    
    
    859
    
    
    
    757Other activities
    
    
    129
    
    
    
    133
    
    
    
    150
    
    
    
    72
    
    
    
    132
    
    
    
    1682,595
    
    
    
    2,031
    
    
    
    1,968
    
    
    
    2,964
    
    
    
    2,513
    
    
    
    2,374Geographical segmentsUK
    
    
    1,752
    
    
    
    1,491
    
    
    
    1,478
    
    
    
    1,667
    
    
    
    1,482
    
    
    
    1,423US
    
    
    843
    
    
    
    540
    
    
    
    490
    
    
    
    1,297
    
    
    
    1,031
    
    
    
    930Rest of the world
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    212,595
    
    
    
    2,031
    
    
    
    1,968
    
    
    
    2,964
    
    
    
    2,513
    
    
    
    2,374
   (c) Capital expenditure and depreciation
 Capital expenditure
    
    
    Depreciation and amortisation2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mBusiness segments  continuing operationsTransmission UK
    
    
    1,600
    
    
    
    1,235
    
    
    
    849
    
    
    
    372
    
    
    
    352
    
    
    
    377Transmission US
    
    
    111
    
    
    
    108
    
    
    
    91
    
    
    
    40
    
    
    
    41
    
    
    
    45Gas Distribution UK
    
    
    514
    
    
    
    490
    
    
    
    444
    
    
    
    181
    
    
    
    170
    
    
    
    161Gas Distribution US
    
    
    188
    
    
    
    36
    
    
    
    25
    
    
    
    91
    
    
    
    24
    
    
    
    19Electricity Distribution & Generation US
    
    
    257
    
    
    
    218
    
    
    
    219
    
    
    
    146
    
    
    
    127
    
    
    
    126Other activities
    
    
    383
    
    
    
    258
    
    
    
    279
    
    
    
    164
    
    
    
    157
    
    
    
    1603,053
    
    
    
    2,345
    
    
    
    1,907
    
    
    
    994
    
    
    
    871
    
    
    
    888Discontinued operations
    
    
    1
    
    
    
    30
    
    
    
    201
    
    
    
    
    
    
    
    72
    
    
    
    773,054
    
    
    
    2,375
    
    
    
    2,108
    
    
    
    994
    
    
    
    943
    
    
    
    965Geographical segmentsUK
    
    
    2,493
    
    
    
    2,007
    
    
    
    1,697
    
    
    
    709
    
    
    
    739
    
    
    
    771US
    
    
    560
    
    
    
    365
    
    
    
    340
    
    
    
    285
    
    
    
    196
    
    
    
    194Rest of the world
    
    
    1
    
    
    
    3
    
    
    
    71
    
    
    
    
    
    
    
    8
    
    
    
    3,054
    
    
    
    2,375
    
    
    
    2,108
    
    
    
    994
    
    
    
    943
    
    
    
    965




---



##### Table of Contents



128   
Notes to the consolidated financial statements continued
    
    National Grid plc
 1. Segmental analysis continued
 (d) Total assets and total liabilities
 Total assets
    
    
    Total liabilities2008
    
    
    2007
    
    
    2008
    
    
    2007£m
    
    
    £m
    
    
    £m
    
    
    £mBusiness segments  continuing operationsTransmission UK*
    
    
    10,076
    
    
    
    8,060
    
    
    
    (1,455
    )
    
    
    (1,434
    )Transmission US
    
    
    1,534
    
    
    
    1,481
    
    
    
    (38
    )
    
    
    (19
    )Gas Distribution UK
    
    
    5,765
    
    
    
    5,404
    
    
    
    (1,222
    )
    
    
    (1,192
    )Gas Distribution US
    
    
    7,031
    
    
    
    1,109
    
    
    
    (1,254
    )
    
    
    (231
    )Electricity Distribution & Generation US*
    
    
    5,525
    
    
    
    4,536
    
    
    
    (2,226
    )
    
    
    (1,697
    )Other activities*
    
    
    2,517
    
    
    
    1,478
    
    
    
    (1,023
    )
    
    
    (603
    )32,448
    
    
    
    22,068
    
    
    
    (7,218
    )
    
    
    (5,176
    )Discontinued operations
    
    
    1,508
    
    
    
    1,968
    
    
    
    (83
    )
    
    
    (477
    )33,956
    
    
    
    24,036
    
    
    
    (7,301
    )
    
    
    (5,653
    )Joint ventures  continuing operations
    
    
    71
    
    
    
    5
    
    
    
    
    
    
    
    Unallocated
    
    
    3,795
    
    
    
    4,348
    
    
    
    (25,141
    )
    
    
    (18,600
    )37,822
    
    
    
    28,389
    
    
    
    (32,442
    )
    
    
    (24,253
    )Geographical segmentsUK
    
    
    17,533
    
    
    
    16,405
    
    
    
    (3,365
    )
    
    
    (3,683
    )US
    
    
    16,494
    
    
    
    7,288
    
    
    
    (3,936
    )
    
    
    (1,966
    )Rest of the world
    
    
    
    
    
    
    348
    
    
    
    
    
    
    
    (4
    )Unallocated
    
    
    3,795
    
    
    
    4,348
    
    
    
    (25,141
    )
    
    
    (18,600
    )37,822
    
    
    
    28,389
    
    
    
    (32,442
    )
    
    
    (24,253
    )
   2. Other operating income
  3. Operating costs
 Before exceptional items,
    
    
    Exceptional items,remeasurements and stranded
    
    
    remeasurements and stranded
    
    
    Total2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mDepreciation of property, plant
and equipment
    
    
    940
    
    
    
    830
    
    
    
    844
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    940
    
    
    
    830
    
    
    
    844Amortisation of intangible assets
    
    
    50
    
    
    
    41
    
    
    
    44
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    54
    
    
    
    41
    
    
    
    44Payroll costs
    
    
    1,071
    
    
    
    794
    
    
    
    807
    
    
    
    108
    
    
    
    26
    
    
    
    47
    
    
    
    1,179
    
    
    
    820
    
    
    
    854Other operating charges:Purchases of electricity*
    
    
    1,589
    
    
    
    1,680
    
    
    
    1,906
    
    
    
    (236
    )
    
    
    (87
    )
    
    
    71
    
    
    
    1,353
    
    
    
    1,593
    
    
    
    1,977Purchases of gas
    
    
    2,011
    
    
    
    544
    
    
    
    566
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,011
    
    
    
    544
    
    
    
    566Rates and property taxes
    
    
    608
    
    
    
    472
    
    
    
    437
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    608
    
    
    
    472
    
    
    
    437Electricity transmission services
scheme direct costs
    
    
    574
    
    
    
    558
    
    
    
    536
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    574
    
    
    
    558
    
    
    
    536Payments to Scottish electricity
transmission network owners
    
    
    226
    
    
    
    237
    
    
    
    259
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    226
    
    
    
    237
    
    
    
    259Other*
    
    
    1,452
    
    
    
    1,165
    
    
    
    1,064
    
    
    
    137
    
    
    
    5
    
    
    
    (7
    )
    
    
    1,589
    
    
    
    1,170
    
    
    
    1,0578,521
    
    
    
    6,321
    
    
    
    6,463
    
    
    
    13
    
    
    
    (56
    )
    
    
    111
    
    
    
    8,534
    
    
    
    6,265
    
    
    
    6,574Operating costs include:Research expenditure
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    6
    
    
    
    7Operating lease rentalsPlant and machinery
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33
    
    
    
    21
    
    
    
    23Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    63
    
    
    
    53




---



##### Table of Contents



() 

Annual Report and Accounts 2007/08   129
 3. Operating costs continued
 (a) Payroll costs
 2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £mWages and salaries
    
    
    1,169
    
    
    
    819
    
    
    
    857Social security costs
    
    
    84
    
    
    
    65
    
    
    
    59Other pension costs
    
    
    218
    
    
    
    132
    
    
    
    140Share-based payments
    
    
    18
    
    
    
    15
    
    
    
    14Severance costs (excluding pension costs)
    
    
    14
    
    
    
    14
    
    
    
    231,503
    
    
    
    1,045
    
    
    
    1,093Less: payroll costs capitalised
    
    
    (324
    )
    
    
    (225
    )
    
    
    (239
    )1,179
    
    
    
    820
    
    
    
    854
  (b) Number of employees
 31 March
    
    
    Average
    
    
    Average
    
    
    Average2008
    
    
    2008
    
    
    2007
    
    
    2006Number
    
    
    Number
    
    
    Number
    
    
    NumberUK
    
    
    10,223
    
    
    
    10,093
    
    
    
    10,356
    
    
    
    10,722US
    
    
    17,145
    
    
    
    13,335
    
    
    
    8,618
    
    
    
    8,400Rest of the world
    
    
    5
    
    
    
    5
    
    
    
    8
    
    
    
    4Continuing operations
    
    
    27,373
    
    
    
    23,433
    
    
    
    18,982
    
    
    
    19,126Discontinued operations
    
    
    204
    
    
    
    119
    
    
    
    730
    
    
    
    1,40327,577
    
    
    
    23,552
    
    
    
    19,712
    
    
    
    20,529
  (c) Key management compensation
 2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £mSalaries and short-term employee benefits
    
    
    9
    
    
    
    8
    
    
    
    7Post-employment benefits
    
    
    8
    
    
    
    5
    
    
    
    5Termination benefits
    
    
    
    
    
    
    1
    
    
    
    Share-based payments
    
    
    3
    
    
    
    3
    
    
    
    220
    
    
    
    17
    
    
    
    14
  (d) Directors emoluments




---



##### Table of Contents



130   Notes to the consolidated financial statements continued
    
    National Grid plc
 3. Operating costs continued
 (e) Auditors remuneration
 2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £mAudit servicesAudit of parent company and consolidated financial statements
    
    
    1.4
    
    
    
    1.2
    
    
    
    1.4Other servicesAudit of subsidiary financial statements pursuant to legislation
    
    
    5.1
    
    
    
    2.8
    
    
    
    2.0Other services supplied pursuant to legislation
    
    
    1.8
    
    
    
    2.2
    
    
    
    0.8Services relating to tax compliance
    
    
    0.7
    
    
    
    0.6
    
    
    
    0.5Services relating to tax advisory
    
    
    0.5
    
    
    
    0.7
    
    
    
    0.9Services relating to corporate finance transactions
    
    
    0.7
    
    
    
    1.4
    
    
    
    0.4All other services
    
    
    0.4
    
    
    
    1.3
    
    
    
    0.8Fees paid by associated pension schemesAudit of pension schemes of the Company pursuant to legislation
    
    
    
    
    
    
    0.2
    
    
    
    0.110.6
    
    
    
    10.4
    
    
    
    6.9Total services pursuant to legislation
    
    
    8.3
    
    
    
    6.4
    
    
    
    4.3Total other services
    
    
    2.3
    
    
    
    4.0
    
    
    
    2.610.6
    
    
    
    10.4
    
    
    
    6.9




---



##### Table of Contents



() 

Annual Report and Accounts 2007/08   131
 4. Exceptional items, remeasurements and stranded cost recoveries
 2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £mExceptional items  restructuring costs (i)
    
    
    (133
    )
    
    
    (22
    )
    
    
    (55
    )Exceptional items  environmental related provisions (ii)
    
    
    (92
    )
    
    
    
    
    
    
    Exceptional items  gain on disposal of subsidiary (iii)
    
    
    6
    
    
    
    
    
    
    
    Exceptional items  profit on sale and reversal of impairment (iv)
    
    
    
    
    
    
    
    
    
    
    21Exceptional items  other (v)
    
    
    (23
    )
    
    
    
    
    
    
    Remeasurements  commodity contracts (vi)
    
    
    232
    
    
    
    81
    
    
    
    (49
    )Stranded cost recoveries (vii)*
    
    
    379
    
    
    
    423
    
    
    
    489Total exceptional items, remeasurements and stranded
cost recoveries included within operating profit*
    
    
    369
    
    
    
    482
    
    
    
    406Exceptional items  debt restructuring costs (viii)
    
    
    
    
    
    
    (45
    )
    
    
    (49
    )Remeasurements  commodity contracts (vi)
    
    
    (9
    )
    
    
    (19
    )
    
    
    (14
    )Remeasurements  net (losses)/gains on derivative financial instruments (ix)
    
    
    (7
    )
    
    
    (153
    )
    
    
    6Total exceptional items and remeasurements included within finance costs
    
    
    (16
    )
    
    
    (217
    )
    
    
    (57
    )Total exceptional items, remeasurements and stranded cost recoveries before taxation*
    
    
    353
    
    
    
    265
    
    
    
    349Exceptional tax item  deferred tax credit arising from reduction in UK tax rate (x)
    
    
    170
    
    
    
    
    
    
    
    Tax on exceptional items  restructuring costs (i)
    
    
    49
    
    
    
    12
    
    
    
    7Tax on exceptional items  environmental related provisions (ii)
    
    
    20
    
    
    
    
    
    
    
    Tax on exceptional items  gain on disposal of subsidiary (iii)
    
    
    (4
    )
    
    
    
    
    
    
    Tax on exceptional items  other (v)
    
    
    5
    
    
    
    
    
    
    
    Tax on remeasurements  commodity contracts (vi)
    
    
    (90
    )
    
    
    (25
    )
    
    
    25Tax on exceptional items  debt restructuring costs (viii)
    
    
    
    
    
    
    14
    
    
    
    15Tax on remeasurements  derivative financial instruments (ix)
    
    
    (28
    )
    
    
    169
    
    
    
    (17
    )Tax on stranded cost recoveries (vii)*
    
    
    (150
    )
    
    
    (169
    )
    
    
    (196
    )Tax on exceptional items, remeasurements and stranded cost recoveries*
    
    
    (28
    )
    
    
    1
    
    
    
    (166
    )Total exceptional items, remeasurements and stranded cost recoveries*
    
    
    325
    
    
    
    266
    
    
    
    183Total exceptional items after taxation
    
    
    (2
    )
    
    
    (41
    )
    
    
    (61
    )Total commodity contract remeasurements after taxation
    
    
    133
    
    
    
    37
    
    
    
    (38
    )Total derivative financial instrument remeasurements after taxation
    
    
    (35
    )
    
    
    16
    
    
    
    (11
    )Total stranded cost recoveries after taxation*
    
    
    229
    
    
    
    254
    
    
    
    293Total exceptional items, remeasurements and stranded cost recoveries after taxation*
    
    
    325
    
    
    
    266
    
    
    
    183
 *Comparatives have been adjusted to present items on a basis consistent with the current year
classification(i)
    Restructuring costs relate to planned cost reduction programmes in the UK and US (2007: UK and
US; 2006: UK only) businesses. For the year ended 31 March 2008, restructuring costs included
pension related costs of £83m arising as a result of redundancies (2007: £10m; 2006: £25m).(ii)
    The environmental charge for the year ended 31 March 2008 includes a charge of £44m resulting
from revised cost estimates in the UK and £48m in the US. Costs incurred with respect to US
environmental provisions are substantially recoverable from customers.(iii)
    The gain on disposal of subsidiary relates to the sale of Advantica.(iv)
    Gain on disposal of an investment in Energis Polska of £8m and reversal of a prior year
impairment of £13m related to National Grids investment in Copperbelt Energy Corporation (CEC).(v)
    A cost of £15m was incurred during the year ended 31 March 2008 relating to the potential
disposal of National Grids property business which we subsequently decided not to proceed with. In
addition, there was a £4m amortisation charge on acquisition-related intangibles and a £4m increase
in nuclear decommissioning provisions.(vi)
    Remeasurements  commodity contracts represent mark-to-market movements on certain commodity
contract obligations, primarily indexed-linked swap contracts, in the US. Under the existing rate
plans in the US, commodity costs are fully recovered from customers, although the pattern of
recovery may differ from the pattern of costs incurred. These movements are comprised of those
impacting operating profit which are based on the change in the commodity contract liability and
those impacting finance costs as a result of the time value of money.(vii)
    Stranded cost recoveries capture the recovery of some of our historical investments in
generating plants that were divested as part of the restructuring and wholesale power deregulation
process in New England and New York during the 1990s. These recoveries are no longer considered to
be part of our core business. Stranded cost recoveries on a pre-tax basis consist of revenue of
£382m (2007: £426m; 2006: £517m) and operating costs of £3m (2007: £3m; 2006: £28m).(viii)
    Debt restructuring costs in the year ended 31 March 2007 represent debt redemption costs
related to the restructuring of our debt portfolio. For 2006 these related to costs incurred on the
early redemption of debt following the disposal of four gas distribution networks (£39m), together
with issue costs associated with the B share scheme (£10m).(ix)
    Remeasurements  net (losses)/gains on derivative financial instruments comprise losses and
gains arising on derivative financial instruments reported in the income statement. These exclude
gains and losses for which hedge accounting has been effective, which have been recognised directly
in equity or offset by adjustments to the carrying value of debt. These remeasurements include a
loss of £3m (2007: £126m; 2006: £nil) relating to pre-tax losses on investment related derivative
financial instruments that offset on a post-tax basis. The tax charge in the year ended 31 March
2008 includes an £11m adjustment in respect of prior years (2007: £56m credit; 2006: £nil).(x)
    The exceptional tax credit in the period of £170m arose from a reduction in the UK corporation
tax rate from 30% to 28% included in the Finance Act 2007. This resulted in a reduction in deferred
tax liabilities.




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##### Table of Contents



132   Notes to the consolidated financial statements continued
    
    National Grid plc
 5. Pensions and other post-retirement benefits
    Pensions
    
    
    US other post-retirement benefits2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mDefined contribution scheme costs
    
    
    5
    
    
    
    3
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Defined benefit scheme costsCurrent service cost
    
    
    125
    
    
    
    113
    
    
    
    112
    
    
    
    21
    
    
    
    15
    
    
    
    16Past service cost
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    7
    
    
    
    6Curtailment gain on redundancies
    
    
    (16
    )
    
    
    (10
    )
    
    
    (24
    )
    
    
    (4
    )
    
    
    
    
    
    
    Settlements on redundancies
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Special termination benefits on redundancies
    
    
    80
    
    
    
    23
    
    
    
    45
    
    
    
    1
    
    
    
    
    
    
    
    Curtailment cost  augmentations
    
    
    3
    
    
    
    3
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    Total in payroll costs  continuing
    
    
    218
    
    
    
    132
    
    
    
    140
    
    
    
    23
    
    
    
    22
    
    
    
    22Curtailment gain on sale of subsidiary undertaking
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest cost
    
    
    912
    
    
    
    806
    
    
    
    826
    
    
    
    89
    
    
    
    63
    
    
    
    63Expected return on plan assets
    
    
    (1,014
    )
    
    
    (885
    )
    
    
    (860
    )
    
    
    (50
    )
    
    
    (41
    )
    
    
    (41
    )Total in finance costs  continuing
    
    
    (102
    )
    
    
    (79
    )
    
    
    (34
    )
    
    
    39
    
    
    
    22
    
    
    
    22Current service costs
    
    
    2
    
    
    
    2
    
    
    
    7
    
    
    
    1
    
    
    
    
    
    
    
    Interest cost
    
    
    
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Expected return on plan assets
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    Curtailment/settlement gain on sale of distribution networks
    
    
    
    
    
    
    
    
    
    
    (168
    )
    
    
    
    
    
    
    
    
    
    
    Total in discontinued operations
    
    
    2
    
    
    
    2
    
    
    
    (161
    )
    
    
    1
    
    
    
    
    
    
    
    
  Pensions
    
    
    US other post-retirement benefits2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mActuarial net gain/(loss) during the year
    
    
    497
    
    
    
    357
    
    
    
    197
    
    
    
    (65
    )
    
    
    8
    
    
    
    (16
    )Exchange differences
    
    
    3
    
    
    
    40
    
    
    
    (30
    )
    
    
    3
    
    
    
    75
    
    
    
    (51
    )Total recognised for the year
    
    
    500
    
    
    
    397
    
    
    
    167
    
    
    
    (62
    )
    
    
    83
    
    
    
    (67
    )Cumulative actuarial gain/(loss)
    
    
    1,322
    
    
    
    825
    
    
    
    468
    
    
    
    (91
    )
    
    
    (26
    )
    
    
    (34
    )




---



##### Table of Contents



() Annual Report and Accounts 2007/08   133
 5. Pensions and other post-retirement benefits continued
  Pensions
    
    
    US other post-retirement benefits2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mPresent value of funded obligations
    
    
    (16,233
    )
    
    
    (16,044
    )
    
    
    (16,520
    )
    
    
    (1,784
    )
    
    
    (1,126
    )
    
    
    (1,223
    )Fair value of plan assets
    
    
    16,536
    
    
    
    15,468
    
    
    
    15,341
    
    
    
    737
    
    
    
    531
    
    
    
    568303
    
    
    
    (576
    )
    
    
    (1,179
    )
    
    
    (1,047
    )
    
    
    (595
    )
    
    
    (655
    )Present value of unfunded obligations
    
    
    (158
    )
    
    
    (83
    )
    
    
    (96
    )
    
    
    
    
    
    
    
    
    
    
    Other post-employment liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34
    )
    
    
    (33
    )
    
    
    (34
    )Unrecognised past service cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    42
    
    
    
    49Net asset/(liability) in the balance sheet
    
    
    145
    
    
    
    (659
    )
    
    
    (1,275
    )
    
    
    (1,045
    )
    
    
    (586
    )
    
    
    (640
    )Liabilities
    
    
    (701
    )
    
    
    (696
    )
    
    
    (1,275
    )
    
    
    (1,045
    )
    
    
    (586
    )
    
    
    (640
    )Assets
    
    
    846
    
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net asset/(liability)
    
    
    145
    
    
    
    (659
    )
    
    
    (1,275
    )
    
    
    (1,045
    )
    
    
    (586
    )
    
    
    (640
    )Changes in the present value of the defined
benefit obligationOpening defined benefit obligation (including unfunded obligations)
    
    
    (16,127
    )
    
    
    (16,616
    )
    
    
    (15,769
    )
    
    
    (1,126
    )
    
    
    (1,223
    )
    
    
    (1,068
    )Current service cost
    
    
    (127
    )
    
    
    (115
    )
    
    
    (119
    )
    
    
    (22
    )
    
    
    (15
    )
    
    
    (16
    )Interest cost
    
    
    (912
    )
    
    
    (808
    )
    
    
    (828
    )
    
    
    (89
    )
    
    
    (63
    )
    
    
    (63
    )Actuarial gains/(losses)
    
    
    1,335
    
    
    
    450
    
    
    
    (1,300
    )
    
    
    8
    
    
    
    (4
    )
    
    
    (40
    )Curtailment gain on redundancies
    
    
    16
    
    
    
    10
    
    
    
    24
    
    
    
    4
    
    
    
    
    
    
    
    Curtailment gain on sale of subsidiary undertaking
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Curtailment gain/settlement on sale of distribution networks
    
    
    
    
    
    
    
    
    
    
    757
    
    
    
    
    
    
    
    
    
    
    
    Net transfers and disposals
    
    
    8
    
    
    
    (1
    )
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    Gains on settlements
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    Special termination benefits
    
    
    (80
    )
    
    
    (23
    )
    
    
    (45
    )
    
    
    (1
    )
    
    
    
    
    
    
    Curtailment cost  augmentations
    
    
    (3
    )
    
    
    (3
    )
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    Acquisition of subsidiary undertakings
    
    
    (1,362
    )
    
    
    (89
    )
    
    
    
    
    
    
    (639
    )
    
    
    (19
    )
    
    
    Plan amendments
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    Employee contributions
    
    
    (15
    )
    
    
    (14
    )
    
    
    (14
    )
    
    
    
    
    
    
    
    
    
    
    Benefits paid (including unfunded obligations)
    
    
    875
    
    
    
    845
    
    
    
    775
    
    
    
    78
    
    
    
    62
    
    
    
    59Transferred to liabilities of businesses held for sale
    
    
    
    
    
    
    48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exchange adjustments
    
    
    (6
    )
    
    
    189
    
    
    
    (127
    )
    
    
    3
    
    
    
    142
    
    
    
    (95
    )Closing defined benefit obligation (including unfunded obligations)
    
    
    (16,391
    )
    
    
    (16,127
    )
    
    
    (16,616
    )
    
    
    (1,784
    )
    
    
    (1,126
    )
    
    
    (1,223
    )Changes in the fair value of plan assetsOpening fair value of plan assets
    
    
    15,468
    
    
    
    15,341
    
    
    
    14,077
    
    
    
    531
    
    
    
    568
    
    
    
    488Expected return on plan assets
    
    
    1,014
    
    
    
    887
    
    
    
    862
    
    
    
    50
    
    
    
    41
    
    
    
    41Actuarial (losses)/gains
    
    
    (838
    )
    
    
    (93
    )
    
    
    1,497
    
    
    
    (73
    )
    
    
    12
    
    
    
    24Assets distributed on settlements and transfers
    
    
    (16
    )
    
    
    
    
    
    
    (623
    )
    
    
    
    
    
    
    
    
    
    
    Transfers (out)/in
    
    
    (8
    )
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Employer contributions
    
    
    465
    
    
    
    276
    
    
    
    191
    
    
    
    46
    
    
    
    28
    
    
    
    30Employee contributions
    
    
    15
    
    
    
    14
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    Acquisition of subsidiary undertakings
    
    
    1,302
    
    
    
    82
    
    
    
    
    
    
    
    259
    
    
    
    7
    
    
    
    Benefits paid
    
    
    (875
    )
    
    
    (845
    )
    
    
    (774
    )
    
    
    (76
    )
    
    
    (58
    )
    
    
    (59
    )Transferred to liabilities of businesses held for sale
    
    
    
    
    
    
    (46
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exchange adjustments
    
    
    9
    
    
    
    (149
    )
    
    
    97
    
    
    
    
    
    
    
    (67
    )
    
    
    44Closing fair value of plan assets
    
    
    16,536
    
    
    
    15,468
    
    
    
    15,341
    
    
    
    737
    
    
    
    531
    
    
    
    568Actual return on plan assets
    
    
    176
    
    
    
    794
    
    
    
    2,359
    
    
    
    (23
    )
    
    
    53
    
    
    
    65Expected contributions to defined benefit plans
in the following year
    
    
    581
    
    
    
    307
    
    
    
    153
    
    
    
    128
    
    
    
    27
    
    
    
    50




---



##### Table of Contents



134   Notes to the consolidated financial statements continued
    
    National Grid plc
 6. Finance income and costs
 2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £mInterest income and similar incomeExpected return on pension and other post-retirement benefit plan assets
    
    
    1,064
    
    
    
    926
    
    
    
    901Interest income on financial instrumentsInterest income from bank deposits and other financial assets
    
    
    209
    
    
    
    214
    
    
    
    130Interest receivable on finance leases
    
    
    2
    
    
    
    3
    
    
    
    4Gains transferred from equity on disposal of available-for-sale investments
    
    
    
    
    
    
    1
    
    
    
    11,275
    
    
    
    1,144
    
    
    
    1,036Interest expense and other financial costsBefore exceptional items and remeasurements
    
    
    (2,035
    )
    
    
    (1,691
    )
    
    
    (1,638
    )Exceptional items and remeasurements
    
    
    (16
    )
    
    
    (217
    )
    
    
    (57
    )(2,051
    )
    
    
    (1,908
    )
    
    
    (1,695
    )Net finance costs
    
    
    (776
    )
    
    
    (764
    )
    
    
    (659
    )Interest expense and other finance costs comprise of the following:Interest on pension and other post-retirement benefit plan obligations
    
    
    (1,001
    )
    
    
    (869
    )
    
    
    (889
    )Interest expense on financial liabilities held at amortised cost:Interest on bank loans and overdrafts
    
    
    (71
    )
    
    
    (48
    )
    
    
    (33
    )Interest on other borrowings
    
    
    (984
    )
    
    
    (768
    )
    
    
    (708
    )Interest on finance leases
    
    
    (11
    )
    
    
    (1
    )
    
    
    (1
    )Exceptional debt redemption costs
    
    
    
    
    
    
    (45
    )
    
    
    (39
    )Exceptional B share issue costs
    
    
    
    
    
    
    
    
    
    
    (10
    )Interest on derivatives
    
    
    (46
    )
    
    
    (54
    )
    
    
    (49
    )Unwinding of discounts on provisions
    
    
    (41
    )
    
    
    (21
    )
    
    
    (18
    )Less: interest capitalised (i)
    
    
    119
    
    
    
    70
    
    
    
    60Interest expense
    
    
    (2,035
    )
    
    
    (1,736
    )
    
    
    (1,687
    )Net gains/(losses) on derivative financial instruments included in remeasurements:Ineffectiveness on derivatives designated as fair value hedges (ii)
    
    
    1
    
    
    
    18
    
    
    
    (10
    )Ineffectiveness on derivatives designated as cash flow hedges
    
    
    13
    
    
    
    
    
    
    
    17Ineffectiveness on derivatives designated as net investment hedges
    
    
    14
    
    
    
    25
    
    
    
    (25
    )On undesignated forward rate risk relating to derivatives designated as net investment hedges
    
    
    (53
    )
    
    
    (82
    )
    
    
    36On derivatives not designated as hedges or ineligible for hedge accounting (iii)
    
    
    18
    
    
    
    (114
    )
    
    
    (12
    )Financial element of remeasurements on commodity contracts
    
    
    (9
    )
    
    
    (19
    )
    
    
    (14
    )Net losses on derivative financial instruments included in remeasurements (iv)
    
    
    (16
    )
    
    
    (172
    )
    
    
    (8
    )Interest expense and other finance costs
    
    
    (2,051
    )
    
    
    (1,908
    )
    
    
    (1,695
    )
 (i)
    
    Interest on funding attributable to assets in the course of construction was capitalised during the year at a rate of 6.3% (2007: 5.6%; 2006: 5.5%).(ii)
    
    Includes a net gain on instruments designated as fair value hedges of £87m (2007: £100m loss; 2006: £11m loss) less a net loss of £86m (2007: £118m gain; 2006: £1m gain)
arising from fair value adjustments to the carrying value of debt.(iii)
    
    Includes a loss of £3m (2007: £126m; 2006: £nil) relating to pre-tax losses on investment-related derivative financial instruments which offset on a post-tax basis.(iv)
    
    Includes a net foreign exchange loss on financing activities of £885m (2007: £122m gain; 2006: £273m loss). These amounts are offset by foreign exchange gains and losses
on derivative financial instruments measured at fair value.




