Sir John Parker. Chairman

Transcription

1 Sir John Parker Chairman

2 Cautionary statement Unless otherwise stated, all financial data of National Grid contained in this presentation is as reported under IFRS.This presentation contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include information with respect to National Grid s financial condition, National Grid s results of operations and businesses, strategy, plans and objectives. Words such as anticipates, expects, intends, plans, believes, seeks, estimates, may, will, continue, project and similar expressions, as well as statements in the future tense, identify forward-looking statements. These forward-looking statements are not guarantees of National Grid s future performance and are subject to assumptions, risks and uncertainties that could cause actual future results to differ materially from those expressed in or implied by such forward-looking statements. Many of these assumptions, risks and uncertainties relate to factors that are beyond National Grid s ability to control or estimate precisely, such as delays in obtaining, or adverse conditions contained in, regulatory approvals and contractual consents, unseasonable weather affecting the demand for electricity and gas, competition and industry restructuring, changes in economic conditions, currency fluctuations, changes in interest and tax rates, changes in energy market prices, changes in historical weather patterns, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, the impact of changes to accounting standards and technological developments. Other factors that could cause actual results to differ materially from those described in this presentation include the ability to integrate the businesses relating to announced or recently completed acquisitions with National Grid s existing business to realise the expected synergies from such integration, the availability of new acquisition opportunities and the timing and success of future acquisition opportunities, the timing and success or other impact of the sales of National Grid s non-core businesses, the failure for any reason to achieve reductions in costs or to achieve operational efficiencies, the failure to retain key management, the behaviour of UK electricity market participants on system balancing, the timing of amendments in prices to shippers in the UK gas market, the performance of National Grid s pension schemes and the regulatory treatment of pension costs, and any adverse consequences arising from outages on or otherwise affecting energy networks, including gas pipelines owned or operated by National Grid. For a more detailed description of some of these assumptions, risks and uncertainties, together with any other risk factors, please see National Grid s filings with and submissions to the US Securities and Exchange Commission (the SEC ) (and in particular the "Risk Factors" and "Operating and Financial Review" sections in its most recent Annual Report on Form 20-F). Except as may be required by law or regulation, National Grid undertakes no obligation to update any of its forward-looking statements. The effects of these factors are difficult to predict. New factors emerge from time to time and National Grid cannot assess the potential impact of any such factor on its activities or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. 2

3 Steve Lucas Finance Director

4 Financial headlines Very strong results Operating profit up 29% PBT up 24%* EPS up 25%* Dividend per share up 15% Average group ROE 11.8% 4 * At actual currency Continuing business performance, excluding exceptional items, remeasurements, and stranded costs recoveries 2008 constant currency figures calculated by applying average 2008 rate ($2.01/ ) to 2007 results (when average rate was $1.91/ )

5 National Grid Operating profit 2,595m 13% 5% 2,005m 44% 38% Transmission Gas Distribution Electricity Distribution & Generation Non-regulated & other 5 Continuing business performance, excluding exceptional items, remeasurements, and stranded cost recoveries constant currency figures calculated by applying average 2008 rate ($2.01/ ) to 2007 results (when average rate was $1.91/ )

6 Transmission Operating profit 1,149m 1,049m Increase in UK allowed revenues and higher US income % up Lower auction revenues on the French interconnector and LNG storage Increased depreciation charge 6 Continuing business performance, excluding exceptional items, remeasurements, and stranded cost recoveries constant currency figures calculated by applying average 2008 rate ($2.01/ ) to 2007 results (when average rate was $1.91/ )

7 Transmission Returns UK vanilla return (%) US return on equity (%) / / / / / /08 UK electricity UK gas* New England Power 7 * For 2005/06 gas transmission and distribution operated under a single regulatory agreement, therefore the UK gas return presented is a combined gas transmission and distribution return (this does not adjust for timing). From 2006/07 onwards UK gas transmission was subject to its own separate regulatory agreement

8 Gas Distribution Operating profit 987m 477m KeySpan acquisition 349 million pounds % up UK formula income up 165 million pounds US seasonal bias (Rhode Island) 8 Continuing business performance, excluding exceptional items, remeasurements, and stranded cost recoveries 2008 constant currency figures calculated by applying average 2008 rate ($2.01/ ) to 2007 results (when average rate was $1.91/ )

