Document:

<PAGE>
                                                                 EXHIBIT 4(a)(i)

                            DATED    DECEMBER, 2001

                       THE NATIONAL GRID COMPANY PLC (1)

                          NATIONAL GRID GROUP PLC (2)

                           NEW NATIONAL GRID PLC (3)

                                      And

                 THE LAW DEBENTURE TRUST CORPORATION p.l.c. (4)

                 ----------------------------------------------

                         FIRST SUPPLEMENTAL TRUST DEED

                            modifying the Trust Deed

                           dated 17th February, 1998

                 constituting up to (pound sterling)460,000,000

               4.25 per cent Unsecured Exchangeable Bond due 2008

                 ----------------------------------------------

                                 ALLEN & OVERY

                                 One New Change

                                London, EC4M 9QQ

<PAGE>
THIS FIRST SUPPLEMENTAL TRUST DEED is made on    DECEMBER, 2001 BETWEEN:

(1) THE NATIONAL GRID COMPANY plc, a company incorporated under the laws of
    England and Wales, whose registered office is at National Grid House, Kirby
    Corner Road, Coventry, CV4 8JY, England (the "ISSUER");

(2) NATIONAL GRID GROUP PLC, a company incorporated under the laws of England
    and Wales, whose registered office is at 15 Marylebone Road, London NW1
    5JD, England ("NGG");

(3) NEW NATIONAL GRID PLC, a company incorporated under the laws of England and
    Wales, whose registered office is at 15 Marylebone Road, London NW1 5JD,
    England (the "SUBSTITUTED OBLIGOR"); and

(4) THE LAW DEBENTURE TRUST CORPORATION P.L.C., a company incorporated under the
    laws of England and Wales, whose registered office is at Fifth Floor, 100
    Wood Street, London EC2V 7EX, England (the "TRUSTEE", which expression
    shall, wherever the context so admits, include such company and all other
    persons or companies for the time being the trustee or trustees of these
    presents) as trustee for the Bondholders.

WHEREAS:

(A) This First Supplemental Trust Deed is supplemental to the Trust Deed dated
    17th February, 1998 (hereinafter called the "PRINCIPAL TRUST DEED") made
    between the Issuer, NGG and the Trustee and constituting an issue of up to
    (pound sterling)460,000,000 4.25 per cent, Unsecured Exchangeable Bonds due
    2008 of the Issuer (the "BONDS"). The Principal Trust Deed provides that the
    Bonds are exchangeable into Shares of NGG.

(B) NGG published a Scheme of Arrangement dated on or about 10th December, 2001
    (the "SCHEME") which provides for the establishment of a new holding company
    for the National Grid Group, being the Substituted Obligor. Further to the
    Scheme, NGG has asked the Trustee for its consent to the substitution in
    place of NGG as issuer of the Shares under the Bonds of the Substituted
    Obligor (the "SUBSTITUTION").

(C) By virtue of Clause 13.1 of the Principal Trust Deed, the Trustee may agree
    (subject as therein provided) without the consent of the Bondholders, to any
    modification to the Principal Trust Deed which is of a formal, minor or
    technical nature or to correct a manifest error or which is in its opinion
    not materially prejudicial to the interests of the Bondholders and by virtue
    of Clause 13.2(A)(a)(ii) may agree with the Issuer to the substitution in
    place of NGG as the issuer of the Shares under the Bonds and the Principal
    Trust Deed of any subsidiary or holding company of NGG. Any such
    modification and substitution shall be binding on the Bondholders and shall
    be notified by the Issuer to the Bondholders within 14 days of the Effective
    Date.

(D) The Issuer, NGG and the Substituted Obligor have requested the Trustee to
    agree to certain modifications contained hereinafter in order to reflect the
    Substitution.

(E) The Trustee, being of the opinion that the modifications and Substitution
    referred to in Recital (D) above are of a formal, minor or technical nature
    and/or to correct a manifest error and/or will not be materially prejudicial
    to the interests of the Bondholders, has agreed to such modifications and
    the Substitution.

<PAGE>
                                       2

NOW THIS FIRST SUPPLEMENTAL TRUST DEED WITNESSES AND IT IS AGREED AND DECLARED
as follows:

1.   DEFINITIONS

     SUBJECT as otherwise provided in this First Supplemental Trust Deed and
     unless there is anything in the subject or context inconsistent therewith,
     all words and expressions defined or construed in the Principal Trust Deed
     shall have the same meanings or constructions in this First Supplemental
     Trust Deed.

2.   SUBSTITUTION

     2.1       THE Trustee, the Issuer, NGG and the Substituted Obligor hereby
               agree pursuant to Clause 13.2(A)(a)(ii) of the Principal Trust
               Deed that with effect from the Effective Date (as defined in
               Clause 4 below) the Substituted Obligor shall be substituted in
               place of NGG as the issuer of the Shares under the Exchange Right
               and the Principal Trust Deed and accordingly shall assume all of
               the obligations and liabilities expressed therein to attach to
               NGG.

     2.2       Consequent upon Clause 2.1 and in accordance with Clause 13.2(B)
               of the Principal Trust Deed, the parties hereto acknowledge that
               NGG shall automatically with effect from the Effective Date be
               released from all of its obligations under the Principal Trust
               Deed and the Bonds.

3.   MODIFICATIONS

     3.1       The provisions of the Principal Trust Deed are modified as from
               the Effective Date as follows:

               (i)       All references to NGG shall become references to the
                         Substituted Obligor;

               (ii)      By the deletion in Clause 16(a) thereof of the words
                         and numbers:

                              (a)  "or NGG";

                         and

                              (b)  "185 Park Street
                                   London SE1 9DY
                                   Fax No: 0171 620 8714
                                   Attention: Treasurer"

                         and the substitution therefor in the case of (b) of the
                         words and numbers:

                         "National Grid Group PLC
                         15 Marylebone Road
                         London NW1 5JD
                         Fax No: 020 7312 5651
                         Attention: Treasury Department";

               (iii)     By the deletion in Clause 16(b) thereof of the words
                         and numbers:

                         "Princes House
                         95 Gresham Street

<PAGE>
                                       3

                    London EC2V 7LY
                    Fax No: 0171 696 5261"

                    and the substitution therefor of the words and numbers:

                    "Fifth Floor
                    100 Wood Street
                    London EC2V 7EX
                    Fax No: 020 7696 5261";

          (iv)      by the insertion in Clause 16, of a new 16(c)

                    "in the case of the Substituted Obligor, to it at:-

                    15 Marylebone Road
                    London
                    NW1 5JD

                    Fax No: 020 7312 5651
                    Attention: Treasury Department"

     3.2  The Conditions set out in Schedule thereto are hereby modified as from
          the Effective Date as follows:

          (i)       all references to NGG shall become references to the
                    Substituted Obligor;

          (ii)      by the deletion of the first paragraph of the Conditions and
                    the substitution in place therefor of the following:

                    "The (pound sterling) 460,000,000 4.25 per cent. Unsecured
                    Exchangeable Bonds due 2008 (the "Bonds, which expression
                    shall in these Terms and Conditions (the "Conditions"),
                    unless the context otherwise requires, include any Bonds
                    issued pursuant to the over-allotment option and any further
                    bonds issued pursuant to Clause 19 and forming a single
                    series with the Bonds) of The National Grid Company plc (the
                    "Issuer") constituted by a trust deed dated 17 February 1998
                    (the "Principal Trust Deed") made between the Issuer, The
                    National Grid Group plc ("NGG") and The Law Debenture Trust
                    Corporation p.l.c. (the "Trustee", which expression shall
                    include all persons of the time being the trustee or
                    trustees under the Trust Deed) as trustee for the holders of
                    the Bonds as supplemented by a supplemental trust deed dated
                    on or about 10th December, 2001 between the Issuer, NGG, New
                    National Grid plc ("Substituted Obligor") and the Trustee
                    (the "First Supplemental Trust Deed", together with the
                    Principal Trust Deed, the "Trust Deed", which expression
                    shall wherever the context so admits include any deed
                    supplemental thereto). The issue of the Bonds was authorised
                    by a resolution of the board of directors of the Issuer
                    passed on 8 January 1998 and by a committee of the board
                    passed on 5 February 1998. The exchange of the Bonds into
                    Shares (as defined in Condition 6(a)(v)) was authorised by a
                    resolution of the board of directors of NGG passed on 8
                    January 1998 and by a committee of the board passed on 5
                    February 1998. The substitution of the Substituted Obligor
                    in place of NGG as issuer of Shares under the Trust Deed was
                    authorised by a resolution of the board of directors of the
                    Substituted Obligor and of NGG on 7th December, 2001. The
                    Bonds are expected to be listed on London Stock

<PAGE>
                                       4

           Exchange plc (the "London Stock Exchange"). The statements in these
           Conditions include summaries of, and are subject to, the detailed
           provisions of, and definitions in, the Trust Deed, the Agency
           Agreement (as defined below) and a deposit and custody agreement
           dated 17 February 1998 made between the Issuer, Marine Midland Bank
           as custodian (in such capacity, the "Custodian"), Marine Midland Bank
           as depositary (in such capacity the "Depositary"), the Registrar and
           the Principal Paying, Transfer and Exchange Agent (each as defined
           below) and the Holders and Beneficial Owners of the Global Receipts
           (as defined therein)(the "Deposit and Custody Agreement"). Copies of
           the Trust Deed, the Deposit and Custody Agreement and an agency
           agreement dated 17 February 1998 (the "Principal Agency Agreement")
           made between the Issuer, NGG, Midland Bank plc, as principal paying,
           transfer and exchange agent (the "Principal Paying, Transfer and
           Exchange Agent", which expression shall include any successor
           principal paying, transfer and exchange agent under the Agency
           Agreement), the other paying, transfer and exchange agent named
           therein (together with the Principal Paying, Transfer and Exchange
           Agent, the "Agents", which expression shall include any additional or
           successor paying, transfer or exchange agents under the Agency
           Agreement), Lloyds Bank Registrars as registrar (the "Registrar",
           which expression shall include any successor registrar under the
           Agency Agreement) and the Trustee as supplemented by a supplemental
           paying, transfer and exchange agency agreement dated on or about 10th
           December, 2001 between the Issuer, NGG, the Substituted Obligor, the
           Trustee, the Agents and the Registrar (the "First Supplemental
           Paying, Transfer and Exchange Agency Agreement", together with the
           Principal Agency Agreement, the "Agency Agreement") are available for
           inspection during normal business hours by the Bondholders at the
           registered office for the time being of the Trustee, which at the
           date hereof is at Fifth Floor, 100 Wood Street, London EC2V 7EX and
           at the specified office of each of the Agents. The Bondholders are
           entitled to the benefit of, are bound by, and are deemed to have
           notice of, all the provisions of the Trust Deed, the Agency Agreement
           and the Deposit and Custody Agreement.";

    (iii)  by the deletion in Condition 6(b)(ii) of the words "National Grid
           House, Kirby Corner Road, Coventry CV4 8JY" and the substitution
           therefor of the words "15 Marylebone Road, London NW1 5JD";

     (iv)  by the deletion of all words in italics within the Conditions.

4.   EFFECTIVE DATE

     This First Supplemental Trust Deed shall become effective on the date upon
     which an office copy of the order of the High Court of Justice sanctioning
     the Scheme is registered with the Registrar of Companies pursuant to
     sub-section (3) of section 425 of the Companies Act 1985. The Issuer will
     notify the Trustee at least two business days prior to the date it proposes
     to register the said office copy of the order.
<PAGE>
                                       5

5.   CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

     A person who is not a party to this First Supplemental Trust Deed has no
     right under the Contracts (Rights of Third Parties) Act 1999 to enforce any
     term of this First Supplemental Trust Deed, but this does not affect any
     right or remedy of a third party which exists or is available apart from
     that Act.

6.   NOTICE TO BONDHOLDERS

     THE Issuer covenants with the Trustee that not later than 14 days after the
     Effective Date it will give notice to the Bondholders of the modifications
     and the Substitution provided for herein in a form previously approved by
     the Trustee.

7.   GENERAL

(A)  THE Principal Trust Deed shall with effect from the Effective Date be read
     and construed in conjunction with this First Supplemental Trust Deed as one
     document.

(B)  A memorandum of this First Supplemental Trust Deed shall be endorsed by the
     Trustee on the Principal Trust Deed and by each of the Issuer, NGG and the
     Substituted Obligor on its duplicate thereof.

(C)  This First Supplemental Trust Deed may be executed in counterparts, each of
     which, taken together, shall constitute one and the same First Supplemental
     Trust Deed and any party may enter into this First Supplemental Trust Deed
     by executing a counterpart.

IN WITNESS whereof this First Supplemental Trust Deed has been executed as a
deed by the Issuer, NGG, the Substituted Obligor and the Trustee and delivered
on the date stated on page 1.
<PAGE>
                                       6

                                  SIGNATORIES

THE COMMON SEAL of                      )                  [GOLD SEAL]
THE NATIONAL GRID                       )
COMPANY PLC                             )
was affixed to this deed                )
in the presence of:                     )

                    Director   [SIGNATURE ILLEGIBLE]

                    Director   [SIGNATURE ILLEGIBLE]

THE COMMON SEAL of                      )                  [GOLD SEAL]
NATIONAL GRID GROUP                     )
PLC was affixed to this                 )
deed in the presence of:                )

                    Director   [SIGNATURE ILLEGIBLE]

                    Secretary  [SIGNATURE ILLEGIBLE]

EXECUTED as a deed                      )
by NEW NATIONAL GRID PLC                )
acting by          and                  )
under the authority of that company     )

                    Director              [SIGNATURE ILLEGIBLE]

                    Director/Secretary    [SIGNATURE ILLEGIBLE]

THE COMMON SEAL of                      )
THE LAW DEBENTURE TRUST                 )
CORPORATION p.l.c, was affixed          )
to this deed in the presence of:        )

                    Director

                    Authorised Signatory<PAGE>
                                                                EXHIBIT 4(a)(ii)

[LOGO]
                       [NATIONAL GRID COMPANY LETTERHEAD]

                                                                         TNT
For the attention of Mr. Martin O'Donovan

Luxembourg. 20th November 2001                                        JU/SES/mts

SUBJECT:  NATIONAL GRID (UK) PROJECT -- (FI No 0.9200) Finance Contract between
          European Investment Bank and The National Grid Company plc dated 5th
          December 1996 as amended by letter agreements dated 3 February 1997,
          12 November 1998 and 29 March 1999 (the "Finance Contract")
          ______________________________________________________________________

Dear Sirs,

We refer to recent discussions concerning amendments to the Finance Contract
and replacement of the existing guarantee given by National Grid Group plc (the
"Existing Guarantor") by a guarantee from New National Grid plc (the
"Replacement Guarantor").

We propose amending the Finance Contract so as to take effect in the form of
Annex 1 to this letter. This amendment will be subject to and only take effect
on the occurrence of the following conditions to be satisfied on or prior to 31
March 2002:

1.   receipt by the Bank of evidence acceptable to it that the Companies Act
     scheme of arrangement as described to the Bank in the note received on 16
     November 2001 entitled "Mechanics of the Scheme" has come into effect;

2.   receipt by the Bank of a guarantee in the form of Annex 2 to this letter
     duly executed by the Replacement Guarantor together with the Annexes
     referred to therein; and

3.   receipt by the Bank of the restructuring fee of EUR 25,000.

Upon the date of satisfaction of the above conditions, the Existing Guarantor
shall be released from its obligations under the Guarantee (as such term is
defined in the Finance Contract).

We should be grateful if you would kindly acknowledge and agree the terms of
this letter by countersigning the 4 enclosed copies and by returning 2 of
them to us.

                               Yours faithfully,
                            EUROPEAN INVESTMENT BANK

                 /s/ K.J. Andreopoulos                /s/ P. Jedefors

                   K.J. Andreopoulos                    P. Jedefors
                 Deputy General Counsel                   Director

Agreed and accepted for and on behalf of
THE NATIONAL GRID COMPANY PLC

              M. O'Donovan
----------------------------------------

Agreed and accepted for and on behalf of
NATIONAL GRID GROUP PLC

              M. O'Donovan
----------------------------------------

Agreed and accepted for and on behalf of
NEW NATIONAL GRID PLC

              M. O'Donovan
----------------------------------------

<PAGE>
                                                                         ANNEX 1

                 E U R O P E A N  I N V E S T M E N T  B A N K

                                                                 FI No 0.9200 GB

________________________________________________________________________________

                           NATIONAL GRID (UK) PROJECT

________________________________________________________________________________

                                FINANCE CONTRACT

                                    between

                            EUROPEAN INVESTMENT BANK

                                      and

                         THE NATIONAL GRID COMPANY PLC

                                                  London,                   2001

<PAGE>
THIS CONTRACT IS MADE BETWEEN:

European Investment Bank having its Head Office at
100 boulevard Konrad Adenauer, Luxembourg-Kirchberg, Grand
Duchy of Luxembourg, represented by

                             hereinafter called: "THE BANK"

of the first part, and

The National Grid Company plc, a public company incorporated
with limited liability in England, and having its registered
office at National Grid House, Kirby Corner Road, Coventry
CV4 8JY, and represented by

                            hereinafter called: "THE BORROWER"

of the second part.