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##### Table of Contents



() Annual Report and Accounts 2007/08   135
  7. TaxationTaxation on items charged/(credited) to the income statement
 2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £mTaxation before exceptional items, remeasurements and stranded cost recoveries*
    
    
    583
    
    
    
    442
    
    
    
    369Exceptional tax item  deferred tax credit arising from the reduction in UK tax rate
    
    
    (170
    )
    
    
    
    
    
    
    Taxation on other exceptional items, remeasurements and stranded cost recoveries*
    
    
    198
    
    
    
    (1
    )
    
    
    166Taxation on total exceptional items, remeasurements and stranded cost recoveries (note 4)*
    
    
    28
    
    
    
    (1
    )
    
    
    166Total tax charge
    
    
    611
    
    
    
    441
    
    
    
    535
 Taxation as a percentage of profit before taxation
 2008
    
    
    2007
    
    
    2006%
    
    
    %
    
    
    %Before exceptional items, remeasurements and stranded cost recoveries*
    
    
    31.7
    
    
    
    29.7
    
    
    
    27.0After exceptional items, remeasurements and stranded cost recoveries
    
    
    27.9
    
    
    
    25.2
    
    
    
    31.1
  2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £mUnited KingdomCorporation tax at 30% (2007: 30%; 2006: 30%)
    
    
    214
    
    
    
    66
    
    
    
    269Corporation tax adjustment in respect of prior years (i)
    
    
    (156
    )
    
    
    (28
    )
    
    
    (8
    )Deferred tax
    
    
    42
    
    
    
    168
    
    
    
    6Deferred tax adjustment in respect of prior years (ii)
    
    
    67
    
    
    
    9
    
    
    
    (6
    )167
    
    
    
    215
    
    
    
    261OverseasCorporate tax
    
    
    213
    
    
    
    109
    
    
    
    122Corporate tax adjustment in respect of prior years
    
    
    31
    
    
    
    (149
    )
    
    
    23Deferred tax
    
    
    191
    
    
    
    207
    
    
    
    158Deferred tax adjustment in respect of prior years
    
    
    9
    
    
    
    59
    
    
    
    (29
    )444
    
    
    
    226
    
    
    
    274Total tax charge
    
    
    611
    
    
    
    441
    
    
    
    535
  (i)
    
    The UK corporation tax adjustment in respect of prior years includes a £9m charge (2007: £51m
credit; 2006: £nil) that relates to exceptional items, remeasurements and stranded cost recoveries.(ii)
    
    The UK deferred tax adjustment in respect of prior years includes a £2m charge (2007: £5m
credit; 2006: £nil) that relates to exceptional items, remeasurements and stranded cost recoveries.
 Taxation on items charged/(credited) to equity
 2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £mCorporate tax credit on share-based payments
    
    
    (7
    )
    
    
    (2
    )
    
    
    Deferred tax (credit)/charge on available-for-sale investments
    
    
    (2
    )
    
    
    1
    
    
    
    1Deferred tax (credit)/charge on revaluation of cash flow hedges
    
    
    (2
    )
    
    
    10
    
    
    
    (20
    )Deferred tax charge/(credit) on share-based payments
    
    
    12
    
    
    
    (11
    )
    
    
    (7
    )Deferred tax charge on actuarial gains
    
    
    98
    
    
    
    70
    
    
    
    6299
    
    
    
    68
    
    
    
    36Total tax charge recognised in consolidated statement of recognised income and expense
    
    
    94
    
    
    
    81
    
    
    
    43Total tax charge/(credit) relating to share-based payments recognised directly in equity (note 26)
    
    
    5
    
    
    
    (13
    )
    
    
    (7
    )99
    
    
    
    68
    
    
    
    36




---



##### Table of Contents



136   Notes to the consolidated financial statements continued
    
    National Grid plc
   7. Taxation continued
 Before
    
    
    After
    
    
    Before
    
    
    After
    
    
    Before
    
    
    Afterexceptional
    
    
    exceptional
    
    
    exceptional
    
    
    exceptional
    
    
    exceptional
    
    
    exceptionalitems,
    
    
    items,
    
    
    items,
    
    
    items,
    
    
    items,
    
    
    items,remeasurements
    
    
    remeasurements
    
    
    remeasurements
    
    
    remeasurements
    
    
    remeasurements
    
    
    remeasurementsand stranded
    
    
    and stranded
    
    
    and stranded
    
    
    and stranded
    
    
    and stranded
    
    
    and strandedcost recoveries
    
    
    cost recoveries
    
    
    cost recoveries
    
    
    cost recoveries
    
    
    cost recoveries
    
    
    cost recoveries2008
    
    
    2008
    
    
    2007
    
    
    2007
    
    
    2006
    
    
    2006£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mProfit before taxationBefore exceptional items, remeasurements
and stranded cost recoveries*
    
    
    1,839
    
    
    
    1,839
    
    
    
    1,486
    
    
    
    1,486
    
    
    
    1,369
    
    
    
    1,369Exceptional items, remeasurements and
stranded cost recoveries*
    
    
    
    
    
    
    353
    
    
    
    
    
    
    
    265
    
    
    
    
    
    
    
    349Profit before taxation from continuing operations
    
    
    1,839
    
    
    
    2,192
    
    
    
    1,486
    
    
    
    1,751
    
    
    
    1,369
    
    
    
    1,718Profit on continuing operations multiplied
by rate of corporation tax in the UK of 30%
(2007: 30%; 2006: 30%)
    
    
    552
    
    
    
    658
    
    
    
    446
    
    
    
    525
    
    
    
    410
    
    
    
    515Effects of:Adjustments in respect of previous years
    
    
    (60
    )
    
    
    (49
    )
    
    
    (53
    )
    
    
    (109
    )
    
    
    (16
    )
    
    
    (12
    )Expenses not deductible for tax purposes
    
    
    102
    
    
    
    117
    
    
    
    44
    
    
    
    111
    
    
    
    84
    
    
    
    108Non-taxable income
    
    
    (75
    )
    
    
    (51
    )
    
    
    (61
    )
    
    
    (154
    )
    
    
    (178
    )
    
    
    (180
    )Adjustment in respect of foreign tax rates*
    
    
    26
    
    
    
    68
    
    
    
    22
    
    
    
    70
    
    
    
    19
    
    
    
    58Impact of share-based payments
    
    
    2
    
    
    
    2
    
    
    
    9
    
    
    
    9
    
    
    
    (5
    )
    
    
    (5
    )Remeasurement of deferred tax
 change in UK tax rate
    
    
    
    
    
    
    (170
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    36
    
    
    
    36
    
    
    
    35
    
    
    
    (11
    )
    
    
    55
    
    
    
    51Total taxation from continuing operations
    
    
    583
    
    
    
    611
    
    
    
    442
    
    
    
    441
    
    
    
    369
    
    
    
    535%
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %Effective income tax rate
    
    
    31.7
    
    
    
    27.9
    
    
    
    29.7
    
    
    
    25.2
    
    
    
    27.0
    
    
    
    31.1
 *Comparatives have been adjusted to present items on a basis consistent with the current year
classification
 Factors that may affect future tax charges




---



##### Table of Contents



() Annual Report and Accounts 2007/08   137
  8. Discontinued operations
  Results of discontinued operations
 2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £mRevenue
    
    
    201
    
    
    
    383
    
    
    
    493Operating costs
    
    
    (166
    )
    
    
    (321
    )
    
    
    (382
    )Operating profit before exceptional items, remeasurements and stranded cost recoveries
    
    
    35
    
    
    
    117
    
    
    
    131Exceptional items (i)
    
    
    
    
    
    
    (55
    )
    
    
    (20
    )Total operating profit from discontinued operations
    
    
    35
    
    
    
    62
    
    
    
    111Net finance costs before remeasurement finance income
    
    
    
    
    
    
    (2
    )
    
    
    (4
    )Remeasurement finance income (ii)
    
    
    8
    
    
    
    37
    
    
    
    Profit before tax from discontinued operations
    
    
    43
    
    
    
    97
    
    
    
    107Taxation
    
    
    (7
    )
    
    
    (11
    )
    
    
    (45
    )Profit after tax from discontinued operations
    
    
    36
    
    
    
    86
    
    
    
    62Gain on disposal of wireless operations
    
    
    1,506
    
    
    
    
    
    
    
    Gain on disposal of Basslink electricity interconnector
    
    
    80
    
    
    
    
    
    
    
    Gain on disposal of gas distribution networks
    
    
    
    
    
    
    
    
    
    
    2,636Gain on disposal of discontinued operations before tax
    
    
    1,586
    
    
    
    
    
    
    
    2,636Taxation
    
    
    (4
    )
    
    
    
    
    
    
    (31
    )Gain on disposal of discontinued operations
    
    
    1,582
    
    
    
    
    
    
    
    2,605Total profit for the year from discontinued operationsBefore exceptional items, remeasurements and stranded cost recoveries
    
    
    28
    
    
    
    104
    
    
    
    77Exceptional items, remeasurements and stranded cost recoveries
    
    
    1,590
    
    
    
    (18
    )
    
    
    2,5901,618
    
    
    
    86
    
    
    
    2,667
 (i)
    The exceptional item for the year ended 31 March 2007 reflects an impairment of goodwill
within the US wireless infrastructure operations. Exceptional items for the year ended 31 March
2006 related to a fine (£15m) incurred in respect of a breach of health and safety laws in 1999 and
to restructuring costs (£5m).(ii)
    Remeasurement finance income for the year ended 31 March 2008 comprised £8m of mark-to-market
gains on financial instruments (2007: £13m) and for the year ended 31 March 2007 an additional £24m
relating to the recognition of gains on the termination of a hedging arrangement.
 9. Dividends
 2008
    
    
    
    
    
    
    2007
    
    
    
    
    
    
    2006pence
    
    
    
    
    
    
    pence
    
    
    
    
    
    
    pence(per ordinary
    
    
    2008
    
    
    (per ordinary
    
    
    2007
    
    
    (per ordinary
    
    
    2006share)
    
    
    £m
    
    
    share)
    
    
    £m
    
    
    share)
    
    
    £mOrdinary dividendsInterim dividend for the year ended 31 March 2008
    
    
    11.7
    
    
    
    300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Final dividend for the year ended 31 March 2007
    
    
    17.8
    
    
    
    480
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interim dividend for the year ended 31 March 2007
    
    
    
    
    
    
    
    
    
    
    10.9
    
    
    
    297
    
    
    
    
    
    
    
    Final dividend for the year ended 31 March 2006
    
    
    
    
    
    
    
    
    
    
    15.9
    
    
    
    433
    
    
    
    
    
    
    
    Interim dividend for the year ended 31 March 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.2
    
    
    
    276Final dividend for the year ended 31 March 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.2
    
    
    
    46929.5
    
    
    
    780
    
    
    
    26.8
    
    
    
    730
    
    
    
    25.4
    
    
    
    745




---



##### Table of Contents



138   
Notes to the consolidated financial statements continued
    
    National Grid plc
 10. Earnings per share
    (a) Basic earnings per share
 Earnings
    
    
    
    
    
    
    Earnings
    
    
    
    
    
    
    EarningsEarnings
    
    
    per share
    
    
    Earnings
    
    
    per share
    
    
    Earnings
    
    
    per share2008
    
    
    2008
    
    
    2007
    
    
    2007
    
    
    2006
    
    
    2006£m
    
    
    pence
    
    
    £m
    
    
    pence
    
    
    £m
    
    
    penceAdjusted earnings  continuing operations*
    
    
    1,253
    
    
    
    48.0
    
    
    
    1,042
    
    
    
    38.3
    
    
    
    998
    
    
    
    35.2Exceptional items after taxation
    
    
    (2
    )
    
    
    (0.1
    )
    
    
    (41
    )
    
    
    (1.5
    )
    
    
    (61
    )
    
    
    (2.2
    )Commodity contract remeasurements after taxation
    
    
    133
    
    
    
    5.1
    
    
    
    37
    
    
    
    1.3
    
    
    
    (38
    )
    
    
    (1.3
    )Derivative financial instruments remeasurements after taxation
    
    
    (35
    )
    
    
    (1.3
    )
    
    
    16
    
    
    
    0.6
    
    
    
    (11
    )
    
    
    (0.4
    )Stranded cost recoveries after taxation*
    
    
    229
    
    
    
    8.8
    
    
    
    254
    
    
    
    9.4
    
    
    
    293
    
    
    
    10.3Earnings  continuing operations
    
    
    1,578
    
    
    
    60.5
    
    
    
    1,308
    
    
    
    48.1
    
    
    
    1,181
    
    
    
    41.6Adjusted earnings  discontinued operations
    
    
    28
    
    
    
    1.1
    
    
    
    104
    
    
    
    3.8
    
    
    
    77
    
    
    
    2.7Gain on disposal of operations after taxation
    
    
    1,582
    
    
    
    60.6
    
    
    
    
    
    
    
    
    
    
    
    2,605
    
    
    
    91.8Other exceptional items and remeasurements
    
    
    8
    
    
    
    0.3
    
    
    
    (18
    )
    
    
    (0.6
    )
    
    
    (15
    )
    
    
    (0.5
    )Earnings  discontinued operations
    
    
    1,618
    
    
    
    62.0
    
    
    
    86
    
    
    
    3.2
    
    
    
    2,667
    
    
    
    94.0Earnings
    
    
    3,196
    
    
    
    122.5
    
    
    
    1,394
    
    
    
    51.3
    
    
    
    3,848
    
    
    
    135.62008
    
    
    
    
    
    
    
    2007
    
    
    
    
    
    
    
    2006millions
    
    
    
    
    
    
    millions
    
    
    
    
    
    
    millionsWeighted average number of shares  basic
    
    
    
    
    
    
    2,609
    
    
    
    
    
    
    
    2,719
    
    
    
    
    
    
    
    2,837
  (b) Diluted earnings per share
 Earnings
    
    
    
    
    
    
    Earnings
    
    
    
    
    
    
    EarningsEarnings
    
    
    per share
    
    
    Earnings
    
    
    per share
    
    
    Earnings
    
    
    per share2008
    
    
    2008
    
    
    2007
    
    
    2007
    
    
    2006
    
    
    2006£m
    
    
    pence
    
    
    £m
    
    
    pence
    
    
    £m
    
    
    penceAdjusted diluted earnings  continuing operations*
    
    
    1,253
    
    
    
    47.8
    
    
    
    1,042
    
    
    
    38.1
    
    
    
    998
    
    
    
    35.0Exceptional items after taxation
    
    
    (2
    )
    
    
    (0.1
    )
    
    
    (41
    )
    
    
    (1.5
    )
    
    
    (61
    )
    
    
    (2.2
    )Commodity contract remeasurements after taxation
    
    
    133
    
    
    
    5.0
    
    
    
    37
    
    
    
    1.3
    
    
    
    (38
    )
    
    
    (1.3
    )Derivative financial instruments remeasurements after taxation
    
    
    (35
    )
    
    
    (1.3
    )
    
    
    16
    
    
    
    0.6
    
    
    
    (11
    )
    
    
    (0.4
    )Stranded cost recoveries after taxation*
    
    
    229
    
    
    
    8.7
    
    
    
    254
    
    
    
    9.3
    
    
    
    293
    
    
    
    10.3Diluted earnings  continuing operations
    
    
    1,578
    
    
    
    60.1
    
    
    
    1,308
    
    
    
    47.8
    
    
    
    1,181
    
    
    
    41.4Adjusted diluted earnings  discontinued operations
    
    
    28
    
    
    
    1.1
    
    
    
    104
    
    
    
    3.8
    
    
    
    77
    
    
    
    2.7Gain on disposal of operations after taxation
    
    
    1,582
    
    
    
    60.3
    
    
    
    
    
    
    
    
    
    
    
    2,605
    
    
    
    91.4Other exceptional items and remeasurements
    
    
    8
    
    
    
    0.3
    
    
    
    (18
    )
    
    
    (0.7
    )
    
    
    (15
    )
    
    
    (0.5
    )Diluted earnings  discontinued operations
    
    
    1,618
    
    
    
    61.7
    
    
    
    86
    
    
    
    3.1
    
    
    
    2,667
    
    
    
    93.6Diluted earnings
    
    
    3,196
    
    
    
    121.8
    
    
    
    1,394
    
    
    
    50.9
    
    
    
    3,848
    
    
    
    135.02008
    
    
    
    
    
    
    
    2007
    
    
    
    
    
    
    
    2006millions
    
    
    
    
    
    
    millions
    
    
    
    
    
    
    millionsWeighted average number of shares  diluted
    
    
    
    
    
    
    2,624
    
    
    
    
    
    
    
    2,737
    
    
    
    
    
    
    
    2,851*Comparatives have been adjusted to present items on a basis consistent with the current year
classification(c) Reconciliation of basic to diluted average number of shares2008
    
    
    
    
    
    
    
    2007
    
    
    
    
    
    
    
    2006millions
    
    
    
    
    
    
    millions
    
    
    
    
    
    
    millionsWeighted average number of ordinary shares  basic
    
    
    
    
    
    
    2,609
    
    
    
    
    
    
    
    2,719
    
    
    
    
    
    
    
    2,837Effect of dilutive potential ordinary shares  employee share plan
    
    
    
    
    
    15
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    14Weighted average number of ordinary shares  diluted
    
    
    
    
    
    
    2,624
    
    
    
    
    
    
    
    2,737
    
    
    
    
    
    
    
    2,851




---



##### Table of Contents



() Annual Report and Accounts 2007/08   139
 11. Goodwill
 £mCost at 1 April 2006
    
    
    2,156Exchange adjustments
    
    
    (192
    )Acquisition of subsidiary undertakings
    
    
    157Reclassification to assets of businesses held for sale
    
    
    (641
    )Cost at 31 March 2007
    
    
    1,480Exchange adjustments
    
    
    23Acquisition of subsidiary undertakings (note 28)
    
    
    2,335Cost at 31 March 2008
    
    
    3,838Accumulated impairment losses at 1 April 2006
    
    
    14Exchange adjustments
    
    
    (1
    )Impairment charge
    
    
    55Reclassification to assets of businesses held for sale
    
    
    (68
    )Accumulated impairment losses at 31 March 2007 and 31 March 2008
    
    
    Net book value at 31 March 2008
    
    
    3,838Net book value at 31 March 2007
    
    
    1,480




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##### Table of Contents



140   
Notes to the consolidated financial
statements continued
    
    National Grid plc
 12. Other intangible assets
 Acquisition-Software
    
    
    related
    
    
    Other
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £mNon-currentCost at 1 April 2006
    
    
    292
    
    
    
    164
    
    
    
    33
    
    
    
    489Exchange adjustments
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )
    
    
    (10
    )Acquisition of subsidiary undertakings
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    55Additions
    
    
    20
    
    
    
    
    
    
    
    12
    
    
    
    32Reclassification to assets of businesses held for sale
    
    
    (21
    )
    
    
    (164
    )
    
    
    (71
    )
    
    
    (256
    )Cost at 31 March 2007
    
    
    286
    
    
    
    
    
    
    
    24
    
    
    
    310Exchange adjustments
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    4Acquisition of subsidiary undertakings (note 28)
    
    
    42
    
    
    
    93
    
    
    
    
    
    
    
    135Additions
    
    
    44
    
    
    
    
    
    
    
    1
    
    
    
    45Disposals
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )Cost at 31 March 2008
    
    
    373
    
    
    
    93
    
    
    
    27
    
    
    
    493Amortisation at 1 April 2006
    
    
    142
    
    
    
    17
    
    
    
    9
    
    
    
    168Exchange adjustments
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )
    
    
    (6
    )Amortisation charge for the year (i)
    
    
    38
    
    
    
    11
    
    
    
    5
    
    
    
    54Reclassification to assets of businesses held for sale
    
    
    (12
    )
    
    
    (28
    )
    
    
    (10
    )
    
    
    (50
    )Amortisation at 31 March 2007
    
    
    165
    
    
    
    
    
    
    
    1
    
    
    
    166Exchange adjustments
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1Amortisation charge for the year (i)
    
    
    48
    
    
    
    4
    
    
    
    2
    
    
    
    54Amortisation at 31 March 2008
    
    
    214
    
    
    
    4
    
    
    
    3
    
    
    
    221Net book value at 31 March 2008
    
    
    159
    
    
    
    89
    
    
    
    24
    
    
    
    272Net book value at 31 March 2007
    
    
    121
    
    
    
    
    
    
    
    23
    
    
    
    144




---



##### Table of Contents



() Annual Report and Accounts 2007/08   141
 13. Property, plant and equipment
 Assets
    
    
    MotorPlant
    
    
    in the
    
    
    vehiclesLand and
    
    
    and
    
    
    course of
    
    
    and officebuildings
    
    
    machinery
    
    
    construction
    
    
    equipment
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mCost at 1 April 2006
    
    
    974
    
    
    
    25,702
    
    
    
    1,716
    
    
    
    677
    
    
    
    29,069Exchange adjustments
    
    
    (53
    )
    
    
    (841
    )
    
    
    (27
    )
    
    
    (1
    )
    
    
    (922
    )Additions
    
    
    16
    
    
    
    604
    
    
    
    1,611
    
    
    
    112
    
    
    
    2,343Acquisition of subsidiary undertakings
    
    
    12
    
    
    
    157
    
    
    
    1
    
    
    
    
    
    
    
    170Reclassification to assets of businesses held for sale
    
    
    (152
    )
    
    
    (1,292
    )
    
    
    (2
    )
    
    
    (22
    )
    
    
    (1,468
    )Disposals
    
    
    (57
    )
    
    
    (112
    )
    
    
    
    
    
    
    (36
    )
    
    
    (205
    )Other reclassifications
    
    
    38
    
    
    
    1,248
    
    
    
    (1,327
    )
    
    
    41
    
    
    
    Cost at 31 March 2007
    
    
    778
    
    
    
    25,466
    
    
    
    1,972
    
    
    
    771
    
    
    
    28,987Exchange adjustments
    
    
    3
    
    
    
    17
    
    
    
    1
    
    
    
    
    
    
    
    21Additions
    
    
    39
    
    
    
    599
    
    
    
    2,307
    
    
    
    64
    
    
    
    3,009Acquisition of subsidiary undertakings (note 28)
    
    
    353
    
    
    
    2,793
    
    
    
    129
    
    
    
    7
    
    
    
    3,282Disposals
    
    
    (40
    )
    
    
    (135
    )
    
    
    
    
    
    
    (56
    )
    
    
    (231
    )Reclassifications
    
    
    25
    
    
    
    1,840
    
    
    
    (1,783
    )
    
    
    57
    
    
    
    139Cost at 31 March 2008
    
    
    1,158
    
    
    
    30,580
    
    
    
    2,626
    
    
    
    843
    
    
    
    35,207Depreciation at 1 April 2006
    
    
    284
    
    
    
    9,400
    
    
    
    
    
    
    
    450
    
    
    
    10,134Exchange adjustments
    
    
    (10
    )
    
    
    (311
    )
    
    
    
    
    
    
    (1
    )
    
    
    (322
    )Depreciation charge for the year (i)
    
    
    18
    
    
    
    801
    
    
    
    
    
    
    
    70
    
    
    
    889Reclassification to assets of businesses held for sale
    
    
    (97
    )
    
    
    (350
    )
    
    
    
    
    
    
    (18
    )
    
    
    (465
    )Disposals
    
    
    (3
    )
    
    
    (107
    )
    
    
    
    
    
    
    (34
    )
    
    
    (144
    )Depreciation at 31 March 2007
    
    
    192
    
    
    
    9,433
    
    
    
    
    
    
    
    467
    
    
    
    10,092Exchange adjustments
    
    
    1
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    7Depreciation charge for the year (i)
    
    
    26
    
    
    
    853
    
    
    
    
    
    
    
    75
    
    
    
