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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

(Mark One)
£ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
R ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended 31 March 2021
OR
`£
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
£ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
For the transition period from      to    

Commission file number: 001-14958

NATIONAL GRID PLC
(Exact name of Registrant as specified in its charter)
England and Wales
(Jurisdiction of incorporation or organization)
1-3 Strand, London WC2N 5EH, England
(Address of principal executive offices)
Justine Campbell
011 44 20 7004 3000
Facsimile No. 011 44 20 7004 3004
Group General Counsel and Company Secretary
National Grid plc
1-3 Strand London WC2N 5EH, England
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class Trading Symbol(s) Name of each exchange on which registered
Ordinary Shares of 12 204/473 pence each NG
The New York Stock Exchange*
American Depositary Shares, each representing five NGG The New York Stock Exchange
Preferred Stock ($100 par value-cumulative):
3.90% Series NMK PR C The New York Stock Exchange
3.60% Series NMK PR B The New York Stock Exchange
____________
*    Not for trading, but only in connection with the registration of American Depositary Shares representing Ordinary Shares pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Securities Exchange Act of 1934: None.

Securities for which there is a reporting obligation pursuant to Section15(d) of the Securities Exchange Act of 1934: None.



    
The number of outstanding shares of each of the issuer’s classes of capital or common stock as of 31 March 2020 was
Ordinary Shares of 12 204/473 pence each    3,814,951,606

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: Yes R No £

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes £ No R

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes R No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files): Yes R No £

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).: Yes R No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “large accelerated filer” “accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer R
Accelerated filer £
Non-accelerated filer £
Emerging growth company £

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standardsprovided pursuant to Section 13(a) of the Exchange Act.  ☐

†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. R

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP £
International Financial Reporting Standards as issued by the International Accounting Standards Board R
Other £

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 £ Item 18 £

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No R

This constitutes the annual report on Form 20-F of National Grid plc (the “Company”) in accordance with the requirements of the US Securities and Exchange Commission (the “SEC”) for the year ended 31 March 2021 and is dated [•] June 2021. Details of events occurring subsequent to the approval of the annual report on [•] May 2021 are summarised in section “Further Information” which forms a part of this Form 20-F. The content of the Group’s website (www.nationalgrid.com/uk) should not be considered to form part of this annual report on Form 20-F.



    
Form 20-F Cross Reference Table

Item Form 20-F caption Location in the document Page(s)
1 Identity of directors, senior management and advisors Not applicable
2 Offer statistics and expected timetable Not applicable
3 Key Information
3A Selected financial data “Additional Information—Five year summary financial information” 263
“Strategic Report—Financial review” 30-39
“Financial Statements—Consolidated income statement” 129-130
“Financial Statements—Consolidated statement of comprehensive income” 131
“Financial Statements—Consolidated statement of financial position” 133
“Financial Statements—Consolidated cash flow statement” 134
Notes to the consolidated financial statements – Note 8. Earnings per share 154
“Additional Information—Other unaudited financial information” 250-260
3B Capitalization and indebtedness Not applicable
3C Reasons for the offer and use of proceeds Not applicable
3D Risk Factors
“Additional Information—Internal control and risk factors—Risk factors”
236-239
4 Information on the company
4A History and development of the company “Additional Information—Want more information or help?” 268
“Additional Information—The business in detail—Key milestones” 226
“Strategic Report—Business Model: “How we operate” 4-7
“Strategic Report—Our response to COVID-19” 8-9
“Strategic Report—Chairman’s Statement” 10-11
“Strategic Report—Chief Executive’s review” 12-14
“Strategic Report—Our business environment”
“Strategic Report—Delivering against our Strategy”
“Strategic Report—Principal operations—UK”; “—Principal operations—US”; and
“—National Grid Ventures and other activities”
15-17
18-19

40-45
“Additional Information—Other unaudited financial information—Capital investment” 254
“Additional Information—Shareholder information—Articles of Association—General” 240-241
“Strategic Report—Financial Review—Summary of Group financial performance for the year ended 31 March 2021” 30
“Strategic Report—Financial Review—Capital Investment, asset growth and value added” and “—Financial Position” 34-35, 35-36
“Financial Statements—Notes to the consolidated financial statements—2. Segmental analysis—(c) Capital expenditure” 139
i


    
“Financial Statements—Notes to the consolidated financial statements—10. Discontinued operations and assets held for sale” and “—Strategic report—Financial Review—Discontinued operations”
“Financial Statements—Notes to the consolidated financial statements—38. Acquisitions—Acquisition of PPL Western Power distribution Investments Limited” and
“— Acquisition of Geronimo Energy LLC and Emerald Energy Venture LLC”
155-156, 33




216
“Additional Information—The business in detail—UK Regulation”; “—US Regulation” and “—Summary of US price controls and rate plans” 228-235
“Additional Information—Shareholder Information— Documents on display” 241
4B Business overview
“Strategic Report—Our Business at a glance”
“Additional Information—The business in detail”
2-3
226-235
“Strategic Report—Business Model: “How we operate” “—Our response to COVID-19” and “—Chairman’s Statement” 4-11
“Strategic Report—Our business environment” 15-17
“Strategic Report—Delivering against our strategy” 18-19
“Strategic Report—Innovation” 23
“Strategic Report— Financial Review” 30-39
“Strategic Report—Principal operations—UK”; “—Principal operations—US”; and “—National Grid Ventures and other activities” 40-45
“Financial Statements—Notes to the consolidated financial statements—2. Segmental analysis” 138-139
“Financial Statements—Notes to the consolidated financial statements—17. Derivative financial instruments—(b) Commodity contract derivatives” 166-167
4C Organizational structure “Financial Statements—Notes to the consolidated financial statements—34. Subsidiary undertakings, joint ventures and associates” 204-208
4D Property, plants and equipment
“Strategic Report—Delivering against our strategy—Financial measures—NGV capital investment”; “Strategic Report—Financial Review—Financial Position”; and “Financial Statements— Notes to the consolidated financial statements—13. Property, plant and equipment”
“Financial Statements—Notes to the consolidated financial statements—10. Discontinued operations and assets held for sale” and “—Strategic report—Financial Review—Discontinued operations”
20, 35-36, 159-161





155-156
“Additional Information—The business in detail: Where we operate” and “—Other disclosures—Property, plant and equipment” 227, 247
ii


    
“Financial Statements—Consolidated statement of financial position”
“Financial Statements- Notes to the consolidated financial statements-5. Exceptional items and remeasurements—Exceptional items—2021—Changes in environmental provision”
133

147
“Financial Statements—Notes to the consolidated financial statements—21. Borrowings”
“Financial Statements—Notes to the consolidated financial statements—38. Acquisitions— Acquisition of PPL Western Power distribution Investments Limited” and
“—Acquisition of Geronimo Energy LLC and Emerald Energy Venture LLC”
170-172


216
“Additional Information—Other unaudited financial information—Capital investment” 254
4A Unresolved staff comments “Additional Information—Other disclosures—Unresolved SEC staff comments” 249
5 Operating and financial review and prospects
5A Operating results “Strategic Report—Financial review” 30-39
“Strategic Report—Our business environment” 15-17
“Additional Information—The business in detail—UK regulation”; “—US regulation”; and “—Summary of US price controls and rate plans” 225-235
“Strategic Report—Principal operations—UK”; “—Principal operations—US”; and “—National Grid Ventures and other activities” 40-45
“Financial Statements—Notes to the consolidated financial statements—2. Segmental analysis” 138-139
“Additional Information—Commentary on consolidated financial statements” 261-262
“Financial Statements—Notes to the consolidated financial statements—32. Financial risk management—(c) Currency risk” 194
“Additional Information—Internal control and risk factors—Risk factors—Law, regulation and political and economic uncertainty” 236
5B Liquidity and capital resources “Strategic Report—Financial review” 30-39
“Financial Statements—Notes to the consolidated financial statements—1.A Going concern” 135
“Financial Statements—Consolidated cash flow statement” 134
“Additional Information—Internal control and risk factors—Risk factors—Financing and liquidity” 238
“Financial Statements—Notes to the consolidated financial statements—17. Derivative financial instruments” 165-167
“Financial Statements—Notes to the consolidated financial statements—20. Cash and cash equivalents” 169
“Financial Statements—Notes to the consolidated financial statements—21. Borrowings” 170-172
“Financial Statements—Notes to the consolidated financial statements—29. Net debt” 187-188
iii


    
“Financial Statements—Notes to the consolidated financial statements—30. Commitments and contingencies” 189
“Financial Statements—Notes to the consolidated financial statements—32. Financial risk management” 190-202
“Financial Statements—Notes to the consolidated financial statements—33. Borrowing facilities” 203
5C Research and development, patents and licenses, etc. “Strategic Report—Innovation” and “Additional Information—Other disclosures—Research, development and innovation activity” 23, 247-249
5D Trend information
“Strategic Report—Chief Executive’s review—Innovations and new technology”
“Strategic Report—Our business environment” “Strategic Report—Financial review”
13-14

15-17
30-39
“Strategic Report—Principal operations—UK”; “—Principal operations—US”; and “—National Grid Ventures and other activities” 40-45
5E Off-balance sheet arrangements “Strategic Report—Financial review—Off-balance sheet items” 36
5F Tabular disclosure of contractual obligations “Financial Statements—Notes to the consolidated financial statements—30. Commitments and contingencies” 189
5G Safe Harbor “Cautionary statement” 269
6 Directors, senior management and employees
6A Directors and senior management “Corporate Governance—Our Board” 72-73
6B Compensation “Corporate Governance—Directors’ Remuneration Report” 92-113
“Financial Statements—Notes to the consolidated financial statements—4. Operating costs—(c) Key management compensation” 145
“Financial Statements—Notes to the consolidated financial statements—25. Pensions and other post-retirement benefits” 174-182
6C Board practices “Corporate Governance—Our Board” 72-73
“Corporate Governance—Corporate Governance Overview” 74-82
“Corporate Governance—Audit Committee” 83-87
“Corporate Governance—Statement of application of and compliance with the UK Corporate Governance Code” 70-71
“Corporate Governance—Directors’ Remuneration Report” 92-113
“Additional Information—Shareholder Information—Articles of Association—Directors”
240-241
6D Employees “Financial Statements—Notes to the consolidated financial statements—4. Operating costs—(b) Number of employees” 144
“Strategic Report—Our stakeholders—How we create value for our stakeholders—Our colleagues”
49
“Additional Information—Other disclosures—Employees” 246
iv


    
6E Share ownership “Corporate Governance—Directors’ Remuneration Report—Statement of implementation of remuneration policy in 2020/21” 100-113
“Additional Information—Other disclosures—All-employee share plans” 245
“Share ownership” “Further Information”
7 Major shareholders and related party transactions
7A Major shareholders “Additional Information—Shareholder information—Material interests in shares” 242
“Material interests in shares” and “Material interest in American Depositary Shares” “Further Information”
7B Related party transactions “Financial Statements—Notes to the consolidated financial statements—31. Related party transactions” 190
“Material interests in shares” “Further Information”
“Financial Statements—Notes to the consolidated financial statements—30. Commitment and contingencies” 189
7C Interests of experts and counsel Not applicable
8 Financial information
8A Consolidated statements and other financial information
“Reports of Independent Registered Public Accounting Firm—Audit opinions for Form 20-F” “Further Information”
“Financial Statements—Consolidated income statement”; “—Consolidated statement of comprehensive income”; “—Consolidated statement of changes in equity”; “—Consolidated statement of financial position”; and “—Consolidated cash flow statement” 129-134
“Financial Statements—Notes to the consolidated financial statements” 135-216
“Strategic Report—Chairman’s Statement” 10-11
“Strategic Report—Financial Review—Dividend” and
“Financial Statements—Notes to the consolidated financial statements—9. Dividends”
39,155
8B Significant changes “Strategic Report—Financial Review—Post balance sheet events”, “Additional Information—Shareholder Information—Events after the reporting period”, and “Subsequent events”; “Financial Statements—Notes to the consolidated financial statements—39. Post balance sheet events” 39, 242, 216, “Further Information”
9 The offer and listing
9A Offer and listing details “Additional Information—Shareholder Information—Share information” 242
9B Plan of distribution Not applicable
9C Markets “Additional Information—Shareholder information—Share Information” 242
9D Selling shareholders Not applicable
9E Dilution Not applicable
9F Expenses of the issue Not applicable
10 Additional information
10A Share capital Not applicable
v


    
10B Memorandum and articles of association
“Additional Information—Shareholder Information—Articles of Association”
240-241
“Additional Information—Other disclosures—Corporate governance practices: differences from New York Stock Exchange (NYSE) listing standards”
“Additional Information—Shareholder Information—Other disclosures—Change of control provisions”
245
“Additional Information—Shareholder information—Share capital” 242
10C Material contracts
“Additional Information—Other disclosures—Material contracts”
246
10D Exchange controls
“Additional Information—Shareholder information—Exchange controls”
242
10E Taxation
“Additional Information——Shareholder information—Taxation”
243-244
10F Dividends and paying agents Not applicable
10G Statement by experts Not applicable
10H Documents on display “Additional Information—Shareholder information—Documents on display” 241
10I Subsidiary information Not applicable
11 Quantitative and qualitative disclosures about market risk
11(a) Quantitative information about market risk “Financial Statements—Notes to the consolidated financial statements—17. Derivative financial instruments” 165-167
“Financial Statements—Notes to the consolidated financial statements—35. Sensitivities” 209-210
“Financial Statements—Notes to the consolidated financial statements—32. Financial risk management” 190-202
“Strategic Report—Financial review” 30-39
11(b) Qualitative information about market risk “Financial Statements—Notes to the consolidated financial statements—17. Derivative financial instruments” 165-167
“Financial Statements—Notes to the consolidated financial statements—32. Financial risk management—(a) Credit risk”; “—(b) Liquidity risk”; “—(c) Currency risk”; “—(d) Interest rate risk”; “—(g) Fair value analysis”; and “—(h) Capital risk management””
191-195
200-202
“Strategic Report—Financial review” 30-39
“Additional Information—Internal Control and Risk factors—Risk Factors” 236-239
12 Description of securities other than equity securities
12A Debt securities Not applicable
12B Warrants and rights Not applicable
12C Other securities Not applicable
12D American depositary shares “Additional Information—Shareholder information—Depositary payments to the Company” 241
“Additional Information—Definitions and glossary of terms” 264-267
“Material interest in American Depositary Shares” “Further Information”
13 Defaults, dividend arrearages and delinquencies Not applicable
vi


    
14 Material modifications to the rights of security holders and use of proceeds Not applicable
15 Controls and procedures “Additional Information—Internal control and risk factors—Disclosure controls” and
“—Internal control over financial reporting”
236
“Corporate Governance—Audit Committee” 83-87
“Report of Independent Registered Public Accounting Firm—Audit opinions for Form 20-F” “Further Information”
16 16A Audit committee financial expert “Corporate Governance—Our Board” 73
16B Code of ethics
“Additional Information—Other disclosures—Code of Ethics”
245
16C Principal accountant fees and services “Corporate Governance—Audit Committee—External audit”, “—Non-audit Services” and “—Audit and non-audit services (£m)” 86-87
“Financial Statements—Notes to the consolidated financial statements—4. Operating costs—(d) Auditors’ remuneration” 145
16D Exemptions from the listing standards for audit committees Not applicable
16E Purchases of equity securities by the issuer and affiliated purchasers “Additional Information—Shareholder information—Share capital—Authority to purchase shares” 242
16F Change in registrant’s certifying accountant
16G Corporate governance “Additional Information—Other disclosures—Corporate governance practices: differences from New York Stock Exchange (NYSE) listing standards” 245
16H Mine safety disclosure Not applicable
17 Financial statements Not applicable
18 Financial statements “Financial Statements—Company accounting policies” 217-218
“Financial Statements—Consolidated income statement”; “—Consolidated statement of comprehensive income”; “—Consolidated statement of changes in equity”; “—Consolidated statement of financial position”; and “—Consolidated cash flow statement” 129-134
“Financial Statements—Notes to the consolidated financial statements” 135-216
“Financial Statements— Reports of Independent Registered Public Accounting Firm—Audit opinions for Form 20-F” “Further Information”
19 Exhibits Filed with the SEC




vii

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NGGTF-20210331_G6.JPG
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NGGTF-20210331_G7.JPG
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NGGTF-20210331_G9.JPG
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NGGTF-20210331_G10.JPG
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NGGTF-20210331_G11.JPG
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NGGTF-20210331_G13.JPG
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NGGTF-20210331_G14.JPG
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NGGTF-20210331_G48.JPG
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NGGTF-20210331_G49.JPG
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NGGTF-20210331_G50.JPG
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NGGTF-20210331_G51.JPG
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NGGTF-20210331_G52.JPG
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NGGTF-20210331_G53.JPG
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NGGTF-20210331_G54.JPG
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NGGTF-20210331_G56.JPG
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NGGTF-20210331_G57.JPG
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NGGTF-20210331_G59.JPG
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NGGTF-20210331_G60.JPG
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NGGTF-20210331_G61.JPG
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NGGTF-20210331_G62.JPG
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NGGTF-20210331_G65.JPG
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NGGTF-20210331_G66.JPG
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NGGTF-20210331_G67.JPG
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NGGTF-20210331_G69.JPG

NGGTF-20210331_G70.JPG
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NGGTF-20210331_G71.JPG
                    

                                                                                                                                                   /0€/6!fhgmal!Z \kn\bZe!mbf^!_hk!ma^!BhfiZgr,!                          

NGGTF-20210331_G72.JPG
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NGGTF-20210331_G79.JPG
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NGGTF-20210331_G92.JPG
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NGGTF-20210331_G93.JPG
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NGGTF-20210331_G94.JPG
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NGGTF-20210331_G95.JPG
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NGGTF-20210331_G96.JPG
           

          @m!ma^!a^Zkm!h_!hnk ZiikhZ\a!mh!k^fng^kZmbhg!bl!Z!lbfie^!ik^fbl^!€!                                                                                             

NGGTF-20210331_G97.JPG
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NGGTF-20210331_G106.JPG
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NGGTF-20210331_G108.JPG
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NGGTF-20210331_G115.JPG
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NGGTF-20210331_G116.JPG

NGGTF-20210331_G117.JPG

NGGTF-20210331_G118.JPG
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NGGTF-20210331_G119.JPG
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NGGTF-20210331_G120.JPG
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NGGTF-20210331_G121.JPG
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NGGTF-20210331_G124.JPG
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NGGTF-20210331_G125.JPG
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NGGTF-20210331_G126.JPG
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NGGTF-20210331_G129.JPG
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NGGTF-20210331_G130.JPG
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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Consolidated income statement
for the years ended 31 March


2021
Notes
Total
£m
Continuing operations
Revenue
2(a),3
14,779 
Provision for bad and doubtful debts
4
(326)
Other operating costs
4,5
(11,558)
Operating profit/(loss)
2(b)
2,895 
Finance income
5,6
58 
Finance costs
5,6
(928)
Share of post-tax results of joint ventures and associates
5,16
58 
Profit before tax
2(b),5
2,083 
Tax
5,7
(442)
Total profit for the year 1,641 
Attributable to:
Equity shareholders of the parent 1,640 
Non-controlling interests from continuing operations
1 
Earnings per share (pence)
Basic earnings per share (continuing)
8
46.6 
Diluted earnings per share (continuing)
8
46.3 
Basic earnings per share (continuing and discontinued)
8
46.6 
Diluted earnings per share (continuing and discontinued)
8
46.3 

2020
Notes
Total
£m
Continuing operations
Revenue
2(a),3
14,540 
Provision for bad and doubtful debts
4
(234)
Other operating costs
4,5
(11,526)
Operating profit/(loss)
2(b)
2,780 
Finance income
5,6
54 
Finance costs
5,6
(1,167)
Share of post-tax results of joint ventures and associates
5,16
87 
Profit/(loss) before tax
2(b),5
1,754 
Tax
5,7
(480)
Profit/(loss) after tax from continuing operations
5
1,274 
Profit/(loss) after tax from discontinued operations
10
(9)
Total profit/(loss) for the year (continuing and discontinued) 1,265 
Attributable to:
Equity shareholders of the parent 1,264 
Non-controlling interests from continuing operations
Earnings per share (pence)
Basic earnings per share (continuing)
8
36.8 
Diluted earnings per share (continuing)
8
36.6 
Basic earnings per share (continuing and discontinued)
8
36.5 
Diluted earnings per share (continuing and discontinued)
8
36.3 
129


National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Consolidated income statement
for the years ended 31 March continued
2019
Notes
Total
£m
Continuing operations
Revenue
2(a),3
14,933 
Provision for bad and doubtful debts
4
(181)
Other operating costs
4,5
(11,882)
Operating profit/(loss)
2(b)
2,870 
Finance income
5,6
88 
Finance costs
5,6
(1,157)
Share of post-tax results of joint ventures and associates
10
40 
Profit/(loss) before tax
2(b),5
1,841 
Tax
5,7
(339)
Profit/(loss) after tax from continuing operations
5
1,502 
Profit/(loss) after tax from discontinued operations
10
12 
Total profit/(loss) for the year (continuing and discontinued) 1,514 
Attributable to:
Equity shareholders of the parent 1,511 
Non-controlling interests from continuing operations
Earnings per share (pence)
Basic earnings per share (continuing)
8
44.3 
Diluted earnings per share (continuing)
8
44.1 
Basic earnings per share (continuing and discontinued)
8
44.6 
Diluted earnings per share (continuing and discontinued)
8
44.4 


130


National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Consolidated statement of comprehensive income
for the years ended 31 March

2021 2020 2019
Notes
£m
£m
£m
Profit after tax from continuing operations 1,641  1,274  1,502 
Other comprehensive income from continuing operations
Items from continuing operations that will never be reclassified to profit or loss:
Remeasurement gains/(losses) on pension assets and post-retirement benefit obligations
25
1,408  (724) 68 
Net gains/(losses) on equity instruments designated at fair value through other comprehensive income 46  (9) — 
Net (losses)/gains on financial liability designated at fair value through profit and loss attributable to changes in own credit risk (11) (3)
Net losses in respect of cash flow hedging of capital expenditure (14) (17) (13)
Tax on items that will never be reclassified to profit or loss
7
(422) 212  (15)
Total items from continuing operations that will never be reclassified to profit or loss 1,007  (541) 47 
Items from continuing operations that may be reclassified subsequently to profit or loss:
Exchange adjustments¹ (1,347) 561  361 
Net gains/(losses) in respect of cash flow hedges 70  (128) (40)
Net gains/(losses) in respect of cost of hedging 14  (78) (66)
Net gains/(losses) on investment in debt instruments measured at fair value
through other comprehensive income
80  (15)
Share of other comprehensive income/(losses) of associates, net of tax 1  (5)
Tax on items that may be reclassified subsequently to profit or loss
7
(8) 35  12 
Total items from continuing operations that may be reclassified subsequently to profit or loss (1,190) 370  270 
Other comprehensive (loss)/income for the year, net of tax from continuing operations (183) (171) 317 
Other comprehensive income for the year, net of tax from discontinued operations²
10
  36 
Other comprehensive (loss)/income for the year, net of tax (183) (165) 353 
Total comprehensive income for the year from continuing operations 1,458  1,103  1,819 
Total comprehensive (loss)/income for the year from discontinued operations
10
  (3) 48 
Total comprehensive income for the year 1,458  1,100  1,867 
Attributable to:
Equity shareholders of the parent
From continuing operations 1,459  1,101  1,815 
From discontinued operations   (3) 48 
1,459  1,098  1,863 
Non-controlling interests
From continuing operations (1)
1.    Comparative amounts have been revised as described in note 1F.
2.    The other comprehensive income from discontinued operations relates to the items of other comprehensive income of Cadent (investment through Quadgas HoldCo Limited). Refer to note 10 for details.

131


National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Consolidated statement of changes in equity
for the years ended 31 March
Share
capital
£m
Share
premium account
£m
Retained
earnings
£m
Other equity reserves1
£m
Total shareholders’
equity
£m
Non-
controlling interests
£m
Total
equity
£m
At 31 March 2018 (as previously reported) 452  1,321  21,599  (4,540) 18,832  16  18,848 
Prior year adjustment² —  —  185  —  185  —  185 
Impact of transition to IFRS 9 and IFRS 15 —  —  (268) 72  (196) —  (196)
At 31 March 2018 (as restated) 452  1,321  21,516  (4,468) 18,821  16  18,837 
Profit for the year —  —  1,511  —  1,511  1,514 
Other comprehensive income for the year —  —  89  263  352  353 
Total comprehensive income for the year —  —  1,600  263  1,863  1,867 
Equity dividends —  —  (1,160) —  (1,160) —  (1,160)
Scrip dividend-related share issue³ (7) —  —  (1) —  (1)
Issue of treasury shares —  —  18  —  18  —  18 
Purchase of own shares —  —  (2) —  (2) —  (2)
Share-based payments —  —  27  —  27  —  27 
Cash flow hedges transferred to the statement of financial position, net of tax —  —  —  (18) (18) —  (18)
At 1 April 2019 458  1,314  21,999  (4,223) 19,548  20  19,568 
Profit for the year —  —  1,264  —  1,264  1,265 
Other comprehensive (loss)/income for the year —  —  (509) 343  (166) (165)
Total comprehensive income for the year —  —  755  343  1,098  1,100 
Equity dividends —  —  (892) —  (892) —  (892)
Scrip dividend-related share issue³ 12  (13) —  —  (1) —  (1)
Issue of treasury shares —  —  17  —  17  —  17 
Purchase of own shares —  —  (6) —  (6) —  (6)
Share-based payments —  —  19  —  19  —  19 
Tax on share-based payments —  —  —  — 
Cash flow hedges transferred to the statement of financial position, net of tax —  —  —  (15) (15) —  (15)
At 1 April 2020 470  1,301  21,895  (3,895) 19,771  22  19,793 
Profit for the year —  —  1,640  —  1,640  1,641 
Other comprehensive income/(loss) for the year —  —  1,001  (1,182) (181) (2) (183)
Total comprehensive income/(loss) for the year —  —  2,641  (1,182) 1,459  (1) 1,458 
Equity dividends —  —  (1,413) —  (1,413) —  (1,413)
Scrip dividend-related share issue³ (5) —  —  (1) —  (1)
Issue of treasury shares —  —  17  —  17  —  17 
Purchase of own shares —  —  (2) —  (2) —  (2)
Share-based payments —  —  27  —  27  —  27 
Tax on share-based payments —  —  (2) —  (2) —  (2)
Cash flow hedges transferred to the statement of financial position, net of tax —  —  —  (17) (17) —  (17)
At 31 March 2021 474  1,296  23,163  (5,094) 19,839  21  19,860 
1.    For further details of other equity reserves, see note 28.
2.    Comparative amounts have been revised as described in note 1F.
3.    Included within the share premium account are costs associated with scrip dividends.


132


National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Consolidated statement of financial position
as at 31 March
2021 2020 2019
Notes
£m
£m
£m
Non-current assets
Goodwill¹
11
4,588  5,712  5,372 
Other intangible assets
12
1,443  1,295  1,084 
Property, plant and equipment¹
13
47,043  49,762  44,859 
Other non-current assets
14
293  354  264 
Pension assets
25
1,747  1,849  1,567 
Financial and other investments
15
755  543  667 
Investments in joint ventures and associates
16
867  995  608 
Derivative financial assets
17
542  1,249  1,045 
Total non-current assets 57,278  61,759  55,466 
Current assets
Inventories and current intangible assets
18
439  549  370 
Trade and other receivables
19
2,919  2,986  3,153 
Current tax assets 67  102  126 
Financial and other investments
15
2,342  1,998  1,981 
Derivative financial assets
17
457  93  108 
Cash and cash equivalents
20
157  73  252 
Assets held for sale
10
3,557  —  1,956 
Total current assets 9,938  5,801  7,946 
Total assets 67,216  67,560  63,412 
Current liabilities
Borrowings
21
(3,737) (4,072) (4,472)
Derivative financial liabilities
17
(145) (380) (350)
Trade and other payables
22
(3,517) (3,602) (3,769)
Contract liabilities
23
(66) (76) (61)
Current tax liabilities (75) (86) (161)
Provisions
26
(260) (348) (316)
Liabilities held for sale
10
(1,568) —  — 
Total current liabilities (9,368) (8,564) (9,129)
Non-current liabilities
Borrowings
21
(27,483) (26,722) (24,258)
Derivative financial liabilities
17
(754) (954) (833)
Other non-current liabilities
24
(843) (891) (808)
Contract liabilities
23
(1,094) (1,082) (933)
Deferred tax liabilities¹
7
(4,815) (4,446) (4,215)
Pensions and other post-retirement benefit obligations
25
(1,032) (2,802) (1,785)
Provisions
26
(1,967) (2,306) (1,883)
Total non-current liabilities (37,988) (39,203) (34,715)
Total liabilities (47,356) (47,767) (43,844)
Net assets 19,860  19,793  19,568 
Equity
Share capital
27
474  470  458 
Share premium account 1,296  1,301  1,314 
Retained earnings¹ 23,163  21,895  21,999 
Other equity reserves¹
28
(5,094) (3,895) (4,223)
Total shareholders’ equity 19,839  19,771  19,548 
Non-controlling interests 21  22  20 
Total equity 19,860  19,793  19,568 
1.    Comparative amounts have been revised as described in note 1F.
The consolidated financial statements set out on pages 129 to 216 were approved by the Board of Directors on 19 May 2021 and were signed on its behalf by:
Sir Peter Gershon Chairman
Andy Agg Chief Financial Officer
National Grid plc
Registered number: 4031152
133


National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Consolidated cash flow statement
for the years ended 31 March
2021 2020 2019
Notes
£m
£m
£m
Cash flows from operating activities
Total operating profit from continuing operations
2(b)
2,895  2,780  2,870 
Adjustments for:
Other fair value movements (22) —  — 
Depreciation, amortisation and impairment 1,672  1,640  1,725 
Share-based payments 27  19  27 
Changes in working capital 296  394  (36)
Changes in provisions (195) 198  18 
Changes in pensions and other post-retirement benefit obligations (55) (117) (140)
Cash generated from operations – continuing operations 4,618  4,914  4,464 
Tax paid (157) (199) (75)
Net cash inflow from operating activities – continuing operations 4,461  4,715  4,389 
Net cash used in operating activities – discontinued operations
10
  (97) (71)
Cash flows from investing activities
Acquisition of financial investments (99) (108) (89)
Acquisition of National Grid Renewables (formerly Geronimo) and Emerald
38
(26) (139) — 
Investments in joint ventures and associates (81) (82) (143)
Loans to joint ventures and associates   —  (31)
Disposal of financial investments 66  63  18 
Disposal of interests in Quadgas HoldCo Limited
10
  1,965  — 
Purchases of intangible assets (426) (317) (306)
Purchases of property, plant and equipment (4,362) (4,583) (3,635)
Disposals of property, plant and equipment 8  68  38 
Dividends received from joint ventures and associates 80  75  68 
Interest received 16  73  68 
Net movements in short-term financial investments (436) 822 
Cash inflows on derivatives 225  58  17 
Cash outflows on derivatives (81) (281) (429)
Net cash flow used in investing activities – continuing operations (5,116) (3,201) (3,602)
Net cash flow used in investing activities – discontinued operations
10
  156 
Cash flows from financing activities
Proceeds from issue of treasury shares 16  16  17 
Purchase of own shares (2) (6) (2)
Proceeds received from loans
29(c)
5,645  4,218  2,932 
Repayment of loans
29(c)
(1,663) (3,253) (1,969)
Payments of lease liabilities
29(c)
(112) (121) (70)
Net movements in short-term borrowings
29(c)
(759) (424) 179 
Cash inflows on derivatives
29(c)
58  62  221 
Cash outflows on derivatives
29(c)
(185) (249) (186)
Interest paid
29(c)
(835) (957) (914)
Dividends paid to shareholders (1,413) (892) (1,160)
Net cash flow from/(used in) financing activities – continuing operations 750  (1,606) (952)
Net increase/(decrease) in cash and cash equivalents
29(b)
95  (183) (80)
Reclassification to held for sale
10,29(b)
(4) —  — 
Exchange movements (7)
Cash and cash equivalents at start of year 73  252  329 
Cash and cash equivalents at end of year
20
157  73  252 

134


National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements

1. Basis of preparation and recent accounting developments
Accounting policies describe our approach to recognising and measuring transactions and balances in the year. The accounting policies applicable across the financial statements are shown below, whereas accounting policies that are specific to a component of the financial statements have been incorporated into the relevant note.

This section also shows areas of judgement and key sources of estimation uncertainty in these financial statements. In addition, we have summarised new International Accounting Standards Board (IASB) accounting standards, amendments and interpretations and whether these are effective for this year end or in later years, explaining how significant changes are expected to affect our reported results.

National Grid’s principal activities involve the transmission and distribution of electricity and gas in Great Britain and northeastern US. The Company is a public limited liability company incorporated and domiciled in England and Wales, with its registered office at 1–3 Strand, London WC2N 5EH.
The Company, National Grid plc, which is the ultimate parent of the Group, has its primary listing on the London Stock Exchange and is also quoted on the New York Stock Exchange.
These consolidated financial statements were approved for issue by the Board on 19 May 2021.
These consolidated financial statements have been prepared in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) and related interpretations as issued by the IASB and IFRS as adopted by the EU. They are prepared on the basis of all IFRS accounting standards and interpretations that are mandatory for periods ended 31 March 2021 and in accordance with the Companies Act 2006 applicable to companies reporting under IFRS adopted pursuant to Regulation (EC) No. 1606/2002 as it applies in the European Union. The comparative financial information has also been prepared on this basis.
The consolidated financial statements have been prepared on a historical cost basis, except for the recording of pension assets and liabilities, the revaluation of derivative financial instruments and certain commodity contracts and certain financial assets and liabilities measured at fair value.
These consolidated financial statements are presented in pounds sterling, which is also the functional currency of the Company.
The notes to the financial statements have been prepared on a continuing basis unless otherwise stated.
A. Going concern
As part of the Directors’ consideration of the appropriateness of adopting the going concern basis of accounting in preparing these financial statements, the Directors have considered both the impact of COVID-19 on the Group’s operations alongside the impact of the acquisition of PPL WPD Investments Limited (WPD) (see note 38) and subsequent disposal of The Narragansett Electric Company (NECO) (see note 10) and the expected planned disposal of a majority stake of National Grid Gas plc. The Directors have assessed the principal risks discussed on pages 24 – 27, including by modelling both a base case and a reasonable worst case scenario.
Reasonable worst-case: The reasonable worst-case scenario covers the materially adverse cash flow impact associated with a further year of COVID-19 disruption across both the UK and US, with a subsequent phased return to normal operations, increased cash outflows from higher costs (e.g. storms), while still delivering our planned capital investment programme for the year ended 31 March 2022. The continuing economic impact of COVID-19 and the consequential impact on cash collections and capital programmes is the key judgement applied in the analysis. The main cash flow impacts identified in the reasonable worst-case scenario are:
a significant reduction in cash collections driven by lower customer demand and increased bad debt in our US businesses;
additional working capital required to fund payment term extensions and charge deferrals in the UK electricity market, intended to help customers and end-user consumers; and
further increases in other costs such as cleaning, safety equipment and IT; offset by a continued reduction in discretionary spend across all areas (e.g. recruitment, travel and consultancy spend).

Impact of WPD acquisition: The cash flows associated with WPD have been based on historic actuals alongside information obtained as part of the financial due diligence process and associated discussions with WPD management. The Directors noted the impact of the transaction on the Group’s financing position as below:
a new bridge facility of £8.25 billion to finance the acquisition, with the first repayment of the bridge expected to be from the proceeds of the announced planned business disposals in 2022; and
c.£1.1 billion of committed facilities to fund WPD working capital.
As part of their analysis, the Board also considered the following potential levers at their discretion to improve the position identified by the analysis if the debt capital markets are not accessible:
the payment of dividends to shareholders;
significant changes in the phasing of the Group’s capital programme with elements of non-essential works and programmes delayed; and
a number of further reductions in operating expenditure across the Group primarily related to workforce cost reductions in both the UK and the US.
Having considered the reasonable worst-case scenario, the impact of the acquisition of WPD (and any penalties if the transaction did not proceed), the timing of the NECO and National Grid Gas plc transactions, and the further levers at the Board’s discretion, the Group continues to have headroom against the Group’s committed facilities identified in note 33 to the financial statements.
In addition to the above, the ability to raise new financing was separately included in the analysis, and the Directors noted the c.£5.6 billion debt issuances completed in the period from 1 April 2020 to 31 March 2021 (disclosed in note 21 to the financial statements) as evidence of the Group’s ability to continue to have access to the debt capital markets if needed. Other factors considered by the Board as part of their Going Concern assessment included the final determinations of the UK RIIO-2 price controls process, the Group’s various ongoing rate case determinations in the US alongside inherent uncertainties in cash flow forecasts (such as the impact of storms in our US business).
Based on the above, the Directors have concluded the Group is well placed to manage its financing and other business risks satisfactorily and have a reasonable expectation that the Group will have adequate resources to continue in operation for at least 12 months from the signing date of these consolidated financial statements. They therefore consider it appropriate to adopt the going concern basis of accounting in preparing the financial statements.
135


National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
1. Basis of preparation and recent accounting developments continued
B. Basis of consolidation
The consolidated financial statements incorporate the results, assets and liabilities of the Company and its subsidiaries, together with a share of the results, assets and liabilities of joint operations.
A subsidiary is defined as an entity controlled by the Group. Control is achieved where the Group is exposed to, or has the rights to, variable returns from its involvement with the entity and has the power to affect those returns through its power over the entity.
The Group accounts for joint ventures and associates using the equity method of accounting, where the investment is carried at cost plus post-acquisition changes in the share of net assets of the joint venture or associate, less any provision for impairment. Losses in excess of the consolidated interest in joint ventures and associates are not recognised, except where the Company or its subsidiaries have made a commitment to make good those losses.
Where necessary, adjustments are made to bring the accounting policies used in the individual financial statements of the Company, subsidiaries, joint operations, joint ventures and associates into line with those used by the Group in its consolidated financial statements under IFRS. Intercompany transactions are eliminated.
The results of subsidiaries, joint operations, joint ventures and associates acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Acquisitions are accounted for using the acquisition method, where the purchase price is allocated to the identifiable assets acquired and liabilities assumed on a fair value basis and the remainder recognised as goodwill.
C. Foreign currencies
Transactions in currencies other than the functional currency of the Company or subsidiary concerned are recorded at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at closing exchange rates. Non-monetary assets are not retranslated unless they are carried at fair value.
Gains and losses arising on the retranslation of monetary assets and liabilities are included in the income statement, except where the application of hedge accounting requires inclusion in other comprehensive income (see note 32(e)).
On consolidation, the assets and liabilities of operations that have a functional currency different from the Company’s functional currency of pounds sterling, principally our US operations that have a functional currency of US dollars, are translated at exchange rates prevailing at the reporting date. Income and expense items are translated at the average exchange rates for the period where these do not differ materially from rates at the date of the transaction. Exchange differences arising are recognised in other comprehensive income and transferred to the consolidated translation reserve within other equity reserves (see note 28).
D. Disposal of The Narragansett Electric Company
As described further in note 10, on 17 March 2021, the Group signed an agreement to sell 100% of the share capital of a wholly owned subsidiary, The Narragansett Electric Company (NECO). The sale is expected to complete in early 2022 once all regulatory approvals are obtained.
As the sale is considered highly probable and is expected to complete within a year, the associated assets and liabilities have been presented as held for sale in the consolidated statement of financial position. However, the transaction has not met the criteria for classification as a discontinued operation and therefore its results for the period are not separately disclosed on the face of the income statement.
E. Areas of judgement and key sources of estimation uncertainty
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. Information about such judgements and estimations is in the notes to the financial statements, and the key areas are summarised below.
Areas of judgement that have the most significant effect on the amounts recognised in the financial statements are as follows:
the judgement that notwithstanding legislation enacted and targets committing the UK, New York State and Massachusetts to achieving net zero greenhouse gas emissions by 2050, these do not trigger a reassessment of the remaining useful economic lives of our gas network assets (see estimate below and note 13); and
following the legal separation of the Electricity System Operator on 1 April 2019, we concluded that the Electricity System Operator acts as an agent in respect of certain Transmission Network Use of Service revenues, principally those collected on behalf of the Scottish and Offshore transmission operators, as detailed in note 3.
Key sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows:
the valuation of liabilities for pensions and other post-retirement benefits (see note 25); and
the cash flows applied in determining the environmental provisions, in particular relating to three US Superfund sites (see note 26).
In light of the current ongoing impact of the COVID-19 pandemic, valuations of certain assets and liabilities are necessarily more subjective. The main impact at 31 March 2021 is the consideration of the recoverability of customer receivables, particularly in relation to US retail customers, in light of the suspension of debt collection activities and customer termination activities (see note 19), which is an area of estimation uncertainty impacting the Group’s position as at 31 March 2021.
In addition, we also highlight the estimates made regarding the useful economic lives of our gas network assets due to the length over which they are being depreciated, the potential for new and evolving technologies over that period, and the range of potential pathways for meeting net zero targets (see note 13 for details and sensitivity analysis).
In order to illustrate the impact that changes in assumptions for the valuation of pension assets and liabilities and cash flows for environmental provisions could have on our results and financial position, we have included sensitivity analyses in note 35. Information on what we believe a reasonably possible range of outcomes to be on the recoverability of customer receivables are included in note 19.
136


National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

1. Basis of preparation and recent accounting developments continued
F. Comparative period revisions
During the year, we have revised the comparative balances primarily to reflect adjustments between property, plant and equipment and goodwill related to the accounting performed for acquisitions made by our US business between 2000 and 2007. The adjustments related to the treatment of certain regulatory liabilities recognised under US GAAP on the acquisition balance sheets under UK GAAP and IFRS. This resulted in an overstatement of goodwill and an understatement of property, plant and equipment. The adjustments had a resulting impact on the deferred tax balances that were recognised at the time of the acquisitions and therefore, these have also been updated for all periods presented, also taking into account any subsequent changes in tax rates. The translation reserve on consolidation of these subsidiaries was also updated.
There have been no income statement impacts (and therefore no impact on the previously reported earnings per share) for any of the periods presented. Opening retained earnings have increased to correct the income statement impact of amortising the overstated goodwill from the period after acquisition until the adoption of IFRS in 2005 and for the impact on deferred tax of the tax rate changes noted above. Any foreign exchange impacts are recorded within the translation reserve within other equity reserves.
Below we set out the impacted line items and the adjustments to our opening statement of financial position as at 1 April 2018. In addition, we set out the adjustments to previously presented balances as at 31 March 2019 and 31 March 2020 (with the only movement each period being as a result of foreign exchange movements):
1 April 2018 31 March 2019 31 March 2020
£m £m £m
Goodwill (460) (497) (521)
Property, plant and equipment 877  946  992 
Deferred tax liability 232  250  262 
Retained earnings 185  185  185 
Translation reserve —  14  24 

G. Accounting policy choices
IFRS provides certain options available within accounting standards. Choices we have made, and continue to make, include the following:
Presentational formats: we use the nature of expense method for our income statement and aggregate our statement of financial position to net assets and total equity.
Financial instruments: we normally opt to apply hedge accounting in most circumstances where this is permitted (see note 32(e)).