9 Gas Distribution Returns UK vanilla return (%) / / /08 UK gas* * For 2005/06 gas transmission and distribution operated under a single regulatory agreement, therefore the UK gas return presented is a combined gas transmission and distribution return (this does not adjust for timing). From 2006/07 onwards UK gas transmission was subject to its own separate regulatory agreement

10 Electricity Distribution & Generation Operating profit 346m 330m Increased electricity distribution revenues % down KeySpan acquisition Lower storm costs Timing differences Higher bad debts and reliability Other items included one off costs 10 Continuing business performance, excluding exceptional items, remeasurements, and stranded cost recoveries constant currency figures calculated by applying average 2008 rate ($2.01/ ) to 2007 results (when average rate was $1.91/ )

11 Electricity Distribution & Generation Returns New York return on equity (%) New England return on equity (%) / / / / / /08 Upstate New York Massachussetts 11 * For 2005/06 gas transmission and distribution operated under a single regulatory agreement, therefore the UK gas return presented is a combined gas transmission and distribution return. From 2006/07 onwards UK gas transmission was subject to its own separate regulatory agreement

12 Group Operating profit 2,595m 13% 5% 2,005m 44% 38% % up Transmission Gas Distribution Electricity Distribution & Generation Non-regulated & other 12 Continuing business performance, excluding exceptional items, remeasurements, and stranded cost recoveries constant currency figures calculated by applying average 2008 rate ($2.01/ ) to 2007 results (when average rate was $1.91/ )

13 Exchange rates Rates For the 12 months ended 31 March Closing $ / rate Average $ / rate for the period Net currency impact on earnings For the 12 months ended 31 March ( m) 2008 Impact on operating profit (26) Impact on interest 16 Impact on tax and minority interests 6 Net impact on earnings (4) 13 Continuing business performance, excluding exceptional items, remeasurements, and stranded cost recoveries.

14 Interest, tax, earnings and dividend Earnings per share For the 12 months ended 31 March ( m) Net finance cost (actual FX) (760) (547) Effective tax rate* 32% 30% EPS 48.0p 38.3p Dividend per share For the 12 months ended 31 March DPS - ordinary 33p 28.7p Dividend per American Depository Share $ $ Continuing business performance, excluding exceptional items, remeasurements, and stranded cost recoveries. * Expressed as a % of profits before exceptional items, certain mark-to-market remeasurements, and stranded cost recoveries Number of shares: 2,609m (2008), 2,719m (2007)

15 2007/08 Pro forma* For the 12 months ended 31 March ( m) 2008 Pro forma 2008 Actual 2007 Operating profit 2,625 2,595 2,031 Gas Distribution Electricity Distribution & Generation Net finance costs (914) (760) (547) Profit before tax (continuing businesses) 1,719 1,839 1,486 Tax (543) (583) (442) Earnings per share 45.1p 48.0p 38.3p 15 *At actual currency Continuing business performance, excluding exceptional items, remeasurements, and stranded cost recoveries.

16 COMPLETE Share repurchase programme ~ 1.9bn 1.5bn of cash returned in 2007/08 Wireless disposal & stranded assets 200m of shares repurchased ~ 600m to be returned during 2008/09 ~ 600m 2007/ /09 Stranded costs Wireless proceeds 16

17 Capital investment 2,345m 258m 218m 526m 3,053m 383m 257m 702m 30% up 1,343m 1,711m Transmission Gas distribution Electricity distribution Non-regulated & other 17 Continuing business capital investment at actual FX

18 Net debt and cashflow (2.8)bn (0.2)bn (17.6)bn (2.3)bn (2.8)bn (0.8)bn (11.8)bn 3.1bn 2006/07 Net Debt Operating Cashflow Investment Interest & Tax Dividends & share buyback Acquisitions & Disposals Other 2007/08 Net Debt 18

19 ISSUED TO GO 2008/09 funding ~ 1.9bn medium and long term debt issued since the start January 2008 ~ 3.4bn* Continue to issue commercial paper. 3bn of committed back up lines undrawn and available ~ 1.5bn ~ 1.5bn of funding requirement remaining ~ 1.9bn Funding required 19 Total funding required for the period January 2008 to April 2009