    954Disposals
    
    
    (17
    )
    
    
    (113
    )
    
    
    
    
    
    
    (49
    )
    
    
    (179
    )Depreciation at 31 March 2008
    
    
    202
    
    
    
    10,179
    
    
    
    
    
    
    
    493
    
    
    
    10,874Net book value at 31 March 2008
    
    
    956
    
    
    
    20,401
    
    
    
    2,626
    
    
    
    350
    
    
    
    24,333Net book value at 31 March 2007
    
    
    586
    
    
    
    16,033
    
    
    
    1,972
    
    
    
    304
    
    
    
    18,895
   2008
    
    
    2007£m
    
    
    £mFreehold
    
    
    910
    
    
    
    540Long leasehold (over 50 years)
    
    
    5
    
    
    
    13Short leasehold (under 50 years)
    
    
    41
    
    
    
    33956
    
    
    
    586




---



##### Table of Contents



142   Notes to the consolidated financial statements continued
    
    National Grid plc
 14. Other non-current assets
 2008
    
    
    2007£m
    
    
    £mLease receivables
    
    
    4
    
    
    
    15Prepayments
    
    
    7
    
    
    
    6Other receivables
    
    
    186
    
    
    
    15Commodity contract assets
    
    
    58
    
    
    
    255
    
    
    
    36
  15. Financial and other investments
 2008
    
    
    2007£m
    
    
    £mNon-currentAvailable-for-sale investments
    
    
    180
    
    
    
    132Investments in joint ventures and associates
    
    
    71
    
    
    
    5251
    
    
    
    137CurrentAvailable-for-sale investments
    
    
    2,062
    
    
    
    1,800Loans and receivables
    
    
    33
    
    
    
    2982,095
    
    
    
    2,098Total financial and other investments
    
    
    2,346
    
    
    
    2,235Financial and other investments include the following:Investments in short-term money funds
    
    
    1,803
    
    
    
    1,591UK managed investments in equity and bonds
    
    
    224
    
    
    
    213US managed investments in equity and bonds
    
    
    107
    
    
    
    74Bank deposits
    
    
    
    
    
    
    250Restricted cash balancesCollateral
    
    
    17
    
    
    
    22Other
    
    
    10
    
    
    
    22Cash surrender value of life insurance policies
    
    
    101
    
    
    
    53Investment in joint ventures and associates
    
    
    71
    
    
    
    5Other investments
    
    
    13
    
    
    
    52,346
    
    
    
    2,235




---



##### Table of Contents



() Annual Report and Accounts 2007/08   143
 16. Deferred tax assets and liabilities
  Deferred tax (assets)/liabilities
 Pensionsand otherAccelerated
    
    
    Share-
    
    
    post-
    
    
    
    
    
    
    Other nettax
    
    
    based
    
    
    retirement
    
    
    Financial
    
    
    temporarydepreciation
    
    
    payments
    
    
    benefits
    
    
    instruments
    
    
    differences
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mDeferred tax assets at 31 March 2006
    
    
    (5
    )
    
    
    (28
    )
    
    
    (397
    )
    
    
    (6
    )
    
    
    (835
    )
    
    
    (1,271
    )Deferred tax liabilities at 31 March 2006
    
    
    3,126
    
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    127
    
    
    
    3,273At 1 April 2006
    
    
    3,121
    
    
    
    (28
    )
    
    
    (397
    )
    
    
    14
    
    
    
    (708
    )
    
    
    2,002Exchange adjustments
    
    
    (90
    )
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    91
    
    
    
    14Charged/(credited) to income statement (i)
    
    
    321
    
    
    
    9
    
    
    
    82
    
    
    
    (9
    )
    
    
    54
    
    
    
    457(Credited)/charged to equity
    
    
    
    
    
    
    (11
    )
    
    
    70
    
    
    
    11
    
    
    
    
    
    
    
    70Acquisition of subsidiary undertakings
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    (13
    )
    
    
    (11
    )Reclassification to liabilities of businesses held for sale
    
    
    (129
    )
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    3
    
    
    
    (124
    )Other
    
    
    63
    
    
    
    
    
    
    
    (238
    )
    
    
    5
    
    
    
    151
    
    
    
    (19
    )At 31 March 2007
    
    
    3,286
    
    
    
    (29
    )
    
    
    (467
    )
    
    
    21
    
    
    
    (422
    )
    
    
    2,389Deferred tax assets at 31 March 2007
    
    
    (4
    )
    
    
    (29
    )
    
    
    (532
    )
    
    
    (9
    )
    
    
    (452
    )
    
    
    (1,026
    )Deferred tax liabilities at 31 March 2007
    
    
    3,290
    
    
    
    
    
    
    
    65
    
    
    
    30
    
    
    
    30
    
    
    
    3,415At 1 April 2007
    
    
    3,286
    
    
    
    (29
    )
    
    
    (467
    )
    
    
    21
    
    
    
    (422
    )
    
    
    2,389Exchange adjustments
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    10Charged/(credited) to income statement (i)
    
    
    123
    
    
    
    
    
    
    
    (9
    )
    
    
    (2
    )
    
    
    196
    
    
    
    308Charged/(credited) to equity
    
    
    
    
    
    
    12
    
    
    
    98
    
    
    
    (4
    )
    
    
    
    
    
    
    106Acquisition of subsidiary undertakings (note 28)
    
    
    289
    
    
    
    
    
    
    
    (60
    )
    
    
    (3
    )
    
    
    365
    
    
    
    591Other
    
    
    (2
    )
    
    
    1
    
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    3At 31 March 2008
    
    
    3,695
    
    
    
    (16
    )
    
    
    (436
    )
    
    
    12
    
    
    
    152
    
    
    
    3,407Deferred tax assets at 31 March 2008
    
    
    (2
    )
    
    
    (16
    )
    
    
    (685
    )
    
    
    (17
    )
    
    
    (322
    )
    
    
    (1,042
    )Deferred tax liabilities at 31 March 2008
    
    
    3,697
    
    
    
    
    
    
    
    249
    
    
    
    29
    
    
    
    474
    
    
    
    4,4493,695
    
    
    
    (16
    )
    
    
    (436
    )
    
    
    12
    
    
    
    152
    
    
    
    3,407
     2008
    
    
    2007£m
    
    
    £mCapital losses
    
    
    220
    
    
    
    216Non-trade deficits
    
    
    10
    
    
    
    203Trading losses
    
    
    
    
    
    
    3




---



##### Table of Contents



144   Notes to the consolidated financial statements continued
    
    National Grid plc
   17. Derivative financial instruments
 2008
    
    
    2007Assets
    
    
    Liabilities
    
    
    Total
    
    
    Assets
    
    
    Liabilities
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mFair value hedgesInterest rate swaps
    
    
    23
    
    
    
    (8
    )
    
    
    15
    
    
    
    16
    
    
    
    (30
    )
    
    
    (14
    )Cross-currency interest rate swaps
    
    
    271
    
    
    
    (43
    )
    
    
    228
    
    
    
    50
    
    
    
    (137
    )
    
    
    (87
    )294
    
    
    
    (51
    )
    
    
    243
    
    
    
    66
    
    
    
    (167
    )
    
    
    (101
    )Cash flow hedgesInterest rate swaps
    
    
    49
    
    
    
    (76
    )
    
    
    (27
    )
    
    
    15
    
    
    
    (6
    )
    
    
    9Cross-currency interest rate swaps
    
    
    609
    
    
    
    (8
    )
    
    
    601
    
    
    
    69
    
    
    
    (25
    )
    
    
    44Foreign exchange forward contracts
    
    
    16
    
    
    
    (7
    )
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    674
    
    
    
    (91
    )
    
    
    583
    
    
    
    84
    
    
    
    (31
    )
    
    
    53Net investment hedgesCross-currency interest rate swaps
    
    
    362
    
    
    
    (49
    )
    
    
    313
    
    
    
    270
    
    
    
    (32
    )
    
    
    238Foreign exchange forward contracts
    
    
    
    
    
    
    (20
    )
    
    
    (20
    )
    
    
    4
    
    
    
    (13
    )
    
    
    (9
    )362
    
    
    
    (69
    )
    
    
    293
    
    
    
    274
    
    
    
    (45
    )
    
    
    229Derivatives not in a formal hedge
relationshipInterest rate swaps
    
    
    76
    
    
    
    (100
    )
    
    
    (24
    )
    
    
    17
    
    
    
    (35
    )
    
    
    (18
    )Interest rate swaptions
    
    
    
    
    
    
    (6
    )
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    Cross-currency interest rate swaps
    
    
    4
    
    
    
    
    
    
    
    4
    
    
    
    123
    
    
    
    (4
    )
    
    
    119Equity index-linked (i)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    145
    
    
    
    (189
    )
    
    
    (44
    )80
    
    
    
    (106
    )
    
    
    (26
    )
    
    
    285
    
    
    
    (228
    )
    
    
    571,410
    
    
    
    (317
    )
    
    
    1,093
    
    
    
    709
    
    
    
    (471
    )
    
    
    238Hedge positions offset within derivative instruments
    
    
    116
    
    
    
    (116
    )
    
    
    
    
    
    
    (52
    )
    
    
    52
    
    
    
    Total
    
    
    1,526
    
    
    
    (433
    )
    
    
    1,093
    
    
    
    657
    
    
    
    (419
    )
    
    
    238
 (i)
    
    The equity index-linked derivatives are investment related derivative financial
instruments that offset each other on a post-tax basis.
  2008
    
    
    2007Assets
    
    
    Liabilities
    
    
    Total
    
    
    Assets
    
    
    Liabilities
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mIn one year or less
    
    
    463
    
    
    
    (114
    )
    
    
    349
    
    
    
    277
    
    
    
    (235
    )
    
    
    42Current
    
    
    463
    
    
    
    (114
    )
    
    
    349
    
    
    
    277
    
    
    
    (235
    )
    
    
    42In more than one year, but not more than two years
    
    
    104
    
    
    
    (3
    )
    
    
    101
    
    
    
    26
    
    
    
    (10
    )
    
    
    16In more than two years, but not more than three years
    
    
    113
    
    
    
    (21
    )
    
    
    92
    
    
    
    12
    
    
    
    (7
    )
    
    
    5In more than three years, but not more than four years
    
    
    358
    
    
    
    (68
    )
    
    
    290
    
    
    
    5
    
    
    
    (3
    )
    
    
    2In more than four years, but not more than five years
    
    
    170
    
    
    
    (36
    )
    
    
    134
    
    
    
    173
    
    
    
    (22
    )
    
    
    151In more than five years
    
    
    318
    
    
    
    (191
    )
    
    
    127
    
    
    
    164
    
    
    
    (142
    )
    
    
    22Non-current
    
    
    1,063
    
    
    
    (319
    )
    
    
    744
    
    
    
    380
    
    
    
    (184
    )
    
    
    1961,526
    
    
    
    (433
    )
    
    
    1,093
    
    
    
    657
    
    
    
    (419
    )
    
    
    238
  2008
    
    
    2007£m
    
    
    £mInterest rate swaps
    
    
    (10,105
    )
    
    
    (7,026
    )Interest rate swaptions
    
    
    (202
    )
    
    
    Cross-currency interest rate swaps
    
    
    (7,120
    )
    
    
    (8,631
    )Foreign exchange forward contracts
    
    
    (2,020
    )
    
    
    (2,213
    )Equity index-linked
    
    
    
    
    
    
    (607
    )Total
    
    
    (19,447
    )
    
    
    (18,477
    )




---



##### Table of Contents



() Annual Report and Accounts 2007/08   145
  18. Inventories and current intangible assets
 2008
    
    
    2007£m
    
    
    £mRaw materials and consumables
    
    
    116
    
    
    
    69Work in progress
    
    
    16
    
    
    
    17Fuel stocks
    
    
    178
    
    
    
    20Current intangible assets
    
    
    145
    
    
    
    2455
    
    
    
    108
   19. Trade and other receivables
 2008
    
    
    2007£m
    
    
    £mTrade receivables
    
    
    1,162
    
    
    
    638Other receivables
    
    
    80
    
    
    
    60Commodity contract assets
    
    
    78
    
    
    
    Prepayments and accrued income
    
    
    949
    
    
    
    5382,269
    
    
    
    1,236
  Provision for impairment of receivables
 2008
    
    
    2007£m
    
    
    £mAt 1 April
    
    
    102
    
    
    
    107Exchange adjustments
    
    
    (1
    )
    
    
    (12
    )Charge for the year, net of recoveries
    
    
    108
    
    
    
    63Acquisition of subsidiary undertaking
    
    
    37
    
    
    
    Uncollectable amounts written off against receivables
    
    
    (91
    )
    
    
    (51
    )Reclassification to assets held for sale
    
    
    
    
    
    
    (5
    )At 31 March
    
    
    155
    
    
    
    102
  2008
    
    
    2007£m
    
    
    £mUp to 3 months past due
    
    
    100
    
    
    
    103 to 6 months past due
    
    
    36
    
    
    
    2Over 6 months past due
    
    
    52
    
    
    
    6188
    
    
    
    18




---



##### Table of Contents



146   Notes to the consolidated financial statements  continued
    
    National Grid plc
 20. Cash and cash equivalents
 2008
    
    
    2007£m
    
    
    £mCash at bank
    
    
    93
    
    
    
    50Short-term deposits
    
    
    81
    
    
    
    1,543Cash and cash equivalents excluding bank overdrafts
    
    
    174
    
    
    
    1,593Bank overdrafts
    
    
    (10
    )
    
    
    (6
    )Net cash and cash equivalents
    
    
    164
    
    
    
    1,587
     21. Borrowings
  2008
    
    
    2007£m
    
    
    £mCurrentBank loans
    
    
    502
    
    
    
    136Bonds
    
    
    2,545
    
    
    
    849Commercial paper
    
    
    562
    
    
    
    Finance leases
    
    
    256
    
    
    
    10Other loans
    
    
    7
    
    
    
    30Bank overdrafts
    
    
    10
    
    
    
    63,882
    
    
    
    1,031Non-currentBank loans
    
    
    1,541
    
    
    
    930Bonds
    
    
    15,287
    
    
    
    13,544Finance leases
    
    
    165
    
    
    
    92Other loans
    
    
    128
    
    
    
    12017,121
    
    
    
    14,686Total borrowings
    
    
    21,003
    
    
    
    15,717
  2008
    
    
    2007£m
    
    
    £mIn one year or less
    
    
    3,882
    
    
    
    1,031In more than one year, but not more than two years
    
    
    1,386
    
    
    
    1,869In more than two years, but not more than three years
    
    
    1,413
    
    
    
    1,011In more than three years, but not more than four years
    
    
    1,700
    
    
    
    748In more than four years, but not more than five years
    
    
    1,302
    
    
    
    1,411In more than five years:by instalments
    
    
    78
    
    
    
    116other than by instalments
    
    
    11,242
    
    
    
    9,53121,003
    
    
    
    15,717




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##### Table of Contents



() 
Annual Report and Accounts 2007/08   147
 21. Borrowings continued
     2008
    
    
    2007£m
    
    
    £mGross finance lease liabilities repayable as follows:In one year or less
    
    
    266
    
    
    
    17In more than one year, but not more than five years
    
    
    120
    
    
    
    48In more than five years
    
    
    99
    
    
    
    94485
    
    
    
    159Less: finance charges allocated to future periods
    
    
    (64
    )
    
    
    (57
    )421
    
    
    
    102The present value of finance lease liabilities is as follows:In one year or less
    
    
    256
    
    
    
    10In more than one year, but not more than five years
    
    
    94
    
    
    
    21In more than five years
    
    
    71
    
    
    
    71421
    
    
    
    102
  22. Trade and other payables
 2008
    
    
    2007£m
    
    
    £mTrade payables
    
    
    1,708
    
    
    
    1,246Commodity contract liabilities
    
    
    36
    
    
    
    138Social security and other taxes
    
    
    114
    
    
    
    108Other payables
    
    
    482
    
    
    
    279Deferred income
    
    
    99
    
    
    
    812,439
    
    
    
    1,852
  23. Other non-current liabilities
 2008
    
    
    2007£m
    
    
    £mCommodity contract liabilities
    
    
    88
    
    
    
    130Other payables
    
    
    347
    
    
    
    214Deferred income
    
    
    1,286
    
    
    
    1,1311,721
    
    
    
    1,475




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##### Table of Contents



148   Notes to the consolidated financial statements continued
    
    National Grid plc
 24. Provisions
 TotalDecommissioning
    
    
    Environmental
    
    
    Emissions
    
    
    Restructuring
    
    
    Other
    
    
    provisions£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mAt 1 April 2006
    
    
    127
    
    
    
    429
    
    
    
    23
    
    
    
    75
    
    
    
    117
    
    
    
    771Exchange adjustments
    
    
    (12
    )
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39
    )Acquisition of subsidiary undertakings
    
    
    1
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Additions
    
    
    
    
    
    
    14
    
    
    
    13
    
    
    
    14
    
    
    
    1
    
    
    
    42Unused amounts reversed
    
    
    (13
    )
    
    
    (11
    )
    
    
    (23
    )
    
    
    (1
    )
    
    
    (2
    )
    
    
    (50
    )Reclassification to working capital
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )Reclassification to assets of businesses held for sale
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15
    )
    
    
    (27
    )Unwinding of discount
    
    
    4
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    21Utilised
    
    
    (25
    )
    
    
    (51
    )
    
    
    (12
    )
    
    
    (32
    )
    
    
    (8
    )
    
    
    (128
    )At 31 March 2007
    
    
    70
    
    
    
    372
    
    
    
    1
    
    
    
    56
    
    
    
    95
    
    
    
    594Exchange adjustments
    
    
    
    
    
    
    3
    
    
    
    2
    
    
    
    
    
    
    
    1
    
    
    
    6Acquisition of subsidiary undertakings
    
    
    23
    
    
    
    338
    
    
    
    125
    
    
    
    
    
    
    
    157
    
    
    
    643Additions
    
    
    5
    
    
    
    124
    
    
    
    5
    
    
    
    25
    
    
    
    17
    
    
    
    176Unused amounts reversed
    
    
    (4
    )
    
    
    (14
    )
    
    
    (1
    )
    
    
    
    
    
    
    (5
    )
    
    
    (24
    )Unwinding of discount
    
    
    6
    
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    41Utilised
    
    
    (13
    )
    
    
    (69
    )
    
    
    (4
    )
    
    
    (15
    )
    
    
    (3
    )
    
    
    (104
    )At 31 March 2008
    
    
    87
    
    
    
    781
    
    
    
    128
    
    
    
    66
    
    
    
    270
    
    
    
    1,332
  2008
    
    
    2007£m
    
    
    £mCurrent
    
    
    389
    
    
    
    167Non-current
    
    
    943
    
    
    
    4271,332
    
    
    
    594
 Decommissioning provision
  Environmental provision
  2008
    
    
    2007Discounted
    
    
    Undiscounted
    
    
    Discounted
    
    
    Undiscounted
    
    
    Nominal£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    discount rateUK gas site decontamination (i)
    
    
    192
    
    
    
    280
    
    
    
    168
    
    
    
    246
    
    
    
    5.0%US sites (ii)
    
    
    587
    
    
    
    792
    
    
    
    200
    
    
    
    296
    
    
    
    6.0%-6.5%Other (iii)
    
    
    2
    
    
    
    2
    
    
    
    4
    
    
    
    4
    
    
    
    n/a781
    
    
    
    1,074
    
    
    
    372
    
    
    
    546
 (i)
    
    Represents the statutory decontamination costs of old gas manufacturing sites in the UK.
The anticipated timing of the cash flows for statutory decontamination cannot be predicted with
certainty, but they are expected to be incurred over the financial years 2009 to 2058 with some 50%
of the spend over the next five years.There are a number of uncertainties that affect the calculation of the provision for UK gas site
decontamination, including the impact of regulation, the accuracy of the site surveys, unexpected
contaminants, transportation costs, the impact of alternative technologies and changes in the
discount rate. We have made our best estimate of the financial effect of these uncertainties in
the calculation of the provision, but future material changes in any of the assumptions could
materially impact on the calculation of the provision and hence the income statement.The undiscounted amount of the provision is the undiscounted best estimate of the liability
having regard to the uncertainties above.(ii)
    
    The remediation expenditure in the US is expected to be incurred between financial years 2009
and 2059. The uncertainties regarding the calculation of this provision are similar to those
considered in respect of UK gas decontamination. However, unlike the UK, with the exception of
immaterial amounts of such costs, this expenditure is expected to be recoverable from rate payers
under the terms of various rate agreements in the US.In determining the undiscounted amount of the environmental provision relating to US sites we do
not have sufficient information to calculate a range of outcomes, but it is expected that any
outcome of the liability would be recovered from rate payers (with the exception of immaterial
amounts of site costs).(iii)
    
    The remainder of the environmental provision relates to the expected cost of remediation of
certain other sites in the UK. This is expected to be utilised within the next five years and there
is no material difference between the discounted and undiscounted amounts.
 Emissions provision
  Restructuring provision




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##### Table of Contents



() Annual Report and Accounts 2007/08   149
 24. Provisions continued
 Other provisions
    25. Share capital
 Allotted, called upand fully paidOrdinary shares
    
    millions
    
    
    £mAt 31 March 2005
    
    
    3,090
    
    
    
    309Issued during the year
    
    
    8
    
    
    
    1Effect of share consolidation (i)
    
    
    (378
    )
    
    
    At 31 March 2006
    
    
    2,720
    
    
    
    310Issued during the year
    
    
    4
    
    
    
    Repurchased during the year (ii)
    
    
    (23
    )
    
    
    (2
    )At 31 March 2007
    
    
    2,701
    
    
    
    308Issued during the year (iii)
    
    
    8
    
    
    
    1Repurchased during the year (iv)
    
    
    (127
    )
    
    
    (15
    )At 31 March 2008
    
    
    2,582
    
    
    
    294
 (i)
    
    On 29 July 2005, the ordinary share capital was consolidated with 43 new ordinary shares
of 1117/43pence each issued for every 49 existing ordinary shares of 10
pence each cancelled.(ii)
    
    From 20 November 2006 to 22 March 2007, the Company repurchased, and subsequently cancelled,
under its share repurchase programme 22,388,381 ordinary shares for aggregate consideration of
£169m, including transaction costs. The shares repurchased have a nominal value of £2m and
represented approximately 1% of the ordinary shares in issue as at 31 March 2007. The excess of the
consideration over the nominal value was charged against retained earnings.(iii)
    
    Included within issued share capital is 3,705,193 ordinary shares that were issued following
the conversion of the Companys B shares to ordinary shares on 28 September 2007.(iv)
    
    From 30 May 2007 to 27 November 2007, the Company repurchased, and subsequently cancelled,
under its share repurchase programme 126,817,712 ordinary shares for aggregate consideration of
£946m, including transaction costs. The shares repurchased have a nominal value of £15m and
represented approximately 5% of the ordinary shares in issue as at 31 March 2008. The excess of the
consideration over the nominal value has been charged against retained earnings.
  B shares
  17 43
 Treasury shares
   (i)
    
    From 21 June 2007 to 31 March 2008 the Company repurchased, under its share repurchase
programme 73,328,706 ordinary shares for aggregate consideration of £570m, including transaction
costs. The shares repurchased have a nominal value of £8m and represented approximately 3% of the
ordinary shares in issue as at 31 March 2008.(ii)
    
    During the year, 100,000 treasury shares were gifted to a National Grid Employee Share Trust
and 2,572,378 treasury shares were re-issued in relation to employee share schemes, in total
representing approximately 0.1% of the ordinary shares in issue as at 31 March 2008. The nominal
value of these shares was £0.3m and the total proceeds received were £10m.(iii)
    
    During the year the Company made gifts totalling £6m to National Grid Employee Share Trusts,
outside of its share repurchase programme, to enable the trustees to make purchases of National
Grid plc shares in order to satisfy the requirements of employee share option and reward plans.




---



##### Table of Contents



150   Notes to the consolidated financial statements continued
    
    National Grid plc
 25. Share capital continued
 Additional information in respect of share capital
 2008
    
    
    2008
    
    
    2007
    
    
    2007
    
    
    2006
    
    
    2006millions
    
    
    £m
    
    
    millions
    
    
    £m
    
    
    millions
    
    
    £mConsideration received in respect
of ordinary shares
issued during the year
    
    
    8
    
    
    
    23
    
    
    
    4
    
    
    
    16
    
    
    
    8
    
    
    
    28Authorised share capitalOrdinary shares (i)
    
    
    4,392
    
    
    
    501
    
    
    
    4,388
    
    
    
    500
    
    
    
    4,388
    
    
    
    500Non-cumulative B shares
    
    
    
    
    
    
    
    
    
    
    3,150
    
    
    
    315
    
    
    
    3,150
    
    
    
    3154,392
    
    
    
    501
    
    
    
    7,538
    
    
    
    815
    
    
    
    7,538
    
    
    
    815
 (i)
    
    On 28 September 2007, the Company increased its authorised ordinary share capital by
3,705,183 ordinary shares to 4,391,705,193 ordinary shares of 1117/43pence
each.
  26. Reconciliation of movements in total equity
 Called-up
    
    
    Share
    
    
    
    
    
    
    Other
    
    
    Totalshare
    
    
    premium
    
    
    Retained
    
    
    equity
    
    
    shareholders
    
    
    Minority
    
    
    Totalcapital
    
    
    account
    
    
    earnings
    
    
    reserves
    
    
    equity
    
    
    interests
    
    
    equity£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mAt 1 April 2005
    
    
    309
    
    
    
    1,289
    
    
    
    5,559
    
    
    
    (5,089
    )
    
    
    2,068
    
    
    
    10
    
    
    
    2,078Total recognised income and expense for the year
    
    
    
    
    
    
    
    
    
    
    3,969
    
    
    
    128
    
    
    
    4,097
    
    
    
    3
    
    
    
    4,100Equity dividends
    
    
    
    
    
    
    
    
    
    
    (745
    )
    
    
    
    
    
    
    (745
    )
    
    
    
    
    
    
    (745
    )Return of capital to shareholders
through B share scheme
    
    
    
    
    
    
    
    
    
    
    (2,009
    )
    
    
    
    
    
    
    (2,009
    )
    
    
    
    
    
    
    (2,009
    )Issue of ordinary share capital
    
    
    1
    
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    28Other movements in minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Movement in shares held in employee
share trusts
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    19Share-based payment
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    17Tax on share-based payment
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    7At 31 March 2006
    
    
    310
    
    
    
    1,316
    
    
    
    6,817
    
    
    
    (4,961
    )
    
    
    3,482
    
    
    
    11
    
    
    
    3,493Total recognised income and expense
for the year
    
    
    
    
    
    
    
    
    
    
    1,689
    
    
    
    (191
    )
    
    
    1,498
    
    
    
    1
    
    
    
    1,499Equity dividends
    
    
    
    
    
    
    
    
    
    
    (730
    )
    
    
    
    
    
    
    (730
    )
    
    
    
    
    
    
    (730
    )Issue of ordinary share capital
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    16Repurchase of shares
    
    
    (2
    )
    
    
    
    
    
    
    (169
    )
    
    
    2
    
    
    
    (169
    )
    
    
    
    
    
    
    (169
    )Other movements in minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Share-based payment
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    15Tax on share-based payment
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    13At 31 March 2007
    
    
    308
    
    
    
    1,332
    
    
    
    7,635
    
    
    
    (5,150
    )
    
    
    4,125
    
    
    
    11
    
    
    
    4,136Total recognised income and expense
for the year
    
    
    
    
    
    
    
    
    
    
    3,530
    
    
    
    (54
    )
    
    
    3,476
    
    
    
    3
    
    
    
    3,479Equity dividends
    
    
    
    
    
    
    
    
    
    
    (780
    )
    
    
    
    
    
    
    (780
    )
    
    
    
    
    
    
    (780
    )Issue of ordinary share capital
    
    
    1
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    13B shares converted to ordinary shares
    
    
    
    
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    
    
    
    
    27Repurchase of share capital and
purchase of treasury shares (i)
    
    
    (15
    )
    
    
    
    
    
    
    (1,522
    )
    
    
    15
    
    
    
    (1,522
    )
    
    
    
    
    
    
    (1,522
    )Other movements in minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    4Share-based payment
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    18Transfer between reserves
    
    
    
    
    
    
    
    
    
    
    63
    
    
    
    (63
    )
    
    
    
    
    
    
    
    
    
    
    Issue of treasury shares
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    10Tax on share-based payment
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )At 31 March 2008
    
    
    294
    
    
    
    1,371
    
    
    
    8,949
    
    
    
    (5,252
    )
    
    
    5,362
    
    
    
    18
    
    
    
    5,380
 (i)
    
    From 30 May 2007 to 31 March 2008, the Company repurchased under its share repurchase
programme 200.1m ordinary shares for aggregate consideration of £1,516m including transaction
costs. The shares repurchased have a nominal value of 1117/43pence each and
represented 8% of the ordinary shares in issue as at 31 March 2008. Included within total equity is a deduction of £570m for treasury shares (31 March
2007: £nil). Further purchases of shares relating to employee share schemes were made for an
aggregate consideration of £6m.