H. New IFRS accounting standards and interpretations effective for the year ended 31 March 2021
The UK’s Financial Conduct Authority announced that the London Inter-bank Offered Rate (LIBOR) will cease to exist by the end of 2021, and will be replaced by alternative reference rates. In September 2019, the IASB amended IFRS 9 and IFRS 7 by issuing Phase I of Interest Rate Benchmark Reform, which modified certain hedge accounting requirements to allow hedge accounting to continue for affected hedges during the period of uncertainty before the hedged items or hedging instruments were amended as a result of the change in the reference rate. The amendments were endorsed in January 2020 for adoption in the EU. The Group early-adopted these changes to IFRS 9 and IFRS 7 with effect from 1 April 2019. Phase II was issued in August 2020 and endorsed in January 2021 for adoption in the EU, resulting in amendments to IFRS 9, IFRS 7 and IFRS 16. The Group has early-adopted these amendments with effect from 1 April 2020 as they enable the Company and its subsidiaries to reflect the effects of transitioning from LIBOR to alternative benchmark interest rates without giving rise to accounting impacts that would not provide useful information to users of the financial statements. There were no transition adjustments on adoption of either phase and the Group has not restated the prior period, but instead has applied the amendments prospectively. Refer to note 32(d) for further details on the contracts to be transitioned to the new alternative benchmark interest rate and for details of our migration project.
The Group has also adopted the following amendments to standards, which have had no material impact on the Group’s results or financial statement disclosure:
amendments to IFRS 16 ‘Leases – COVID-19 Related Rent Concessions’;
amendments to IFRS 3 ‘Business Combinations’;
amendments to IAS 1 and IAS 8 ‘Definition of Material’; and
amendments to the References to the Conceptual Framework.
I. New IFRS accounting standards and interpretations not yet adopted
The following new accounting standards and amendments to existing standards have been issued but are not yet effective:
IFRS 17 ‘Insurance Contracts’;
amendments to IFRS 3 ‘Business Combinations’;
amendments to IAS 16 ‘Property, Plant and Equipment’;
amendments to IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’;
amendments to IAS 1 ‘Presentation of Financial Statements’;
amendments to IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’; and
annual improvements to IFRS standards 2018-2020.
The Group is currently assessing the impact of the above standards, but they are not expected to have a material impact. The Group has not adopted any other standard, amendment or interpretation that has been issued but is not yet effective.

137


National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
2. Segmental analysis
This note sets out the financial performance for the year split into the different parts of the business (operating segments). The performance of these operating segments is monitored and managed on a day-to-day basis. Revenue and the results of the business are analysed by operating segment, based on the information the Board of Directors uses internally for the purposes of evaluating the performance of each operating segment and determining resource allocation between them. The Board is National Grid’s chief operating decision maker (as defined by IFRS 8 ‘Operating Segments’) and assesses the profitability of operations principally on the basis of operating profit before exceptional items and remeasurements (see note 5). As a matter of course, the Board also considers profitability by segment, excluding the effect of timing. However, the measure of profit disclosed in this note is operating profit before exceptional items and remeasurements as this is the measure that is most consistent with the IFRS results reported within these financial statements.

The results of our three principal businesses are reported to the Board of Directors and are treated as reportable operating segments. The following table describes the main activities for each reportable operating segment:
UK Electricity Transmission
The high-voltage electricity transmission networks in England and Wales and independent Great Britain system operator.
UK Gas Transmission
The high-pressure gas transmission networks in Great Britain and system operator in Great Britain.
US Regulated
Gas distribution networks, electricity distribution networks and high-voltage electricity transmission networks in New York and New England and electricity generation facilities in New York.
The UK Electricity Transmission segment also includes the independent Electricity System Operator (ESO). Although there is a separate governance structure (including a separate Executive Committee), the Board receives financial information on an aggregated UK Electricity Transmission basis, which includes the results of the ESO, and accordingly the ESO is included within the reportable segment.
National Grid Ventures (NGV) is our only other operating segment. It does not currently meet the thresholds set out in IFRS 8 to be identified as a separate reportable segment and therefore its results are not required to be separately presented. Instead, NGV’s results are reported alongside the results of all other operating businesses on an aggregated basis as ‘NGV and Other’, with certain additional disclosure included in footnotes.
NGV represents our key strategic growth area outside our regulated core business in competitive markets across the US and the UK. The business comprises all commercial operations in metering, LNG at the Isle of Grain in the UK, electricity interconnectors and our investments in National Grid Renewables (formerly Geronimo) and Emerald Energy Venture LLC (Emerald).
Other activities that do not form part of any of the segments in the above table or NGV primarily relate to our UK property business together with insurance and corporate activities in the UK and US and the Group’s investments in technology and innovation companies through National Grid Partners.
The segmental information is presented in relation to continuing operations only.
(a) Revenue
Revenue primarily represents the sales value derived from the generation, transmission and distribution of energy, together with the sales value derived from the provision of other services to customers. Refer to note 3 for further details.
Sales between operating segments are priced considering the regulatory and legal requirements to which the businesses are subject. The analysis of revenue by geographical area is on the basis of destination. There are no material sales between the UK and US geographical areas.
2021 2020 2019
Total
sales

£m
Sales
between
segments
£m
Sales
to third
parties
£m
Total
sales
£m
Sales
between
segments
£m
Sales
to third
parties
£m
Total
sales
£m
Sales
between
segments
£m
Sales
to third
parties
£m
Operating segments – continuing operations:
UK Electricity Transmission 3,992  (10) 3,982  3,702  (8) 3,694  3,351  (20) 3,331 
UK Gas Transmission 904  (16) 888  927  (16) 911  896  (12) 884 
US Regulated 9,195    9,195  9,205  —  9,205  9,846  —  9,846 
NGV and Other¹ 715  (1) 714  736  (6) 730  876  (4) 872 
Total revenue from continuing operations 14,806  (27) 14,779  14,570  (30) 14,540  14,969  (36) 14,933 
Split by geographical areas – continuing operations:
UK 5,482  5,282  5,045 
US 9,297  9,258  9,888 
14,779  14,540  14,933 
1.    Included within NGV and Other is £636 million (2020: £608 million; 2019: £597 million) of revenue relating to NGV.

138


National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

2. Segmental analysis continued
(b) Operating profit
A reconciliation of the operating segments’ measure of profit to profit before tax from continuing operations is provided below. Further details of the exceptional items and remeasurements are provided in note 5.
Before exceptional items
and remeasurements

After exceptional items
and remeasurements
2021 2020 2019

2021 2020 2019
£m
£m
£m

£m
£m
£m
Operating segments – continuing operations:







UK Electricity Transmission 1,034  1,320  1,015 

1,027  1,316  778 
UK Gas Transmission 342  348  303 

337  347  267 
US Regulated 1,313  1,397  1,724 

1,344  880  1,425 
NGV and Other1
237  242  400 

187  237  400 
Total operating profit from continuing operations 2,926  3,307  3,442 

2,895  2,780  2,870 








Split by geographical area – continuing operations:







UK 1,612  1,925  1,695 

1,550  1,915  1,422 
US 1,314  1,382  1,747 

1,345  865  1,448 

2,926  3,307  3,442 

2,895  2,780  2,870 
Below we reconcile total operating profit from continuing operations to profit before tax from continuing operations. Total operating exceptional items and remeasurements of £31 million charge (2020: £527 million charge; 2019: £572 million charge) are detailed in note 5. This is comprised of a £7 million charge (2020: £4 million charge; 2019: £237 million charge) attributable to UK Electricity Transmission; £5 million charge (2020: £1 million charge; 2019: £36 million charge) to UK Gas Transmission; £31 million gain (2020: £517 million charge; 2019: £299 million charge) to US Regulated; and £50 million charge (2020: £5 million charge; 2019: £nil) to NGV and Other.
Reconciliation to profit before tax:
Operating profit from continuing operations 2,926  3,307  3,442  2,895  2,780  2,870 
Finance income 35  70  73  58  54  88 
Finance costs (977) (1,119) (1,066) (928) (1,167) (1,157)
Share of post-tax results of joint ventures and associates 66  88  40  58  87  40 
Profit before tax from continuing operations 2,050  2,346  2,489  2,083  1,754  1,841 
1.    Included within NGV and Other is £298 million (2020: £269 million; 2019: £263 million) of operating profit before exceptional items and remeasurements and £296 million of operating profit after exceptional items and remeasurements (2020: £268 million; 2019: £263 million), relating to NGV.

(c) Capital expenditure
Capital expenditure represents additions to property, plant and equipment and non-current intangibles but excludes additional investments in and loans to joint ventures and associates.
Net book value of property, plant and
equipment and other intangible assets
Capital expenditure
Depreciation, amortisation
and impairment
2021 2020 2019 2021 2020 2019 2021 2020 2019
£m
£m
£m
£m
£m
£m
£m
£m
£m
Operating segments:
UK Electricity Transmission 14,379  13,788  13,288  1,072  1,043  925  (507) (469) (628)
UK Gas Transmission 4,531  4,513  4,412  176  249  308  (165) (171) (181)
US Regulated1,2
27,128  30,615  25,488  3,223  3,228  2,650  (888) (855) (700)
NGV and Other2,3
2,448  2,141  2,755  460  559  438  (112) (145) (226)
Total from continuing operations2
48,486  51,057  45,943  4,931  5,079  4,321  (1,672) (1,640) (1,735)
Split by geographical area – continuing operations:
UK 21,352  20,427  19,343  1,708  1,847  1,584  (783) (784) (931)
US2
27,134  30,630  26,600  3,223  3,232  2,737  (889) (856) (804)
Total from continuing operations2
48,486  51,057  45,943  4,931  5,079  4,321  (1,672) (1,640) (1,735)
Asset type:
Property, plant and equipment2
47,043  49,762  44,859  4,510  4,727  4,015  (1,476) (1,464) (1,560)
Non-current intangible assets 1,443  1,295  1,084  421  352  306  (196) (176) (175)
Total from continuing operations2
48,486  51,057  45,943  4,931  5,079  4,321  (1,672) (1,640) (1,735)
1.    In 2020, we transferred certain software assets and properties which are held outside the US rate base and operate for the benefit of our US Regulated businesses, that were previously included within the NGV and Other segment, to the US Regulated segment. These assets were included within NGV and Other in 2019, and had a net book value of £1,062 million, capital expenditure of £87 million and depreciation, amortisation and impairment of £102 million.
2.    Comparative amounts have been revised as described in note 1F.
3.    Included within NGV and Other are assets with a net book value of £2,396 million (2020: £2,080 million; 2019: £1,635 million), capital expenditure of £431 million (2020: £550 million; 2019: £317 million) and depreciation, amortisation and impairment of £92 million (2020: £124 million; 2019: £114 million) relating to NGV.

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
3. Revenue
Revenue arises in the course of ordinary activities and principally comprises:
transmission services;
distribution services; and
generation services.
Transmission services, distribution services and certain other services (excluding rental income but including metering) fall within the scope of IFRS 15 ‘Revenue from Contracts with Customers’, whereas generation services (which solely relate to the contract with the Long Island Power Authority (LIPA) in the US) are accounted for under IFRS 16 ‘Leases’ as rental income, also presented within revenue. Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties and value added tax. The Group recognises revenue when it transfers control over a product or service to a customer.

Below, we include a description of principal activities, by reportable segment, from which the Group generates its revenue. For more detailed information about our segments, see note 2.
(a) UK Electricity Transmission
The UK Electricity Transmission segment principally generates revenue by providing electricity transmission services (both as transmission owner in England and Wales and independent system operator in Great Britain). Our business operates as a monopoly regulated by Ofgem, which has established price control mechanisms that set the amount of annual allowed returns our business can earn (along with the Scottish and Offshore transmission operators amongst others). The IFRS revenues we record are principally a function of volumes and price. Price is determined prior to our financial year-end with reference to the regulated allowed returns and estimated annual volumes. Where revenue received or receivable exceeds the maximum amount permitted by our regulatory agreement, adjustments will be made to future prices to reflect this over-recovery. No liability is recognised, as such an adjustment to future prices relates to the provision of future services. Similarly, no asset is recognised where a regulatory agreement permits adjustments to be made to future prices in respect of an under-recovery. As part of our regulatory agreements we are entitled to recover certain costs directly from customers (pass-through costs). These amounts are included in the overall calculation of allowed revenue as stipulated by regulatory agreements.
The System Operator earns revenue for balancing supply and demand of electricity on the transmission system, where it acts as principal. Revenue is recognised as the service is provided. The System Operator also collects revenues on behalf of transmission operators, principally National Grid Electricity Transmission plc and the Scottish and Offshore transmission operators, from users who connect to or use the transmission system. In this context, there is a judgement about whether the System Operator acts as a principal or agent in respect of the transmission network revenues collected on behalf of the Scottish and Offshore transmission operators (as set out in note 1). These amounts are paid to the transmission operators before the System Operator has collected payment from the users (electricity suppliers) and therefore the System Operator does hold some exposure to credit losses with electricity suppliers. However, the System Operator must set the charges paid by electricity suppliers by reference to the price control mechanism described above. That mechanism does not grant the System Operator with discretion to deviate from that mechanism. In addition, the transmission operators own and maintain the electricity network and receive direct feedback from electricity suppliers on the quality of the network they provide. As a result, we have concluded that the System Operator acts as an agent in respect of these transmission revenues and therefore records the attributable revenue net of operating costs.
The transmission of high-voltage electricity encompasses the following principal services:
    the supply of high-voltage electricity (including both transmission and system operator charges); and
    construction work (principally for connections).
For the supply of high-voltage electricity, revenue is recognised based on capacity and volumes. Our performance obligation is satisfied over time as our customers make use of our network. We bill monthly in arrears and our payment terms are up to 60 days.
For construction work relating to connections, customers can either pay over the useful life of the connection or upfront. Revenue is recognised over time, as we provide access to our network, and where the customer pays upfront, revenues are deferred as a contract liability and released over the life of the asset.
For other construction where there is no consideration for any future services, for example diversions (being the re-routing of network assets at our customers’ request), revenues are recognised as the construction work is completed.
(b) UK Gas Transmission
The UK Gas Transmission segment of the Group principally generates revenue by providing gas transmission services to our customers (both as transmission owner and as system operator) in Great Britain. Similar to our UK Electricity Transmission business, our business operates as a monopoly regulated by Ofgem. The price control mechanism in place that determines our annual allowances is also similar, as is the way in which revenue is recorded.
The transmission of gas encompasses the following principal services:
    the supply of high-pressure gas (including both transmission and system operator charges); and
    construction work (principally for connections).
For the supply of high-pressure gas, revenue is recognised based on capacity and volumes. Our performance obligation is satisfied over time as our customers make use of our network, and we bill monthly in arrears with payment terms of up to 45 days.
For construction work relating to connections, customers pay for the connection upfront. Revenue is recognised over time, as we provide access to our network. As revenues are received upfront, they are deferred as a contract liability and released over the life of the connection.
For other construction where there is no consideration for any future services (such as diversions), revenues are recognised when the construction work is completed.
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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

3. Revenue continued
(c) US Regulated
The US Regulated segment of the Group principally generates revenue by providing gas and electricity distribution services in New York and New England, high voltage electricity transmission services in New York and New England, and electricity generation in New York.
Distribution services
Provision of gas and electricity distribution services in New York and New England. This comprises the following principal services:
    Gas and electricity distribution: revenue is recognised based on usage by customers (over time) and billed monthly. Payment terms are 30 days; and
    Connections: revenue is recognised over time, as we provide access to our network. Where payments are made upfront, they are deferred as contract liabilities or customer contributions (where they relate to government entities) and released over the life of the connection.
Transmission services
Provision of electricity transmission services to customers and operation of electricity transmission facilities. Our principal services are:
    Electricity transmission: revenue is recognised based on usage by customers (over time) and billed monthly. Payment terms are 30 days; and
    Connections: revenue is recognised over time, as we provide access to our network. Where payments are made upfront, they are deferred as contract liabilities or customer contributions (where they relate to government entities) and released over the life of the connection.
Electricity generation
Provision of energy services and supply capacity to produce energy for the use of customers of the Long Island Power Authority (LIPA) through a power supply agreement where LIPA receives all of the energy and capacity from the asset until at least 2025. The arrangement is treated as an operating lease within the scope of the leasing standard, where we act as lessor with rental income being recorded as other income, which forms part of total revenue. Lease payments (capacity payments) are recognised on a straight-line basis and variable lease payments are recognised as the energy is generated.
(d) NGV and Other
NGV and Other generates revenue from electricity interconnectors, LNG at the Isle of Grain, National Grid Renewables, metering, our UK commercial property business, rental income and insurance.
The Group recognises revenue from transmission services through interconnectors and LNG at the Isle of Grain by means of customers’ use of capacity and volumes. Revenue is recognised over time and is billed monthly. Payment terms are up to 30 days.
Other revenue in the scope of IFRS 15 principally includes revenues from our UK metering business and sales of renewables projects from National Grid Renewables to Emerald (see note 38). Revenue is recognised as it is earned. In the case of the UK metering business, revenue is billed monthly and payment terms are up to 30 days.
Other revenue, recognised in accordance with standards other than IFRS 15, includes property sales by our UK commercial property business (including sales to our St William joint venture) and rental income. Property sales are recorded at a point in time (when the sale is legally completed) and rental income is recorded over time.
(e) Disaggregation of revenue
In the following tables, revenue is disaggregated by primary geographical market and major service lines. The table reconciles disaggregated revenue with the Group’s reportable segments (see note 2).
Revenue for the year ended 31 March 2021
UK Electricity Transmission
£m
UK Gas Transmission
£m
US Regulated
£m
NGV and Other
£m
Total
£m
Revenue under IFRS 15





Transmission 1,814  603  403  316  3,136 
Distribution     8,317    8,317 
System Operator 2,076  240      2,316 
Other 67  12  15  302  396 
Total IFRS 15 revenue 3,957  855  8,735  618  14,165 
Other revenue
Generation     376    376 
Other 25  33  84  96  238 
Total other revenue 25  33  460  96  614 
Total revenue from continuing operations 3,982  888  9,195  714  14,779 

Geographical split for the year ended 31 March 2021
UK Electricity Transmission
£m
UK Gas Transmission
£m
US Regulated
£m
NGV and Other
£m
Total
£m
Revenue under IFRS 15
UK 3,957  855    553  5,365 
US     8,735  65  8,800 
Total IFRS 15 revenue 3,957  855  8,735  618  14,165 
Other revenue
UK 25  33    59  117 
US     460  37  497 
Total other revenue 25  33  460  96  614 
Total revenue from continuing operations 3,982  888  9,195  714  14,779 
141


National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
3. Revenue continued
(e) Disaggregation of revenue continued
Revenue for the year ended 31 March 2020
UK Electricity Transmission
£m
UK Gas
Transmission
£m
US Regulated
£m
NGV and Other
£m
Total
£m
Revenue under IFRS 15
Transmission 1,992  649  425  309  3,375 
Distribution —  —  8,319  —  8,319 
System Operator 1,610  214  —  —  1,824 
Other 69  15  12  296  392 
Total IFRS 15 revenue 3,671  878  8,756  605  13,910 
Other revenue
Generation —  —  369  —  369 
Other 23  33  80  125  261 
Total other revenue 23  33  449  125  630 
Total revenue from continuing operations 3,694  911  9,205  730  14,540 

Geographical split for the year ended 31 March 2020
UK Electricity Transmission
£m
UK Gas
Transmission
£m
US Regulated
£m
NGV and Other
£m
Total
£m
Revenue under IFRS 15
UK 3,671  878  —  567  5,116 
US —  —  8,756  38  8,794 
Total IFRS 15 revenue 3,671  878  8,756  605  13,910 
Other revenue
UK 23  33  —  110  166 
US —  —  449  15  464 
Total other revenue 23  33  449  125  630 
Total revenue from continuing operations 3,694  911  9,205  730  14,540 

142


National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

3. Revenue continued
(e) Disaggregation of revenue continued
Revenue for the year ended 31 March 2019
UK Electricity Transmission
£m
UK Gas
Transmission
£m
US Regulated
£m
NGV and Other
£m
Total
£m
Revenue under IFRS 15
Transmission 1,909  661  370  313  3,253 
Distribution —  —  8,941  —  8,941 
System Operator 1,416  172  —  —  1,588 
Other —  —  —  284  284 
Total IFRS 15 revenue 3,325  833  9,311  597  14,066 
Other revenue
Generation —  —  367  —  367 
Other 51  168  275  500 
Total other revenue 51  535  275  867 
Total revenue from continuing operations 3,331  884  9,846  872  14,933 

Geographical split for the year ended 31 March 2019
UK Electricity Transmission
£m
UK Gas
Transmission
£m
US Regulated
£m
NGV and Other
£m
Total
£m
Revenue under IFRS 15
UK 3,325  833  —  585  4,743 
US —  —  9,311  12  9,323 
Total IFRS 15 revenue 3,325  833  9,311  597  14,066 
Other revenue
UK 51  —  245  302 
US —  —  535  30  565 
Total other revenue 51  535  275  867 
Total revenue from continuing operations 3,331  884  9,846  872  14,933 

Contract liabilities (see note 23) represent revenue to be recognised in future periods relating to contributions in aid of construction of £1,160 million (2020: £1,158 million; 2019: £994 million). Revenue is recognised over the life of the asset. The asset lives for connections in UK Electricity Transmission, UK Gas Transmission, NGV and US Regulated are 40 years, 36 years, 15 years and up to 51 years respectively. The weighted average amortisation period is 19 years.
Future revenues in relation to unfulfilled performance obligations not yet received in cash amount to £4.8 billion (2020: £3.1 billion; 2019: £3.5 billion). £1.6 billion (2020: £1.5 billion; 2019: £1.6 billion) relates to connection contracts in UK Electricity Transmission which will be recognised as revenue over 26 years and £3.0 billion (2020: £1.5 billion; 2019: £1.8 billion) relates to revenues to be earned under Grain LNG contracts until 2045. The remaining amount will be recognised as revenue over 9 years.
The amount of revenue recognised for the year ended 31 March 2021 from performance obligations satisfied (or partially satisfied) in previous periods, mainly due to the changes in the estimate of the stage of completion, is £nil (2020: £nil; 2019: £nil).
143


National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
4. Operating costs
Below we have presented separately certain items included in our operating costs from continuing operations. These include a breakdown of payroll costs (including disclosure of amounts paid to key management personnel) and fees paid to our auditors.

2021 2020 2019
£m
£m
£m
Depreciation, amortisation and impairment 1,672  1,640  1,735 
Payroll costs 1,770  1,684  1,852 
Purchases of electricity 1,130  1,403  1,454 
Purchases of gas 1,250  1,316  1,642 
Property and other taxes 1,193  1,191  1,108 
Balancing Services Incentive Scheme 1,875  1,317  1,196 
Other 2,668  2,975  2,895 
Other operating costs 11,558  11,526  11,882 
Provision for bad and doubtful debts 326  234  181 
Total operating costs 11,884  11,760  12,063 
Operating costs include:
Inventory consumed 316  328  415 
Research and development expenditure 17  14  19 
(a) Payroll costs
2021 2020 2019
£m
£m
£m
Wages and salaries¹ 2,282  2,188  2,084 
Social security costs 172  168  156 
Defined contribution scheme costs 77  75  72 
Defined benefit pension costs 136  135  232 
Share-based payments 27  19  27 
Severance costs (excluding pension costs) 11  76 
2,705  2,586  2,647 
Less: payroll costs capitalised (935) (902) (795)
Total payroll costs 1,770  1,684  1,852 
1.    Included within wages and salaries are US other post-retirement benefit costs of £43 million (2020: £45 million; 2019: £48 million). For further information refer to note 25.
(b) Number of employees
31 March 2021 Monthly average 2021 31 March 2020 Monthly average 2020 31 March 2019 Monthly average 2019
UK 6,657  6,517  6,321 6,151 5,962 6,227
US 17,026  16,821  16,748 16,679 16,614 16,669
Total number of employees 23,683  23,338  23,069 22,830 22,576 22,896
144


National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

4. Operating costs continued
(c) Key management compensation
2021 2020 2019
£m
£m
£m
Short-term employee benefits 7 
Compensation for loss of office   — 
Post-employment benefits 1 
Share-based payments 4 
Total key management compensation 12  12  11 
Key management compensation relates to the Board, including the Executive Directors and Non-executive Directors for the years presented.
(d) Auditors’ remuneration
Auditors’ remuneration is presented below in accordance with the requirements of the Companies Act 2006 and the principal accountant fees and services disclosure requirements of Item 16C of Form 20-F:
2021 2020 2019
£m
£m
£m
Audit fees payable to the Parent Company’s auditors and their associates in respect of:
Audit of the Parent Company’s individual and consolidated financial statements¹ 2.5  1.9  1.6 
The auditing of accounts of any associate of the Company² 8.1  8.7  8.5 
Other services supplied³ 6.4  6.3  5.2 
17.0  16.9  15.3 
Total other services4
All other fees:
Other assurance services5
0.8  0.6  1.1 
Other non-audit services not covered above6
2.0  0.5  2.2 
2.8  1.1  3.3 
Total auditors’ remuneration 19.8  18.0  18.6 
1.    Audit fees in each year represent fees for the audit of the Company’s financial statements and regulatory reporting for the years ended 31 March 2021, 2020 and 2019.
2.    The 2019 comparative was updated in 2020 following finalisation of the 2019 audit fee with the Audit Committee in 2020.
3.    Other services supplied represent fees payable for services in relation to other statutory filings or engagements that are required to be carried out by the auditors. In particular, this includes fees for reports under section 404 of the US Public Company Accounting Reform and Investor Protection Act of 2002 (Sarbanes-Oxley), audit reports on regulatory returns and the review of interim financial statements for the six-month periods ended 30 September 2020, 2019 and 2018 respectively.
4.    There were no tax compliance or tax advisory fees and no audit related fees as described in Item 16C(b) of Form 20-F.
5.    In all years, principally relates to assurance services provided in relation to comfort letters for debt issuances and, in 2021, also includes amounts related to capacity market auction monitoring services.
6.    For 2021, includes the class 1 Circular in respect of the acquisition of WPD announced on 18 March 2021. In 2020, other assurance services include auction monitor work on Contracts for Difference, a review of controls over our data on New York customers and IT project assurance. In 2019, non-audit services primarily related to the UK Commercial Property business in respect of the evaluation of possible options for the use of property assets.

The Audit Committee considers and makes recommendations to the Board, to be put to shareholders for approval at each AGM, in relation to the appointment, re-appointment, removal and oversight of the Company’s independent auditors. The Committee also considers and approves the audit fees on behalf of the Board in accordance with the Competition and Market Authority Audit Order 2014. The auditors’ remuneration is then put to shareholders at each AGM.
Certain services are prohibited from being performed by the external auditors under the Sarbanes-Oxley Act. Of the above services, none were prohibited.
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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
5. Exceptional items and remeasurements
To monitor our segmental performance, we use a profit measure that excludes certain income and expenses. We call that measure ‘adjusted profit’. Adjusted profit (which excludes exceptional items and remeasurements as defined below) is used by management to monitor financial performance as it is considered that it aids the comparability of our reported financial performance from year to year. We exclude items from adjusted profit because, if included, these items could distort understanding of our performance for the year and the comparability between periods. This note analyses these items, which are included in our results for the year but are excluded from adjusted profit.

Exceptional items and remeasurements from continuing operations
2021 2020 2019
£m
£m
£m
Included within operating profit
Exceptional items:
Changes in environmental provisions 14  (402) — 
New operating model implementation costs (55) —  — 
Transaction costs (24) —  — 
Cost efficiency and restructuring programmes   —  (204)
Massachusetts Gas labour dispute   —  (283)
Impairment of nuclear connection development costs   —  (137)
(65) (402) (624)
Remeasurements – commodity contract derivatives 34  (125) 52 
(31) (527) (572)
As disclosed in note 8, the Group also presents an adjusted earnings per share measure that is calculated before exceptional items and remeasurements. This measure is presented after tax and therefore details of tax exceptional items and the tax effect of exceptional items and remeasurements are also provided in this note.
2021 2020 2019
£m
£m
£m
Included within finance income and costs
Remeasurements:
Net (losses)/gains on financing derivatives (41) (40)
Net gains/(losses) on financial assets at fair value through profit and loss 23  (16) 15 
Net gains/(losses) on financial liabilities at fair value through profit and loss 90  (49) (51)
72  (64) (76)
Included within share of post-tax results of joint ventures and associates
Remeasurements:
Remeasurements – net losses on financial instruments (8) (1) — 
Total included within profit before tax 33  (592) (648)
Included within tax
Exceptional items – movements arising on items not included in profit before tax:
Deferred tax charge arising on the reversal of the reduction in UK corporation tax rate   (192) — 
Tax on exceptional items 8  103  144 
Tax on remeasurements (34) 42 
(26) (47) 149 
Total exceptional items and remeasurements after tax 7  (639) (499)
Analysis of total exceptional items and remeasurements after tax
Exceptional items after tax (57) (491) (480)
Remeasurements after tax 64  (148) (19)
Total exceptional items and remeasurements after tax 7  (639) (499)

146


National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

5. Exceptional items and remeasurements continued
Exceptional items
Management uses an exceptional items framework that has been discussed and approved by the Audit Committee. This follows a three-step process which considers the nature of the event, the financial materiality involved and any particular facts and circumstances. In considering the nature of the event, management focuses on whether the event is within the Group’s control and how frequently such an event typically occurs. In determining the facts and circumstances, management considers factors such as ensuring consistent treatment between favourable and unfavourable transactions, the precedent for similar items, the number of periods over which costs will be spread or gains earned, and the commercial context for the particular transaction.
Items of income or expense that are considered by management for designation as exceptional items include significant restructurings, write-downs or impairments of non-current assets, significant changes in environmental or decommissioning provisions, integration of acquired businesses, gains or losses on disposals of businesses or investments and significant debt redemption costs as a consequence of transactions such as significant disposals or issues of equity, and the related tax, as well as deferred tax arising on changes to corporation tax rates.
Costs arising from restructuring programmes include redundancy costs. Redundancy costs are charged to the consolidated income statement in the year in which a commitment is made to incur the costs and the main features of the restructuring plan have been announced to affected employees.
Set out below are details of the transactions against which we have considered the application of our exceptional items framework in each of the years for which results are presented.
2021
We have considered certain costs incurred in the period against our Exceptional Items Framework, and concluded £55 million of costs associated with the implementation of our new operating model, the £14 million release of environmental provisions for which the original provision was treated as exceptional and the £24 million of transaction costs associated with the acquisition of Western Power Distribution (WPD) and the sale of NECO should be treated as exceptional items in the current year.
New operating model implementation costs: The Group incurred £55 million of costs in relation to the design and implementation of our new operating model that is built on a foundation of six business units as described further in the Strategic Review. The costs recognised in the year ended 31 March 2021 primarily relate to professional fees incurred in designing the new operating model, alongside the redundancy provisions accrued in relation to those employees where announcements have been made that they will be leaving the organisation as a result of the changes. Whilst the costs incurred this year do not meet the quantitative threshold to be classified as exceptional on a standalone basis, we have concluded that the costs should be classified as exceptional in line with our exceptional items policy, in order to ensure that the costs are treated in a consistent manner with similar costs incurred previously. The total cash outflow for the year was £33 million.
Transaction costs: £24 million of transaction costs were incurred to date in relation to the acquisition of WPD (see note 38) and the sale of NECO (see note 10). The costs relate to legal fees, bankers' fees and professional fees. Whilst the costs incurred in the current year in isolation are not sufficiently material to warrant classification as an exceptional item, we are expecting further costs to be incurred next year, for example, in regards to success fees on completion of the acquisition. When taken in aggregate, the costs incurred over both years will be sufficiently material to be classified as exceptional in line with our policy. The total cash outflow for the year was £14 million.
Changes in environmental provision: In the US, the most significant component of our £1.5 billion environmental provision relates to several Superfund sites, and arose from former manufacturing gas plant facilities, formerly owned or operated by the Group or its predecessor companies. The sites are subject to both State and Federal law in the US. Under Federal and State Superfund laws, potential liability for the historical contamination may be imposed on responsible parties jointly and severally, without regard to fault, even if the activities were lawful when they occurred. The provisions and the Group’s share of estimated costs are re-evaluated at each reporting period.
We have recognised an exceptional gain of £14 million relating to the release of environmental provisions relating to one of our US Superfund sites, for which the original provision was treated as an exceptional item. The reduction in the provision arose as a result of the re-evaluation of the Group’s share of estimated costs following the finalisation of discussions on the scope of certain remediation work with government authorities. The release has been recorded as an exceptional item in line with the treatment of the original provision.
2020
We concluded that the increase in costs associated with the changes in our environmental provisions (£402 million) and the additional deferred tax charge reflecting the impact of the remeasurement of the Group’s deferred tax liabilities as a result of a change in the substantively enacted UK corporation tax rate (£192 million) meet the criteria to be classified as exceptional.
A further £10 million of COVID-19 related costs incurred in the year ended 31 March 2020 were similarly not classified as exceptional in view of the quantum involved and all costs associated with the settlement reached with the State of New York in respect of the Downstate New York Gas Moratorium were also treated as part of adjusted profit.
Changes in environmental provisions: As a result of notices issued by governmental authorities and newly developed cost estimates prepared by third-party engineers in relation to our US Superfund sites, we re-evaluated our estimates of total costs and cost sharing allocations borne by the Company, and accordingly increased our provision by £326 million. Under the terms of our rate plans, we are entitled to recovery of environmental clean-up costs from rate payers, but under IFRS no asset can be recognised for this recovery.
Also included in the total environmental charge was the £76 million impact of the change in the real discount rate applied to the environmental provisions across the Group, of which £66 million related to the US and £10 million to the UK. Given the substantial and sustained change in gilts and corporate bond yields, we concluded it was appropriate to reduce the real discount rate from 1% to 0.5%. The weighted average remaining duration of our cash flows is now around 10 years.

147


National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
5. Exceptional items and remeasurements continued
2019
In assessing certain items of income and expenditure against our exceptional items framework, we concluded that the costs associated with the Massachusetts Gas labour dispute (£283 million), our cost efficiency and restructuring programme (£204 million) and impairments relating to two nuclear connection cancellations (£137 million) should be treated as exceptional (as described further below). We also considered whether the £95 million income from two legal settlements received in the period should be classified as exceptional. However, we concluded it was appropriate to recognise the income in earnings before exceptional items (within NGV and Other), in line with the treatment of the original costs.
Cost efficiency and restructuring programmes: Our UK and US businesses incurred restructuring charges as we reviewed organisational structures, operational activities and relevant roles and responsibilities to ensure we are able to operate more efficiently and to continue to drive outperformance for customers and shareholders. The cash outflow for the year was £93 million.
Massachusetts Gas labour dispute: Between June 2018 and January 2019, National Grid implemented a workforce contingency plan across its Massachusetts Gas business following the expiration of contracts for the 1,250 members of the existing workforce. The net incremental cost of the experienced contractors working alongside supervisors and workers from other areas of the business was £283 million, reflecting the financial performance of the US regulated business had the workforce contingency plan not been implemented. The total cash outflow related to the labour dispute was £320 million for the year.
Impairment of nuclear connection development costs: In 2018, Toshiba announced the cancellation of its NuGen project to build a new nuclear power station at Moorside in Cumbria, and NuGen terminated its connection agreement with UK Electricity Transmission. In February 2019, Hitachi terminated its connection agreements in respect of its Horizon projects at Wylfa and Oldbury. As there was no realistic prospect of these schemes continuing in their present form, we concluded that it was appropriate to impair the assets we had been developing for over 10 years. After deducting cash inflows relating to termination fees received of £13 million, the net impairment charge was £137 million.
Remeasurements
Remeasurements comprise unrealised gains or losses recorded in the consolidated income statement arising from changes in the fair value of certain of our financial assets and liabilities accounted for at fair value through profit and loss (FVTPL). Once the fair value movements are realised (for example, when the derivative matures), the previously recognised fair value movements are then reversed through remeasurements and recognised within earnings before exceptional items and remeasurements. These assets and liabilities include commodity contract derivatives and financing derivatives to the extent that hedge accounting is not available or is not fully effective.
The unrealised gains or losses reported in profit and loss on certain additional assets and liabilities treated at FVTPL are also classified within remeasurements. These relate to financial assets (which fail the ‘solely payments of principal and interest test’ under IFRS 9), the money market fund investments used by Group Treasury for cash management purposes and certain financial liabilities which we elected to designate at FVTPL. In all cases, these fair values increase or decrease because of changes in foreign exchange, commodity or other financial indices over which we have no control.
We report unrealised gains or losses relating to certain discrete classes of financial assets accounted for at FVTPL within adjusted profit. These comprise our portfolio of investments made by National Grid Partners, our investment in Sunrun Neptune 2016 LLC and the contingent consideration arising on the acquisition of National Grid Renewables (all within NGV and Other). The performance of these assets (including changes in fair value) are included in our assessment of adjusted profit for the relevant business units.
Remeasurements excluded from adjusted profit are made up of the following categories:
i.Net gains/(losses) on commodity contract derivatives represent mark-to-market movements on certain physical and financial commodity contract obligations in the US. These contracts primarily relate to the forward purchase of energy for supply to customers, or to the economic hedging thereof, that are required to be measured at fair value and that do not qualify for hedge accounting. Under the existing rate plans in the US, commodity costs are recoverable from customers although the timing of recovery may differ from the pattern of costs incurred;
ii.Net gains/(losses) on financing derivatives comprise gains and losses arising on derivative financial instruments used for the risk management of interest rate and foreign exchange exposures. These exclude gains and losses for which hedge accounting has been effective, and have been recognised directly in the consolidated statement of other comprehensive income or are offset by adjustments to the carrying value of debt (see notes 17 and 32);
iii.Net gains/(losses) on financial assets measured at FVTPL comprise gains and losses on the investment funds held by our insurance captives which are categorised as FVTPL (see note 15);
iv.Net gains/(losses) on financial liabilities measured at FVTPL comprise the change in the fair value (excluding changes due to own credit risk) of a financial liability that was designated at FVTPL on transition to IFRS 9 to reduce a measurement mismatch (see note 21); and
v.Unrealised net gains/(losses) on derivatives and other financial instruments within our joint ventures and associates.
Items included within tax
2020
The Finance Act 2016, which was enacted on 15 September 2016, reduced the main UK corporation tax rate to 17% with effect from 1 April 2020. Deferred tax balances were calculated at this rate for the years ended 31 March 2017 to 2019. On 17 March 2020, the UK Government utilised the Provisional Collection of Taxes Act 1968 to substantively enact a reversal of the reduction in the main UK corporation tax rate to 17% with effect from 1 April 2020, resulting in the rate remaining at 19%. Deferred taxes at 31 March 2020 were measured using enacted tax rates and reflected in these financial statements, resulting in a £192 million deferred tax charge, principally due to the remeasurement of deferred tax liabilities. The treatment of this charge as exceptional was consistent with the treatment for the year ended 31 March 2017 when the original reduction in the tax rate was substantively enacted, resulting in the recognition of an exceptional tax credit of £94 million.


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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

6. Finance income and costs
This note details the interest income generated by our financial assets and interest expense incurred on our financial liabilities, primarily our financing portfolio (including our financing derivatives). It also includes the net interest on our pensions and other post-retirement assets. In reporting adjusted profit, we adjust net financing costs to exclude any net gains or losses on financial instruments included in remeasurements (see note 5).

Finance income and costs remeasurements include unrealised gains and losses on certain assets and liabilities now treated at FVTPL. The interest income, dividends and interest expense on these items are included in finance income and finance costs before remeasurements, respectively.
2021 2020 2019
Notes
£m
£m
£m
Finance income
Interest income on financial instruments:
Bank deposits and other financial assets 33  48  54 
Dividends received on equities held at fair value through other comprehensive income (FVOCI) 2 
Other income   20  17 
35  70  73 
Finance costs
Net interest on pensions and other post-retirement benefit obligations
25
(38) (23) (22)
Interest expense on financial liabilities held at amortised cost:
Bank loans and overdrafts (72) (73) (72)
Other borrowings¹ (854) (997) (970)
Interest expense on financial liabilities held at fair value through profit and loss (FVTPL) (20) (22) (20)
Interest on derivatives 7  (39) (43)
Unwinding of discount on provisions
26
(78) (77) (74)
Other interest (53) (10) — 
Less: interest capitalised² 131  122  135 
(977) (1,119) (1,066)
Remeasurements – Finance income
Net gains/(losses) on FVTPL financial assets 23  (16) 15 
23  (16) 15 
Remeasurements – Finance costs
Net gains/(losses) on FVTPL financial liabilities 90  (49) (51)
Net gains/(losses) on financing derivatives³:
Derivatives designated as hedges for hedge accounting 44  (13) (37)
Derivatives not designated as hedges for hedge accounting (85) 14  (3)
49  (48) (91)
Total remeasurements – Finance income and costs 72  (64) (76)
Finance income 58  54  88 
Finance costs (928) (1,167) (1,157)
Net finance costs from continuing operations (870) (1,113) (1,069)
1.    Includes interest expense on lease liabilities (see note 13 for details).
2.    Interest on funding attributable to assets in the course of construction in the current year was capitalised at a rate of 3.1% (2020: 3.6%; 2019: 3.9%). In the UK, capitalised interest qualifies for a current year tax deduction with tax relief claimed of £13 million (2020: £15 million; 2019: £19 million). In the US, capitalised interest is added to the cost of plant and qualifies for tax depreciation allowances.
3.    Includes a net foreign exchange gain on borrowing activities of £172 million (2020: £66 million gain; 2019: £264 million gain) offset by foreign exchange losses and gains on financing derivatives measured at fair value.


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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
7. Tax
Tax is payable in the territories where we operate, mainly the UK and the US. This note gives further details of the total tax charge and tax liabilities, including current and deferred tax. The current tax charge is the tax payable on this year’s taxable profits. Deferred tax is an accounting adjustment to provide for tax that is expected to arise in the future due to differences in the accounting and tax bases.

The tax charge for the period is recognised in the income statement, the statement of comprehensive income or directly in equity, according to the accounting treatment of the related transaction. The tax charge comprises both current and deferred tax.
Current tax assets and liabilities are measured at the amounts expected to be recovered from or paid to the tax authorities. The tax rates and tax laws used to compute the amounts are those that have been enacted or substantively enacted by the reporting date.
The Group operates internationally in territories with different and complex tax codes. Management exercises judgement in relation to the level of provision required for uncertain tax outcomes. There are a number of tax positions not yet agreed with the tax authorities where different interpretations of legislation could lead to a range of outcomes. Judgements are made for each position having regard to particular circumstances and advice obtained.
Deferred tax is provided for using the balance sheet liability method, and is recognised on temporary differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases.
Deferred tax liabilities are generally recognised on all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences arise from the initial recognition of goodwill or from the initial recognition of other assets and liabilities in a transaction (other than a business combination) that affects neither the accounting nor the taxable profit or loss.
Deferred tax liabilities are recognised on taxable temporary differences arising on investments in subsidiaries and joint arrangements except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, based on the tax rates and tax laws that have been enacted or substantively enacted by the reporting date.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be recovered. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when they relate to income taxes levied by the same tax authority and the Company and its subsidiaries intend to settle their current tax assets and liabilities on a net basis.