<PAGE>
                                      -2-

WHEREAS:

1.   THE BORROWER is undertaking a project (hereinafter called "THE PROJECT")
     comprising the reinforcement and enhancement of the existing electricity
     transmission grid (275kV - 400kV) throughout England and Wales, and
     consolidating the load dispatch from five to one control centre, as more
     particularly described in the technical description set out in Schedule A
     hereto as the same may be amended from time to time with the consent of THE
     BANK (hereinafter called the "TECHNICAL DESCRIPTION").

2.   The estimated total cost of THE PROJECT is GBP 443 million (four hundred
     and forty-three million pounds sterling) including price and technical
     contingencies.

3.   The cost of THE PROJECT is to be financed as follows:

                                                                 GBP million
                                                                 -----------

     Own funds                                                      243

4.   In order to complete the financing
     THE BORROWERS has requested from THE
     BANK a credit in an amount equivalent to GBP million           200
                                                                 ------------
                                                   Total            443

5.   Since part of the credit granted under this Contract may be disbursed in
     ecus, for the purposes of this Contract the term "currency" includes the
     ecu as defined in Schedule B. The European Council took decisions at the
     Madrid Summit of 15th and 16th December 1995 relating to the change of
     name of the European monetary unit from "ecu" to "Euro" with effect from
     the start of the third stage of European economic and monetary union (EMU).

6.   THE BORROWER is a wholly-owned subsidiary of National Grid Group plc which
     in turn is a wholly-owned subsidiary of New National Grid plc (hereinafter
     called the "GUARANTOR") which has agreed to execute a guarantee
     (hereinafter called the "GUARANTEE") in respect to THE BORROWER's financial
     obligations hereunder.

7.   THE BANK, being satisfied that the financing of THE PROJECT comes within
     the scope of its functions and having regard to the matters recited above,
     has decided to give effect to THE BORROWER's request by granting to THE
     BORROWER under this Finance Contract (hereinafter called the "CONTRACT") a
     loan in an amount equivalent to GBP 200 million (two hundred million
     pounds sterling).

8.   The board of directors of THE BORROWER has authorised the borrowing
     provided for hereunder by resolution in the terms set out in Annex 1 by
     which THE BORROWER's signatories are duly authorised to sign this Contract
     on its behalf; and it has been duly certified in the form set out in Annex
     II that such borrowing is within the corporate powers of THE BORROWER.

9.   References herein to Articles, Recitals, Schedules and Annexes are
     references respectively to articles of, and recitals, schedules and
     annexes to, this Contract and the following terms have the respective
     meanings assigned to them in the following Recitals and Articles:
<PAGE>
                                      -3-

<Table>
<Caption>

Term                                         Article
----                                         -------
<S>                                          <C>
Accounting Date                              6.01(f)
Authority                                    7.07(1)B
Business Day                                 5.03(3)
Companies Act Subsidiary                     8.05
Contract                                     seventh Recital
Conversion                                   3.01C(2)(i)
Conversion Date                              3.01C(2)(ii)
Conversion Option Date                       3.01C(2)(i)
Conversion Request                           3.01C(2)(i)
Conversion Year                              3.01C(2)(i)
Converted Fixed-Rate Tranche                 3.01C(2)(ii)
Credit                                       1.01
Disbursement Notice                          1.02(3)
Electricity Act                              7.07(1)B
Environmental Laws                           7.07(2)
Financial Indebtedness                       8.05
Fixed-Margin Convertible Tranche             1.02(2)(c)
Fixed-Margin Interest Rate                   3.01C
Fixed-Margin Non-Convertible Interest Rate   3.01D
Fixed-Margin Non-Convertible Tranche         1.02(2)(c)
Fixed-Rate Tranche                           1.02(2)(c)
Group                                        8.05
Guarantee                                    sixth Recital
Guarantor                                    sixth Recital
LIBOR                                        Schedule C
Loan                                         2.01
Material Adverse Change                      1.04B(b)
Maturity Date                                3.01B(2)(ii)
Moody's                                      8.05
NG Group                                     8.05
Notice Day                                   3.01B(3)(ii)(a)
Notice Period                                3.01B(3)(ii)(a)
Payment Date                                 4.02(1)(A)
Pre-disbursement Date                        1.04B(b)
Prepayment Amount                            4.02(1)(A)
Prepayment Date                              4.02(1)(A)
Prepayment Notice                            4.02(1)(A)
Project                                      first Recital
Project Finance Borrowing                    8.05
Project Finance Company                      8.05
Proposal                                     3.01C(2)(i)
Quarter Date                                 3.01C(1)
Reference Period                             3.01C(1)
Reference Rate                               4.02(1)(B)(2)
Relevant Assets                              8.05
Request                                      1.02(2)
Review Date                                  4.01(B)(2)
Revisable Fixed-Rate Tranche                 1.02(2)(c)
Revisable Reference Period                   3.01B(2)
Revisable Test Date                          4.01B
Revision Date                                3.01B(3)(ii)(a)
Revision Notice                              3.01B(3)(ii)(a)
Security Interest                            8.05
Subsidiaries                                 8.05
Subsidiary Undertaking                       8.05
Standard & Poors                             8.05
Technical Description                        first Recital
Test Date                                    4.01(B)(2)
Tranche                                      1.02(1)
</Table>

<PAGE>
                                      -4-

          Transmission Business     8.05
          Transmission License      8.05

NOW THEREFORE it is hereby agreed as follows:

                                   ARTICLE 1
                                  DISBURSEMENT

1.01      AMOUNT OF CREDIT

          By this Contract THE BANK establishes in favour of THE BORROWER, and
          THE BORROWER accepts, a credit (hereinafter called the "CREDIT") in an
          amount equivalent to GBP 200 million (two hundred million pounds
          sterling), to be used for the purpose of the financing of THE PROJECT.

1.02      DISBURSEMENT PROCEDURES

          (1)  Subject to the provisions of Articles 1.04 and 1.07, the Credit
          shall be disbursed in up to a maximum of eight tranches (each being
          referred to individually as a "TRANCHE") which shall each be in a
          minimum amount equivalent to GBP 25,000,000 and in an amount which is
          a multiple of GBP 5,000,000 or the equivalent thereof.

          (2)  Disbursement of each Tranche shall be subject to receipt by THE
          BANK of a written request (a "REQUEST") from THE BORROWER specifying:

          (a)  the amount (expressed in GBP) of the Tranche;

          (b)  the currency in which THE BORROWER prefers the Tranche to be
               disbursed, being a currency referred to in Article 1.03;

          (c)  the interest rate basis selected under Article 3.01 specifying
               whether the Tranche is to bear a fixed rate of interest (such
               Tranche being referred to as a "FIXED-RATE TRANCHE") or a
               revisable rate of interest (such Tranche being referred to as a
               "REVISABLE FIXED-RATE TRANCHE") or a convertible interest rate
               basis (such Tranche being referred to as a "FIXED-MARGIN
               CONVERTIBLE TRANCHE") or a fixed margin to LIBOR rate of interest
               (such Tranche being referred to as a "FIXED-MARGIN
               NON-CONVERTIBLE TRANCHE");

          (d)  THE BORROWER's preferred payment schedule, chosen in accordance
               with Article 4.01A; and

          (e)  the preferred date for disbursement, it being understood that THE
               BANK may disburse the Tranche up to four calendar months from the
               date of the Request.

<PAGE>
                                      -5-

          THE BORROWER may also at its discretion specify in the Request (a) the
          applicable interest rate, if any, previously indicated by THE BANK
          without commitment to be applicable to the currency of the Tranche
          during its lifetime or, in the case of a Revisable Fixed-Rate Tranche,
          for its initial Revisable Reference Period or, in the case of a
          Fixed-Margin Convertible Tranche or a Fixed-Margin Non-Convertible
          Tranche, for the first Reference Period; and/or (b) the fixed margin
          to LIBOR previously indicated by THE BANK as applicable to the Tranche
          and/or (c) the Conversion Year preferred by it.

          No Request may be made before the elapse of one month from the
          immediately preceding Request nor may any Request be made later than
          31st December 1999. Subject to the proviso to Article 1.02(3) each
          Request is irrevocable.

          (3)  THE BANK shall, as soon as practicable and in any event no later
          than a date falling between 10 and 15 days before the proposed date of
          disbursement, if the Request conforms to Article 1.02(2) and subject
          to Articles 1.03 and 1.07, deliver to THE BORROWER a notice
          (hereinafter a "DISBURSEMENT NOTICE") which shall: (i) confirm the
          amount and currency composition of the Tranche specified in the
          Request; (ii) specify the interest rate or rates applicable during the
          Tranche's lifetime pursuant to Article 3.01A or confirm or specify the
          interest rate or rates applicable during the first Revisable Reference
          Period pursuant to Article 3.01B, or, if calculated, the variable
          interest rate as determined pursuant to Article 3.01C or 3.01D, as the
          case may be; (iii) specify the repayment terms applicable thereto;
          (iv) specify the date of disbursement of the Tranche; and (v) specify,
          where relevant, the fixed margin to LIBOR applicable to the Tranche
          and the Conversion Year or the expiry date of the first Revisable
          Reference Period; Provided that if one or more of the elements
          specified in the Disbursement Notice does not conform to the
          corresponding element in the Request THE BORROWER may within three
          London business days following receipt of the Disbursement Notice
          revoke the Request by notice to THE BANK and thereupon the Request and
          the Disbursement Notice shall be of no effect.

          (4)  THE BANK shall in any event not be obliged to issue a
          Disbursement Notice unless it is reasonably satisfied that funds in
          the currency and for maturities such as to enable THE BANK to fund the
          Tranche contemplated in the Request are readily available to it upon
          satisfactory terms and conditions, having regard among other matters
          to administrative consents of the relevant monetary authorities; for
          this purpose, whether terms and conditions are satisfactory shall be
          determined on the basis of THE BANK's reasonable opinion as to whether
          or not the terms and conditions relating to the procurement of such
          funds are such that acceptance thereof would adversely affect THE
          BANK's position or operations in any significant financial market.
          Provided that if THE BANK is unable to fund any Tranche in application
          of the provisions of this paragraph (4), THE BANK shall, after
          consultation with THE BORROWER, extend the period for disbursement of
          the Credit for such period as THE BANK shall decide in agreement with
          THE BORROWER.

          (5)  Disbursement shall be made to such bank account of THE BORROWER
          as it shall notify to THE BANK not less than ten days before the date
          of disbursement.

1.03      CURRENCY OF DISBURSEMENT

          Subject to availability, THE BANK shall disburse each Tranche in the
          currency for which THE BORROWER has expressed a preference; provided
          that Fixed-Margin Convertible Tranches and Fixed-Margin
          Non-Convertible Tranches shall, unless otherwise agreed by THE BANK,
          be available in GBP, in Japanese Yen or Swiss Francs.

          Each currency of disbursement shall be the ecu, a currency of one of
          the Member States of THE BANK or any other currency (including
          Japanese Yen, Swiss francs and US Dollars) which is widely traded on
          the principal foreign exchange market.
<PAGE>
                                      -6-

     For the calculation of the sums to be disbursed in currencies other than
     GBP, THE BANK shall apply the middle-market exchange rate prevailing on
     the London foreign exchange market or, failing which, any other major
     internationally recognised market chosen by THE BANK, on such date (being
     days on which banks are open for business in London, Luxembourg and the
     relevant other market) before disbursement as THE BANK shall decide.

1.04 CONDITIONS OF DISBURSEMENT

     A.   Disbursement of the first Tranche under Article 1.02 is subject to
     fulfilment of each of the following conditions to the satisfaction of THE
     BANK before the date fixed for disbursement:

     (a)  the condition mentioned in Article 8.01 shall have been satisfied;

     (b)  all material approvals and consents necessary to proceed with the
     implementation of THE PROJECT shall have been received by THE BORROWER; and

     (c)  that insurances in accordance with the requirements of Article 7.05
     shall be in place.

     B.   Disbursement of each Tranche under Article 1.02 is subject to
     fulfilment of each of the following conditions to the satisfaction of THE
     BANK before the date fixed for disbursement:

     (a)  following drawdown of the relevant Tranche the aggregate amount of the
     Credit drawdown will not exceed the aggregate expenditure incurred or
     contractually committed by THE BORROWER in respect of THE PROJECT up to the
     date of the relevant Request;

     (b)  at the latest two Business Days prior to the date of disbursement (the
     "PRE-DISBURSEMENT DATE"), there shall not have occurred any Material
     Adverse Change in relation to THE BORROWER or the Guarantor since the date
     of this Contract; provided THE BANK shall act reasonably in determining
     the occurrence or non-occurrence of a Material Adverse Change; for the
     purpose of this subparagraph (b), "MATERIAL ADVERSE CHANGE" means, in
     relation to THE BORROWER, any event or condition which materially impairs
     the ability of THE BORROWER to perform its financial and other obligations
     under this Finance Contract; or (ii) in relation to the Guarantor an event
     or condition which materially impairs its ability to perform its financial
     obligations under the Guarantee; and

     (c)  receipt by THE BANK of a certificate from THE BORROWER in the form of
     Annex III.

1.05 DEFERMENT COMMISSION

     If any disbursement of any Tranche under Article 1.02 is deferred at the
     request of THE BORROWER, with the consent of THE BANK, or by reason of
     non-fulfilment of the conditions of disbursement, THE BORROWER shall pay
     deferment commission on the amount of which disbursement is deferred at an
     annual rate of 1% calculated from the original specified disbursement date
     to the actual disbursement date or, if the Tranche is not wholly disbursed,
     to the date of annulment or cancellation of the Tranche. The request for
     deferral must be received by THE BANK at least seven days before the
     original disbursement date. Such commission shall accrue from day to day
     and shall be payable on each date specified in Article 5.03(1).
<PAGE>
                                      -7-

1.06 ANNULMENT OF CREDIT

     If the cost of THE PROJECT should fall short of the figure stated in the
     Recitals, THE BANK may, by notice to THE BORROWER, annul the Credit in
     proportion to the amount of the shortfall and in an amount such as to
     ensure that the Credit (including any amount disbursed hereunder) does not
     exceed 50% of such cost.

     THE BORROWER may at any time, by notice to THE BANK, in whole or in part
     annual any undisbursed portion of the Credit.

     If THE BORROWER annuls any undisbursed Tranche for which the relevant
     Request has not been revoked pursuant to the proviso to Article 1.02(3), it
     shall pay a flat commission calculated on the amount annulled at half the
     rate of interest applied by THE BANK at the date of annulment to loans made
     by it in the European Union in the same proportions between currencies and
     for the same maturities as the Tranche in question. Such commission shall
     be payable in addition to any commission payable under Article 1.05.

1.07 CANCELLATION OF CREDIT

     THE BANK may, by notice to THE BORROWER, cancel the undisbursed portion of
     the Credit at any time and with immediate effect:

     (a)  following the occurrence of any event mentioned in Article 11.01(A) or
          (B); or

     (b)  if exceptional circumstances shall arise which adversely and
          materially affect THE BANK's access to national or relevant
          international capital markets;

     provided that THE BANK shall not be entitled to cancel, on grounds of case
     (b), any Tranche which has been the subject of a Disbursement Notice.

     Alternatively, if THE BANK is of the opinion that a situation described in
     case (a) or (b) has arisen and is temporary, it may by notice to THE
     BORROWER suspend the undisbursed portion of the Credit. In such case, the
     suspension shall continue until THE BANK notifies THE BORROWER (which it
     shall do as soon as reasonably possible) that it is again in a position to
     issue a Disbursement Notice.

     The Credit shall be considered as cancelled if THE BANK demands repayment
     under Article 11.

     If the Credit is cancelled by reason of the circumstances mentioned under
     case (a) above, THE BORROWER shall pay commission on the cancelled amount
     in respect of which a Disbursement Notice has been issued at an annual rate
     of 0.75% calculated from the date of the relevant Request to the date of
     cancellation.

     Such commission shall be payable in addition to any commission payable
     under Article 1.05 or 1.06.

1.08 CURRENCY OF SUMS DUE UNDER ARTICLE 1

     Commission due from THE BORROWER to THE BANK under this Article 1 shall be
     calculated and payable in pounds sterling.
<PAGE>
                                     - 8 -

                                   ARTICLE 2
                                    THE LOAN

2.01      AMOUNT OF LOAN

          The loan (herein called the "LOAN") shall comprise the aggregate of
          the amounts in the currencies disbursed by THE BANK, as notified by
          THE BANK upon the occasion of the disbursement of each Tranche.

2.02      CURRENCY OF REPAYMENTS

          Without prejudice to the terms of Article 4.02, each repayment under
          Article 4 or, as the case may be, Article 11 shall be effected in the
          currencies disbursed. The amount to be repaid on each repayment date
          in each currency in respect of each Tranche shall be proportional to
          the amount of the Tranche outstanding in that currency.

2.03      CURRENCY OF INTEREST AND OTHER CHARGES

          Interest and other charges payable under Articles 3, 4 and 11 shall be
          calculated and be payable in respect of each Tranche in each currency
          in which the Tranche is repayable.

          Subject to Article 1.08, any other payment shall be made in the
          currency specified by THE BANK having regard to the currency of the
          expenditure to be reimbursed by means of that payment.