20 2008/09 financing metric Interest cover Reflects the calculation used by our credit rating agencies 3.2x for the year Aim to manage within a range of x / / / Target range Interest cover 20

21 Financial performance return on equity (nominal) 13.5%* 12.2% 11.8% average 9.7%* RAV Indexation causes significant movements. Reduced gearing following proceeds from network sales reduced return in 2005/ / / /08 Return Average 21 * Prior years restated to reflect an accounting reclassification between segments relating to the pension scheme deficit in electricity transmission in the UK. The reclassification reduced the return on equity from 14.1% to 13.5% in 2006/07, from 10.1% to 9.7% in 2005/06, and reduced the three year average to 2006/07 from 12.4% to 12.0%.

22 Financial headlines Very strong results Operating profit up 29% PBT up 24%* EPS up 25%* Dividend per share up 15% Average group ROE 11.8% 22 * At actual currency Continuing business performance, excluding exceptional items, certain mark-to-market remeasurements, and stranded costs recoveries 2008 constant currency figures calculated by applying average 2008 rate ($2.01/ ) to 2007 results (when average rate was $1.91/ )

23 Steve Holliday Chief Executive

24 A year of transformational change and a strong financial performance Focused KeySpan acquisition completed 4.6bn of planned disposals 4 new rate plans in place Integrated KeySpan integration progressing well Good progress implementing our global operating model Controllable costs down 1%* Disciplined Financing 1.6bn of shares repurchased Interest cover of 3.2x Organic investment up 30%, programme on track 2007/08 headlines Earnings per share Dividend per share up 25% up 15% ** 24 * Real controllable cost reduction on prior year, in 2006/07 prices, at constant currency. ** Recommended by the Board.

25 Regulation changing policy and regulatory landscape Reliability Customer service Transmission UK electricity reliability: % Gas Distribution Customer satisfaction*: US ranked #1 & #2 Elec. Dist. & Gen. Service quality: 92% of targets hit Climate change Security of supply 25 * J.D.Power and associates 2008 Gas Utility Business Customer Satisfaction Study

26 Rate plan filings our $15.2bn* US rate base ~55% gas ~45% electricity 26 * Excluding US stranded costs.

27 Rate plan filings our $15.2bn* US rate base 7% Upstate New York gas 23% Upstate New York electricity 27 * Excluding US stranded costs.

28 Rate plan filings Upstate New York US rate base: $15.2bn* 7% 23% Gas filing Revenue decoupling Gas mains replacement Cost recovery (e.g bad debts; pensions) Deferral account $128m recovery in calendar 2008 agreed $128m recovery in calendar 2009 agreed $1.47bn electricity capex filings 'Upstate' New York (elec.) 'Upstate' New York (gas) October filing established investment plan December cost filing for 2008 capex 50% recovered in 2010 through deferral acc. Balance recovered from 1 January 2012 Annual cost filings planned 28 * Excluding US stranded costs.

29 Strong baseline investment pipeline growing our asset base 2007/08 investment 3.1bn, up 30% UK regulatory asset value +11% 17.2bn 2% 15.5bn 98% US rate base* % $15.2bn $14.4bn Capex currently un-supported Capex supported by regulatory / customer agreement * US rate base is as reported to our regulators, excluding US stranded assets. In upstate New York rate base is reported for the rate year ended 31 October.

30 Strong baseline investment pipeline disciplined delivery 2008/09 investment ~ 3bn ~ 0.5bn ~ 0.2bn ~ 1.0bn Transmission Gas Distribution ~ 1.3bn Electricity Distribution & Generation Non-regulated & other Managing inflation Regulatory protection Indexation in UK rate plans Some inflation protection in US rate plans Procurement strategy Manage workload within regulatory allowances 30