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

7. Tax continued
The tax charge for the year can be analysed as follows:
2021 2020 2019
£m
£m
£m
Current tax:
UK corporation tax at 19% (2020: 19%; 2019: 19%)
213  179  132 
UK corporation tax adjustment in respect of prior years 23  (4) (12)
236  175  120 
Overseas corporation tax 3  (2)
Overseas corporation tax adjustment in respect of prior years (15) (41) (40)
(12) (43) (32)
Total current tax from continuing operations 224  132  88 
Deferred tax:
UK deferred tax 63  269  27 
UK deferred tax adjustment in respect of prior years (26)
37  275  29 
Overseas deferred tax 174  64  208 
Overseas deferred tax adjustment in respect of prior years 7  14 
181  73  222 
Total deferred tax from continuing operations 218  348  251 
Total tax charge from continuing operations 442  480  339 

Tax charged/(credited) to the consolidated statement of comprehensive income and equity
2021 2020 2019
£m
£m
£m
Current tax:
Cash flow hedges, cost of hedging and own credit reserve 6   
Deferred tax:
Investments at fair value through other comprehensive income 12  (1) — 
Cash flow hedges, cost of hedging and own credit reserve (2) (40) (12)
Remeasurements of pension assets and post-retirement benefit obligations 414  (206) 12 
Share-based payments 2  (3) — 
432  (250)
Total tax recognised in the statements of comprehensive income from continuing operations 430  (247)
Total tax relating to share-based payments recognised directly in equity from continuing operations 2  (3) — 
432  (250)
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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
7. Tax continued
The tax charge for the year for the continuing business, is higher (2020: higher tax charge; 2019: lower tax charge) than the standard rate of corporation tax in the UK of 19% (2020: 19%; 2019: 19%):
2021 2020 2019
£m £m £m
Profit before tax from continuing operations
Before exceptional items and remeasurements 2,050  2,346  2,489 
Exceptional items and remeasurements 33  (592) (648)
Profit before tax from continuing operations 2,083  1,754  1,841 
Profit before tax from continuing operations multiplied by UK corporation tax rate of 19% (2020: 19%; 2019: 19%)
396  334  350 
Effect of:
Adjustments in respect of prior years¹ (11) (30) (36)
Expenses not deductible for tax purposes 30  29  28 
Non-taxable income² (9) (18) (36)
Adjustment in respect of foreign tax rates 42  18  56 
Deferred tax impact of change in UK tax rate   192  (3)
Adjustment in respect of post-tax profits of joint ventures and associates included within profit before tax (12) (17) (8)
Other³ 6  (28) (12)
Total tax charge from continuing operations 442  480  339 
% % %
Effective tax rate – continuing operations 21.2  27.4  18.4 
1.    The prior year adjustments are primarily due to agreement of prior period tax returns.
2.    Includes tax on chargeable disposals after the offset of capital losses.
3.    Other primarily comprises the movement in the deferred tax asset on previously unrecognised capital losses and claims for land remediation relief.
Factors that may affect future tax charges
In the Spring Budget 2021, the UK government announced an increase in the main corporation tax rate from 19% to 25% with effect from 1 April 2023. Since this had not been substantively enacted at the balance sheet date, deferred tax balances as at 31 March 2021 have been calculated at the current main UK corporation tax rate of 19%.
We expect our future deferred tax liabilities to increase reflecting the impact of the rate change. If the amended tax rate of 25% had been used, the deferred tax liability would have been approximately £560 million higher.
US government and US states are also considering changes to federal and state tax rates respectively, but as no changes have been substantively enacted at the balance sheet date deferred tax balances as at 31 March 2021 have been calculated at the prevailing tax rates.
We will continue to monitor the developments driven by Brexit, the OECD’s Base Erosion and Profit Shifting (BEPS) project and European Commission initiatives including fiscal aid investigations. At this time, we do not expect this to have any material impact on our future tax charges. Governments across the world including the UK and the US have introduced various stimulus/reliefs for businesses to cope with the impact of the COVID-19 pandemic, from which we do not currently expect there to be a material impact on our future tax charges.




152


National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

7. Tax continued
Tax included within the statement of financial position
The following are the major deferred tax assets and liabilities recognised, and the movements thereon, during the current and prior reporting periods:
Accelerated
tax
depreciation
£m
Share-
based
payments
£m
Pensions
and other
post-
retirement
benefits
£m
Financial
instruments
£m
Other net
temporary
differences1
£m
Total
£m
Deferred tax liabilities/(assets)
At 1 April 20192
5,727  (9) (170) (1,340) 4,215 
Exchange adjustments and other2,3
222  (30) (28) (3) (27) 134 
Charged/(credited) to income statement 613  (7) 44  (13) (287) 350 
(Credited)/charged to other comprehensive income and equity —  (2) (206) (46) (253)
At 1 April 20202
6,562  (48) (360) (55) (1,653) 4,446 
Exchange adjustments and other3
(501) 51  174  (268)
Charged/(credited) to income statement 373  —  (12) (147) 215 
Charged to other comprehensive income and equity —  414  —  422 
At 31 March 2021 6,434  (42) 93  (44) (1,626) 4,815 
1.    The deferred tax asset of £1,626 million as at 31 March 2021 (2020: £1,653 million) in respect of other net temporary differences primarily relates to net operating losses of £455 million (2020: £547 million), US environmental provisions of £453 million (2020: £529 million) and US bad debt provision of £184 million (2020: £124 million).
2.    Comparative amounts have been revised as described in note 1F.
3.     Exchange adjustments and other comprises foreign exchange arising on translation of the US dollar deferred tax balances. In 2020, it also included reclassification of £29 million from other temporary differences to share-based payments.
Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balances net. The deferred tax balances (after offset) for statement of financial position purposes consist solely of deferred tax liabilities of £4,815 million (2020: £4,446 million). This balance is after offset of a deferred tax asset of £455 million (2020: £547 million) which has been recognised in respect of net operating losses (£440 million) and capital losses (£15 million).
Deferred tax assets in respect of some capital losses as well as trading losses and non-trade deficits have not been recognised as their future recovery is uncertain or not currently anticipated. The total deferred tax assets not recognised are as follows:
2021 2020
£m
£m
Capital losses 1,620  1,626 
Non-trade deficits 1 
Trading losses 7 
The capital losses arose in the UK on disposal of certain businesses or assets. They are available to carry forward indefinitely but can only be offset against future capital gains. The UK non-trade deficits arose prior to 1 April 2017 and therefore can only be offset against future non-trade profits.
At 31 March 2021 and 31 March 2020, there were no recognised deferred tax liabilities for taxes that would be payable on the unremitted earnings of the Group’s subsidiaries or its associates as there are no significant corporation tax consequences of the Group’s UK, US or overseas subsidiaries or associates paying dividends to their parent companies. There are also no significant income tax consequences for the Group from the payment of dividends by the Group to its shareholders.


153


National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
8. Earnings per share (EPS)
EPS is the amount of profit after tax attributable to each ordinary share. Basic EPS is calculated on profit after tax for the year attributable to equity shareholders divided by the weighted average number of shares in issue during the year. Diluted EPS shows what the impact would be if all outstanding share options were exercised and treated as ordinary shares at year end. The weighted average number of shares is increased by additional shares issued as scrip dividends and reduced by shares repurchased by the Company during the year. The earnings per share calculations are based on profit after tax attributable to equity shareholders of the Company which excludes non-controlling interests.

Adjusted earnings and EPS, which exclude exceptional items and remeasurements, are provided to reflect the adjusted profit sub-totals used by the Company. We have included reconciliations from this additional EPS measure to earnings for both basic and diluted EPS to provide additional detail for these items. For further details of exceptional items and remeasurements, see note 5.
(a) Basic EPS
Earnings
EPS
Earnings
EPS
Earnings
EPS
2021 2021 2020 2020 2019 2019
£m
pence
£m
pence
£m
pence
Adjusted earnings from continuing operations 1,633  46.4  1,912  55.2  1,998  59.0 
Exceptional items and remeasurements after tax from continuing operations 7  0.2  (639) (18.4) (499) (14.7)
Earnings from continuing operations 1,640  46.6  1,273  36.8  1,499  44.3 
Adjusted earnings from discontinued operations     0.2  57  1.7 
Exceptional items and remeasurements after tax from discontinued operations     (14) (0.5) (45) (1.4)
Earnings from discontinued operations     (9) (0.3) 12  0.3 
Total adjusted earnings 1,633  46.4  1,917  55.4  2,055  60.7 
Total exceptional items and remeasurements after tax (including discontinued operations) 7  0.2  (653) (18.9) (544) (16.1)
Total earnings 1,640  46.6  1,264  36.5  1,511  44.6 
2021 2020 2019
millions
millions
millions
Weighted average number of ordinary shares – basic 3,523  3,461  3,386 

(b) Diluted EPS
Earnings
EPS
Earnings
EPS
Earnings
EPS
2021 2021 2020 2020 2019 2019
£m
pence
£m
pence
£m
pence
Adjusted earnings from continuing operations 1,633  46.1  1,912  55.0  1,998  58.8 
Exceptional items and remeasurements after tax from continuing operations 7  0.2  (639) (18.4) (499) (14.7)
Earnings from continuing operations 1,640  46.3  1,273  36.6  1,499  44.1 
Adjusted earnings from discontinued operations     0.1  57  1.7 
Exceptional items and remeasurements after tax from discontinued operations     (14) (0.4) (45) (1.4)
Earnings from discontinued operations     (9) (0.3) 12  0.3 
Total adjusted earnings 1,633  46.1  1,917  55.1  2,055  60.5 
Total exceptional items and remeasurements after tax (including discontinued operations) 7  0.2  (653) (18.8) (544) (16.1)
Total earnings 1,640  46.3  1,264  36.3  1,511  44.4 
2021 2020 2019
millions
millions
millions
Weighted average number of ordinary shares – diluted 3,540  3,478  3,401 

(c) Reconciliation of basic to diluted average number of shares
2021 2020 2019
millions
millions
millions
Weighted average number of ordinary shares – basic 3,523  3,461  3,386 
Effect of dilutive potential ordinary shares – employee share plans 17  17  15 
Weighted average number of ordinary shares – diluted 3,540  3,478  3,401 


154


National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

9. Dividends
Interim dividends are recognised when they become payable to the Company’s shareholders. Final dividends are recognised when they are approved by shareholders.
2021 2020 2019
Pence
per share
Cash
dividend
£m
Scrip dividend
£m
Pence
per share
Cash
dividend
£m
Scrip
dividend
£m
Pence
per share
Cash
dividend
£m
Scrip
dividend
£m
Interim dividend in respect of the current year 17.00 348  249  16.57 335  241  16.08 450  94 
Final dividend in respect of the prior year 32.00 1,065  54  31.26 557  517  30.44 710  319 
49.00 1,413  303  47.83 892  758  46.52 1,160  413 


The Directors are proposing a final dividend for the year ended 31 March 2021 of 32.16p per share that will absorb approximately £1,141 million of shareholders’ equity (assuming all amounts are settled in cash). It will be paid on 18 August 2021 to shareholders who are on the register of members at 4 June 2021 (subject to shareholders’ approval at the AGM). A scrip dividend will be offered as an alternative.

10. Discontinued operations and assets held for sale
The results and cash flows of significant assets or businesses sold during the year are shown separately from our continuing operations, and presented within discontinued operations in the income statement and cash flow statement. Assets and businesses are classified as held for sale when their carrying amounts are recovered through sale rather than through continuing use. They only meet the held for sale condition when the assets are ready for immediate sale in their present condition, management is committed to the sale and it is highly probable that the sale will complete within one year. Depreciation ceases on assets and businesses when they are classified as held for sale and the assets and businesses are impaired if the proceeds less sale costs fall short of the carrying value.

The Narragansett Electric Company
On 17 March 2021, the Group signed an agreement to sell 100% of the share capital of a wholly owned subsidiary, The Narragansett Electric Company (NECO). NECO is part of our US Regulated segment and is a retail distribution company providing electricity and gas to customers in Rhode Island. The expected sale proceeds are £2.8 billion ($3.8 billion), and the sale is expected to complete in March 2022 once all regulatory approvals are obtained.
As the sale is considered highly probable and is expected to complete within a year, the associated assets and liabilities have been presented as held for sale in the consolidated statement of financial position. However, as NECO does not represent a separate major line of business or geographical operations, it has not met the criteria for classification as a discontinued operation and therefore its results for the period are not separately disclosed on the face of the income statement.
The following assets and liabilities of NECO were classified as held for sale at 31 March 2021:
2021
£m
Goodwill 562 
Intangible assets 3 
Property, plant and equipment 2,713 
Trade and other receivables 237 
Cash and cash equivalents 4 
Other assets 38 
Total assets held for sale 3,557 
Borrowings (1,123)
Pension liabilities (49)
Other liabilities (396)
Total liabilities held for sale (1,568)
Net assets held for sale 1,989 

No impairment losses were recognised upon remeasurement of the assets and liabilities prior to classification as held for sale. NECO generated profit after tax of £104 million (2020: £31 million; 2019: £137 million) for the year ended 31 March 2021. Current and deferred tax balances relating to NECO have not been included as held for sale on the basis that those balances will be retained by National Grid rather than transferring with the other assets and liabilities of NECO.
The Group also announced its intention to sell a majority stake in the UK Gas Transmission business. However, as the process is still at an early stage and is not expected to be marketed until later in the year, the business has not been classified as held for sale and has not met the criteria for classification as a discontinued operation as at 31 March 2021.


155


National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
10. Discontinued operations and assets held for sale continued
Quadgas HoldCo Limited
In June 2019, the Group sold its remaining 39% interest in Cadent (held through its holding in Quadgas HoldCo Limited (Quadgas)). This interest had been classified as held for sale from 30 June 2018 until the date of disposal, as detailed in the Annual Report and Accounts for the year ended 31 March 2019.
The aggregate carrying value of our investment in Quadgas at the disposal date was £1,956 million. This was comprised of the carrying value of the Group’s equity interest in Quadgas of £1,494 million, a shareholder loan to Quadgas of £352 million and a derivative financial asset with a fair value of £110 million. The total sales proceeds were £1,965 million. The gain on disposal was £9 million.
We considered the disposal of our 39% investment in Quadgas as the final stage of the plan to dispose of our interest in the UK Gas Distribution business first announced in 2015, and accordingly treated the results and cash flows arising from Quadgas as a discontinued operation on the basis that the sale formed the final part of a ‘single coordinated plan’ to dispose of UK Gas Distribution. As a consequence, we classified the various elements of income, expense and cash flows within discontinued operations as set out below. Once the assets were treated as ‘held for sale’, equity accounting ceased for our investment in our associate. We therefore ceased to record our share of profits from 30 June 2018.
The summary income statement for discontinued operations is as follows:
2020 2019
£m
£m
Revenue   — 
Operating costs¹ (23) (1)
Operating loss (23) (1)
Net finance income 6  23 
Share of post-tax results of joint ventures and associates²   (5)
(Loss)/profit before tax from discontinued operations (17) 17 
Tax from discontinued operations (1) (5)
(Loss)/profit after tax from discontinued operations (18) 12 
Gain on disposal 9  — 
Total (loss)/profit after tax from discontinued operations³ (9) 12 
1.    Operating costs for the year ended 31 March 2020 related to final transaction costs and other expenses in relation to Quadgas.
2.    For the year ended 31 March 2019, the amount presented is the net of £43 million impairment charge against the investment in Quadgas and £38 million share of Quadgas post-tax profits recognised prior to classification as held for sale.
3.    For the year ended 31 March 2020, the £23 million of operating expenses and the £9 million gain on disposal are treated as exceptional. For the year ended 31 March 2019, the £43 million impairment charge against the investment in Quadgas, net operating costs of £1 million and the tax thereon are classified as exceptional items.
The summary statement of comprehensive income for discontinued operations is as follows:
2020 2019
£m
£m
(Loss)/profit after tax from discontinued operations (9) 12 
Other comprehensive income
Items that will never be reclassified to profit or loss:
Share of other comprehensive income of associate, net of tax   36 
Total items from discontinued operations that will never be reclassified to profit or loss   36 
Items that may be reclassified subsequently to profit or loss:
Net gains in respect of cash flow hedges 6  — 
Total items from discontinued operations that may be reclassified subsequently to profit or loss 6  — 
Other comprehensive income for the year, net of tax from discontinued operations 6  36 
Total comprehensive (loss)/income for the year from discontinued operations (3) 48 

The summary cash flows for discontinued operations are as follows:
Cash flows used in operating activities of £97 million in 2020 (2019: £71 million) primarily related to cash outflows in respect of voluntary contributions totalling £66 million paid to the Warm Homes Fund, the utilisation of provisions and the payment of the final transaction fees incurred in the period.
Cash inflows from investing activities of £6 million in 2020 (2019: £156 million) were comprised of dividends received and interest received on the shareholder loan.
There were no cash flows for financing activities in 2020 or 2019.
156


National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

11. Goodwill
Goodwill represents the excess of what we paid to acquire businesses over the fair value of their net assets at the acquisition date. We assess whether goodwill is recoverable by performing an impairment review annually or more frequently if events or changes in circumstances indicate a potential impairment.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing exchange rate. Goodwill is allocated to cash-generating units and this allocation is made to those cash-generating units that are expected to benefit from the acquisition in which the goodwill arose.
Impairment is recognised where there is a difference between the carrying value of the cash-generating unit and the estimated recoverable amount of the cash-generating unit to which that goodwill has been allocated. Any impairment is recognised immediately in the income statement and is not subsequently reversed. Any impairment loss is first allocated to the carrying value of the goodwill and then to the other assets within the cash-generating unit. Recoverable amount is defined as the higher of fair value less costs to sell and estimated value-in-use at the date the impairment review is undertaken. Value-in-use represents the present value of expected future cash flows, discounted using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
Total
£m
Net book value at 1 April 2019¹ 5,372 
Exchange adjustments¹ 259 
Acquisition of National Grid Renewables (note 38) 81 
Net book value at 1 April 2020 5,712 
Exchange adjustments (562)
Reclassification to held for sale (note 10) (562)
Net book value at 31 March 2021 4,588 
1.    Comparative amounts have been revised as described in note 1F.

There is no significant accumulated impairment charge as at 31 March 2021 or 31 March 2020.
The amounts disclosed above as at 31 March 2021 relate to the following cash-generating units: New York £3,004 million (2020: £3,334 million); Massachusetts £963 million (2020: £1,069 million); Rhode Island £nil (2020: £438 million); Federal £544 million (2020: £790 million); and National Grid Renewables £77 million (2020: £81 million). Following the announcement of the sale of NECO (see note 10), goodwill balances relating to the Rhode Island cash generating unit and a portion of the goodwill relating to the Federal cash generating unit were reclassified as held for sale in the period.
Goodwill is reviewed annually for impairment and the recoverability of goodwill has been assessed by comparing the carrying amount of our operations described above (our cash-generating units) with the expected recoverable amount on a value-in-use basis. In each assessment, the value-in-use has been calculated based on five-year plan projections that incorporate our best estimates of future cash flows, customer rates, costs (including changes in commodity prices), future prices and growth. Such projections reflect our current regulatory rate plans taking into account regulatory arrangements to allow for future rate plan filings and recovery of investment. The projections also take account of the costs associated with our net zero plans and the associated regulatory arrangements. Our plans have proved to be reliable guides in the past and the Directors believe the estimates are appropriate.
The future economic growth rate used to extrapolate projections beyond five years is 2.1% (2020: 2.1%). The growth rate has been determined having regard to data on projected growth in US real gross domestic product (GDP). Based on the position of our business in the underlying US economy, it is appropriate for the terminal growth rate to be based upon the overall growth in real GDP and, given the nature of our operations, to extend over a long period of time. Cash flow projections have been discounted to reflect the time value of money, using a post-tax discount rate of 5.0% (2020: 4.5%). The equivalent pre-tax discount rate is 5.3% (2020: 4.5%). The discount rate represents the estimated weighted average cost of capital of these operations.
In assessing the carrying value of goodwill, we have sensitised our forecasts to factor in a reduction in revenues and lower tax costs into our cash flow forecasts, but we have not reflected the impact of additional rate base growth on future earnings. While it is possible that a key assumption in the calculation could change, the Directors believe that no reasonably foreseeable change would result in an impairment of goodwill, in view of the long-term nature of the key assumptions and the margin by which the estimated value-in-use exceeds the carrying amount. This remains the case even after taking into account the short-term effects of COVID-19, the most significant of which is an increase in bad debt charges in the short term.


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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
12. Other intangible assets
Other intangible assets mainly comprise software which is written down (amortised) over the period we expect to receive a benefit from the asset. An amortisation expense is charged to the income statement to reflect the reduced value of the asset over time. Amortisation is calculated by estimating the number of years we expect the asset to be used (useful economic life or UEL) and charging the cost of the asset to the income statement equally over this period.

Identifiable intangible assets are recorded at cost less accumulated amortisation and any provision for impairment. Other intangible assets are tested for impairment only if there is an indication that the carrying value of the assets may have been impaired. Impairments of assets are calculated as the difference between the carrying value of the asset and the recoverable amount, if lower. Where such an asset does not generate cash flows that are independent from other assets, the recoverable amount of the cash-generating unit to which that asset belongs is estimated. Impairments are recognised in the consolidated income statement and are disclosed separately. Any assets which suffered impairment in a previous period are reviewed for possible reversal of the impairment at each reporting date.
Internally generated intangible assets, such as software, are recognised only if: i) an asset is created that can be identified; ii) it is probable that the asset created will generate future economic benefits; and iii) the development cost of the asset can be measured reliably. Where no internally generated intangible asset can be recognised, development expenditure is recorded as an expense in the period in which it is incurred.
Other intangible assets are amortised on a straight-line basis over their estimated useful economic lives. Amortisation periods for other intangible assets are:
Years
Software
3 to 10
Software
£m
Assets in the course of construction
£m
Total
£m
Cost at 1 April 2019 1,784  384  2,168 
Exchange adjustments 45  18  63 
Additions 38  314  352 
Reclassifications 159  (159) — 
Cost at 1 April 2020 2,026  557  2,583 
Exchange adjustments (102) (43) (145)
Additions 414  421 
Disposals (47) (2) (49)
Reclassifications¹ 255  (240) 15 
Reclassification to held for sale (note 10) (19) —  (19)
Cost at 31 March 2021 2,120  686  2,806 
Accumulated amortisation at 1 April 2019 (1,084) —  (1,084)
Exchange adjustments (28) —  (28)
Amortisation charge for the year (176) —  (176)
Accumulated amortisation at 1 April 2020 (1,288) —  (1,288)
Exchange adjustments 61  —  61 
Amortisation charge for the year (196) —  (196)
Accumulated amortisation of disposals 44  —  44 
Reclassification to held for sale (note 10) 16  —  16 
Accumulated amortisation at 31 March 2021 (1,363) —  (1,363)
Net book value at 31 March 2021² 757  686  1,443 
Net book value at 31 March 2020 738  557  1,295 
1.    Reclassifications includes amounts transferred from property, plant and equipment (see note 13).
2.    The Group has capitalised £298 million (2020: £240 million) in relation to the Gas Business Enablement system in the US, of which £82 million (2020: £30 million) is in service and is being amortised over 10 years, with the remainder included within assets in the course of construction. A further £117 million (2020: £59 million) in relation to our new UK general ledger system is also included within assets in the course of construction as at 31 March 2021, and is expected to be amortised over 10 years once it is commissioned in July 2021.

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

13. Property, plant and equipment
Property, plant and equipment are the physical assets controlled by us. The cost of these assets primarily represents the amount initially paid for them. This includes both their purchase price and the construction and other costs associated with getting them ready for operation. A depreciation expense is charged to the income statement to reflect annual wear and tear and the reduced value of the asset over time. Depreciation is calculated by estimating the number of years we expect the asset to be used (useful economic life or UEL) and charging the cost of the asset to the income statement equally over this period.

We operate an energy networks business and therefore have a significant physical asset base. We continue to invest in our networks to maintain reliability, create new customer connections and ensure our networks are flexible and resilient. Our business plan envisages these additional investments will be funded through a mixture of cash generated from operations and the issue of new debt.

Property, plant and equipment is recorded at cost, less accumulated depreciation and any impairment losses. Cost includes the purchase price of the asset; any payroll and finance costs incurred which are directly attributable to the construction of property, plant and equipment; and the cost of any associated asset retirement obligations.
Property, plant and equipment includes assets in which the Group’s interest comprises legally protected statutory or contractual rights of use. Additions represent the purchase or construction of new assets, including capital expenditure for safety and environmental assets, and extensions to, enhancements to, or replacement of, existing assets. All costs associated with projects or activities which have not been fully commissioned at the period end are classified within assets in the course of construction.
Items within property, plant and equipment are tested for impairment only if there is some indication that the carrying value of the assets may have been impaired. Impairments of assets are calculated as the difference between the carrying value of the asset and the recoverable amount, if lower. Where such an asset does not generate cash flows that are independent from other assets, the recoverable amount of the cash-generating unit to which that asset belongs is estimated. Impairments are recognised in the income statement and if immaterial are included within the depreciation charge for the year.
(a) Asset useful economic lives
No depreciation is provided on freehold land or assets in the course of construction. Other items of property, plant and equipment are depreciated, on a straight-line basis, at rates estimated to write off their book values over their estimated useful economic lives. In assessing estimated useful economic lives, consideration is given to any contractual arrangements and operational requirements relating to particular assets. The assessments of estimated useful economic lives and residual values of assets are performed annually.
Unless otherwise determined by operational requirements, the depreciation periods for the principal categories of property, plant and equipment are, in general, as shown in the table below split between the UK and US, along with the weighted average remaining UEL for each class of property, plant and equipment (which is calculated by applying the annual depreciation charge per class of asset to the net book value of that class of asset).
Years
UK
US
Weighted average remaining
UEL
Freehold and leasehold buildings
up to 60
up to 100
9
Plant and machinery:

Electricity transmission plant and wires
15 to 100
45 to 80
30
Electricity distribution plant n/a
35 to 85
33
Electricity generation plant n/a
20 to 93
10
Interconnector plant and other
5 to 60
5 to 50
16
Gas plant – mains, services and regulating equipment
10 to 65
47 to 95
45
Gas plant – storage
5 to 40
12 to 65
12
Gas plant – meters
7 to 30
14 to 40
20
Motor vehicles and office equipment
up to 10
up to 26
4

(b) Gas asset lives
The role that gas networks play in the pathway to achieving the greenhouse gas emissions reductions targets set in the jurisdictions in which we operate is currently uncertain. However, we believe the gas assets which we own and operate today will continue to have a crucial role in maintaining security, reliability and affordability of energy beyond 2050, although the scale and purpose for which the networks will be used is dependent on technological developments and policy choices of governments and regulators.
In the UK, the useful economic life of gas mains, services and regulating assets relating to the National Transmission System (NTS) are frequently reviewed throughout the year and subject to a detailed review at the year end. The most material components of these are our pipeline assets, which are due to be fully depreciated by 2070, with other assets being depreciated over various periods between now and then. Those reviews considered a number of scenarios, which consider the implications of the UK’s net zero by 2050 legislation for the NTS. Our most recent review concluded that the most likely outcome was for the NTS network assets to remain in use beyond 2050, including in those scenarios where the greenhouse gas emissions of gas networks were largely eliminated.
With respect to our US gas distribution assets, asset lives are assessed as part of detailed depreciation studies completed as part of each separate rate proceeding. Depreciation studies consider the physical condition of assets and the expected operational life of an asset. We believe these assessments are our best estimate of the UEL of our gas network assets in the US.
The weighted average remaining UEL for our US gas distribution fixed asset base is circa 50 years, however a sizeable proportion of our assets are assumed to have UELs which extend beyond 2080. We continue to believe the lives identified by rate proceedings are the best estimate of the assets’ UELs, although we continue to keep this assumption under review as we learn more about possible future pathways towards net zero. Whilst the targets, goals and ambitions have now been formalised in legislation in the states in which we operate, there is widespread recognition that work needs to be done to define the possible future decarbonisation pathways. We continue to actively engage and support our regulators to enable the clean energy transition in a safe, reliable and affordable way.
Asset depreciation lives feed directly into our US regulatory recovery mechanisms, such that any shortening of asset lives and regulatory recovery periods as agreed with regulators should be recoverable through future rates, subject to agreement, over future periods, as part of wider considerations around ensuring the continuing affordability of gas in our service territories.
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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
13. Property, plant and equipment continued
Given the uncertainty described relating to the UELs of our gas assets, below we provide a sensitivity on the depreciation charge for our UK and US regulated segments were a shorter UEL presumed:
Increase in depreciation expense for the year ended 31 March 2021 Increase in depreciation expense for the year ended 31 March 2020
UK regulated
£m
US regulated
£m
UK regulated
£m
US regulated
£m
UELs limited to 2050 35  160  37  151 
UELs limited to 2060 12  70  13  66 
UELs limited to 2070 1  28  —  26 

Note that this sensitivity calculation excludes any assumptions regarding the residual value for our asset base and the effect shortening asset depreciation lives would be expected to have on our regulatory recovery mechanisms.
(c) Analysis of property, plant and equipment
Land and
buildings
£m
Plant and
machinery
£m
Assets
in the
course of
construction
£m
Motor
vehicles
and office
equipment
£m
Total
£m
Cost at 1 April 2019 (before transition to IFRS 16)1
3,338  53,829  5,049  930  63,146 
Right-of-use assets recognised on transition to IFRS 162
381  67  —  20  468 
Cost at 1 April 2019 (as restated) 3,719  53,896  5,049  950  63,614 
Exchange adjustments1
98  1,484  83  33  1,698 
Additions 130  464  4,029  104  4,727 
Disposals (79) (486) (9) (65) (639)
Reclassifications3,4
29  4,251  (4,381) 14  (87)
Cost at 1 April 2020 3,897  59,609  4,771  1,036  69,313 
Exchange adjustments (213) (3,308) (130) (73) (3,724)
Additions 89  328  4,023  70  4,510 
Disposals (6) (344) (26) (48) (424)
Reclassifications3
96  3,007  (3,243) 77  (63)
Reclassification to held for sale (note 10) (111) (3,231) (174) (44) (3,560)
Cost at 31 March 2021 3,752  56,061  5,221  1,018  66,052 
Accumulated depreciation at 1 April 20191
(778) (16,918) —  (591) (18,287)
Exchange adjustments1
(16) (329) —  (20) (365)
Depreciation charge for the year (92) (1,252) —  (120) (1,464)
Disposals 36  464  —  58  558 
Reclassifications3
(7) —  11 
Accumulated depreciation at 1 April 2020 (847) (18,042) —  (662) (19,551)
Exchange adjustments 37  698  —  46  781 
Depreciation charge for the year (90) (1,270) —  (116) (1,476)
Disposals —  339  —  48  387 
Reclassifications3
(5) — 
Reclassification to held for sale (note 10) 22  798  —  27  847 
Accumulated depreciation at 31 March 2021 (876) (17,482) —  (651) (19,009)
Net book value at 31 March 2021 2,876  38,579  5,221  367  47,043 
Net book value at 31 March 2020 3,050  41,567  4,771  374  49,762 
1.    Comparative amounts have been revised as described in note 1F.
2.    On 1 April 2019, £468 million of additional right-of-use assets were recognised on transition to IFRS 16. See note 37 for details.
3.    Represents amounts transferred between categories, (to)/from other intangible assets (see note 12), from inventories and reclassifications between cost and accumulated depreciation.
4.    In 2020, comprised an £87 million reduction in the gross cost of assets in the course of construction in our UK Electricity Transmission business for costs previously capitalised and accrued as due to a supplier, that were subsequently no longer payable.
2021 2020
£m £m
Information in relation to property, plant and equipment
Capitalised interest included within cost 2,233  2,118 
Contributions to cost of property, plant and equipment included within:
Trade and other payables 138  84 
Non-current liabilities 400  428 
Contract liabilities – current 66  76 
Contract liabilities – non-current 1,093  1,082 

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

13. Property, plant and equipment continued
(d) Right-of-use assets
The Group leases various properties, land, equipment and cars. With effect from 1 April 2019, new lease arrangements entered into are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group (see note 37). The right-of-use asset and associated lease liability arising from a lease are initially measured at the present value of the lease payments expected over the lease term. The lease payments include fixed payments, any variable lease payments dependent on an index or a rate, and any break fees or renewal option costs that we are reasonably certain to incur. The discount rate applied is the rate implicit in the lease or, if that is not available, then the incremental rate of borrowing for a similar term and similar security (which is determined based on observable data for borrowing rates for the specific group entity that has entered into the lease, with specific adjustments for the term of the lease and any lease-specific risk premium). The lease term takes account of exercising any extension options that are at our option if we are reasonably certain to exercise the option and any lease termination options unless we are reasonably certain not to exercise the option. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the income statement over the lease period using the effective interest rate method. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. For short-term leases (lease term of 12 months or less) and leases of low-value assets (such as computers), the Group continues to recognise a lease expense on a straight-line basis.
The table below shows the net book value of right-of-use assets included within property, plant and equipment at 31 March 2021 and 31 March 2020, split by category. The associated lease liabilities are disclosed in note 21.
31 March 2021 Land and
buildings
£m
Plant and
machinery
£m
Assets
in the
course of
construction
£m
Motor
vehicles
and office
equipment
£m
Total
£m
Net book value at 31 March 2021 365  81    184  630 
Additions 60  6    64  130 
Depreciation charge for the year (29) (16)   (68) (113)

31 March 2020
Land and
buildings
£m
Plant and
machinery
£m
Assets
in the
course of
construction
£m
Motor
vehicles
and office
equipment
£m
Total
£m
Net book value at 31 March 2020 364  95  —  225  684 
Additions 10  —  73  84 
Depreciation charge for the year (29) (16) —  (72) (117)

The following balances have been included in the income statement for the years ended 31 March 2021 and 31 March 2020 in respect of right-of-use assets:
2021 2020
£m £m
Included within net finance income and costs:
Interest expense on lease liabilities (21) (26)
Included within revenue:
Lease income¹ 390  404 
Included within operating expenses:
Expense relating to short-term and low-value leases (13) (12)
1.    Included within lease income is £376 million (2020: £353 million) of variable lease payments, the majority of which relates to the power supply arrangement entered into with LIPA (see note 3).
The total of future minimum sublease payments expected to be received under non-cancellable subleases is £104 million (2020: £94 million).

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
14. Other non-current assets
Other non-current assets include assets that do not fall into any other non-current asset category (such as goodwill or property, plant and equipment) where the benefit to be received from the asset is not due to be received until after 31 March 2022.
2021 2020
£m
£m
Other receivables 45  35 
Non-current tax assets 6  65 
Prepayments 5  19 
Accrued income¹ 237  235 
293  354 
1.    Includes accrued income in relation to property sales to the St William joint venture.

15. Financial and other investments
The Group holds a range of financial and other investments. These investments include short-term money market funds, quoted investments in equities or bonds of other companies, investments in our venture capital portfolio (National Grid Partners), bank deposits with a maturity of greater than three months, and investments that can not be readily used in operations, principally collateral deposited in relation to derivatives.

The classification of each investment held by the Group is determined based on two main factors:
its contractual cash flows – whether the assets cash flows are solely payments of the principal and interest on the financial asset on pre-determined dates or whether the cash flows are determined by other factors such as the performance of a company; and
the business model for holding the investments – whether the intention is to hold onto the investment for the longer term (collect the contractual cash flows), or to sell the asset with the intention of managing any gain or loss on sale or to manage any liquidity requirements.
The four categories of financial and other investments are as follows:
Financial assets at amortised cost – debt instruments that have contractual cash flows that are solely payments of principal and interest, and which are held within a business model whose objective is to collect contractual cash flows, are held at amortised cost. This category includes our receivables in relation to deposits and collateral;
FVOCI debt and other investments – debt investments, such as bonds, that have contractual cash flows that are solely payments of principal and interest, and which are held within a business model whose objective is both to collect the contractual cash flows and to sell the debt instruments, are measured at fair value through other comprehensive income (FVOCI), with gains or losses recognised in the consolidated statement of comprehensive income instead of through the income statement. On disposal, any gains or losses are recognised within finance income in the income statement (see note 6). Other investments include insurance contracts, measured at fair value, and held to back the present value of unfunded pension liabilities in note 25;
FVOCI equity instruments – the Group has elected to measure equity instruments that are shares held as part of a portfolio of financial instruments which back some long-term employee liabilities at FVOCI on the basis that they are not held for trading and so recognising gains and losses on these investments in the income statement would not be representative of performance in the year. On disposal, any realised gains and losses are transferred to retained earnings (see note 28); and
FVTPL investments – other financial investments are subsequently measured at fair value with any gains or losses recognised in the income statement (FVTPL). This primarily comprises our money market funds, insurance company fund investments and corporate venture capital investments held by National Grid Partners.
Financial and other investments are initially recognised on trade date. Subsequent to initial recognition, the fair values of financial assets that are quoted in active markets are based on bid prices. When independent prices are not available, fair values are determined using valuation techniques used by the relevant markets using observable market data where possible (see note 32(g) for further details).

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

15. Financial and other investments continued
2021 2020
£m
£m
Non-current
FVOCI debt and other investments 416  352 
FVOCI equity investments 99  83 
FVTPL investments 240  108 
755  543 
Current
FVTPL investments 1,768  1,278 
Financial assets at amortised cost 574  720 
2,342  1,998 
3,097  2,541 
Financial and other investments include the following:
Investments in short-term money market funds 1,412  951 
Investments held by National Grid Partners 136  97 
Other investments 103  11 
Balances that are restricted or not readily used in operations:
Collateral1
540  685 
Insurance company and non-qualified plan investments 589  542 
Cash surrender value of life insurance policies 283  220 
Other investments 34  35 
3,097  2,541 
1.    The collateral balance includes: £480 million (2020: £685 million) of collateral placed with counterparties with whom we have entered into a credit support annex to the International Swaps and Derivatives Association (ISDA) Master Agreement; £42 million (2020: £nil) of collateral paid by operating companies as required security deposits under the Connection and Use of System Code; and £18 million (2020: £nil) of restricted amounts allocated for specific projects within the National Grid Electricity System Operator.
FVTPL and FVOCI investments are recorded at fair value. The carrying value of current financial assets at amortised cost approximates their fair values, primarily due to short-dated maturities. The exposure to credit risk at the reporting date is the fair value of the financial investments. For further information on our credit risk, refer to note 32(a).
For the purposes of impairment assessment, the investments in bonds are considered to be low risk as they are investment grade securities; life insurance policies are held with regulated insurance companies; and deposits, collateral receivable and other financial assets at amortised cost are investment grade. All financial assets held at FVOCI or amortised cost are therefore considered to have low credit risk and have an immaterial impairment loss allowance equal to 12-month expected credit losses.
In determining the expected credit losses for these assets, some or all of the following information has been considered: credit ratings, the financial position of counterparties, the future prospects of the relevant industries and general economic forecasts.
No FVOCI or amortised cost financial assets have had modified cash flows during the period. There has been no change in the estimation techniques or significant assumptions made during the year in assessing the loss allowance for these financial assets. There were no significant movements in the gross carrying value of financial assets during the year that contribute to changes in the loss allowance. No collateral is held in respect of any of the financial investments in the above table. No balances are more than 30 days past due, and no balances were written off during the year.

16. Investments in joint ventures and associates
Investments in joint ventures and associates represent businesses we do not control but over which we exercise joint control or significant influence. They are accounted for using the equity method. A joint venture is an arrangement established to engage in economic activity, which the Group jointly controls with other parties and has rights to a share of the net assets of the arrangement. An associate is an entity which is neither a subsidiary nor a joint venture, but over which the Group has significant influence.
2021 2020
Associates
£m
Joint
ventures
£m
Total
£m
Associates
£m
Joint
ventures
£m
Total
£m
Share of net assets at 1 April 341  654  995  291  317  608 
Exchange adjustments (22) (36) (58) 20  12  32 
Additions 6  75  81  16  156  172 
Capitalisation of shareholder loan to Nemo Link Limited       —  176  176 
Share of post-tax results for the year 30  28  58  40  47  87 
Share of other comprehensive income of associates, net of tax 1    1  — 
Dividends received (31) (49) (80) (41) (34) (75)
Other movements¹ (96) (34) (130) 14  (20) (6)
Share of net assets at 31 March 229  638  867  341  654  995 
1.    Within associates, the other movements for the year primarily relates to the reclassification of an investment in an associate to financial investments.
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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued

16. Investments in joint ventures and associates continued
A list of joint ventures and associates including the name and proportion of ownership is provided in note 34. Transactions with and outstanding balances with joint ventures and associates are shown in note 31. The joint ventures and associates have no significant contingent liabilities to which the Group is exposed, and the Group has no significant contingent liabilities in relation to its interests in the joint ventures and associates. The Group has capital commitments of £141 million (2020: £240 million) in relation to joint ventures.
At 31 March 2021, the Group had three material joint ventures, being its 50% equity stakes in BritNed and Nemo Link Limited (Nemo) and its 51% stake in Emerald Energy Venture LLC (Emerald). The Group has one material associate, being its 26.25% investment in Millennium Pipeline Company LLC. BritNed is a joint venture with the Dutch transmission system operator, TenneT, and operates the subsea electricity link between Great Britain and the Netherlands, commissioned in 2011. Nemo is a joint venture with the Belgian transmission operator, Elia, and is a subsea electricity interconnector between the UK and Belgium, which became operational on 31 January 2019. BritNed and Nemo have reporting periods ending on 31 December with monthly management reporting information provided to National Grid. Emerald is a joint venture with Washington State Investment Board and builds and operates wind and solar assets. Emerald was acquired on 11 July 2019. Millennium Pipeline Company LLC is an associate that owns a natural gas pipeline from southern New York to the Lower Hudson Valley.
Summarised financial information as at 31 March, together with the carrying amount of the investments, is as follows:
BritNed Development
Limited
Millennium Pipeline Company LLC
Nemo Link
Limited
Emerald Energy
Venture LLC
2021 2020 2021 2020 2021 2020 2021 2020
£m
£m
£m
£m
£m
£m
£m
£m
Statement of financial position
Non-current assets 409  399  795  910  536  582  559  435 
Cash and cash equivalents 47  54  27  33  31  26  112  66 
All other current assets 24  24  26  8  12 
Non-current liabilities (81) (45) (256) (315) (30) (29) (286) (232)
Current liabilities (22) (16) (38) (43) (19) (10) (27) (2)
Net assets 377  396  552  611  526  574  370  273 
Group’s ownership interest
in joint venture/associate
189  198  145  160  263  287  189  139 
Group adjustment: elimination
of profits on sales to joint venture
  —    —    —  (23) (10)
Carrying amount of the Group’s investment 189  198  145  160  263  287  166  129 

BritNed Development
Limited
Millennium Pipeline Company LLC
Nemo Link
Limited
Emerald Energy
Venture LLC
2021 2020 2021 2020 2021 2020 2021 2020
£m
£m
£m
£m
£m
£m
£m
£m
Income statement
Revenue 72  80  199  206  66  45  28  19 
Depreciation and amortisation (15) (14) (43) (46) (24) (23) (14) (7)
Other costs (15) (10) (21) (20) (6) (8) (22) (10)
Operating profit/(loss) 42  56  135  140  36  14  (8)
Net interest expense (1) —  (18) (22)   —    (3)
Profit/(loss) before tax 41  56  117  118  36  14  (8) (1)
Income tax expense (11) (10)   —  (14) (2)   — 
Profit/(loss) for the year 30  46  117  118  22  12  (8) (1)
Group’s share of profit/(loss) 15  23  31  31  11  6  (4) (1)
Group adjustment: tax charge   —  (9) (9)   —  1  — 
Group’s share of post-tax results for the year 15  23  22  22  11  (3) (1)

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

17. Derivative financial instruments
Derivatives are financial instruments that derive their value from the price of an underlying item such as interest rates, foreign exchange rates, credit spreads, commodities, equities or other indices. In accordance with policies approved by the Board, derivatives are transacted generally to manage exposures to fluctuations in interest rates, foreign exchange rates and commodity prices. Our derivatives balances comprise two broad categories:
financing derivatives: These are used to manage our exposure to interest rates and foreign exchange rates. Specifically, we use these derivatives to manage our financing portfolio, holdings in foreign operations and contractual operational cash flows; and
commodity contract derivatives: These are used to manage our US customers’ exposure to price and supply risks. Some forward contracts for the purchase of commodities meet the definition of derivatives. We also enter into derivative financial instruments linked to commodity prices, including index futures, options and swaps, which are used to manage market price volatility.