2.04      NOTIFICATION BY THE BANK

          After disbursement of a Tranche, THE BANK shall deliver to THE
          BORROWER a summary statement showing the disbursement date, amount,
          repayment terms and the fixed or prevailing variable interest rate of
          and for that Tranche. Such confirmation shall include the relevant
          amortisation table referred to in Article 4.01A.

                                   ARTICLE 3
                                    INTEREST

3.01      RATE OF INTEREST

3.01A     FIXED-RATE TRANCHES

          The outstanding balance of each Tranche which is a Fixed-Rate Tranche
          shall bear interest at the rate or rates specified in the Disbursement
          Notice, each of which rates shall be the interest rate offered by THE
          BANK at the date of issue of the relevant Disbursement Notice in
          respect of loans to be made in the relevant currency and granted by
          THE BANK to borrowers in the EU on the same repayment terms and on the
          same terms for the payment of interest as the Tranche in question.

          THE BORROWER shall pay interest on Fixed-Rate Tranches semi-annually
          in arrears on the payment dates specified in Article 5.03(2) or in the
          relevant Disbursement Notice.

<PAGE>
                                     - 9 -

3.01B     REVISABLE FIXED-RATE TRANCHES

          (1)  Interest shall accrue on the principal amount of Revisable
          Fixed-Rate Tranches outstanding at nominal fixed interest rates
          applicable to successive Revisable Reference Periods as determined
          pursuant to Article 3.01B(3).

          (2)  "REVISABLE REFERENCE PERIOD" means, subject to Article 3.01B(4),
          a period commencing on the date of disbursement of the relevant
          Tranche or the date of expiry of the immediately preceding relevant
          Revisable Reference Period and expiring as follows:

               (i)  the first Revisable Reference Period shall expire on such
               date as is specified in the relevant Disbursement Notice being no
               earlier than the fourth anniversary of the date if drawdown of
               such Tranche and being a payment date specified in Article
               5.03(2) or the relevant Disbursement Notice and being no later
               than such date falling in the tenth year after such drawdown; and

               (ii) each subsequent Revisable Reference Period shall expire on
               the date specified in the relevant notice of acceptance given by
               THE BORROWER pursuant to Article 3.01B(3)(ii)(b) below, being a
               date falling at least four years after the date of expiry of the
               first Revisable Reference Period and being a date falling at
               least four years after the expiry of the preceding Revisable
               Reference Period and being a date falling no later than the most
               recent date specified in Article 5.03(2) or the relevant
               Disbursement Notice prior to the twentieth anniversary of the
               date of drawdown of such Tranche (such date being hereinafter
               referred as the "MATURITY DATE" for such Tranche).

          (3)  (i)  Interest on the relevant Tranche shall be payable at a fixed
               rate determined by THE BANK for each successive Revisable
               Reference Period to be the rate applicable to its customers in
               the EU in respect of loans denominated in the currency of the
               Tranche, having the same maturity and the same interest payment
               basis as the relevant Tranche. The rate of interest for the first
               Revisable Reference Period shall be specified in the relevant
               Disbursement Notice.

               (ii) For each subsequent Revisable Reference Period the interest
               rate applicable to the relevant Tranche shall be determined as
               follows:

               (a)  before 12 noon (Luxembourg time) on any Business Day (the
                    "NOTICE DAY") falling in the interval between 60 and 30 days
                    (the "NOTICE PERIOD") prior to the commencement of each
                    subsequent Revisable Reference Period (the "REVISION DATE")
                    and, where reasonably practicable, after prior consultation
                    with THE BORROWER, THE BANK shall, subject to Article 4.01B,
                    indicate by irrevocable notice (the "REVISION NOTICE") the
                    interest rate which shall apply to the Tranche for each
                    choice of duration of the Revisable Reference Period as
                    permitted by Article 3.01B(2)(ii), to the extent that
                    funding is available to THE BANK for each duration;

               (b)  by not later than 17:00 Luxembourg time on the Notice Day
                    THE BORROWER shall indicate to THE BANK by irrevocable
                    notice its acceptance or rejection of the rate indicated by
                    THE BANK for one of the permitted durations; upon delivery
                    of such notice of acceptance, THE BORROWER shall be obliged
                    to pay interest at the specified rate for a revisable
                    reference period of the specified duration, failing delivery
                    of an acceptance by THE BORROWER in due time; if THE
                    BORROWER rejects the indicated rate, THE BORROWER shall be
                    obliged to prepay the Tranche on the Revision Date in
                    question.

<PAGE>
                                      -10-

      (4)  If so requested by THE BORROWER prior to the Notice Day, and provided
           relevant funding in the currency of the relevant Tranche is available
           to THE BANK, THE BANK may propose a modification of the duration of
           the relevant Revisable Reference Period in accordance with THE
           BORROWER's request provided that the modified Revisable Reference
           Period has (a) a minimum duration of four years, and (b) has an
           expiry date falling on a date mentioned in Article 5.03(2) or the
           relevant Disbursement Notice falling no later than the relevant
           Maturity Date. THE BANK shall notify the modified Revisable Reference
           Period in the relevant Revision Notice and THE BORROWER may accept
           the proposal by the notice mentioned in Article 3.01B(3)(ii)(b).

      (5)  THE BORROWER shall pay interest in Revisable Fixed-Rate Tranches
           semi-annually in arrears on the payment dates specified in Article
           5.03(2) or in the relevant Disbursement Notice commencing on the
           first such date following the date of disbursement of the Tranche.

3.01C FIXED-MARGIN CONVERTIBLE TRANCHES

      (1)  The daily outstanding balance of each Tranche which is a
      Fixed-Margin Convertible Tranche shall bear interest at the Fixed-Margin
      Interest Rate.

      "FIXED-MARGIN INTEREST RATE" means an annual percentage rate of interest
      equal to LIBOR (as defined in Schedule C) adjusted by Y, calculated by THE
      BANK for each successive Reference Period. The Fixed-Margin Interest Rate
      for each Reference Period shall be the rate so notified by THE BANK to THE
      BORROWER within 10 days of commencement of the Reference Period to which
      such rate applies;

      where

      "Y" means such fixed margin to LIBOR (being either plus or minus)
      determined by THE BANK and notified to THE BORROWER in the relevant
      Disbursement Notice in respect of the period from the date of drawdown up
      to 15th December of the year of conversion specified in the relevant
      Disbursement Notice and thereafter such fixed margin shall be plus 15
      basis points;

      "QUARTER DATE" means each 5th February, 5th May, 5th August and 5th
      November (or if any such day is not a Business Day, the next following day
      which is a Business Day); and

      "REFERENCE PERIOD" means each period from, and including, one Quarter
      Date to, but excluding, the next following Quarter Date, except that the
      initial Reference Period shall commence on the date of disbursement of the
      Tranche and the final Reference Period shall end on, but exclude, the
      final repayment date of the Tranche.

      THE BORROWER shall pay interest on Fixed-Margin Convertible-Rate Tranches
      quarterly in arrears on each date specified in Article 5.03(1), commencing
      on the first such date following the date of disbursement of the Tranche.
<PAGE>
                                      -11-

      (2)   The Fixed-Margin Interest Rate basis as specified in Article
            3.01C(1) shall be modified at the request of THE BORROWER on the
            following conditions:

      (i)   upon receipt by THE BANK of a Conversion Request from THE BORROWER
            on any Business Day falling between 60 and 30 days prior to the a
            Conversion Option Date and after prior consultation with THE
            BORROWER, and on condition that the necessary funds are available to
            THE BANK for this purpose. THE BANK shall, upon giving THE BORROWER
            notice at least 2 Business Days prior to making such proposal,
            propose to THE BORROWER the fixed rate of interest to be applicable
            to the specified Fixed-Margin Convertible-Rate Tranche for its
            remaining term and shall propose that this rate shall apply as from
            the Conversion Option Date, with interest to be payable
            semi-annually in arrears on the date(s) specified in Article 5.03(2)
            or in the relevant Disbursement Notice (such change of interest rate
            basis being referred to as "CONVERSION"); and such rate shall be the
            rate of interest applicable to loans denominated in the respective
            currencies of the Tranches concerned and granted by THE BANK to
            borrowers in the EU on the same repayment terms and on the same
            terms for the payment of interest as the Tranche in question;
            provided that THE BANK shall not be obliged to make more than one
            such proposal per Tranche.

            For the purposes of this Article 3.01C, "CONVERSION OPTION DATE"
            means each Quarter Date in the year (the "CONVERSION YEAR")
            specified by THE BANK in the relevant Disbursement Notice being a
            year falling not earlier than two years from the date of
            disbursement of the relevant Tranche and not later than four years
            before the relevant Maturity Date; and "CONVERSION REQUEST" means a
            written notice from THE BORROWER requesting THE BANK to submit to
            them a proposal for converting the basis of the whole but not part
            only of a specified Fixed-Margin Convertible Tranche to a fixed-rate
            basis.

            Any such proposal (the "PROPOSAL") shall include any proposal for
            modifications to this Contract which THE BANK in its discretion
            considers reasonably necessary for the purpose of amending the
            applicable interest rate basis or causing the financial terms of the
            Contract to conform to THE BANK's standard terms of lending for
            fixed-rate loans at the date of the Proposal;

      (ii)  any notice by THE BORROWER accepting the Proposal in respect of any
            Fixed-Margin Convertible-Rate Tranche shall be served in writing on
            THE BANK by 5 p.m. (Luxembourg time) on the same day as THE
            BORROWER's receipt of the Proposal; provided that, if the Proposal
            is delivered after 12 noon Luxembourg time on any Business Day, and
            THE BORROWER does not accept the Proposal by the time specified, THE
            BANK, at the written request of THE BORROWER made on the day of
            receipt of the Proposal, shall on the next following Business Day
            submit to THE BORROWER a further Proposal that is open for
            acceptance on the same basis as the first Proposal; the Conversion
            Option Date in respect of which a Proposal is accepted is
            hereinafter referred to as the "CONVERSION DATE" and a Fixed-Margin
            Convertible-Rate Tranche subject to Conversion hereunder is
            hereinafter referred to as a "CONVERTED FIXED-RATE TRANCHE"; the
            notice shall specify the Tranches to which it applies;

      (iii) in the event of THE BORROWER's acceptance of the Proposal, (a) any
            modifications to this Contract shall be effected by an agreement
            between THE BANK and THE BORROWER and the Guarantor; (b) any accrued
            interest shall be payable on the Conversion Date; and (c) interest
            on the Converted Fixed-Rate Tranches shall thereafter be payable
            annually on the payment date(s) mentioned in Article 5.03(2) or in
            the relevant Disbursement Notice;
<PAGE>
                                      -12-

          (iv) in the event of THE BORROWER's refusal or non-acceptance of a
               Proposal or of THE BORROWER failing to make a written request
               under paragraph (i) above or of a failure by the relevant parties
               to reach the agreement mentioned in item (a) of subparagraph
               (iii) above, the Fixed-Margin Interest Rate basis as specified in
               Article 3.01C(1) shall remain in full force and effect in respect
               of the balance of the Tranche outstanding.

3.01D     FIXED-MARGIN NON-CONVERTIBLE TRANCHES

          Interest shall accrue on the daily outstanding balance of each
          Fixed-Margin Non-Convertible Tranche at the Fixed-Margin
          Non-Convertible Interest Rate. For the purpose of this Article 3.01D:

          "FIXED-MARGIN NON-CONVERTIBLE INTEREST RATE" means an annual
          percentage rate equal to LIBOR (as defined in Schedule C) adjusted by
          X, calculated by THE BANK for each successive Reference Period (as
          defined in 3.01C). The rate of interest for each Reference Period
          shall be the rate so notified by THE BANK to THE BORROWER within 10
          days of commencement of the Reference Period to which such rate
          applies; provided that in the event of a Tranche being drawn down on a
          date other than on a Quarter Date the Fixed-Margin Non-Convertible
          Interest Rate for the initial Reference Period shall be LIBOR;

          where

          "X" means such fixed margin to LIBOR (being either plus or minus)
          determined by THE BANK and notified to THE BORROWER in the relevant
          Disbursement Notice; provided that, if THE BANK is unable to offer a
          Fixed-Margin Non-Convertible Interest Rate for the full duration of
          the Tranche but is able to do so for a lesser period, THE BANK shall
          make an offer in respect of such lesser period and, provided THE
          BORROWER shall have promptly in writing accepted, the Fixed-Margin
          Non-Convertible Interest Rate shall thereafter be LIBOR plus 15 basis
          points from the date of termination of such period until the final
          repayment date of the Tranche.

          THE BORROWER shall pay interest on Fixed-Margin Non-Convertible
          Tranches quarterly in arrears on each date specified in Article
          5.03(1), commencing on the first such date following the date of
          disbursement.

3.02      INTEREST ON OVERDUE SUMS

          Without prejudice to Article 11 and by exception to Article 3.01,
          interest shall accrue on any overdue sum from the due date to the
          actual date of payment at an annual rate calculated as follows:

          (a)  for an amount due under any Tranche, at a rate equal to the sum
               of (i) 2.5% and (ii) the relevant rate from time to time
               applicable thereto pursuant to Article 3.01; and

          (b)  for any other amount, at a rate equal to the sum of (i) 2.5% and
               (ii) the rate of interest charged by THE BANK on the due date for
               loans made in the currency in question for a term of up to 20
               years.

          Such interest is payable in the same currency as the overdue sum on
          which it accrues.
<PAGE>
                                      -13-

                                   ARTICLE 4
                                   REPAYMENT

4.01      NORMAL REPAYMENT

          A.   Scheduled Repayment

          THE BORROWER shall repay each Tranche by semi-annual instalments on
          the dates specified in Article 5.03(2) (or, if different, in the
          relevant Disbursement Notice) in accordance with the terms of the
          amortisation table specified in the relevant notice mentioned in
          Article 2.04 and providing (1) in the case of Fixed-Rate Tranches
          only, for repayment on a constant annuity basis so that the aggregate
          of principal and interest payable in respect of the Tranche shall be
          nearly as possible the same on each repayment date or for repayment by
          equal instalments of principal or (2) in the case of Revisable
          Fixed-Rate Tranches, Fixed-Margin Non-Convertible Tranches and
          Fixed-Margin Convertible Tranches for repayment by equal instalments
          of principal.

          Each amortisation table shall be drawn up on the basis that repayment
          of each Tranche shall begin not later than the first semi-annual
          payment date mentioned in Article 5.03(2) (or, if different, in the
          relevant Disbursement Notice) falling after the fourth anniversary of
          disbursement and shall end on a semi-annual payment date mentioned in
          Article 5.03(2) (or, if different, in the relevant Disbursement
          Notice) falling after the elapse of not less than four years and not
          more than twenty years from the date of disbursement; provided that,
          if so requested by THE BORROWER, THE BANK may agree that a Tranche
          shall be repayable in a single instalment on a date mentioned in
          Article 5.03(2) or a date specified in the Disbursement Notice falling
          not more than ten years from the date of disbursement.

          B.   Exceptional Circumstances

          (1)  If on or before a date (hereinafter a "REVISABLE TEST DATE")
          falling three months prior to any Revision Date THE BANK shall
          determine that appropriate counterpart funds are not available to it
          in national or international finance markets by reason of exceptional
          circumstances which adversely affect such markets or its access to
          such markets, THE BANK may on or before the Revisable Test Date give
          notice to THE BORROWER to repay on such Revision Date the full
          outstanding amount of the relevant Revisable Fixed-Rate Tranche, and
          THE BORROWER shall comply with such notice.

          If THE BANK shall exercise its right under this Article 4.01B, it may
          at its discretion offer to fund the outstanding amount of the
          Revisable Fixed-Rate Tranche, in any other currency available to THE
          BANK, for the outstanding period of the Tranche or, if shorter, for
          the longest maturity at which counterpart funds are available to THE
          BANK, subject to acceptance by THE BORROWER and to the execution, at
          least 45 days before the Revision Date concerned, of such further
          contract and guarantee, conforming so far as practicable to the terms
          of the present Contract and the Guarantee, as THE BANK shall require.

          (2)  If on or before the date (hereinafter a "TEST DATE") falling
          three months prior to the date (the "REVIEW DATE") mentioned in
          Article 5.03(1) next preceding the tenth anniversary of the date of
          disbursement of any Fixed-Margin Non-Convertible Tranches or
          Fixed-Margin Convertible Tranche THE BANK shall determine that
          appropriate counterpart funds are not available to it in national or
          international finance markets by reason of exceptional circumstances
          which materially and adversely affect its access to such markets. THE
          BANK may on or before the Test Date give notice to THE BORROWER to
          prepay on such Review Date the full outstanding amount of each such
          Fixed-Margin Non-Convertible Tranches and Fixed-Margin Convertible
          Tranche and THE BORROWER shall comply with such notice.
<PAGE>
                                      -14-

          If THE BANK shall exercise its right under this Article 4.01B(2), it
          may at its discretion offer to fund the outstanding amount of the
          Fixed-Margin Non-Convertible or Fixed-Margin Convertible Tranche, in
          any other currency available to THE BANK, or on another interest rate
          basis, for the outstanding period of the Fixed-Margin Non-Convertible
          or Fixed-Margin Convertible Tranche or, if shorter, for the longest
          maturity at which counterpart funds are available to THE BANK, subject
          to acceptance by THE BORROWER and to the execution, at least 45 days
          before the Review Date concerned, of such further contract and
          guarantee, conforming so far as practicable to the terms of the
          present Contract and the Guarantee, as THE BANK shall require. The
          procedure for the determination of the rate of interest shall conform
          to the practice of THE BANK prevailing at the time of the Test Date.