31 Global operating model unlocking additional value Controllable cost savings KeySpan synergy savings $38m run rate at 31 March staff reduction (voluntary early retirement) Non-operational office consolidation On track for $100m run rate by March 2009 Global operating model 3 year implementation Further steps to come e.g.: Control centre consolidation Rationalising workforce locations Co-location of electricity and gas scheduling & dispatch functions Sources of achieved KeySpan integration savings ~55% ~15% ~25% ~5% Information systems Process alignment Finance Shared Services & Corporate consolidation 31

32 Priorities building on 2007/ /09 focus on execution and delivery Regulation Investment Global operating model Longer term Climate change Security of supply 32

33 Strong financial performance positive outlook 2007/08 earnings per share up 25% 8% annual dividend increases to 2011/12* Ordinary dividend per share (p) /08 dividend per share* up 15% 20 FY2007 FY2008 FY2009 FY2010 FY2011 FY Actual Target 33 * Recommended by the Board.

34 Appendix 1

35 IFRS technical details This presentation is based on continuing business performance, so it excludes exceptional items and remeasurements. These remeasurements relate to movements in the carrying value of financial instruments and of commodity contracts. They arise from changes in mark-to-market values or exchange rates and are reflected in the income statement to the extent that hedge accounting is not achieved or is not fully effective. Further details can be found in Note 3 of National Grid s 2007/08 Full Year Results report at 35

36 Business results For the 12 months ended 31 March ( m) change Operating profit (actual FX) 2,595 2,031 28% Operating profit (constant FX) 2,595 2,005 29% Profit before tax (actual FX) 1,839 1,486 24% Earnings per share 48.0p 38.3p 25% Dividend per share 33.0p 28.7p 15% 36 Continuing business performance, excluding exceptional items, remeasurements and stranded cost recoveries 2007 constant FX figures calculated by applying average 2008 rate ($2.01/ ) to 2007 results (when average rate was $1.91/ )

37 Business results and statutory results* For the 12 months ended 31 March ( m) Operating profit ** 2,595 2,031 Exceptional operating items, remeasurements and stranded Net finance costs (including exceptional items and remeasurements) (776) (764) Share of post tax results of joint ventures 4 2 Statutory profit before tax (continuing businesses) 2,192 1,751 Tax (611) (441) Statutory earnings (continuing businesses) 1,581 1,310 Statutory earnings (discontinued operations) 1, Statutory earnings 3,199 1,396 Minority interests (3) (2) Statutory earnings attributable to equity shareholders 3,196 1,394 Earnings per share 60.5p 48.1p 37 *At actual currency **Excluding exceptional items, remeasurements, stranded cost recoveries and discontinued businesses

38 Revenue and other operating income* For the 12 months ended 31 March ( m) Transmission - UK 2,956 2,822 Transmission - US Gas distribution - UK 1,391 1,199 Gas distribution - US 2, Electricity distribution 3,126 3,004 Non-regulated businesses and other US Stranded Costs (Sales eliminations) (210) (219) Total revenue and other operating income 11,498 8, *At actual currency Continuing business performance, excluding exceptional items and remeasurements

39 Transmission* Depreciation & Amortisation For the 12 months ended 31 March ( m) Electricity Transmission Owner Electricity System Operator Other Electricity 1 3 Sub total Electricity transmission UK Gas Transmission Owner Gas System Owner Sub total Gas transmission UK New England Transmission New York Transmission Interconnectors 7 8 Sub-total Electricity transmission US Interconnectors UK 7 7 LNG 5 4 Sub total other Total Transmission depreciation & amortisation *At actual currency 39

40 Transmission* Operating costs For the 12 months ended 31 March ( m) Electricity Transmission Owner** Electricity System Operator Other Electricity Sub total Electricity transmission UK 1,227 1,192 Gas Transmission Owner Gas System Owner Other gas 9 9 Sub total Gas transmission UK New England Transmission New York Transmission Interconnectors Sub-total Electricity transmission US Interconnectors UK 7 7 LNG Sub total other Total Transmission operating costs 1,694 1, *At actual currency ** Includes BSIS costs ( 574m 2007/08, 550m 2006/07)

41 Transmission* Operating profit For the 12 months ended 31 March ( m) Electricity Transmission Owner Electricity System Operator Sub total Electricity transmission UK Gas Transmission Owner Gas System Owner Sub total Gas transmission UK New England Transmission New York Transmission Interconnectors 6 7 Sub-total Electricity transmission US Interconnectors UK LNG Other 7 2 Sub total other Total Transmission operating costs 1,149 1, *At actual currency Continuing business performance, excluding exceptional items and remeasurements