Derivatives are initially recognised at fair value and subsequently remeasured to fair value at each reporting date. Changes in fair values are recorded in the period they arise, in either the consolidated income statement or other comprehensive income. Where the gains or losses recorded in the income statement arise from changes in the fair value of derivatives to the extent that hedge accounting is not applied or is not fully effective, these are recorded as remeasurements, detailed in notes 5 and 6. Where the fair value of a derivative is positive it is carried as a derivative asset, and where negative as a derivative liability.
The fair value of derivative financial instruments is calculated by taking the present value of future cash flows, primarily incorporating market observable inputs. The various inputs include foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies, interest rate and inflation curves, the forward rate curves of underlying commodities, and for those positions that are not fully cash collateralised the credit quality of the counterparties.
Certain clauses embedded in non-derivative financial instruments or other contracts are presented as derivatives because they impact the risk profile of their host contracts and they are deemed to have risks or rewards not closely related to those host contracts.
Further information on how derivatives are valued and used for risk management purposes is presented in note 32. Information on commodity contracts and other commitments not meeting the definition of derivatives is presented in note 30.
The fair values of derivatives by category are as follows:
2021 2020
Assets
£m
Liabilities
£m
Total
£m
Assets
£m
Liabilities
£m
Total
£m
Current 457  (145) 312  93  (380) (287)
Non-current 542  (754) (212) 1,249  (954) 295 
999  (899) 100  1,342  (1,334)
Financing derivatives 942  (767) 175  1,267  (1,134) 133 
Commodity contract derivatives 57  (132) (75) 75  (200) (125)
999  (899) 100  1,342  (1,334)

(a) Financing derivatives
The fair values of financing derivatives by type are as follows:
2021 2020
Assets
£m
Liabilities
£m
Total
£m
Assets
£m
Liabilities
£m
Total
£m
Interest rate swaps 325  (159) 166  556  (337) 219 
Cross-currency interest rate swaps 601  (351) 250  643  (514) 129 
Foreign exchange forward contracts¹ 16  (74) (58) 58  (39) 19 
Inflation-linked swaps   (183) (183) —  (234) (234)
Equity options       10  (10) — 
942  (767) 175  1,267  (1,134) 133 
1.    Included within the foreign exchange forward contracts balance are £32 million (2020: £3 million) of derivative liabilities in relation to the hedging of capital expenditure and a deal-contingent foreign exchange forward contract liability of £9 million (2020: £nil) in relation to the disposal of NECO (see note 10).
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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
17. Derivative financial instruments continued
(a) Financing derivatives continued
The maturity profile of financing derivatives is as follows:
2021 2020
Assets
£m
Liabilities
£m
Total
£m
Assets
£m
Liabilities
£m
Total
£m
Current
Less than 1 year 428  (70) 358  62  (254) (192)
428  (70) 358  62  (254) (192)
Non-current
In 1 to 2 years 10  (14) (4) 480  (51) 429 
In 2 to 3 years 24  (12) 12  13  (5)
In 3 to 4 years 62  (80) (18) 20  (28) (8)
In 4 to 5 years 4  (42) (38) 31  (109) (78)
More than 5 years 414  (549) (135) 661  (687) (26)
514  (697) (183) 1,205  (880) 325 
942  (767) 175  1,267  (1,134) 133 

The notional contract amounts of financing derivatives by type are as follows:
2021 2020
£m
£m
Interest rate swaps (2,259) (3,101)
Cross-currency interest rate swaps (8,389) (8,097)
Foreign exchange forward contracts (4,651) (3,284)
Inflation-linked swaps (500) (500)
Equity options   (800)
(15,799) (15,782)

Derivatives with a notional value of £2,810 million, pay or receive cash flows that reference GBP LIBOR of £2,041 million (maturing between 2023 and 2040) or USD LIBOR of £769 million (maturing between 2023 and 2026). LIBOR is being replaced as an interest rate benchmark by alternative reference rates and therefore negotiations are underway to amend these contracts, with any related hedge documentation then being amended. At 31 March 2021, none of the contracts had yet been amended.
(b) Commodity contract derivatives
The fair values of commodity contract derivatives by type are as follows:
2021 2020
Assets
£m
Liabilities
£m
Total
£m
Assets
£m
Liabilities
£m
Total
£m
Commodity purchase contracts accounted for as derivative contracts
Forward purchases of gas 44  (94) (50) 64  (108) (44)
Derivative financial instruments linked to commodity prices
Electricity capacity 2    2  —  —  — 
Electricity swaps 10  (33) (23) (83) (79)
Electricity options   (1) (1) —  —  — 
Gas swaps 1  (3) (2) (8) (1)
Gas options   (1) (1) —  (1) (1)
57  (132) (75) 75  (200) (125)
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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

17. Derivative financial instruments continued
(b) Commodity contract derivatives continued
The maturity profile of commodity contract derivatives is as follows:
2021 2020
Assets
£m
Liabilities
£m
Total
£m
Assets
£m
Liabilities
£m
Total
£m
Current
Less than one year 29  (75) (46) 31 (126) (95)
29  (75) (46) 31 (126) (95)
Non-current
In 1 to 2 years 7  (24) (17) 8 (35) (27)
In 2 to 3 years 7  (16) (9) 9 (24) (15)
In 3 to 4 years 7  (7)   8 (12) (4)
In 4 to 5 years 6  (5) 1  7 (1) 6
More than 5 years 1  (5) (4) 12 (2) 10
28  (57) (29) 44 (74) (30)
57  (132) (75) 75 (200) (125)

The notional quantities of commodity contract derivatives by type are as follows:
2021 2020
Forward purchases of gas1
36m Dth
102m Dth
Electricity swaps
12,321 GWh
12,836 GWh
Gas swaps
47m Dth
89m Dth
Gas options
40m Dth
26m Dth
1.    Forward gas purchases have terms up to five years (2020: four years). The contractual obligations under these contracts are £104 million (2020: £128 million).

18. Inventories and current intangible assets
Inventories represent assets that we intend to use in order to generate revenue in the short term, either by selling the asset itself (for example, fuel stocks) or by using it to fulfil a service to a customer or to maintain our network (consumables).

Inventories are stated at the lower of weighted average cost and net realisable value. Where applicable, cost comprises direct materials and direct labour costs as well as those overheads that have been incurred in bringing the inventories to their present location and condition.
Emission allowances, principally relating to the emissions of carbon dioxide in the UK and sulphur and nitrous oxides in the US, are recorded as intangible assets within current assets. They are initially recorded at cost and subsequently at the lower of cost and net realisable value. A liability is recorded in respect of the obligation to deliver emission allowances, and emission charges are recognised in the income statement in the period in which emissions are made.
2021 2020
£m
£m
Fuel stocks 94  151 
Raw materials and consumables 253  265 
Current intangible assets – emission allowances 92  133 
439  549 

There is a provision for obsolescence of £10 million against inventories as at 31 March 2021 (2020: £21 million).

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
19. Trade and other receivables
Trade and other receivables include amounts which are due from our customers for services we have provided, accrued income which has not yet been billed, prepayments, contract assets where certain milestones are required to be fulfilled and other receivables that are expected to be settled within twelve months.

Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost, less any appropriate allowances for estimated irrecoverable amounts.
2021 2020
£m
£m
Trade receivables 1,503  1,571 
Accrued income 863  849 
Prepayments 387  408 
Contract assets 13  — 
Other receivables 153  158 
2,919  2,986 

Trade receivables are non-interest-bearing and generally have a 30 to 90 days term. Due to their short maturities, the fair value of trade and other receivables approximates their carrying value. The maximum exposure of trade receivables to credit risk is the gross carrying amount of £2,152 million (2020: £2,063 million).
Provision for impairment of receivables
A provision for credit losses is recognised at an amount equal to the expected credit losses that will arise over the lifetime of the trade receivables and accrued income.
2021 2020
£m
£m
At 1 April 512  394 
Exchange adjustments (57) 20 
Charge for the year, net of recoveries 326  234 
Uncollectible amounts written off (59) (136)
Reclassification to held for sale (note 10) (50) — 
At 31 March 672  512 

The trade receivables balance, accrued income balance and provisions balance split by geography are as follows:
As at 31 March 2021 As at 31 March 2020
UK US Total UK US Total
£m £m £m £m £m £m
Trade receivables 227  1,925  2,152  227  1,836  2,063 
Accrued income 547  339  886  461  408  869 
Provision for impairment of receivables and accrued income (23) (649) (672) (40) (472) (512)

There are no retail customers in the UK businesses. A provision matrix is not used in the UK as an assessment of expected losses on individual debtors is performed, and the provision is not material.
In the US, £1,852 million (2020: £1,852 million) of the trade receivables and accrued income balance is attributable to retail customers. For non-retail US customer receivables, a provision matrix is not used and expected losses are determined on individual debtors.
The provision for retail customer receivables in the US is calculated based on a series of provision matrices which are prepared by regulated entity and by customer type. The expected loss rates in each provision matrix are based on historical loss rates adjusted for current and forecasted economic conditions at the balance sheet date. The inclusion of forward-looking information in the provision matrix setting process under IFRS 9 resulted in loss rates that reflect expected future economic conditions and the recognition of an expected loss on all debtors even where no loss event has occurred.
In March 2020, the Group’s US distribution businesses ceased certain customer cash collection activities in response to regulatory instructions and to changes in State, Federal and City level regulations and guidance, and actions to minimise risk to the Group’s employees as a result of COVID-19. The Group also ceased customer termination activities as requested by relevant local authorities. Certain collection activities did resume during the year where permitted, but this was a small proportion compared to normal levels.
In calculating our provision for impairment of receivables at 31 March 2021, we were able to incorporate the actual cash collection levels experienced since the start of the pandemic to determine the expected loss rates per category of outstanding receivable by operating company, which is summarised in the provision matrix shown below. For the year ended 31 March 2020, there was limited cash collection data available with regards to the impact that COVID-19 would have on collection of receivables. Therefore, in order to reflect the impact of COVID-19 into our calculation of the charge for the year, we considered the macroeconomic data including unemployment levels and our previous experience regarding debtor recoverability during and in the aftermath of the 2008/09 financial crisis (which impacted all of our service territories) and that following Superstorm Sandy in 2012 which impacted our downstate New York gas business specifically.

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

19. Trade and other receivables continued
Based on our review of these factors, we concluded that a reasonable range for the provisions recognised in the current year would be £320 million to £342 million ($440 million to $470 million), which considered the continued application of our previous experience regarding debtor recoverability in the aftermath of historical impactful events, as well as the collections experience seen since the start of the pandemic, and concluded that a total charge of £326 million represented our best estimate based on the information available. For the year ended 31 March 2020, we determined that the additional provision recognised in light of the cessation of customer terminations and collections following the moratoriums introduced would lie between £81 million and £161 million ($100 million and $200 million), and concluded an additional COVID-19 related charge of £117 million represented our best estimate based on the information available, primarily as this represented an impact twice as severe as Superstorm Sandy, adjusted to incorporate all service territories impacted.
The average expected loss rates and gross balances for the retail customer receivables in our US operations are set out below:
2021 2021 2020 2020
%
£m
%
£m
Accrued income 7  322  395 
0 – 30 days past due 7  580  651 
30 – 60 days past due 24  155  14  194 
60 – 90 days past due 36  108  29  109 
3 – 6 months past due 52  140  47  121 
6 – 12 months past due 66  180  63  105 
Over 12 months past due 71  367  79  277 
1,852  1,852 

US retail customer receivables are not collateralised. Trade receivables are written off when regulatory requirements are met. Write-off policies vary between jurisdictions as they are aligned with the local regulatory requirements, which differ between regulators. There were no significant amounts written off during the period that were still subject to enforcement action. Our internal definition of default is aligned with that of the individual regulators in each jurisdiction.
For further information on our wholesale and retail credit risk, refer to note 32(a).

20. Cash and cash equivalents
Cash and cash equivalents include cash balances, together with short-term investments with an original maturity of less than three months that are readily convertible to cash. Bank overdrafts are only shown net within cash and cash equivalents when there is a legal right to offset unconditionally and an intention to settle net has been demonstrated by the physical movement of cash.

Net cash and cash equivalents reflected in the cash flow statement are net of bank overdrafts, which are reported in borrowings. The carrying amounts of cash and cash equivalents and bank overdrafts approximate their fair values.
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for periods varying between one day and three months, depending on the immediate cash requirements, and earn interest at the respective short-term deposit rates.
Cash and cash equivalents held in currencies other than sterling have been converted into sterling at year-end exchange rates. For further information on currency exposures, refer to note 32(c).
2021 2020
£m £m
Cash at bank 117  73 
Short-term deposits 40  — 
Cash and cash equivalents 157  73 

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
21. Borrowings
We borrow money primarily in the form of bonds and bank loans. These are for a fixed term and may have fixed or floating interest rates or are linked to RPI. We use derivatives to manage risks associated with interest rates, inflation rates and foreign exchange. Lease liabilities are also included within borrowings.
Our price controls and rate plans require us to fund our networks within a certain ratio of debt to equity or regulatory value and, as a result, we have issued a significant amount of debt. As we continue to invest in our networks, the value of debt is expected to increase over time. To maintain a strong balance sheet and to allow us to access capital markets at commercially acceptable interest rates, we balance the amount of debt we issue with the value of our assets, and we take account of certain other metrics used by credit rating agencies.

All borrowings are measured at amortised cost, with the exception of one current liability which is measured at fair value through profit and loss in order to eliminate a measurement mismatch.
Borrowings, which include interest-bearing, zero-coupon and inflation-linked debt, overdrafts and collateral payable, are initially recorded at fair value. This normally reflects the proceeds received (net of direct issue costs for liabilities measured at amortised cost). Subsequently, borrowings are stated either: i) at amortised cost; or ii) at fair value though profit and loss. Where a borrowing is held at amortised cost, any difference between the proceeds after direct issue costs and the redemption value is recognised over the term of the borrowing in the income statement using the effective interest method. For the liability held at fair value through profit and loss, interest is calculated using the effective interest method.
Where a borrowing or liability is held at fair value, changes in the fair value of the borrowing due to changes in the issuer’s credit risk are recorded in the own credit reserve within equity (see note 28). All other changes in the fair value of the liability are recognised in the income statement within remeasurements (see notes 5 and 6).
2021 2020
£m
£m
Current
Bank loans 1,022  1,244 
Bonds¹ 1,987  1,446 
Commercial paper 628  1,269 
Lease liabilities 99  112 
Other loans 1 
3,737  4,072 
Non-current
Bank loans 2,532  2,819 
Bonds 24,209  23,094 
Lease liabilities 586  623 
Other loans 156  186 
27,483  26,722 
Total borrowings 31,220  30,794 
1.    Includes a liability held at fair value through profit and loss of £682 million (2020: £741 million).
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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

21. Borrowings continued
Total borrowings are repayable as follows:
2021 2020
£m
£m
Less than 1 year 3,737  4,072
In 1 to 2 years 1,745  2,212
In 2 to 3 years 889  1,664
In 3 to 4 years 2,206  757
In 4 to 5 years 1,833  2,122
More than 5 years:
By instalments 927  870
Other than by instalments 19,883  19,097
31,220  30,794

The fair value of borrowings at 31 March 2021 was £34,676 million (2020: £34,174 million). Where market values were available, the fair value of borrowings (Level 1) was £20,333 million (2020: £14,059 million). Where market values were not available, fair value of borrowings (Level 2) was £14,343 million (2020: £20,115 million), and calculated by discounting cash flows at prevailing interest rates. The notional amount outstanding of the debt portfolio at 31 March 2021 was £31,010 million (2020: £30,422 million). There have been no new issuances since the year end.
In 2020, the assets of the Colonial Gas Company were merged with the Boston Gas Company, and have been ringfenced post-merger. Certain gas distribution assets of NECO are subject to liens and other charges and are provided as collateral over borrowings totalling £67 million at 31 March 2021 (2020: £84 million), all of which have been classified as held for sale as at 31 March 2021 (see note 10).
Collateral is placed with or received from any derivative counterparty where we have entered into a credit support annex to the ISDA Master Agreement once the current mark-to-market valuation of the trades between the parties exceeds an agreed threshold. Included in current bank loans is £582 million (2020: £785 million) in respect of cash received under collateral agreements. For further details of our borrowing facilities, refer to note 33. For further details of our bonds in issue, please refer to the debt investor section of our website. Unless included herein, the information on our website is unaudited.
Certain borrowings, primarily some of our USD denominated bank loans and company car lease contracts, have payments that are linked to LIBOR. LIBOR is being replaced as an interest rate benchmark by alternative reference rates and therefore negotiations are underway to amend these contracts. At 31 March 2021, none of the contracts had yet been amended. £328 million of bank loans affected by GBP LIBOR, £59 million of bank loans affected by USD LIBOR and £173 million of lease liabilities affected by USD LIBOR will be impacted.
Financial liability at fair value through profit and loss
The financial liability designated at fair value through profit and loss is analysed as follows:
i.    the fair value of the liability was £682 million (2020: £741 million), which includes cumulative changes in fair value attributable to changes in credit risk recognised in other comprehensive income, post tax of £1 million (2020: £10 million);
ii.    the amount repayable at maturity in November 2021 is £684 million (2020: £759 million); and
iii.    the difference between carrying amount and contractual amount at maturity is £2 million (2020: £18 million).
This liability has been reclassified in order to eliminate a measurement mismatch with derivatives which provide an economic hedge. The associated derivatives are collateralised and do not contain significant exposure to our own credit risk. The presentation of credit risk in other comprehensive income does not, therefore, create or enlarge an accounting mismatch in profit or loss.
The change in the fair value attributable to a change in credit risk is calculated as the difference between the total change in the fair value of the liability and the change in the value of the liability due to changes in market risk factors alone. The change in the fair value due to market risk factors was calculated using benchmark yield curves as at the end of the reporting period holding the credit risk margin constant. The fair value of the liability was calculated using observed market prices.
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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
21. Borrowings continued
Lease liabilities
The Group adopted IFRS 16 on 1 April 2019, which resulted in the recognition of £474 million of additional lease liabilities. Refer to note 37 for details.
Lease liabilities are initially measured at the present value of the lease payments expected over the lease term. The discount rate applied is the rate implicit in the lease or if that is not available, then the incremental rate of borrowing for a similar term and similar security. The lease term takes account of exercising any extension options that are at our option if we are reasonably certain to exercise the option and any lease termination options unless we are reasonably certain not to exercise the option. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the income statement over the lease period using the effective interest rate method.

2021 2020
£m
£m
Gross lease liabilities are repayable as follows:

Less than 1 year 114  132 
1 to 5 years 321  361 
More than 5 years 464  481 
899  974 
Less: finance charges allocated to future periods (214) (239)
685  735 
The present value of lease liabilities are as follows:
Less than 1 year 99  112 
1 to 5 years 267  297 
More than 5 years 319  326 
685  735 


22. Trade and other payables
Trade and other payables include amounts owed to suppliers, tax authorities and other parties which are due to be settled within 12 months. The total also includes deferred amounts, some of which represent monies received from customers but for which we have not yet delivered the associated service. These amounts are recognised as revenue when the service is provided.

Trade and other payables are initially recognised at fair value and subsequently measured at amortised cost, with the exception of contingent consideration, which is subsequently measured at fair value.
2021 2020
£m
£m
Trade payables 2,165  2,205 
Deferred payables 154  137 
Customer contributions¹ 138  84 
Social security and other taxes 140  202 
Contingent consideration (note 38) 39  30 
Other payables 881  944 
3,517  3,602 
1.    Relates to amounts received from government-related entities for connecting to our networks, where we have obligations remaining under the contract.
Due to their short maturities, the fair value of trade payables approximates their carrying value.

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

23. Contract liabilities
Contract liabilities primarily relate to the advance consideration received from customers for construction contracts, mainly in relation to connections, for which revenue is recognised over the life of the asset.



2021 2020
£m
£m
Current 66  76 
Non-current 1,094  1,082 
1,160  1,158 

Significant changes in the contract liabilities balances during the period are as follows:
2021 2020
£m
£m
As at 1 April 1,158  994 
Exchange adjustments (65) 39 
Revenue recognised that was included in the contract liability balance at the beginning of the period (96) (60)
Increases due to cash received, excluding amounts recognised as revenue during the period 262  185 
Reclassification to held for sale (note 10) (99) — 
At 31 March 1,160  1,158 



24. Other non-current liabilities
Other non-current liabilities include deferred income and customer contributions which will not be recognised as income until after 31 March 2022. It also includes contingent consideration and other payables that are not due until after that date.

Other non-current liabilities are initially recognised at fair value and subsequently measured at amortised cost, with the exception of contingent consideration, which is subsequently measured at fair value.
2021 2020
£m
£m
Deferred income¹ 78  101 
Customer contributions² 400  428 
Contingent consideration (note 38) 18  44 
Other payables 347  318 
843  891 
1.    Principally the deferral of profits relating to the sale of property, which we expect to recognise in future years.
2.    Relates to amounts received from government-related entities for connecting to our networks, where we have obligations remaining under the contract.
There is no material difference between the fair value and the carrying value of other payables.

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
25. Pensions and other post-retirement benefits
All of our employees are eligible to participate in a pension plan. We have defined contribution (DC) and defined benefit (DB) pension plans in the UK and the US. In the US we also provide healthcare and life insurance benefits to eligible employees, post-retirement. The fair value of associated plan assets and present value of DB obligations are updated annually in accordance with IAS 19 (revised). We separately present our UK and US pension plans to show geographical split. Below we provide a more detailed analysis of the amounts recorded in the primary financial statements and the actuarial assumptions used to value the DB obligations.

National Grid’s UK pension arrangements are held in separate Trustee administered funds. The arrangements are managed by Trustee companies with boards consisting of company- and member-appointed directors. In the US, the assets of the plans are held in trusts and administered by the Retirement Plans Committee comprised of appointed employees of the Company.

Defined contribution plans
These plans are designed to provide members with a pension pot for their retirement. The risks associated with these plans are assumed by the member.
Payments to these DC plans are charged as an expense as they fall due. There is no legal or constructive obligation on National Grid to pay additional contributions into a DC plan if the fund has insufficient assets to pay all employees’ benefits relating to employee service in the current and prior periods.
In March 2021, National Grid announced its intention to move to a new DC plan from 1 April 2021.
The National Grid YouPlan (YouPlan)
Up until 31 March 2021, YouPlan was the qualifying UK pension plan that was used for automatic enrolment of new hires. National Grid paid contributions into YouPlan to provide DC benefits on behalf of employees, providing a double match of member contributions, up to a maximum Company contribution of 12% of salary as well as the cost of administration and insured benefits.
National Grid UK Retirement Plan (NGUKRP)
The NGUKRP is part of a Master Trust Arrangement managed by Legal & General and is National Grid’s qualifying UK pension plan from 1 April 2021 and is used for the automatic enrolment of new hires. From April 2021, National Grid pays contributions into the NGUKRP to provide DC benefits on behalf of its employees, providing a double match of member contributions up to a maximum Company contribution of 12% of salary.
Defined benefit plans
On retirement, members of DB plans receive benefits whose value is dependent on factors such as salary and length of pensionable service. National Grid’s obligation in respect of DB pension plans is calculated separately for each DB plan by projecting the estimated amount of future benefit payments that employees have earned for their pensionable service in the current and prior periods. These future benefit payments are discounted to determine the present value of the liabilities. Current service cost and any unrecognised past service cost are recognised immediately. The discount rate is set with reference to the yield curve on high-quality corporate bonds at the valuation date.
Advice is taken from independent actuaries relating to the appropriateness of the key assumptions applied, including life expectancy, expected salary and pension increases, and inflation. Comparatively small changes in the assumptions used may have a significant effect on the amounts recognised in the consolidated income statement, the consolidated statement of other comprehensive income and the net asset or liability recognised in the consolidated statement of financial position.
Remeasurements of pension assets and post-retirement benefit obligations are recognised in full in the period in which they occur in the consolidated statement of other comprehensive income.
The COVID-19 pandemic
The COVID-19 pandemic has had a global impact on economies, including on equity and bond markets. This directly affects the value of assets held in our pension schemes, as well as the value of National Grid’s DB obligations. Our UK DB plans operate low-risk investment strategies with limited exposure to equities and other return-seeking assets, reducing the impact of investment volatility. Additionally, the large allocation to bonds leads to significant hedging against changes in the value of DB obligations that result from falling bond yields. Our US plans also hedge much of this market risk, however they do have larger asset allocations in return-seeking assets such as equities. Following the start of the pandemic, US equity markets have performed strongly and therefore our US DB plans have remained in a relatively strong funding position. The markets for unquoted investments are illiquid and therefore given the market volatility at 31 March 2020, there was a risk that the valuations provided by fund managers as at 31 March 2020 were based on valuation models that had unobservable inputs, making them subject to additional estimation uncertainty. Such uncertainty has reduced as at 31 March 2021.

UK pensions plans
The principal UK DB pensions plans are the National Grid UK Pension Scheme (NGUKPS) and the National Grid Electricity Group of the Electricity Supply Pension Scheme (NGEG of ESPS). In the US, we have four principal plans and various healthcare and life insurance plans.
National Grid UK Pension Scheme (NGUKPS)
NGUKPS consists of two legally and actuarially separate sections: Section A and Section B. This follows the transfer of Section C, a section supported by an unrelated third party, out of NGUKPS in September 2020. The plan closed to new hires on 1 April 2002.

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

25. Pensions and other post-retirement benefits continued
Scheme funding
The arrangements are subject to independent actuarial funding valuations at least every three years, and following consultation and agreement with us, the qualified actuary certifies the employers’ contributions, which, together with the specified contributions payable by the employees and proceeds from the plans’ assets, are expected to be sufficient to fund the benefits payable.
The results of the most recent actuarial valuations are shown below. See page 176 for the assumptions used for IAS 19 (revised) purposes.
Section A of NGUKPS Section B of NGUKPS
NGEG of ESPS
Latest full actuarial valuation 31 March 2019 31 March 2019 31 March 2019
Actuary Willis Towers Watson Willis Towers Watson Aon Hewitt
Market value of plan assets at latest valuation £6,551 million £5,765 million £3,144 million
Actuarial value of benefits due to members £6,502 million £5,831 million £3,381 million
Market value as percentage of benefits 101% 99% 93%
Funding surplus/(deficit) £49 million (£66 million) (£237 million)
Section A
Following the latest actuarial valuation at 31 March 2019, Section A remains in surplus, and so no deficit funding contributions are required. National Grid and the Trustees have agreed a schedule of contributions whereby the employers will continue to contribute 51.8% of pensionable salary, less member contributions, in respect of future benefit accrual.
Section B
The latest full actuarial valuation at 31 March 2019 determined that Section B was in deficit. To recover the deficit, National Grid paid recovery plan payments of approximately £34 million per annum over two years to September 2020. In addition, the employers contribute 51.4% of pensionable salary, less member contributions, in respect of future benefit accrual.
Investment de-risking transactions
In December 2020, the Trustees of the NGUKPS exchanged £0.8 billion of gilts from Section A for a buy-in transaction with Rothesay Life. This follows two similar arrangements entered into in the previous year. In Section A, £2.8 billion of gilts were exchanged for a buy-in policy with Rothesay Life, and in Section B, £1.6 billion of gilts were exchanged for a buy-in policy with Legal & General.
These policies provide bulk annuities in respect of some pensioner and dependant members of NGUKPS and were funded by existing assets. All policies are held by the Trustee. For each transaction, the pricing of the policies was highly competitive; however, under IAS 19 the methodology for calculating the value of the buy-ins (as an asset held by the pension plan) differs from the price paid. This resulted in the recognition of actuarial losses on purchase of £0.1 billion (2020: £0.7 billion), recorded within the consolidated statement of other comprehensive income.
National Grid Electricity Group of the Electricity Supply Pension Scheme
The last full actuarial valuation for the NGEG of the ESPS determined that the plan was in deficit. To recover the deficit, National Grid agreed to a payment plan of £54 million per annum over three years to 2022, and a final payment of £26 million in 2023, all adjusted for changes in the Retail Price Index (RPI). In addition, National Grid contributes 44% of pensionable salary, less member contributions, in respect of the ongoing service cost. The plan closed to new hires from 1 April 2006.
The plan holds a longevity insurance contract which covers improvements in longevity, providing long-term protection to the scheme, should some pensioner and dependant members live longer than currently expected.
Administration costs
National Grid pays additional contributions to Section B of NGUKPS and NGEG of ESPS in respect of the costs of plan administration and the Pension Protection Fund (PPF) levies. Section A of NGUKPS will fund these costs from the Section’s assets. Up to 31 March 2020, National Grid was responsible for the costs of plan administration and the Pension Protection Fund (PPF) levies for both Sections A and B of NGUKPS and NGEG of ESPS.

Security arrangements
National Grid has also established security arrangements with charges in favour of the Trustees.
Section A of NGUKPS Section B of NGUKPS NGEG of ESPS
Value of security arrangements at 31 March 2021 £186 million £nil £100 million
Principal supporting employers
National Grid plc and National Grid UK Limited
National Grid Gas plc (NGG)
National Grid Electricity Transmission plc (NGET)
Additional amounts payable1 at 31 March 2021
n/a
A maximum of £175 million
A maximum of £500 million
1.    These amounts are payable if certain trigger events occur which have been individually agreed between the plans and their relevant supporting employers.

All of the security is currently provided in the form of surety bonds, but may also be provided as letters of credit or cash. The assets held as security will be paid to the respective section or plan in the event that the relevant supporting employer is subject to an insolvency event or fails to make the required contributions; and applicable to NGEG of ESPS only, if NGET loses its licence to operate under relevant legislation. Counter indemnities have also been taken out to ensure the obligations will be fulfilled.
In addition, a guarantee of £1 billion has been provided to Section A of NGUKPS, with the payment contingent on insolvency or on failure to pay pension obligations to Section A and can be claimed against National Grid plc, National Grid Holdings One plc or Lattice Group Limited (up to £1 billion in total).

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
25. Pensions and other post-retirement benefits continued
US pension plans
National Grid has multiple DC pension plans which allow employee as well as Company contributions. Non-union employees hired after 1 January 2011, as well as new hire represented union employees, receive a core contribution into the DC plan, irrespective of the employee’s contribution into the plan.
National Grid sponsors four non-contributory qualified DB pension plans, which provide vested union employees, and vested non-union employees hired before 1 January 2011 with retirement benefits within prescribed limits as defined by the US Internal Revenue Service. National Grid also provides non-qualified DB pension arrangements for a section of current and former employees, which are closed to new entrants. Benefits under the DB plans generally reflect age, years of service and compensation and are paid in the form of an annuity or lump sum. An independent actuary performs valuations annually. The Company funds the DB plans by contributing no less than the minimum amount required, but no more than the maximum tax-deductible amount allowed under US Internal Revenue Service regulations. The range of contributions determined under these regulations can vary significantly depending upon the funded status of the plans. At present, there is some flexibility in the amount that is contributed on an annual basis. In general, the Company’s policy for funding the US pension plans is to contribute the amounts collected in rates and capitalised in the rate base during the year, to the extent that the funding is no less than the minimum amount required. For the current financial year, these contributions amounted to approximately £110 million (2020: £153 million).
US retiree healthcare and life insurance plans
National Grid provides healthcare and life insurance benefits to eligible employees, post-retirement. Eligibility is based on certain age and length of service requirements, and in most cases, retirees contribute to the cost of their healthcare coverage. In the US, there is no governmental requirement to pre-fund post-retirement healthcare and life insurance plans. However, in general, the Company’s policy for funding the US retiree healthcare and life insurance plans is to contribute amounts collected in rates and capitalised in the rate base during the year. For the current financial year, these contributions amounted to £26 million (2020: £18 million).
For the last few years, it has been the Company’s policy to primarily direct contributions to the DB pension plans due to concerns over tax deductible limitations relating to the retiree and healthcare and life insurance plans.
Actuarial assumptions
The Company has applied the following financial assumptions in assessing DB liabilities:
UK pensions
2021 2020 2019
%
%
%
Discount rate – past service 2.00  2.35  2.40 
Discount rate – future service 2.15  2.35  2.45 
Salary increases 3.40  2.90  3.50 
Rate of increase in RPI – past service 3.15  2.65  3.25 
Rate of increase in RPI – future service 3.00  2.45  3.20 

At 31 March 2021 and 31 March 2020, single equivalent financial assumptions are shown above for presentational purposes, although full yield curves have been used in our calculations. In 2019, single equivalent financial assumptions were set which reflected the average duration for the aggregate past and future service obligations.
The discount rate is determined by reference to high-quality UK corporate bonds at the reporting date. The rate of increase in salaries has been set using a promotional scale where appropriate. The rates of increases stated are not indicative of historical increases awarded or a guarantee of future increase, but merely an appropriate assumption used in assessing DB liabilities. RPI is the key assumption that determines assumed increases in pensions in payment and deferment in the UK only.
US pensions
US other post-retirement benefits
2021 2020 2019 2021 2020 2019
%
%
%
%
%
%
Discount rate 3.25  3.30  3.95  3.25  3.30  3.95 
Salary increases 4.30  3.50  3.50  4.30  3.50  3.50 
Initial healthcare cost trend rate n/a n/a n/a 7.10  7.00  7.25 
Ultimate healthcare cost trend rate n/a n/a n/a 4.50  4.50  4.50 

Discount rates for US pension liabilities have been determined by reference to appropriate yields on high-quality US corporate bonds at the reporting date based on the duration of plan liabilities. The healthcare cost trend rate is expected to reach the ultimate trend rate by 2030 (2020: 2030). The table below sets out the projected life expectancies adopted for the UK and US pension arrangements:
2021 2020 2019
UK
years
US
years
UK
years
US
years
UK
years
US
years
Assumed life expectations for a retiree age 65
Males 21.8 21.6 22.1 20.9 22.0 22.1
Females 23.7 24.0 23.8 23.4 23.6 24.2
In 20 years:
Males 23.1 23.2 23.3 22.5 23.3 23.7
Females 25.2 25.5 25.3 25.1 25.2 25.9
176


National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

25. Pensions and other post-retirement benefits continued
Maturity profile of DB obligations
The weighted average duration of the DB obligation for each category of plan is 14 years for UK pension plans; 14 years for US pension plans and 17 years for US other post-retirement benefit plans.
As at the reporting date, the present value of the funded obligations split according to member status was approximately:
    UK pensions: 8% active members (2020: 8%; 2019: 10%); 14% deferred members (2020: 14%; 2019: 16%); 78% pensioner members (2020: 78%; 2019: 74%);
    US pensions: 35% active members (2020: 36%; 2019: 37%); 9% deferred members (2020: 9%; 2019: 9%); 56% pensioner members (2020: 55%; 2019: 54%); and
    US other post-retirement benefits: 34% active members (2020: 35%; 2019: 39%); 66% pensioner members (2020: 65%; 2019: 61%).
For sensitivity analysis see note 35.
Amounts recognised in the consolidated statement of financial position
2021 2020 2019
£m
£m
£m
Present value of funded obligations (23,283) (24,281) (24,609)
Fair value of plan assets 24,388  23,748  24,793 
1,105  (533) 184 
Present value of unfunded obligations (324) (345) (330)
Other post-employment liabilities (66) (75) (72)
Net defined benefit asset/(liability) 715  (953) (218)
Represented by:
Liabilities (1,032) (2,802) (1,785)
Assets 1,747  1,849  1,567 
715  (953) (218)

The geographical split of pensions and other post-retirement benefits is as shown below:
UK Pensions US Pensions US other post-retirement benefits
2021 2020 2019 2021 2020 2019 2021 2020 2019
£m
£m
£m
£m
£m
£m
£m
£m
£m
Present value of funded obligations (13,571) (12,775) (14,200) (6,681) (7,809) (6,901) (3,031) (3,697) (3,508)
Fair value of plan assets 14,680  14,364  15,507  6,909  6,972  6,646  2,799  2,412  2,640 
1,109  1,589  1,307  228  (837) (255) (232) (1,285) (868)
Present value of unfunded obligations (74) (69) (76) (250) (276) (254)   —  — 
Other post-employment liabilities   —  —    —  —  (66) (75) (72)
Net defined benefit asset/(liability) 1,035  1,520  1,231  (22) (1,113) (509) (298) (1,360) (940)
Represented by:
Liabilities (74) (69) (76) (393) (1,373) (769) (565) (1,360) (940)
Assets 1,109  1,589  1,307  371  260  260  267  —  — 
1,035  1,520  1,231  (22) (1,113) (509) (298) (1,360) (940)

The recognition of the pension assets in both the UK in relation to the NGUKPS, the NGEG of ESPS and the US in relation to the Niagara Mohawk Plan and the KeySpan Retirement Plan reflects legal and actuarial advice that we have taken regarding recognition of surpluses under IFRIC 14. Similarly on the recognition of US other post-retirement assets in relation to: the Long Island Union Life Insurance plan; the New York Union Health Insurance Plan; the Long Island Union Health Insurance plan; and Retirees Health and Welfare Plan II.
We have concluded that the Group has an unconditional right to a refund from the individual plans, including from each Section of the NGUKPS and the NGEG of ESPS, in the event of a winding up. In the UK, the Trustees must seek the agreement of the Company to any benefit augmentation beyond the provisions set out in the Scheme Rules. In the US, surplus assets may be used to pay benefits under other plans, thereby allowing the Company to settle other liabilities under other Plans.
177


National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
25. Pensions and other post-retirement benefits continued
Amounts recognised in the income statement and statement of other comprehensive income
2021 2020 2019
£m
£m
£m
Included within operating costs
Administration costs 18  16  14 
Included within payroll costs
Defined benefit plan costs:
Current service cost 175  178  193 
Past service cost – augmentations   — 
Past service credit – redundancies (1) —  (7)
Special termination benefit cost – redundancies 5  55 
Past service cost – plan amendments¹   —  34 
179  180  280 
Included within finance income and costs
Net interest cost 38  23  22 
Total included in income statement 235  219  316 
Remeasurement gains/(losses) of pension assets and post-retirement benefit obligations² 1,408  (724) 68 
Exchange adjustments 186  (97) (101)
Total included in the statement of other comprehensive income 1,594  (821) (33)
1.    For the year ended 31 March 2019, the estimated cost of equalising for the impact of GMP under the most cost-effective permissible methodology (Section A of NGUKPS – £17 million; Section B of NGUKPS – £12 million; NGEG of ESPS – £5 million).
2.    This includes actuarial losses from the purchase of buy-in policies of £0.1 billion (2020: £0.7 billion).
The geographical split of pensions and other post-retirement benefits is as shown below:
UK Pensions US Pensions US other post-retirement benefits
2021 2020 2019 2021 2020 2019 2021 2020 2019
£m
£m
£m
£m
£m
£m
£m
£m
£m
Included within operating costs
Administration costs 9  7  2 
Included within payroll costs
Defined benefit plan costs:
Current service cost 28  33  41  104  100  104  43  45  48 
Past service cost – augmentations   —    —  —    —  — 
Past service credit – redundancies (1) —  (7)   —  —    —  — 
Special termination benefit cost – redundancies 5  55    —  —    —  — 
Past service cost – plan amendments   —  34    —  —    —  — 
32  35  128  104  100  104  43  45  48 
Included within finance income and costs
Net interest (income)/cost (38) (31) (31) 35  21  21  41  33  32 
Total included in income statement 3  13  103  146  127  132  86  79  81 
Remeasurement (losses)/gains of pension assets and post-retirement benefit obligations¹ (622) 143  57  1,017  (588) (14) 1,013  (279) 25 
Exchange adjustments   —  —  83  (42) (42) 103  (55) (59)
Total included in the statement of other comprehensive income (622) 143  57  1,100  (630) (56) 1,116  (334) (34)
1.    UK pensions is stated after actuarial losses from the purchase of buy-in policies of £0.1 billion (2020: £0.7 billion).
Following a High Court ruling in October 2018, UK pension schemes were required to equalise Guaranteed Minimum Pensions (GMPs). As a result, a past service cost of £34 million was recognised in the year ended 31 March 2019 for the UK DB pension schemes. This reflected the estimated cost of equalising GMPs for current pension scheme members using the most cost-effective permissible methodology. Following the further High Court ruling in December 2020, an additional allowance of £0.4 million, was included for the year ended 31 March 2021, reflecting the associated cost for members who had transferred out of the pension scheme and were therefore not previously in scope.
178


National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

25. Pensions and other post-retirement benefits continued
Reconciliation of the net defined benefit liability
2021 2020 2019
£m
£m £m
Opening net defined benefit liability (953) (218) (263)
Cost recognised in the income statement (235) (219) (316)
Remeasurement and foreign exchange effects recognised in the statement of other comprehensive income 1,594  (821) (33)
Employer contributions 274  327  419 
Other movements (14) (22) (25)
Reclassification to held for sale (note 10) 49  —  — 
Closing net defined benefit asset/(liability) 715  (953) (218)

The geographical split of pensions and other post-retirement benefits is as shown below:
UK pensions
US pensions
US other post-retirement benefits
2021 2020 2019 2021 2020 2019 2021 2020 2019
£m
£m £m
£m
£m £m
£m
£m £m
Opening net defined benefit asset/(liability) 1,520  1,231  1,104  (1,113) (509) (552) (1,360) (940) (815)
Cost recognised in the income statement (3) (13) (103) (146) (127) (132) (86) (79) (81)
Remeasurement and foreign exchange effects recognised in the statement of other comprehensive income (622) 143  57  1,100  (630) (56) 1,116  (334) (34)
Employer contributions 138  156  174  110  153  231  26  18  14 
Other movements 2  (1)   —  —  (16) (25) (24)
Reclassification to held for sale (note 10)   —  —  27  —  —  22     
Closing net defined benefit
asset/(liability)
1,035  1,520  1,231  (22) (1,113) (509) (298) (1,360) (940)

Changes in the present value of defined benefit obligations (including unfunded obligations)
2021 2020 2019
£m
£m £m
Opening defined benefit obligations (24,626) (24,939) (24,054)
Current service cost (175) (178) (193)
Interest cost (651) (751) (771)
Actuarial gains/(losses) – experience 123  148  (69)
Actuarial (losses)/gains – demographic assumptions (1) 452  266 
Actuarial losses – financial assumptions (1,268) (84) (619)
Past service credit – redundancies 1  — 
Special termination benefit cost – redundancies (5) (2) (55)
Past service cost – augmentations   —  (5)
Past service cost – plan amendments   —  (34)
Medicare subsidy received (25) (22) (19)
Employee contributions (1) (1) (1)
Benefits paid 1,246  1,282  1,376 
Exchange adjustments 1,166  (531) (768)
Reclassification to held for sale (note 10) 609  —  — 
Closing defined benefit obligations (23,607) (24,626) (24,939)


179


National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
25. Pensions and other post-retirement benefits continued
The geographical split of pensions and other post-retirement benefits is as shown below:
UK pensions
US pensions
US other post-retirement benefits
2021 2020 2019 2021 2020 2019 2021 2020 2019
£m
£m
£m
£m
£m
£m
£m
£m
£m
Opening defined benefit obligations (12,844) (14,276) (14,226) (8,085) (7,155) (6,582) (3,697) (3,508) (3,246)
Current service cost (28) (33) (41) (104) (100) (104) (43) (45) (48)
Interest cost (296) (335) (358) (243) (280) (277) (112) (136) (136)
Actuarial (losses)/gains – experience (21) 113  (56) (72) (45) (52) 216  80  39 
Actuarial (losses)/gains – demographic assumptions (1) 140  224    78  —    234  42 
Actuarial (losses)/gains – financial assumptions (1,181) 798  (568) (62) (595) (24) (25) (287) (27)
Past service credit – redundancies 1  —    —  —    —  — 
Special termination benefit cost – redundancies (5) (2) (55)   —  —    —  — 
Past service cost – augmentations   —  (5)   —  —    —  — 
Past service cost – plan amendments   —  (34)   —  —    —  — 
Medicare subsidy received   —  —    —  —  (25) (22) (19)
Employee contributions (1) (1) (1)   —  —    —  — 
Benefits paid 731  752  837  371  374  398  144  156  141 
Exchange adjustments   —  —  804  (362) (514) 362  (169) (254)
Reclassification to held for sale (note 10)   —  —  460  —  —  149  —  — 
Closing defined benefit obligations (13,645) (12,844) (14,276) (6,931) (8,085) (7,155) (3,031) (3,697) (3,508)

Changes in the value of plan assets
2021 2020 2019
£m
£m £m
Opening fair value of plan assets 23,748  24,793  23,858 
Interest income 613  728  749 
Return on plan assets in excess of/(less than) interest¹ 2,554  (1,240) 490 
Administration costs (18) (16) (14)
Employer contributions 274  327  419 
Employee contributions 1 
Benefits paid (1,244) (1,279) (1,377)
Exchange adjustments (980) 434  667 
Reclassification to held for sale (note 10) (560) —  — 
Closing fair value of plan assets 24,388  23,748  24,793 
Actual return on plan assets 3,167  (512) 1,239 
Expected contributions to plans in the following year 212  269  307 
1.    This includes actuarial losses from the purchase of buy-in policies of £0.1 billion (2020: £0.7 billion).
The geographical split of pensions and other post-retirement benefits is as shown below:
UK pensions
US pensions
US other post-retirement benefits
2021 2020 2019 2021 2020 2019 2021 2020 2019
£m
£m £m
£m
£m £m
£m
£m £m
Opening fair value of plan assets 14,364  15,507  15,330  6,972  6,646  6,030  2,412  2,640  2,498 
Interest income 334  366  389  208  259  256  71  103  104 
Return on plan assets in excess of/
(less than) interest¹
581  (908) 457  1,151  (26) 62  822  (306) (29)
Administration costs (9) (9) (6) (7) (6) (7) (2) (1) (1)
Employer contributions 138  156  174  110  153  231  26  18  14 
Employee contributions 1    —  —    —  — 
Benefits paid (729) (749) (838) (371) (374) (398) (144) (156) (141)
Exchange adjustments   —  —  (721) 320  472  (259) 114  195 
Reclassification to held for sale (note 10)   —  —  (433) —  —  (127) —  — 
Closing fair value of plan assets 14,680  14,364  15,507  6,909  6,972  6,646  2,799  2,412  2,640 
Actual return on plan assets 915  (542) 846  1,359  233  318  893  (203) 75 
Expected contributions to plans in the following year 93  137  148  113  125  150  6 
1.    This includes actuarial losses from the purchase of buy-in policies of £0.1 billion (2020: £0.7 billion).