4.02      VOLUNTARY PREPAYMENT

          1. FIXED- AND REVISABLE-RATE TRANCHES

          A. THE BORROWER may prepay all or part of any Fixed-Rate Tranche,
          Revisable Fixed-Rate Tranche, or Converted Fixed-Rate Tranche upon
          giving written notice (hereinafter a "PREPAYMENT NOTICE") specifying
          the Tranche and the amount (the "PREPAYMENT AMOUNT") to be prepaid and
          the proposed date of prepayment (the "PREPAYMENT DATE"), which shall
          be a payment date specified in Article 5.03(2) or in the relevant
          Disbursement Notice (each a "PAYMENT DATE"). The Prepayment Notice
          shall be delivered to THE BANK at least one month prior to the
          Prepayment Date. Save in the case of prepayment of a Revisable-Rate
          Tranche on the last day of a Revisable Reference Period, prepayment
          shall be subject to the payment by the BORROWER of the compensation,
          if any, due to THE BANK in accordance with the provisions of
          paragraphs B and C below.

          B. The amount of compensation due on the Tranche prepaid shall be the
          amount of the shortfall in interest incurred by THE BANK in respect of
          each half-year ending on successive Payment Dates falling after the
          Prepayment Date (but, in the case of a Revisable-Rate Tranche, falling
          on or before the date of expiry of the current Revisable Reference
          Period) calculated in the manner stated in the following subparagraph
          and discounted in accordance with last sentence of this paragraph B.

          The amount of the shortfall shall be calculated as the amount by
          which:

          (x) the interest that would have been payable during that half-year
              on the prepaid part of the Tranche

          exceeds

          (y) the interest which would have been so payable during that
              half-year if calculated at the Reference Rate; for which purpose
              the "REFERENCE RATE" means the rate (reduced in each case by 15
              (fifteen) basis points) which THE BANK determines on the date
              falling one month prior to the Prepayment Date to be either (i)
              the rate for a loan quoted by THE BANK in the relevant currency,
              having the same financial characteristics as the Tranche, in
              particular the same period for the payment of interest, the same
              remaining life to maturity and the same type of repayment profile
              or in the case of a Revisable-Rate Tranche, if less, the remaining
              duration of the current Revisable Reference Period, or (ii) if the
              Bank does not quote such a rate, the rate for a loan or available
              money market placement for the period most closely corresponding
              to that maturity or to that remaining duration of the
              Revisable-Rate Tranche as aforesaid.

          The interest rate which THE BANK, following the procedures laid down
          by the Board of Directors of THE BANK, quotes for a loan is, in
          accordance with the Statute of THE BANK, determined on the basis of
          conditions prevailing on the capital markets.

<PAGE>
                                      -15-

          Each amount so calculated shall be discounted to the Prepayment Date
          by applying a discount rate equal to the rate determined pursuant to
          indent (y) of this paragraph B.

          C. On the date falling on or before 30 days prior to the proposed
          Prepayment Notice THE BANK shall give notice to THE BORROWER of the
          amount of compensation due or, as the case may be, the absence of
          compensation. If by 5 PM Luxembourg time on the same date THE BORROWER
          fails to confirm its intention to effect prepayment on the terms
          notified by THE BANK, the proposed prepayment shall not take place.

          Save as aforesaid, THE BORROWER shall be obliged to effect payment in
          accordance with the Prepayment Notice, together with accrued interest
          on the Prepayment Amount as well as any sum due under this Article
          4.02.

          2. FIXED-MARGIN NON-CONVERTIBLE TRANCHES AND FIXED-MARGIN CONVERTIBLE
             TRANCHES

          THE BORROWER may prepay any Non-Convertible Tranche or
          Convertible-Rate Tranche (prior to Conversion), together with accrued
          interest, on the date of expiry of any Reference Period. Prepayment
          may be effected without penalty and subject to thirty days' prior
          written notice. The notice shall be irrevocable.

          Sums prepaid under Article 4.02.1 or 4.02.2 shall not be available to
          be re-borrowed.

4.03      COMPULSORY PREPAYMENT

          A. If the total cost of THE PROJECT should fall significantly short of
          the figure stated in the Recitals, THE BORROWER shall upon demand of
          THE BANK prepay the required amount of the Loan, together with
          interest and related sums accrued thereon, on the date indicated by
          THE BANK. For this purpose, the required amount of the Loan shall be
          the minimum amount such as to ensure that the outstanding principal
          amount of the Loan shall not exceed 50% of the total cost of THE
          PROJECT.

          B. If, without the prior written contact of THE BANK, the BORROWER
          ceases to be a Subsidiary which is wholly-owned by the Guarantor, THE
          BANK may require that THE BORROWER consult with it. Such consultation
          shall take place within 30 days from the date of THE BANK's request.
          If after 30 days from the date of such a request THE BANK is of the
          opinion that such event has, or is likely to have, a material adverse
          effect on the future servicing of the Loan or on the solvency of THE
          BORROWER then THE BANK may require THE BORROWER to prepay the Loan,
          together with accrued interest and a premium calculated on the amount
          to be prepaid in accordance with Article 4.02. THE BORROWER shall
          effect payment of the amount demanded on the date specified by THE
          BANK, such date being a date falling not less than 30 days from the
          date of the demand.

          C. If at any time while the Loan is outstanding a Loss-of-Rating Event
          shall occur, THE BORROWER shall so inform THE BANK and THE BANK may
          demand that THE BORROWER consult with it with regard to the
          implications of the Loss-of-Rating Event on THE BORROWER's obligations
          and on the possible provision of additional security in support
          thereof. Such consultation shall take place within 30 days from the
          date of THE BANK's request. If, after the elapse of 30 days from the
          date of such request, THE BANK is of the reasonable opinion that the
          Loss-of-Rating Event has, or is likely to have, a material adverse
          effect on the future servicing of the Loan or on the financial
          stability of THE BORROWER, it may request THE BORROWER to provide
          additional security for the Loan in the form of a guarantee in terms
          and from a bank acceptable to THE BANK or of other security acceptable
          to THE BANK.

          If within a further period of 30 days the additional security has not
          been executed in manner, form and substance satisfactory to THE BANK,
          THE BANK may forthwith request THE BORROWER to prepay the Loan,
          together with accrued interest and a premium calculated on the amount
          to be prepaid in accordance with Article 4.02B. THE BORROWER shall
          effect payment of the amount demanded on the date specified by THE
          BANK, such date being a date falling not less than 30 days from the
          date of the demand. If
<PAGE>
                                      -16-

         such date should not coincide with an interest payment date, for the
         purposes of calculation of premium under Article 4.02B, the broken
         period until the ensuing interest payment date shall itself be treated
         in like manner as per Article 4.02B.

         Provided that for the purposes of this Contract a "LOSS-OF-RATING
         EVENT" means any change in the rating awarded to any unsecured
         unsubordinated long or medium debt of THE BORROWER by any
         internationally recognised credit rating agency, such that:

         a.       if the rating is given by Moody's, it falls below A3; or
         b.       if the rating is given by Standard & Poor's, it falls below
                  A-.

         For the purposes of this Article THE BORROWER undertakes to procure
         that at all times it shall maintain a rating with each of the agencies
         referred to at a. and b. above.

         D.       (1)      If the transmission of electricity ceases to be the
         principal business of THE BORROWER whether as a result of the cessation
         of any business or activity or of the disposal or transfer of any
         business or activity, THE BORROWER shall consult with THE BANK within
         thirty days after such cessation. For the purposes of this paragraph
         (1) the "principal business of THE BORROWER" shall mean a business that
         from time to time exploits at least 90% of net tangible fixed assets or
         generates at least 90% of operating profit of THE BORROWER as reported
         in THE BORROWER's most recent consolidated accounts.

                  (2)      In the event that any licence of THE BORROWER
         associated with the transmission of electricity is or revoked, modified
         or surrendered then, THE BORROWER shall consult with THE BANK within
         thirty days after such or revocation, modification or surrender.

                  (3)      If, in the circumstances referred to in paragraph (1)
         above, THE BANK is of the reasonable opinion that such cessation taken
         as a whole has a material adverse effect on the future servicing of the
         Loan, or if, in the circumstances referred to in paragraph (2) above,
         THE BANK is of the reasonable opinion that such revocation,
         modification or surrender taken as a whole has a material adverse
         effect on the future servicing of the Loan, the following shall take
         place:

         (i)      THE BANK shall notify THE BORROWER if it requires a bank or
                  other financial institution acceptable to THE BANK to be
                  appointed (at the expense of THE BORROWER) as a guarantor of
                  THE BORROWER's financial obligations hereunder on terms and
                  conditions reasonably acceptable to THE BANK; and

         (ii)     if THE BORROWER fails to implement any such requirement under
                  (i) above or declare its unwillingness or inability to comply
                  with THE BANK's requirement, it shall, within 30 days from
                  notification to it of THE BANK's requirement, give notice of
                  prepayment of the whole outstanding balance of the Loan on a
                  date falling not later than sixty days after such
                  notification, (together with accrued interest thereon and a
                  premium calculated in accordance with Article 4.02), and shall
                  prepay in accordance with such notice.

         E.       In case of any partial prepayment due under this Article 4.03,
         THE BORROWER may select which Tranche or Tranches are to be prepaid.

4.04     GENERAL PROVISIONS REGARDING PREPAYMENT UNDER ARTICLE 4

         Prepayment shall be made in all currencies of the Tranche in question
         in proportion to the respective amounts outstanding, save that THE
         BORROWER may elect instead to prepay under Article 4.02 the whole
         amount outstanding in one or more currencies under the Tranche.

         In case of partial prepayment in all currencies, each amount prepaid
         shall be applied in reduction of outstanding instalments in inverse
         order of maturity.

<PAGE>
                                      -17-

This Article 4 shall not prejudice Article 11.

                                   ARTICLE 5
                                    PAYMENTS

5.01     PLACE OF PAYMENT

         Each sum payable by THE BORROWER under this Contract shall be paid to
         the respective account notified by THE BANK to THE BORROWER. THE BANK
         shall indicate the account not less than fifteen days before the due
         date for the first payment by THE BORROWER and shall notify any change
         of account not less than fifteen days before the date of the first
         payment to which the change applies, save that this period of notice
         does not apply in the case of payment under Article 11 but THE BANK
         shall indicate the account in its demand for payment thereunder.

5.02     CALCULATION OF PAYMENTS RELATING TO A FRACTION OF A YEAR

         Any amount due in respect of any Tranche by way of interest, commission
         or otherwise hereunder, and calculated in respect of a fraction of a
         year, shall be calculated on the basis of:

         (a)      in respect of Fixed-Rate Tranches, Revisable Fixed-Rate
                  Tranches, or Converted Fixed-Rate Tranches a year of three
                  hundred and sixty days and a month of thirty days; and

         (b)      in respect of Fixed-Margin Non-Convertible Tranches and
                  Fixed-Margin Convertible Tranches a year of three hundred and
                  sixty-five days (or, in case of a currency other than GBP,
                  three hundred and sixty days) and the number of days elapsed.

5.03     DATES OF PAYMENT

         (1)      Sums due quarterly hereunder are payable to THE BANK on 5th
         February, 5th May, 5th August, and 5th November in each year.

         (2)      Sums due semi-annually hereunder are payable to THE BANK on
         5th February and 5th August.

         (3)      If any payment date specified in Article 5.03(1) or (2) or in
         the relevant Disbursement Notice falls on a day which is not a Business
         Day the payment shall be effected on the next following day which is a
         Business Day or on the immediately preceding day which is a Business
         Day in the case of payments due in respect of a Fixed-Margin
         Non-Convertible Tranche or a Fixed-Margin Convertible Tranche. A
         Business Day means a day (other than a Saturday or Sunday) on which
         banks are open for business in Luxembourg and London (or, if the
         currency of disbursement is a currency other than GBP, the relevant
         principal banking centre for such currency) (herein called a "BUSINESS
         DAY").

         (4)      Other sums due hereunder are payable within seven days of
         receipt by THE BORROWER of the demand made by THE BANK.

         (5)      A sum due from THE BORROWER shall be deemed paid when it is
         received by THE BANK.

<PAGE>
                                      -18-

                                   ARTICLE 6
                         REPRESENTATION AND WARRANTIES

6.01  THE BORROWER REPRESENTS AND WARRANTS TO THE BANK THAT:

     (a)  it is duly incorporated and validly existing as a public company with
          limited liability under the laws of England and it has power to carry
          on its business as it is now being conducted and to own its property
          and other assets;

     (b)  it has the power to execute, deliver and perform its obligations under
          this Contract and all necessary corporate, shareholder and other
          action has been taken to authorise the execution, delivery and
          performance of the same by it;

     (c)  this Contract constitutes its valid and legally binding obligations;

     (d)  the execution and delivery of, the performance of its obligations
          under, and compliance with the provisions of, this Contract do not and
          will not:

          (i)   contravene any existing applicable law, statute, rule or
                regulation, or any judgement, decree or permit to which it is
                subject;

          (ii)  conflict with, or result in any material breach of any of the
                terms of, or constitute a material default under, any other
                agreement or other instrument to which it is a party or is
                subject or by which either of them or its property is bound
                which might reasonably be expected to have a material adverse
                effect on its ability to perform its material obligations under
                this Contract; or

          (iii) contravene or conflict with any provision of its Memorandum and
                Articles of Association;

     (e)  every material consent, authorisation, licence or approval of, or
          registration with, or declaration to, governmental or public bodies or
          authorities or courts required by it to authorise, or required by it
          in connection with the execution, delivery, validity, enforceability
          or admissibility in evidence of this Contract or the performance by it
          of its material obligations under this Contract has been obtained or
          made and is in full force and effect, and there has been no material
          default in the observance of the conditions or restrictions (if any)
          imposed in, or in connection with, any of the same;

     (f)  the consolidated audited accounts of THE BORROWER for the year ended
          31st March 2001 (the "ACCOUNTING DATE") have been prepared on a basis
          consistent with previous years and have been approved by its auditors
          as representing a true and fair view of the results of its operations
          for that year and accurately disclose or reserve against all the
          liabilities (actual or contingent) of THE BORROWER;

     (g)  there has been no Material Adverse Change in relation to THE BORROWER
          since the Accounting Date and no event or circumstance which
          constitutes or would with the passage of time constitute an event of
          default under Article 10.01 has occurred and is continuing;

     (h)  no litigation, arbitration or regulatory proceedings or investigations
          for which process has been served on it or any of its relevant
          subsidiaries are current and which, if adversely determined, should
          result in a material adverse change in relation to THE BORROWER; and

     (i)  THE BORROWER has obtained all necessary consents, authorisations,
          licences or approvals of governmental or public bodies or authorities
          in connection with THE PROJECT and all such consents, authorisations,
          licences or approvals are in full force and effect.

<PAGE>
                                      -19-

          The representations and warranties contained in this Article 6.01
          shall be treated as being made on the date on which this Contract is
          amended and restated.

                                   ARTICLE 7
                            PARTICULAR UNDERTAKINGS

7.01      USE OF LOAN AND OTHER FUNDS

          THE BORROWER shall use the proceeds of the Loan for the execution of
          THE PROJECT.

7.02      COMPLETION OF THE PROJECT

          THE BORROWER undertakes to carry out THE PROJECT in accordance with
          the Technical Description (as amended from time to time with the
          agreement of THE BANK) and use its best efforts to complete it by the
          final date specified in the Technical Description or by such later
          date as THE BANK may agree.

7.03      INCREASED COST OF THE PROJECT

          If the cost of THE PROJECT exceeds the estimated figure set out in the
          second Recital, THE BORROWER shall obtain the finance to fund the
          excess cost without recourse to THE BANK, so as to enable THE BORROWER
          to complete THE PROJECT in accordance with the Technical Description.

7.04      TENDERING PROCEDURE

          THE BORROWER shall, so far as appropriate and possible and in manner
          satisfactory to THE BANK, purchase goods, secure services and order
          works for THE PROJECT by international tender open at least to
          nationals of all countries which are signatories of the Agreement on
          the European Economic Area and in accordance with each Directive of
          the European Union applicable to THE PROJECT.

7.05      INSURANCE

          So long as the Loan is outstanding, THE BORROWER shall ensure that all
          works and property forming part of THE PROJECT are insured (whether by
          third parties or by self insurance) in conformity with good industry
          practice.

7.06      MAINTENANCE

          So long as the Loan is outstanding, THE BORROWER shall maintain,
          repair, overhaul and renew all property (excluding obsolete property
          and/or property which has reached the end of its useful life) forming
          part of THE PROJECT as required to keep it in repair and in good
          working order.