42 Transmission Principal operating profit movements 176m 27m 1,149m 1,049m ( 62)m ( 21)m ( 20)m 2007 UK Revenue US Revenue Auction Revenue Depreciation & Amortisation Other Continuing business performance, excluding exceptional items and remeasurements 2008 constant FX figures calculated by applying average 2008 rate ($2.01/ ) to 2007 results (when average rate was $1.91/ )

43 Gas distribution * Operating profit For the 12 months ended 31 March ( m) Depreciation and amortisation UK (181) (170) Depreciation and amortisation US (91) (24) Total depreciation and amortisation costs (272) (194) Operating costs UK (615) (608) Operating costs US (2,362) (543) Total operating costs (2,977) (1,151) Operating profit UK Operating profit US Total Gas distribution operating profit *At actual currency Continuing business performance, excluding exceptional items and remeasurements

44 Gas distribution Principal operating profit movements 349m 165m ( 13)m 12m 987m 474m 2007 KeySpan UK Formula income Rhode Island Other Continuing business performance, excluding exceptional items and remeasurements 2008 constant FX figures calculated by applying average 2008 rate ($2.01/ ) to 2007 results (when average rate was $1.91/ )

45 Electricity distribution and generation * Operating profit For the 12 months ended 31 March ( m) Operating costs* (2,650) (2,513) Depreciation and amortisation* (146) (127) Total Electricity distribution and generation operating profit *At actual currency Continuing business performance, excluding exceptional items, remeasurements and stranded cost recoveries

46 Electricity distribution and generation Principal operating profit movements 346m 15m 25m 33m ( 27)m ( 13)m ( 17)m ( 32)m 330m 2007 Revenues KeySpan Storms Timing Reliability Bad debts Other Continuing business performance, excluding exceptional items, remeasurements and stranded cost recoveries 2008 constant FX figures calculated by applying average 2008 rate ($2.01/ ) to 2007 results (when average rate was $1.91/ )

47 Non-regulated and other activities Operating profit For the 12 months ended 31 March ( m) Revenue Other operating income - (1) Operating costs (21) (22) Depreciation and amortisation (8) (7) Sub total Grain LNG 12 9 Revenue Other operating income (2) - Operating costs (139) (127) Depreciation and amortisation (145) (144) Sub total Metering Revenue Other operating income Operating costs (23) (29) Depreciation and amortisation (1) (2) Sub-total Property Sub total Other (80) (65) Total Non-regulated and other businesses operating profit Continuing business performance, excluding exceptional items

48 Operating cashflow For the 12 months ended 31 March 2008 Operating profit * m 2,595 Depreciation and amortisation 994 Working capital and other (470) Operating cashflow ** 3,119 * Excluding exceptional items, remeasurements and stranded cost recoveries ** Excludes tax 48

49 Cashflow and net debt m Net debt at 1 April 2007 (11,788) Operating cashflow from continuing operations* 3,119 Net interest (694) Tax continuing operations (110) Acquisition of KeySpan (including debt acquired) (5,948) Cash payments for capital expenditure (2,851) Sale of Wireless & Basslink 3,064 Equity dividends paid (780) Share repurchase programme (1,498) Other cash flows** 194 Change in net debt from cashflow in year (5,504) Total non cash movements in year (349) Net debt at 31 March 2008 (17,641) 49 * Excludes tax **Includes exceptional spend ( 132m), stranded cost recoveries of 278m and cashflows related to discontinued businesses