180


National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

25. Pensions and other post-retirement benefits continued
Main defined benefit risks
DB pension plans can pose a significant risk to future cash flows, as National Grid underwrites the financial and demographic risks associated with these plans. Although the governing bodies have sole responsibility for setting investment strategies and managing risks, National Grid closely works with and supports the governing bodies of each plan, to assist them in mitigating the risks associated with their plans and to ensure that the plans are funded to meet their obligations.
The most significant risks associated with the DB plans are:
investment risk – the plans invest in a variety of asset classes, with actual returns likely to differ from the underlying discount rate adopted, impacting the funding position of the plan through the net balance sheet asset or liability. Each plan seeks to balance the level of investment return required with the risk that it can afford to take, to design the most appropriate investment portfolio. Volatility will be controlled through using liability-matching asset strategies including bulk annuities, as well as interest rate hedging and management of foreign exchange exposure, and diversification of the return-seeking assets;
changes in bond yields – liabilities are calculated using discount rates set with reference to the yields on high-quality corporate bonds prevailing in the UK and US debt markets and will fluctuate as yields change;
member longevity – longevity is a key driver of liabilities and changes in life expectancy have a direct impact on liabilities. Improvements in life expectancy will lead to pension payments being paid for longer than expected and benefits ultimately being more expensive. This risk has been partly mitigated by recent scheme investment transactions including a longevity insurance contract (longevity swap) for NGEG of ESPS and three separate buy-in policies for NGUKPS Section A and B;
counterparty risk – is managed by having a diverse range of counterparties and through having a strong collateralisation process (including for the longevity swap held by NGEG of ESPS). Measurement and management of counterparty risk is delegated to the relevant investment managers. For our bulk annuity policies, various termination provisions were introduced in the contracts, managing our exposure to counterparty risk. The insurers’ operational performance and financial strength are monitored on a regular basis;
currency risk – fluctuations in the value of foreign denominated assets due to exposure to currency exchange rates is managed through a combination of segregated currency hedging overlay and currency hedging carried out by some of the investment managers; and
inflation risk – changes in inflation will affect the current and future pensions but are partially mitigated through investing in inflation-matching assets and hedging instruments as well as bulk annuity buy-in policies.
Defined benefit investment strategies
In the UK, each plan has a Trustee that is the governing body. The Trustees’ responsibilities are set out in the Trust Deed and Rules. In the US, the fiduciary committee for all the retirement plans is the Retirement Plan Committee (RPC). The RPC is structured in accordance with US laws governing retirement plans under the Employee Retirement Income Security Act (ERISA). The Trustees and RPC, after taking advice from professional investment advisors and in consultation with National Grid, set the key principles, including expected returns, risk and liquidity requirements. In setting these they take into account expected contributions, maturity of the pension liabilities, and in the UK, the strength of the covenant. The Trustees and RPC formulate an investment strategy to manage risk through diversification. Where appropriate, the strategies may include interest rate and inflation hedging instruments, and currency hedging to hedge specific risks.
Investments are usually grouped into:
    return-seeking assets – equities, property and diversified funds where the objective is to achieve growth within the constraints of the plans’ risk profiles. These assets should produce returns greater than the liability increase, so improving the funding position, and are assessed by reference to benchmarks and performance targets agreed with the investment managers; and
    liability-matching assets – liability-driven investment (LDI) funds, buy-ins, government securities, corporate bonds and swaps, where the objective is to secure fixed or inflation-adjusted cash flows in future. These investments are generally expected to match the change in liability valuation, so protecting the funding position. Bonds and securities are also measured against certain market benchmarks.
The approximate investment allocations for our plans is as follows:
2021 2020 2019
UK pensions
US pensions
US other post-retirement benefits
UK pensions
US pensions
US other post-retirement benefits
UK pensions
US pensions
US other post-retirement benefits
%
%
%
%
%
%
%
%
%
Return-seeking assets 18  55  74  21  49  71  23  56  73 
Liability-matching assets 82  45  26  79  51  29  77  44  27 

Investments are predominantly made in assets considered to be of investment grade. Where investments are made in non-investment grade assets, the higher volatility involved is carefully judged and balanced against the expected higher returns. Similarly, investments are made predominantly in regulated markets. Where investments are made either in non-investment grade assets or outside of regulated markets, investment levels are kept to prudent levels and subject to agreed control ranges, to control the risk. Should these investments fall outside the pre-agreed ranges, corrective actions and timescales are agreed with the investment manager to remedy the position.
The governing bodies ensure that the performance of investment managers is regularly reviewed against measurable objectives, consistent with each pension plan’s long-term objectives and accepted risk levels. Where required, the portfolios are amended, or investment managers changed.
The Trustees and RPC can generally delegate responsibility for the selection of specific bonds, securities and other investments to appointed investment managers. Investment managers are selected based on the required skills, expertise of those markets, process and financial security to manage the investments. The investment managers use their skill and expertise to manage the investments competently. In some cases, they may further delegate this responsibility, through appointing sub-managers.
The pension plans hold sufficient cash to meet benefit requirements, with other investments being held in liquid or realisable assets to meet unexpected cash flow requirements. The plans do not borrow money, or act as guarantor, to provide liquidity to other parties (unless it is temporary).
181


National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
25. Pensions and other post-retirement benefits continued
Defined benefit investment strategies continued
In the UK, both NGUKPS and NGEG of ESPS have Responsible Investment (RI) Policies, which take into account Environmental, Social and Governance (ESG) factors. The NGUKPS RI also incorporates the six UN-backed Principles for Responsible Investment (UNPRI). The Trustees believe that ESG factors can be material to financial outcomes and therefore these should and will be considered alongside other factors. The Trustees recognise that their primary responsibility remains a fiduciary one, i.e. their first duty is to ensure the best possible return on investments with the appropriate level of risk. However, the Trustees also recognise the increasing materiality of ESG factors and that they have a fiduciary and regulatory duty to consider RI, including ESG factors and the potential impact on the quality and sustainability of long-term investment returns and therefore on the Trustees’ primary fiduciary duty.
In the US, the regulatory and political landscape is evolving with respect to ESG investments within retirement plans. The prior administration had restrictive policies around ESG investments in retirement plans. The current administration is more supportive of ESG investments which will allow fiduciaries more opportunities to incorporate ESG principles into their investment strategy and still remain compliant with ERISA, the federal law governing US retirement plans. Currently, many of the active investment managers for the National Grid US plans utilise ESG factors as part of their investment screening process.
Asset allocations
Within the asset allocations below, there is significant diversification across regions, asset managers, currencies and bond categories.
UK pensions
2021 2020 2019
Quoted
Unquoted
Total
Quoted
Unquoted
Total
Quoted
Unquoted
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
Equities
555  801  1,356  732  732  1,464  1,181  784  1,965 
Corporate bonds 3,730  37  3,767  3,837  —  3,837  3,625  —  3,625 
Government securities 1,836    1,836  2,051  —  2,051  6,114  —  6,114 
Property 104  565  669  103  585  688  108  749  857 
Diversified alternatives   712  712  —  893  893  —  771  771 
Liability-matching assets 1,731  ¹ 4,133  ² 5,864  1,704  ¹ 3,278  ² 4,982  1,751  ¹ —  1,751 
Longevity swap   (64) (64) —  (51) (51) —  (35) (35)
Cash and cash equivalents 34  250  284  29  222  251  40  259  299 
Other (including net current assets and liabilities)   256  256  —  249  249  —  160  160 
7,990  6,690  14,680  8,456  5,908  14,364  12,819  2,688  15,507 
1.    Consists of pooled funds which invests mainly in fixed interest securities.
2.    Comprises the buy-in policies held by NGUKPS.
US pensions
2021 2020 2019
Quoted
Unquoted
Total
Quoted
Unquoted
Total
Quoted
Unquoted
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
Equities 560  2,359  2,919  467  2,043  2,510  533  2,178  2,711 
Corporate bonds 1,547  507  2,054  1,640  518  2,158  1,329  425  1,754 
Government securities 354  527  881  535  732  1,267  422  640  1,062 
Property   264  264  —  307  307  —  316  316 
Diversified alternatives 167  458  625  162  464  626  183  487  670 
Infrastructure   130  130  —  121  121  —  99  99 
Cash and cash equivalents 24    24  24  —  24  21  —  21 
Other (including net current assets and liabilities) 12    12  (44) (41) (8) 21  13 
2,664  4,245  6,909  2,784  4,188  6,972  2,480  4,166  6,646 

US other post-retirement benefits
2021 2020 2019
Quoted
Unquoted
Total
Quoted
Unquoted
Total
Quoted
Unquoted
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
Equities 419  1,303  1,722  353  1,037  1,390  404  1,184  1,588 
Corporate bonds 13    13  15  —  15  19  —  19 
Government securities 533  3  536  551  552  540  543 
Diversified alternatives 185  172  357  162  161  323  175  166  341 
Other¹   171  171  —  132  132  —  149  149 
1,150  1,649  2,799  1,081  1,331  2,412  1,138  1,502  2,640 
1.    Other primarily comprises insurance contracts.

182


National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

26. Provisions
Provisions are recognised when an obligation exists resulting from a past event, and it is probable that cash will be paid to settle it, but the exact amount of cash required can only be estimated. The majority of our provisions relate to environmental remediation, specifically in relation to certain Superfund sites in the US, being sites we own or have owned in the past where hazardous substances are present as a result of the historic operations of manufactured gas plants in Brooklyn, New York. We also recognise provisions for decommissioning costs for various assets we would be required to remove at the end of their lives, the costs associated with restructuring plans and for lease contracts we have entered into that are now loss-making.

In determining the quantum of the provision we recognise, we make estimates in relation to management’s best judgement of the evaluation of the likelihood and the probability of exposure to potential loss, and the costs that would be incurred. Should circumstances change following unforeseeable developments, the likelihood or quantum could alter.

Provisions are recognised where a legal or constructive obligation exists at the reporting date, as a result of a past event, where the amount of the obligation can be reliably estimated and where the outflow of economic benefit is probable.
The quantum of the provision recognised for decommissioning, environmental, restructuring and other costs is based on estimated future expenditure, discounted to present values. An initial estimate of decommissioning and environmental costs attributable to property, plant and equipment is recorded as part of the original cost of the related property, plant and equipment. Provisions to decommission significant portions of our regulated transmission and distribution assets are not recognised where no legal obligations exist, and a realistic alternative exists to incurring costs to decommission assets at the end of their life. In any case, even if a legal or constructive obligation did exist, it is not currently determinable when remediation work would take place and therefore no provision would be recorded at this point.
Changes in the provision arising from revised estimates, discount rates or changes in the expected timing of expenditure that relates to property, plant and equipment are recorded as adjustments to their carrying value and depreciated prospectively over their remaining estimated useful economic lives; otherwise such changes are recognised in the income statement.
The unwinding of the discount is included within the income statement within finance costs.
Environmental
£m
Decommissioning
£m
Restructuring
£m
Other
£m
Total
provisions
£m
At 1 April 2019 1,639  188  83  289  2,199 
Exchange adjustments 82  —  10  97 
Additions¹ 437  93  52  589 
Unused amounts reversed (29) (16) (16) (9) (70)
Unwinding of discount 65  —  77 
Utilised (123) (21) (39) (55) (238)
At 31 March 2020 2,071  254  35  294  2,654 
Exchange adjustments (185) (9) (1) (21) (216)
Additions 26  42  11  67  146 
Unused amounts reversed (38) (27) —  (16) (81)
Unwinding of discount 66  —  78 
Utilised (161) (16) (19) (62) (258)
Reclassification to held for sale (note 10) (79) (7) —  (10) (96)
At 31 March 2021 1,700  244  26  257  2,227 

2021 2020
£m
£m
Current 260  348 
Non-current 1,967  2,306 
2,227  2,654 
1.    For the year ended 31 March 2020, £402 million of additions related to exceptional environmental provisions, of which £76 million related to the impact of the change in the real discount rate from 1% to 0.5% during the year (see note 5 for details).


183


National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
26. Provisions continued
Environmental provisions
The environmental provision represents the estimated restoration and remediation costs relating to a number of sites owned and managed by subsidiary undertakings, together with certain US sites that National Grid no longer owns. The environmental provision is as follows:
2021 2020
Discounted
£m
Undiscounted
£m
Real
discount
rate
Discounted
£m
Undiscounted
£m
Real
discount
rate
UK sites 167  171  0.5  % 175  184  0.5  %
US sites 1,533  1,583  0.5  % 1,896  1,955  0.5  %
1,700  1,754  2,071  2,139 

The remediation expenditure in the UK relates to old gas manufacturing sites and also to electricity transmission sites. Cash flows are expected to be incurred until 2075, although the weighted average duration of the cash flows is 15 years. A number of estimation uncertainties affect the calculation of the provision, including the impact of regulation, the accuracy of site surveys, unexpected contaminants, transportation costs, the impact of alternative technologies and changes in the real discount rate. This provision incorporates our best estimate of the financial effect of these uncertainties, but future changes in any of the assumptions could materially impact the calculation of the provision. The undiscounted amount is the undiscounted best estimate of the liability having regard to these uncertainties.
The remediation expenditure in the US is expected to be incurred until 2069, of which the majority relates to three Superfund sites (being sites where hazardous substances are present as a result of the historic operations of manufactured gas plants in Brooklyn, New York). The weighted average duration of the cash flows is 10 years. The uncertainties regarding the calculation of this provision are similar to those considered in respect of UK sites. Under the terms of our rate plans, we are entitled to recovery of environmental clean-up costs from rate payers.
Decommissioning provisions
The decommissioning provisions primarily include £160 million (2020: £174 million) of expenditure relating to asset retirement obligations estimated to be incurred until 2104 and £60 million (2020: £74 million) of expenditure relating to the demolition of gas holders, which is estimated to be incurred until 2026.
Restructuring provisions
In 2021, we are undertaking the design and implementation of our new operating model in both our UK and US businesses, which resulted in the recognition of a £11 million provision in the year. The income statement expense relating to the provision has been treated as an exceptional item, and details are provided in note 5.
Other provisions
Included within other provisions at 31 March 2021 are the following amounts:
    £166 million (2020: £164 million) of estimated liabilities in respect of past events insured by insurance subsidiary undertakings, including employer liability claims. In accordance with insurance industry practice, these estimates are based on experience from previous years, but we currently expect that cash flows will be incurred until 2049;
    £21 million (2020: £37 million) in respect of legacy provisions recognised following the sale of UK Gas Distribution;
    £27 million (2020: £31 million) in respect of onerous lease commitments and rates payable on surplus properties with expenditure expected to be incurred until ###; and
    £13 million (2020: £17 million) in respect of emissions provisions.

184


National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

27. Share capital
Ordinary share capital represents the total number of shares issued which are publicly traded. We also disclose the number of treasury shares the Company holds, which are shares that the Company has bought itself, predominantly to actively manage scrip issuances and settle employee share option and reward plan liabilities.

Share capital is accounted for as an equity instrument. An equity instrument is any contract that includes a residual interest in the consolidated assets of the Company after deducting all its liabilities and is recorded at the proceeds received, net of direct issue costs, with an amount equal to the nominal amount of the shares issued included in the share capital account and the balance recorded in the share premium account.
Allotted, called-up and fully paid
million
£m
At 1 April 2019 3,687  458 
Issued during the year in lieu of dividends¹ 93  12 
At 31 March 2020 3,780  470 
Issued during the year in lieu of dividends¹ 35 
At 31 March 2021 3,815  474 
1.    The issue of shares under the scrip dividend programme is considered to be a bonus issue under the terms of the Companies Act 2006, and the nominal value of the shares is charged to the share premium account.
The share capital of the Company consists of ordinary shares of 12204473 pence nominal value each including ADSs. The ordinary shares and ADSs allow holders to receive dividends and vote at general meetings of the Company. The Company holds treasury shares but may not exercise any rights over these shares including the entitlement to vote or receive dividends. There are no restrictions on the transfer or sale of ordinary shares.
In line with the provisions of the Companies Act 2006, the Company has amended its Articles of Association and ceased to have authorised share capital.
Treasury shares
At 31 March 2021, the Company held 266 million (2020: 272 million) of its own shares. The market value of these shares as at 31 March 2021 was £2,296 million (2020: £2,574 million).
For the benefit of employees and in connection with the operation of the Company’s various share plans, the Company made the following transactions in respect of its own shares during the year ended 31 March 2021:
i.    During the year, 4 million (2020: 3 million) treasury shares were gifted to National Grid Employee Share Trusts and 2 million (2020: 2 million) treasury shares were re-issued in relation to employee share schemes, in total representing approximately 0.2% (2020: 0.1%) of the ordinary shares in issue as at 31 March 2021. The nominal value of these shares was £1 million (2020: £1 million) and the total proceeds received were £17 million (2020: £17 million). National Grid settles share awards under its Long Term Incentive Plan and the Save As You Earn scheme, by the transfer of treasury shares to its employee share trusts.
ii.    During the year, the Company made payments totalling £2 million (2020: £6 million) to National Grid Employee Share Trusts to enable the trustees to make purchases of National Grid plc shares to settle share awards in relation to all employee share plans and discretionary reward plans. The cost of such purchases is deducted from retained earnings in the period that the transaction occurs.
The maximum number of ordinary shares held in treasury during the year was 272 million (2020: 277 million) representing approximately 7.1% (2020: 7.3%) of the ordinary shares in issue as at 31 March 2021 and having a nominal value of £34 million (2020: £34 million).

185


National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
28. Other equity reserves
Other equity reserves are different categories of equity as required by accounting standards and represent the impact of a number of our historical transactions or fair value movements on certain financial instruments that the Company holds.

Other equity reserves comprise the translation reserve (see accounting policy C in note 1), cash flow hedge reserve and the cost of hedging reserve (see note 32), debt instruments at fair value through other comprehensive income reserve (FVOCI debt) and equity investments at fair value through other comprehensive income reserve (FVOCI equity) (see note 15), the capital redemption reserve and the merger reserve.
The merger reserve arose as a result of the application of merger accounting principles under the then prevailing UK GAAP, which under IFRS 1 was retained for mergers that occurred prior to the IFRS transition date. Under merger accounting principles, the difference between the carrying amount of the capital structure of the acquiring vehicle and that of the acquired business was treated as a merger difference and included within reserves. The merger reserve represents the difference between the carrying value of subsidiary undertaking investments and their respective capital structures following the Lattice demerger from BG Group plc and the 1999 Lattice refinancing.
The cash flow hedge reserve will amortise as the committed future cash flows from borrowings are paid or capitalised in fixed assets (as described in note 32). Cost of hedging, FVOCI debt, and FVOCI equity reserves arose as a result of the adoption of IFRS 9 on 1 April 2018. See note 15 for further detail on FVOCI debt and FVOCI equity reserves and note 32 in respect of cost of hedging reserve.
As the amounts included in other equity reserves are not attributable to any of the other classes of equity presented, they have been disclosed as a separate classification of equity.
Translation
£m
Cash flow
 hedge
£m
Cost of hedging
£m
Available-for-sale
£m
FVOCI equity
£m
FVOCI
debt
£m
Own
credit
£m
Capital
redemption
£m
Merger
£m
Total
£m
At 1 April 2018 (as previously reported) 390  128  —  88  —  —  —  19  (5,165) (4,540)
Transfer on transition to IFRS 9 —  (3) 76  (88) 34  46  —  —  72 
At 1 April 2018 (as restated) 390  125  76  —  34  46  19  (5,165) (4,468)
Exchange adjustments1,2
360  —  —  —  —  —  —  —  —  360 
Net (losses)/gains taken to equity —  (206) (107) —  —  —  —  (304)
Share of net gains of associates taken to equity —  —  —  —  —  —  —  — 
Transferred to profit or loss —  166  41  —  —  —  —  —  —  207 
Net losses in respect of cash flow hedging of capital expenditure —  (13) —  —  —  —  —  —  —  (13)
Tax —  —  —  —  (1) —  —  12 
Cash flow hedges transferred to the statement of financial position, net of tax —  (18) —  —  —  —  —  —  —  (18)
At 1 April 2019 750  61  17  —  34  48  13  19  (5,165) (4,223)
Exchange adjustments1,2
560  —  —  —  —  —  —  —  —  560 
Net losses taken to equity —  (142) (33) —  (13) (15) (3) —  —  (206)
Share of net losses of associates taken to equity —  (5) —  —  —  —  —  —  —  (5)
Transferred to profit or loss —  14  (45) —  —  —  —  —  —  (31)
Net losses in respect of cash flow hedging of capital expenditure —  (17) —  —  —  —  —  —  —  (17)
Tax —  29  11  —  (2) —  —  —  42 
Cash flow hedges transferred to the statement of financial position, net of tax —  (15) —  —  —  —  —  —  —  (15)
At 1 April 2020 1,310  (75) (50) —  25  31  10  19  (5,165) (3,895)
Exchange adjustments¹ (1,345) —  —  —  —  —  —  —  —  (1,345)
Net gains/(losses) taken to equity —  14  11  —  36  80  (11) —  —  130 
Share of net gains of associates taken to equity —  —  —  —  —  —  —  — 
Transferred to profit or loss —  56  —  —  —  —  —  —  59 
Net losses in respect of cash flow hedging of capital expenditure —  (14) —  —  —  —  —  —  —  (14)
Tax —  (13) —  (10) —  —  —  (13)
Cash flow hedges transferred to the statement of financial position, net of tax —  (17) —  —  —  —  —  —  —  (17)
At 31 March 2021 (35) (48) (28)   51  111  1  19  (5,165) (5,094)
1.    The exchange adjustments recorded in the translation reserve comprise a loss of £1,507 million (2020: gain of £545 million; 2019: gain of £896 million) relating to the translation of foreign operations offset by a gain of £183 million (2020: gain of £5 million; 2019: loss of £550 million) relating to borrowings, cross-currency swaps and foreign exchange forward contracts used to hedge the net investment in non-sterling denominated subsidiaries.
2.    Comparative amounts have been revised as described in note 1F.





186


National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

29. Net debt
We define net debt as the amount of borrowings and overdrafts less cash, current financial investments and related financing derivatives.

(a) Composition of net debt
Net debt is comprised as follows:
2021 2020 2019
£m
£m
£m
Cash and cash equivalents 157  73  252 
Current financial investments 2,342  1,998  1,981 
Borrowings (31,220) (30,794) (28,730)
Financing derivatives¹ 175  133  (32)
(28,546) (28,590) (26,529)
1.    The financing derivatives balance included in net debt excludes the commodity derivatives (see note 17).

(b) Analysis of changes in net debt
Notes
Cash
and cash
equivalents
£m
Financial
investments
£m
Borrowings
£m
Financing
derivatives
£m
Total1
£m
At 1 April 2018 329  2,694  (26,625) 600  (23,002)
Impact of transition to IFRS 9
37
—  —  (32) —  (32)
Cash flow
29(c)
(80) (846) (240) 422  (744)
Fair value gains and losses —  14  (9) (1,011) (1,006)
Foreign exchange movements 79  (724) —  (642)
Interest income/(charges)
6
—  29  (1,062) (43) (1,076)
Other non-cash movements —  11  (38) —  (27)
At 1 April 2019 252  1,981  (28,730) (32) (26,529)
Impact of transition to IFRS 16
37
—  —  (474) —  (474)
Cash flow
29(c)
(183) (42) 450  450  675 
Fair value gains and losses —  (57) (246) (302)
Foreign exchange movements 24  (807) —  (779)
Interest income/(charges)
6
—  34  (1,092) (39) (1,097)
Other non-cash movements —  —  (84) —  (84)
At 1 April 2020 73  1,998  (30,794) 133  (28,590)
Cash flow
29(c)
95  429  (2,336) (1,808)
Fair value gains and losses —  14  159  31  204 
Foreign exchange movements (7) (106) 1,710  —  1,597 
Interest income/(charges)
6
—  (946) (932)
Other non-cash movements —  —  (136) —  (136)
Reclassification to held for sale
10
(4) —  1,123  —  1,119 
At 31 March 2021 157  2,342  (31,220) 175  (28,546)
Balances at 31 March 2021 comprise:
Non-current assets —  —  —  514  514 
Current assets 157  2,342  —  428  2,927 
Current liabilities —  —  (3,737) (70) (3,807)
Non-current liabilities —  —  (27,483) (697) (28,180)
157  2,342  (31,220) 175  (28,546)
1.    Includes accrued interest at 31 March 2021 of £263 million (2020: £246 million; 2019: £223 million).
2.    Cash flows on current financial investments are comprised of £7 million (2020: £35 million; 2019: £24 million) of interest received and £436 million of cash inflows (2020: £7 million outflows; 2019: £822 million outflows) of net cash flow movements in short-term financial investments, as presented in the consolidated cash flow statement.


187


National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
29. Net debt continued
(c) Reconciliation of cash flow from liabilities within net debt to cash flow statement
2021 2020 2019
Borrowings and other
£m
Financing derivatives
£m
Borrowings and other
£m
Financing derivatives
£m
Borrowings and other
£m
Financing derivatives
£m
Cash flows per financing activities section of cash flow statement:
Proceeds received from loans 5,645    4,218  —  2,932  — 
Repayment of loans (1,663)   (3,253) —  (1,969) — 
Payments of lease liabilities (112)   (121) —  (70) — 
Net movements in short-term borrowings (759)   (424) —  179  — 
Cash inflows on derivatives   58  —  62  —  221 
Cash outflows on derivatives   (185) —  (249) —  (186)
Interest paid (804) (31) (904) (53) (856) (58)
Cash flows per financing activities section of cash flow statement 2,307  (158) (484) (240) 216  (23)
Adjustments:
Non-net debt-related items 29    34  —  24  — 
Derivative cash inflow in relation to capital expenditure   10  —  13  —  13 
Derivative cash inflows per investing section of cash flow statement   225  —  58  —  17 
Derivative cash outflows per investing section of cash flow statement
  (81) —  (281) —  (429)
Cash flows relating to financing liabilities within net debt 2,336  (4) (450) (450) 240  (422)
Analysis of changes in net debt:
Borrowings 2,336    (450) —  240  — 
Financing derivatives   (4) —  (450) —  (422)
Cash flow movements relating to financing liabilities within net debt 2,336  (4) (450) (450) 240  (422)

(d) Reconciliation of changes in liabilities arising from financing activities
The table below reconciles changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. For the purposes of this table, the liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the consolidated cash flow statement within financing activities. As a result we have separately disclosed the reconciliation below, excluding derivatives associated with our net investment hedges and derivatives associated with the hedging of capital expenditure, given that they are both classified in the consolidated cash flow statement within investing activities.
Notes
Borrowings
£m
Financing derivatives
£m
Total
£m
At 1 April 2018 (26,625) 553  (26,072)
Impact of transition to IFRS 9
37
(32) —  (32)
Cash flow
29(c)
(240) 23  (217)
Fair value gains and losses (9) (334) (343)
Foreign exchange movements (724) —  (724)
Interest charges
6
(1,062) (14) (1,076)
Other non-cash movements (38) —  (38)
At 1 April 2019 (28,730) 228  (28,502)
Impact of transition to IFRS 16
37
(474) —  (474)
Cash flow
29(c)
450  240  690 
Fair value gains and losses (57) (231) (288)
Foreign exchange movements (807) —  (807)
Interest charges
6
(1,092) (9) (1,101)
Other non-cash movements (84) —  (84)
At 1 April 2020 (30,794) 228  (30,566)
Cash flow
29(c)
(2,336) 158  (2,178)
Fair value gains and losses 159  (301) (142)
Foreign exchange movements 1,710  —  1,710 
Interest charges
6
(946) 11  (935)
Other non-cash movements (136) —  (136)
Reclassification to held for sale
10
1,123  —  1,123 
At 31 March 2021 (31,220) 96  (31,124)

188


National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

30. Commitments and contingencies
Commitments are those amounts that we are contractually required to pay in the future as long as the other party meets its obligations. These commitments primarily relate to energy purchase agreements and contracts for the purchase of assets which, in many cases, extend over a long period of time. We also disclose any contingencies, which include guarantees that companies have given, where we pledge assets against current obligations that will remain for a specific period.
2021 2020
£m
£m
Future capital expenditure
Contracted for but not provided 2,716  2,629 
Energy purchase commitments¹
Less than 1 year 1,255  1,365 
In 1 to 2 years 894  890 
In 2 to 3 years 975  973 
In 3 to 4 years 959  955 
In 4 to 5 years 896  861 
More than 5 years 10,805  11,314 
15,784  16,358 
Guarantees²
Guarantee of sublease for US property (expires 2040) 149  173 
Guarantees of certain obligations of Grain LNG (expire up to 2025) 33  34 
Guarantees of certain obligations for construction of HVDC West Coast Link (expected expiry 2059) 85  92 
Guarantees of certain obligations of National Grid North Sea Link Limited (various expiry dates)² 584  683 
Guarantees of certain obligations of St William Homes LLP (various expiry dates)³ 53  30 
Guarantees of certain obligations of National Grid IFA 2 Limited (expected expiry 2022)² 170  564 
Guarantees of certain obligations of National Grid Viking Link Limited (expected expiry 2024) 1,276  1,096 
Other guarantees and letters of credit (various expiry dates) 486  150 
2,836  2,822 
1.    Energy purchase commitments relate to contractual commitments to purchase electricity or gas that are used to satisfy physical delivery requirements to our customers or for energy that we use ourselves (i.e. normal purchase, sale or usage) and hence are accounted for as ordinary purchase contracts (see note 32(f)). Details of commodity contract derivatives that do not meet the normal purchase, sale or usage criteria, and hence are accounted for as derivative contracts, are shown in note 17(b).
2.    Included within total guarantees are guarantees to both joint ventures and Engineering, Procurement and Construction contractors regarding the construction of interconnectors of £136 million (2020: £358 million).
3.    Includes guarantees to related parties.
Through the ordinary course of our operations, we are party to various litigation, claims and investigations. We do not expect the ultimate resolution of any of these proceedings to have a material adverse effect on our results of operations, cash flows or financial position.

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
31. Related party transactions
Related parties include joint ventures, associates, investments and key management personnel.

The following significant transactions with related parties were in the normal course of business. Amounts receivable from and payable to related parties are due on normal commercial terms:
2021 2020 2019
£m
£m
£m
Sales: Goods and services supplied to a pension plan 3 
Sales: Goods and services supplied to joint ventures¹ 79  101  151 
Sales: Goods and services supplied to associates² 1  33  192 
Purchases: Goods and services received from joint ventures³ 35  61  26 
Purchases: Goods and services received from associates³ 43  56  141 
Receivable from joint ventures4
263  255  584 
Receivable from associates4
  368 
Payable to joint ventures 17  — 
Payable to associates 3  12 
Interest income from joint ventures  
Interest income from associates   23 
Dividends received from joint ventures5
49  34  30 
Dividends received from associates6
32  41  171 
1.    During the year, £14 million (2020: £38 million; 2019: £139 million) of property sites were sold to St William Homes LLP, £50 million of sales were made to Emerald Energy Venture LLC (2020: £21 million; 2019: £nil) and a further £6 million (2020: £32 million; 2019; £2 million) of sales were made to NGET/SPT Upgrades Limited.
2.    In previous years, sales related to transactions with Quadgas, until the date it ceased to be a related party following the disposal of our 39% stake in June 2019 (see note 10) and included income of £31 million in 2020 and £52 million in 2019 relating to a Transitional Service Agreement following the sale of the UK Gas Distribution business to Quadgas.
3.    During the year, the Group received goods and services from a number of US associates, both for the transportation of gas and for pipeline services in the US, most notably, £41 million (2020: £31 million; 2019: £30 million) of purchases from Millennium Pipeline Company LLC. The Group also purchased assets of £5 million (2020: £58 million; 2019: £26 million) from NGET/SPT Upgrades Limited (a joint venture).
4.    Amounts receivable from joint ventures include £241 million (2020: £242 million; 2019: £325 million) in relation to St William Homes LLP. There are no longer loans receivable from Quadgas (2020: £nil; 2019: £352 million) and Nemo Link (a joint venture) (2020: £nil; 2019: £258 million).
5.    Includes dividends of £18 million (2020: £25 million; 2019: £30 million) received from BritNed Development Limited and £25 million (2020: £8 million; 2019:£ nil) from Nemo Link Limited.
6.    Includes dividends of £31 million (2020: £32 million; 2019: £24 million) received from Millennium Pipeline Company LLC. Dividends of £133 million were received from Quadgas in 2019.
Details of investments in principal subsidiary undertakings, joint ventures and associates are disclosed in note 34, and information relating to pension fund arrangements is disclosed in note 25. For details of Directors’ and key management remuneration, refer to note 4(c).

32. Financial risk management
Our activities expose us to a variety of financial risks including credit risk, liquidity risk, capital risk, currency risk, interest rate risk, inflation risk and commodity price risk. Our risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential volatility of financial performance from these risks. We use financial instruments, including derivative financial instruments, to manage these risks.

Risk management related to financing activities is carried out by a central treasury department under policies approved by the Finance Committee of the Board. The objective of the treasury department is to manage funding and liquidity requirements, including managing associated financial risks, to within acceptable boundaries. The Finance Committee provides written principles for overall risk management, and written policies covering the following specific areas: foreign exchange risk, interest rate risk, credit risk, liquidity risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity. The Finance Committee has delegated authority to administer the commodity price risk policy and credit policy for US-based commodity transactions to the Energy Procurement Risk Management Committee and the National Grid USA Board of Directors.
We have exposure to the following risks, which are described in more detail below:
    credit risk;
    liquidity risk;
    currency risk;
    interest rate risk;
    commodity price risk; and
    capital risk.
Where appropriate, derivatives and other financial instruments used for hedging currency and interest rate risk exposures are formally designated as fair value, cash flow or net investment hedges as defined in IFRS 9. Hedge accounting allows the timing of the profit or loss impact of qualifying hedging instruments to be recognised in the same reporting period as the corresponding impact of hedged exposures. To qualify for hedge accounting, documentation is prepared specifying the risk management objective and strategy, the component transactions and methodology used for measurement of effectiveness.
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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

32. Financial risk management continued
Hedge accounting relationships are designated in line with risk management activities further described below. The categories of hedging entered into are as follows:
    currency risk arising from our forecasted foreign currency transactions (capital expenditure or revenues) is designated in cash flow hedges;
    currency risk arising from our net investments in foreign operations is designated in net investment hedges; and
    currency and interest rate risk arising from borrowings are designated in cash flow or fair value hedges.
Critical terms of hedging instruments and hedged items are transacted to match on a 1:1 ratio by notional values. Hedge ineffectiveness can nonetheless arise from inherent differences between derivatives and non-derivative instruments and other market factors including credit, correlations, supply and demand, and market volatilities. Ineffectiveness is recognised in the remeasurements component of finance income and costs (see note 6). Hedge accounting is discontinued when a hedging relationship no longer qualifies for hedge accounting.
Certain hedging instrument components are treated separately as costs of hedging with the gains and losses deferred in a component of other equity reserves and released systematically into profit or loss to correspond with the timing and impact of hedged exposures, or released in full to finance costs upon an early discontinuation of a hedging relationship.
Refer to sections (c) currency risk and (d) interest rate risk below for further details on hedge accounting.
(a) Credit risk
We are exposed to the risk of loss resulting from counterparties’ default on their commitments including failure to pay or make a delivery on a contract. This risk is inherent in our commercial business activities. Exposure arises from derivative financial instruments, deposits with banks and financial institutions, trade receivables and committed transactions with wholesale and retail customers.
Treasury credit risk
Counterparty risk arises from the investment of surplus funds and from the use of derivative financial instruments. As at 31 March 2021, the following limits were in place for investments and derivative financial instruments held with banks and financial institutions:
Maximum limit
£m
Long-term limit
£m
Triple ‘A’ G7 sovereign entities (AAA) 2,259  1,129 
Triple ‘A’ vehicles (AAA) 500  — 
Triple ‘A’ range institutions and non-G7 sovereign entities (AAA) 1,232  616 
Double ‘A+’ G7 sovereign entities (AA+) 2,054  1,027 
Double ‘A’ range institutions (AA)
822 to 1,027
411 to 513
Single ‘A’ range institutions (A)
288 to 411
144 to 205

The maximum limit applies to all transactions, including long-term transactions. The long-term limit applies to transactions which mature in more than 12 months’ time.
As at 31 March 2021 and 2020, we had a number of exposures to individual counterparties. In accordance with our treasury policies, counterparty credit exposure utilisations are monitored daily against the counterparty credit limits. Counterparty credit ratings and market conditions are reviewed continually with limits being revised and utilisation adjusted, if appropriate. Management does not expect any significant losses from non-performance by these counterparties. Further information on financial investments subject to impairment provisioning is included in note 15.
Commodity credit risk
The credit policy for US-based commodity transactions is owned by the Finance Committee to the Board, which establishes controls and procedures to determine, monitor and minimise the credit exposure to counterparties.
Wholesale and retail credit risk
Our principal commercial exposure in the UK is governed by the credit rules within the regulated codes: Uniform Network Code and Connection and Use of System Code. These set out the level of credit relative to the RAV for each credit rating. In the US, we are required to supply electricity and gas under state regulations. Our policies and practices are designed to limit credit exposure by collecting security deposits prior to providing utility services, or after utility services have commenced if certain applicable regulatory requirements are met. Collection activities are managed on a daily basis. Sales to retail customers are usually settled in cash, cheques, electronic bank payments or by using major credit cards. We are committed to measuring, monitoring, minimising and recording counterparty credit risk in our wholesale business. The utilisation of credit limits is regularly monitored, and collateral is collected against these accounts when necessary.
Since March 2020, the Group’s US distribution business ceased certain cash collection and termination activities in response to regulatory instructions following the COVID-19 pandemic. This has resulted in the recognition of expected credit losses (see note 19 for further details).
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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
32. Financial risk management continued
(a) Credit risk continued
Offsetting financial assets and liabilities
The following tables set out our financial assets and liabilities which are subject to offset and to enforceable master netting arrangements or similar agreements. The tables show the amounts which are offset and reported net in the statement of financial position. Amounts which cannot be offset under IFRS, but which could be settled net under terms of master netting arrangements if certain conditions arise, and with collateral received or pledged, are shown to present National Grid’s net exposure.
Financial assets and liabilities on different transactions would only be reported net in the balance sheet if the transactions were with the same counterparty, a currently enforceable legal right of offset exists, and the cash flows were intended to be settled on a net basis.
Amounts which do not meet the criteria for offsetting on the statement of financial position, but could be settled net in certain circumstances, principally relate to derivative transactions under ISDA agreements, where each party has the option to settle amounts on a net basis in the event of default of the other party.
Commodity contract derivatives that have not been offset on the balance sheet may be settled net in certain circumstances under ISDA or North American Energy Standards Board (NAESB) agreements.
For bank account balances and bank overdrafts, there are no ‘Gross amounts offset’ under cash pooling arrangements (2020: £23 million). Our UK bank accounts for National Grid subsidiaries previously participated in GBP, EUR and USD Composite Accounting System overdraft facilities subject to offsetting gross and net overdraft limits. EUR and USD offsetting arrangements have been discontinued in the year and GBP offsetting arrangements have no impact as at 31 March 2021. In the US, no offsetting arrangements exist, and cash transactions are settled through Service Company bank accounts with subsequent intercompany payables and receivables reported by subsidiaries with the Service Company.
The gross amounts offset for trade payables and receivables, which are subject to general terms and conditions, are insignificant.
Related amounts
available to be offset but
not offset in statement
of financial position
At 31 March 2021
Gross
carrying
amounts
£m
Gross
amounts
offset
£m
Net amount
presented in
statement of
financial
position
£m
Financial instruments
£m
Cash
collateral
received/
pledged
£m
Net amount
£m
Assets
Financing derivatives 942    942  (234) (561) 147 
Commodity contract derivatives 57    57  (8)   49 
999    999  (242) (561) 196 
Liabilities
Financing derivatives (767)   (767) 234  467  (66)
Commodity contract derivatives (132)   (132) 8  4  (120)
(899)   (899) 242  471  (186)
100    100    (90) 10 

Related amounts
available to be offset but
not offset in statement
of financial position
At 31 March 2020
Gross
carrying
amounts
£m
Gross
amounts
offset
£m
Net amount
presented in
statement of
financial
position
£m
Financial instruments
£m
Cash
collateral
received/
pledged
£m
Net amount
£m
Assets
Financing derivatives 1,267  —  1,267  (351) (694) 222 
Commodity contract derivatives 75  —  75  (5) (3) 67 
1,342  —  1,342  (356) (697) 289 
Liabilities
Financing derivatives (1,134) —  (1,134) 351  646  (137)
Commodity contract derivatives (200) —  (200) (187)
(1,334) —  (1,334) 356  654  (324)
—  —  (43) (35)
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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

32. Financial risk management continued
(b) Liquidity risk
Our policy is to determine our liquidity requirements by the use of both short-term and long-term cash flow forecasts. These forecasts are supplemented by a financial headroom analysis which is used to assess funding requirements for at least a 24-month period and maintain adequate liquidity for a continuous 12-month period.
We believe our contractual obligations, including those shown in commitments and contingencies in note 30, can be met from existing cash and investments, operating cash flows and other financing that we reasonably expect to be able to secure in the future, together with the use of committed facilities if required.
Our debt agreements and banking facilities contain covenants, including those relating to the periodic and timely provision of financial information by the issuing entity, restrictions on disposals and financial covenants, such as restrictions on the level of subsidiary indebtedness. Failure to comply with these covenants, or to obtain waivers of those requirements, could in some cases trigger a right, at the lender’s discretion, to require repayment of some of our debt and may restrict our ability to draw upon our facilities or access the capital markets.
The following is a payment profile of our financial liabilities and derivatives:
At 31 March 2021
Less than
1 year
£m
1 to 2
years
£m
2 to 3
years
£m
More than
3 years
£m
Total
£m
Non-derivative financial liabilities
Borrowings, excluding lease liabilities (3,350) (1,690) (806) (25,562) (31,408)
Interest payments on borrowings¹ (810) (755) (731) (12,018) (14,314)
Lease liabilities (118) (108) (90) (599) (915)
Other non-interest-bearing liabilities (3,207) (350)     (3,557)
Contingent consideration (40) (24)     (64)
Derivative financial liabilities
Financing derivatives – receipts² 3,773  749  451  4,326  9,299 
Financing derivatives – payments² (3,899) (877) (533) (5,153) (10,462)
Commodity contract derivatives – receipts² 12        12 
Commodity contract derivatives – payments² (83) (23) (14) (12) (132)
Derivative financial assets
Financing derivatives – receipts² 2,162  926  833  1,789  5,710 
Financing derivatives – payments² (1,700) (834) (780) (1,536) (4,850)
Commodity contract derivatives – receipts² 21  4  1  1  27 
Commodity contract derivatives – payments² (21) (4) (2)   (27)
(7,260) (2,986) (1,671) (38,764) (50,681)

At 31 March 2020
Less than
1 year
£m
1 to 2
years
£m
2 to 3
years
£m
More than
3 years
£m
Total
£m
Non-derivative financial liabilities
Borrowings, excluding lease liabilities (3,672) (2,150) (1,611) (22,214) (29,647)
Interest payments on borrowings¹ (765) (750) (714) (12,002) (14,231)
Lease liabilities (132) (114) (99) (629) (974)
Other non-interest-bearing liabilities (3,149) (318) —  (3,467)
Contingent consideration (32) (16) (32) (16) (96)
Derivative financial liabilities
Financing derivatives – receipts² 2,249  986  1,208  3,510  7,953 
Financing derivatives – payments² (2,582) (1,136) (1,463) (4,067) (9,248)
Commodity contract derivatives – receipts² —  — 
Commodity contract derivatives – payments² (116) (50) (24) (12) (202)
Derivative financial assets
Financing derivatives – receipts² 2,469  1,063  570  1,775  5,877 
Financing derivatives – payments² (2,271) (527) (375) (1,478) (4,651)
Commodity contract derivatives – receipts² 20  —  22 
Commodity contract derivatives – payments² (21) —  —  —  (21)
(7,998) (3,009) (2,539) (35,133) (48,679)
1.    The interest on borrowings is calculated based on borrowings held at 31 March without taking account of future issues. Floating rate interest is estimated using a forward interest rate curve as at 31 March. Payments are included on the basis of the earliest date on which the Company can be required to settle.
2.    The receipts and payments line items for derivatives comprise gross undiscounted future cash flows, after considering any contractual netting that applies within individual contracts. Where cash receipts and payments within a derivative contract are settled net, and the amount to be received/(paid) exceeds the amount to be paid/(received), the net amount is presented within derivative receipts/(payments).