---



##### Table of Contents



() Annual Report and Accounts 2007/08   
151
 26. Reconciliation of movements in total equity continued
 Other equity reserves
 Cash flow
    
    
    Available-
    
    
    CapitalTranslation
    
    
    hedge
    
    
    for-sale
    
    
    redemption
    
    
    Merger
    
    
    TotalAt 1 April 2005
    
    
    (13
    )
    
    
    51
    
    
    
    4
    
    
    
    2
    
    
    
    (5,133
    )
    
    
    (5,089
    )Net income/(expense)
recognised directly in
equity
    
    
    140
    
    
    
    (14
    )
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    128At 31 March 2006
    
    
    127
    
    
    
    37
    
    
    
    6
    
    
    
    2
    
    
    
    (5,133
    )
    
    
    (4,961
    )Net (expense)/income
recognised directly in
equity
    
    
    (175
    )
    
    
    (11
    )
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    (191
    )Repurchase of share capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2At 31 March 2007
    
    
    (48
    )
    
    
    26
    
    
    
    1
    
    
    
    4
    
    
    
    (5,133
    )
    
    
    (5,150
    )Net (expense)/income
recognised directly in
equity
    
    
    (25
    )
    
    
    (37
    )
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    (54
    )Repurchase of share capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    15Transfer between reserves
    
    
    
    
    
    
    (31
    )
    
    
    
    
    
    
    
    
    
    
    (32
    )
    
    
    (63
    )At 31 March 2008
    
    
    (73
    )
    
    
    (42
    )
    
    
    9
    
    
    
    19
    
    
    
    (5,165
    )
    
    
    (5,252
    )
     27. Consolidated cash flow statement
 (a) Cash flow from operating activities  discontinued operations
 2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £mOperating profit
    
    
    35
    
    
    
    62
    
    
    
    111Adjustments for:Exceptional items
    
    
    
    
    
    
    55
    
    
    
    20Depreciation and amortisation
    
    
    
    
    
    
    72
    
    
    
    77Share-based payment charge
    
    
    
    
    
    
    
    
    
    
    3Changes in working capital, provisions and pensions
    
    
    (25
    )
    
    
    (8
    )
    
    
    (47
    )Cash flow relating to exceptional items
    
    
    
    
    
    
    
    
    
    
    (26
    )Cash flow relating to discontinued operations
    
    
    10
    
    
    
    181
    
    
    
    138
 (b) Cash flow from investing activities 
discontinued operations
 2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £mDisposal proceeds
    
    
    3,064
    
    
    
    27
    
    
    
    5,750Acquisition of subsidiaries, net of cash acquired
    
    
    
    
    
    
    (85
    )
    
    
    Other investing activities
    
    
    (14
    )
    
    
    (47
    )
    
    
    (209
    )Cash flow relating to discontinued operations
    
    
    3,050
    
    
    
    (105
    )
    
    
    5,541




---



##### Table of Contents



152   Notes to the consolidated financial statements continued
    
    National Grid plc
  27. Consolidated cash flow statement continued(c) Reconciliation of net cash flow to movement in net debt
 2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £mMovement in cash and cash equivalents
    
    
    (1,450
    )
    
    
    175
    
    
    
    1,181(Decrease)/increase in financial investments
    
    
    (45
    )
    
    
    1,725
    
    
    
    (25
    )(Increase)/decrease in borrowings and derivatives
    
    
    (1,589
    )
    
    
    (3,045
    )
    
    
    2,304Cash paid to shareholders under B share scheme
    
    
    26
    
    
    
    26
    
    
    
    1,957Net interest paid
    
    
    694
    
    
    
    597
    
    
    
    704Change in net debt resulting from cash flows
    
    
    (2,364
    )
    
    
    (522
    )
    
    
    6,121Changes in fair value of financial assets and liabilities and exchange movements
    
    
    (133
    )
    
    
    331
    
    
    
    (299
    )Issue of B shares
    
    
    
    
    
    
    
    
    
    
    (2,009
    )Net interest charge on the components of net debt
    
    
    (901
    )
    
    
    (655
    )
    
    
    (660
    )Borrowings of subsidiary undertaking acquired
    
    
    (2,446
    )
    
    
    (48
    )
    
    
    Amounts reclassified to businesses held for sale
    
    
    17
    
    
    
    (42
    )
    
    
    Other non-cash movements
    
    
    (26
    )
    
    
    (2
    )
    
    
    (17
    )Movement in net debt (net of related derivative financial instruments) in the year
    
    
    (5,853
    )
    
    
    (938
    )
    
    
    3,136Net debt at start of year
    
    
    (11,788
    )
    
    
    (10,850
    )
    
    
    (13,638
    )Impact of adoption of IAS 32 and IAS 39 (i)
    
    
    
    
    
    
    
    
    
    
    (348
    )Net debt (net of related derivative financial instruments) at end of year
    
    
    (17,641
    )
    
    
    (11,788
    )
    
    
    (10,850
    )
 (i)
    
    The adoption of IAS 39 resulted in changes to the carrying value of borrowings and
financial investments as at 1 April 2005.
 (d) Analysis of changes in net debt
 Cash
    
    
    
    
    
    
    Net cashand cash
    
    
    Bank
    
    
    and cash
    
    
    Financialequivalents
    
    
    overdrafts
    
    
    equivalents
    
    
    investments
    (ii)
    
    Borrowings
    (ii)
    
    Derivatives
    (ii)
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mAt 31 March 2005
    
    
    272
    
    
    
    (18
    )
    
    
    254
    
    
    
    398
    
    
    
    (14,290
    )
    
    
    
    
    
    
    (13,638
    )Impact of adoption of IAS 32 and IAS 39 (i)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    (894
    )
    
    
    543
    
    
    
    (348
    )Cash flow
    
    
    1,166
    
    
    
    15
    
    
    
    1,181
    
    
    
    (155
    )
    
    
    5,037
    
    
    
    58
    
    
    
    6,121Fair value gains and losses
    
    
    14
    
    
    
    
    
    
    
    14
    
    
    
    3
    
    
    
    (207
    )
    
    
    (109
    )
    
    
    (299
    )Issue of B shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,009
    )
    
    
    
    
    
    
    (2,009
    )Interest charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    135
    
    
    
    (746
    )
    
    
    (49
    )
    
    
    (660
    )Other non-cash movements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17
    )
    
    
    
    
    
    
    (17
    )At 31 March 2006
    
    
    1,452
    
    
    
    (3
    )
    
    
    1,449
    
    
    
    384
    
    
    
    (13,126
    )
    
    
    443
    
    
    
    (10,850
    )Cash flow
    
    
    178
    
    
    
    (3
    )
    
    
    175
    
    
    
    1,509
    
    
    
    (2,233
    )
    
    
    27
    
    
    
    (522
    )Fair value gains and losses
    
    
    (14
    )
    
    
    
    
    
    
    (14
    )
    
    
    (9
    )
    
    
    511
    
    
    
    (157
    )
    
    
    331Interest charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    215
    
    
    
    (833
    )
    
    
    (37
    )
    
    
    (655
    )Other non-cash movements
    
    
    (23
    )
    
    
    
    
    
    
    (23
    )
    
    
    (1
    )
    
    
    (30
    )
    
    
    (38
    )
    
    
    (92
    )At 31 March 2007
    
    
    1,593
    
    
    
    (6
    )
    
    
    1,587
    
    
    
    2,098
    
    
    
    (15,711
    )
    
    
    238
    
    
    
    (11,788
    )Cash flow
    
    
    (1,446
    )
    
    
    (4
    )
    
    
    (1,450
    )
    
    
    (251
    )
    
    
    (729
    )
    
    
    66
    
    
    
    (2,364
    )Fair value gains and losses
    
    
    4
    
    
    
    
    
    
    
    4
    
    
    
    4
    
    
    
    (990
    )
    
    
    849
    
    
    
    (133
    )Interest charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    211
    
    
    
    (1,066
    )
    
    
    (46
    )
    
    
    (901
    )Acquisition of subsidiary undertaking
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33
    
    
    
    (2,479
    )
    
    
    
    
    
    
    (2,446
    )Other non-cash movements
    
    
    23
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    (18
    )
    
    
    (14
    )
    
    
    (9
    )At 31 March 2008
    
    
    174
    
    
    
    (10
    )
    
    
    164
    
    
    
    2,095
    
    
    
    (20,993
    )
    
    
    1,093
    
    
    
    (17,641
    )
 (i)
    
    National Grid adopted IAS 39 with effect from 1 April 2005 consistent with the
requirements of IFRS 1. The adoption of IAS 39 also resulted in changes to the carrying value of
borrowings and financial investments as at 1 April 2005.(ii)
    
    Includes interest. Accrued interest at 31 March 2008 was £(225)m.




---



##### Table of Contents



() Annual Report and Accounts 2007/08   153
  Notes to the consolidated financial statements supplementary information
 28. Acquisitions
   IFRSbook value atacquisition
    
    
    Fair value*£m
    
    
    £mOther intangible assets
    
    
    42
    
    
    
    135Property, plant and equipment
    
    
    3,152
    
    
    
    3,282Financial and other investments  non-current
    
    
    129
    
    
    
    129Inventories and current intangibles
    
    
    505
    
    
    
    505Trade and other receivables
    
    
    767
    
    
    
    748Financial and other investments  current
    
    
    33
    
    
    
    33Cash and cash equivalents
    
    
    260
    
    
    
    260Assets of businesses held for sale
    
    
    472
    
    
    
    1,487Borrowings  current
    
    
    (545
    )
    
    
    (545
    )Trade and other payables
    
    
    (713
    )
    
    
    (749
    )Borrowings  non-current
    
    
    (1,852
    )
    
    
    (1,934
    )Other non-current liabilities
    
    
    (169
    )
    
    
    (169
    )Deferred tax liabilities
    
    
    (132
    )
    
    
    (591
    )Pensions and other post-retirement benefit obligations
    
    
    (440
    )
    
    
    (440
    )Provisions
    
    
    (649
    )
    
    
    (643
    )Liabilities of businesses held for sale
    
    
    (73
    )
    
    
    (73
    )Minority interest
    
    
    (8
    )
    
    
    (8
    )Net assets acquired
    
    
    779
    
    
    
    1,427Goodwill arising on acquisition
    
    
    
    
    
    
    2,335Total consideration
    
    
    
    
    
    
    3,762




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##### Table of Contents



154   Notes to the consolidated financial statements continued
    
    National Grid plc
   28. Acquisitions continuedPro forma information
 2008
    
    
    2008Actual
    
    
    Pro forma£m
    
    
    £mRevenue
    
    
    11,423
    
    
    
    12,345Operating profit before exceptional items, remeasurements and stranded cost recoveries
    
    
    2,595
    
    
    
    2,625Total operating profit
    
    
    2,964
    
    
    
    2,901Profit after taxation from continuing operations before exceptional items, remeasurements and stranded cost recoveries
    
    
    1,256
    
    
    
    1,175Profit for the year from continuing operations
    
    
    1,581
    
    
    
    1,443Profit for the year
    
    
    3,199
    
    
    
    3,087
 29. Commitments and contingencies  (a) Future capital expenditure
 2008
    
    
    2007£m
    
    
    £mContracted for but not provided
    
    
    1,097
    
    
    
    1,554
 (b) Lease commitments
 2008
    
    
    2007£m
    
    
    £mIn one year or less
    
    
    83
    
    
    
    80In more than one year, but not more than two years
    
    
    83
    
    
    
    76In more than two years, but not more than three years
    
    
    80
    
    
    
    72In more than three years, but not more than four years
    
    
    69
    
    
    
    68In more than four years, but not more than five years
    
    
    66
    
    
    
    64In more than five years
    
    
    356
    
    
    
    440737
    
    
    
    800
  (c) Energy purchase commitments
 2008
    
    
    2007£m
    
    
    £mIn one year or less
    
    
    1,790
    
    
    
    1,233In more than one year, but not more than two years
    
    
    900
    
    
    
    642In more than two years, but not more than three years
    
    
    475
    
    
    
    476In more than three years, but not more than four years
    
    
    295
    
    
    
    186In more than four years, but not more than five years
    
    
    130
    
    
    
    141In more than five years
    
    
    1,163
    
    
    
    1,0534,753
    
    
    
    3,731




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##### Table of Contents



() Annual Report and Accounts 2007/08   155
 29. Commitments and contingencies continued
 (d) Other commitments, contingencies and guarantees
   (i)
    
    guarantees of a subsidiary companys obligations under a membership interest and stock purchase
agreement amounting to £282m. These will expire on closing the agreement;(ii)
    
    a letter of support of obligations under a shareholders agreement relating to the
interconnector project between Great Britain and The Netherlands amounting to approximately £227m.
This expires in 2010;(iii)
    
    a guarantee amounting to approximately £105m of half of the obligations
of the interconnector project between Great Britain and The Netherlands. This expires in 2010;(iv)
    
    guarantees of certain obligations in respect of the UK Grain LNG Import Terminal for which the
maximum annual liability amounts to £86m. These run for varying lengths of time, expiring between
2019 and 2028;(v)
    
    guarantees of £59m relating to certain property obligations of subsidiary undertakings. The
majority of these expire by December 2025;(vi)
    
    a guarantee of £50m in respect of liabilities under a meter operating contract that runs until
May 2008;(vii)
    
    an uncapped guarantee, for which the maximum liability is estimated at £40m, to The Crown
Estates in support of the transfer of the interconnector between France and England to National
Grid Interconnectors Limited as part of the Licence to Assign Lease. This is ongoing;(viii)
    
    letters of credit in support of gas balancing obligations amounting to £25m, lasting for
less than one year;(ix)
    
    collateral of £15m to secure syndicate insurance obligations which are evergreen;(x)
    
    guarantees in respect of a former associate amounting to £14m, the majority of which relates to
its obligations to supply telecommunications services. These are open-ended; and(xi)
    
    other guarantees amounting to £22m arising in the normal course of business and entered into
on normal commercial terms. These guarantees run for varying lengths of time.
  (e) Amounts receivable under sublease arrangements
  (f) Litigation and claims
    30. Related party transactions
  2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £mSales: Services supplied to a pension plan
    
    
    3
    
    
    
    4
    
    
    
    4Purchases: Services received from joint ventures and associates
    
    
    33
    
    
    
    26
    
    
    
    32




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##### Table of Contents



156   
Notes to the consolidated financial
statements  continued
    
    National Grid plc
 31. Actuarial information on pensions and other post-retirement benefits
 UK pension schemes
  National Grid UK Pension Scheme
      Electricity Supply Pension Scheme




---



##### Table of Contents



() 

Annual Report and Accounts
2007/08   157
 31. Actuarial information on pensions and other post-retirement benefits continued
 US pension plans
   US retiree healthcare and life insurance plans
    Asset allocations and actuarial assumptions
  UK pensions
    
    
    US pensions
    
    
    US other post-retirement benefits2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006%
    
    
    %
    
    
    %
    
    
    %
    
    
    %
    
    
    %
    
    
    %
    
    
    %
    
    
    %Equities (i)
    
    
    35.9
    
    
    
    35.8
    
    
    
    40.7
    
    
    
    60.6
    
    
    
    63.7
    
    
    
    66.4
    
    
    
    63.1
    
    
    
    68.5
    
    
    
    69.0Corporate bonds (ii)
    
    
    25.0
    
    
    
    18.6
    
    
    
    19.2
    
    
    
    33.6
    
    
    
    33.5
    
    
    
    32.0
    
    
    
    32.3
    
    
    
    31.1
    
    
    
    30.6Gilts
    
    
    29.8
    
    
    
    33.9
    
    
    
    30.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Property
    
    
    6.7
    
    
    
    8.5
    
    
    
    8.5
    
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    2.6
    
    
    
    3.2
    
    
    
    1.5
    
    
    
    5.8
    
    
    
    2.8
    
    
    
    1.4
    
    
    
    4.6
    
    
    
    0.4
    
    
    
    0.4Total
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
 (i)
    
    Included within equities at 31 March 2008 were ordinary shares of National Grid plc with a
value of £24m (2007: £24m).(ii)
    
    Included within corporate bonds is an investment in a bond issued by a subsidiary undertaking
with a value of £20m (2007: £nil).




---



##### Table of Contents



158  Notes to the consolidated financial statements continued
    
    National Grid plc
 31. Actuarial information on pensions and other post-retirement benefits continued
  UK pensions
    
    
    US pensions
    
    
    US other post-retirement benefits2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006%
    
    
    %
    
    
    %
    
    
    %
    
    
    %
    
    
    %
    
    
    %
    
    
    %
    
    
    %Discount rate (i)
    
    
    6.6
    
    
    
    5.4
    
    
    
    4.9
    
    
    
    6.5
    
    
    
    5.8
    
    
    
    6.0
    
    
    
    6.5
    
    
    
    5.8
    
    
    
    6.0Expected return on plan assets
    
    
    6.4
    
    
    
    6.1
    
    
    
    5.8
    
    
    
    7.9
    
    
    
    8.3
    
    
    
    8.3
    
    
    
    7.6
    
    
    
    8.3
    
    
    
    8.3Rate of increase in salaries (ii)
    
    
    4.6
    
    
    
    4.2
    
    
    
    3.9
    
    
    
    4.0
    
    
    
    4.1
    
    
    
    4.1
    
    
    
    4.0
    
    
    
    4.1
    
    
    
    4.1Rate of increase in pensions
in payment
    
    
    3.8
    
    
    
    3.3
    
    
    
    3.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aRate of increase in pensions
in deferment
    
    
    3.7
    
    
    
    3.2
    
    
    
    2.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aRate of increase in Retail Price
Index or equivalent
    
    
    3.7
    
    
    
    3.2
    
    
    
    2.9
    
    
    
    3.0
    
    
    
    2.5
    
    
    
    3.0
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aInitial healthcare cost trend rate
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    10.0
    
    
    
    10.0
    
    
    
    10.0Ultimate healthcare cost trend rate
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    5.0
    
    
    
    5.0
    
    
    
    5.0
 (i)
    
    The discount rates for pension liabilities have been determined by reference to
appropriate yields prevailing in the UK and US debt markets at the balance sheet date.(ii)
    
    A promotional age-related scale has also been used where appropriate.
  2008
    
    
    2007UK
    
    
    US
    
    
    UK
    
    
    USyears
    
    
    years
    
    
    years
    
    
    yearsToday:Males
    
    
    20.9
    
    
    
    18.2
    
    
    
    20.1
    
    
    
    17.6Females
    
    
    23.1
    
    
    
    20.5
    
    
    
    22.5
    
    
    
    20.2In 20 years:Males
    
    
    23.2
    
    
    
    18.2
    
    
    
    21.2
    
    
    
    17.6Females
    
    
    25.4
    
    
    
    20.5
    
    
    
    23.6
    
    
    
    20.2
  Change inpension and other
    
    
    Change inpost-retirement obligation
    
    
    annual pension cost2008
    
    
    2007
    
    
    2008
    
    
    2007£m
    
    
    £m
    
    
    £m
    
    
    £m0.1% increase (2007: 0.1% decrease) in discount rate
    
    
    251
    
    
    
    260
    
    
    
    4
    
    
    
    40.5% increase in long-term rate of increase in salaries
    
    
    131
    
    
    
    139
    
    
    
    5
    
    
    
    8Increase of one year to life expectations at age 60
    
    
    588
    
    
    
    557
    
    
    
    4
    
    
    
    4
  2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £mIncreaseEffect on the aggregate of the service cost and interest cost
    
    
    16
    
    
    
    14
    
    
    
    15Effect on defined benefit obligation
    
    
    251
    
    
    
    170
    
    
    
    186DecreaseEffect on the aggregate of the service cost and interest cost
    
    
    (13
    )
    
    
    (12
    )
    
    
    (12
    )Effect on defined benefit obligation
    
    
    (214
    )
    
    
    (147
    )
    
    
    (161
    )
  2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mDetails of experience gains/(losses) for all plansPresent value of funded and unfunded obligations
    
    
    (18,175
    )
    
    
    (17,253
    )
    
    
    (17,839
    )
    
    
    (16,837
    )
    
    
    (16,405
    )Fair value of plan assets
    
    
    17,273
    
    
    
    15,999
    
    
    
    15,909
    
    
    
    14,565
    
    
    
    13,907(902
    )
    
    
    (1,254
    )
    
    
    (1,930
    )
    
    
    (2,272
    )
    
    
    (2,498
    )Difference between the expected and actual return on plan assets (i)
    
    
    (911
    )
    
    
    (81
    )
    
    
    1,521
    
    
    
    405
    
    
    
    n/aExperience gains on plan liabilities (i)
    
    
    152
    
    
    
    9
    
    
    
    192
    
    
    
    42
    
    
    
    n/aActuarial gains/(losses) on plan liabilities (i)
    
    
    1,343
    
    
    
    446
    
    
    
    (1,340
    )
    
    
    (152
    )
    
    
    n/a
 (i)
    
    National Grid adopted IAS 19 from 1 April 2004 hence no information has been presented for
the year ended 31 March 2004.




---



##### Table of Contents



() 
Annual Report and Accounts 2007/08   159
 32. Supplementary information on derivative financial instruments
  Treasury financial instruments




---



##### Table of Contents



160  Notes to the consolidated financial statements continued
    
    National Grid plc
 33. Financial risk
   (a) Market risk
      2008
    
    
    2007Sterling
    
    
    Euro
    
    
    US dollar
    
    
    Other
    
    
    Total
    
    
    Sterling
    
    
    Euro
    
    
    US dollar
    
    
    Other
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mCash and cash
equivalents
    
    
    168
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    174
    
    
    
    733
    
    
    
    2
    
    
    
    858
    
    
    
    
    
    
    
    1,593Financial investments
    
    
    1,063
    
    
    
    92
    
    
    
    898
    
    
    
    42
    
    
    
    2,095
    
    
    
    1,663
    
    
    
    61
    
    
    
    345
    
    
    
    29
    
    
    
    2,098Borrowings*
    
    
    (9,111
    )
    
    
    (5,342
    )
    
    
    (5,769
    )
    
    
    (781
    )
    
    
    (21,003
    )
    
    
    (8,030
    )
    
    
    (4,677
    )
    
    
    (2,443
    )
    
    
    (567
    )
    
    
    (15,717
    )Pre-derivative
position
    
    
    (7,880
    )
    
    
    (5,244
    )
    
    
    (4,871
    )
    
    
    (739
    )
    
    
    (18,734
    )
    
    
    (5,634
    )
    
    
    (4,614
    )
    
    
    (1,240
    )
    
    
    (538
    )
    
    
    (12,026
    )Derivative effect
    
    
    1,069
    
    
    
    5,301
    
    
    
    (6,016
    )
    
    
    739
    
    
    
    1,093
    
    
    
    (1,709
    )
    
    
    4,693
    
    
    
    (2,972
    )
    
    
    226
    
    
    
    238Net debt position
    
    
    (6,811
    )
    
    
    57
    
    
    
    (10,887
    )
    
    
    
    
    
    
    (17,641
    )
    
    
    (7,343
    )
    
    
    79
    
    
    
    (4,212
    )
    
    
    (312
    )
    
    
    (11,788
    )
 *

    Includes bank overdrafts
   2008
    
    
    2007Sterling
    
    
    Euro
    
    
    US dollar
    
    
    Other
    
    
    Total
    
    
    Sterling
    
    
    Euro
    
    
    US dollar
    
    
    Other
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mTrade and other
receivables
    
    
    182
    
    
    
    
    
    
    
    1,138
    
    
    
    
    
    
    
    1,320
    
    
    
    172
    
    
    
    
    
    
    
    526
    
    
    
    
    
    
    
    698Trade and other
payables
    
    
    (1,290
    )
    
    
    
    
    
    
    (1,050
    )
    
    
    
    
    
    
    (2,340
    )
    
    
    (1,208
    )
    
    
    
    
    
    
    (563
    )
    
    
    
    
    
    
    (1,771
    )Other non-current
liabilities
    
    
    (18
    )
    
    
    
    
    
    
    (417
    )
    
    
    
    
    
    
    (435
    )
    
    
    (11
    )
    
    
    
    
    
    
    (333
    )
    
    
    
    
    
    
    (344
    )




---



##### Table of Contents



() Annual Report and Accounts 2007/08   161
 33. Financial risk continued  (a) Market risk continued
   2008
    
    
    2007£m
    
    
    £mFixed interest rate borrowingsIn one year or less
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,620
    )
    
    
    (619
    )In more than one year, but not more than two years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (906
    )
    
    
    (1,525
    )In more than two years, but not more than three years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (642
    )
    
    
    (569
    )In more than three years, but not more than four years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,008
    )
    
    
    (263
    )In more than four years, but not more than five years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (900
    )
    
    
    (901
    )In more than five years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,579
    )
    
    
    (4,886
    )(11,655
    )
    
    
    (8,763
    )Floating interest rate borrowings (including RPI)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,348
    )
    
    
    (6,954
    )Total borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,003
    )
    
    
    (15,717
    )During 2008 and 2007, net debt was managed using derivative instruments to hedge interest rate risk as follows:2008
    
    
    2007Fixed-
    
    
    Floating-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fixed-
    
    
    Floating-rate
    
    
    rate
    
    
    RPI(i)
    
    
    Other(ii)
    
    
    Total
    
    
    rate
    
    
    rate
    
    
    RPI(i)
    
    
    Other(ii)
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mCash and cashequivalents
    
    
    
    
    
    
    174
    
    
    
    
    
    
    
    
    
    
    
    174
    
    
    
    
    
    
    
    1,593
    
    
    
    
    
    
    
    
    
    
    
    1,593Financial investments
    
    
    223
    
    
    
    1,835
    
    
    
    
    
    
    
    37
    
    
    
    2,095
    
    
    
    
    
    
    
    1,872
    
    
    
    
    
    
    
    226
    
    
    
    2,098Borrowings*
    
    
    (11,655
    )
    
    
    (4,825
    )
    
    
    (4,523
    )
    
    
    
    
    
    
    (21,003
    )
    
    
    (8,763
    )
    
    
    (3,307
    )
    
    
    (3,647
    )
    
    
    
    
    
    
    (15,717
    )Pre-derivative position
    
    
    (11,432
    )
    
    
    (2,816
    )
    
    
    (4,523
    )
    
    
    37
    
    
    
    (18,734
    )
    
    
    (8,763
    )
    
    
    158
    
    
    
    (3,647
    )
    
    
    226
    
    
    
    (12,026
    )Derivative effect
    
    
    1,814
    
    
    
    (708
    )
    
    
    (2
    )
    
    
    (11
    )
    
    
    1,093
    
    
    
    2,747
    
    
    
    (2,501
    )
    
    
    
    
    
    
    (8
    )
    
    
    238Net debt position
    
    
    (9,618
    )
    
    
    (3,524
    )
    
    
    (4,525
    )
    
    
    26
    
    
    
    (17,641
    )
    
    
    (6,016
    )
    
    
    (2,343
    )
    
    
    (3,647
    )
    
    
    218
    
    
    
    (11,788
    )
  (i)
    
    Represents financial instruments which are linked to the UK retail price index.(ii)
    
    Represents financial instruments which are not directly affected by interest rate risk, such
as investments in equity, foreign exchange forward contracts or other similar financial
instruments.




