NGG

Business Context and Reporting Period

Company: National Grid plc
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended March 31, 2008
Accounting Basis: International Financial Reporting Standards (IFRS)
Business Overview: National Grid operates electricity and gas transmission and distribution networks in the United Kingdom and the United States. The reporting period includes the acquisition of KeySpan Corporation in August 2007, which significantly expanded its US footprint.

Key Financial Metrics

Note: The filing text does not provide specific line items for cash flow, debt totals, or liquidity ratios in the summary section; these are incorporated by reference from the Annual Report and Accounts.

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased by approximately 31% to £11.4 billion, driven primarily by the acquisition of KeySpan Corporation and the inclusion of its results from August 2007.
• Profit Surge: Total profit for the year more than doubled to £3.2 billion (from £1.4 billion). This significant increase is largely attributable to gains on the disposal of non-core businesses, specifically the UK wireless operations and the Australian electricity interconnector business, which were classified as discontinued operations.
• Continuing Operations: Profit from continuing operations grew more modestly to £1.6 billion, reflecting organic growth and the integration of new US assets.
• Share Capital: The company executed a share consolidation (43 new shares for every 49 existing shares) to facilitate a £2 billion return of cash to shareholders via a B share scheme.

Guidance, Outlook, and Risks

Management Commentary & Outlook: The company continues to execute a share buy-back program, having returned approximately £1.8 billion to shareholders following the sale of its UK wireless business. Management anticipates no significant difficulty in leasing alternative office space if current leases expire. The company is actively negotiating to reduce its lease footprint at MetroTech in Brooklyn, New York.

Risks and Contingencies: Forward-looking statements are subject to risks including:

• Regulatory approvals and contractual consents for acquisitions and operations.
• Unseasonable weather affecting energy demand.
• Currency fluctuations (GBP/USD).
• Changes in energy market prices and interest rates.
• Integration risks associated with the KeySpan acquisition.
• Pension scheme performance and regulatory treatment of pension costs.
• Operational outages on gas pipelines or electricity networks.

Internal Controls: Management concluded that internal controls over financial reporting were effective as of March 31, 2008. KeySpan Corporation was excluded from this assessment due to its recent acquisition, though it represented 25% of total assets and 22% of total revenues.

Investor Verification Checklist

• Acquisition Impact: Verify the specific contribution of KeySpan Corporation to the 2008 revenue and profit figures to distinguish between organic growth and acquisition effects.
• Discontinued Operations: Review the details of the gains from the sale of UK wireless and Australian interconnector businesses to understand the volatility in total profit versus continuing operations profit.
• Share Buy-back Progress: Confirm the remaining capacity of the share buy-back program (26 million shares remaining as of June 2008) and the total capital returned to date.
• Debt and Liquidity: Consult the full Annual Report (Exhibit 15.1) for detailed debt maturities, interest coverage ratios, and cash flow statements, as these are not explicitly detailed in the Form 20-F summary text.
• Regulatory Environment: Assess the impact of potential changes in UK and US energy regulations on future rate-setting and capital expenditure requirements.