50 Interest cover Detailed Calculation ( m) 2005/ / /08 Interest expense (P&L) 1,693 1,736 2,035 Capitalised interest Interest on pensions debt adjustment Interest on decommissioning liabilities adjustment Interest on lease rentals adjustment Pensions interest on scheme liabilities (891) (869) (1001) Unwinding of discounts on provisions (18) (21) (41) Exceptional debt redemption costs (49) (45) 0 Adjusted interest expense ,137 Net cash inflow from operating activities 2,971 2,958 3,165 Interest income on financial instruments Dividends received Working capital adjustment 212 (18) 150 Current pension service cost (119) (113) (127) add back employer pension contributions add back interest on pensions debt adjustment add back lease rentals Corporation tax Prior year adjustment (if negative) (415) (175) (427) Ofgem assumed Interest (17) - - add back cash tax paid (for continuing operations) Adjusted net cash inflow from operating activities 3,260 3,585 3,614 Interest cover (adjusted funds from operations + adjusted interest expense)

51 Exceptional items,remeasurements and stranded cost recoveries For the 12 months ended 31 March 2008 m Restructuring costs (133) Environmental provision (92) Other (17) Stranded cost recoveries 379 Remeasurements commodity contracts 232 Impact on operating profit 369 Exceptional finance costs - Remeasurements net losses on derivative financial instruments Remeasurements commodity contracts (9) Impact on net finance costs (16) Total pre-tax exceptional items, remeasurements and stranded cost recoveries (7)

52 Pensions IAS19 data m At 31 March 2008 ESPS (mainly NGET) NGUK PS US NG total Market value of assets 1,321 12,660 3,292 17,273 Present value of liabilities (1,733) (11,833) (4,607) (18,173) (Deficit) / surplus (412) 827 (1,315) (900) Deferred tax 115 (232) (Deficit) / surplus net of deferred tax (297) 595 (789) (491) Discount rates 6.6% 6.6% 6.5% At 31 March 2007 Market value of assets 1,336 12,865 1,798 15,999 Present value of liabilities (1,824) (12,828) (2,592) (17,244) (Deficit) / surplus (488) 37 (794) (1,245) Deferred tax 146 (11) (Deficit) / surplus net of deferred tax (342) 26 (476) (792) Discount rates 5.4% 5.4% 5.8% 52 Note in 2007, Wireless pension liabilities are classified as liabilities of business held for sale.

53 Appendix 2

54 Group RoE (nominal) Explanation Equity based - Total invested capital minus net debt Invested Capital Total UK RAV US invested capital Other businesses (net assets) Adjusted net income Regulatory and accounting depreciation Regulatory capitalisation adjustments RPI indexation US stranded costs excluded 54

55 Group RoE (nominal) Detailed Calculation Group RoE 2005/ / /08 IFRS statutory net income 3,850 1,396 3,199 Exceptional items - discontinued (2,590) 18 (1,590) Exceptional items - continuing 110 (12) (96) Minority interests (2) (2) (3) IFRS US stranded costs (after tax) (293) (254) (229) KeySpan pro forma 5 months - - (55) IFRS income excluding US stranded costs 1,075 1,146 1,226 Depreciation Regulatory and accounting depreciation adjustment (122) (167) (186) Regulatory and accounting capitalisation (95) (107) (118) Sold operations (43) - (10) Indexation of RAV Pension revenue adjustment - - (60) Adjusted Group PAT 1,130 1,545 1,424 UK RAV 13,503 14,350 15,485 Other UK transmission US invested capital (excluding stranded costs) 5,944 5,712 11,535 Unregulated businesses (net assets) Wireless and Basslink 1,484 1,374 - Joint ventures Group enterprise value 21,830 22,295 28,144 Adjusted opening net debt (10,186) (10,850) (16,461) Gearing 47% 49% 58% Group equity value 11,644 11,445 11,683 Group RoE (nominal) 9.7% 13.5% 12.2% Weighted inflation rate 2.7% 4.4% 3.9% UK inflation rate 2.4% 4.8% 3.8% US inflation rate 3.4% 3.1% 4.0% 55

56 UK operational return High level calculation 5.05% vanilla return Pre tax cost of debt / post tax cost of equity and 60% gearing Invested Capital Opening UK RAV IFRS Operating Profit after cash tax adjusted for Regulatory depreciation REPEX capitalisation Pensions deficit payments revenues, costs and tax effects Cash tax to put it on the basis of Ofgem s assumed capital structure 56