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
32. Financial risk management continued
(c) Currency risk
National Grid operates internationally with mainly the pound sterling as the functional currency for the UK companies and the US dollar for the US businesses. Currency risk arises from three major areas: funding activities, capital investment and related revenues, and holdings in foreign operations. This risk is managed using financial instruments including derivatives as approved by policy, typically cross-currency interest rate swaps, foreign exchange swaps and forwards.
Funding activities – our policy is to borrow in the most advantageous market available. Foreign currency funding gives rise to risk of volatility in the amount of functional currency cash to be repaid. This risk is reduced by swapping principal and interest back into the functional currency of the issuer. All foreign currency debt and transactions are hedged except where they provide a natural offset to assets elsewhere in the Group.
Capital investment and related revenues – capital projects often incur costs or generate revenues in a foreign currency, most often euro transactions done by the UK business. Our policy for managing foreign exchange transaction risk is to hedge contractually committed foreign currency cash flows over a prescribed minimum size, typically by buying euro forwards to hedge future expenditure, and selling euro forwards to hedge future revenues. For hedges of forecast cash flows our policy is to hedge a proportion of highly probable cash flows.
Holdings in foreign operations – we are exposed to fluctuations on the translation into pounds sterling of our foreign operations. The policy for managing this translation risk is to issue foreign currency debt or to replicate foreign debt using derivatives that pay cash flows in the currency of the foreign operation. The primary managed exposure arises from dollar denominated assets and liabilities held by our US operations, with a smaller euro exposure in respect of joint venture investments.
Derivative financial instruments were used to manage foreign currency risk as follows:
2021 2020
Sterling
£m
Euro
£m
Dollar
£m
Other
£m
Total
£m
Sterling
£m
Euro
£m
Dollar
£m
Other
£m
Total
£m
Cash and cash equivalents 63    94    157  18  —  55  —  73 
Financial investments 1,215    1,127    2,342  813  —  1,185  —  1,998 
Borrowings (12,210) (5,351) (12,660) (999) (31,220) (12,407) (4,150) (13,217) (1,020) (30,794)
Pre-derivative position (10,932) (5,351) (11,439) (999) (28,721) (11,576) (4,150) (11,977) (1,020) (28,723)
Derivative effect (826) 5,459  (5,494) 1,036  175  (1,169) 4,341  (4,214) 1,175  133 
Net debt position (11,758) 108  (16,933) 37  (28,546) (12,745) 191  (16,191) 155  (28,590)
The exposure to dollars largely relates to our net investment hedge activities; exposure to euros largely relates to hedges for our future non-sterling capital expenditure.
The currency exposure on other financial instruments is as follows:
2021 2020
Sterling
£m
Euro
£m
Dollar
£m
Other
£m
Total
£m
Sterling
£m
Euro
£m
Dollar
£m
Other
£m
Total
£m
Trade and other receivables 282    1,387    1,669  306  —  1,403  —  1,709 
Trade and other payables (1,207)   (1,878)   (3,085) (1,177) —  (2,002) —  (3,179)
Other non-current liabilities (77)   (288)   (365) (85) —  (277) —  (362)
The carrying amounts of other financial instruments are denominated in the above currencies, which in most instances are the functional currency of the respective subsidiaries. Our exposure to dollars is due to activities in our US subsidiaries. We do not have any other significant exposure to currency risk on these balances.
Hedge accounting for currency risk
Where available, derivatives transacted for hedging are designated for hedge accounting. Economic offset is qualitatively determined because the critical terms (currency and volume) of the hedging instrument match the hedged exposure. If a forecast transaction was no longer expected to occur, the cumulative gain or loss previously reported in equity would be transferred to the income statement. This has not occurred in the current or comparative years.
Cash flow hedging of currency risk of capital expenditure and revenues is designated as hedging the exposure to movements in the spot translation rates only; the timing of forecasted transactions is not designated as a hedged risk. Gains and losses on hedging instruments arising from forward points and foreign currency basis spreads are excluded from designation and are recognised immediately in profit or loss, along with any hedge ineffectiveness. On recognition of the hedged purchase or sale in the financial statements, the associated hedge gains and losses, deferred in the cash flow hedge reserve in other equity reserves, are transferred out of reserves and included with the recognition of the underlying transaction. Where a non-financial asset or a non-financial liability results from a forecast transaction or firm commitment being hedged, the amounts deferred in reserves are included directly in the initial measurement of that asset or liability.
Net investment hedging is also designated as hedging the exposure to movements in spot translation rates only: spot-related gains and losses on hedging instruments are presented in the cumulative translation reserve within other equity reserves to offset gains or losses on translation of the hedged balance sheet exposure. Any ineffectiveness is recognised immediately in the income statement. Amounts deferred in the cumulative translation reserve with respect to net investment hedges are subsequently recognised in the income statement in the event of disposal of the overseas operations concerned. Any remaining amounts deferred in the cost of hedging reserve are also released to the income statement.
Hedges of foreign currency funding are designated as cash flow hedges or fair value hedges of forward exchange risk (hedging both currency and interest rate risk together, where applicable). Gains and losses arising from foreign currency basis spreads are excluded from designation and are treated as a cost of hedging, deferred initially in other equity reserves and released into profit or loss over the life of the hedging relationship. Hedge accounting for funding is described further in the interest rate risk section below.
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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

32. Financial risk management continued
(d) Interest rate risk
National Grid’s interest rate risk arises from our long-term borrowings. Our interest rate risk management policy is to seek to minimise total financing costs (being interest costs and changes in the market value of debt). Hedging instruments principally consist of interest rate and cross-currency swaps that are used to translate foreign currency debt into functional currency and to adjust the proportion of fixed-rate and floating-rate in the borrowings portfolio to within a range set by the Finance Committee of the Board. The benchmark interest rates hedged are currently based on LIBOR.
LIBOR is being replaced as an interest rate benchmark by alternative reference rates in certain currencies including our functional currencies, USD and GBP, and foreign currencies in which we operate. This impacts contracts including financial liabilities that pay LIBOR-based cash flows, and derivatives that receive or pay LIBOR-based cash flows. The change in benchmark also affects discount rates which will impact the valuations of certain liabilities. We have disclosed our exposure to LIBOR on our derivative portfolio in note 17, on our borrowings in note 21 and on our hedging arrangements in note 32(e). We are managing the risk by planning to replace LIBOR cash flows with alternative reference rates on our affected contracts. The migration project is underway, with all affected contracts expected to be amended by 31 December 2021. As at 31 March 2021 no contracts had yet been amended. The Finance Committee of the Board have delegated to the treasury department the authority to determine which benchmarks are the most appropriate. A combination of LIBOR and the successor benchmarks, primarily GBP Sterling Overnight Index Average (SONIA) and USD Secured Overnight Financing Rate (SOFR) will be used in the portfolio during the migration period.
We also consider inflation risk and hold some inflation-linked borrowings. We believe that these provide a partial economic offset to the inflation risk associated with our UK inflation-linked revenues.
The table in note 21 sets out the carrying amount, by contractual maturity, of borrowings that are exposed to interest rate risk before taking into account interest rate swaps.
Net debt was managed using derivative financial instruments to hedge interest rate risk as follows:
2021 2020
Fixed rate
£m
Floating
rate
£m
Inflation
linked
£m
Other1
£m
Total
£m
Fixed rate
£m
Floating
rate
£m
Inflation
linked
£m
Other1
£m
Total
£m
Cash and cash equivalents 64  67    26  157  71  10  —  (8) 73 
Financial investments   2,309    33  2,342  —  1,966  —  32  1,998 
Borrowings (23,163) (1,762) (6,295)   (31,220) (20,969) (3,085) (6,740) —  (30,794)
Pre-derivative position (23,099) 614  (6,295) 59  (28,721) (20,898) (1,109) (6,740) 24  (28,723)
Derivative effect 2,869  (2,511) (183)   175  2,259  (1,892) (234) —  133 
Net debt position (20,230) (1,897) (6,478) 59  (28,546) (18,639) (3,001) (6,974) 24  (28,590)
1.    Represents financial instruments which are not directly affected by interest rate risk, such as investments in equity or other similar financial instruments.
Hedge accounting for interest rate risk
Borrowings paying variable or floating-rates expose National Grid to cash flow interest rate risk, partially offset by cash held at variable rates. Where a hedging instrument results in paying a fixed-rate, it is designated as a cash flow hedge because it has reduced the cash flow volatility of the hedged borrowing. Changes in the fair value of the derivative are initially recognised in other comprehensive income as gains or losses in the cash flow hedge reserve, with any ineffective portion recognised immediately in the income statement.
Borrowings paying fixed-rates expose National Grid to fair value interest rate risk. Where the hedging instrument pays a floating-rate, it is designated as a fair value hedge because it has reduced the fair value volatility of the borrowing. Changes in the fair value of the derivative and changes in the fair value of the hedged item in relation to the risk being hedged are both adjusted on the balance sheet and offset in the income statement to the extent the fair value hedge is effective, with the residual difference remaining as ineffectiveness.
Both types of hedges are designated as hedging the currency and interest rate risk arising from changes in forward points. Amounts accumulated in the cash flow hedge reserve (cash flow hedges only) and the deferred cost of hedging reserve (both cash flow and fair value hedges) are reclassified from reserves to the income statement on a systematic basis as hedged interest expense is recognised. Adjustments made to the carrying value of hedged items in fair value hedges are similarly released to the income statement to match the timing of the hedged interest expense.
When hedge accounting is discontinued, any remaining cumulative hedge accounting balances continue to be released to the income statement to match the impact of outstanding hedged items. Any remaining amounts deferred in the cost of hedging reserve are released immediately to the income statement as finance costs.
The Group early-adopted Phase I of IFRS Interest Rate Benchmark Reform amendments related to hedge accounting with effect from 1 April 2019, and Phase II with effect from 1 April 2020. The amendments impact our fair value hedging relationships where derivative cash flows will be transitioned from paying LIBOR to paying an alternative reference rate. The hedged risk must be re-documented to reflect this, and allow existing hedge designations to continue unchanged during the period of uncertainty relating to the timing and method of benchmark migrations.
The amendments will be applied until the earliest point in time of the Group’s contracts that reference LIBOR being amended, the hedging relationship being formally discontinued or formal market conventions ending uncertainty being published and widely adopted. If amended cash flows do not cause a hedging relationship to be discontinued, then the amendments will cease to be applied only when that relationship is discontinued under IFRS 9.
The IFRS amendments impact fair value and cash flow hedges of interest rate risk and related hedging instruments, and certain net investment hedges that use cross-currency interest rate swaps to pay a foreign currency floating rate and receive a functional currency floating rate. The notional values of hedging instruments, for each type of hedging relationship impacted, are shown in the hedge accounting tables in note 32(e). These amounts also correspond to the exposures designated as hedged.

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
32. Financial risk management continued
(e) Hedge accounting
In accordance with the requirements of IFRS 7, certain additional information about hedge accounting is disaggregated by risk type and hedge designation type in the tables below:
Year ended 31 March 2021
Fair value hedges of foreign currency and interest rate risk
Cash flow hedges of foreign currency and interest rate risk
Cash flow hedges of foreign currency risk
Net investment hedges
£m
£m
£m
£m
Consolidated statement of comprehensive income
Net gains/(losses) in respect of:
Cash flow hedges   14  (14)  
Cost of hedging (15) (24)   50 
Transferred to profit or loss in respect of:
Cash flow hedges   56     
Cost of hedging 1  2     
Consolidated statement of changes in equity
Other equity reserves – cost of hedging balances (11) (30)   6 
Consolidated statement of financial position
Derivatives – carrying value of hedging instruments¹
Assets – current   10  2  5 
Assets – non-current 187  59  1  140 
Liabilities – current   (12) (24) (17)
Liabilities – non-current (113) (255) (22)  
Profiles of the significant timing, price and rate information of hedging instruments
Maturity range Jan 2023 – Jan 2043 Sep 2021 – Nov 2040 Apr 2021 – Feb 2027 Mar 2022 – Sep 2027
Spot foreign exchange range:
GBP:USD 1.64
1.30 – 1.66
1.31 – 1.41
1.22 – 1.40
GBP:EUR
1.11 – 1.24
1.08 – 1.24
1.04 – 1.29
1.15 – 1.16
EUR:USD
1.13 – 1.17
1.13 – 1.14
n/a n/a
Interest rate range:
GBP
LIBOR +30bps/+408bps
0.976% – 5.845%
n/a n/a
USD
 LIBOR +68bps/+115bps
2.513% – 3.864%
n/a n/a
1.    The use of derivatives may entail a derivative transaction qualifying for more than one hedge type designation under IFRS 9. Therefore, the derivative amounts in the table above are grossed up by hedge type, whereas they are presented net at an instrument level in the statement of financial position.

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

32. Financial risk management continued
(e) Hedge accounting continued
Year ended 31 March 2020
Fair value hedges of foreign currency and interest rate risk
Cash flow hedges of foreign currency and interest rate risk
Cash flow hedges of foreign currency risk
Net investment hedges
£m
£m
£m
£m
Consolidated statement of comprehensive income
Net losses in respect of:
Cash flow hedges —  (143) (17) — 
Cost of hedging (7) —  (30)
Transferred to profit or loss in respect of:
Cash flow hedges —  14  —  — 
Cost of hedging (1) —  (45)
Consolidated statement of changes in equity
Other equity reserves – cost of hedging balances (8) —  (43)
Consolidated statement of financial position
Derivatives – carrying value of hedging instruments¹
Assets – current — 
Assets – non-current 247  106  — 
Liabilities – current (1) (105) (8) (82)
Liabilities – non-current (39) (264) (12) (19)
Profiles of the significant timing, price and rate information of hedging instruments
Maturity range May 2020 – Feb 2040 Jul 2020 – Dec 2039 Apr 2020 – Dec 2024 Jun 2020 – Sep 2027
Spot foreign exchange range:
GBP:USD 1.64
1.30 – 1.66
1.24 – 1.41
1.21 – 1.49
GBP:EUR
1.19 – 1.24
1.10 – 1.24
1.04 – 1.30
1.14
EUR:USD
1.13 – 1.17
1.13 – 1.14
n/a n/a
Interest rate range:
GBP
LIBOR +30bps/+408bps
1.331% – 5.850%
n/a n/a
USD
LIBOR –44bps/+115bps
1.103% – 3.864%
n/a n/a
1.    The use of derivatives may entail a derivative transaction qualifying for more than one hedge type designation under IFRS 9. Therefore, the derivative amounts in the table above are grossed up by hedge type, whereas they are presented net at an instrument level in the statement of financial position.

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
32. Financial risk management continued
(e) Hedge accounting continued
The following tables show the effects of hedge accounting on financial position and year-to-date performance for each type of hedge. These tables also present notional values of hedging instruments (and equal hedged exposures) impacted by IFRS 9 Interest Rate Benchmark Reform amendments.
(i) Fair value hedges of foreign currency and interest rate risk on recognised borrowings:
As at 31 March 2021 Balance of fair value hedge adjustments in borrowings Change in value used for calculating ineffectiveness
Hedging instrument notional Continuing hedges Discontinued hedges Hedged item Hedging instrument Hedge ineffectiveness
Hedge type £m £m £m £m £m £m
Foreign currency and interest rate risk on borrowings1,2
(2,755) 121  (85) 153  (127) 26 
1.    The carrying value of the hedged borrowings is £2,714 million, of which £nil is current and £2,714 million is non-current.
2.    Included within the hedging instrument notional balance is £2,679 million impacted by Interest Rate Benchmark Reform amendments.
As at 31 March 2020 Balance of fair value hedge adjustments in borrowings Change in value used for calculating ineffectiveness
Hedging instrument notional
Continuing hedges
Discontinued hedges
Hedged item
Hedging instrument
Hedge ineffectiveness
Hedge type
£m
£m
£m
£m
£m
£m
Foreign currency and interest rate risk on borrowings1,2
(1,751) (31) (95) (42) 48 
1.    The carrying value of the hedged borrowings was £1,883 million, of which £72 million was current and £1,811 million was non-current.
2.    Included within the hedging instrument notional balance was £1,675 million impacted by Interest Rate Benchmark Reform amendments.
(ii) Cash flow hedges of foreign currency and interest rate risk:
As at 31 March 2021 Balance in cash flow hedge reserve Change in value used for calculating ineffectiveness
Hedging instrument notional
Continuing hedges
Discontinued hedges
Hedged item
Hedging instrument
Hedge ineffectiveness
Hedge type
£m
£m
£m
£m
£m
£m
Foreign currency and interest rate risk on borrowings¹
(4,884) (11) (6) (16) 16   
Foreign currency risk on forecasted cash flows (988) (31) 3  17  (17)  
1.    Included within the hedging instrument notional balance is £176 million impacted by Interest Rate Benchmark Reform amendments.
As at 31 March 2020 Balance in cash flow hedge reserve Change in value used for calculating ineffectiveness
Hedging instrument notional
Continuing hedges
Discontinued hedges
Hedged item
Hedging instrument
Hedge ineffectiveness
Hedge type
£m
£m
£m
£m
£m
£m
Foreign currency and interest rate risk on borrowings¹
(4,127) (69) (22) 142  (143) (1)
Foreign currency risk on forecasted cash flows (794) —  17  (17) — 
1.    Included within the hedging instrument notional balance was £176 million impacted by Interest Rate Benchmark Reform amendments.
(iii) Net investment hedges of foreign currency risk:
As at 31 March 2021 Balance in translation reserve Change in value used for calculating ineffectiveness
Hedging instrument notional
Continuing hedges
Discontinued hedges
Hedged item
Hedging instrument
Hedge ineffectiveness
Hedge type
£m
£m
£m
£m
£m
£m
Currency risk on foreign operations¹
(2,786) 183  (2,826) (183) 183   
1.    Included within the hedging instrument notional balance is £nil impacted by Interest Rate Benchmark Reform amendments.
As at 31 March 2020 Balance in translation reserve Change in value used for calculating ineffectiveness
Hedging instrument notional
Continuing hedges
Discontinued hedges
Hedged item
Hedging instrument
Hedge ineffectiveness
Hedge type
£m
£m
£m
£m
£m
£m
Currency risk on foreign operations¹ (3,064) 45  (2,871) (6) — 
1.    Included within the hedging instrument notional balance was £nil impacted by Interest Rate Benchmark Reform amendments.

198


National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

32. Financial risk management continued
(f) Commodity price risk
We purchase electricity and gas to supply our customers in the US and to meet our own energy needs. Substantially all our costs of purchasing electricity and gas for supply to customers are recoverable at an amount equal to cost. The timing of recovery of these costs can vary between financial periods leading to an under- or over-recovery within any particular year that can lead to large fluctuations in the income statement. We follow approved policies to manage price and supply risks for our commodity activities.
Our energy procurement risk management policy and delegations of authority govern our US commodity trading activities for energy transactions. The purpose of this policy is to ensure we transact within pre-defined risk parameters and only in the physical and financial markets where we or our customers have a physical market requirement. In addition, state regulators require National Grid to manage commodity risk and cost volatility prudently through diversified pricing strategies. In some jurisdictions we are required to file a plan outlining our strategy to be approved by regulators. In certain cases, we might receive guidance with regard to specific hedging limits.
Energy purchase contracts for the forward purchase of electricity or gas that are used to satisfy physical delivery requirements to customers, or for energy that the Group uses itself, meet the expected purchase or usage requirements of IFRS 9. They are, therefore, not recognised in the financial statements until they are realised. Disclosure of commitments under such contracts is made in note 30.
US states have introduced a variety of legislative requirements with the aim of increasing the proportion of our electricity that is derived from renewable or other forms of clean energy. Annual compliance filings regarding the level of Renewable Energy Certificates (and other similar environmental certificates) are required by the relevant department of utilities. In response to the legislative requirements, National Grid has entered into long-term, typically fixed-price, energy supply contracts to purchase both renewable energy and environmental certificates. We are entitled to recover all costs incurred under these contracts through customer billing.
Under IFRS, where these supply contracts are not accounted for as leases, they are considered to comprise two components, being a forward purchase of power at spot prices, and a forward purchase of environmental certificates at a variable price (being the contract price less the spot power price). With respect to our current contracts, neither of these components meets the requirement to be accounted for as a derivative. The environmental certificates are currently required for compliance purposes, and at present there are no liquid markets for these attributes. Accordingly, this component meets the expected purchase or usage exemption of IFRS 9. We expect to enter into an increasing number of these contracts, in order to meet our compliance requirements in the short to medium term. In future, if and when liquid markets develop, and to the extent that we are in receipt of environmental certificates in excess of our required levels, this exemption may cease to apply, and we may be required to account for forward purchase commitments for environmental certificates as derivatives at fair value through profit and loss.
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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
32. Financial risk management continued
(g) Fair value analysis
Included in the statement of financial position are financial instruments which are measured at fair value. These fair values can be categorised into hierarchy levels that are representative of the inputs used in measuring the fair value. The best evidence of fair value is a quoted price in an actively traded market. In the event that the market for a financial instrument is not active, a valuation technique is used.
2021 2020
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Assets
Investments held at FVTPL 1,768    240  2,008  1,278  —  108  1,386 
Investments held at FVOCI 99  416    515  83  352  —  435 
Investments in associates         —  —  103  103 
Financing derivatives   942    942  —  1,257  10  1,267 
Commodity contract derivatives   12  45  57  —  66  75 
1,867  1,370  285  3,522  1,361  1,618  287  3,266 
Liabilities
Financing derivatives   (584) (183) (767) —  (889) (245) (1,134)
Commodity contract derivatives   (75) (57) (132) —  (136) (64) (200)
Liabilities held at fair value (682)     (682) (741) —  —  (741)
Contingent consideration1
    (57) (57) —  —  (74) (74)
(682) (659) (297) (1,638) (741) (1,025) (383) (2,149)
1,185  711  (12) 1,884  620  593  (96) 1,117 
1.    Contingent consideration relates to the acquisition of National Grid Renewables (see note 38).
Level 1:
Financial instruments with quoted prices for identical instruments in active markets.
Level 2:
Financial instruments with quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in inactive markets, and financial instruments valued using models where all significant inputs are based directly or indirectly on observable market data.
Level 3:
Financial instruments valued using valuation techniques where one or more significant inputs are based on unobservable market data.
Our Level 1 financial investments and liabilities held at fair value are valued using quoted prices from liquid markets.
Our Level 2 financial investments held at fair value are valued using quoted prices for similar instruments in active markets, or quoted prices for identical or similar instruments in inactive markets. Alternatively, they are valued using models where all significant inputs are based directly or indirectly on observable market data.
Our Level 2 financing derivatives include cross-currency, interest rate and foreign exchange derivatives. We value these by discounting all future cash flows by externally sourced market yield curves at the reporting date, taking into account the credit quality of both parties. These derivatives can be priced using liquidly traded interest rate curves and foreign exchange rates, and therefore we classify our vanilla trades as Level 2 under the IFRS 13 framework. One FX forward transacted in the year contains deal-contingent terms linked to the sale of NECO. As at the reporting date, these terms have no material impact on the valuation. This will be re-assessed at each relevant reporting date.
Our Level 2 commodity contract derivatives include over-the-counter gas and power swaps as well as forward physical gas deals. We value our contracts based on market data obtained from the New York Mercantile Exchange (NYMEX) and the Intercontinental Exchange (ICE) where monthly prices are available. We discount based on externally sourced market yield curves at the reporting date, taking into account the credit quality of both parties and liquidity in the market. Our commodity contracts can be priced using liquidly traded swaps. Therefore, we classify our vanilla trades as Level 2 under the IFRS 13 framework.
Our Level 3 financing derivatives include cross-currency swaps, inflation-linked swaps and equity options, where the market is illiquid. In valuing these instruments, we use in-house valuation models and obtain external valuations to support each reported fair value.
Our Level 3 commodity contract derivatives primarily consist of our forward purchases of electricity and gas that we value using proprietary models. Derivatives are classified as Level 3 where significant inputs into the valuation technique are neither directly nor indirectly observable (including our own data, which are adjusted, if necessary, to reflect the assumptions market participants would use in the circumstances).
Our Level 3 investments include equity instruments accounted for at fair value through profit and loss. These equity holdings are part of our corporate venture capital portfolio held by National Grid Partners and comprise a series of small unquoted investments where prices or valuation inputs are unobservable. These investments are either recently acquired or there have been recent funding rounds with third parties and therefore the valuation is based on the latest transaction price and any subsequent investment-specific adjustments.
Our Level 3 investments also include our investment in Sunrun Neptune 2016 LLC, which is accounted for at fair value through profit and loss. The investment is fair valued by discounting expected cash flows using a weighted average cost of capital specific to Sunrun Neptune 2016 LLC.
In light of the current ongoing impact of the COVID-19 pandemic, the valuations of certain assets and liabilities can be more subjective. While there have been significant movements in market indices, we are satisfied that there has been no significant impact on the fair values of our financial instruments measured at fair value, and that any impact is reflected in the fair values in the table above.

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

32. Financial risk management continued
(g) Fair value analysis continued
The changes in value of our Level 3 financial instruments are as follows:
Financing derivatives
Commodity contract
derivatives
Other3
Total
2021 2020 2021 2020 2021 2020 2021 2020
£m £m
£m
£m
£m
£m
£m
£m
At 1 April (235) (214) 2  137  152  (96) (61)
Net gains/(losses) for the year1,2
51  (20) (16) (2) 26  33  12 
Purchases   —  (1) 26  32  51  31  77 
Acquisition of National Grid Renewables   —    —    (74)   (74)
Settlements 1  (1) (1) (31) 16  (18) 16  (50)
Reclassification to held for sale (note 10)   —  4  —    —  4  — 
At 31 March (183) (235) (12) 183  137  (12) (96)
1.    Gain of £51 million (2020: £20 million loss) is attributable to derivative financial instruments held at the end of the reporting period and has been recognised in finance costs in the income statement.
2.    Loss of £46 million (2020: £17 million loss) is attributable to commodity contract derivative financial instruments held at the end of the reporting period.
3.    Other comprises our investments in Sunrun Neptune 2016 LLC and the investments made by National Grid Partners, which are accounted for at fair value through profit and loss as well as the contingent consideration arising from the acquisition of National Grid Renewables (see note 38).

The impacts on a post-tax basis of reasonably possible changes in significant Level 3 assumptions are as follows:
Financing derivatives
Commodity contract derivatives
Other3
2021 2020 2021 2020 2021 2020
£m
£m
£m
£m
£m
£m
10% increase in commodity prices¹   —  3    — 
10% decrease in commodity prices¹   —  (1) —    — 
+10% market area price change   —  (4) (4)   — 
-10% market area price change   —  7    — 
+20 basis points change in Limited Price Inflation (LPI) market curve² (83) (95)   —    — 
-20 basis points change in LPI market curve² 83  90    —    — 
+50 basis points change in discount rate   —    —  (5) (3)
-50 basis points change in discount rate   —    —  5 
1.    Level 3 commodity price sensitivity is included within the sensitivity analysis disclosed in note 35.
2.    A reasonably possible change in assumption of other Level 3 derivative financial instruments is unlikely to result in a material change in fair values.
3.    The investments acquired in the period were on market terms, and sensitivity is considered insignificant at 31 March 2021.
The impacts disclosed above were considered on a contract-by-contract basis with the most significant unobservable inputs identified.
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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
32. Financial risk management continued
(h) Capital risk management
The capital structure of the Group consists of shareholders’ equity, as disclosed in the consolidated statement of changes in equity, and net debt (note 29). National Grid’s objectives when managing capital are: to safeguard our ability to continue as a going concern; to remain within regulatory constraints of our regulated operating companies; and to maintain an efficient mix of debt and equity funding thus achieving an optimal capital structure and cost of capital. We regularly review and manage the capital structure as appropriate in order to achieve these objectives.
Maintaining appropriate credit ratings for our operating and holding companies is an important aspect of our capital risk management strategy and balance sheet efficiency. We monitor our balance sheet efficiency using several metrics including retained cash flow/net debt (RCF), regulatory gearing and interest cover. For the year ended 31 March 2021, these metrics for the Group were 6.6% (2020: 9.2%), 65% (2020: 63%) and 4.5x (2020: 4.1x), respectively. We believe these are consistent with the current credit ratings for National Grid plc in respect of the main companies of the Group, based on guidance from the rating agencies.
We monitor the RAV gearing within NGET and the regulated transmission businesses within NGG. This is calculated as net debt expressed as a percentage of RAV, and indicates the level of debt employed to fund our UK regulated businesses. It is compared with the level of RAV gearing indicated by Ofgem as being appropriate for these businesses, at around 60% to 62.5%. We also monitor net debt as a percentage of rate base for our US operating companies, comparing this with the allowed rate base gearing inherent within each of our agreed rate plans, typically around 50%.
The majority of our regulated operating companies in the US and the UK are subject to certain restrictions on the payment of dividends by administrative order, contract and/or licence. The types of restrictions that a company may have that would prevent a dividend being declared or paid unless they are met include:
    dividends must be approved in advance by the relevant US state regulatory commission;
    the subsidiary must have at least two recognised rating agency credit ratings of at least investment grade;
    dividends must be limited to cumulative retained earnings, including pre-acquisition retained earnings;
    the securities of National Grid plc must maintain an investment grade credit rating, and if that rating is the lowest investment grade bond rating it cannot have a negative watch/review for downgrade notice by a credit rating agency;
    the subsidiary must not carry on any activities other than those permitted by the licences;
    the subsidiary must not create any cross-default obligations or give or receive any intra-group cross-subsidies; and
    the percentage of equity compared with total capital of the subsidiary must remain above certain levels.
There is a further restriction relating only to NECO, which is required to maintain its consolidated net worth above certain levels.
These restrictions are subject to alteration in the US as and when a new rate case or rate plan is agreed with the relevant regulatory bodies for each operating company and in the UK through the normal licence review process.
As most of our business is regulated, at 31 March 2021 the majority of our net assets are subject to some of the restrictions noted above. These restrictions are not considered to be significantly onerous, nor do we currently expect they will prevent the planned payment of dividends in future in line with our dividend policy.
All the above requirements are monitored on a regular basis in order to ensure compliance. The Group has complied with all externally imposed capital requirements to which it is subject.

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

33. Borrowing facilities
To support our liquidity requirements and provide backup to commercial paper and other borrowings, we agree committed credit facilities with financial institutions over and above the value of borrowings that may be required. These committed credit facilities have never been drawn, and our undrawn amounts are listed below.

At 31 March 2021, we had bilateral committed credit facilities of £5,410 million (2020: £5,495 million). In addition, we had committed credit facilities from syndicates of banks of £115 million at 31 March 2021 (2020: £277 million). All committed credit facilities were undrawn in 2021 and 2020. An analysis of the maturity of these undrawn committed facilities is shown below:
2021 2020
£m
£m
Undrawn committed borrowing facilities expiring:
Less than 1 year   — 
In 1 to 2 years 1,668  1,940 
In 2 to 3 years 534  1,668 
In 3 to 4 years 1,718  277 
In 4 to 5 years 1,605  1,887 
More than 5 years   — 
5,525  5,772 

Of the unused facilities at 31 March 2021, £5,410 million (2020: £5,495 million) is available for liquidity purposes, while £115 million (2020: £277 million) is available as backup to specific US borrowings. £1,668 million of the undrawn bilateral facilities due to mature in one to two years, were renegotiated between 1 April 2021 and 19 May 2021, with an uplift in the amount committed to £1,861 million with new expiry dates to May 2024. Of the £534 million of undrawn committed borrowings facilities due to expire within two to three years, £150 million was renegotiated between 1 April 2021 and 19 May 2021, with the expiry extended by a further year to June 2024. £400 million of additional undrawn bilateral facilities were entered into subsequent to the year end with expiry dates in May 2024.
In addition, we have the following facilities which are not included in the table above:
for the separately regulated business of National Grid Electricity System Operator Limited, the Group has a facility of £550 million (2020: £550 million). This facility is not available as Group general liquidity support;
the Group has Export Credit Agency (ECA) facilities totalling £1,345 million (2020: £901 million), of which £446 million (2020: £233 million) is undrawn; and
the Group has two new loan facilities in place relating to the acquisition of PPL Western Power Distribution Investments Limited (WPD) (see note 38). A facility of £8,250 million (31 March 2020: £nil) to finance the consideration and a facility of £1,105 million (31 March 2020: £nil) to back up acquired debt which contains change of control provisions, of which £8,250 million and £1,105 million is undrawn. Subsequent to the year end the £1,105 million facility has been cancelled as waivers have been obtained by WPD in relation to the change of control clauses.
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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
34. Subsidiary undertakings, joint ventures and associates
While we present consolidated results in these financial statements as if we were one company, our legal structure is such that there are a number of different operating and holding companies that contribute to the overall result. This structure has evolved through acquisitions as well as regulatory requirements to have certain activities within separate legal entities.

Subsidiary undertakings
A list of the Group’s subsidiaries as at 31 March 2021 is given below. The entire share capital of subsidiaries is held within the Group except where the Group’s ownership percentages are shown. These percentages give the Group’s ultimate interest and therefore allow for the situation where subsidiaries are owned by partly owned intermediate subsidiaries. Where subsidiaries have different classes of shares, this is largely for historical reasons, and the effective percentage holdings given represent both the Group’s voting rights and equity holding. Shares in National Grid (US) Holdings Limited, National Grid (US) Investments 2 Limited, National Grid Hong Kong Limited, National Grid Luxembourg SARL and NGG Finance plc are held directly by National Grid plc. All other holdings in subsidiaries are owned by other subsidiaries within the Group. All subsidiaries are consolidated in the Group’s financial statements.
Principal Group companies are identified in bold. These companies are incorporated and principally operate in the countries under which they are shown. All entities incorporated in the United States are taxed in the United States on their worldwide income other than where indicated in the footnotes below. Other entities are tax resident in their jurisdiction of incorporation other than where indicated in the footnotes below.
Incorporated in England and Wales
Registered office: 1–3 Strand, London WC2N 5EH, UK (unless stated otherwise in footnotes).

Beegas Nominees Limited
Birch Sites Limited
Carbon Sentinel Limited
Droylsden Metering Services Limited
Gridcom Limited
Icelink Interconnector Limited
Landranch Limited
Lattice Group Employee Benefit Trust Limited
Lattice Group Limited
Lattice Group Trustees Limited
Natgrid Limited
NatGrid One Limited1
NatgridTW1 Limited1
National Grid Belgium Limited2*
National Grid Blue Power Limited2*
National Grid Carbon Limited
National Grid Commercial Holdings Limited
National Grid Distributed Energy Limited
National Grid Electricity Group Trustee Limited
National Grid Electricity System Operator Limited
National Grid Electricity Transmission plc
National Grid Energy Metering Limited
National Grid Four Limited2*
National Grid Fourteen Limited2*
National Grid Gas Holdings Limited
National Grid Gas plc
National Grid Grain LNG Limited
National Grid Holdings Limited1
National Grid Holdings One plc
National Grid IFA 2 Limited
National Grid Interconnector Holdings Limited
National Grid Interconnectors Limited
National Grid International Limited1
National Grid Metering Limited
National Grid North Sea Link Limited
National Grid Offshore Limited
National Grid Partners Limited

National Grid Plus Limited
National Grid Property Holdings Limited
National Grid Seventeen Limited2*
National Grid Smart Limited
National Grid Ten
National Grid Thirty Five Limited2*
National Grid Thirty Six Limited
National Grid Twelve Limited1
National Grid Twenty Eight Limited
National Grid Twenty-Five Limited2*
National Grid Twenty Seven Limited
National Grid Twenty Three Limited1
National Grid UK Limited
National Grid UK Pension Services Limited
National Grid (US) Holdings Limited1
National Grid (US) Investments 2 Limited1
National Grid (US) Investments 4 Limited1
National Grid (US) Partner 1 Limited1
National Grid Ventures Limited
National Grid Viking Link Limited
National Grid William Limited
NG Nominees Limited
NGC Employee Shares Trustee Limited
NGG Finance plc
Ngrid Intellectual Property Limited
NGT Telecom No. 1 Limited2*
NGT Two Limited
Port Greenwich Limited
Stargas Nominees Limited
Supergrid Electricity Limited
Supergrid Energy Transmission Limited
Supergrid Limited
Thamesport Interchange Limited
The National Grid Group Quest Trustee Company Limited
The National Grid YouPlan Trustee Limited
Transco Limited
Warwick Technology Park Management Company (No 2) Limited (60.56%)3

1.    Companies where National Grid plc has issued guarantees over the liabilities of the companies as at 31 March 2021 and for which the companies are taking the exemption from the requirements of an audit for their individual financial statements as permitted by section 479A of the Companies Act.
2.    Registered office: c/o KPMG, 15 Canada Square, London E14 5GL, UK.
3.    Registered office: Shire Hall, PO Box 9, Warwick CV34 4RL, UK.

*    In liquidation.

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

34. Subsidiary undertakings, joint ventures and associates continued
Subsidiary undertakings continued
Incorporated in the US
Registered office: National Registered Agents, Inc., 1209 Orange Street, Wilmington, DE 19801, USA (unless stated otherwise in footnotes).

