NGG

Business Context and Reporting Period

Company: National Grid plc
Filing Date: May 20, 2010
Reporting Period: Announcement of a proposed capital raise (not a periodic financial report)
Business Overview: National Grid focuses on the transmission and distribution of electricity and gas in the United Kingdom and the United States. The company is addressing significant changes in the UK energy landscape, including security of supply, carbon emission reductions, and the need for transmission reinforcements to meet 2020 government targets.

Key Financial Metrics and Capital Structure

Proposed Capital Raise: Approximately £3.2 billion (net of expenses).
Instrument: Fully underwritten Rights Issue.
Share Details: 990,439,017 new ordinary shares at 335 pence per share.
Subscription Ratio: 2 new shares for every 5 existing ordinary shares.
Discounts:

• 43.7% discount to the closing middle market price (adjusted for the recommended final dividend of 24.84 pence).
• 35.7% discount to the theoretical ex-rights price.

Use of Proceeds: Funding a portion of the UK capital investment programme and general corporate purposes.
Credit Ratings: The Board aims to maintain single A credit ratings for UK operating companies.

Note: This filing does not provide specific revenue, profit, cash flow, or debt figures for the current or prior periods.

Material Changes and Strategic Drivers

The primary material change is the proposed dilution of existing shareholders via the Rights Issue to secure financial flexibility. Strategic drivers include:

• UK Investment: Replacing ageing assets and major infrastructure reinforcement driven by environmental targets and the decline of North Sea gas reserves.
• US Strategy: Restoring baseline business performance through new rate plans and improved operating efficiency.
• Regulatory Environment: Committing capital to projects under incentive arrangements provided by Ofgem to support the Electricity Networks Strategy Group's identified needs.

Guidance, Outlook, and Risks

Management Commentary: The Board believes the equity raise is essential to fund increased capital investment, deliver attractive shareholder returns, and strengthen the long-term competitive position in a volatile economic environment.
Timeline:

• Trading in Nil Paid and Fully Paid Rights expected to commence: May 26, 2010.
• Trading in New Shares expected to commence: June 14, 2010.

Risks and Contingencies:

• Regulatory changes and decisions by governmental bodies.
• Network failures, infrastructure damage, or inability to carry out critical operations.
• Fluctuations in exchange rates, interest rates, and commodity prices.
• Adverse changes in global credit markets affecting access to capital.
• Pension scheme funding requirements and regulatory treatment of pension costs.
• Reputational harm from supply disruptions.

Forward-Looking Statements: The announcement contains forward-looking statements subject to uncertainties that could cause actual results to differ materially from expectations.

Key Facts for Investor Verification

• Verify the final subscription ratio and issue price once the Rights Issue is formally approved.
• Confirm the specific allocation of the £3.2 billion proceeds between UK capital projects and general corporate purposes in subsequent filings.
• Monitor the impact of the 43.7% discount on the share price and earnings per share (EPS) dilution.
• Track the status of UK regulatory approvals (Ofgem) for the capital investment projects cited as the rationale for the raise.
• Review the company's credit rating outlook from major agencies following the announcement of the equity raise.