---



##### Table of Contents



162   Notes to the consolidated financial statements continued
    
    National Grid plc
 33. Financial risk continued  (b) Credit risk
 
 Maximum limit
    
    
    Long-term limit£m
    
    
    £mRatingAAA rated G8 sovereign entities
    
    Unlimited
    
    UnlimitedTriple A vehicles
    
    
    140
    
    
    
    140Triple A range institutions (AAA)
    
    
    620 to 965
    
    
    
    310 to 505Double A range institutions (AA)
    
    
    345 to 450
    
    
    
    175 to 225Single A range institutions (A)
    
    
    80 to 140
    
    
    
    40 to 70




---



##### Table of Contents



() Annual Report and Accounts 2007/08   163
 33. Financial risk continued  (c) Liquidity analysis
  Due
    
    
    Due
    
    
    DueDue
    
    
    between
    
    
    between
    
    
    3 yearswithin
    
    
    1 and 2
    
    
    2 and 3
    
    
    and1 year
    
    
    years
    
    
    years
    
    
    beyond
    
    
    TotalAt 31 March 2008
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mNon derivative financial
liabilitiesBorrowings, excluding finance lease liabilities
    
    
    (3,379
    )
    
    
    (1,345
    )
    
    
    (1,380
    )
    
    
    (14,626
    )
    
    
    (20,730
    )Interest payments on borrowings (i)
    
    
    (822
    )
    
    
    (728
    )
    
    
    (663
    )
    
    
    (7,946
    )
    
    
    (10,159
    )Finance lease liabilities
    
    
    (266
    )
    
    
    (38
    )
    
    
    (34
    )
    
    
    (147
    )
    
    
    (485
    )Other non interest-bearing liabilities
    
    
    (2,190
    )
    
    
    (347
    )
    
    
    
    
    
    
    
    
    
    
    (2,537
    )Derivative financial
liabilitiesDerivative contracts  receipts
    
    
    990
    
    
    
    495
    
    
    
    710
    
    
    
    5,329
    
    
    
    7,524Derivative contracts  payments
    
    
    (647
    )
    
    
    (364
    )
    
    
    (587
    )
    
    
    (5,538
    )
    
    
    (7,136
    )Commodity contracts
    
    
    (490
    )
    
    
    (257
    )
    
    
    (188
    )
    
    
    (279
    )
    
    
    (1,214
    )Total at 31 March 2008
    
    
    (6,804
    )
    
    
    (2,584
    )
    
    
    (2,142
    )
    
    
    (23,207
    )
    
    
    (34,737
    )
 Due
    
    
    Due
    
    
    DueDue
    
    
    between
    
    
    between
    
    
    3 yearswithin
    
    
    1 and 2
    
    
    2 and 3
    
    
    and1 year
    
    
    years
    
    
    years
    
    
    beyond
    
    
    TotalAt 31 March 2007
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mNon derivative financial
liabilitiesBorrowings, excluding finance lease liabilities
    
    
    (776
    )
    
    
    (1,865
    )
    
    
    (1,013
    )
    
    
    (12,283
    )
    
    
    (15,937
    )Interest payments on borrowings (i)
    
    
    (686
    )
    
    
    (612
    )
    
    
    (548
    )
    
    
    (6,489
    )
    
    
    (8,335
    )Finance lease liabilities
    
    
    (17
    )
    
    
    (17
    )
    
    
    (12
    )
    
    
    (113
    )
    
    
    (159
    )Other non interest-bearing liabilities
    
    
    (1,525
    )
    
    
    (214
    )
    
    
    
    
    
    
    
    
    
    
    (1,739
    )Derivative financial
liabilitiesDerivative contracts  receipts
    
    
    382
    
    
    
    608
    
    
    
    299
    
    
    
    2,116
    
    
    
    3,405Derivative contracts  payments
    
    
    (443
    )
    
    
    (571
    )
    
    
    (318
    )
    
    
    (1,910
    )
    
    
    (3,242
    )Commodity contracts
    
    
    (56
    )
    
    
    (55
    )
    
    
    (38
    )
    
    
    (240
    )
    
    
    (389
    )Total at 31 March 2007
    
    
    (3,121
    )
    
    
    (2,726
    )
    
    
    (1,630
    )
    
    
    (18,919
    )
    
    
    (26,396
    )
 (i)
    
    The interest on borrowings is calculated based on borrowings held at 31 March without
taking account of future issues. Floating-rate interest is estimated using a future
interest rate curve as at 31 March.




---



##### Table of Contents



164   Notes to the consolidated financial statements continued
    
    National Grid plc
 33. Financial risk continued(d) Sensitivity analysis
    n
    
    the balance sheet sensitivity to interest rates relates only to derivative financial instruments
and available-for-sale investments, as debt and other deposits are carried at amortised cost and so
their carrying value does not change as interest rates move;n
    
    the sensitivity of accrued interest to movements in interest rates is calculated on net floating
rate exposures on debt, deposits and derivative instruments;n
    
    changes in the carrying value of derivatives from movements in interest rates designated as cash
flow hedges are assumed to be recorded fully within equity;n
    
    changes in the carrying value of derivative financial instruments designated as net investment
hedges from movements in interest rates are recorded in the income statement as they are designated
using the spot rather than the forward translation method. The impact of movements in the US dollar
to sterling exchange rate are recorded directly in equity;n
    
    changes in the carrying value of derivative financial instruments not in hedging relationships
only affect the income statement;n
    
    all other changes in the carrying value of derivative financial instruments designated as
hedges are fully effective with no impact on the income statement;n
    
    debt with a maturity below one year is floating rate for the accrued interest part of the
calculation;n
    
    the floating leg of any swap or any floating-rate debt is treated as not having any interest rate
already set, therefore a change in interest rates affects a full 12 month period for the accrued
interest portion of the sensitivity calculations; andn
    
    sensitivity to the retail price index does not take into account any changes to revenue or
operating costs that are affected by the retail price index or inflation generally.
  2008
    
    
    2007Income
    
    
    Other equity
    
    
    Income
    
    
    Other equitystatement
    
    
    reserves
    
    
    statement
    
    
    reserves-/+ £m
    
    
    -/+ £m
    
    
    -/+ £m
    
    
    -/+ £mUK retail price index +/- 0.50%
    
    
    16
    
    
    
    
    
    
    
    13
    
    
    
    UK interest rates +/- 0.50%
    
    
    46
    
    
    
    57
    
    
    
    35
    
    
    
    43US interest rates +/- 0.50%
    
    
    31
    
    
    
    7
    
    
    
    26
    
    
    
    8US dollar exchange rate +/- 10%
    
    
    18
    
    
    
    590
    
    
    
    36
    
    
    
    194
   (e) Capital and risk management




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##### Table of Contents



() Annual Report and Accounts 2007/08   165
 34. Commodity risk
    2008
    
    
    
    
    
    
    2007*Assets
    
    
    Liabilities
    
    
    Total
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £mCommodity purchase contracts accounted for as derivative contractsForward purchases of electricity
    
    
    
    
    
    
    (47
    )
    
    
    (47
    )
    
    
    (132
    )Forward purchases of gas
    
    
    116
    
    
    
    (39
    )
    
    
    77
    
    
    
    Forward purchases of electricity capacity
    
    
    1
    
    
    
    (12
    )
    
    
    (11
    )
    
    
    Derivative financial instruments linked to commodity pricesElectricity swaps
    
    
    
    
    
    
    (26
    )
    
    
    (26
    )
    
    
    (136
    )NYMEX gas and electricity futures
    
    
    19
    
    
    
    
    
    
    
    19
    
    
    
    136
    
    
    
    (124
    )
    
    
    12
    
    
    
    (268
    )The maturity of commodity contracts measured at fair value can be analysed as follows:
 2008
    
    
    
    
    
    
    2007*Assets
    
    
    Liabilities
    
    
    Total
    
    
    Total£m
    
    
    £m
    
    
    £m
    
    
    £mIn one year or less
    
    
    78
    
    
    
    (36
    )
    
    
    42
    
    
    
    (138
    )Current
    
    
    78
    
    
    
    (36
    )
    
    
    42
    
    
    
    (138
    )In more than one year, but not more than two years
    
    
    40
    
    
    
    (36
    )
    
    
    4
    
    
    
    (42
    )In more than two years, but not more than three years
    
    
    14
    
    
    
    (12
    )
    
    
    2
    
    
    
    (11
    )In more than three years, but not more than four years
    
    
    4
    
    
    
    (18
    )
    
    
    (14
    )
    
    
    (12
    )In more than four years, but not more than five years
    
    
    
    
    
    
    (12
    )
    
    
    (12
    )
    
    
    (12
    )In more than five years
    
    
    
    
    
    
    (10
    )
    
    
    (10
    )
    
    
    (53
    )Non-current
    
    
    58
    
    
    
    (88
    )
    
    
    (30
    )
    
    
    (130
    )Total
    
    
    136
    
    
    
    (124
    )
    
    
    12
    
    
    
    (268
    )
 *In 2007 all commodity contracts were liabilities
  2008
    
    2007Forward purchases of electricity (i)
    
    Nil
    
    NilForward purchases of gas (ii)
    
    197m Dth
    
    
    n/aForward purchases of electricity capacity
    
    23 GWh
    
    
    n/aElectricity swaps
    
    5,466 GWh
    
    6,845 GWhNYMEX electricity futures
    
    581 GWh
    
    
    n/aNYMEX gas futures
    
    19m Dth
    
    
    n/a
 (i)
    
    Forward electricity purchases have terms up to 12 years but do not have specified notional
quantities as these are defined by a percentage of unit output. The future obligations of these
contracts are £316m (2007: £389m).(ii)
    
    Forward gas purchases have terms up to seven years. The future obligations of these contracts
are £873m (2007: n/a).




---



##### Table of Contents



166   Notes to the consolidated financial statements continued
    
    National Grid plc
 34. Commodity risk continued
 2008
    
    
    2007Income
    
    
    Other equity
    
    
    Income
    
    
    Other equitystatement
    
    
    reserves
    
    
    statement
    
    
    reserves£m
    
    
    £m
    
    
    £m
    
    
    £m10% increase in commodity prices
    
    
    25
    
    
    
    (1
    )
    
    
    10
    
    
    
    10% reduction in commodity prices
    
    
    (22
    )
    
    
    1
    
    
    
    (10
    )
    
    
    
  35. Bonds and facilities
 Issuer
    
    Original Notional Value
    
    Description of instrument
    
    DueBondsBritish Transco Finance Inc.
    
    USD 300m
    
    6.625% Fixed Rate
    
    
    2018British Transco International Finance BV
    
    FRF 2,000m
    
    5.125% Fixed Rate
    
    
    2009USD 1,500m
    
    Zero Coupon Bond
    
    
    2021Brooklyn Union Gas Company(i)
    
    USD 153m
    
    NYSERDA 4.7% GFRBs Series 1996
    
    
    2021USD 400m
    
    KEDNY 5.6% Senior Unsecured Note
    
    
    2016KeySpan Corporation(i)
    
    USD 700m
    
    KeySpan MTN 7.625%
    
    
    2010USD 250m
    
    KeySpan MTN 8.00%
    
    
    2030USD 160m
    
    KeySpan 4.9% Notes
    
    
    2008USD 307m
    
    KeySpan 5.803% Notes
    
    
    2035USD 150m
    
    KeySpan 4.65% Notes
    
    
    2013USD 150m
    
    KeySpan 5.875% Notes
    
    
    2033KeySpan Gas East Corporation(i)
    
    USD 400m
    
    KeySpan 7.875% Gas East MTN Program
    
    
    2010(National Grid Energy Delivery Long Island)
    
    USD 100m
    
    KEDLI 5.6% Senior Unsecured Note
    
    
    2016KeySpan Ravenswood LLC(i)
    
    USD 412m
    
    Ravenswood Master Lease Notes
    
    
    2009National Grid Electricity Transmission plc
    
    EUR 600m
    
    4.125% Fixed Rate
    
    
    2008GBP 250m
    
    4.75% Fixed Rate
    
    
    2010GBP 300m
    
    2.983% Guaranteed Retail Price Index-Linked
    
    
    2018GBP 220m
    
    3.806% Retail Price Index-Linked
    
    
    2020GBP 450m
    
    5.875% Fixed Rate
    
    
    2024GBP 360m
    
    6.5% Fixed Rate
    
    
    2028GBP 70m
    
    3.589% Limited Retail Price Index-Linked
    
    
    2030GBP 50m
    
    2.817% Guaranteed Limited Retail Price Index-Linked
    
    
    2032GBP 75m
    
    5.0% Fixed Rate
    
    
    2035GBP 50m
    
    2.2280% Retail Price Index-Linked
    
    
    2035GBP 75m
    
    2.0353% Retail Price Index-Linked
    
    
    2035GBP 50m
    
    1.8204% Retail Price Index-Linked
    
    
    2035JPY 10,000m
    
    Callable Fixed Rate Notes
    
    
    2035GBP 200m
    
    1.6449% Retail Price Index-Linked
    
    
    2036GBP 50m
    
    1.6747% Retail Price Index-Linked
    
    
    2036GBP 50m
    
    1.819% Retail Price Index-Linked
    
    
    2056GBP 150m
    
    1.823% Retail Price Index-Linked
    
    
    2056GBP 50m
    
    1.797% Retail Price Index-Linked
    
    
    2056GBP 50m
    
    1.6574% Retail Price Index-Linked
    
    
    2056GBP 50m
    
    1.8055% Index-Linked (ii)
    
    
    2039GBP 150m
    
    1.8575% Index-Linked (ii)
    
    
    2039




---



##### Table of Contents



() Annual Report and Accounts 2007/08   167
 35. Bonds and facilities continued
 Issuer
    
    Original Notional Value
    
    Description of instrument
    
    DueNew England Power Company
    
    USD 136m
    
    Floating Rate Tax Exempt Pollution Control Revenue Bonds
    
    
    2020USD 106m
    
    Floating Rate Tax Exempt Pollution Control Revenue Bonds
    
    
    2022National Grid Gas Holdings plc
    
    GBP 503m
    
    Floating Rate (iii)
    
    
    2009GBP 503m
    
    4.1875% Index-Linked (iii)
    
    
    2022GBP 503m
    
    7.0% Fixed Rate (iii)
    
    
    2024National Grid Gas plc
    
    GBP 300m
    
    5.625% Fixed Rate (iv)
    
    
    2007GBP 250m
    
    8.875% Fixed Rate
    
    
    2008AUD 500m
    
    7.0% Fixed Rate
    
    
    2008GBP 300m
    
    5.375% Fixed Rate
    
    
    2009GBP 300m
    
    6.0% Fixed Rate
    
    
    2017GBP 275m
    
    8.75% Fixed Rate
    
    
    2025GBP 50m
    
    6.2% Fixed Rate
    
    
    2028GBP 100m
    
    1.6747% Retail Price Index-Linked
    
    
    2036GBP 115m
    
    1.7298% Retail Price Index-Linked
    
    
    2046GBP 100m
    
    1.6298% Retail Price Index-Linked
    
    
    2048GBP 100m
    
    1.5522% Retail Price Index-Linked
    
    
    2048GBP 300m
    
    1.754% Retail Price Index-Linked
    
    
    2036GBP 140m
    
    1.7864% Index-Linked
    
    
    2037GBP 50m
    
    1.7552% Index-Linked
    
    
    2037GBP 50m
    
    1.6783% Index-Linked
    
    
    2037GBP 100m
    
    1.9158% Index-Linked
    
    
    2037GBP 50m
    
    1.8928% Index-Linked
    
    
    2037GBP 65m
    
    1.9211% Index-Linked
    
    
    2037GBP 50m
    
    1.7642% Index-Linked
    
    
    2037GBP 100m
    
    1.7762% Index-Linked
    
    
    2037EUR 100m
    
    4.445% Fixed Rate (ii)
    
    
    2009GBP 100m
    
    1.7744% Index-Linked (ii)
    
    
    2039GBP 100m
    
    1.8625% Index-Linked (ii)
    
    
    2039GBP 75m
    
    1.5803% Index-Linked (ii)
    
    
    2052GBP 300m
    
    6.375% Fixed Rate (ii)
    
    
    2020GBP 503m
    
    Floating Rate (iii)
    
    
    2009GBP 503m
    
    4.1875% Index-Linked (iii)
    
    
    2022GBP 503m
    
    7.0% Fixed Rate (iii)
    
    
    2024National Grid plc
    
    CAD 200m
    
    4.98% Fixed Rate
    
    
    2011EUR 500m
    
    3.75% Fixed Rate
    
    
    2008EUR 1,000m
    
    4.125% Fixed Rate
    
    
    2013EUR 600m
    
    5.0% Fixed Rate
    
    
    2018EUR 500m
    
    4.375% Fixed Rate
    
    
    2020EUR 600m
    
    Floating Rate
    
    
    2010EUR 300m
    
    Floating Rate (iv)
    
    
    2008EUR 750m
    
    Floating Rate
    
    
    2012EUR 300m
    
    Floating Rate
    
    
    2009EUR 450m
    
    Floating Rate
    
    
    2008EUR 100m
    
    3.25% Fixed Rate
    
    
    2009GBP 300m
    
    5.25% Fixed Rate
    
    
    2011GBP 250m
    
    5.5% Fixed Rate
    
    
    2013USD 1,000m
    
    6.3% Fixed Rate
    
    
    2016USD 100m
    
    Floating Rate
    
    
    2011NGG Finance plc
    
    EUR 750m
    
    6.125% Fixed Rate
    
    
    2011Niagara Mohawk Power Corporation
    
    USD 200m
    
    8.875% Senior Notes (iv)
    
    
    2007USD 600m
    
    7.75% Senior Notes
    
    
    2008USD 116m
    
    7.2% Tax-Exempt First Mortgage Bonds (v)
    
    
    2029
 (i)
    
    These bonds were acquired as part of the KeySpan acquisition in August 2007.(ii)
    
    Issued during the year ended 31 March 2008.(iii)
    
    The bonds were transferred from National Grid Gas Holdings plc to National Grid Gas plc
during the year.(iv)
    
    Matured during the year ended 31 March 2008.(v)
    
    Secured against the assets of Niagara Mohawk Power Corporation.




---



##### Table of Contents



168   Notes to the consolidated financial statements continued
    
    National Grid plc
 35. Bonds and facilities continued
 Issuer
    
    Original Notional Value
    
    Description of instrument
    
    DueBank loans and other loansNational Grid plc
    
    USD 150m
    
    Floating Rate (i)
    
    
    2011National Grid Grain LNG Limited
    
    GBP 120m
    
    Floating Rate
    
    
    2014GBP 140m
    
    Floating Rate (i)
    
    
    2023National Grid Electricity Transmission plc
    
    GBP 200m
    
    Floating Rate
    
    
    2012GBP 200m
    
    Floating Rate
    
    
    2017National Grid Gas plc
    
    GBP 200m
    
    Floating Rate
    
    
    2012GBP 180m
    
    1.88% Retail Price Index-Linked
    
    
    2022GBP 190m
    
    2.14% Retail Price Index-Linked (i)
    
    
    2022JPY 10,000m
    
    4.31% Fixed Rate
    
    
    2029JPY 10,000m
    
    4.63% Fixed Rate
    
    
    2029National Grid USA
    
    EUR 100m
    
    Floating Rate (i)
    
    
    2011USD 150m
    
    Floating Rate (i)
    
    
    2011
 (i)
    
    Issued during the year ended 31 March 2008.
  Issuer
    
    Original Notional Value
    
    Description of instrument
    
    DueBonds and loans issued after 31 March 2008National Grid plc
    
    USD 150m
    
    Floating Rate
    
    
    2011National Grid Gas plc
    
    EUR 750m
    
    5.125% Fixed Rate
    
    
    2013GBP 300m
    
    6.00% Fixed Rate
    
    
    2038
 Borrowing facilities
 Undrawn committed borrowing facilities
 2008
    
    
    2007£m
    
    
    £mExpiring:In one year or less
    
    
    756
    
    
    
    762In more than one year, but not more than two years
    
    
    408
    
    
    
    In more than two years
    
    
    1,699
    
    
    
    1,4072,863
    
    
    
    2,169
  36. Share options and reward plans
  Active share plans




---



##### Table of Contents



() Annual Report and Accounts 2007/08   169
 36. Share options and reward plans continued
 Additional information in respect of active share schemes
 2008
    
    
    2007
    
    
    2006millions
    
    
    millions
    
    
    millionsPerformance Share PlanAwards of ordinary share equivalents at 1 April
    
    
    8.0
    
    
    
    9.2
    
    
    
    6.6Awards made
    
    
    3.1
    
    
    
    2.6
    
    
    
    3.1Lapses/forfeits
    
    
    (3.4
    )
    
    
    (3.8
    )
    
    
    (0.5
    )Awards vested
    
    
    (0.2
    )
    
    
    
    
    
    
    Awards of ordinary share equivalents at 31 March
    
    
    7.5
    
    
    
    8.0
    
    
    
    9.2Conditional awards available for release at 31 March
    
    
    
    
    
    
    
    
    
    
    Deferred Share PlanAwards of ordinary share equivalents at 1 April
    
    
    0.4
    
    
    
    
    
    
    
    Awards made
    
    
    0.2
    
    
    
    0.4
    
    
    
    Lapses/forfeits
    
    
    
    
    
    
    
    
    
    
    Awards vested
    
    
    (0.1
    )
    
    
    
    
    
    
    Awards of ordinary share equivalents at 31 March
    
    
    0.5
    
    
    
    0.4
    
    
    
    Conditional awards available for release at 31 March
    
    
    
    
    
    
    0.1
    
    
    
    Retention Award PlansAwards of ordinary share equivalents at 1 April
    
    
    
    
    
    
    
    
    
    
    Awards made
    
    
    0.8
    
    
    
    
    
    
    
    Lapses/forfeits
    
    
    
    
    
    
    
    
    
    
    Awards vested
    
    
    
    
    
    
    
    
    
    
    Awards of ordinary share equivalents at 31 March
    
    
    0.8
    
    
    
    
    
    
    
    Conditional awards available for release at 31 March
    
    
    
    
    
    
    
    
    
    
    
 Non-active share plans
 We also have a number of historical plans where awards are still outstanding but no further awards
will be granted. These include the Executive Share Option Plan and the Share Matching Plan.
 The Executive Share Option Plan applied to senior executives, including Executive Directors.
Options granted were subject to the achievement of performance targets related to TSR over a three
year period and those for 2000 are awaiting retest. The share options are generally exercisable
between the third and tenth anniversaries of the date of grant if the relevant performance target
is achieved.
 The Share Matching Plan applied to Executive Directors and other senior employees whereby a
predetermined part of each participants bonus entitlement was automatically deferred into National
Grid plc shares (known as qualifying shares) and a matching award may be exercised under the Plan
after a three year period provided the Director or senior employee remains employed by the Company
or its subsidiary undertakings.
  Additional information in respect of non-active share schemes
 2008
    
    
    2007
    
    
    2006000s
    
    
    000s
    
    
    000sShare Matching PlanAwards at 1 April
    
    
    384
    
    
    
    436
    
    
    
    342Awards granted
    
    
    1
    
    
    
    
    
    
    
    149Lapses/forfeits
    
    
    
    
    
    
    
    
    
    
    (1
    )Awards exercised
    
    
    (183
    )
    
    
    (52
    )
    
    
    (54
    )Awards at 31 March
    
    
    202
    
    
    
    384
    
    
    
    436Options exercisable at 31 March
    
    
    109
    
    
    
    164
    
    
    
    45Transitional Share Awards/Special Share AwardsAwards of ordinary share equivalents at 1 April
    
    
    77
    
    
    
    133
    
    
    
    234Awards made
    
    
    
    
    
    
    
    
    
    
    Lapses/forfeits
    
    
    (1
    )
    
    
    (6
    )
    
    
    (39
    )Awards vested
    
    
    (73
    )
    
    
    (50
    )
    
    
    (62
    )Awards of ordinary share equivalents at 31 March
    
    
    3
    
    
    
    77
    
    
    
    133Conditional awards available for release at 31 March
    
    
    3
    
    
    
    1
    
    
    
    




---



##### Table of Contents



170   Notes to the consolidated financial statements continued
    
    National Grid plc
 36. Share options and reward plans continued
 Share options
  Sharesave
    
    
    Executive Planscheme options
    
    
    optionsWeighted
    
    
    
    
    
    
    Weightedaverage
    
    
    
    
    
    
    average
    
    
    
    
    
    
    Totalprice
    
    
    
    
    
    
    price
    
    
    
    
    
    
    options£
    
    
    millions
    
    
    £
    
    
    millions
    
    
    millionsAt 31 March 2005
    
    
    3.35
    
    
    
    31.2
    
    
    
    4.86
    
    
    
    10.4
    
    
    
    41.6Granted
    
    
    4.34
    
    
    
    5.6
    
    
    
    
    
    
    
    
    
    
    