Agave Solar, LLC
Altona Solar, LLC
Apple River Solar, LLC
Apple Solar, LLC
Argenta Solar, LLC
Armenia Solar, LLC
Artemisia Solar, LLC1
Ashland Solar, LLC
Athens Solar, LLC
Audubon Wind Farm, LLC
Autauga Solar, LLC
Baileyville Solar, LLC (previously Ellison Solar, LLC)**
Banner Solar, LLC
Bazile Creek Wind Farm, LLC
Bee Hollow Solar, LLC
Bell Plaine Solar, LLC
Benevolent Solar, LLC
Birdsong Creek Solar, LLC
Black Bear Solar, LLC
Blackhawk Solar, LLC
Blaze Solar, LLC2
Blevins Solar, LLC
Blue Ridge Wind, LLC
Blue Spring Solar, LLC
Blues Solar, LLC
Bluewater Solar, LLC
Boone Solar, LLC
Boston Gas Company3
Braeburn Solar, LLC
Bridges Solar, LLC
Brilliance Solar, LLC
British Transco Capital, Inc.4
British Transco Finance, Inc.4
Brock Solar, LLC
Broken Bridge Corp.5
Brook Trout Solar, LLC
BT Noble Solar, LLC6
Bullsnake Solar, LLC
Burley Solar, LLC
Burlington Solar, LLC
Burr Ridge Wind, LLC
Cage Ranch Solar, LLC
Cage Ranch Solar II, LLC
Cage Ranch Solar III, LLC
Caldwell Solar, LLC
Caldwell Solar II, LLC
Cameo Solar, LLC
Canary Solar, LLC
Canby Solar, LLC
Carriere Solar, LLC
Cass Wind Farm, LLC
Cattle Ridge Wind Farm 2, LLC
Cedar Grove Solar, LLC
Centennial Solar, LLC
Chewelah Solar, LLC
Clear Creek Solar, LLC
Clermont Solar, LLC
Clinton County Solar, LLC
Coles Solar, LLC
Commonwealth Solar, LLC
Compass Prairie Wind, LLC
Coneflower Solar, LLC1
Conestoga Wind, LLC
Copperhead Solar, LLC
Creekview Solar, LLC
Crocker Wind Farm 2, LLC
Dahlia Solar, LLC1
Dakota Hills Wind Farm, LLC
Day Lily Solar, LLC1
Deatsville Solar, LLC
Deer Trail Solar, LLC
Dodson Creek Solar, LLC7
Donnellson Solar, LLC
East Galesburg Solar, LLC
East Macomb Solar, LLC
Eastern Hemlock Solar, LLC
Eatonville Solar, LLC
Elba Solar, LLC
Elburn Solar, LLC
Eldena Solar, LLC
Elk Creek Solar, LLC
Elk Creek Solar 2, LLC
EUA Energy Investment Corporation3
Exie Solar, LLC

Falls City Solar, LLC
Fayette Solar, LLC8
Firstview Wind Farm, LLC
Fish Creek Solar, LLC
Forrest Solar, LLC
Fort Solar, LLC
Fowlkes Solar, LLC
Front Range Wind Farm, LLC
Fulton Solar, LLC
Gala Solar, LLC
Galesburg Solar, LLC
Gardenia Solar, LLC1
Genesee Solar Energy, LLC
Gillis Solar, LLC
Glenwood Solar, LLC
Golden Solar, LLC
Goldendale Solar, LLC
Goldenrod Wind Farm, LLC
Goldfinch Solar, LLC
Grand Junction Solar, LLC
Granite State Power Link LLC4
Grant Solar, LLC
Grant Solar 2, LLC
Grayson Solar, LLC
Greenbrier Creek Solar, LLC
Greensky Solar, LLC
Greenwood Solar, LLC
Grid NY LLC9
Grindstone Wind Farm, LLC10
Hale County Solar, LLC
Hale Solar, LLC
Hampton Solar, LLC
Hansford Energy Storage, LLC
Harmony Solar ND, LLC
Harmony Solar ND 2, LLC
Harrington Solar, LLC
Hartley Solar, LLC
Hearth Solar, LLC
Heyworth Solar, LLC
Hill River Solar, LLC
Honeybee Solar, LLC
Hoosier Solar, LLC
Hoskins Solar, LLC
Illumination Solar, LLC
Innovation Solar, LLC
Irwin Solar, LLC
Itasca Energy Development, LLC1
Itasca Energy Services, LLC
Jackalope Solar, LLC
Jack Rabbit Wind, LLC
Jackson County Solar, LLC
Jantz Solar, LLC
Jonagold Solar, LLC
Junction Solar, LLC
Kankakee Solar, LLC
KeySpan CI Midstream Limited4
KeySpan Energy Corporation9
KeySpan Energy Services Inc.4
KeySpan Gas East Corporation9
KeySpan International Corporation4
KeySpan MHK, Inc.4
KeySpan Midstream Inc.4
KeySpan Plumbing Solutions, Inc.9
Kindle Solar, LLC
Kingsnake Solar, LLC
Knox Solar, LLC
KSI Contracting, LLC4
KSI Electrical, LLC4
KSI Mechanical, LLC4
Lake Charlotte Solar, LLC
Lake Iris Solar, LLC
Lakeside Solar, LLC
Lamdin Solar, LLC
Land Management & Development, Inc.9
Landwest, Inc.9
Lansing Solar, LLC
Lawrence Solar, LLC
Leola Wind Farm, LLC
Liberty Solar, LLC
Lilac Solar, LLC1
Limestone Solar, LLC
Lind Solar, LLC
Livingston County Solar, LLC
Long Mount Solar, LLC

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
34. Subsidiary undertakings, joint ventures and associates continued
Subsidiary undertakings continued
Incorporated in the US continued

Lordsburg Solar, LLC
Louisa Solar, LLC
Lowlands Solar, LLC
Lydia Solar, LLC
Macedonia Solar, LLC
Madden Creek Solar, LLC
Marion County Solar, LLC
Massachusetts Electric Company3
Maverick Wind Farm, LLC
Mazon Solar, LLC
Mazon Solar 2, LLC
McFadden Solar, LLC
Meadowlands Solar, LLC
Merton Solar, LLC
Metrowest Realty LLC4
Miller Creek Solar, LLC
Millers Ferry Solar, LLC
Moonrise Solar, LLC
Morgan County Solar, LLC
Morning Glory Solar, LLC1
Mountain Laurel Solar, LLC
Muddy Creek Solar, LLC
Mustang Ridge Wind Farm, LLC
Mystic Steamship Corporation7
Nantucket Electric Company3
National Grid Algonquin LLC4
National Grid Connect Inc.4
National Grid Development Holdings Corp.4
National Grid Electric Services LLC9
National Grid Energy Management LLC4
National Grid Energy Services LLC4
National Grid Energy Trading Services LLC9
National Grid Engineering & Survey Inc.9
National Grid Generation LLC9
National Grid Generation Ventures LLC11
National Grid Glenwood Energy Center, LLC4
National Grid IGTS Corp.9
National Grid Insurance USA Ltd12
National Grid Islander East Pipeline LLC4
National Grid LNG GP LLC4
National Grid LNG LLC4
National Grid LNG LP LLC4
National Grid Millennium LLC4
National Grid NE Holdings 2 LLC3
National Grid North America Inc.4
National Grid North East Ventures Inc.4
National Grid Partners Inc.9
National Grid Partners LLC4
National Grid Port Jefferson Energy Center LLC4
National Grid Renewables, LLC (previously NGV Emerald Acquisition Co., LLC)4
National Grid Renewables Development, LLC (previously Geronimo Energy, LLC)
National Grid Renewables E Wind, LLC (previously Geronimo E Wind LLC)1
National Grid Renewables Operations, LLC4
National Grid Renewables Projects, LLC (previously Geronimo Solar Energy, LLC)1
National Grid Renewables Stutsman, LLC (previously Geronimo Stutsman Wind Farm, LLC)
National Grid Services Inc.4
National Grid Transmission Services Corporation3
National Grid US 6 LLC4,†
National Grid US LLC4
National Grid USA4
National Grid USA Service Company, Inc.3
NEES Energy, Inc.3
New England Electric Transmission Corporation5
New England Energy Incorporated3
New England Hydro Finance Company, Inc. (53.704%)3
New England Hydro-Transmission Corporation (53.704%)5
New England Hydro-Transmission Electric Company, Inc. (53.704%)3
New England Power Company3
Newport America Corporation13
Newton Solar, LLC
NG Renewables Energy Marketing, LLC4
NG Renewables Energy Services, LLC
NGNE LLC4
NGV Emerald Energy Venture Holdings, LLC4
NGV OSW Holdings, LLC4
NGV US Distributed Energy Inc.4
NGV US, LLC (previously NGV Emerald Holdings, LLC)4
NGV US Transmission Inc.4
Niagara Mohawk Energy, Inc.4
Niagara Mohawk Holdings, Inc.9
Niagara Mohawk Power Corporation9
Niobrara Wind, LLC
NM Properties, Inc.9
Noble Storage, LLC
Nordic VOS, LLC
North Adair Solar, LLC
Northeast Renewable Link LLC4
North East Transmission Co., Inc.4
North Fork Wind, LLC
North Rock Solar, LLC
Onton Solar, LLC
Opinac North America, Inc.4
Oreana Solar, LLC
Parklawn Solar, LLC
Patriotic Solar, LLC
Pearl River County Solar, LLC
Pennington Solar, LLC
Peony Solar, LLC
Philadelphia Coke Co., Inc.4
Pierce County Solar, LLC
Pike County Solar, LLC
Pinon Pine Solar, LLC
Piper Solar, LLC
Pipestone Solar, LLC
Placedo Solar, LLC
Pleasant Plains Solar, LLC
Plum Creek Wind Farm, LLC
Plum Creek Wind Farm 2, LLC
Portage Solar, LLC
Port of the Islands North, LLC9
Prairie Oasis Solar, LLC
Prairie Rose Wind 2, LLC1
Prosperity Wind Farm, LLC
Prosperity Wind Farm 2, LLC
Radiance Solar, LLC1
Red Rock Solar SD, LLC
Red Wolf Solar, LLC
Regal Solar, LLC
Regal Solar 2, LLC
River North Solar, LLC
Robertson Solar, LLC
Rochester Solar, LLC1
Rock Ridge Wind Farm, LLC
Rocky Meadow Solar, LLC
Rolling Hills Solar, LLC
Ross County Solar, LLC7
Royal Solar, LLC
Royal Solar 2, LLC
Royerton Solar, LLC
Saddle Solar, LLC
Saginaw Bay Solar, LLC
Sandstone Creek Solar, LLC
Sandstone Creek Solar 2, LLC
Sapphire Sky Wind Farm, LLC
Scorpion Solar, LLC
Serenity Solar, LLC1
Shelby Solar, LLC
Sherco Solar, LLC1
Sherco Solar 2, LLC1
Silver City Solar, LLC
Simpson Solar, LLC (previously Geronimo White Pine Solar, LLC)
South Belleville Solar, LLC
South Macomb Solar, LLC
Spotlight Solar, LLC
Spring Brook Solar, LLC
Springfield Solar Farm, LLC
Spring River Solar, LLC
Stockton Solar, LLC
Stony Brook Wind, LLC
Stony Point Solar, LLC
Stove Creek Solar, LLC
Sturgis Solar, LLC
Summit Lake Solar, LLC
Sunbeam Solar, LLC
Sunray Solar, LLC
Sunrise Solar, LLC
Sycamore Creek Solar, LLC
Thacker Solar, LLC
The Brooklyn Union Gas Company9
The Narragansett Electric Company13
Tilton Solar, LLC
Torchlight Solar, LLC1
Transgas Inc.3
Tri-City Solar, LLC
Turquoise Solar, LLC
Uintah Solar, LLC
Unbridled Solar, LLC (previously Henderson Solar, LLC)
Union City Solar, LLC
Upper Hudson Development Inc.9
Valley Appliance and Merchandising Company13



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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

34. Subsidiary undertakings, joint ventures and associates continued
Subsidiary undertakings continued

Valley Solar, LLC
Vermont Green Line Devco, LLC (90%)4
Vibrant Solar, LLC
Virgo Community Solar Gardens, LLC1
Virtue Solar, LLC
Vivid Solar, LLC
Wallowa Solar, LLC
Wayfinder Group, Inc.3
Wayside Solar, LLC
Western Hemlock Solar, LLC
Wheatfield Solar, LLC
White Elm Wind Farm, LLC
Wild Springs Solar, LLC1
Wildcat Ridge Wind Farm, LLC
Wildhorse Creek Solar, LLC
Willard Solar, LLC
Williams County Solar, LLC
Wiregrass Solar, LLC
Wolf River Solar, LLC
Wonder Lake Solar, LLC
Woodlands Solar, LLC
Worthington Solar, LLC
Yellowbud Solar, LLC
Yellowhammer Solar, LLC
Young County Solar, LLC
Yucca Solar, LLC


Incorporated in Australia
Registered office: Level 7, 330 Collins Street, Melbourne, VIC 3000, Australia
National Grid Australia Pty Limited

Incorporated in Canada
Registered office: Stewart McKelvey LLP, c/o Charles Reagh, Queen’s Marque, 600-1741 Lower Water Street, Halifax, Nova Scotia, B3J 0J2, Canada
KeySpan Energy Development Co.

Incorporated in Hong Kong
Registered office: Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong
National Grid Hong Kong Limited

Incorporated in the Isle of Man
Registered office: Third Floor, St George’s Court, Upper Church Street, Douglas, IM1 1EE, Isle of Man, UK
National Grid Insurance Company (Isle of Man) Limited
NGT Holding Company (Isle of Man) Limited*


Incorporated in Jersey
Registered office: 44 Esplanade, St Helier, JE4 9WG, Jersey, UK
National Grid Jersey Investments Limited*
NG Jersey Limited*

Incorporated in Luxembourg
Registered office: 412F, Route d’Esch, L-2086, Luxembourg, Grand Duchy of Luxembourg
National Grid Luxembourg SARL

Incorporated in the Netherlands
Registered office: Westblaak 89, 3012 KG Rotterdam, PO Box 21153, 3001 AD, Rotterdam, Netherlands
British Transco International Finance B.V.

Incorporated in the Republic of Ireland
Registered office: c/o Moore Stephens Nathans, Third Floor, Ulysses House, 23/24 Foley Street, Dublin, D01 W2T2, Ireland
National Grid Company (Ireland) Designated Activity Company*


1.Registered office: National Grid Renewables Development, LLC, 8400 Normandale Lake Blvd. Suite 1200, Bloomington, MN 55437, USA.
2.Registered office: National Registered Agents, Inc., 160 Greentree Drive, Suite 101, Dover DE 19904, USA.
3.Registered office: Corporation Service Company, 84 State Street, Boston MA 02109, USA.
4.Registered office: Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, USA.
5.Registered office: Corporation Service Company, 10 Ferry Street, Suite 313, Concord NH 03301, USA.
6.Registered office: National Registered Agents, Inc., 1999 Bryan St, Bryan Street, Dallas, Dallas County TX 75201, USA.
7.Registered office: The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware, 19801, USA.
8.Registered office: 60 Mine Lake Ct, Mine Lake Court, Suite 200, Raleigh, Wake County, NC 27615, USA.
9.Registered office: Corporation Service Company, 80 State Street, Albany NY 12207, USA.
10.Registered office: National Registered Agents, Inc., 30600 Telegraph Road, Suite 2345, Bingham Farms, MI 48025-5720, USA.
11.Registered office: Corporation Service Company, 84 State Street, Albany NY 12207, USA.
12.Registered office: One MetroTech Center, Brooklyn NY 11201, USA.
13.Registered office: Corporation Service Company, 222 Jefferson Boulevard, Suite 200, Warwick RI 02888, USA.

*    In liquidation.
**    Name change post 31 March 2021.
    Entity is tax resident in the United Kingdom.


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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
34. Subsidiary undertakings, joint ventures and associates continued
Joint ventures
A list of the Group’s joint ventures as at 31 March 2021 is given below. All joint ventures are included in the Group’s financial statements using the equity method of accounting. Principal joint ventures are identified in bold.
Incorporated in England and Wales
Registered office: 1–3 Strand, London WC2N 5EH, UK (unless stated otherwise in footnotes).
BritNed Development Limited (50%)*
Joint Radio Company Limited (50%)1**
National Places LLP (50%)2
Nemo Link Limited (50%)
NGET/SPT Upgrades Limited (50%)
St William Homes LLP (50%)3

Incorporated in the US
Registered office: Corporation Service Company, 251 Little Falls Drive, Wilmington, DE 19808, USA (unless stated otherwise in footnotes).
Bight Wind Holdings, LLC (30%)4
Clean Energy Generation, LLC (50%)
Emerald Energy Venture LLC (51%)
Island Park Energy Center, LLC (50%)
Islander East Pipeline Company, LLC (50%)4
LI Energy Storage System, LLC (50%)
LI Solar Generation, LLC (50%)

Incorporated in France
Registered office: 1 Terrasse Bellini, Tour Initiale, TSA 41000 – 9291,
Paris La Defense, CEDEX, France
IFA2 SAS (50%)

Associates
A list of the Group’s associates as at 31 March 2021 is given below. Unless otherwise stated, all associates are included in the Group’s financial statements using the equity method of accounting. Principal associates are identified in bold.
Incorporated in the US
Registered office: Corporation Service Company, 251 Little Falls Drive, Wilmington, DE 19808, USA (unless stated otherwise in footnotes).
Clean Line Energy Partners LLC (32%)4
Connecticut Yankee Atomic Power Company (19.5%)5
Direct Global Power, Inc. (26%)4
Energy Impact Fund LP (9.41%)6
KHB Venture LLC (33.33%)7
Maine Yankee Atomic Power Company (24%)8
Millennium Pipeline Company, LLC (26.25%)4
New York Transco LLC (28.3%)9
NYSEARCH RMLD, LLC (22.63%)
The Hive IV, LLC (28.2%)4
Yankee Atomic Electric Company (34.5%)10

Incorporated in Belgium
Registered office: Avenue de Cortenbergh 71, 1000 Brussels, Belgium
Coreso SA (15.84%)

Other investments
A list of the Group’s other investments as at 31 March 2021 is given below.
Incorporated in England and Wales
Registered office: 1 More London Place, London SE1 2AF, UK
Energis plc (33.06%)

1.    Registered office: Friars House, Manor House Drive, Coventry CV1 2TE, UK.
2.    Registered office: 80 Cheapside, London, EC2V 6EE, UK.
3.    Registered office: Berkeley House, 19 Portsmouth Road, Cobham, Surrey KT11 1JG, UK.
4.    Registered office: The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington DE 19801, USA.
5.    Registered office: Carla Pizzella, 362 Injun Hollow Road, East Hampton CT 06424-3099, USA.
6.    Registered office: Harvard Business Services, Inc., 16192 Coastal Highway, Lewes DE 19958, Sussex County, USA.
7.    Registered office: De Maximus Inc., 135 Beaver Street, 4th Floor, Waltham MA 02452, USA.
8.    Registered office: Joseph D Fay, 321 Old Ferry Road, Wiscasset ME 04578, USA.
9.    Registered office: Corporation Service Company, 80 State Street, Albany NY 12207, USA.
10.    Registered office: Karen Sucharzewski, 49 Yankee Road, Rowe MA 01367, USA.

*    National Grid Interconnector Holdings Limited owns 284,500,000 €0.20 C Ordinary shares and one £1.00 Ordinary A share.
**    National Grid Gas plc owns all £1.00 A Ordinary shares.
    National Grid Electricity Transmission plc owns 50 £1.00 A Ordinary shares.
    In administration.

Our interests and activities are held or operated through the subsidiaries, joint arrangements or associates as disclosed above. These interests and activities (and their branches) are established in – and subject to the laws and regulations of – these jurisdictions.
The following UK subsidiaries will take advantage of the audit exemption set out within section 479A of the Companies Act 2006 for the year ended 31 March 2021:
Company name Company number
NatGrid One Limited 5521240
Natgrid TW1 Limited 7579324
National Grid Holdings Limited 3096772
National Grid International Limited 2537092
National Grid Twelve Limited 4355616
National Grid Twenty Three Limited 6999009
National Grid (US) Holdings Limited 2630496
National Grid (US) Investments 2 Limited 3784528
National Grid (US) Investments 4 Limited 3867128
National Grid (US) Partner 1 Limited 4314432


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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

35. Sensitivities
In order to give a clearer picture of the impact on our results or financial position of potential changes in significant estimates and assumptions, the following sensitivities are presented. These sensitivities are based on assumptions and conditions prevailing at the year-end and should be used with caution. The effects provided are not necessarily indicative of the actual effects that would be experienced because our actual exposures are constantly changing.

The sensitivities in the tables below show the potential impact in the income statement (and consequential impact on net assets) for a reasonably possible range of different variables each of which have been considered in isolation (i.e. with all other variables remaining constant). There are a number of these sensitivities which are mutually exclusive, and therefore if one were to happen, another would not, meaning a total showing how sensitive our results are to these external factors is not meaningful.
The sensitivities included in the tables below broadly have an equal and opposite effect if the sensitivity increases or decreases by the same amount unless otherwise stated.
(a) Sensitivities on areas of estimation uncertainty
The table below sets out the sensitivity analysis for certain areas of estimation uncertainty set out in note 1E. These estimates are those that have a significant risk of resulting in a material adjustment to the carrying values of assets and liabilities in the next year. Note that the sensitivity analysis for the useful economic lives of our gas network assets is included in note 13.
2021 2020
Income
statement
£m
Net
assets
£m
Income
statement
£m
Net
assets
£m
Pensions and other post-retirement benefit liabilities (pre-tax)¹:
UK discount rate change of 0.5%²
4  952  877 
US discount rate change of 0.5%²
17  730  10  514 
UK RPI rate change of 0.5%³
3  723  670 
UK long-term rate of increase in salaries change of 0.5%
1  42  39 
US long-term rate of increase in salaries change of 0.5%
3  42  47 
UK change of one year to life expectancy at age 654
1  612  545 
US change of one year to life expectancy at age 65
4  429  456 
Assumed US healthcare cost trend rates change of 1%
26  437  31  507 
Environmental provision:
10% change in estimated future cash flows
170  170  210  210 
1.    The changes shown are a change in the annual pension or other post-retirement benefit service charge and change in the defined benefit obligations.
2.    A change in the discount rate is likely to occur as a result of changes in bond yields and as such would be expected to be offset to a significant degree by a change in the value of the bond assets held by the plans. In the UK, there would also be a £257 million (2020: £205 million) net assets offset from the buy-in policies, where the accounting value of the buy-in asset is set equal to the associated liabilities.
3.    The projected impact resulting from a change in RPI reflects the underlying effect on pensions in payment, pensions in deferment and resultant increases in salary assumptions. The buy-in policies would have a £190 million (2020: £152 million) net assets offset to the above.
4.    In the UK, the buy-in policies and the longevity swap entered into, would have a £183 million (2020: £223 million) net assets offset to the above.
Pensions and other post-retirement benefits assumptions
Sensitivities have been prepared to show how the defined benefit obligations and annual service costs could potentially be impacted by changes in the relevant actuarial assumption that were reasonably possible as at 31 March 2021. In preparing sensitivities, the potential impact has been calculated by applying the change to each assumption in isolation and assuming all other assumptions remain unchanged. This is with the exception of RPI in the UK where the corresponding change to increases to pensions in payment, increases to pensions in deferment and increases in salary are recognised.
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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
35. Sensitivities continued
(b) Sensitivities on financial instruments
We are further required to show additional sensitivity analysis under IFRS 7 and these are shown separately in the subsequent table due to the additional assumptions that are made in order to produce meaningful sensitivity disclosures.
Our net debt as presented in note 29 is sensitive to changes in market variables, primarily being UK and US interest rates, the UK RPI and the dollar to sterling exchange rate. These impact the valuation of our borrowings, deposits and derivative financial instruments. The analysis illustrates the sensitivity of our financial instruments to reasonably possible changes in these market variables.
The following main assumptions were made in calculating the sensitivity analysis for continuing operations:
    the amount of net debt, the ratio of fixed to floating interest rates of the debt and derivatives portfolio, and the proportion of financial instruments in foreign currencies are all constant and on the basis of the hedge designations in place at 31 March 2021 and 2020 respectively;
    the statement of financial position sensitivity to interest rates relates to items presented at their fair values: derivative financial instruments; our investments measured at fair value through profit and loss (FVTPL) and fair value through other comprehensive income; and our liability measured at FVTPL. Further debt and other deposits are carried at amortised cost and so their carrying value does not change as interest rates move;
    the sensitivity of interest to movements in interest rates is calculated on net floating rate exposures on debt, deposits and derivative instruments;
    changes in the carrying value of derivatives from movements in interest rates of designated cash flow hedges are assumed to be recorded fully within equity; and
    changes in the carrying value of derivative financial instruments designated as net investment hedges from movements in interest rates are presented in equity as costs of hedging, with a one-year release to the income statement. The impact of movements in the dollar to sterling exchange rate are recorded directly in equity.
2021 2020
Income
statement
£m
Other equity
reserves
£m
Income
statement
£m
Other equity
reserves
£m
Financial risk (post-tax):
UK RPI change of 0.5%¹
25    27  — 
UK interest rates change of 0.5%
12  98  14  47 
US interest rates change of 0.5%
6  22  27 
US dollar exchange rate change of 10%²
44  285  49  216 
1.    Excludes sensitivities to LPI curve. Further details on sensitivities are provided in note 32(g).
2.    The other equity reserves impact does not reflect the exchange translation in our US subsidiaries’ net assets. It is estimated this would change by £1,425 million (2020: £1,319 million) in the opposite direction if the dollar exchange rate changed by 10%.
Our commodity contract derivatives are sensitive to price risk. Additional sensitivities in respect to commodity price risk and to our derivative fair values are as follows:
2021 2020
Income
statement
£m
Net
assets
£m
Income
statement
£m
Net
assets
£m
Commodity price risk (post-tax):
10% increase in commodity prices
20  20  26  26 
10% decrease in commodity prices
(21) (21) (27) (27)
Assets and liabilities carried at fair value (post-tax):
10% fair value change in derivative financial instruments¹
14  14  12  12 
10% fair value change in commodity contract derivative liabilities
6  6 
1.    The effect of a 10% change in fair value assumes no hedge accounting.

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

36. Additional disclosures in respect of guaranteed securities
We have preferred shares that are listed on a US national securities exchange and are guaranteed by a company in the Group. This guarantor commits to honour any liabilities should the company issuing the debt have any financial difficulties. In order to provide debt holders with information on the financial stability of the company providing the guarantee, we are required to disclose individual financial information for this company. We have chosen to include this information in the Group financial statements rather than submitting separate stand-alone financial statements.

Niagara Mohawk Power Corporation, a wholly owned subsidiary of the Group, has issued preferred shares that are listed on a US national securities exchange and are guaranteed by National Grid plc. In order to provide preferred shareholders with information on the financial stability of the company providing the guarantee, we are required to disclose individual financial information for these companies. We have chosen to include this information in the Group financial statements rather than submitting separate stand-alone financial statements.
The following summarised financial information is given in respect of Niagara Mohawk Power Corporation as a result of National Grid plc’s guarantee, dated 29 October 2007, of Niagara Mohawk Power Corporation’s 3.6% and 3.9% issued preferred shares, which amount to £29 million. National Grid plc’s guarantee of Niagara Mohawk Power Corporation’s preferred shares is full and unconditional. There are no restrictions on the payment of dividends by Niagara Mohawk Power Corporation or limitations on National Grid plc’s guarantee of the preferred shares, and there are no factors that may affect payments to holders of the guaranteed securities.
The following summarised financial information for National Grid plc and Niagara Mohawk Power Corporation is presented on a combined basis and is intended to provide investors with meaningful and comparable financial information, and is provided pursuant to the early adoption of Rule 13-01 of Regulation S-X in lieu of the separate financial statements of Niagara Mohawk Power Corporation.
Summarised financial information is presented, on a combined basis, as at 31 March 2021. The combined amounts are presented under IFRS measurement principles. Inter-company transactions have been eliminated. Investments in other non-issuer and non-guarantor subsidiaries are included at cost, subject to impairment.
Summarised financial information for the year ended 31 March 2021 – IFRS
National Grid plc and Niagara Mohawk Power Corporation combined
£m
Combined statement of financial position
Non-current loans to other subsidiaries — 
Non-current assets 8,940 
Current loans to other subsidiaries 20,692 
Current assets 1,553 
Current loans from other subsidiaries (17,589)
Current liabilities (1,342)
Non-current loans from other subsidiaries (2,059)
Non-current liabilities (6,363)
Net assets¹
3,832 
Equity 3,832 
Combined income statement – continuing operations
Revenue 2,462 
Operating costs (4,562)
Operating profit (2,100)
Other income from other subsidiaries
9,978 
Other income and costs, including taxation (182)
Profit after tax 7,696 
1.    Excluded from net assets above are investments in other consolidated subsidiaries with a carrying value of £14,415 million.

37. Transition to new accounting standards
(a) Transition to IFRS 16
The Group adopted IFRS 16 ‘Leases’, with effect from 1 April 2019. IFRS 16 introduced a single lease accounting model for lessees (rather than the previous distinction between operating and finance leases). A contract is, or contains, a lease, if it provides the right to control the use of an identified asset for a specific period of time in exchange for consideration. The new standard resulted in our operating leases being accounted for in the consolidated statement of financial position as ‘right-of-use’ assets with corresponding lease liabilities also recognised. It therefore increased both our assets and liabilities (including net debt). It also changed the timing and presentation in the consolidated income statement as it resulted in an increase in finance costs and depreciation largely offset by a reduction in the previously straight-line operating costs.
Transition options
We applied IFRS 16 using the modified retrospective approach. Comparatives were not restated on adoption. Instead, on the opening balance sheet date, right-of-use assets (net of accrued rent or rent-free periods, and reported within property, plant and equipment), additional lease liabilities (reported within borrowings) and any associated deferred tax were recognised, with no cumulative transition adjustment to reflect through retained earnings. For short-term leases (lease term of 12 months or less) and leases of low-value assets (such as computers), the Group continues to recognise a lease expense on a straight-line basis as permitted by IFRS 16.
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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
37. Transition to new accounting standards continued
(a) Transition to IFRS 16 continued
We elected to apply the practical expedient to grandfather our previous assessments of whether contracts were previously accounted for as a lease, as permitted by the standard, instead of reassessing all significant contracts as at the date of initial application to determine whether they met the IFRS 16 definition of a lease.
We elected to apply the practical expedient on transition, which permitted right-of-use assets to be measured at an amount equal to the lease liability on adoption of the standard (adjusted for any prepaid or accrued lease expenses).
In addition, we also elected the option to adjust the carrying amounts of the right-of-use assets as at 1 April 2019 for any onerous lease provisions that had been recognised on the Group consolidated statement of financial position as at 31 March 2019, rather than performing impairment assessments on transition.
Impact of transition
At 31 March 2019, the Group disclosed non-cancellable operating lease commitments of £0.3 billion, of which the majority were in the US. A further £0.4 billion of lease liabilities were recognised due to the requirement in IFRS 16 to recognise lease liabilities for the term that we are reasonably certain to exercise lease extension or lease termination options for, rather than only for the period of the minimum contractual term that was used in determining our lease liability commitments. This was partially offset by the £0.2 billion impact of discounting our lease liabilities at the incremental borrowing rate for each lease. The weighted average discount rate applied to lease liabilities recognised on the transition date was 2.8%. There were some immaterial short-term and low-value leases, which were recognised on a straight-line basis as an expense in the consolidated income statement over the remaining lease term.
As a result, the Group recognised additional right-of-use assets of £0.5 billion and lease liabilities (which are included within net debt) of £0.5 billion at 1 April 2019. No additional net deferred tax was recognised. The transition adjustment was in addition to the £270 million of finance leases already recognised on the consolidated statement of financial position under IAS 17. There was no impact on net assets as shown in the table below, which shows the impacted balances from the Group consolidated statement of financial position.
Impact of transition
31 March 2019 (before the impact
of IFRS 16)1
£m
IFRS 16
transition adjustments
£m
1 April 2019
As restated
£m
Property, plant and equipment – Right-of-use assets
Land and buildings 2,560  381  2,941 
Plant and machinery 36,911  67  36,978 
Assets in the course of construction 5,049  —  5,049 
Motor vehicles and office equipment 339  20  359 
Total property, plant and equipment 44,859  468  45,327 
Borrowings – Lease liabilities
Current (65) (48) (113)
Non-current (205) (426) (631)
Total lease liabilities (270) (474) (744)
Other liabilities
Trade and other payables (3,769) (3,766)
Other non-current liabilities (808) (805)
Net assets 19,568  —  19,568 
Equity
Total equity 19,568  —  19,568 
1.    Comparative amounts have been revised as described in note 1F.

The impact of IFRS 16 on profit after tax as a result of adopting the new standard was not material. However, it resulted in an increase in operating profit due to the operating costs now being replaced with depreciation and interest charges.
The impact on the cash flow statement was also not material, although there was an increase in operating cash flows and decrease in financing cash flows, because repayment of the principal portion of the lease liabilities is now classified as cash flows from financing activities rather than operating cash flows.
Ongoing accounting policy
With effect from 1 April 2019, new lease arrangements entered into are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. The right-of-use asset and associated lease liability arising from a lease are initially measured at the present value of the lease payments expected over the lease term, plus any other costs. The discount rate applied is the rate implicit in the lease or if that is not available, then the incremental rate of borrowing for a similar term and similar security.
The lease term takes account of exercising any extension options that are at our option if we are reasonably certain to exercise the option and any lease termination options unless we are reasonably certain not to exercise the option.
Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the income statement over the lease period using the effective interest rate method. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. For short-term leases (lease term of 12 months or less) and leases of low-value assets (such as computers), the Group continues to recognise a lease expense on a straight-line basis.
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National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

37. Transition to new accounting standards continued
(b) Transition to IFRS 9 and IFRS 15
On 1 April 2018, the Group adopted IFRS 9 and IFRS 15. Both standards were applied using the modified retrospective approach whereby comparative amounts were not restated on transition, but a cumulative adjustment was made to retained earnings in the opening consolidated statement of financial position as at 1 April 2018. The impact of the transition on the opening consolidated statement of financial position is set out in the following table:
Impact of transition
31 March 2018
 (Before the impact of transition adjustments)*
Transition adjustments
1 April 2018
IFRS 9
IFRS 15
£m
£m
£m
£m
Non-current assets
Goodwill 4,984  —  —  4,984 
Other intangible assets 899  —  —  899 
Property, plant and equipment 40,730  —  —  40,730 
Other non-current assets 115  —  —  115 
Pension assets 1,409  —  —  1,409 
Financial and other investments 899 
1
—  899 
Investments in joint ventures and associates 2,168  —  —  2,168 
Derivative financial assets 1,319  —  —  1,319 
Total non-current assets 52,523  —  —  52,523 
Current assets
Inventories and current intangible assets 341  —  —  341 
Trade and other receivables 2,798 
2
(3) 2,795 
Current tax assets 114  —  —  114 
Financial and other investments 2,694 
1
—  2,694 
Derivative financial assets 405  —  —  405 
Cash and cash equivalents 329  —  —  329 
Total current assets 6,681  —  (3) 6,678 
Total assets 59,204  —  (3) 59,201 
Current liabilities
Borrowings (4,447) —  —  (4,447)
Derivative financial liabilities (401) —  —  (401)
Trade and other payables (3,453) — 
597
(3,394)
Contract liabilities —  — 
(53)7
(53)
Current tax liabilities (123) —  —  (123)
Provisions (273) —  —  (273)
Total current liabilities (8,697) —  (8,691)
Non-current liabilities
Borrowings (22,178)
(32)3
—  (22,210)
Derivative financial liabilities (660) —  —  (660)
Other non-current liabilities (1,317) — 
5677
(750)
Contract liabilities —  — 
(813)7
(813)
Deferred tax liabilities (3,868)
54
748
(3,789)
Pensions and other post-retirement benefit obligations (1,672) —  —  (1,672)
Provisions (1,779) —  —  (1,779)
Total non-current liabilities (31,474) (27) (172) (31,673)
Total liabilities (40,171) (27) (166) (40,364)
Net assets 19,033  (27) (169) 18,837 
Equity
Share capital 452  —  —  452 
Share premium account 1,321  —  —  1,321 
Retained earnings 21,784 
(99)5
(169)9
21,516 
Other equity reserves (4,540)
726
—  (4,468)
Total shareholders’ equity 19,017  (27) (169) 18,821 
Non-controlling interests 16  —  —  16 
Total equity 19,033  (27) (169) 18,837 
*Comparative amounts have been revised as described in note 1F.

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
37. Transition to new accounting standards continued
(b) Transition to IFRS 9 and IFRS 15 continued
IFRS 9: Financial Instruments
IFRS 9 has changed the rules concerning the classification and measurement of financial instruments, impairment of financial assets, and hedge accounting. Details of the impact of applying IFRS 9 for the year ended 31 March 2019 are set out below.
Adjustments arising in the year ended 31 March 2019 as a result of the transition to IFRS 9:
1.The available-for-sale category for financial assets was replaced with investments held at fair value through profit and loss (FVTPL) and investments held at fair value through other comprehensive income (FVOCI). Changes to the classification and measurement of financial assets did not alter the carrying value of any financial assets held by the Group. The net impact to retained earnings of the reclassification on transition was an £8 million gain.
As described in note 15, all recognised financial assets that are within the scope of IFRS 9 are initially recorded at fair value and subsequently measured at amortised cost or fair value based on the Group’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Therefore on 1 April 2018, the Group reclassified its investments as follows:
Money market funds and fund investments held by captive insurance companies were classified as financial assets at FVTPL because their contractual cash flows are not solely payments of principal and interest;
Investments in debt securities that have contractual payments that are solely payments of principal and interest, and which are held as part of the liquidity portfolio or to back employee benefit liabilities, were classified as financial assets at FVOCI because they are held in a business model whose objective is to collect the contractual cash flows and to sell the debt instruments;
The Group has elected to hold investments in equity securities, which are held to back employee benefit liabilities, as financial assets at FVOCI as the Group does not believe that changes in their fair value is reflective of the financial performance of the Group; and
Loans to joint ventures and associates, cash at bank, and short-term deposits are classified at amortised cost as they have contractual cash flows which are solely payments of principal and interest and the Group holds them to collect contractual cash flows.
Aside from derivative financial instruments, which remain classified as FVTPL, the Group did not previously have any financial assets or liabilities classified at FVTPL.
The table below illustrates those financial assets and liabilities that were reclassified at 1 April 2018:
Financial asset/liability
Note
Original measurement category under IAS 39
New measurement category under IFRS 9
Original carrying amount under IAS 39
£m
Change to measurement basis under IFRS 9
£m
New carrying amount under IFRS 9
£m
Money market funds and fund investments in equities and bonds
15
Available-for-sale investments Financial assets at FVTPL 2,294  —  2,294 
Cash surrender value of life insurance policies and investments in debt securities
15
Available-for-sale investments Financial assets at FVOCI 343  —  343 
Investments in equity securities
15
Available-for-sale investments Financial assets at FVOCI (equity instruments) 84  —  84 
Loans to joint ventures and associates and restricted balances
15
Loans and receivables Financial assets at amortised cost 872  —  872 
Borrowings
21
Financial liabilities at amortised cost Financial liabilities at fair value through profit and loss (570) (32) (602)

Note that the table above does not include derivative assets, derivative liabilities, trade receivables, cash at bank and short-term deposits, borrowings measured at amortised cost or trade payables. This is because neither the classification nor the measurement of these items has changed on transition to IFRS 9.
2.The change from the incurred loss impairment model of IAS 39 to the expected loss model in IFRS 9 did not have a material impact on the Group’s credit loss provision. The Group calculates its impairment provision on trade receivables using a sophisticated provisions matrix. The inclusion of forward-looking information did not have a significant impact on the matrix as the relevant short-term future economic conditions affecting our retail customers in the US are expected to be similar to recent experience.
3.The Group elected to reclassify an existing liability with a carrying value of £570 million from amortised cost to fair value through profit and loss to reduce a measurement mismatch. At transition, the resultant impacts included an increase in the carrying value of the liability of £32 million, a reduction in retained earnings of £40 million and the establishment of an own credit reserve (within other equity reserves) of £7 million.
4.Deferred tax was recognised on the adjustments recorded on the transition to IFRS 9. Reserve impacts are stated net of related deferred tax.
5.Retained earnings included the impact from adjustments 1, 3 and 6.
6.The Group adopted the hedge accounting requirements of IFRS 9, which more closely align with the Group’s risk management policies. On transition, it was concluded that all IAS 39 hedge relationships are qualifying IFRS 9 relationships with the treatment of the cost of hedging being the main change. The effect was a reclassification in reserves of a £67 million gain from retained earnings and a £10 million gain from the cash flow hedge reserve, into a new cost of hedging reserve (within other equity reserves). In this reserve, qualifying unrealised gains and losses excluded from hedging relationships are deferred and released systematically into profit or loss to match the timing of hedged items.
214


National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the consolidated financial statements

37. Transition to new accounting standards continued
(b) Transition to IFRS 9 and IFRS 15 continued
IFRS 15: Revenue from Contracts with Customers
IFRS 15 primarily changed the accounting for our connection and diversion revenues in our regulated businesses. No practical expedients on transition were applied.
The accounting for revenue under IFRS 15 did not represent a substantive change from the Group’s previous practice under IAS 18 for recognising revenue from sales to customers with the exception of the following items:
    Certain pass-through revenues (principally revenues collected on behalf of the Scottish and Offshore transmission operators) were recorded net of operating costs, whereas previously they were recognised gross of operating costs. Had we not adopted IFRS 15, our revenues and operating costs for the year ended 31 March 2019 would have been £1,197 million higher, with no impact to operating profits;
    Contributions for capital works relating to connections for our customers were deferred as contract liabilities on our consolidated statement of financial position on transition, and released over the life of the connection assets. This was a change for our US Regulated business and our UK Gas Transmission business, where previously revenues were recorded once the work was completed. Had we not adopted IFRS 15, our revenues and operating profit for the year ended 31 March 2019 would have been £57 million higher; and
    In the UK, contributions for capital works relating to diversions were recognised as the works are completed. This was a change for the UK regulated businesses where revenues were previously deferred over the life of the asset. Had we not adopted IFRS 15, our revenues and operating profit for the year ended 31 March 2019 would have been £26 million and £23 million lower, respectively.
Adjustments arising in the year ended 31 March 2019 as a result of the transition to IFRS 15:
7.Deferred income from contributions for capital works were reclassified to contract liabilities. In addition, these liabilities for capital works relating to connections have increased as these capital contributions for connections were cumulatively adjusted for on 1 April 2018 and are now deferred and released over the life of the connection assets. This was a change for our US Regulated business and our UK Gas Transmission business where previously revenues were recorded once the work was completed.
Partially offsetting the increase in contract liabilities for connections was the change in accounting treatment for contributions relating to diversions in our UK businesses. These contributions are recognised as revenue as the works are completed where previously revenue was recognised over the life of the assets.
8.    Deferred tax was recorded on the incremental amounts recorded against capital contributions and contract liabilities on the transition to IFRS 15. Deferred tax balances have been calculated at the rate substantively enacted at the balance sheet date.
9.    The transition adjustment reflected the net of adjustments 7 and 8 above.

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the consolidated financial statements
continued
38. Acquisitions
This note outlines the acquisition announced during the year and the acquisition made in the prior year.

Acquisition of PPL Western Power Distribution Investments Limited
On 17 March 2021, National Grid plc entered into an agreement to acquire 100% of the share capital of PPL WPD Investments Limited (WPD), the holding company of Western Power Distribution plc, which is the UK’s largest electricity distribution network operator. The total consideration for the transaction is £7.8 billion. The transaction is expected to complete in July 2021.
Acquisition of Geronimo Energy LLC and Emerald Energy Venture LLC
On 11 July 2019, National Grid Ventures acquired 100% of the share capital of National Grid Renewables (formerly known as Geronimo Energy LLC) and 51% of Emerald Energy Venture LLC (Emerald), which is jointly controlled by National Grid and Washington State Investment Board (WSIB). National Grid Renewables Development LLC is a leading developer of wind and solar generation based in Minneapolis in the US, and the acquisition is a significant step in National Grid’s commitment to the decarbonisation agenda, towards developing and growing a large-scale renewable generation business in the US, and delivering sustainable, reliable and efficient energy. This is National Grid’s first ownership stake in wind generation and an expansion of our activities in solar generation. Whilst National Grid Renewables develops the assets, Emerald has a right of first refusal to buy, build and operate those assets.
The total consideration was £209 million, satisfied by a combination of cash and contingent consideration. The contingent consideration was recorded within trade and other payables for the amount payable within one year, with the remainder recorded within other non-current liabilities. The fair value of contingent consideration recognised was determined as the present value of our best estimate of the value that we will be required to pay, taking into consideration management’s estimates of the volume of successful development activity by National Grid Renewables over the relevant period.The contingent consideration will be payable over a number of years.
The fair values of the assets and liabilities recognised at the acquisition date for both the acquisition of the subsidiary, National Grid Renewables, and the joint venture, Emerald, are set out below.
£m
Intangible assets
Property, plant and equipment
Investment in joint venture – Emerald 90 
Cash
Other identifiable assets and liabilities 30 
Total identifiable assets 128 
Goodwill 81 
Total consideration transferred 209 
Satisfied by:
Contingent consideration – National Grid Renewables
70 
Cash consideration – National Grid Renewables
49 
Cash consideration – Emerald 90 
209 

The goodwill arising from the acquisition comprised the value associated with the potential future projects that will be developed by National Grid Renewables as well as the expertise of the management team that was acquired, neither of which qualify for recognition as tangible or intangible assets. At the acquisition date, there were no material contingent liabilities.
Total acquisition-related costs of £3 million were recognised within operating costs within the consolidated income statement, of which £1 million was recognised in the year ended 31 March 2020.
National Grid Renewables earns revenue from selling its development stage assets to Emerald and other third parties. Emerald generates revenue from the assets it purchases from National Grid Renewables once they are operational and has no other business (see note 16). Neither entity has generated significant revenues or profits for the period between the acquisition date and 31 March 2020. Even if the acquisition had completed on 1 April 2019, there would have been no significant revenues or profits for the year ended 31 March 2020.

39. Post balance sheet events
In the period between 1 April 2021 and 19 May 2021, there have been no significant post balance sheet events.
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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Company accounting policies

We are required to include the stand-alone balance sheet of our ultimate Parent Company, National Grid plc, under the Companies Act 2006. This is because the publicly traded shares are actually those of National Grid plc (the Company) and the following disclosures provide additional information to shareholders.

A. Basis of preparation
National Grid plc is the Parent Company of the National Grid Group, which is engaged in the transmission and distribution of electricity and gas in Great Britain and northeastern US. The Company is a public limited company, limited by shares. The Company is incorporated and domiciled in England, with its registered office at 1–3 Strand, London, WC2N 5EH.
The financial statements of National Grid plc for the year ended 31 March 2021 were approved by the Board of Directors on 19 May 2021. The Company meets the definition of a qualifying entity under Financial Reporting Standard 100 (FRS 100) issued by the Financial Reporting Council. Accordingly, these individual financial statements of the Company have been prepared in accordance with Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (FRS 101). In preparing these financial statements the Company applies the recognition and measurement requirements of International Financial Reporting Standards (IFRS) as adopted by the EU, but makes amendments where necessary in order to comply with the provisions of the Companies Act 2006 and sets out below where advantage of the FRS 101 disclosure exemptions has been taken.
These individual financial statements have been prepared on an historical cost basis, except for the revaluation of financial instruments, and are presented in pounds sterling, which is the currency of the primary economic environment in which the Company operates. The comparative financial information has also been prepared on this basis.
These individual financial statements have been prepared on a going concern basis, which presumes that the Company has adequate resources to remain in operation, and that the Directors intend it to do so, for at least one year from the date the financial statements are signed. As the Company is part of a larger group it participates in the Group’s centralised treasury arrangements and so shares banking arrangements with its subsidiaries. The Company is expected to generate positive cash flows or be in a position to obtain finance via intercompany loans to continue to operate for the foreseeable future.
As described further in note 1 to the consolidated financial statements, the Directors have considered the impact of COVID-19 on the Group. Based on this analysis, they have concluded that the Company will have adequate resources to continue in operation for at least 12 months from the signing date of these financial statements. Therefore, they continue to adopt the going concern basis of accounting in preparing the financial statements.
In accordance with the exemption permitted by section 408 of the Companies Act 2006, the Company has not presented its own profit and loss account or statement of comprehensive income.
The following exemptions from the requirements of IFRS have been applied in the preparation of these financial statements of the Company in accordance with FRS 101:
    a cash flow statement and related notes;
    disclosures in respect of transactions with wholly owned subsidiaries;
    disclosures in respect of capital management; and
    the effects of new but not yet effective IFRS standards.