7.07      OPERATIONAL AND ENVIRONMENTAL COVENANTS

          (1)  So long as the Loan is outstanding, THE BORROWER shall:

          A.   unless, save as contemplated by Article 4.03D, THE BANK shall
          have consented otherwise in writing, retain title to and possession of
          the assets which comprise THE

<PAGE>
                                      -20-

     PROJECT or, as appropriate, replace and renew such assets (excluding
     obsolete assets and/or assets which have reached the end of their useful
     life) and shall operate THE PROJECT in accordance with its original
     purpose. THE BANK may withhold its consent only where the proposed action
     would prejudice THE BANK's interests as lender to THE BORROWER or would
     render THE PROJECT ineligible for financing by THE BANK under Article 198e
     of the Treaty of Rome; and

     B.   comply, or shall ensure compliance, in all material respects with the
     conditions and restrictions (if any) imposed in, or in connection with,
     every consent, authorisation, licence or approval of governmental or public
     bodies or authorities or courts or the Gas and Electricity Markets
     Authority (the "AUTHORITY") from time to time appointed under Section 1 of
     the Electricity Act 1989 and any replacement legislation including, to the
     extend applicable, the Utilities Act 2000 (the "ELECTRICITY ACT")
     (including the transmission licence (the "TRANSMISSION LICENCE") granted to
     it under Section 6 of the Electricity Act required in connection with THE
     PROJECT and do, or cause to be done, all other acts and things which may
     from time to time be necessary under applicable law (including
     Environmental Laws), the Grid Code, the Distribution Code and the Fuel
     Security Code (each as defined in the Transmission Licence) for the
     continued due compliance therewith.

     (2)  For the purposes of this Article 7.07:

          "ENVIRONMENTAL LAWS" means, in relation to environmental matters, all
          or any relevant statutes, rules, regulations, statutory instruments,
          treaties, directives, directions, by-laws, codes of practice,
          circulars, guidance notes, orders, notices, demands, injunctions,
          statute law or common law, statutory or common law duty of care, of
          any governmental authority or agency or any regulatory body in any
          jurisdiction or the European Union which in any such case is directly
          binding on and enforceable against THE BORROWER (or, where relevant
          to another person, that other person).

7.08 PARI PASSU UNDERTAKING

     THE BORROWER undertakes that its obligations under this Contract are
     direct and unconditional obligations of THE BORROWER and rank and will
     rank at least pari passu with all other unsecured and unsubordinated
     obligations (including contingent obligations) of THE BORROWER other than
     those obligations of THE BORROWER to its unsecured creditors which would,
     on a winding-up of THE BORROWER, be preferred by operation of law.

                                   ARTICLE 8
                                    SECURITY

8.01 GUARANTEE

     The obligations of THE BANK under this Contract are conditional upon the
     execution and delivery to it of the duly executed Guarantee in form and
     substance approved by THE BANK, whereby the Guarantor unconditionally
     guarantees the due performance of THE BORROWER's financial obligations
     under this Contract. THE BORROWER hereby acknowledges and consents to the
     terms of the Guarantee.
<PAGE>
                                      -21-

8.02 NEGATIVE PLEDGE

     Subject to Article 8.03, so long as any part of the Loan remains
     outstanding, THE BORROWER shall not, and it shall procure that no other
     member of the Group will, create or permit to subsist any Security
     Interest on, or with respect to, any of its present or future business,
     undertaking, assets or revenues (including any uncalled capital).

8.03 Subject to Article 8.04, Article 8.02 does not apply to:-

     (A)  any Security Interest created with the prior written consent of THE
     BANK;

     (B)  Security Interests granted prior to the date of this Agreement and
     disclosed to THE BANK in writing but only if the maximum principal amount
     secured thereby is not subsequently increased;

     (C)  any Security Interest by way of title retention entered into in the
     ordinary course of business;

     (D)  any lien arising by operation of law in ordinary course of business;

     (E)  any banker's lien or right of set-off arising by operation of law in
     the ordinary course of commercial banking transactions or any contractual
     set-off arrangements in the ordinary course of commercial banking
     transactions;

     (F)  any Security Interest existing over assets acquired after the date of
     this Agreement and existing on the date of acquisition, provided that:-

     (1)  the Security Interest is not created in contemplation of the
     acquisition of the same; and

     (2)  the maximum principal amount secured thereby or the maturity of those
     obligations is not thereafter increased;

     (G)  any Security Interest over the assets of any company which becomes a
     Subsidiary of THE BORROWER after the date of this Agreement and which
     exist at the date on which it becomes a Subsidiary of THE BORROWER, but
     only if:-

     (1)  the principal amount secured by the Security Interest is not
     increased after the date it becomes a Subsidiary of THE BORROWER; and

     (2)  the Security Interest is not created in contemplation of it becoming
     a Subsidiary of THE BORROWER;

     (H)  any Security Interest over goods and/or documents of title, or
     insurance policies and sale contracts in relation to such goods, arising
     in the ordinary course of trading in connection with letters of credit and
     similar transactions where such Security Interest secures only so much of
     the acquisition cost of such goods which is required to be paid within 180
     days after the date upon which the same was first incurred;

     (I)  any Security Interest created in substitution for any Security
     Interest permitted pursuant to this Article (other than Security Interests
     initially permitted pursuant to paragraph (H) above), provided that the
     substituted Security Interest is over the same asset and the principal
     amount secured does not exceed the principal amount secured on such asset
     prior to the substitution;

     (J)  any other Security Interest so long as the aggregate outstanding
     principal amount of indebtedness secured by all the Security Interests
     permitted under this Article (with the exception of amounts secured by
     Security Interests referred to in paragraphs (A) to (E) and
<PAGE>
                                      -22-

     (M) below) does not exceed, when combined with all Security Interests of
     the NG Group, GBP 80 million;

     (K) any Security Interest created or granted from time to time in respect
     of any Project Finance Borrowing including, for the avoidance of doubt, any
     Security Interest created or granted by a member of the Group in its
     capacity as a shareholder of a company making a Project Finance Borrowing
     over its shareholding in that company (including, in the case of a member
     of the Group whose only material assets are shares in the company incurring
     the Project Finance Borrowing, a supporting floating charge over all or
     substantially all of that member's assets) as security for such Project
     Finance Borrowing, provided that the right of recourse against such
     shareholder is limited to the realisation of the shareholding in that
     company;

     (L) any Security Interest created by a Project Finance Company; and

     (M) any Security Interest created or granted from time to time by a member
     of the Group in its capacity as a shareholder of a Project Finance Company
     over its shareholding in that Project Finance Company as security for the
     obligations of such Project Finance Company.

8.04 Notwithstanding anything in Article 8.03 above, none of THE BORROWER or any
     of its Subsidiaries will create or permit to subsist any Security Interest
     over:

     (A) Relevant Assets used in the Transmission Business carried out pursuant
     to any Transmission Licence; or

     (B) any shareholding in any Subsidiary of THE BORROWER which is the legal
     and/or beneficial owner of Relevant Assets used in the Transmission
     Business carried out pursuant to any Transmission Licence.

8.05 The following terms used in this Article 8 and, where relevant, in Article
     11 shall bear the following meaning:

     "COMPANIES ACT SUBSIDIARY" means a subsidiary within the meaning of Section
     736 of the Companies Act 1985, as amended by Section 144 of the Companies
     Act 1989.

     "FINANCIAL INDEBTEDNESS" means (without double-counting) any indebtedness
     of the Group in respect of (a) moneys borrowed or debit balances at banks
     and other financial institutions; (b) any debenture, bond, note, commercial
     paper, loan stock or other debt instrument; (c) any acceptance or
     documentary credit facilities, bill discounting or factoring facilities;
     (d) receivables sold or discounted (otherwise than on a non-recourse
     basis); (e) the acquisition cost of any asset to the extent payable before
     or after the time of acquisition or possession by the party liable where
     the advance or deferred payment is arranged primarily as a method of
     raising finance or financing the acquisition of that asset; (f) leases
     (whether in respect of land, machinery, equipment or otherwise) entered
     into primarily as a method of raising finance or financing the acquisition
     of that asset; (g) currency or interest swap, cap or collar arrangements or
     any other derivative instrument; (h) amounts raised under any other
     transaction having the commercial effect of a borrowing or raising of
     money; (i) any guarantee, indemnity or similar assurance in respect of
     indebtedness of any person falling within any of paragraphs (a) to (h)
     (both inclusive) above.

     "GROUP" means THE BORROWER and its Subsidiaries from time to time but if
     at any time a Project Finance Company, is a Subsidiary Undertaking but not
     a Companies Act Subsidiary then, for so long as it shall be a Subsidiary
     Undertaking but not a Companies Act Subsidiary, it shall be deemed (unless
     the contrary is specified) not to be a member of the Group.

     "MOODY'S" means Moody's Investors Services Inc.

<PAGE>
                                      -23-

     "NG GROUP" means for the purposes of this Article 8 the Guarantor and its
     Subsidiaries from time to time but for the purposes of Articles 8.02, 9.02
     and 11 if at any time a Project Finance Company is a Subsidiary Undertaking
     but not a Companies Act Subsidiary, then, for so long as it shall be a
     Subsidiary Undertaking but not a Companies Act Subsidiary, it shall be
     deemed (unless the contrary is specified) not to be a member of the NG
     GROUP.

     "PROJECT FINANCE BORROWING" means any Financial Indebtedness to finance a
     project: --

     (a)  which is made by a single purpose company, partnership or other legal
          person (whether or not a member of the NG Group) whose principal
          assets and business are constituted by that project and whose
          liabilities in respect of the Financial Indebtedness concerned are not
          directly or indirectly the subject of a guarantee, indemnity or other
          form of assurance, undertaking or support from any member of the NG
          Group (except as expressly referred to in paragraph (b)(iii) below or
          as a result of the making of acceptances or endorsements of bills in
          the ordinary course of trading or payment netting arrangements and
          other usual course of business banking arrangements); or

     (b)  in respect of which the person or persons making that Financial
          Indebtedness available to the relevant borrower (whether or not a
          member of the NG Group) have no recourse whatsoever to any member of
          the NG Group for the repayment of or payment of any sum relating to
          that Financial Indebtedness other than:--

          (i)   recourse to the borrower or one or more of its subsidiaries, for
                amounts limited to the aggregate cash flow or net cash flow
                (other than historic cash flow or historic net cash flow) from
                the project; and/or

          (ii)  recourse to the borrower or one or more of its subsidiaries or
                any shareholder of the borrower for the purpose only of enabling
                amounts to be claimed in respect of that Financial Indebtedness
                in any enforcement of any Security Interest permitted pursuant
                to Article 8.02 given by the borrower or one or more of its
                subsidiaries over the assets comprised in the project (or given
                by any shareholder of the borrower over its shares in the
                borrower together with, in the case of a UK-incorporated
                shareholder whose only material assets are those shares in the
                borrower, a supporting floating charge over all or substantially
                all of its assets to secure that Financial Indebtedness or any
                recourse referred to in (iii) below or as a result of the making
                of acceptances or endorsements of bills in the ordinary course
                of trading or payment netting arrangements and other usual
                course of business banking arrangements, provided that (A) the
                extent of the recourse to the borrower or one or more of its
                subsidiaries or shareholder is limited solely to the amount of
                any recoveries made on any such enforcement, and (B) the person
                or persons are not entitled, by virtue of any right to claim
                arising out of or in connection with the Financial Indebtedness,
                to commence proceedings for the winding up or dissolution of the
                borrower, the subsidiary or shareholder or to appoint or procure
                the appointment of any receiver, trustee or similar person or
                official in respect of the borrower, the subsidiary or
                shareholder or any of its assets (save for the assets the
                subject of the relevant Security Interest); and/or

          (iii) recourse to such borrower generally, or directly or indirectly
                to a member of the NG Group under any form of assurance or
                undertaking, which recourse is limited to a claim for damages
                (other than liquidated damages and damages required to be
                calculated in a specified way) for breach of an obligation (not
                being a payment obligation or an obligation to procure payment
                by another or an obligation to comply or to procure compliance
                by another with any financial ratios or other tests of financial
                condition) by the person against whom such recourse is
                available; or

     (c)  which THE BANK shall have agreed in writing to treat as Project
          Finance Borrowing for the purposes of this Article 8.
<PAGE>
                                      -24-

     If at any time any Financial Indebtedness is made to finance a project and
     that Financial Indebtedness does not qualify as a "Project Finance
     Borrowing" pursuant to the above subparagraphs (b)(i), (ii) or (iii) but
     would so qualify if there were not recourse to a member of the NG Group
     which is either (i) limited as to the period during which it is in force
     (for example, during the period up to completion of the project) or (ii)
     limited as to the obligations of the borrower to which it applies, then, in
     any such case, the Financial Indebtedness shall be regarded as a "Project
     Finance Borrowing" for the purposes of this definition to the extent that,
     and during the period that, there is no such recourse to a member of the NG
     Group.

     "PROJECT FINANCE COMPANY" means any company, partnership or other legal
     person falling within the scope of paragraph (a) of the definition of
     Project Finance Borrowing or which THE BANK has agreed shall be treated as
     a Project Finance Company for the purposes of this Article 8.

     "RELEVANT ASSETS" has the meaning given to it in the relevant Transmission
     Licence.

     "SECURITY INTEREST" means any mortgage, pledge, lien, charge, assignment,
     hypothecation or security interest or any other agreement or arrangement
     having the effect of conferring security.

     "STANDARD AND POORS" means Standard & Poor's Corporation.

     "SUBSIDIARIES" means Companies Act Subsidiaries and Subsidiary Undertakings
     (and "SUBSIDIARY" shall be construed accordingly).

     "SUBSIDIARY UNDERTAKING" means a subsidiary undertaking within the meaning
     of Section 285 of the Companies Act 1985, as inserted by Section 21 of the
     Companies Act 1989.

     "TRANSMISSION BUSINESS" has the meaning given to it in the relevant
     Transmission Licence.

     "TRANSMISSION LICENCE" means a licence granted under Section 6(1)(b) of the
     Electricity Act.

                                   ARTICLE 9

                             INFORMATION AND VISITS

9.01 INFORMATION CONCERNING THE PROJECT

     THE BORROWER shall:

     (a)  deliver to THE BANK, (i) by 30th March 1997 and on each anniversary of
          that date until THE PROJECT is completed, a report on the
          implementation of THE PROJECT substantially in the form set out in
          Schedule D; and (ii) from time to time, any such further document or
          information concerning the financing, implementation and operation of
          THE PROJECT as THE BANK in its capacity as a lender to THE BORROWER
          may reasonably require;

     (b)  submit for the approval of THE BANK as soon as is reasonably
          practicable any material change to the general plans, timetable or
          expenditure programme for THE PROJECT, by relation to the disclosures
          made to THE BANK prior to the signing of this Contract; and
<PAGE>
                                      -25-

     (c)  generally inform THE BANK of any fact or event known to THE BORROWER
          which might substantially prejudice or affect the conditions of
          execution or operation of THE PROJECT.

9.02 INFORMATION CONCERNING THE BORROWER

     A.   THE BORROWER shall:

     (a)  deliver to THE BANK (i) each year, as soon as the same are available
          and in any event within 180 days after the end of each of its
          financial years, its audited consolidated financial statements
          (including balance sheet, profit and loss account and cash flow
          statement); and (ii) from time to time all financial information from
          time to time delivered by THE BORROWER to its creditors generally,
          such information to be delivered to THE BANK promptly following
          delivery of the same to its creditors;

     (b)  ensure that its accounting records clearly show the operations
          relating to the financing and execution of THE PROJECT to the extent
          required by law;

     (c)  immediately inform THE BANK;

          (i)   of any material change in its Memorandum or Articles of
                Association;

          (ii)  any modification of the provisions in Article 54 of the Articles
                of Association of the Guarantor relating to the Special Share;

          (iii) of the occurrence of the event referred to in Article 4.03B or
                of its belief or, as the case may be, reasonable grounds for
                belief that such an event has occurred;

          (iv)  immediately, of any fact which obliges it, the Guarantor or any
                member of the NG Group or of any demand made to it, the
                Guarantor or any such member of the NG Group to prepay in
                advance of maturity by reason of declared event of default in
                relation thereto any Financial Indebtedness (but excluding any
                Project Finance Borrowings);

          (v)   immediately of any intention on its part, the Guarantor or any
                other member of the NG Group to grant any Security Interest over
                any of its assets in favour of a third party other than any
                Security Interest permitted by Article 8.03;

          (v)   generally of any fact or event known to THE BORROWER which would
                reasonably prevent the fulfilment of any material obligation of
                THE BORROWER under this Contract; and

     (d)  immediately inform THE BANK of any modification of the terms of the
          Transmission Licence.

9.03 VISITS

     THE BORROWER shall use reasonable endeavours to permit upon reasonable
     notice and at all reasonable times, or to ensure such permission is granted
     to, persons designated by THE BANK to visit the sites, installations and
     works comprising THE PROJECT and to conduct such checks as they may wish,
     and to provide them, or ensure that they are provided, with all necessary
     assistance for this purpose.

<PAGE>
                                      -26-

10.01 TAXES, DUTIES AND FEES

      THE BORROWER shall pay all taxes, duties, fees and other impositions of
      whatsoever nature, including stamp duty and registration fees, arising out
      of the execution or implementation of this Contract or any related
      document and in the creation of any security for the Loan.