57 UK Electricity transmission return Detailed Calculation Electricity Transmission 2006/ /08 IFRS Operating Profit Corporate recharges and other (10) (10) IFRS Operating Profit (adjusted) Depreciation Accounting depreciation Regulatory depreciation (420) (453) Depreciation Adjustment (177) (213) Non operational capex (15) (11) Quasi capex - 7 Pensions deficit revenue - (45) Regulatory Operating Profit Cash Tax Charge (104) (112) Vanilla Return Opening TO RV 5,648 6,034 Opening SO RV TIRG - 1 Total RV 5,759 6,082 Real Vanilla Return 4.7% 4.6% Timing adjustment 0.2% 0.0% Vanilla Return (including timing adjustment) 4.9% 4.6% 57

58 UK Gas transmission return Detailed Calculation Gas Transmission 2006/ /08 IFRS Operating Profit Corporate recharges and other (5) (5) IFRS Operation Profit (adjusted) Depreciation Accounting depreciation Regulatory depreciation (115) (125) Depreciation Adjustment (23) (14) Regulatory vs Accounting Capex Non operational capex - (2) Quasi capex and expensed regulatory capex - 14 Total Repex adjustment - 12 Pensions Pensions deficit revenue - (37) Regulatory Operating Profit Cash Tax Charge (34) (25) Vanilla Return GAS TO RAV 2,759 3,365 GAS SO RAV Total RV 2,825 3,409 Real Vanilla Return 7.6% 6.9% Timing adjustment (0.3%) 0.3% Vanilla Return (including timing adjustment) 7.3% 7.2% 58

59 UK Gas distribution return Detailed Calculation Gas distribution 2006/ /08 IFRS Operating Profit Corporate recharges and other (13) (14) IFRS Operation Profit (adjusted) Depreciation Accounting depreciation Regulatory depreciation (207) (219) Depreciation Adjustment (40) (38) Regulatory vs Accounting Capex Ofgem replacement expenditure REPEX (50%) (117) (177) Capitalised contributions released (21) (22) Total Regulatory vs Accounting capex adjustment (138) (199) Pensions Pensions deficit revenue - (3) Regulatory Operating Profit Cash Tax credit / (charge) 49 (7) Vanilla Return Gas Distribution RAV 5,775 5,986 Total RV 5,775 5,986 Real Vanilla Return 4.6% 5.4% Timing adjustment 0.4% (0.3%) Vanilla Return (including timing adjustment) 5.0% 5.1% 59

60 US main rate plans Gas distribution Downstate New York Long Island Upstate New York Boston (MA) Essex (MA) Colonial (MA) Rhode Island New Hampshire Base ROE 9.8% 9.8% 10.6% 10.2% 11.2% 11.2% 11.3% 10.4% Rate Base $2,239m $1,715m $1,084m $1,328m $168m $641m $578m $265m Actual Return 14.9% 10.4% N/A 7.4% 25.7% 12.7% 3.2% 4.9% Sharing shareholders % 100% to 10.5% 50% to 12.5% 35% to 13.5% 100% to 10.5% 50% to 12.5% 35% to 13.5% 100% to 11.75% 50% to 14% 25% to 16% 10% above 16% 100% from % 75% from % None None 50% to 12.25% 25% above 12.25% None 60

61 US main rate plans Electricity Base ROE Upstate New York Mass. Elec. Rhode Island NEP 10.6% 11% 10.5% 11.2% LIPA Generation 9.5%** Rate Base $4,882m $1,373m $682m $800m $692m Actual Return 8.4%* 9.5% 6.9% 11.9% 9.5% Sharing shareholders % 100% to 11.75% 50% to 14% 25% to 16% 10% above 16% 100% of $70m 50%of next $75m 50% from % 25% above 11.5% None Extras 100bp with incentives 61 * Excluding certain one-off items relating to voluntary early retirement costs and write-offs in the deferral account. ** Note debt equity split for GenCO assets. Glenwood and Port Jeff a 30/70 equity /debt split with a 10.75% RoE

62 UK rate plans Transmission and Gas Distribution Electricity Tx Gas Tx Gas Dx Base return 5.05%* 5.05%* 5.25% RAV 6.6bn 4.2bn 6.5bn Actual Return 4.6% 7.2% 5.1% Sharing shareholders % 100% 100% 100% 62 * Average over the price control period