    5.6Lapsed  expired
    
    
    3.33
    
    
    
    (4.1
    )
    
    
    4.32
    
    
    
    (0.9
    )
    
    
    (5.0
    )Exercised
    
    
    3.25
    
    
    
    (12.8
    )
    
    
    4.04
    
    
    
    (2.3
    )
    
    
    (15.1
    )At 31 March 2006
    
    
    3.68
    
    
    
    19.9
    
    
    
    5.01
    
    
    
    7.2
    
    
    
    27.1Granted
    
    
    5.58
    
    
    
    4.2
    
    
    
    
    
    
    
    
    
    
    
    4.2Lapsed  expired
    
    
    3.82
    
    
    
    (0.9
    )
    
    
    5.48
    
    
    
    (1.9
    )
    
    
    (2.8
    )Exercised
    
    
    3.43
    
    
    
    (1.9
    )
    
    
    5.00
    
    
    
    (2.1
    )
    
    
    (4.0
    )At 31 March 2007
    
    
    4.07
    
    
    
    21.3
    
    
    
    4.74
    
    
    
    3.2
    
    
    
    24.5Granted
    
    
    6.55
    
    
    
    2.9
    
    
    
    
    
    
    
    
    
    
    
    2.9Lapsed  expired
    
    
    4.43
    
    
    
    (1.0
    )
    
    
    5.31
    
    
    
    (0.1
    )
    
    
    (1.1
    )Exercised
    
    
    3.37
    
    
    
    (6.3
    )
    
    
    4.45
    
    
    
    (1.1
    )
    
    
    (7.4
    )At 31 March 2008
    
    
    4.74
    
    
    
    16.9
    
    
    
    4.87
    
    
    
    2.0
    
    
    
    18.9Included within options outstanding at 31 March 2008, 31 March 2007 and 31 March 2006 were the following options that were exercisable:At 31 March 2008
    
    
    3.74
    
    
    
    0.5
    
    
    
    4.78
    
    
    
    1.3
    
    
    
    1.8At 31 March 2007
    
    
    3.17
    
    
    
    4.1
    
    
    
    4.63
    
    
    
    2.4
    
    
    
    6.5At 31 March 2006
    
    
    3.24
    
    
    
    0.5
    
    
    
    5.03
    
    
    
    7.1
    
    
    
    7.6
   2008
    
    
    2007
    
    
    2006£
    
    
    £
    
    
    £Sharesave scheme options
    
    
    7.79
    
    
    
    6.50
    
    
    
    5.89Executive Plan options
    
    
    7.68
    
    
    
    6.68
    
    
    
    5.50
 Additional information in respect of share options
 2008
    
    
    2007
    
    
    2006£m
    
    
    £m
    
    
    £mShare options exercisedCash received on exercise of all share options during the year
    
    
    23
    
    
    
    16
    
    
    
    54Tax benefits realised from share options exercised during the year
    
    
    10
    
    
    
    5
    
    
    
    5
  Weighted average
    
    
    
    
    
    
    Weighted averageexercise price of
    
    
    Number
    
    
    exercise price of
    
    
    Number
    
    
    Exercise price
    
    
    Normal datesexercisable options
    
    
    exercisable
    
    
    outstanding options
    
    
    outstanding
    
    
    per share
    
    
    of exercise£
    
    
    millions
    
    
    £
    
    
    millions
    
    
    pence
    
    
    yearsExecutive Plan
    
    
    3.91
    
    
    
    0.1
    
    
    
    3.91
    
    
    
    0.1
    
    
    
    375.8-490.0
    
    
    
    2002-20095.34
    
    
    
    0.2
    
    
    
    5.34
    
    
    
    0.2
    
    
    
    424.0-566.5
    
    
    
    2003-20105.27
    
    
    
    
    
    
    
    5.26
    
    
    
    0.6
    
    
    
    526.0-623.0
    
    
    
    2004-20114.70
    
    
    
    1.0
    
    
    
    4.70
    
    
    
    1.0
    
    
    
    434.3-481.5
    
    
    
    2006-20134.05
    
    
    
    
    
    
    
    4.05
    
    
    
    0.1
    
    
    
    405.0
    
    
    
    2007-20144.78
    
    
    
    1.3
    
    
    
    4.87
    
    
    
    2.0
  Share-based payment charges




---



##### Table of Contents



() Annual Report and Accounts 2007/08   171
 36. Share options and reward plans continued
 Awards under share option plans
  2008
    
    
    2007
    
    
    2006Average share price
    
    
    846.0p
    
    
    
    746.0p
    
    
    
    569.0pAverage exercise price
    
    
    655.0p
    
    
    
    558.0p
    
    
    
    434.0pAverage fair value
    
    
    190.0p
    
    
    
    166.8p
    
    
    
    128.0p
   2008
    
    
    2007
    
    
    2006Dividend yield (%)
    
    
    4.5
    
    
    
    4.5
    
    
    
    4.5Volatility (%)
    
    
    15.6-18.9
    
    
    
    15.6-18.9
    
    
    
    15.6-18.9Risk-free investment rate (%)
    
    
    4.2
    
    
    
    4.2
    
    
    
    4.2Average life (years)
    
    
    4.1
    
    
    
    3.9
    
    
    
    4.3
   (i)
    
    implied volatility in traded options over the Companys shares;(ii)
    
    historical volatility of the Companys shares from October 2002 (the date of the business
combination with Lattice Group plc); and(iii)
    
    implied volatility of comparator companies where options in their shares are traded.
 Awards under other share scheme plans
  2008
    
    
    2007
    
    
    2006Average share price
    
    
    766.9p
    
    
    
    594.0p
    
    
    
    535.6pAverage fair value
    
    
    522.8p
    
    
    
    403.1p
    
    
    
    358.0p
  2008
    
    
    2007
    
    
    2006Dividend yield (%)
    
    
    4.4
    
    
    
    4.4
    
    
    
    4.4Volatility (%)
    
    
    19.9
    
    
    
    19.9
    
    
    
    19.9Risk-free investment rate (%)
    
    
    4.1
    
    
    
    4.1
    
    
    
    4.1




---



##### Table of Contents



172   Notes to the consolidated financial statements continued
    
    National Grid plc
 37. Subsidiary undertakings, joint ventures and associates Principal subsidiary undertakings
  Principal activityNational Grid Gas plc (i)
    
    
    
    Transmission and distribution of gasNational Grid Electricity Transmission plc (i)
    
    
    
    Transmission of electricity in England and WalesNew England Power Company (incorporated in the US) (i)
    
    
    
    Transmission of electricityMassachusetts Electric Company (incorporated in the US) (i)
    
    
    
    Distribution of electricityThe Narragansett Electric Company (incorporated in the US) (i)
    
    
    
    Distribution of electricityNiagara Mohawk Power Corporation (incorporated in the US) (i)
    
    
    
    Distribution and transmission of electricity and gasNational Grid Metering Limited (i)
    
    
    
    Metering servicesOnStream Metering Services Limited (i)
    
    
    
    Metering servicesNational Grid Grain LNG Limited (i)
    
    
    
    LNG import terminalBoston Gas Company (incorporated in the US) (i)
    
    
    
    Distribution of gasNational Grid Electric Services LLC (incorporated in the US) (i)
    
    
    
    Transmission and distribution of electricityNational Grid Generation LLC (incorporated in the US) (i)
    
    
    
    Generation of electricityNew England Electric Transmission Corporation (incorporated in the US) (i)
    
    
    
    Transmission of electricityNantucket Electric Company (incorporated in the US) (i)
    
    
    
    Distribution of electricityKeySpan Gas East Corporation (incorporated in the US) (i)
    
    
    
    Distribution of gasKeySpan-Ravenswood, LLC (incorporated in the US) (i)
    
    
    
    Electricity generationThe Brooklyn Union Gas Company (incorporated in the US) (i)
    
    
    
    Distribution of gasNGG Finance plc (ii)
    
    
    
    FinancingBritish Transco Finance, Inc. (incorporated in the US) (i)
    
    
    
    FinancingBritish Transco International Finance B.V. (incorporated in The
Netherlands) (i)
    
    
    
    FinancingNational Grid Property Limited (i)
    
    
    
    Property servicesNational Grid Holdings One plc (ii)
    
    
    
    Holding companyLattice Group plc (i)
    
    
    
    Holding companyNational Grid USA (incorporated in the US) (i)
    
    
    
    Holding companyNiagara Mohawk Holdings, Inc. (incorporated in the US) (i)
    
    
    
    Holding companyNational Grid Commercial Holdings Limited (i)
    
    
    
    Holding companyNational Grid Gas Holdings plc (i)
    
    
    
    Holding companyNational Grid (US) Holdings Limited (ii)
    
    
    
    Holding companyNational Grid Holdings Limited (i)
    
    
    
    Holding companyKeySpan Corporation (incorporated in the US) (i)
    
    
    
    Holding company
 
 (i)
    
    Issued ordinary share capital held by subsidiary undertakings.(ii)
    
    Issued ordinary share capital held by National Grid plc. Principal joint ventures and associates
 % ownership
    
    Principal activityBlue  ng (Holdings) Limited
    
    50
    
    Holding companyBritNed Development Limited
    
    50
    
    Interconnector between UK and NetherlandsMillennium Pipeline Company, LLC (incorporated in the US)
    
    26.25
    
    Gas pipeline constructionIroquois Gas Transmission System, L.P. (incorporated in the US)
    
    20.4
    
    Transmission of gas




---



##### Table of Contents



() Annual Report and Accounts 2007/08   173
 38. National Grid Gas plc and Niagara Mohawk Power Corporation additional disclosures
       Summary
income statement for the year ended 31 March 2008  IFRS
 Parent
    
    
    
    
    
    
    
    
    
    
    Subsidiaryguarantor
    
    
    Issuer of notes
    
    
    guarantorNiagaraNational
    
    
    Mohawk
    
    
    British
    
    
    National
    
    
    
    
    
    
    
    
    
    
    NationalGrid
    
    
    Power
    
    
    Transco
    
    
    Grid Gas
    
    
    Other
    
    
    Consolidation
    
    
    Gridplc
    
    
    Corporation
    
    
    Finance Inc.
    
    
    plc
    
    
    subsidiaries
    
    
    adjustments
    
    
    consolidated£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    
    
    
    
    2,108
    
    
    
    
    
    
    
    2,459
    
    
    
    7,104
    
    
    
    (248
    )
    
    
    11,423Other operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    67
    
    
    
    
    
    
    
    75Operating costsDepreciation and amortisation
    
    
    
    
    
    
    (101
    )
    
    
    
    
    
    
    (432
    )
    
    
    (461
    )
    
    
    
    
    
    
    (994
    )Payroll costs
    
    
    
    
    
    
    (201
    )
    
    
    
    
    
    
    (226
    )
    
    
    (752
    )
    
    
    
    
    
    
    (1,179
    )Purchases of electricity
    
    
    
    
    
    
    (609
    )
    
    
    
    
    
    
    
    
    
    
    (744
    )
    
    
    
    
    
    
    (1,353
    )Purchases of gas
    
    
    
    
    
    
    (297
    )
    
    
    
    
    
    
    (110
    )
    
    
    (1,604
    )
    
    
    
    
    
    
    (2,011
    )Rates and property taxes
    
    
    
    
    
    
    (93
    )
    
    
    
    
    
    
    (227
    )
    
    
    (288
    )
    
    
    
    
    
    
    (608
    )Electricity transmission services scheme direct costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (574
    )
    
    
    
    
    
    
    (574
    )Payments to Scottish electricity transmission
network owners
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (226
    )
    
    
    
    
    
    
    (226
    )Other operating charges
    
    
    
    
    
    
    (248
    )
    
    
    
    
    
    
    (514
    )
    
    
    (1,075
    )
    
    
    248
    
    
    
    (1,589
    )
    
    
    
    (1,549
    )
    
    
    
    
    
    
    (1,509
    )
    
    
    (5,724
    )
    
    
    248
    
    
    
    (8,534
    )Operating profit
    
    
    
    
    
    
    559
    
    
    
    
    
    
    
    958
    
    
    
    1,447
    
    
    
    
    
    
    
    2,964Net finance costs
    
    
    (116
    )
    
    
    (116
    )
    
    
    
    
    
    
    (298
    )
    
    
    (246
    )
    
    
    
    
    
    
    (776
    )Dividends receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500
    
    
    
    (500
    )
    
    
    Interest in equity accounted affiliates
    
    
    1,711
    
    
    
    
    
    
    
    
    
    
    
    (27
    )
    
    
    (7
    )
    
    
    (1,673
    )
    
    
    4Profit before taxation
    
    
    1,595
    
    
    
    443
    
    
    
    
    
    
    
    633
    
    
    
    1,694
    
    
    
    (2,173
    )
    
    
    2,192Taxation
    
    
    (14
    )
    
    
    (194
    )
    
    
    
    
    
    
    (141
    )
    
    
    (262
    )
    
    
    
    
    
    
    (611
    )Profit for the year from continuing operations
    
    
    1,581
    
    
    
    249
    
    
    
    
    
    
    
    492
    
    
    
    1,432
    
    
    
    (2,173
    )
    
    
    1,581Profit for the year from discontinued operations
    
    
    1,618
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    1,615
    
    
    
    (1,618
    )
    
    
    1,618Profit for the year
    
    
    3,199
    
    
    
    249
    
    
    
    
    (i)
    
    
    495
    
    
    
    3,047
    
    
    
    (3,791
    )
    
    
    3,199Attributable to:Equity shareholders
    
    
    3,196
    
    
    
    249
    
    
    
    
    
    
    
    495
    
    
    
    3,044
    
    
    
    (3,788
    )
    
    
    3,196Minority interests
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    (3
    )
    
    
    33,199
    
    
    
    249
    
    
    
    
    (i)
    
    
    495
    
    
    
    3,047
    
    
    
    (3,791
    )
    
    
    3,199
 
 (i)
    
    Profit for the year for British Transco Finance Inc. is £nil as interest payable to
external bond holders is offset by interest receivable on loans to National Grid Gas plc.




---



##### Table of Contents



174   Notes to the consolidated financial statements continued
    
    National Grid plc
 38. National Grid Gas plc
and Niagara Mohawk Power Corporation additionaldisclosures continued
 Summary
income statement for the year ended 31 March 2007  IFRS
 Parent
    
    
    
    
    
    
    
    
    
    
    Subsidiaryguarantor
    
    
    Issuer of notes
    
    
    guarantorNiagaraNational
    
    
    Mohawk
    
    
    British
    
    
    National
    
    
    
    
    
    
    
    
    
    
    NationalGrid
    
    
    Power
    
    
    Transco
    
    
    Grid Gas
    
    
    Other
    
    
    Consolidation
    
    
    Gridplc
    
    
    Corporation
    
    
    Finance Inc.
    
    
    plc
    
    
    subsidiaries
    
    
    adjustments
    
    
    consolidated£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    
    
    
    
    2,189
    
    
    
    
    
    
    
    2,231
    
    
    
    4,593
    
    
    
    (318
    )
    
    
    8,695Other operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    77
    
    
    
    
    
    
    
    83Operating costsDepreciation and amortisation
    
    
    
    
    
    
    (102
    )
    
    
    
    
    
    
    (389
    )
    
    
    (380
    )
    
    
    
    
    
    
    (871
    )Payroll costs
    
    
    
    
    
    
    (209
    )
    
    
    
    
    
    
    (228
    )
    
    
    (383
    )
    
    
    
    
    
    
    (820
    )Purchases of electricity
    
    
    
    
    
    
    (633
    )
    
    
    
    
    
    
    
    
    
    
    (960
    )
    
    
    
    
    
    
    (1,593
    )Purchases of gas
    
    
    
    
    
    
    (309
    )
    
    
    
    
    
    
    (113
    )
    
    
    (122
    )
    
    
    
    
    
    
    (544
    )Rates and property taxes
    
    
    
    
    
    
    (104
    )
    
    
    
    
    
    
    (211
    )
    
    
    (157
    )
    
    
    
    
    
    
    (472
    )Electricity transmission services scheme direct costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (558
    )
    
    
    
    
    
    
    (558
    )Payments to Scottish electricity transmission
network owners
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (237
    )
    
    
    
    
    
    
    (237
    )Other operating charges
    
    
    (2
    )
    
    
    (154
    )
    
    
    
    
    
    
    (531
    )
    
    
    (801
    )
    
    
    318
    
    
    
    (1,170
    )(2
    )
    
    
    (1,511
    )
    
    
    
    
    
    
    (1,472
    )
    
    
    (3,598
    )
    
    
    318
    
    
    
    (6,265
    )Operating profit
    
    
    (2
    )
    
    
    678
    
    
    
    
    
    
    
    765
    
    
    
    1,072
    
    
    
    
    
    
    
    2,513Net finance costs
    
    
    18
    
    
    
    (131
    )
    
    
    
    
    
    
    (280
    )
    
    
    (371
    )
    
    
    
    
    
    
    (764
    )Dividends receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,850
    
    
    
    (1,850
    )
    
    
    Interest in equity accounted affiliates
    
    
    1,286
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    (1
    )
    
    
    (1,298
    )
    
    
    2Profit before taxation
    
    
    1,302
    
    
    
    547
    
    
    
    
    
    
    
    500
    
    
    
    2,550
    
    
    
    (3,148
    )
    
    
    1,751Taxation
    
    
    8
    
    
    
    (238
    )
    
    
    
    
    
    
    (239
    )
    
    
    28
    
    
    
    
    
    
    
    (441
    )Profit for the year from continuing operations
    
    
    1,310
    
    
    
    309
    
    
    
    
    
    
    
    261
    
    
    
    2,578
    
    
    
    (3,148
    )
    
    
    1,310Profit for the year from discontinued operations
    
    
    86
    
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    73
    
    
    
    (86
    )
    
    
    86Profit for the year
    
    
    1,396
    
    
    
    309
    
    
    
    
    (i)
    
    
    274
    
    
    
    2,651
    
    
    
    (3,234
    )
    
    
    1,396Attributable to:Equity shareholders
    
    
    1,394
    
    
    
    309
    
    
    
    
    
    
    
    274
    
    
    
    2,649
    
    
    
    (3,232
    )
    
    
    1,394Minority interests
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    (2
    )
    
    
    21,396
    
    
    
    309
    
    
    
    
    (i)
    
    
    274
    
    
    
    2,651
    
    
    
    (3,234
    )
    
    
    1,396
 
 (i)
    
    Profit for the year for British Transco Finance Inc. is £nil as interest payable to
external bond holders is offset by interest receivable on loans to National Grid Gas plc.




---



##### Table of Contents



() Annual Report and Accounts 2007/08   175
 38. National Grid Gas plc and Niagara Mohawk Power Corporation additional disclosures continued
 Summary income statement for the year ended 31 March 2006  IFRS
 Parent
    
    
    
    
    
    
    
    
    
    
    Subsidiaryguarantor
    
    
    Issuer of notes
    
    
    guarantorNiagaraNational
    
    
    Mohawk
    
    
    British
    
    
    National
    
    
    
    
    
    
    
    
    
    
    NationalGrid
    
    
    Power
    
    
    Transco
    
    
    Grid Gas
    
    
    Other
    
    
    Consolidation
    
    
    Gridplc
    
    
    Corporation
    
    
    Finance Inc.
    
    
    plc
    
    
    subsidiaries
    
    
    adjustments
    
    
    consolidated£m*
    
    
    £m*
    
    
    £m*
    
    
    £m*
    
    
    £m*
    
    
    £m*
    
    
    £m*Revenue
    
    
    1
    
    
    
    2,360
    
    
    
    
    
    
    
    2,281
    
    
    
    4,589
    
    
    
    (363
    )
    
    
    8,868Other operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    76
    
    
    
    
    
    
    
    80Operating costsDepreciation and amortisation
    
    
    
    
    
    
    (105
    )
    
    
    
    
    
    
    (396
    )
    
    
    (387
    )
    
    
    
    
    
    
    (888
    )Payroll costs
    
    
    
    
    
    
    (221
    )
    
    
    
    
    
    
    (213
    )
    
    
    (420
    )
    
    
    
    
    
    
    (854
    )Purchases of electricity
    
    
    
    
    
    
    (694
    )
    
    
    
    
    
    
    
    
    
    
    (1,283
    )
    
    
    
    
    
    
    (1,977
    )Purchases of gas
    
    
    
    
    
    
    (418
    )
    
    
    
    
    
    
    (148
    )
    
    
    
    
    
    
    
    
    
    
    (566
    )Rates and property taxes
    
    
    
    
    
    
    (104
    )
    
    
    
    
    
    
    (180
    )
    
    
    (153
    )
    
    
    
    
    
    
    (437
    )Electricity transmission services scheme direct costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (536
    )
    
    
    
    
    
    
    (536
    )Payments to Scottish electricity transmission
network owners
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (259
    )
    
    
    
    
    
    
    (259
    )Other operating charges
    
    
    
    
    
    
    (281
    )
    
    
    
    
    
    
    (983
    )
    
    
    (588
    )
    
    
    795
    
    
    
    (1,057
    )
    
    
    
    (1,823
    )
    
    
    
    
    
    
    (1,920
    )
    
    
    (3,626
    )
    
    
    795
    
    
    
    (6,574
    )Operating profit
    
    
    1
    
    
    
    537
    
    
    
    
    
    
    
    365
    
    
    
    1,039
    
    
    
    432
    
    
    
    2,374Net finance costs
    
    
    (1
    )
    
    
    (130
    )
    
    
    
    
    
    
    (193
    )
    
    
    (335
    )
    
    
    
    
    
    
    (659
    )Dividends receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    310
    
    
    
    (310
    )
    
    
    Interest in equity accounted affiliates
    
    
    1,149
    
    
    
    
    
    
    
    
    
    
    
    441
    
    
    
    3
    
    
    
    (1,590
    )
    
    
    3Profit before taxation
    
    
    1,149
    
    
    
    407
    
    
    
    
    
    
    
    613
    
    
    
    1,017
    
    
    
    (1,468
    )
    
    
    1,718Taxation
    
    
    34
    
    
    
    (148
    )
    
    
    
    
    
    
    (123
    )
    
    
    (298
    )
    
    
    
    
    
    
    (535
    )Profit for the year from continuing operations
    
    
    1,183
    
    
    
    259
    
    
    
    
    
    
    
    490
    
    
    
    719
    
    
    
    (1,468
    )
    
    
    1,183Profit for the year from discontinued operations
    
    
    2,667
    
    
    
    
    
    
    
    
    
    
    
    2,494
    
    
    
    185
    
    
    
    (2,679
    )
    
    
    2,667Profit for the year
    
    
    3,850
    
    
    
    259
    
    
    
    
    (i)
    
    
    2,984
    
    
    
    904
    
    
    
    (4,147
    )
    
    
    3,850Attributable to:Equity shareholders
    
    
    3,848
    
    
    
    259
    
    
    
    
    
    
    
    2,984
    
    
    
    902
    
    
    
    (4,145
    )
    
    
    3,848Minority interests
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    (2
    )
    
    
    23,850
    
    
    
    259
    
    
    
    
    (i)
    
    
    2,984
    
    
    
    904
    
    
    
    (4,147
    )
    
    
    3,850
  (i)
    
    Profit for the year for British Transco Finance Inc. is £nil as interest payable to external
bond holders is offset by interest receivable on loans to National Grid Gas plc.