      THE BORROWER shall pay all principal, interest, commission and other
      amounts due under this Contract gross without deduction of any national or
      local impositions whatsoever; Provided that, if THE BORROWER is obliged to
      make any such deduction, it will gross up the payment to THE BANK so that
      after deduction, the net amount received by THE BANK is equivalent to the
      sum due. If THE BORROWER are obliged to deduct any amounts under this
      Article and THE BANK subsequently becomes entitled to recover any sum or
      to claim a credit against any tax payable by it in respect of the
      resulting grossed-up payment which is in excess of the amount originally
      due to THE BANK, THE BANK shall promptly upon receiving such sum or credit
      pay such excess amounts to THE BORROWER.

      If for whatever reason THE BANK's ability to receive interest payments
      gross from UK borrowers generally ceases, THE BANK shall notify THE
      BORROWER.

10.02 OTHER CHARGES

      THE BORROWER shall bear any professional, banking, transfer or exchange
      costs reasonably incurred in the execution or implementation of this
      Contract or related document, and in the creation of any security for the
      Loan.

                                   ARTICLE 11

                      PREPAYMENT UPON AN EVENT OF DEFAULT

11.01 RIGHT TO DEMAND REPAYMENT

      THE BORROWER shall repay the Loan or any part thereof, together with
      accrued interest and other accrued sums, forthwith upon demand being made
      therefor by THE BANK:

      (A)   immediately:

      (a)   if any representation or statement made by or on behalf of THE
            BORROWER or the Guarantor upon which THE BANK has relied in
            connection with the negotiation of this Contract or during its
            lifetime proves to have been incorrect in any material particular
            when made:

      (b)   if THE BORROWER fails on due date to repay any part of the Loan or
            to pay interest thereon, or to make any other payment to THE BANK as
            herein provided;

      (c)   if (i) any Financial indebtedness of a member of the Group is not
            paid when due or within any originally applicable grace period; or
            (ii) an event of default (howsoever described) occurs under any
            document relating to Financial Indebtedness of Group; or (iii) any
            Financial Indebtedness of a member of the Group becomes prematurely
            due and payable or is placed on demand as a result of an event of
            default (howsoever described); or (iv) any commitment for, or
            underwriting of, any Financial Indebtedness of a member of the Group
            is cancelled or suspended as a result of an event of default
            howsoever described) under the document relating to that Financial

<PAGE>
                                      -27-

          Indebtedness; or (v) any Security Interest securing Financial
          Indebtedness over an asset of a member of the Group becomes
          enforceable by reason of an event of default howsoever described, so
          long as the aggregate amount of Financial Indebtedness in
          sub-paragraphs (i) to (v) above exceeds an amount equal to GBP 20
          million at that time (or its equivalent in any other currency); and
          provided that for the purposes of this paragraph (c) the definition of
          Financial Indebtedness shall exclude Project Finance Borrowing;

     (d)  if THE BORROWER or any of its Subsidiaries is deemed unable to pay its
          debts within the meaning of Section 123(1)(a), (b), (c) or (e) or
          123(2) of the insolvency Act 1985 or any statutory modification or
          re-enactment thereof, whether or not a court of justice has so
          determined, or shall make or seek to make a composition with its
          creditors generally;

     (e)  if an order is made or an effective resolution is passed for the
          winding up of THE BORROWER or if THE BORROWER ceases to carry on the
          whole or substantially the whole of its business or activities, save
          in the course of a reconstruction, merger, consolidation,
          reorganisation or amalgamation or other similar arrangement on terms
          previously consented to by THE BANK (such consent not to be
          unreasonably withheld or delayed); or

     (f)  (i) if an encumbrancer takes possession of, or a receiver, liquidator,
          administrative receiver or administrator is appointed over, any
          substantial part of the business or assets of THE BORROWER or any
          substantial part of the property forming part of THE PROJECT, and such
          appointment is not discharged within 21 days of being made; (ii) if
          THE BORROWER petitions for the appointment of an administrator over
          its affairs; or (iii) if any distress, execution, sequestration or
          other process is levied or enforced upon the whole or any material
          part of the property of THE BORROWER or any substantial part of the
          property forming part of THE PROJECT and is not discharged or stayed
          within 21 days; or

     (g)  if any event occurs in relation to THE BORROWER, any Subsidiary of THE
          BORROWER, which is likely to have a material adverse effect on the
          ability of THE BORROWER to comply with its obligations under this
          Contract; and

     (B)  Upon expiry of a reasonable period of time specified in a notice
     served by THE BANK on THE BORROWER, without the matter being remedied to
     the reasonable satisfaction of THE BANK:

     (a)  if THE BORROWER fails in a material respect to comply with any
          obligation under this Contract other than one mentioned in Article
          11.01(A)(b);

     (b)  if any material fact stated in the Recitals substantially alters and
          if the alteration either materially prejudices the interests of THE
          BANK as lender to THE BORROWER or materially and adversely affects the
          implementation or operation of THE PROJECT;

     (c)  THE BORROWER or any Subsidiary of THE BORROWER fails to comply in all
          material respects with all applicable provisions of the Electricity
          Act or its Transmission Licence (if any) and such failure to comply is
          reasonably likely to have a material adverse effect on the ability of
          THE BORROWER to perform its obligations under the Contract; or

     (d)  Any Transmission Licence held by THE BORROWER is:

          (i)  revoked or surrendered or any notice of revocation is issued by
               the Secretary of State and the notice is to take effect prior to
               the final repayment date (disregarding any acceleration of such
               date pursuant to this Article 11) of any Tranche of the Loan; or

<PAGE>
                                      -28-

          (ii) modified in any manner which is reasonably likely to have a
               material adverse effect on the ability of THE BORROWER to perform
               its obligations under this Contract.

11.02 OTHER RIGHTS AT LAW

      Article 11.01 shall not restrict any other right of THE BANK at law to
      require prepayment of the Loan.

11.03 DAMAGES

      Where demand for prepayment is made under Article 11.01 THE BORROWER shall
      pay to THE BANK on the amount of each instalment, as set out in any
      amortisation table drawn up pursuant to Article 4.01A, a sum calculated at
      an annual rate of 0.25% from the date of the demand to the respective
      original due date of the instalment, as set out in the applicable
      amortisation table.

      In case of demand under Article 11.01 for prepayment of a Fixed-Rate
      Tranche, Converted Fixed-Rate Tranche or Revisable Fixed-Rate Tranche, THE
      BORROWER shall pay to THE BANK an amount calculated as at the date of
      demand, as the greater of:

     (a) The amount calculated according to the provisions of Articles 4.02
         applied to the sum which has become immediately due and payable, and
         with effect from the date of declaration to that effect; and

     (b) an amount calculated at an annual rate of 0.25% from the date of the
         demand to the respective date on which each instalment of the Tranche
         demanded would have been repayable but for the making of the demand.

      In case of demand under Article 11.01 for prepayment of a Fixed-Margin
      Non-Convertible Tranche or unconverted Fixed-Margin Convertible Tranche,
      THE BORROWER shall pay to THE BANK a sum calculated as at the date of the
      demand at an annual rate of 0.25% from the date of the demand to the
      respective date on which each instalment of the amount demanded would have
      been repayable but for the making of the demand.

11.04 NON-WAIVER

      No failure or delay by THE BANK in exercising any of its rights under this
      Article 11 shall be construed as a waiver of such right.

11.05 APPLICATION OF SUMS RECEIVED

      Sums received following a demand under Article 11 shall be applied first
      in payment of damages, commission and interest in that order and secondly
      in reduction of outstanding instalments in inverse order of maturity. They
      shall be applied between Tranches at the discretion of THE BANK acting
      reasonably.

                                   ARTICLE 12
                              LAW AND JURISDICTION

12.01 LAW

      This Contract and its formation, construction and validity shall be
      governed by English Law.
<PAGE>
                                      -29-

12.02 JURISDICTION

      All disputes concerning this Contract shall be submitted to the
      jurisdiction of the Courts of England: THE BANK appoints The Securities
      Management Trust Limited whose present address is 19 Old Jewry, London EC2
      to be its agent for the purpose of accepting service of legal process.

                                   ARTICLE 13
                                 FINAL CLAUSES

13.01 NOTICES

      Save as provided in Article 12.02, notices and other communications given
      hereunder by one party to this Contract to the other shall be sent to its
      respective address set out below, or to such other address as it shall
      have previously notified to the former in writing as its new address for
      such purpose:

      - FOR THE BANK           : 100 boulevard Konrad Adenauer
                                 L-2950 Luxembourg-Kirchberg
                                 Attention: Credit Risk Department
                                 Tel: (-352) 43 79-1
                                 Fax: (-352) 43 77 04

      - FOR THE BORROWER       : 15 Marylebone Road
                                 London NW1 5JD
                                 Attention: Martin O'Donovan
                                 /Paul Phillips
                                 Tel: (44) 20 7312 5600
                                 Fax: (44) 20 7312 5651

13.02 FORM OF NOTICE

      Notices and other communications, for which fixed periods are laid down in
      this Contract or which themselves fix periods binding on the addressee,
      shall be served by hand delivery, registered letter, telegram, telex or
      other means of transmission which affords evidence of receipt by the
      addressee. The date of registration or, as the case may be, the stated
      date of receipt of transmission shall be conclusive for the determination
      of a period.

13.03 RECITALS, SCHEDULES AND ANNEXES

      The Recitals and following Schedules form part of this Contract:

      - Schedule A                       Technical Description
      - Schedule B                       Definition of ecu
      - Schedule C                       Definition of LIBOR
      - Schedule D                       Project Reporting Form

      The following Annexes are attached hereto:

      - Annex I                          Resolution of Board of Directors of
                                         THE BORROWER incorporating Authority
                                         of Signatory
      - Annex II                         Certificate of Borrowing Powers of THE
                                         BORROWER
      - Annex III                        Drawdown Certificate

<PAGE>
                                      -30-

IN WITNESS WHEREOF the parties hereto have caused this Contract to be executed
in four originals in the English language, each page having been initialled by
Mr. S.E. Sturmer on behalf of THE BANK.

   Signed for and on behalf of                  Signed for and on behalf of
    EUROPEAN INVESTMENT BANK                   THE NATIONAL GRID COMPANY PLC

this               day of                    2001, at London
<PAGE>
                                                                      SCHEDULE A
                                                                          1 of 2

PROJECT:       NATIONAL GRID TRANSMISSION (UK)

                             TECHNICAL DESCRIPTION
                             ---------------------

The project consists of the study, design, implementation, commissioning
(including acceptance tests) and operation of about 32 electricity schemes
dispersed through the Promoter's transmission network (400kV - 275 kV) in
England and Wales. The main data is summarised on the attached schedule.

The project is conceived in such a way that all schemes will comply with the
relevant national legislation and EC Directives in particular, with those
relating to the protection of the environment (79/409/EEC and 85/411/EEC on
wild birds, 85/338/EEC on the CORINE Programme). The sub-projects will avoid
sites of particular or special interest.

All equipment will be free of PCB or other toxic agents capable of being
released into the atmosphere.

Procurement of goods and services will comply with the Procurement Directive
(93/38/EEC) and its transposition in English law. This includes advertising
for a range of equipment/materials in the Official Journal of the EU.

These schemes will be commissioned progressively by the end of 1999.

<PAGE>
                                                                      SCHEDULE A
                                                                          2 of 2

PROJECT:       NATIONAL GRID TRANSMISSION (UK)

<Table>
<Caption>
Project Category              Promoter's               Project Description
                              Reference
                              Number         (PIMS)
<S>                           <C>            <C>       <C>
Operational Control           NGB631                   Vision 2000 to consolidate Despatch
                                                       control to one centre at Wokingham

Reactive Power                5554           7126      Installation of 1745 MVAr of Reactive
Compensation                  5744           7352      Compensation throughout England
                              6045           7353      and Wales
                              6261           7354
                              7009           7437

Switchgear Replacement        2481                     Replacement of 80 x 400 kV and
                              2482                     73 x 275 kV switchgears in
                              2483                     accordance with Promoters Policy
                              4321                     [Ref: TR1248].

Infrastructure                3861,5595,     5717      Modification to existing networks to
                              4349,5471,     5864      increase throughout capacities
                              4341,5558,     7071      in accordance with Promoters
                              4344,8074,     7072      PIMS Approval codes involving 29
                              5559,8129,     4754      400kV switchgears, 3840 MVA
                              8437,8438                transformer capacity and 1km of 400
                                                       kV oil-filled cable.
</Table>
<PAGE>
                                                                      SCHEDULE B

                                    THE ecu

The ecu is the same as the ecu that is used as the unit of account of the
European Communities, and which is at present comprised of the specific amounts
of the currencies of 12 of the Member States of the European Community shown
below.

Pursuant to Council Regulation (EC) No. 3320/94 of 22nd December 1994, the
composition of the ecu basket is as follows:

               German mark         :         0.6242
               pound Sterling      :         0.08784
               French franc        :         1.332
               Italian lira        :         151.8
               Dutch guilder       :         0.2198
               Belgian franc       :         3.301
               Luxembourg franc    :         0.130
               Danish krone        :         0.1976
               Irish pound         :         0.008552
               Greek drachma       :         1.440
               Spanish peseta      :         6.885
               Portuguese escudo   :         1.393

Changes to the ecu may be made by the European Communities, in which event
references to the ecu shall be read accordingly (see Information).

If THE BANK should consider that the ecu (see Payment in Euros and Information,
hereafter) has ceased to be used as the unit of account of the European
Communities and as the single currency of the European Union, it shall so
notify THE BORROWER. As from the date of such notification, the ecu shall be
replaced by the currencies of which it was comprised - or their countervalue in
one or more of those currencies - as at the time of its most recent use as the
unit of account of the European Communities.

PAYMENT IN EUROS

Upon substitution of the ecu by the Euro, all payments due in ecus under this
Contract shall be made in Euros at the rate of one Euro for one ecu. The
substitution of the ecu by the Euro shall not have the effect of bringing about
the payment in component currencies referred to in the preceding paragraph.

INFORMATION

Article 109G of the EC Treaty, as introduced by the Treaty on European Union,
provides that the currency composition of the ecu basket shall not be changed.
From the start of the third stage of European economic and monetary union, the
value of the ecu as against the currencies of the Member States participating
in the third stage will be irrevocably fixed and the ecu will become a currency
in its own right.

The European Council at the Madrid Summit in December 1995 decided that the
name of that new currency will be the Euro. Consequently, references to the ecu
shall apply to the Euro. In the case of contracts denominated by reference to
the official ecu basket of the European Community, in accordance with the
Treaty as confirmed by the European Council at the Madrid Summit in December
1995, substitution of the ecu by the Euro will be made at the rate of one to
one.

<PAGE>
                                                                      SCHEDULE C

                              DEFINITION OF LIBOR

"LIBOR" means

(i)  in respect of any Reference Period of one month or more, the rate for
deposits for a period being the number of whole months most closely
corresponding to the duration of the Reference Period (for which purpose a
fraction of fifteen days or less shall be disregarded), and,

(ii) in respect of a Reference Period of less than a month, the rate for
deposits for a period of one month,

which appears on Telerate p. 3750 against the currency of the Tranche as of
11:00 a.m. London time, in the case of GBP on the day (the "Reset Date") on
which the Reference Period starts or, if that day is not a London Business Day,
on the next following day which is such a Business Day, determined in each case
in the currency of the relevant Tranche (the period for which the rate is taken
being hereinafter called the "Representative Period").

If such rate does not appear on Telerate p. 3750, THE BANK shall request the
principal London offices of four major banks in the London interbank market,
selected by THE BANK (the "Reference Banks"), to quote the rate at which
deposits in the currency and amount of the relevant Tranche are offered by each
of them at approximately 11:00 a.m. London time on the relevant London
Business Day, to prime banks in the London interbank market for a period equal
to the Representative Period. If at least two such quotations are provided, the
rate will be the arithmetic mean of the quotations provided.

If fewer than two quotations are provided as requested, the rate will be the
arithmetic mean of the rates quoted at approximately 11:00 a.m. London time on
the Reset Date by major banks in London (selected by THE BANK) for loans in the
currency and amount of the relevant Tranche to leading European banks for a
period equal to the Representative Period.

All percentages resulting from any arithmetic mean calculations referred to
in this Schedule will be rounded upwards, if necessary, to the next higher one
hundred-thousandth of a percentage point.

THE BANK shall inform THE BORROWER without delay of the quotations received by
THE BANK.

In the case of currencies other than GBP, the Reset Date shall be determined by
reference to the banking convention for such currency on the London market.

<PAGE>

                                                                     SCHEDULE D
                                                                     ----------

                             PROJECT REPORTING FORM
                             ----------------------

PROJECT:                NATIONAL GRID TRANSMISSION (UK)
-------

-------------------------------------------------------------------------------
Project Category              Implementation Progress %          Cost
                        ----------------------------------      (MGBP)
                        1996      1997      1998      1999
-------------------------------------------------------------------------------
Operational Control

Reactive Power
Compensation

Switchgear Replacement

Infrastructure
-------------------------------------------------------------------------------

CAPACITY ADDED BY PROJECT                             YEAR:
-------------------------

-------------------------------------------------------------------------------
Project Components                      Cost/Unit                Units
-------------------------------------------------------------------------------
Reactive Compensation                                            MVAr

400 kV Switchgears                                               Units

275 kV Switchgears                                               Units

Transformer Capacity                                             MVA

400 kV Line Length                                               km

275 kV Line Length                                               km

400 kV Cable Length                                              km

275 kV Cable Length                                              km
-------------------------------------------------------------------------------

<PAGE>

                                                                      ANNEX III
                                                                      ---------

                CERTIFICATE FROM THE BORROWER AND THE GUARANTOR
                -----------------------------------------------

TO:       EIB
FROM:     THE NATIONAL GRID COMPANY PLC AND THE NATIONAL GRID GROUP PLC
          [Date]

Dear Sirs,

RE:  Finance Contract between the National Grid Company plc and yourselves
     dated [    -    ] (hereinafter referred to as the "Finance Contract")

     ---------------------------------------------------------------------

     Terms defined in the Finance Contract have the same meaning when used in
     this letter.

     For the purposes of Article 1.04(b) we hereby certify to you as follows:

     (1)  that no event mentioned in Article 11.01, nor any event which, with
     the giving of notice and/or the expiry of any grace, remedy or similar
     period would constitute any event as mentioned in Article 11.01, has
     occurred and is continuing;

     (2)  the representations and warranties set out in Article 6.01 are true
     and fulfilled as at the date of this certificate; and

     (3)  the terms of Article 8.02 have been complied with as of the date
     hereof.

                               Yours faithfully,
                              for and on behalf of
                         THE NATIONAL GRID COMPANY PLC

                                      and

                          THE NATIONAL GRID GROUP PLC

                            [Authorised Signatories]

<PAGE>
                                                                        ANNEX 2

                E U R O P E A N   I N V E S T M E N T   B A N K

                                                               FI NO. 0.9200 GB

_______________________________________________________________________________

                           NATIONAL GRID (UK) PROJECT

_______________________________________________________________________________

                       GUARANTEE AND INDEMNITY AGREEMENT

                                    between

                            EUROPEAN INVESTMENT BANK

                                      and

                             NEW NATIONAL GRID PLC

                                                          London, [      ] 2001

<PAGE>

MADE BETWEEN:

European Investment Bank having its Head Office at 100, boulevard Konrad
Adenauer, Luxembourg-Kirchberg, Grand Duchy of Luxembourg, represented by
[            ]

                                             hereinafter called: "THE BANK"

of the first part, and

New National Grid plc, a public company incorporated with limited liability in
England and having its registered office at 15 Marylebone Road, London NW1 5JD
England, represented by [            ]

                                        hereinafter called: "THE GUARANTOR"

of the second part.

<PAGE>
                                      -2-

WHEREAS:

-    By an agreement, dated 5th December 1996 as amended and supplemented by
     letter agreements dated 3 February 1997, 12 November 1998, 29 March 1999
     and the date hereof (hereinafter called "THE FINANCE CONTRACT") made
     between THE BANK, on the one hand, and The National Grid Company plc on the
     other hand (hereinafter called "THE BORROWER"), THE BANK established in
     favour of THE BORROWER a credit equivalent to GBP 200,000,000 (two hundred
     million pounds sterling) which has been fully drawn;

-    The Borrower is a wholly owned subsidiary of National Grid Group plc which
     in turn become a wholly owned subsidiary of THE GUARANTOR;

-    The obligations of THE BANK under THE FINANCE CONTRACT are conditional upon
     the execution and delivery by THE GUARANTOR of a guarantee of performance
     by THE BORROWER of THE BORROWER's financial obligations under THE FINANCE
     CONTRACT;

-    Execution of this Guarantee and Indemnity Agreement by THE GUARANTOR has
     been authorised by the Board of Directors of THE GUARANTOR (Annexure I);
     and it has been duly certified in the form set out in Annexure II that the
     issue of this Guarantee and Indemnity is within the corporate powers of THE
     GUARANTOR.

NOW THEREFORE it is hereby agreed as follows:

                                   ARTICLE 1
                                FINANCE CONTRACT

1.01 THE GUARANTOR acknowledges notice of the provisions of THE FINANCE
     CONTRACT, an original copy of which has been delivered to it. Unless
     otherwise defined herein terms defined in THE FINANCE CONTRACT shall have
     the same meaning.

                                   ARTICLE 2
                                   GUARANTEE

2.01 In consideration of the credit established by THE BANK under THE FINANCE
     CONTRACT, THE GUARANTOR hereby guarantees the payment of all principal
     monies, interest, commission, liquidated damages, charges, expenses and
     other monies (each such sum being hereinafter referred to as a "Guaranteed
     Sum") which may from time to time become payable by THE BORROWER under THE
     FINANCE CONTRACT. THE GUARANTOR undertakes that, if THE BORROWER should
     default in the payment of any Guaranteed Sum, THE GUARANTOR shall pay the
     sum in default to THE BANK on demand, in the currencies specified in THE
     FINANCE CONTRACT and to the accounts specified in the demand.
<PAGE>
                                      -3-

2.02 The obligations of THE GUARANTOR hereunder are those of a primary obligor
     and not merely those of a surety. They shall not be impaired or discharged
     by reason of:

     (a)  illegality, invalidity, or unenforceability in or of the terms of THE
          FINANCE CONTRACT or any other guarantee or security for THE BORROWER'S
          obligations thereunder;

     (b)  disability, incapacity or change in status or constitution of THE
          BORROWER, THE BANK, any other guarantor or any other person;

     (c)  liquidation or insolvency of THE BORROWER, any other guarantor or any
          other person;

     (d)  any time or other indulgence granted by THE BANK or any arrangement
          entered into or composition accepted by THE BANK, varying the rights
          of THE BANK under THE FINANCE CONTRACT or any other guarantee or
          security arrangement granted in connection therewith;

     (e)  any forbearance or delay on the part of THE BANK in asserting any of
          its rights against THE BORROWER under THE FINANCE CONTRACT; or

     (f)  any circumstance, other than performance, which might otherwise
          discharge the obligations of THE GUARANTOR.

2.03 This Guarantee and Indemnity is a continuing security and shall endure
     until all Guaranteed Sums shall have been fully paid or discharged. No
     payment or discharge which may be avoided under any enactment relating to
     insolvency, no payment or discharge made or given which is subsequently
     avoided and no release, return, cancellation or any such discharge of this
     Guarantee and Indemnity given or made on the faith of any such payment or
     discharge aforesaid shall constitute discharge of THE GUARANTOR under this
     Guarantee and Indemnity or prejudice or affect THE BANK's right to recover
     from THE GUARANTOR to the full extent of this Guarantee and Indemnity.

2.04 Any money received in connection with this Guarantee and Indemnity may be
     placed by THE BANK to the credit of a suspense account with a view to
     preserving the right of THE BANK to prove for the whole of the claims
     against THE BORROWER or may be applied by THE BANK in or towards
     satisfaction of such of the Guaranteed Sums as THE BANK in its absolute
     discretion may from time to time determine; provided, however, THE
     GUARANTOR's responsibility in respect of the Guaranteed Sums shall be
     discharged to the extent of payment made by THE GUARANTOR under this
     Guarantee and Indemnity.

2.05 THE GUARANTOR agrees that until all the Guaranteed Sums have been fully
     paid or discharged:

     (a)  it shall not seek to enforce any obligation owned to THE GUARANTOR by
          THE BORROWER which arises by virtue of the discharge by THE GUARANTOR
          of its obligations hereunder;

     (b)  it shall pay to THE BANK all dividends in liquidation or otherwise
          received by it from or for the account of THE BORROWER in respect of
          any obligation referred to in indent (a) above; THE BANK shall apply
          such sums to reduce the outstanding Guaranteed Sums in such sequence
          as it may decide; and
<PAGE>
                                      -4-

          (c)  it shall have no right of subrogation to the rights of THE BANK
               under THE FINANCE CONTRACT or any security arrangement granted in
               connection therewith.

2.06      THE GUARANTOR acknowledges: (i) that it has entered into this
          Guarantee and Indemnity Agreement on the basis of its own assessment
          of THE BORROWER and any security provided, and (ii) that it has not
          been induced to enter into this Guarantee and Indemnity Agreement by
          any representation made by THE BANK. THE BANK is not obliged to report
          to THE GUARANTOR on the financial position of THE BORROWER or of any
          other guarantor or on any security provided. THE BANK shall have no
          liability to THE GUARANTOR for granting or disbursing the Loan, for
          cancelling or not cancelling the credit or for demanding or not
          demanding prepayment under THE FINANCE CONTRACT.

2.07      As a continuing obligation additional to and separate from those set
          out in Articles 2.01 and 2.02, and without prejudice to the validity
          or enforceability of those obligations, THE GUARANTOR unconditionally
          and irrevocably undertakes that, if any Guaranteed Sum should not be
          recoverable from THE GUARANTOR under Article 2.01 for whatsoever
          reason, and whether or not the reason may have been known to THE BANK
          at any material time, THE GUARANTOR shall, upon first written demand
          by THE BANK, and as if it were a sole and independent obligor,
          compensate THE BANK by way of a full indemnity for all loss resulting
          from the failure of THE BORROWER to make payment of any Guaranteed Sum
          in the amount and currency provided for by or pursuant to THE FINANCE
          CONTRACT, whether upon the normal due date, upon acceleration or
          otherwise.

                                   ARTICLE 3
                            ENFORCEMENT OF GUARANTEE

3.01      A certificate of THE BANK as to any default by THE BORROWER in the
          payment of any Guaranteed Sum shall, in the absence of manifest error,
          be conclusive against THE GUARANTOR.

3.02      THE GUARANTOR undertakes to pay all sums due hereunder in full, free
          of set-off or counterclaim. This Guarantee and Indemnity may be
          enforced by THE BANK upon provision of a statement of the reason for
          the demand. THE BANK shall not be obliged to take any action against
          THE BORROWER or to have recourse to any other guarantee.

3.03      Where THE BANK makes any demand hereunder, THE GUARANTOR may pay to
          THE BANK all outstanding Guaranteed Sums, including sums arising under
          Article 3.02 of THE FINANCE CONTRACT, in settlement of its obligations
          hereunder. If THE GUARANTOR makes such payment, THE BANK shall, upon
          the request and at the expense of THE GUARANTOR, assign to THE
          GUARANTOR the corresponding rights of THE BANK relating thereto under
          THE FINANCE CONTRACT and under any security therefor.

                                   ARTICLE 4
                                  UNDERTAKINGS

4.01      THE GUARANTOR shall deliver to THE BANK each year, as soon as the same
          are available and in any event within 180 days after the end of each
          of its financial years, a
<PAGE>
                                      -5-

          copy of its annual report, containing its audited, consolidated
          financial statements, together with all other such information as THE
          BANK may reasonably require of THE GUARANTOR from time to time in
          writing as to THE GUARANTOR's financial situation and shall inform THE
          BANK as soon as is reasonably practicable of any material change in
          its Memorandum or Articles of Association, but in the event of any
          modification or formal proposal for the modification of the provisions
          in Article 54 of its Articles of Association relating to the Special
          Share only at the same time as Shareholders generally are informed of
          such modification.

4.02      THE GUARANTOR shall ensure that the obligations of THE BORROWER set
          out in Article 8.02 to 8.05 of THE FINANCE CONTRACT are complied with.

4.03      NEGATIVE PLEDGE

          Subject to Article 4.04, so long as any part of the Loan remains
          outstanding, THE GUARANTOR shall not, and it shall procure that no
          other member of the NG Group will create or permit to subsist any
          Security Interest on, or with respect to, any of its present or future
          business, undertaking, assets or revenues (including any uncalled
          capital).

4.04      Subject to Article 4.05, Article 4.03 does not apply to:-

          (A)  any Security Interest created with the prior written consent of
               THE BANK;

          (B)  Security Interests granted prior to the date of this Agreement
               and disclosed to THE BANK in writing but only if the maximum
               principal amount secured thereby is not subsequently increased;

          (C)  any Security Interest by way of title retention entered into the
               ordinary course of business;

          (D)  any lien arising by operation of law in ordinary course of
               business;

          (E)  any banker's lien or right of set-off arising by operation of law
               in the ordinary course of commercial banking transactions or any
               contractual set-off arrangements in the ordinary course of
               commercial banking transactions;

          (F)  any Security Interest existing over assets acquired after the
               date of this Agreement and existing on the date of acquisition,
               provided that:-

               (1)  the Security Interest is not created in contemplation of the
                    acquisition of the same; and

               (2)  the maximum principal amount secured thereby or the maturity
                    of those obligations is not thereafter increased;

          (G)  any Security Interest over the assets of any company which
               becomes a Subsidiary of THE GUARANTOR after the date of this
               Agreement and which exist at the date on which it becomes a
               Subsidiary of THE GUARANTOR, but only if:-

               (1)  the principal amount secured by the Security Interest is not
                    increased after the date it becomes a Subsidiary of THE
                    GUARANTOR; and

               (2)  the Security Interest is not created in contemplation of it
                    becoming a Subsidiary of THE GUARANTOR;

<PAGE>
                                      -6-

     (H)  any Security Interest over goods and/or documents of title, or
          insurance policies and sale contracts in relation to such goods,
          arising in the ordinary course of trading in connection with letters
          of credit and similar transactions where such Security Interest
          secures only so much of the acquisition cost of such goods which is
          required to be paid within 180 days after the date upon which the
          same was first incurred;

     (I)  any Security Interest created in substitution for any Security
          Interest permitted pursuant to this Article, provided that the
          substituted Security Interest is over the same asset and the principal
          amount secured does not exceed the principal amount secured on such
          asset prior to the substitution;

     (J)  any other Security Interest so long as the aggregate outstanding
          principal amount of indebtedness secured by all the Security Interests
          permitted under this Clause does not exceed, when combined with all
          Security Interests of the NG Group, GBP 80 million;

     (K)  any Security Interest created or granted from time to time in respect
          of any Project Finance Borrowing including, for the avoidance of
          doubt, any Security Interest created or granted by a member of the NG
          Group in its capacity as a shareholder of a company making a Project
          Finance Borrowing over its shareholding in that company (including, in
          the case of a member of the NG Group whose only material assets are
          shares in the company incurring the Project Finance Borrowing, a
          supporting floating charge over all or substantially all of that
          member's assets) as security for such Project Finance Borrowing,
          provided that the right of recourse against such shareholder is
          limited to the realisation of the shareholding in that company;

     (L)  any Security Interest created by a Project Finance Company;

     (M)  any Security Interest created or granted from time to time by a member
          of the NG Group in its capacity as a shareholder of a Project Finance
          Company over its shareholding in that Project Finance Company as
          security for the obligations of such Project Finance Company;

     (N)  any Security Interest whether granted prior to or after the date of
          this Agreement which is granted by a Subsidiary of the Guarantor
          incorporated in, or which has its principal place of business in, the
          United States to secure Financial Indebtedness up to US$4,200,000,000
          in aggregate outstanding; and

     (O)  any Security Interest created by a special purpose securitisation
          vehicle over its assets where substantially all of those assets were
          acquired by that vehicle from a member of the NG Group as part of or
          to facilitate a securitisation and where the disposal of those assets
          to the securitisation vehicle constitutes a disposal of assets on
          arm's length terms, the consideration for which is substantially all
          cash or cash equivalent consideration, after the date hereof, so long
          as the aggregate outstanding principal amount of Financial
          Indebtedness secured by all the Security Interests permitted under
          this paragraph (O) by all members of the NG Group does not exceed
          US$1,000,000,000 or its equivalent in other currencies at any time.

4.05 Notwithstanding anything in Article 4.03 above, none of THE GUARANTOR or
     any of its Subsidiaries will create or permit to subsist any Security
     Interest over;

     (A)  Relevant Assets used in the Transmission Business carried out pursuant
          to any Transmission Licence; or

<PAGE>
                                      -7-

     (B)  any shareholding in any Subsidiary of THE GUARANTOR which is the legal
          and/or beneficial owner of Relevant Assets used in the Transmission
          Business carried out pursuant to any Transmission Licence.

4.06 The following terms used in this Article 4 shall bear the following
meaning:

          "COMPANIES ACT SUBSIDIARY" means a subsidiary within the meaning of
          Section 736 of the Companies Act 1985, as amended by Section 144 of
          the Companies Act 1989.

          "NG GROUP" means THE GUARANTOR and its Subsidiaries from time to time
          but for the purposes of this Article 4 if at any time a Project
          Finance Company is a Subsidiary Undertaking but not a Companies Act
          Subsidiary, then, for so long as it shall be a Subsidiary Undertaking
          but not a Companies Act Subsidiary, it shall be deemed (unless the
          contrary is specified) not to be a member of the NG Group.