---



##### Table of Contents



176   Notes to the consolidated financial statements continued
    
    National Grid plc
 38. National Grid Gas plc and Niagara Mohawk Power Corporation additional disclosures continued
 Balance sheet as at 31 March 2008  IFRS
 Parent
    
    
    
    
    
    
    
    
    
    
    Subsidiaryguarantor
    
    
    Issuer of notes
    
    
    guarantorNiagaraNational
    
    
    Mohawk
    
    
    British
    
    
    National
    
    
    
    
    
    
    
    
    
    
    NationalGrid
    
    
    Power
    
    
    Transco
    
    
    Grid Gas
    
    
    Other
    
    
    Consolidation
    
    
    Gridplc
    
    
    Corporation
    
    
    Finance Inc.
    
    
    plc
    
    
    subsidiaries
    
    
    adjustments
    
    
    consolidated£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mNon-current assetsGoodwill
    
    
    
    
    
    
    564
    
    
    
    
    
    
    
    
    
    
    
    3,274
    
    
    
    
    
    
    
    3,838Other intangible assets
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    56
    
    
    
    204
    
    
    
    
    
    
    
    272Property, plant and equipment
    
    
    
    
    
    
    2,756
    
    
    
    
    
    
    
    9,761
    
    
    
    11,816
    
    
    
    
    
    
    
    24,333Deferred tax assets
    
    
    3
    
    
    
    67
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (70
    )
    
    
    Other non-current assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,101
    
    
    
    
    
    
    
    1,101Amounts owed by subsidiary undertakings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,630
    
    
    
    1,067
    
    
    
    (6,697
    )
    
    
    Financial and other investments (i)
    
    
    3,189
    
    
    
    20
    
    
    
    
    
    
    
    19
    
    
    
    11,082
    
    
    
    (14,059
    )
    
    
    251Derivative financial assets
    
    
    751
    
    
    
    
    
    
    
    
    
    
    
    101
    
    
    
    211
    
    
    
    
    
    
    
    1,063Total non-current assets
    
    
    3,943
    
    
    
    3,419
    
    
    
    
    
    
    
    15,567
    
    
    
    28,755
    
    
    
    (20,826
    )
    
    
    30,858Current assetsInventories and current intangible assets
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    31
    
    
    
    406
    
    
    
    
    
    
    
    455Trade and other receivables
    
    
    3
    
    
    
    401
    
    
    
    
    
    
    
    254
    
    
    
    1,611
    
    
    
    
    
    
    
    2,269Amounts owed by subsidiary undertakings
    
    
    11,350
    
    
    
    
    
    
    
    154
    
    
    
    125
    
    
    
    6,465
    
    
    
    (18,094
    )
    
    
    Financial and other investments
    
    
    787
    
    
    
    2
    
    
    
    
    
    
    
    499
    
    
    
    807
    
    
    
    
    
    
    
    2,095Derivative financial assets
    
    
    341
    
    
    
    
    
    
    
    
    
    
    
    81
    
    
    
    41
    
    
    
    
    
    
    
    463Cash and cash equivalents
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    3
    
    
    
    166
    
    
    
    
    
    
    
    174Total current assets
    
    
    12,481
    
    
    
    426
    
    
    
    154
    
    
    
    993
    
    
    
    9,496
    
    
    
    (18,094
    )
    
    
    5,456Assets of businesses held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,508
    
    
    
    
    
    
    
    1,508Total assets
    
    
    16,424
    
    
    
    3,845
    
    
    
    154
    
    
    
    16,560
    
    
    
    39,759
    
    
    
    (38,920
    )
    
    
    37,822Current liabilitiesBorrowings
    
    
    (1,019
    )
    
    
    (351
    )
    
    
    (3
    )
    
    
    (680
    )
    
    
    (1,829
    )
    
    
    
    
    
    
    (3,882
    )Derivative financial liabilities
    
    
    (79
    )
    
    
    
    
    
    
    
    
    
    
    (27
    )
    
    
    (8
    )
    
    
    
    
    
    
    (114
    )Trade and other payables
    
    
    (51
    )
    
    
    (231
    )
    
    
    
    
    
    
    (580
    )
    
    
    (1,577
    )
    
    
    
    
    
    
    (2,439
    )Amounts owed to subsidiary undertakings
    
    
    (4,804
    )
    
    
    (170
    )
    
    
    
    
    
    
    (1,490
    )
    
    
    (11,630
    )
    
    
    18,094
    
    
    
    Current tax liabilities
    
    
    
    
    
    
    (41
    )
    
    
    
    
    
    
    (27
    )
    
    
    (230
    )
    
    
    
    
    
    
    (298
    )Provisions
    
    
    
    
    
    
    (16
    )
    
    
    
    
    
    
    (50
    )
    
    
    (323
    )
    
    
    
    
    
    
    (389
    )Total current liabilities
    
    
    (5,953
    )
    
    
    (809
    )
    
    
    (3
    )
    
    
    (2,854
    )
    
    
    (15,597
    )
    
    
    18,094
    
    
    
    (7,122
    )Non-current liabilitiesBorrowings
    
    
    (4,460
    )
    
    
    (417
    )
    
    
    (151
    )
    
    
    (4,906
    )
    
    
    (7,187
    )
    
    
    
    
    
    
    (17,121
    )Derivative financial liabilities
    
    
    (179
    )
    
    
    
    
    
    
    
    
    
    
    (83
    )
    
    
    (57
    )
    
    
    
    
    
    
    (319
    )Other non-current liabilities
    
    
    
    
    
    
    (188
    )
    
    
    
    
    
    
    (1,043
    )
    
    
    (490
    )
    
    
    
    
    
    
    (1,721
    )Amounts owed to subsidiary undertakings
    
    
    (452
    )
    
    
    (615
    )
    
    
    
    
    
    
    
    
    
    
    (5,630
    )
    
    
    6,697
    
    
    
    Deferred tax liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,630
    )
    
    
    (1,847
    )
    
    
    70
    
    
    
    (3,407
    )Pensions and other post-retirement benefits
    
    
    
    
    
    
    (784
    )
    
    
    
    
    
    
    
    
    
    
    (962
    )
    
    
    
    
    
    
    (1,746
    )Provisions
    
    
    
    
    
    
    (166
    )
    
    
    
    
    
    
    (64
    )
    
    
    (713
    )
    
    
    
    
    
    
    (943
    )Total non-current liabilities
    
    
    (5,091
    )
    
    
    (2,170
    )
    
    
    (151
    )
    
    
    (7,726
    )
    
    
    (16,886
    )
    
    
    6,767
    
    
    
    (25,257
    )Liabilities of businesses held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (63
    )
    
    
    
    
    
    
    (63
    )Total liabilities
    
    
    (11,044
    )
    
    
    (2,979
    )
    
    
    (154
    )
    
    
    (10,580
    )
    
    
    (32,546
    )
    
    
    24,861
    
    
    
    (32,442
    )Net assets (i)
    
    
    5,380
    
    
    
    866
    
    
    
    
    
    
    
    5,980
    
    
    
    7,213
    
    
    
    (14,059
    )
    
    
    5,380EquityCalled up share capital
    
    
    294
    
    
    
    94
    
    
    
    
    
    
    
    45
    
    
    
    182
    
    
    
    (321
    )
    
    
    294Share premium account
    
    
    1,371
    
    
    
    1,486
    
    
    
    
    
    
    
    204
    
    
    
    3,642
    
    
    
    (5,332
    )
    
    
    1,371Retained earnings
    
    
    8,949
    
    
    
    (723
    )
    
    
    
    
    
    
    4,433
    
    
    
    10,055
    
    
    
    (13,765
    )
    
    
    8,949Other equity reserves
    
    
    (5,252
    )
    
    
    9
    
    
    
    
    
    
    
    1,298
    
    
    
    (6,666
    )
    
    
    5,359
    
    
    
    (5,252
    )Total shareholders equity (i)
    
    
    5,362
    
    
    
    866
    
    
    
    
    
    
    
    5,980
    
    
    
    7,213
    
    
    
    (14,059
    )
    
    
    5,362Minority interests
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18Total equity (i)
    
    
    5,380
    
    
    
    866
    
    
    
    
    
    
    
    5,980
    
    
    
    7,213
    
    
    
    (14,059
    )
    
    
    5,380
 (i)
    
    Includes parent Companys subsidiaries, associates and joint ventures presented on an equity
accounted basis.




---



##### Table of Contents



() Annual Report and Accounts 2007/08   177
 38. National Grid Gas plc and Niagara Mohawk Power Corporation additionaldisclosures continued
 Balance sheet as at 31 March 2007  IFRS
 Parent
    
    
    
    
    
    
    
    
    
    
    Subsidiaryguarantor
    
    
    Issuer of notes
    
    
    guarantorNiagaraNational
    
    
    Mohawk
    
    
    British
    
    
    National
    
    
    
    
    
    
    
    
    
    
    NationalGrid
    
    
    Power
    
    
    Transco
    
    
    Grid Gas
    
    
    Other
    
    
    Consolidation
    
    
    Gridplc
    
    
    Corporation
    
    
    Finance Inc.
    
    
    plc
    
    
    subsidiaries
    
    
    adjustments
    
    
    consolidated£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mNon-current assetsGoodwill
    
    
    
    
    
    
    569
    
    
    
    
    
    
    
    
    
    
    
    911
    
    
    
    
    
    
    
    1,480Other intangible assets
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    41
    
    
    
    91
    
    
    
    
    
    
    
    144Property, plant and equipment
    
    
    
    
    
    
    2,624
    
    
    
    
    
    
    
    8,829
    
    
    
    7,442
    
    
    
    
    
    
    
    18,895Deferred tax assets
    
    
    3
    
    
    
    143
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (146
    )
    
    
    Other non-current assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    71
    
    
    
    
    
    
    
    73Amounts owed by subsidiary undertakings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,611
    
    
    
    620
    
    
    
    (6,231
    )
    
    
    Financial and other investments (i)
    
    
    1,508
    
    
    
    20
    
    
    
    
    
    
    
    47
    
    
    
    11,385
    
    
    
    (12,823
    )
    
    
    137Derivative financial assets
    
    
    192
    
    
    
    
    
    
    
    
    
    
    
    65
    
    
    
    123
    
    
    
    
    
    
    
    380Total non-current assets
    
    
    1,703
    
    
    
    3,368
    
    
    
    
    
    
    
    14,595
    
    
    
    20,643
    
    
    
    (19,200
    )
    
    
    21,109Current assetsInventories and current intangible assets
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    28
    
    
    
    64
    
    
    
    
    
    
    
    108Trade and other receivables
    
    
    3
    
    
    
    377
    
    
    
    
    
    
    
    238
    
    
    
    618
    
    
    
    
    
    
    
    1,236Amounts owed by subsidiary undertakings
    
    
    9,047
    
    
    
    
    
    
    
    156
    
    
    
    92
    
    
    
    5,432
    
    
    
    (14,727
    )
    
    
    Financial and other investments
    
    
    279
    
    
    
    19
    
    
    
    
    
    
    
    305
    
    
    
    1,495
    
    
    
    
    
    
    
    2,098Derivative financial assets
    
    
    119
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    149
    
    
    
    
    
    
    
    277Cash and cash equivalents
    
    
    751
    
    
    
    4
    
    
    
    
    
    
    
    172
    
    
    
    666
    
    
    
    
    
    
    
    1,593Total current assets
    
    
    10,199
    
    
    
    416
    
    
    
    156
    
    
    
    844
    
    
    
    8,424
    
    
    
    (14,727
    )
    
    
    5,312Assets of businesses held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,968
    
    
    
    
    
    
    
    1,968Total assets
    
    
    11,902
    
    
    
    3,784
    
    
    
    156
    
    
    
    15,439
    
    
    
    31,035
    
    
    
    (33,927
    )
    
    
    28,389Current liabilitiesBorrowings
    
    
    (360
    )
    
    
    (120
    )
    
    
    (3
    )
    
    
    (353
    )
    
    
    (195
    )
    
    
    
    
    
    
    (1,031
    )Derivative financial liabilities
    
    
    (29
    )
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    (194
    )
    
    
    
    
    
    
    (235
    )Trade and other payables
    
    
    (23
    )
    
    
    (306
    )
    
    
    
    
    
    
    (587
    )
    
    
    (936
    )
    
    
    
    
    
    
    (1,852
    )Amounts owed to subsidiary undertakings
    
    
    (2,776
    )
    
    
    (216
    )
    
    
    
    
    
    
    (2,440
    )
    
    
    (9,295
    )
    
    
    14,727
    
    
    
    Current tax liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34
    )
    
    
    (41
    )
    
    
    
    
    
    
    (75
    )Provisions
    
    
    
    
    
    
    (13
    )
    
    
    
    
    
    
    (31
    )
    
    
    (123
    )
    
    
    
    
    
    
    (167
    )Total current liabilities
    
    
    (3,188
    )
    
    
    (655
    )
    
    
    (3
    )
    
    
    (3,457
    )
    
    
    (10,784
    )
    
    
    14,727
    
    
    
    (3,360
    )Non-current liabilitiesBorrowings
    
    
    (4,524
    )
    
    
    (710
    )
    
    
    (153
    )
    
    
    (3,219
    )
    
    
    (6,080
    )
    
    
    
    
    
    
    (14,686
    )Derivative financial liabilities
    
    
    (54
    )
    
    
    
    
    
    
    
    
    
    
    (83
    )
    
    
    (47
    )
    
    
    
    
    
    
    (184
    )Other non-current liabilities
    
    
    
    
    
    
    (148
    )
    
    
    
    
    
    
    (1,012
    )
    
    
    (315
    )
    
    
    
    
    
    
    (1,475
    )Amounts owed to subsidiary undertakings
    
    
    
    
    
    
    (620
    )
    
    
    
    
    
    
    
    
    
    
    (5,611
    )
    
    
    6,231
    
    
    
    Deferred tax liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,627
    )
    
    
    (908
    )
    
    
    146
    
    
    
    (2,389
    )Pensions and other post-retirement benefits
    
    
    
    
    
    
    (876
    )
    
    
    
    
    
    
    
    
    
    
    (406
    )
    
    
    
    
    
    
    (1,282
    )Provisions
    
    
    
    
    
    
    (130
    )
    
    
    
    
    
    
    (74
    )
    
    
    (223
    )
    
    
    
    
    
    
    (427
    )Total non-current liabilities
    
    
    (4,578
    )
    
    
    (2,484
    )
    
    
    (153
    )
    
    
    (6,015
    )
    
    
    (13,590
    )
    
    
    6,377
    
    
    
    (20,443
    )Liabilities of businesses held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (450
    )
    
    
    
    
    
    
    (450
    )Total liabilities
    
    
    (7,766
    )
    
    
    (3,139
    )
    
    
    (156
    )
    
    
    (9,472
    )
    
    
    (24,824
    )
    
    
    21,104
    
    
    
    (24,253
    )Net assets (i)
    
    
    4,136
    
    
    
    645
    
    
    
    
    
    
    
    5,967
    
    
    
    6,211
    
    
    
    (12,823
    )
    
    
    4,136EquityCalled up share capital
    
    
    308
    
    
    
    95
    
    
    
    
    
    
    
    45
    
    
    
    181
    
    
    
    (321
    )
    
    
    308Share premium account
    
    
    1,332
    
    
    
    1,499
    
    
    
    
    
    
    
    204
    
    
    
    3,091
    
    
    
    (4,794
    )
    
    
    1,332Retained earnings
    
    
    7,635
    
    
    
    (951
    )
    
    
    
    
    
    
    4,467
    
    
    
    9,454
    
    
    
    (12,970
    )
    
    
    7,635Other equity reserves
    
    
    (5,150
    )
    
    
    2
    
    
    
    
    
    
    
    1,251
    
    
    
    (6,515
    )
    
    
    5,262
    
    
    
    (5,150
    )Total shareholders equity (i)
    
    
    4,125
    
    
    
    645
    
    
    
    
    
    
    
    5,967
    
    
    
    6,211
    
    
    
    (12,823
    )
    
    
    4,125Minority interests
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11Total equity (i)
    
    
    4,136
    
    
    
    645
    
    
    
    
    
    
    
    5,967
    
    
    
    6,211
    
    
    
    (12,823
    )
    
    
    4,136
 (i)
    
    Includes parent Companys subsidiaries, associates and joint ventures presented on an equity
accounted basis.




---



##### Table of Contents



178   Notes to the consolidated financial statements continued
    
    National Grid plc
 38. National Grid Gas plc and Niagara Mohawk Power Corporation additionaldisclosures continued
 Cash flow statements
 Parent
    
    
    
    
    
    
    
    
    
    
    Subsidiaryguarantor
    
    
    Issuer of notes
    
    
    guarantorNiagaraNational
    
    
    Mohawk
    
    
    British
    
    
    National
    
    
    
    
    
    
    
    
    
    
    NationalGrid
    
    
    Power
    
    
    Transco
    
    
    Grid Gas
    
    
    Other
    
    
    Consolidation
    
    
    Gridplc
    
    
    Corporation
    
    
    Finance Inc.
    
    
    plc
    
    
    subsidiaries
    
    
    adjustments
    
    
    consolidated£m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mYear ended 31 March 2008Net cash provided by operating activities 
continuing operations
    
    
    4
    
    
    
    316
    
    
    
    
    
    
    
    1,552
    
    
    
    1,283
    
    
    
    
    
    
    
    3,155Net cash provided by operating activities 
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    10Net cash provided by operating activities
    
    
    4
    
    
    
    316
    
    
    
    
    
    
    
    1,552
    
    
    
    1,293
    
    
    
    
    
    
    
    3,165Net cash provided by/(used in) investing activities 
continuing operations
    
    
    1,547
    
    
    
    (209
    )
    
    
    
    
    
    
    (1,630
    )
    
    
    (3,658
    )
    
    
    (2,123
    )
    
    
    (6,073
    )Net cash (used in)/provided by investing activities 
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    3,054
    
    
    
    
    
    
    
    3,050Net cash used in investing activities
    
    
    1,547
    
    
    
    (209
    )
    
    
    
    
    
    
    (1,634
    )
    
    
    (604
    )
    
    
    (2,123
    )
    
    
    (3,023
    )Net cash (used in)/provided by financing activities
    
    
    (2,302
    )
    
    
    (105
    )
    
    
    
    
    
    
    (87
    )
    
    
    (1,221
    )
    
    
    2,123
    
    
    
    (1,592
    )(Decrease)/increase in cash and cash equivalents
in the year
    
    
    (751
    )
    
    
    2
    
    
    
    
    
    
    
    (169
    )
    
    
    (532
    )
    
    
    
    
    
    
    (1,450
    )Year ended 31 March 2007Net cash provided by operating activities 
continuing operations
    
    
    1
    
    
    
    374
    
    
    
    
    
    
    
    1,341
    
    
    
    1,064
    
    
    
    
    
    
    
    2,780Net cash provided by operating activities 
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    178
    
    
    
    
    
    
    
    178Net cash provided by operating activities
    
    
    1
    
    
    
    374
    
    
    
    
    
    
    
    1,341
    
    
    
    1,242
    
    
    
    
    
    
    
    2,958Net cash used in investing activities  continuing operations
    
    
    (1,225
    )
    
    
    (140
    )
    
    
    
    
    
    
    (1,381
    )
    
    
    (403
    )
    
    
    (807
    )
    
    
    (3,956
    )Net cash provided by/(used in) investing activities 
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    (132
    )
    
    
    
    
    
    
    (105
    )Net cash used in investing activities
    
    
    (1,225
    )
    
    
    (140
    )
    
    
    
    
    
    
    (1,354
    )
    
    
    (535
    )
    
    
    (807
    )
    
    
    (4,061
    )Net cash provided by/(used in) financing activities
    
    
    940
    
    
    
    (232
    )
    
    
    
    
    
    
    (42
    )
    
    
    (195
    )
    
    
    807
    
    
    
    1,278(Decrease)/increase in cash and cash equivalents
in the year
    
    
    (284
    )
    
    
    2
    
    
    
    
    
    
    
    (55
    )
    
    
    512
    
    
    
    
    
    
    
    175Year ended 31 March 2006Net cash provided by operating activities 
continuing operations
    
    
    
    
    
    
    329
    
    
    
    
    
    
    
    1,140
    
    
    
    1,401
    
    
    
    
    
    
    
    2,870Net cash (used in)/provided by operating activities 
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (57
    )
    
    
    158
    
    
    
    
    
    
    
    101Net cash provided by operating activities
    
    
    
    
    
    
    329
    
    
    
    
    
    
    
    1,083
    
    
    
    1,559
    
    
    
    
    
    
    
    2,971Net cash used in investing activities  continuing operations
    
    
    
    
    
    
    (192
    )
    
    
    
    
    
    
    (146
    )
    
    
    (659
    )
    
    
    (492
    )
    
    
    (1,489
    )Net cash provided by/(used in) investing activities  
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,635
    
    
    
    (94
    )
    
    
    
    
    
    
    5,541Net cash (used in)/provided by investing activities
    
    
    
    
    
    
    (192
    )
    
    
    
    
    
    
    5,489
    
    
    
    (753
    )
    
    
    (492
    )
    
    
    4,052Net cash provided by/(used in) financing activities
    
    
    914
    
    
    
    (141
    )
    
    
    
    
    
    
    (6,355
    )
    
    
    (752
    )
    
    
    492
    
    
    
    (5,842
    )Increase/(decrease) in cash and cash equivalents in the year
    
    
    914
    
    
    
    (4
    )
    
    
    
    
    
    
    217
    
    
    
    54
    
    
    
    
    
    
    
    1,181




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##### Table of Contents



() Annual Report and Accounts 2007/08   179
 Company accounting policies
  A. Basis of preparation of individual
financial statements under UK GAAP
       B. Fixed asset investments
  C. Taxation
 D. Foreign currencies
   E. Financial instruments




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##### Table of Contents



180   Company accounting policies continued
    
    National Grid plc
 F. Hedge accounting
 G. Parent Company guarantees
  H. Share-based payments
   I. Dividends




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##### Table of Contents



() Annual Report and Accounts 2007/08   181
 Company balance sheet
 at 31 March
 2008
    
    
    2007Notes
    
    
    £m
    
    
    £mFixed assetsInvestments
    
    
    2
    
    
    
    4,276
    
    
    
    3,707Current assetsDebtors (amounts falling due within one year)
    
    
    3
    
    
    
    8,545
    
    
    
    9,050Debtors (amounts falling due after more than one year)
    
    
    3
    
    
    
    2,811
    
    
    
    3Derivative financial instruments (amounts falling due within one year)
    
    
    5
    
    
    
    341
    
    
    
    119Derivative financial instruments (amounts falling due after more than one year)
    
    
    5
    
    
    
    751
    
    
    
    192Current asset investments
    
    
    
    
    
    
    787
    
    
    
    1,03013,235
    
    
    
    10,394Creditors (amounts falling due within one year)Borrowings
    
    
    6
    
    
    
    (1,019
    )
    
    
    (360
    )Derivative financial instruments
    
    
    5
    
    
    
    (79
    )
    
    
    (29
    )Other creditors
    
    
    
    
    
    
    (4,855
    )
    
    
    (2,799
    )4
    
    
    
    (5,953
    )
    
    
    (3,188
    )Net current assets
    
    
    
    
    
    
    7,282
    
    
    
    7,206Total assets less current liabilities
    
    
    
    
    
    
    11,558
    
    
    
    10,913Creditors (amounts falling due after more than one year)Borrowings
    
    
    6
    
    
    
    (4,460
    )
    
    
    (4,524
    )Derivative financial instruments
    
    
    5
    
    
    
    (179
    )
    
    
    (54
    )Amounts owed to subsidiary undertakings
    
    
    
    
    
    
    (452
    )
    
    
    (5,091
    )
    
    
    (4,578
    )Net assets employed
    
    
    
    
    
    
    6,467
    
    
    
    6,335Capital and reservesCalled up share capital
    
    
    7
    
    
    
    294
    
    
    
    308Share premium account
    
    
    8
    
    
    
    1,371
    
    
    
    1,332Cash flow hedge reserve
    
    
    8
    
    
    
    14
    
    
    
    22Other equity reserves
    
    
    8
    
    
    
    124
    
    
    
    91Profit and loss account
    
    
    8
    
    
    
    4,664
    
    
    
    4,582Total shareholders funds
    
    
    9
    
    
    
    6,467
    
    
    
    6,335
   Sir John Parker  Steve Lucas




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##### Table of Contents



182   Notes to the Company financial statements
    
    National Grid plc
 Notes to the Company financial statements
   1. Adoption of new accounting standardsNew financial reporting standards (FRS) and abstracts adopted in 2007/08
 Amendment to FRS 3 on reporting
financial performance
    
    Removes inconsistencies between FRS 3 and both FRS 26 Financial Instruments: Recognition
and measurement and FRS 23 The effects of changes in foreign exchange rates, in
particular as regards recycling to the profit and loss account of gains and losses and exchange
differences previously recognised in the statement of recognised gains and losses.Amendment to FRS 26 on financial instruments:
measurement  recognition and derecognition
    
    Implements the recognition and derecognition material in IAS 39. The requirements of FRS 5,
Reporting the substance of transactions, are superseded for transactions that fall within FRS
26s scope, but FRS 5 continues to apply to transactions in non-financial assets and liabilities.UITF Abstract 42 on reassessment
of embedded derivatives
    
    Prohibits reassessment of the treatment of embedded derivatives subsequent to initial
recognition unless there is a change in the terms of the contract that significantly modifies
the cash flows that otherwise would be required under the contract, in which case
reassessment is required.UITF Abstract 44 on group and
treasury share transactions
    
    Provides guidance on whether share-based transactions involving treasury shares or involving
group entities (for instance, options over a parents shares) should be accounted for as equity-
settled or cash-settled.
 New FRS not yet adopted
 Amendment to FRS 20 on
share-based payment
    
    Clarifies the definition of vesting conditions and the accounting treatment of cancellations.
Vesting conditions are defined as either service conditions or performance conditions.
Cancellations by employees are accounted for in the same way as cancellations by the
Company. It is expected that the amendment to FRS 20 will be adopted on 1 April 2009.
 2. Fixed asset investments
 Shares in
    
    
    Loan tosubsidiary
    
    
    subsidiaryundertakings
    
    
    undertaking
    
    
    Total£m
    
    
    £m
    
    
    £mAt 31 March 2006
    
    
    2,428
    
    
    
    
    
    
    
    2,428Additions
    
    
    952
    
    
    
    327
    
    
    
    1,279At 31 March 2007
    
    
    3,380
    
    
    
    327
    
    
    
    3,707Additions
    
    
    896
    
    
    
    
    
    
    
    896Reclassification of loan as amounts owed by subsidiary undertakings
    
    
    
    
    
    
    (327
    )
    
    
    (327
    )At 31 March 2008
    
    
    4,276
    
    
    
    
    
    
    
    4,276




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##### Table of Contents



() Annual Report and Accounts 2007/08   183
 3. Debtors
 2008
    
    
    2007£m
    
    
    £mAmounts falling due within one year:Amounts owed by subsidiary undertakings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,542
    
    
    
    9,047Prepayments and accrued income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    38,545
    
    
    
    9,050Amounts falling due after more than one year:Amounts owed by subsidiary undertakings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,808
    
    
    
    Deferred taxation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    32,811
    
    
    
    3Deferredtaxation£mAt 1 April 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )Charged to equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )Charged to the profit and loss account (i)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12At 1 April 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Credited to equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Credited to the profit and loss account (i)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )At 31 March 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3(i) Included is a deferred tax charge of £2m (2007: credit of £13m) in respect of prior years.Factors that may affect future deferred tax charges
The changes enacted in the Finance Act 2007 included a reduction in the UK Corporation Tax rate
from 30% to 28% with effect from 1 April 2008. The deferred tax expected to reverse has been
measured using the 28% rate.4. Creditors (amounts falling due within one year)2008
    
    
    
    2007£m
    
    
    
    £mBorrowings (note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,019
    
    
    
    360Derivative financial instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79
    
    
    
    29Amounts owed to subsidiary undertakings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,804
    
    
    
    2,776Other creditors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51
    
    
    
    235,953
    
    
    
    3,1885. Derivative financial instrumentsThe fair value of derivative financial instruments shown on the balance sheet is as follows:2008
    
    2007Assets
    
    
    Liabilities
    
    
    Total
    
    
    Assets
    
    
    Liabilities
    
    
    Total£m
    
    
    
    £m
    
    
    
    £m
    
    
    
    £m
    
    
    
    £m
    
    
    
    £mCurrent
    
    
    341
    
    
    
    (79
    )
    
    
    262
    
    
    
    119
    
    
    
    (29
    )
    
    
    90Non-current
    
    
    751
    
    
    
    (179
    )
    
    
    572
    
    
    
    192
    
    
    
    (54
    )
    
    
    1381,092
    
    
    
    (258
    )
    
    
    834
    
    
    
    311
    
    
    
    (83
    )
    
    
    228For each class of derivative financial instruments, our exposure, based on the sterling equivalent notional value of the pay leg is as follows:2008
    
    
    
    2007£m
    
    
    
    £mInterest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,952
    )
    
    
    (3,625
    )Interest rate swaptions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (202
    )
    
    
    Cross-currency interest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,919
    )
    
    
    (5,179
    )Foreign exchange forward contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,721
    )
    
    
    (2,114
    )Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,794
    )
    
    
    (10,918
    )




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##### Table of Contents



184   Notes
to the Company financial statements continued
    
    National Grid plc
 6. Borrowings
 2008
    
    
    2007£m
    
    
    £mAmounts falling due within one year:Bank loans and overdrafts
    
    
    192
    
    
    
    30Bonds
    
    
    827
    
    
    
    301Other loans
    
    
    
    
    
    
    291,019
    
    
    
    360Amounts falling due after more than one year:Bank loans
    
    
    75
    
    
    
    Bonds
    
    
    4,385
    
    
    
    4,5244,460
    
    
    
    4,524Total borrowings
    
    
    5,479
    
    
    
    4,8842008
    
    
    
    2007£m
    
    
    
    £mTotal borrowings are repayable as follows:In one year or less
    
    
    1,019
    
    
    
    360In more than one year, but not more than two years
    
    
    342
    
    
    
    642In more than two years, but not more than three years
    
    
    650
    
    
    
    295In more than three years, but not more than four years
    
    
    999
    
    
    
    495In more than four years, but not more than five years
    
    
    792
    
    
    
    897In more than five years, other than by instalments
    
    
    1,677
    
    
    
    2,1955,479
    
    
    
    4,884
  7. Called up share capital
 Called up and fully paidmillions
    
    
    £mAt 31 March 2006
    
    
    2,720
    
    
    
    310Issued during the year
    
    
    4
    
    
    
    Repurchased during the year (i)
    
    
    (23
    )
    
    
    (2
    )At 31 March 2007
    
    
    2,701
    
    
    
    308Issued during the year (ii)
    
    
    8
    
    
    
    1Repurchased during the year (iii)
    
    
    (127
    )
    
    
    (15
    )At 31 March 2008
    
    
    2,582
    
    
    
    294
 (i)
    
    From 20 November 2006 to 22 March 2007, the Company repurchased, and subsequently
cancelled, under its share repurchase programme 22,388,381 ordinary shares for aggregate
consideration of £169m, including transaction costs. The shares repurchased have a nominal value of
£2m and represented approximately 1% of the ordinary shares in issue as at 31 March 2007. The
consideration has been charged against retained earnings.(ii)
    
    Included within issued share capital was 3,705,193 ordinary shares that were issued following
the conversion of the Companys B shares to ordinary shares on 28 September 2007.(iii)
    
    From 30 May 2007 to 27 November 2007, the Company repurchased, and subsequently cancelled,
under its share repurchase programme 126,817,712 ordinary shares for aggregate consideration of
£946m, including transaction costs. The shares repurchased have a nominal value of £15m and
represented approximately 5% of the ordinary shares in issue as at 31 March 2008. The consideration
has been charged against retained earnings.