          "PROJECT FINANCE BORROWING" means any Financial Indebtedness to
          finance a project:-

          (a)  which is made by a single purpose company, partnership or other
               legal person (whether or not a member of the NG Group) whose
               principal assets and business are constituted by that project and
               whose liabilities in respect of the Financial Indebtedness
               concerned are not directly or indirectly the subject of a
               guarantee, indemnity or other form of assurance, undertaking or
               support from any member of the NG Group (except as expressly
               referred to in paragraph (b)(iii) below or as a result of the
               making of acceptances or endorsements of bills in the ordinary
               course of trading or payment netting arrangements and other usual
               course of business banking arrangements); or

          (b)  in respect of which the person or persons making that Financial
               Indebtedness available to the relevant borrower (whether or not a
               member of the NG Group) have no recourse whatsoever to any member
               of the NG Group for the repayment of or payment of any sum
               relating to that Financial Indebtedness other than:-

               (i)  recourse to the borrower or one or more of its subsidiaries
                    for amounts limited to the aggregate cash flow or net cash
                    flow (other than historic cash flow or historic net cash
                    flow) from the project; and/or

               (ii) recourse to the borrower or one or more of its subsidiaries
                    or any shareholder of the borrower for the purpose only of
                    enabling amounts to be claimed in respect of that Financial
                    Indebtedness in an enforcement of any Security Interest
                    permitted pursuant to Article 8.02 of THE FINANCE CONTRACT
                    given by the borrower or one or more of its subsidiaries
                    over the assets comprised in the project (or given by any
                    shareholder of the borrower over its shares in the borrower
                    together with, in the case of a UK incorporated shareholder
                    whose only material assets are those shares in the borrower,
                    a supporting floating charge over all or substantially all
                    of its assets) to secure that Financial Indebtedness or any
                    recourse referred to in (iii) below or as a result of the
                    making of acceptances or endorsements or bills in the
                    ordinary course of trading or payment netting arrangements
                    and other usual course of business banking arrangements,
                    provided that (A) the extent of the recourse to the borrower
                    or one or more of its subsidiaries or shareholder is limited
                    solely to the amount of any recoveries made on any such
                    enforcement, and (B) the person or persons are not entitled,
                    by virtue of any right to claim arising out of or in
                    connection with the Financial Indebtedness, to commence
                    proceedings for the winding up or dissolution of the
                    borrower the subsidiary or shareholder or to appoint or
                    procure the appointment of any receiver, trustee or similar
                    person or official in respect of the borrower the subsidiary
                    or shareholder or any of its assets (save for the assets the
                    subject of the relevant Security Interest); and/or
<PAGE>
                                      -8-

              (iii) recourse to such borrower generally, or directly or
                    indirectly to a member of the NG Group under any form of
                    assurance or undertaking, which recourse is limited to a
                    claim for damages (other than liquidated damages and damages
                    required to be calculated in a specified way) for breach of
                    an obligation (not being a payment obligation or an
                    obligation to procure payment by another or an obligation to
                    comply or to procure compliance by another with any
                    financial ratios or other tests of financial condition) by
                    the person against whom such recourse is available; or

          (c)  which THE BANK shall have agreed in writing to treat as Project
               Finance Borrowing for the purposes of this Article 4.

          If at any time any Financial Indebtedness is made to finance a project
          and that Financial Indebtedness does not qualify as a "Project Finance
          Borrowing" pursuant to the above sub-paragraphs (b)(i), (ii) or (iii)
          but would so qualify if there were not recourse to a member of the NG
          Group which is either (i) limited as to the period during which it is
          in force (for example, during the period up to completion of the
          project) or (ii) limited as to the obligations of the borrower to
          which it applies, then, in any such case, the Financial Indebtedness
          shall be regarded as a "Project Finance Borrowing" for the purposes of
          this definition to the extent that, and during the period that, there
          is no such recourse to a member of the NG Group.

          "PROJECT FINANCE COMPANY" means any company, partnership or other
          legal person falling within the scope of paragraph (a) of the
          definition of Project Finance Borrowing or which THE BANK has agreed
          shall be treated as a Project Finance Company for the purposes of this
          Article 4.

          "RELEVANT ASSETS" has the meaning given to it in the relevant
          Transmission Licence.

          "SECURITY INTEREST" means any mortgage, pledge, lien, charge,
          assignment, hypothecation or security interest or any other agreement
          or arrangement having the effect of conferring security.

          "SUBSIDIARIES" means Companies Act Subsidiaries and Subsidiary
          Undertakings (and "Subsidiary" shall be construed accordingly).

          "SUBSIDIARY UNDERTAKING" means a subsidiary undertaking within the
          meaning of Section 21 of the Companies Act 1989.

          "TRANSMISSION BUSINESS" has the meaning given to it in the relevant
          Transmission Licence.

          "TRANSMISSION LICENCE" means a licence granted under Section 6(1)(b)
          of the Electricity Act.

    4.07  PARI PASSU RANKING

          THE GUARANTOR undertakes that the obligations under this Guarantee
          Agreement are direct and unconditional obligations of THE GUARANTOR
          and rank and will rank at least pari passu with all other unsecured
          and unsubordinated contingent obligations of THE GUARANTOR other than
          those obligations of THE GUARANTOR to its unsecured creditors which
          would, on a winding-up of THE GUARANTOR, be preferred by operation of
          law.

<PAGE>
                                      -9-

    4.08  FINANCIAL UNDERTAKINGS

          THE GUARANTOR undertakes:

          (A)  that for each period of 12 months ending on the last day of each
               financial year and each financial half-year of the NG Group (an
               "End Date") EBITDA shall exceed Net Interest Payable by not less
               than 3.0 times;

          (B)  that for each period of 12 months ending on the last day of each
               financial year and each financial half-year of the NG Group (an
               "End Date") Net Debt shall not exceed EBITDA by more than: 5.00
               times;

          (C)  that NG Group members other than itself shall not incur Financial
               Indebtedness other than: (1) under the Finance Facility; (2)
               Financial Indebtedness which is secured by a Security Interest
               which has been created with prior written consent of THE BANK;
               (3) any Financial Indebtedness owing by one member of the NG
               Group to another member of the NG Group, or any guarantee,
               indemnity or similar assurance issued by any Subsidiary in
               connection with the Financial Indebtedness of another Subsidiary
               that is permitted under this Article 4.08(C); (4) in the case of
               Subsidiaries (including THE BORROWER) incorporated or established
               outside the United States of America, Financial Indebtedness in
               an aggregate amount not exceeding (when aggregated with Financial
               Indebtedness of such Subsidiaries which is permitted under (3)
               above) GBP 4 000 000 000; (5) in the case of Subsidiaries
               incorporated or established within the United States of America,
               Financial Indebtedness in an aggregate amount not exceeding (when
               aggregated with Financial Indebtedness of such Subsidiaries which
               is permitted under (3) above) USD 7 000 000 000;

          provided that in the case of (4) and (5) above the monetary limits
          referred to shall be reduced to the extent the equivalent limits in
          Clause 19.15(a) of the Finance Facility are reduced by the operation
          of clause 8.7 of the Finance Facility; and in the case only of (4) and
          (5) above the amount of any Cash or Cash Equivalent held by a
          Subsidiary may be set off against the amount of its Financial
          Indebtedness; and the GBP or USD equivalent of any Financial
          Indebtedness in any other currency shall be converted at the spot rate
          of exchange determined pursuant to the Finance Facility;

          For the purposes of paragraph (c) above, the amount of any Financial
          Indebtedness which is constituted by currency or interest swaps, cap
          or collar arrangements or any other derivative instruments shall be
          calculated by aggregating the mark-to-market values of any such
          currency or interest swaps, cap or collar arrangements or other
          derivative instruments, and the determination of such amount shall
          (within the bounds of ordinary market practice) be in THE BANK'S sole
          discretion and shall, in the absence of manifest error, be conclusive
          and shall not be open to dispute by THE GUARANTOR or any third party.

          (D)  that, subject to the exceptions listed in cl.19.9(b),
               subparagraphs (i) to (ix), of the Finance Facility, it shall not
               and undertakes that no other member of the NG Group shall make
               any voluntary or involuntary disposal of any of its assets
               whether by a single transaction or a series of them;

          (E)  that THE BORROWER shall comply with the Negative Pledge contained
               in Article 8.02 of the Finance Contract and the financial
               covenants contained in Article 7.08 of THE FINANCE CONTRACT and
               shall direct or assist companies forming part of the NG Group so
               as to enable THE BORROWER to comply with such covenants.

          For the purposes of this Guarantee Agreement and of THE FINANCE
          CONTRACT, terms defined in the Finance Facility and which are not
          otherwise defined in this Agreement shall, unless otherwise agreed by
          THE BANK, have the meaning attributed to them in that

<PAGE>
                                      -10-

document as at the date hereof and the financial results to which the
definitions below refer shall unless otherwise stated be the consolidated
financial accounts of THE GUARANTOR to be delivered pursuant to Article 4.01
and such results shall be measured twice yearly as indicated in such Article:

"Bonds"

means:

(a) the mandatorily exchangeable bonds due 2003, exchangeable into ordinary
    shares of Energis Plc and issued by the National Grid Group plc ("NGG");

(b) the exchangeable bonds due 2008, exchangeable into ordinary shares of NGG
    and issued by NGG; and

(c) other similar debt instruments issued or to be issued by NGG or any company
    in the Group and exchangeable into share capital.

"CONSOLIDATED PROFITS BEFORE INTEREST AND TAX" shall mean in respect of any
period, the consolidated net pre-taxation profits on operating activities
(after adding back Net Interest Payable and excluding any Exceptional Items and
after adding back restructuring costs incurred as a result of the Acquisition)
of the NG Group for that period based on the latest accounts supplied pursuant
to Article 9.02A of THE FINANCE CONTRACT.

"EBITDA" shall mean in respect of any period, Consolidated Profits before
Interest and Tax for that period, after adding back depreciation and
amortisation of goodwill.

"EXCEPTIONAL ITEMS" has the meaning given to it in FRS 3 issued by the
Accounting Standards Board.

"FINANCIAL INDEBTEDNESS" means (without double-counting) any indebtedness of
the NG Group in respect of (a) moneys borrowed or debit balances at banks and
other financial institutions; (b) any debenture, bond, note, commercial paper,
loan stock or other debt instrument; (c) any acceptance or documentary credit
facilities, bill discounting or factoring facilities; (d) receivables sold or
discounted (otherwise than on a non-recourse basis); (e) the acquisition cost
of any asset to the extent payable before or after the time of acquisition or
possession by the party liable where the advance or deferred payment is
arranged primarily as a method of raising finance or financing the acquisition
of that asset; (f) leases (whether in respect of land, machinery, equipment or
otherwise) entered into primarily as a method of raising finance or financing
the acquisition of that asset; (g) currency or interest swap, cap or collar
arrangements or any other derivative instrument; (h) amounts raised under any
other transaction having the commercial effect of a borrowing or raising of
money; (i) any guarantee, indemnity or similar assurance in respect of
indebtedness of any person falling within any of paragraphs (a) to (h) (both
inclusive) above.

"FINANCE FACILITY" shall mean a bank facility agreement entered into on or
about the date hereof, in replacement of such a facility dated 5th March 1999,
between THE GUARANTOR, NGG, National Grid Group Finance plc and the parties
named therein as Agent, Banks and Arrangers, providing facilities in an
aggregate value of USD 2,300,000,000.

"NET DEBT" shall mean the aggregate principal amount (or amounts equivalent to
principal, howsoever described) comprised in the Financial Indebtedness of the
NG Group (excluding amounts referred to in paragraph (g) and paragraph (i) (in
so far as those amounts referred to in paragraph (i) relate to amounts referred
to in paragraph (g)) of the definition of Financial Indebtedness) at the time
calculated on a consolidated basis less Cash and Cash Equivalents held by any
member of the NG Group.

<PAGE>
                                      -11-

     "NET INTEREST PAYABLE" shall mean in respect of any period, all interest
     and all other continuing, regular or periodic costs, charges and expenses
     in the nature of interest (whether paid, payable or capitalised) incurred
     by the NG Group in effecting, servicing or maintaining all Financial
     Indebtedness of the NG Group, excluding any premia payable which arise on
     or solely as a result of the redemption of any Bonds or the purchase of any
     Bonds with a view to cancellation where such premia are defined by formulae
     and/or market price mechanisms so that their quanta cannot be determined
     prior to the time at which they are to be calculated, less all interest and
     similar income receivable by the NG Group during that period (but only to
     the extent the same accrue and are receivable by the NG Group in a freely
     convertible and transferable currency) in each case as determined from the
     financial statements relating to that period delivered under Article
     9.02A(a).

4.09 CHANGE OF BUSINESS

     THE GUARANTOR undertakes that save with the prior written consent of THE
     BANK no substantial change shall be made to the general nature of the
     business of the NG Group, taken as a whole, such business to be treated as
     including electricity generation, transmission, distribution, or metering
     or supply and the provision of telecommunications services and the
     acquisition and operation of the National Air Traffic Control System.

                                   ARTICLE 5
                       AMENDMENT TO THE FINANCE CONTRACT

5.01 Subject to Article 5.02, THE BANK may agree to any amendment to THE FINANCE
     CONTRACT which does not increase the amounts payable by THE BORROWER
     thereunder or THE GUARANTOR hereunder or permit THE BANK more easily to
     make a claim against THE GUARANTOR hereunder. THE BANK shall notify THE
     GUARANTOR of each such amendment.

5.02 THE BANK may not amend or vary the terms of THE FINANCE CONTRACT save as
     provided in Article 5.01 or save with the prior written consent of THE
     GUARANTOR, which consent shall not be unreasonably withheld.

                                   ARTICLE 6
                          TAXES, CHARGES AND EXPENSES

6.01 Taxes or fiscal charges, legal costs and other expenses incurred in the
     execution or implementation of this Guarantee and Indemnity Agreement shall
     be borne by THE GUARANTOR. THE GUARANTOR shall make payments hereunder
     without withholding or deduction on account of tax or fiscal charges.

<PAGE>
                                      -12-

                                   ARTICLE 7
                              Law and Jurisdiction

7.01  Law

      This Guarantee and Indemnity Agreement, its formation, construction and
      its validity  shall be governed by and construed in all respects in
      accordance with the laws of England.

7.02  Jurisdiction

      The parties hereto submit to the exclusive jurisdiction of the Courts of
      England and all disputes concerning this Guarantee and Indemnity Agreement
      shall be submitted to such court. THE BANK appoints The Securities
      Management Trust Limited of 19 Old Jewry, London EC2 to be its attorney
      for the purpose of accepting service on its behalf of any writ, notice,
      order, judgement or other legal process. Any such service against THE
      GUARANTOR shall be sent by registered mail to the address of THE GUARANTOR
      under Article 8.01 hereof.

7.03  Invalidity

      If any provision hereof is invalid, such invalidity shall not prejudice
      any other provision hereof.

                                   ARTICLE 8
                                 Final Clauses

8.01  Notices

      Notices and other communications given hereunder (other than such as arise
      out of litigation) to THE GUARANTOR or to THE BANK shall be sent out by
      telex, telegram, registered letter or letter with recorded delivery
      addressed to it at its address set out below or at such other address as
      it shall have previously notified to the other in writing as its new
      address for such purpose:

      - FOR THE BANK                    : 100, boulevard Konrad Adenauer
                                          L-2950 Luxembourg
                                          Attn: Credit Risk Department
                                          Telex: 3530 BNKEU LU
                                          Fax: 00-352-437704

      - FOR THE GUARANTOR               : 15 Marylebone Road
                                          London NW1 5JD
                                          England
                                          Attn. Martin O'Donovan/Paul Phillips
                                          Fax: (0044171) 620 87 14
<PAGE>
                                      -13-

8.02  RECITALS AND ANNEXURES

      The Recitals form part of this Guarantee and Indemnity Agreement.

      The following Annexures are attached hereto:

      Annexure I                               - Resolution of the Board of
                                                 Directors of THE GUARANTOR and
                                                 Authority of Signatory

      Annexure II                              - Certificate of Guarantee Powers

      IN WITNESS WHEREOF the parties hereto have caused this Guarantee and
      Indemnity Agreement to be executed in four originals in the English
      language, each page having been initialled by Mr. S.E. Sturmer on behalf
      of THE BANK.

        Signed for and on behalf of             Signed for and on behalf of
         EUROPEAN INVESTMENT BANK                  NEW NATIONAL GRID PLC

this [ ] day of [        ] 2001, at London
<PAGE>
                   [THE NATIONAL GRID COMPANY PLC LETTERHEAD]

Luxembourg, 20th November 2001                              JU/SES/mts

SUBJECT:  Finance Contract between European Investment Bank and The National
          Grid Company plc dated 5th December 1996 as amended and supplemented
          by letter agreements dated 3 February 1997, 12 November 1998, 29 March
          1999 and 2001 (the "Finance Contract")
          ----------------------------------------------------------------------

Dear Sirs,

We write to you with reference to certain provisions of the Finance Contract.
Terms defined in the Finance Contract have the same meaning where used in this
letter.

ARTICLE 4.03D

With reference to Article 4.03D and for the avoidance of doubt we confirm that
should at any time during the 30 day consultation period referred to therein the
Loss-of-Rating Event cease to be continuing then THE BORROWER shall have no
further obligations under Article 4.03B with respect to that particular
Loss-of-Rating Event.

ARTICLE 11.01A(b)

With regard to Article 11.01A(b), we would inform you that it is not the policy
of THE BANK to exercise its rights under that subparagraph without having regard
to the fact that clerical and administrative errors can occur in any
organisation.

                               Yours faithfully,
                            EUROPEAN INVESTMENT BANK

               /s/ K.J. Andreopoulos              /s/ P. Jedefors

                K.J. Andreopoulos                    P. Jedefors
              Deputy General Counsel                  Director

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