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##### Table of Contents



() Annual Report
and Accounts 2007/08   185
  8. Reserves
 Share
    
    
    Cash flow
    
    
    Other
    
    
    Profitpremium
    
    
    hedge
    
    
    equity
    
    
    and lossaccount
    
    
    reserve
    
    
    reserves
    
    
    account£m
    
    
    £m
    
    
    £m
    
    
    £mAt 1 April 2006
    
    
    1,316
    
    
    
    7
    
    
    
    74
    
    
    
    5,237Net loss transferred from equity in respect of cash flow hedges (net of tax)
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    Issue of ordinary share capital
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    Repurchase of shares
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    (169
    )Share-based payment
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    Retained loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (486
    )At 31 March 2007
    
    
    1,332
    
    
    
    22
    
    
    
    91
    
    
    
    4,582Net gain transferred from equity in respect of cash flow hedges (net of tax)
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    Issue of ordinary share capital
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    B shares converted to ordinary shares
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    Repurchase of share capital and purchase of treasury shares (i)
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    (1,520
    )Issue of treasury shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12Share-based payment
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    Retained profit for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,590At 31 March 2008
    
    
    1,371
    
    
    
    14
    
    
    
    124
    
    
    
    4,664(i)   From 30 May 2007 to 31 March 2008, the Company repurchased under its
share repurchase programme 200.1m ordinary shares for aggregate
consideration of £1,516m including transaction costs. Further purchases of
shares outside the official share repurchase programme were for an
aggregate consideration of £4m.The Company has not presented its own profit and loss account as permitted
by section 230 of the Companies Act 1985. The Companys profit after
taxation was £2,370m (2007: £244m). Of the Companys profit and loss
account reserve of £4,664m at 31 March 2008 (2007: £4,582m), £1,623m (2007:
£2,131m) relating to gains on intra-group transactions was not
distributable to shareholders.9. Reconciliation of movements in shareholders funds2008
    
    
    2007£m
    
    
    £mProfit for the year after taxation
    
    
    
    
    
    
    
    
    
    
    2,370
    
    
    
    244Dividends (i)
    
    
    
    
    
    
    
    
    
    
    (780
    )
    
    
    (730
    )Profit/(loss) for the financial year
    
    
    
    
    
    
    
    
    
    
    1,590
    
    
    
    (486
    )Proceeds of issue of ordinary shares
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    16Proceeds of issue of treasury shares
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    B shares converted to ordinary shares
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    Movement on cash flow hedge reserve (net of tax)
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    15Share-based payment
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    15Repurchase of ordinary shares
    
    
    
    
    
    
    
    
    
    
    (1,520
    )
    
    
    (169
    )Net increase/(decrease) in shareholders funds
    
    
    
    
    
    
    
    
    
    
    132
    
    
    
    (609
    )Opening shareholders funds
    
    
    
    
    
    
    
    
    
    
    6,335
    
    
    
    6,944Closing shareholders funds
    
    
    
    
    
    
    
    
    
    
    6,467
    
    
    
    6,335
 (i)
    
    For further details on dividends, refer to note 9 in the consolidated financial
statements. 10. Commitments and contingencies
  11. Directors and employees




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##### Table of Contents



186   Definitions and glossary of terms
    
    National Grid plc
   Definitions and glossary of terms
 Aaccounts
    
    A set of financial statements, including all
the associated notes.American 
Depositary 
Shares (ADSs)
    
    Securities of National Grid listed on the
New York Stock Exchange, each of which
represents five ordinary shares.BB shares
    
    Non-cumulative preference shares of 10 pence
nominal value each that were issued in 2004
in connection with a £2 billion return of capital
to shareholders. The last remaining B shares
were converted into ordinary shares in
September 2007.BETTA
    
    The British Electricity Trading and Transmission
Arrangements, being the regulations that
govern our role as operator of the electricity
networks in Great Britain, together with those
of other market participants.Board
    
    The Board of Directors of the Company
(for more information see pages 12 and 13).BSIS
    
    The Balancing Services Incentive Scheme,
an incentive arrangement applicable to our
UK electricity transmission operations.Cconsolidated 
financial 
statements
    
    Financial statements that include the results
and financial position of the Company and its
subsidiaries together as if they are a
single entity.called up 
share capital
    
    Shares (common stock) that have been issued
and have been fully paid for.capital 
allowances
    
    Depreciation or amortisation charges that are
allowed as deductions for tax purposes. This
often differs from the amount of depreciation or
amortisation recorded for accounting purposes,
resulting in the recognition of deferred tax.carrying value
    
    The amount at which an asset or a liability
is recorded in the balance sheet.Combined Code
    
    The Combined Code on Corporate
Governance, being guidance on how
companies should be governed applicable to
UK listed companies, including National Grid.
 the Company,
National Grid,
we, our or us
    
    We use terms the Company, National Grid,
we, our or us to refer to either National
Grid plc itself or to National Grid plc and its
subsidiaries collectively, depending on context.contingent 
liability
    
    A possible obligation or potential liability
arising from past events for which no provision
has been recorded, but for which disclosure in
the financial statements is made.Ddeferred tax
    
    For most assets and liabilities, this is the
difference between the carrying value for
accounting purposes in the balance sheet
and the amount of tax that will be deductible
(or payable) for that asset or liability in future
tax returns.decatherm
    
    An amount of energy equal to 1 million British
thermal units (BTUs), equivalent to
approximately 293 kWh.derivative
    
    A financial instrument or other contract
where the value is linked to an underlying
index, such as exchange rates, interest rates
or commodity prices. In most cases, contracts
for the sale or purchase of commodities that
are used to supply customers or for our own
needs are excluded from this definition.Eequity
    
    In financial statements, the amount of net
assets attributable to shareholders.FFERC
    
    The US Federal Energy Regulatory Commission.finance lease
    
    A lease where the asset is treated as if it
was owned for the period of the lease and
the obligation to pay future rentals is treated
as if they were borrowings. Also known as
a capital lease.financial year
    
    For National Grid this is an accounting year
ending on 31 March. Also known as a fiscal
year.FRS
    
    A UK Financial Reporting Standard as
issued by the UK Accounting Standards
Board. These apply to the Companys
individual financial statements on pages
179 to 185, which are prepared in
accordance with UK GAAP.




---



##### Table of Contents



() Annual Report
and Accounts 2007/08   187
   FSA
    
    The UK Financial Services Authority, the
financial markets regulator, which includes
regulation of companies with listed securities
in the UK, including National Grid and certain
of its subsidiaries.GGreat Britain
    
    England, Wales and Scotland.GW
    
    Gigawatt, being an amount of power equal
to 1 billion watts (109watts).GWh
    
    Gigawatt hours, being an amount of energy
equal to delivering 1 billion watts of power for
one hour (equivalent to 3.6 million joules).HHSE
    
    Health & Safety Executive, the main safety
regulator in the UK.IIAS or IFRS
    
    An International Accounting Standard or
International Financial Reporting Standard,
as issued by the International Accounting
Standards Board. IFRS is also used as the
term to describe international generally
accepted accounting principles as a whole.
The Companys consolidated financial
statements are prepared in accordance
with IFRS.individual 
financial 
statements
    
    Financial statements of a company on its
own, not including its subsidiaries or joint
ventures.IFRIC
    
    The International Financial Reporting
Interpretations Committee, which provides
guidance on how to apply accounting
standards.Jjoint venture
    
    A company or other entity which is controlled
jointly with other parties.KKeySpan
    
    KeySpan Corporation and its subsidiaries,
acquired by National Grid on 24 August 2007.kV
    
    Kilovolt, being an amount of electric force
equal to 1,000 volts.
 kW
    
    Kilowatts, being an amount of power equal
to 1,000 watts.kWh
    
    Kilowatt hours, being an amount of energy
equal to delivering 1,000 watts of power for
a period of one hour.Llifetime 
allowance
    
    The lifetime allowance is an overall ceiling
on the amount of UK tax privileged pension
savings that any one individual can draw.LNG
    
    Liquefied natural gas, being natural gas that
has been condensed into a liquid form,
typically at temperatures at or below -163°C
(-260°F).lost time injury
    
    An incident arising out of National Grids
operations which leads to an injury where the
employee or contractor normally has time off
the following day or shift following the incident.
It relates to one specific (acute) identifiable
incident which arises as a result of National
Grids premises, plant or activities, which was
reported to the supervisor at the time and was
subject to appropriate investigation.Mm3
    
    A cubic metre.mcm
    
    Million standard cubic metres, equivalent to
approximately 35.3 million standard cubic feet.mcm/d
    
    Million standard cubic metres per day.MW
    
    Megawatts, being an amount of power equal
to 1 million watts.MWh
    
    Megawatt hours, being an amount of energy
equal to delivering 1 million watts of power for
a period of one hour.Nnet assets
    
    In financial statements, the amount by which
total assets exceeds total liabilities at their
carrying values.New England
    
    The states of Massachusetts, New Hampshire,
Vermont and Maine.northeastern US
    
    The northeastern region of the US,
comprising the states of New York,
Massachusetts, Rhode Island, New
Hampshire, Maine, Vermont, Connecticut,
New Jersey and Pennsylvania.




---



##### Table of Contents



188   Definitions and glossary of terms continued
    
    National Grid plc
    OOfgem
    
    The UK Office of Gas and Electricity Markets,
part of the UK Gas and Electricity Markets
Authority (GEMA), which regulates the energy
markets in the UK.OSHA
    
    The Occupational Safety & Health
Administration, the main federal agency
charged with the enforcement of safety and
health legislation in the US.ordinary shares
    
    Voting shares entitling the holder to part-
ownership of a company. Also known as
common stock. National Grids ordinary
shares have a nominal value of 1117/43pence.PPersonal 
Lifetime 
Allowance
    
    The lifetime allowance applicable to individuals
who registered their pre-6 April 2006 UK
pension benefits for protection.provision
    
    A liability of uncertain timing or amount, arising
from a past event, that has not yet become
due for payment.purchase 
accounting
    
    The accounting process of aligning the
accounting policies of an acquired business
with those of National Grid and of adjusting
the carrying value of assets and liabilities
acquired from their previous accounting book
value to their fair values at the date control
was acquired by National Grid.PWh
    
    Petawatt hour, being an amount of energy
equal to delivering 1 billion watts of power
for 1 million hours.Sscm
    
    Standard cubic metre, a quantity of gas which
at 15°C and atmospheric pressure (1.013 bar)
occupies the volume of 1m3.SEC
    
    The US Securities and Exchange Commission,
the financial regulator for companies with
registered securities in the US, including
National Grid and certain of its subsidiaries.share premium
    
    The difference between the amounts shares
are issued for and the nominal value of
those shares.subsidiary
    
    A company or other entity that is controlled
by National Grid.
 Ttherm
    
    An amount of energy equal to 10,000
British Thermal Units (BTUs), equivalent
to approximately 29.3 kWh, primarily used
to measure natural gas.trade payables
    
    Amounts invoiced by suppliers for services
received for which payment has yet to
be made.trade 
receivables
    
    Amounts billed to customers for services
provided for which payment has yet to
be received.treasury shares
    
    Shares that have been repurchased but
not cancelled.tonne
    
    A unit of mass equal to 1,000 kilograms,
equivalent to approximately 2,205 pounds.tonnes
CO2equivalent
    
    A measure of greenhouse gas emissions
in terms of the equivalent amount of
carbon dioxide.TWh
    
    Terawatt hours, being an amount of energy
equal to delivering 1 billion watts of power
for 1,000 hours.UUK
    
    The United Kingdom, comprising England,
Wales, Scotland and Northern Ireland.UK GAAP
    
    Generally accepted accounting principles
in the UK. These differ from IFRS and from
US GAAP.Uniform 
Network 
Code
    
    The legal and contractual framework for
the supply and transport of gas in the
UK, comprising a common set of rules for all
industry participants which ensure competition
can be facilitated on level terms.US
    
    The United States of America.US GAAP
    
    Generally accepted accounting principles
in the US. These differ from IFRS and from
UK GAAP.




---



##### Table of Contents



() Annual Report and Accounts 2007/08   189
  Summary consolidated financial information
 Financial summary (unaudited)
  As previously measuredIFRS
    
    
    under UK GAAP31 March
    
    
    31 March
    
    
    31 March
    
    
    31 March
    
    
    31 March
    
    
    31 March2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2005
    
    
    2004Summary income statement
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £m
    
    
    £mRevenue
    
    
    11,423
    
    
    
    8,695
    
    
    
    8,868
    
    
    
    7,174
    
    
    
    8,313
    
    
    
    9,019Operating profitBefore exceptional items, remeasurements
and stranded cost recoveries
    
    
    2,595
    
    
    
    2,031
    
    
    
    1,968
    
    
    
    1,936
    
    
    
    2,045
    
    
    
    2,076Exceptional items, remeasurements and stranded cost recoveries
    
    
    369
    
    
    
    482
    
    
    
    406
    
    
    
    177
    
    
    
    (120
    )
    
    
    (137
    )Goodwill amortisation
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    (85
    )
    
    
    (95
    )2,964
    
    
    
    2,513
    
    
    
    2,374
    
    
    
    2,113
    
    
    
    1,840
    
    
    
    1,844Profit before taxationBefore exceptional items, remeasurements
and stranded cost recoveries
    
    
    1,839
    
    
    
    1,486
    
    
    
    1,369
    
    
    
    1,235
    
    
    
    1,299
    
    
    
    1,254Exceptional items, remeasurements and stranded cost recoveries
    
    
    353
    
    
    
    265
    
    
    
    349
    
    
    
    177
    
    
    
    (37
    )
    
    
    185Goodwill amortisation
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    (85
    )
    
    
    (95
    )2,192
    
    
    
    1,751
    
    
    
    1,718
    
    
    
    1,412
    
    
    
    1,177
    
    
    
    1,344Profit for the year attributable to equity shareholdersBefore exceptional items, remeasurements
and stranded cost recoveries
    
    
    1,281
    
    
    
    1,146
    
    
    
    1,075
    
    
    
    1,376
    
    
    
    1,027
    
    
    
    958Exceptional items, remeasurements and stranded cost recoveries
    
    
    1,915
    
    
    
    248
    
    
    
    2,773
    
    
    
    48
    
    
    
    (5
    )
    
    
    217Goodwill amortisation
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    (85
    )
    
    
    (95
    )3,196
    
    
    
    1,394
    
    
    
    3,848
    
    
    
    1,424
    
    
    
    937
    
    
    
    1,080Summary statement of net assetsNon-current assets
    
    
    30,858
    
    
    
    21,109
    
    
    
    22,106
    
    
    
    25,596
    
    
    
    19,897
    
    
    
    18,394Current assets
    
    
    5,456
    
    
    
    5,312
    
    
    
    3,818
    
    
    
    1,964
    
    
    
    4,814
    
    
    
    5,003Assets of businesses held for sale
    
    
    1,508
    
    
    
    1,968
    
    
    


    
    
    
    
    
    
    
    
    
    
    
    Total assets
    
    
    37,822
    
    
    
    28,389
    
    
    
    25,924
    
    
    
    27,560
    
    
    
    24,711
    
    
    
    23,397Current liabilities
    
    
    (7,122
    )
    
    
    (3,360
    )
    
    
    (5,683
    )
    
    
    (5,974
    )
    
    
    (5,679
    )
    
    
    (4,147
    )Non-current liabilities
    
    
    (25,257
    )
    
    
    (20,443
    )
    
    
    (16,748
    )
    
    
    (19,465
    )
    
    
    (17,172
    )
    
    
    (17,613
    )Liabilities of businesses held for sale
    
    
    (63
    )
    
    
    (450
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total liabilities
    
    
    (32,442
    )
    
    
    (24,253
    )
    
    
    (22,431
    )
    
    
    (25,439
    )
    
    
    (22,851
    )
    
    
    (21,760
    )Net assets
    
    
    5,380
    
    
    
    4,136
    
    
    
    3,493
    
    
    
    2,121
    
    
    
    1,860
    
    
    
    1,637Summary cash flow statementCash generated from operationsContinuing operations
    
    
    3,265
    
    
    
    3,090
    
    
    
    2,973
    
    
    
    2,820
    
    
    
    2,909
    
    
    
    2,810Discontinued operations
    
    
    10
    
    
    
    181
    
    
    
    138
    
    
    
    638
    
    
    
    n/a
    
    
    
    n/a3,275
    
    
    
    3,271
    
    
    
    3,111
    
    
    
    3,458
    
    
    
    2,909
    
    
    
    2,810Tax paid  continuing and discontinued operations
    
    
    (110
    )
    
    
    (313
    )
    
    
    (140
    )
    
    
    (150
    )
    
    
    (150
    )
    
    
    (18
    )Net cash inflow from operating activities
    
    
    3,165
    
    
    
    2,958
    
    
    
    2,971
    
    
    
    3,308
    
    
    
    2,759
    
    
    
    2,792Net cash flows (used in)/from investing activities
    
    
    (3,023
    )
    
    
    (4,061
    )
    
    
    4,052
    
    
    
    (2,900
    )
    
    
    n/a
    
    
    
    n/aDividends received from joint ventures
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    5
    
    
    
    8Net cash outflow for capital expenditure and financial investment
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    (1,262
    )
    
    
    (1,254
    )Net cash (outflow)/inflow for acquisitions and disposals
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    (1,130
    )
    
    
    7Net cash (outflow)/inflow for the management of liquid resources
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    (54
    )
    
    
    (48
    )Net cash flows (used in)/from financing activities
    
    
    (1,592
    )
    
    
    1,278
    
    
    
    (5,842
    )
    
    
    (400
    )
    
    
    n/a
    
    
    
    n/aNet cash outflow for returns on investments and servicing of finance
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    (758
    )
    
    
    (692
    )Equity dividends paid
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    (628
    )
    
    
    (560
    )Net cash inflow/(outflow) from financing activities
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    1,081
    
    
    
    (240
    )Net (decrease)/increase in cash and cash equivalents (UK GAAP  cash only)
    
    
    (1,450
    )
    
    
    175
    
    
    
    1,181
    
    
    
    8
    
    
    
    13
    
    
    
    13




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##### Table of Contents



190   Shareholder information
    
    National Grid plc
   Shareholder Information
  Financial calendar
  4 June 2008
    
    Ordinary shares go ex-dividend
for 2007/08 final dividend6 June 2008
    
    Ordinary shares dividend record date9 July 2008
    
    DRIP election deadline28 July 2008
    
    2008 Annual General Meeting and Interim Management
Statement20 August 2008
    
    2007/08 Final dividend paid on ordinary shares20 November 2008
    
    2008/09 Interim/half-year results3 December 2008
    
    Ordinary shares go ex-dividend
for 2008/09 interim dividend5 December 2008
    
    Ordinary shares dividend record date5 December 2008
    
    DRIP election deadline21 January 2009
    
    2008/09 Interim dividend paid on ordinary shares30 January 2009
    
    Interim Management StatementMay 2009
    
    2008/09 Preliminary results
 Dividends and dividend re-investment plan (DRIP)
 Website and electronic communication
      Share dealing




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##### Table of Contents



() Annual Report and Accounts 2007/08   191
  Shareholder Networking
   
  Individual savings accounts (ISAs)
 ShareGift
  Capital Gains Tax (CGT)
  Shareholdings
  Size of
    
    Number of
    
    % of
    
    
    Number of
    
    
    % ofshareholding
    
    shareholders
    
    shareholders
    
    
    shares
    
    
    shares1-50
    
    
    226,065
    
    
    19.0466
    
    
    
    6,951,153
    
    
    
    0.269351-100
    
    
    356,269
    
    
    30.0167
    
    
    
    24,183,116
    
    
    
    0.9366101-500
    
    
    506,385
    
    
    42.6644
    
    
    
    100,729,641
    
    
    
    3.9015501-1,000
    
    
    52,727
    
    
    4.4424
    
    
    
    37,038,159
    
    
    
    1.43451,001-10,000
    
    
    43,218
    
    
    3.6412
    
    
    
    100,134,486
    
    
    
    3.878310,001-50,000
    
    
    1,108
    
    
    0.0934
    
    
    
    21,825,810
    
    
    
    0.845350,001-100,000
    
    
    249
    
    
    0.0210
    
    
    
    18,104,707
    
    
    
    0.7012100,001-500,000
    
    
    455
    
    
    0.0383
    
    
    
    106,876,744
    
    
    
    4.1394500,001-1,000,000
    
    
    167
    
    
    0.0141
    
    
    
    114,779,960
    
    
    
    4.44551,000,001+
    
    
    260
    
    
    0.0219
    
    
    
    2,051,289,740
    
    
    
    79.4484Total
    
    
    1,186,903
    
    
    
    
    
    
    2,581,913,516
   Share price




---



##### Table of Contents



192   Shareholder information continued
    
    National Grid plc
   For queries about ORDINARY 
SHARES contact:Capita RegistrarsTelephone:
0871 664 0500*
(from outside the UK: +44 20 7098 1198)
(textphone: 18001 0870 242 2379)*Calls are charged at 10p per minute plus network extras()
    
    email: nationalgrid@capitaregistrars.com
Website: www.nationalgrid.com/shareholders()
    
    Postal address:National Grid Share Register
Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield HD8 0GA
 For queries about 
AMERICAN DEPOSITARY 
SHARES (ADSs or ADRs) contact:The Bank of New York Mellon()
    
    Telephone: 1-800-466-7215
(from outside the US: +1-212-815-3700)()
    
    email: shareowners@bankofny.com
Website: www.adrbny.com()
    
    Postal address:The Bank of New York Mellon
Shareholders Correspondence 
PO Box 11258
Church Street Station 
New York NY 10286-1258
   Cautionary Statement
 This document
comprises the Annual
Report and Accounts
for the year ended 31
March 2008 for
National Grid and its
subsidiaries. It
contains the
Directors Report and
Financial Statements,
together with the
Independent Auditors
Report thereon, as
required by the UK
Companies Act 1985.
The Annual Review of
National Grid for the
same period is
published as a
separate document.
The Directors Report
on pages 98 and 99
and the Directors
Remuneration Report
on pages 100 to 110
have each been drawn
up in accordance with
the requirements of
English law, and
liability in respect
thereof is also
governed by English
law. In particular,
the liability of the
Directors for these
reports is solely to
National Grid.
This document also
contains certain
statements that are
neither reported
financial results nor
other historical
information. These
statements are
forward-looking
statements within the
meaning of Section
27A of the Securities
Act of 1933, as
amended, and Section
21E of the Securities
Exchange Act of 1934,
as amended. These
statements include
information with
respect to our
financial condition,
our results of
operations and
businesses, strategy,
plans and objectives.
Words such as
anticipates,
expects, intends,
plans, believes,
seeks, estimates,
may, will,
continue, project
and similar
expressions, as well
as statements in the
future tense,
identify
    
    forward-looking
statements. These
forward-looking
statements are not
guarantees of our
future performance
and are subject to
assumptions, risks
and uncertainties
that could cause
actual future results
to differ materially
from those expressed
in or implied by such
forward-looking
statements. Many of
these assumptions,
risks and
uncertainties relate
to factors that are
beyond our ability to
control or estimate
precisely, such as
delays in obtaining,
or adverse conditions
contained in,
regulatory approvals
and contractual
consents,
unseasonable weather
affecting the demand
for electricity and
gas, competition and
industry
restructuring,
changes in economic
conditions, currency
fluctuations, changes
in interest and tax
rates, changes in
energy market prices,
changes in historical
weather patterns,
changes in laws,
regulations or
regulatory policies,
developments in legal
or public policy
doctrines, the impact
of changes to
accounting standards
and technological
developments. Other
factors that could
cause actual results
to differ materially
from those described
in this document
include the ability
to integrate the
businesses relating
to announced
acquisitions with our
existing business to
realise the expected
synergies from such
integration, the
availability of new
acquisition
opportunities and the
timing and success of
future acquisition
opportunities, the
timing and success or
other impact of the
    
    sales of our non-core
businesses, the
failure for any
reason to achieve
reductions in costs
or to achieve
operational
efficiencies, the
failure to retain key
management, the
behaviour of UK
electricity market
participants on
system balancing, the
timing of amendments
in prices to shippers
in the UK gas market,
the performance of
our pension schemes
and the regulatory
treatment of pension
costs, and any
adverse consequences
arising from outages
on or otherwise
affecting energy
networks, including
gas pipelines, which
we own or operate.
For a more detailed
description of some
of these assumptions,
risks and
uncertainties,
together with any
other risk factors,
please see our
filings with and
submissions to the US
Securities and
Exchange Commission
(the SEC) (and in
particular the Risk
Factors and
Operating and
Financial Review
sections in our most
recent Annual Report
on Form 20-F).
 Except
as may be required by
law or regulation,
National Grid
undertakes no
obligation to update
any of its
forward-looking
statements. The
effects of these
factors are difficult
to predict. New
factors emerge from
time to time and we
cannot assess the
potential impact of
any such factor on
our activities or the
extent to which any
factor, or
combination of
factors, may cause
results to differ
materially from those
contained in any
forward-looking
statement.()
    
    Printed on revive 100 uncoated paper. This paper is
made from 100% de-inked post consumer waste. It has
been certified according to the rules of the Forest
Stewardship Council (FSC) and it is produced at a
mill that is certified to ISO 14001 environmental
management standards. The mill uses pulps that are
an elemental chlorine free (ECF) process and the
inks used are all vegetable oil based.National Grid plc1-3 Strand, London WC2N 5EH,
United Kingdom Registered in
England and Wales No. 4031152www.nationalgrid.com




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##### Table of Contents



Designed and produced by Likemindwww.likemindgroup.comPrinted at St Ives Westerham Press Ltd, ISO 14001,FSC certified and CarbonNeutral®




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##### Table of Contents



National Grid plc
1-3 Strand, London WC2N 5EH,
United Kingdom Registered in
England and Wales No. 4031152 UK
Shareholder enquiries: 0871 664
0500 US Shareholder enquiries:
1-800-466-7215
www.nationalgrid.com