The exemption from disclosing key management personnel compensation has not been taken as there are no costs borne by the Company in respect of employees, and no related costs are recharged to the Company.
As the consolidated financial statements of National Grid plc, which are available from the registered office, include the equivalent disclosures, the Company has also taken the exemptions under FRS 101 in respect of certain disclosures required by IFRS 13 ‘Fair value measurement’ and the disclosures required by IFRS 7 ‘Financial instruments: Disclosures’.
There are no areas of judgement or key sources of estimation uncertainty that are considered to have a significant effect on the amounts recognised in the financial statements.
The balance sheet has been prepared in accordance with the Company’s accounting policies approved by the Board and described below.
B. Fixed asset investments
Investments held as fixed assets are stated at cost less any provisions for impairment. Investments are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairments are calculated such that the carrying value of the fixed asset investment is the lower of its cost or recoverable amount. Recoverable amount is the higher of its fair value less costs of disposal and its value-in-use. The Company accounts for common control transactions at cost.
C. Tax
Current tax for the current and prior periods is provided at the amount expected to be paid or recovered using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is provided in full on temporary differences which result in an obligation at the balance sheet date to pay more tax, or the right to pay less tax, at a future date, at tax rates expected to apply when the temporary differences reverse based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is provided for using the balance sheet liability method and is recognised on temporary differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted.
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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Company accounting policies continued
D. Foreign currencies
Transactions in currencies other than the functional currency of the Company are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at closing exchange rates. Gains and losses arising on retranslation of monetary assets and liabilities are included in the profit and loss account.
E. Financial instruments
The Company’s accounting policies are the same as the Group’s accounting policies under IFRS, namely IAS 32 ‘Financial Instruments: Presentation’, IFRS 9 ‘Financial Instruments’ and IFRS 7 ‘Financial Instruments: Disclosures’. The Company applies these policies only in respect of the financial instruments that it has, namely investments, derivative financial instruments, debtors, cash at bank and in hand, borrowings and creditors.
The policies are set out in notes 15, 17, 19, 20, 21 and 22 to the consolidated financial statements. The Company is taking the exemption for financial instruments disclosures, because IFRS 7 disclosures are given in notes 32 and 35 to the consolidated financial statements.
F. Hedge accounting
The Company applies the same accounting policy as the Group in respect of fair value hedges and cash flow hedges. This policy is set out in note 32 to the consolidated financial statements.
G. Parent Company guarantees
The Company has guaranteed the repayment of the principal sum, any associated premium and interest on specific loans due by certain subsidiary undertakings primarily to third parties. Such guarantees are accounted for by the Company as insurance contracts. In the event of default or non-performance by the subsidiary, a liability is recorded in accordance with IAS 37.
H. Share awards to employees of subsidiary undertakings
The issuance by the Company to employees of its subsidiaries of a grant over the Company’s options represents additional capital contributions by the Company to its subsidiaries. An additional investment in subsidiaries results in a corresponding increase in shareholders’ equity. The additional capital contribution is based on the fair value of the option at the date of grant, allocated over the underlying grant’s vesting period. Where payments are subsequently received from subsidiaries, these are accounted for as a return of a capital contribution and credited against the Company’s investments in subsidiaries. The Company has no employees.
I. Dividends
Interim dividends are recognised when they are paid to the Company’s shareholders. Final dividends are recognised when they are approved by shareholders.
J. Directors’ remuneration
Full details of Directors’ remuneration are disclosed on pages 92 to 113.



218


National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Company balance sheet
as at 31 March


2021 2020
Notes
£m
£m
Fixed assets
Investments
1
14,389  14,362 
Current assets
Debtors (amounts falling due within one year)
2
20,699  12,427 
Debtors (amounts falling due after more than one year)
2
143  398 
Investments
5
784  752 
Cash at bank and in hand 40 
Total current assets 21,666  13,579 
Creditors (amounts falling due within one year)
3
(18,312) (16,836)
Net current assets/(liabilities) 3,354  (3,257)
Total assets less current liabilities 17,743  11,105 
Creditors (amounts falling due after more than one year)
3
(3,085) (2,620)
Net assets 14,658  8,485 
Equity
Share capital
7
474  470 
Share premium account 1,296  1,301 
Cash flow hedge reserve (3) (28)
Cost of hedging reserve (15) (6)
Other equity reserves 426  399 
Profit and loss account
8
12,480  6,349 
Total shareholders’ equity 14,658  8,485 

The Company’s profit after tax for the year was £5,107 million (2020: £3,684 million profit). Profits available for distribution by the Company to shareholders were £9.9 billion at 31 March 2021. The financial statements of the Company on pages 217 to 223 were approved by the Board of Directors on 19 May 2021 and were signed on its behalf by:
Sir Peter Gershon Chairman
Andy Agg Chief Financial Officer

National Grid plc
Registered number: 4031152


219


National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Company statement of changes in equity
for the years ended 31 March
Share
capital
£m
Share
premium account
£m
Cash flow
hedge
reserve
£m
Cost of hedging reserve
£m
Other
equity
reserves
£m
Profit
and loss
account
£m
Total shareholders’
equity
£m
At 1 April 2019 458  1,314  —  380  3,546  5,699 
Profit for the year¹ —  —  —  —  —  3,684  3,684 
Other comprehensive (loss)/profit for the year
Transferred from equity (net of tax) —  —  (29) (6) —  —  (35)
Total comprehensive (loss)/profit for the year —  —  (29) (6) —  3,684  3,649 
Other equity movements
Scrip dividend-related share issue² 12  (13) —  —  —  —  (1)
Issue of treasury shares —  —  —  —  —  17  17 
Purchase of own shares —  —  —  —  —  (6) (6)
Share awards to employees of subsidiary undertakings —  —  —  —  19  —  19 
Equity dividends —  —  —  —  —  (892) (892)
At 31 March 2020 470  1,301  (28) (6) 399  6,349  8,485 
Profit for the year¹ —  —  —  —  —  5,107  5,107 
Other comprehensive profit/(loss) for the year
Transferred to/(from) equity (net of tax) —  —  25  (9) —  —  16 
Dividends in specie (note 1) —  —  —  —  —  2,422  2,422 
Total comprehensive profit/(loss) for the year —  —  25  (9) —  7,529  7,545 
Other equity movements
Scrip dividend-related share issue² (5) —  —  —  —  (1)
Issue of treasury shares —  —  —  —  —  17  17 
Purchase of own shares —  —  —  —  —  (2) (2)
Share awards to employees of subsidiary undertakings —  —  —  —  27  —  27 
Equity dividends —  —  —  —  —  (1,413) (1,413)
At 31 March 2021 474  1,296  (3) (15) 426  12,480  14,658 
1.    Included within profit for the year is dividend income from subsidiaries of £7,556 million (2020: £3,887 million).
2.    Included within the share premium account are costs associated with scrip dividends.

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National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the Company financial statements

1. Fixed asset investments
Shares in subsidiary undertakings
£m
Cost at 1 April 2019 9,923 
Additions 7,011 
Disposals (2,572)
Cost at 31 March 2020 14,362 
Additions 2,447 
Cost at 31 March 2021 16,809 
Provision at 1 April 2019 and 1 April 2020
— 
Charge for the year (2,420)
Provision at 31 March 2021 (2,420)
Net book value at 31 March 2021 14,389 
Net book value at 31 March 2020 14,362 

During the year, there was a capital contribution of £27 million (2020: £19 million) which represents the fair value of equity instruments granted to subsidiaries’ employees arising from equity-settled employee share schemes.
In addition, the Company acquired a 100% investment in National Grid (US) Investments 2 Limited and National Grid Hong Kong Limited from its subsidiary undertaking, National Grid Luxembourg SARL, for a total consideration of £2,420 million in the form of a dividend in specie. Then as part of a wider group restructuring project, National Grid (US) Investments 2 Limited, was identified as a subsidiary no longer required and hence a number of accounting steps were implemented to reduce the net assets of that company to a nominal value. These steps included a capital reduction and the payment of dividends to the Company of £2,422 million. Following the receipt of these dividends the carrying value of the investment was reviewed and an impairment charge was made to the profit and loss account of £2,420 million. It is anticipated that National Grid (US) Investments 2 Limited will be placed into voluntary liquidation in the next financial year.
During the year ended 31 March 2020, the Company made a further investment of £2,000 million in National Grid (US) Holdings Limited, following a rights issue by that company; acquired National Grid (US) Investments 2 Limited from an indirect subsidiary undertaking for £2,420 million; and disposed of its investments in National Grid Holdings One plc and National Grid (US) Investments 2 Limited in exchange for an investment in National Grid Luxembourg SARL at a cost of £2,572 million.
The Company’s direct subsidiary undertakings as at 31 March 2021 were as follows: National Grid (US) Holdings Limited, National Grid (US) Investments 2 Limited, National Grid Hong Kong Limited, National Grid Luxembourg SARL and NGG Finance plc. The names of indirect subsidiary undertakings, joint ventures and associates are included in note 34 to the consolidated financial statements.
The Directors believe that the carrying value of the investments is supported by the fair value of their underlying net assets.

2. Debtors
2021 2020
£m
£m
Amounts falling due within one year
Derivative financial instruments (note 4) 86  37 
Amounts owed by subsidiary undertakings 20,613  12,390 
20,699  12,427 
Amounts falling due after more than one year
Derivative financial instruments (note 4) 139  27 
Amounts owed by subsidiary undertakings   363 
Deferred tax 4 
143  398 

The carrying values stated above are considered to represent the fair values of the assets. For the purposes of the impairment assessment, loans to subsidiary undertakings are considered low credit risk as the subsidiaries are solvent and are covered by the Group’s liquidity arrangements.
A reconciliation of the movement in deferred tax in the year is shown below:
Deferred tax
£m
At 1 April 2019 — 
Charged to equity
At 31 March 2020
Credited to equity (4)
At 31 March 2021 4 

221


National Grid plc Annual Report and Accounts 2020/21    Financial Statements
Notes to the Company financial statements
continued
3. Creditors
2021 2020
£m
£m
Amounts falling due within one year
Borrowings (note 6) 635  666 
Derivative financial instruments (note 4) 34  278 
Amounts owed to subsidiary undertakings 17,589  15,834 
Other creditors 54  58 
18,312  16,836 
Amounts falling due after more than one year
Borrowings (note 6) 823  355 
Derivative financial instruments (note 4) 203  160 
Amounts owed to subsidiary undertakings 2,059  2,105 
3,085  2,620 
Amounts owed to subsidiary undertakings falling due after more than one year are repayable as follows:
In 1 to 2 years   — 
In 2 to 3 years   — 
In 3 to 4 years 1,061  — 
In 4 to 5 years 998  443 
More than 5 years   1,662 
2,059  2,105 

The carrying values stated above are considered to represent the fair values of the liabilities.

4. Derivative financial instruments
The fair values of derivative financial instruments are:
2021 2020
Assets
£m
Liabilities
£m
Total
£m
Assets
£m
Liabilities
£m
Total
£m
Amounts falling due within one year 86  (34) 52  37  (278) (241)
Amounts falling due after more than one year 139  (203) (64) 27  (160) (133)
225  (237) (12) 64  (438) (374)

For each class of derivative, the notional contract1 amounts are as follows:
2021 2020
£m
£m
Cross-currency interest rate swaps (3,604) (3,804)
Foreign exchange forward contracts (9,517) (7,886)
(13,121) (11,690)
1.    The notional contract amounts of derivatives indicate the gross nominal value of transactions outstanding at the balance sheet date.

5. Investments
2021 2020
£m
£m
Investments in short-term money funds 697  572 
Restricted balances – collateral 87  180 
784  752 
222


National Grid plc Annual Report and Accounts 2020/21    Financial Statements | Notes to the Company financial statements

6. Borrowings
The following table analyses the Company’s total borrowings:
2021 2020
£m
£m
Amounts falling due within one year
Bank loans 8  46 
Bonds 362 
Commercial paper 265  618 
635  666 
Amounts falling due after more than one year
Bonds 823  355 
1,458  1,021 

The maturity of total borrowings is as follows:
2021 2020
£m £m
Total borrowings are repayable as follows:
Less than 1 year 635  666 
In 1 to 2 years   355 
In 2 to 3 years   — 
In 3 to 4 years   — 
In 4 to 5 years   — 
More than 5 years 823  — 
1,458  1,021 

The notional amount of borrowings outstanding as at 31 March 2021 was £1,480 million (2020: £1,018 million).

7. Share capital
The called-up share capital amounting to £474 million (2020: £470 million) consists of 3,814,951,606 ordinary shares of 12204/473 pence each (2020: 3,780,237,016 ordinary shares of 12204/473 pence each). For further information on share capital, refer to note 27 of the consolidated financial statements.

8. Shareholders’ equity and reserves
At 31 March 2021, the profit and loss account reserve stood at £12,480 million (2020: £6,349 million) of which profits available for distribution by the Company to shareholders were £9.9 billion (2020: £5 billion). The Company bore no employee costs in either the current or prior year.
For further details of dividends paid and payable to shareholders, refer to note 9 of the consolidated financial statements.

9. Parent Company guarantees
The Company has guaranteed the repayment of the principal sum, any associated premium and interest on specific loans due by certain subsidiary undertakings primarily to third parties. At 31 March 2021, the sterling equivalent amounted to £2,108 million (2020: £2,169 million). The guarantees are for varying terms from less than one year to open-ended.
In addition, as part of the sectionalisation of the National Grid UK Pension Scheme on 1 January 2017, a guarantee of £1 billion has been provided to Section A. This payment is contingent on insolvency or on failure to pay pensions obligations to Section A and can be claimed against National Grid plc, National Grid Holdings One plc or Lattice Group Limited (up to £1 billion in total). Refer to note 25 of the consolidated financial statements.

10. Audit fees
The audit fee in respect of the Parent Company was £28,000 (2020: £27,000). Fees payable to Deloitte for non-audit services to the Company are not required to be disclosed as they are included within note 4 to the consolidated financial statements.

223
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NGGTF-20210331_G136.JPG
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NGGTF-20210331_G137.JPG
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NGGTF-20210331_G138.JPG
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NGGTF-20210331_G139.JPG
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NGGTF-20210331_G140.JPG
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NGGTF-20210331_G141.JPG
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NGGTF-20210331_G142.JPG
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NGGTF-20210331_G145.JPG
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NGGTF-20210331_G146.JPG
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Alternative performance measures/non-IFRS reconciliations Within the Annual Report, a number of financial measures are presented. These measures have been categorised as alternative performance measures (APMs), as per the European Securities and Markets Authority (ESMA) guidelines and the Securities and Exchange Commission (SEC) conditions for use of non-GAAP financial measures. An APM is a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined under IFRS. The Group uses a range of these measures to provide a better understanding of its underlying performance. APMs are reconciled to the most directly comparable IFRS financial measure where practicable. The Group has defined the following financial measures as APMs derived from IFRS: net revenue, the various adjusted operating profit, earnings and earnings per share metrics detailed in the ‘adjusted profit measures’ section below, net debt, capital investment, funds from operations (FFO), FFO interest cover and retained cash flow (RCF)/adjusted net debt. For each of these we present a reconciliation to the most directly comparable IFRS measure. We also have a number of APMs derived from regulatory measures which have no basis under IFRS; we call these Regulatory Performance Measures (RPMs). They comprise: Group Return on Equity (RoE), UK and US regulatory RoE, regulated asset base, regulated financial performance, regulatory gearing, asset growth, Value Added, including Value Added per share and Value Growth. These measures include the inputs used by utility regulators to set the allowed revenues for many of our businesses. We use RPMs to monitor progress against our regulatory agreements and certain aspects of our strategic objectives. Further, targets for certain of these performance measures are included in the Company’s Annual Performance Plan (APP) and Long Term Performance Plan (LTPP) and contribute to how we reward our employees. As such, we believe that they provide close correlation to the economic value we generate for our shareholders and are therefore important supplemental measures for our shareholders to understand the performance of the business and to ensure a complete understanding of Group performance. As the starting point for our RPMs is not IFRS, and these measures are not governed by IFRS, we are unable to provide meaningful reconciliations to any directly comparable IFRS measures, as differences between IFRS and the regulatory recognition rules applied have built up over many years. Instead, for each of these we present an explanation of how the measure has been determined and why it is important, and an overview as to why it would not be meaningful to provide a reconciliation to IFRS. Alternative performance measures Net revenue Net revenue is revenue less pass-through costs, such as UK system balancing costs, gas and electricity commodity costs in the US and, prior to the adoption of IFRS 15, payments to other UK network owners. Pass-through costs are fully recoverable from our customers and are recovered through separate charges that are designed to recover those costs with no profit. Where revenue received or receivable exceeds the maximum amount permitted by our regulatory agreement, adjustments will be made to future prices to reflect this over-recovery. No liability is recognised, as such an adjustment to future prices relates to the provision of future services. Similarly, no asset is recognised where a regulatory agreement permits adjustments to be made to future prices in respect of an under-recovery. 2021 2020 2019 Gross revenue Pass- through costs Net revenue Gross revenue Pass- through costs Net revenue Gross revenue Pass- through costs Net revenue £m £m £m £m £m £m £m £m £m UK Electricity Transmission 3,992 (2,062) 1,930 3,702 (1,528) 2,174 3,351 (1,397) 1,954 UK Gas Transmission 904 (233) 671 927 (242) 685 896 (227) 669 US Regulated 9,195 (3,253) 5,942 9,205 (3,460) 5,745 9,846 (3,978) 5,868 NGV and Other 715 — 715 736 — 736 876 — 876 Sales between segments (27) — (27) (30) — (30) (36) — (36) Total 14,779 (5,548) 9,231 14,540 (5,230) 9,310 14,933 (5,602) 9,331 Adjusted profit measures In considering the financial performance of our business and segments, we use various adjusted profit measures in order to aid comparability of results year- on-year. The various measures are presented on pages 30 – 39 and reconciled below. Adjusted results, also referred to as Headline results – these exclude the impact of exceptional items and remeasurements that are treated as discrete transactions under IFRS and can accordingly be classified as such. This is a measure used by management that is used to derive part of the incentive target set annually for remunerating certain Executive Directors, and further details of these items are included in Note 5 to the financial statements. Underlying results – further adapts our adjusted results to take account of volumetric and other revenue timing differences arising due to the in-year difference between allowed and collected revenues, including revenue incentives, as governed by our rate plans in the US or regulatory price controls in the UK (but excluding totex-related allowances and adjustments). For 2020/21, as highlighted on page 251, our underlying results exclude £207 million (2019/20: £147 million) of timing differences as well as £150 million (2019/20: £nil) of major storm costs (as costs were above our $100 million storm cost timing threshold in the current year). We expect to recover major storm costs incurred through regulatory mechanisms in the US. Constant currency – the adjusted profit measures are also shown on a constant currency basis to show the year-on-year comparisons excluding any impact of foreign currency movements. National Grid plc Annual Report and Accounts 2020/21 Additional Information Other unaudited financial information 250

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Reconciliation of statutory, adjusted and underlying profits and earnings – at actual exchange rates – continuing operations Year ended 31 March 2021 Statutory Exceptionals and remeasurements Adjusted Timing Major storm costs Underlying £m £m £m £m £m £m UK Electricity Transmission 1,027 7 1,034 88 — 1,122 UK Gas Transmission 337 5 342 96 — 438 US Regulated 1,344 (31) 1,313 23 150 1,486 NGV and Other 187 50 237 — — 237 Total operating profit 2,895 31 2,926 207 150 3,283 Net finance costs (870) (72) (942) — — (942) Share of post-tax results of joint ventures and associates 58 8 66 — — 66 Profit before tax 2,083 (33) 2,050 207 150 2,407 Tax (442) 26 (416) (41) (39) (496) Profit after tax 1,641 (7) 1,634 166 111 1,911 Year ended 31 March 2020 Statutory Exceptionals and remeasurements Adjusted Timing Major storm costs Underlying £m £m £m £m £m £m UK Electricity Transmission 1,316 4 1,320 (146) — 1,174 UK Gas Transmission 347 1 348 54 — 402 US Regulated 880 517 1,397 239 — 1,636 NGV and Other 237 5 242 — — 242 Total operating profit 2,780 527 3,307 147 — 3,454 Net finance costs (1,113) 64 (1,049) — — (1,049) Share of post-tax results of joint ventures and associates 87 1 88 — — 88 Profit before tax 1,754 592 2,346 147 — 2,493 Tax (480) 47 (433) (45) — (478) Profit after tax 1,274 639 1,913 102 — 2,015 Year ended 31 March 2019 Statutory Exceptionals and remeasurements Adjusted Timing Major storm costs Underlying £m £m £m £m £m £m UK Electricity Transmission 778 237 1,015 77 — 1,092 UK Gas Transmission 267 36 303 38 — 341 US Regulated 1,425 299 1,724 (223) 93 1,594 NGV and Other 400 — 400 — — 400 Total operating profit 2,870 572 3,442 (108) 93 3,427 Net finance costs (1,069) 76 (993) — — (993) Share of post-tax results of joint ventures and associates 40 — 40 — — 40 Profit before tax 1,841 648 2,489 (108) 93 2,474 Tax (339) (149) (488) 36 (24) (476) Profit after tax 1,502 499 2,001 (72) 69 1,998 National Grid plc Annual Report and Accounts 2020/21 Additional Information | Other unaudited financial information 251

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Reconciliation of adjusted and underlying profits – at constant currency At constant currency Adjusted at actual exchange rate Constant currency adjustment Adjusted Timing Major storm costs Underlying Year ended 31 March 2020 £m £m £m £m £m £m UK Electricity Transmission 1,320 — 1,320 (146) — 1,174 UK Gas Transmission 348 — 348 54 — 402 US Regulated 1,397 (56) 1,341 229 — 1,570 NGV and Other 242 1 243 — — 243 Total operating profit 3,307 (55) 3,252 137 — 3,389 Net finance costs (1,049) 30 (1,019) — — (1,019) Share of post-tax results of joint ventures and associates 88 (1) 87 — — 87 Profit before tax 2,346 (26) 2,320 137 — 2,457 At constant currency Adjusted at actual exchange rate Constant currency adjustment Adjusted Timing Major storm costs Underlying Year ended 31 March 2019 £m £m £m £m £m £m UK Electricity Transmission 1,015 — 1,015 77 — 1,092 UK Gas Transmission 303 — 303 38 — 341 US Regulated 1,724 (46) 1,678 (217) 91 1,552 NGV and Other 400 (1) 399 — — 399 Total operating profit 3,442 (47) 3,395 (102) 91 3,384 Net finance costs (993) 19 (974) — — (974) Share of post-tax results of joint ventures and associates 40 (1) 39 — — 39 Profit before tax 2,489 (29) 2,460 (102) 91 2,449 Earnings per share calculations from continuing operations – at actual exchange rates The table below reconciles the profit before tax from continuing operations as per the previous tables back to the earnings per share from continuing operations for each of the adjusted profit measures. Earnings per share is only presented for those adjusted profit measures that are at actual exchange rates, and not for those at constant currency. Profit after tax Non- controlling interest Profit after tax attributable to shareholders Weighted average number of shares Earnings per share Year ended 31 March 2021 £m £m £m millions pence Statutory 1,641 (1) 1,640 3,523 46.6 Adjusted (also referred to as Headline) 1,634 (1) 1,633 3,523 46.4 Underlying 1,911 (1) 1,910 3,523 54.2 Profit after tax Non- controlling interest Profit after tax attributable to shareholders Weighted average number of shares Earnings per share Year ended 31 March 2020 £m £m £m millions pence Statutory 1,274 (1) 1,273 3,461 36.8 Adjusted (also referred to as Headline) 1,913 (1) 1,912 3,461 55.2 Underlying 2,015 (1) 2,014 3,461 58.2 Profit after tax Non- controlling interest Profit after tax attributable to shareholders Weighted average number of shares Earnings per share Year ended 31 March 2019 £m £m £m millions pence Statutory 1,502 (3) 1,499 3,386 44.3 Adjusted (also referred to as Headline) 2,001 (3) 1,998 3,386 59.0 Underlying 1,998 (3) 1,995 3,386 58.9 National Grid plc Annual Report and Accounts 2020/21 Additional Information Other unaudited financial information continued 252

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Timing and regulated revenue adjustments As described on pages 228 – 235, our allowed revenues are set in accordance with our regulatory price controls or rate plans. We calculate the tariffs we charge our customers based on the estimated volume of energy we expect will be delivered during the coming period. The actual volumes delivered will differ from the estimate. Therefore, our total actual revenue will be different from our total allowed revenue. These differences are commonly referred to as timing differences.  If we collect more than the allowed revenue, adjustments will be made to future prices to reflect this over-recovery, and if we collect less than the allowed level of revenue, adjustments will be made to future prices to reflect the under-recovery. In the US, a substantial portion of our costs are pass-through costs (including commodity and energy-efficiency costs) and are fully recoverable from our customers. Timing differences between costs of this type being incurred and their recovery through revenue are also included in timing. The amounts calculated as timing differences are estimates and subject to change until the variables that determine allowed revenue are final.  Our continuing operating profit for the year includes a total estimated in-year under-collection of £207 million (2019/20: £147 million under-collection). Our closing balance at 31 March 2021 was £54 million over-recovered. In the UK, there was a cumulative under-recovery of £150 million at 31 March 2021 (2020: over-recovery of £24 million). In the US, cumulative timing over-recoveries at 31 March 2021 were £198 million (2020: £240 million over-recovery). The total estimated in-year over- or under-collection excludes opening balance adjustments related to estimates or finalisation of balances as part of regulatory submissions. In addition to the timing adjustments described above, as part of the RIIO price controls in the UK, outperformance against allowances as a result of the totex incentive mechanism, together with changes in output-related allowances included in the original price control, will almost always be adjusted in future revenue recoveries, typically starting in two years’ time. We are also recovering revenues in relation to certain costs incurred (for example pension contributions made) in prior years.  Our current IFRS revenues and earnings include these amounts that relate to certain costs incurred in prior years or that will need to be repaid or recovered in future periods. Such adjustments will form an important part of the continuing difference between reported IFRS results and underlying economic performance based on our regulatory obligations.  For our UK Regulated businesses as a whole, timing and regulated revenue adjustments totalled a return of £184 million in the year (2019/20: £92 million recovery). In the US, accumulated regulatory entitlements cover a range of different areas, with the most significant being environmental remediation and pension assets, as well as deferred storm costs.  All regulatory entitlements are recoverable (or repayable) over different periods, which are agreed with the regulators to match the expected payment profile for the liabilities. UK Electricity Transmission UK Gas Transmission US Regulated Total £m £m £m £m 1 April 2020 opening balance¹ 18 16 227 261 Over/(under) recovery (88) (96) (23) (207) 31 March 2021 closing balance to (recover)/return³ (70) (80) 204 54 UK Electricity Transmission UK Gas Transmission US Regulated Total £m £m £m £m 1 April 2019 opening balance¹ (127) 59 452 384 Over/(under) recovery 146 (54) (229) (137) 31 March 2020 closing balance to (recover)/return2,3 19 5 223 247 UK Electricity Transmission UK Gas Transmission US Regulated Total £m £m £m £m 1 April 2018 opening balance¹ (41) 97 235 291 Over/(under) recovery (77) (38) 217 102 31 March 2019 closing balance to (recover)/return2,3 (118) 59 452 393 1. Opening balances have been restated to reflect the finalisation of calculated over/(under)-recoveries in the UK and the US. 2. US over/(under) recovery and all US Regulated balances have been translated using the average exchange rate for the year ended 31 March 2021. 3. The over-recovered closing balance at 31 March 2021 was £48 million (translated at the closing rate of $1.38:£1). 31 March 2020 was £264 million (translated at the closing rate of $1.24:£1). 31 March 2019 was £407 million (translated at the closing rate of $1.30:£1). National Grid plc Annual Report and Accounts 2020/21 Additional Information | Other unaudited financial information 253

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Capital investment ‘Capital investment’ or ‘investment’ refer to additions to property, plant and equipment and intangible assets, and contributions to joint ventures and associates, other than the St William Homes LLP joint venture during the period. We also include the Group’s investments by National Grid Partners during the period, which are classified for IFRS purposes as non-current financial assets in the Group’s consolidated statement of financial position. Investments made to our St William Homes LLP arrangement are excluded based on the nature of this joint venture arrangement. We typically contribute property assets to the joint venture in exchange for cash and accordingly do not consider these transactions to be in the nature of capital investment. Year ended 31 March  At actual exchange rates At constant currency 2021 2020 % change 2021 2020 % change£m £m £m £m UK Electricity Transmission 1,072 1,043 3 1,072 1,043 3 UK Gas Transmission 176 249 (29) 176 249 (29) US Regulated 3,223 3,228 — 3,223 3,098 4 NGV and Other 460 559 (18) 460 559 (18) Group capital expenditure 4,931 5,079 (3) 4,931 4,949 — Equity investment, funding contributions and loans to joint ventures and associates¹ 78 56 39 78 54 44 Acquisition of National Grid Renewables (formerly Geronimo) and Emerald — 209 n/a — 195 n/a Increase in financial assets (National Grid Partners) 38 61 (38) 38 59 (36) Group capital investment 5,047 5,405 (7) 5,047 5,257 (4) 1. Excludes £nil (2020: £15 million) equity contribution to the St William Homes LLP joint venture. Net debt See note 29 on page 187 for the definition and reconciliation of net debt. Cash flow statement used in credit metric calculation The table below re-analyses our IFRS operating cash flows for the purposes of facilitating calculation of certain measures of credit worthiness – being RCF/ adjusted net debt and FFO/adjusted net debt as described further below. The differences between this table and the consolidated cash flow statement relate to the disaggregation of cash flows relating to items considered ‘exceptional’ as described in note 5, as explained within the footnotes below: 2021 2020 2019 Notes £m £m £m Cash flows from operating activities Total operating profit from continuing operations 2(b) 2,895 2,780 2,870 Adjustments for: Exceptional items and remeasurements 5 31 527 572 Other fair value movements (22) — — Depreciation, amortisation and impairment 1,672 1,640 1,588 Share-based payments 27 19 27 Changes in working capital 312 269 40 Changes in provisions (195) (169) (110) Changes in pensions and other post-retirement benefit obligations (55) (92) (123) Cash flows relating to exceptional items (47) (60) (400) Cash generated from operations – continuing operations 4,618 4,914 4,464 Tax paid (157) (199) (75) Net cash inflow from operating activities – continuing operations 4,461 4,715 4,389 National Grid plc Annual Report and Accounts 2020/21 Additional Information Other unaudited financial information continued 254

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Funds from operations and interest cover FFO is the cash flows generated by the operations of the Group. Credit rating metrics, including FFO, are used as indicators of balance sheet strength. 2021 2020¹ 2019¹ Year ended 31 March  £m £m £m Interest expense (income statement) 977 1,119 1,066 Hybrid interest reclassified as dividend (38) (39) (51) Capitalised interest 131 122 135 Pensions interest adjustment (16) 16 (4) Interest on lease rentals adjustment — — 11 Unwinding of discount on provisions (78) (77) (74) Other interest adjustments — — 1 Adjusted interest expense 976 1,141 1,084 Net cash inflow from operating activities 4,461 4,715 4,389 Interest received on financial instruments 16 73 68 Interest paid on financial instruments (835) (957) (914) Dividends received 80 75 201 Working capital adjustment (312) (269) (40) Excess employer pension contributions 116 176 260 Hybrid interest reclassified as dividend 38 39 51 Lease rentals — — 34 Difference in net interest expense in income statement to cash flow (138) (187) (186) Difference in current tax in income statement to cash flow (67) 67 (13) Current tax related to prior periods 8 (45) (52) Cash flow from discontinued operations — (97) (71) Other fair value adjustments 22 — — Funds from operations (FFO) 3,389 3,590 3,727 FFO interest cover ((FFO + adjusted interest expense)/adjusted interest expense) 4.5 x 4.1 x 4.4 x 1. Numbers for 2020 and 2019 reflect the calculations for the total Group as based on the published accounts for the respective years.  National Grid plc Annual Report and Accounts 2020/21 Additional Information | Other unaudited financial information 255

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Retained cash flow/adjusted net debt RCF/adjusted net debt is one of two credit metrics that we monitor in order to ensure the Group is generating sufficient cash to service its debts, consistent with maintaining a strong investment-grade credit rating. We calculated RCF/adjusted net debt applying the methodology used by Moody’s, as this is one of the most constrained calculations of credit worthiness. The net debt denominator includes adjustments to take account of the equity component of hybrid debt. 2021 2020 2019 Year ended 31 March  £m £m £m Funds from operations (FFO) 3,389 3,590 3,727 Hybrid interest reclassified as dividend (38) (39) (51) Ordinary dividends paid to shareholders (1,413) (892) (1,160) RCF (excluding share buybacks) 1,938 2,659 2,516 Repurchase of shares — — — RCF (net of share buybacks) 1,938 2,659 2,516 Borrowings¹ 32,339 30,794 28,730 Less: 50% hybrid debt (1,032) (1,054) (1,039) Cash and cash equivalents (157) (73) (252) Financial and other investments (1,768) (1,278) (1,311) Underfunded pension obligations 467 1,442 845 Operating leases adjustment² — — 248 Derivative balances removed from debt² — (116) 141 Currency swaps² — 203 38 Nuclear decommissioning liabilities reclassified as debt² — 6 18 Collateral – cash received under collateral agreements (582) (785) (558) Accrued interest removed from short-term debt² — (246) (223) Adjusted net debt (includes pension deficit) 29,267 28,893 26,637 RCF (excluding share buybacks)/adjusted net debt 6.6 % 9.2 % 9.4 % RCF (net of share buybacks)/adjusted net debt 6.6 % 9.2 % 9.4 % 1. Before NECO reclassification. 2. Below agency threshold, prior year not restated. Regulatory Performance Measures Regulated financial performance – UK Regulatory financial performance is a pre-interest and tax measure, starting at segmental operating profit and making adjustments (such as the elimination of all pass-through items included in revenue allowances and timing) to approximate regulatory profit for the UK regulated activities. This measure provides a bridge for investors between a well-understood and comparable IFRS starting point and through the key adjustments required to approximate regulatory profit. This measure also provides the foundation to calculate Group RoE. For the reasons noted above, the table below shows the principal differences between the IFRS operating profit and the regulated financial performance, but is not a formal reconciliation to an equivalent IFRS measure. UK Electricity Transmission 2021 2020 2019 Year ended 31 March  £m £m £m Adjusted operating profit 1,034 1,320 1,015 Movement in regulatory ‘IOUs’ 188 (99) 174 Deferred taxation adjustment 60 63 64 RAV indexation (average 3% long-run inflation) 424 406 391 Regulatory vs IFRS depreciation difference (439) (459) (394) Fast money/other 28 26 72 Pensions (54) (52) (51) Performance RAV created 111 119 90 Regulated financial performance 1,352 1,324 1,361 National Grid plc Annual Report and Accounts 2020/21 Additional Information Other unaudited financial information continued 256

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UK Gas Transmission 2021 2020 2019 Year ended 31 March £m £m £m Adjusted operating profit 342 348 303 Movement in regulatory ‘IOUs’ 34 67 68 Deferred taxation adjustment 12 25 8 RAV indexation (average 3% long-run inflation) 189 185 179 Regulatory vs IFRS depreciation difference (88) (77) (42) Fast money/other 25 (17) (10) Pensions (34) (34) (33) Performance RAV created (23) (24) (30) Regulated financial performance 457 473 443 Regulated financial performance – US US Regulated 2021 2020 2019 Year ended 31 March £m £m £m Adjusted operating profit 1,313 1,397 1,724 Provision for bad and doubtful debts (COVID-19), net of recoveries¹ 120 117 — Major storm costs 150 — 93 Timing 23 239 (223) US GAAP pension adjustment 3 (4) (80) Regulated financial performance 1,609 1,749 1,514 1. US Regulated financial performance includes an adjustment reflecting our expectation for future recovery of COVID-19-related provision for bad and doubtful debts. Total regulated financial performance 2021 2020 2019 Year ended 31 March £m £m £m UK Electricity Transmission 1,352 1,324 1,361 UK Gas Transmission 457 473 443 US Regulated 1,609 1,749 1,514 Total regulated financial performance 3,418 3,546 3,318 US timing, major storms and movement in UK regulatory ‘IOUs’ – Revenue related to performance in one year may be recovered in later years. Where revenue received or receivable exceeds the maximum amount permitted by our regulatory agreement, adjustments will be made to future prices to reflect this over-recovery. No liability is recognised under IFRS, as such an adjustment to future prices relates to the provision of future services. Similarly, no asset is recognised under IFRS where a regulatory agreement permits adjustments to be made to future prices in respect of an under-recovery. In the UK, this is calculated as the movement in other regulated assets and liabilities. Performance RAV – UK performance efficiencies are in-part remunerated by the creation of additional RAV which is expected to result in future earnings under regulatory arrangements. This is calculated as in-year totex outperformance multiplied by the appropriate regulatory capitalisation ratio and multiplied by the retained company incentive sharing ratio. Pension adjustment – Cash payments against pension deficits in the UK are recoverable under regulatory contracts. In US Regulated operations, US GAAP pension charges are generally recoverable through rates. Revenue recoveries are recognised under IFRS but payments are not charged against IFRS operating profits in the year. In the UK, this is calculated as cash payments against the regulatory proportion of pension deficits in the UK regulated business, whereas in the US, it is the difference between IFRS and US GAAP pension charges. 3% RAV indexation – Future UK revenues are expected to be set using an asset base adjusted for inflation. This is calculated as UK RAV multiplied by 3% (long-run RPI inflation assumption). UK deferred taxation adjustment – Future UK revenues are expected to recover cash taxation cost including the unwinding of deferred taxation balances created in the current year. This is the difference between: (a) IFRS underlying EBITDA less other regulatory adjustments; and (b) IFRS underlying EBITDA less other regulatory adjustments less current taxation (adjusted for interest tax shield) then grossed up at full UK statutory tax rate. Regulatory depreciation – US and UK regulated revenues include allowance for a return of regulatory capital in accordance with regulatory assumed asset lives. This return does not form part of regulatory profit. Fast/slow money adjustment – The regulatory remuneration of costs incurred is split between in-year revenue allowances and the creation of additional RAV. This does not align with the classification of costs as operating costs and fixed asset additions under IFRS accounting principles. This is calculated as the difference between IFRS classification of costs as operating costs or fixed asset additions and the regulatory classification. National Grid plc Annual Report and Accounts 2020/21 Additional Information | Other unaudited financial information 257

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Regulated asset base The regulated asset base is a regulatory construct, based on predetermined principles not based on IFRS. It effectively represents the invested capital on which we are authorised to earn a cash return. By investing efficiently in our networks, we add to our regulated asset base over the long term, and this in turn contributes to delivering shareholder value. Our regulated asset base is comprised of our regulatory asset value in the UK, plus our rate base in the US. Maintaining efficient investment in our regulated asset base ensures we are well positioned to provide consistently high levels of service to our customers and increases our revenue allowances in future years. While we have no specific target, our overall aim is to achieve between 5% and 7% growth in regulated asset base each year through continued investment in our networks in both the UK and US. In the UK, the way in which our transactions impact RAV is driven by principles set out by Ofgem. In a number of key areas these principles differ from the requirements of IFRS, including areas such as additions and the basis for depreciation. Further, our UK RAV is adjusted annually for inflation. RAV in each of our retained UK businesses has evolved over the period since privatisation in 1990, and as a result, historical differences between the initial determination of RAV and balances reported under UK GAAP at that time still persist. Due to the above, substantial differences exist in the measurement bases between RAV and an IFRS balance metric, and therefore, it is not possible to provide a meaningful reconciliation between the two. In the US, rate base is a regulatory measure determined for each of our main US operating companies. It represents the value of property and other assets or liabilities on which we are permitted to earn a rate of return, as set out by the regulatory authorities for each jurisdiction. The calculations are based on the applicable regulatory agreements for each jurisdiction and include the allowable elements of assets and liabilities from our US companies. For this reason, it is not practical to provide a meaningful reconciliation from the US rate base to an equivalent IFRS measure. However, we include the calculation below. ‘Total Regulated and other balances’ includes the under or over-recovery of revenues that National Grid’s UK regulated businesses target to collect in any year, which are based on the regulator’s forecasts for that year. Under the UK price control arrangements, revenues will be adjusted in future years to take account of actual levels of collected revenue, costs and outputs delivered when they differ from those regulatory forecasts. In the US, other regulatory assets and liabilities include regulatory assets and liabilities which are not included in the definition of rate base, including working capital where appropriate. The investment in ‘NGV and other businesses’ includes net assets excluding pensions, tax and items related to the UK Gas Distribution sale. Year ended 31 March (£m at constant currency) RAV, rate base or other business assets Total Regulated and other balances 2021 2020¹ 20212,3 20201,2,3 £m £m £m £m UK Electricity Transmission 14,565 14,133 14,379 13,772 UK Gas Transmission 6,307 6,298 6,333 6,291 US Regulated 20,041 18,598 22,015 20,211 Total regulated 40,913 39,029 42,727 40,274 NGV and other businesses 4,458 3,942 4,122 3,428 Total Group regulated and other balances 45,371 42,971 46,849 43,702 1. Figures relating to prior periods have, where appropriate, been re-presented at constant currency, for opening balance adjustments following the completion of the UK regulatory reporting pack process in 2019, and finalisation of US balances. 2. Includes totex-related regulatory IOUs of £310 million (2020: £411 million), over-recovered timing balances of £150 million (2020: £24 million under-recovered) and under-recovered legacy balances related to previous price controls of £nil (2020: £78 million). 3. Includes assets for construction work-in-progress of £1,639 million (2020: £1,510 million), other regulatory assets related to timing and other cost deferrals of £806 million (2020: £642 million) and net working capital liabilities of £471 million (2020: £361 million). US rate base and other total regulated and other balances for 31 March 2020 have been restated in the table above at constant currency. At actual currency the values were £20.6 billion and £25.5 billion respectively. Group RoE Group RoE provides investors with a view of the performance of the Group as a whole compared with the amounts invested by the Group in assets attributable to equity shareholders. It is the ratio of our regulatory financial performance to our measure of equity investment in assets. It therefore reflects the regulated activities as well as the contribution from our non-regulated businesses together with joint ventures and non-controlling interests. We use Group RoE to measure our performance in generating value for our shareholders, and targets for Group RoE are included in the incentive mechanisms for executive remuneration within both the APP and LTPP schemes. Group RoE is underpinned by our regulated asset base. For the reasons noted above, no reconciliation to IFRS has been presented, as we do not believe it would be practical. However, we do include the calculations below. Calculation: Regulatory financial performance including a long-run assumption of 3% RPI inflation, less adjusted interest and adjusted taxation divided by equity investment in assets: • adjusted interest removes interest on pensions, capitalised interest in regulated operations and unwind of discount rate on provisions; • adjusted taxation adjusts the Group taxation charge for differences between IFRS profit before tax and regulated financial performance less adjusted interest; and • equity investment in assets is calculated as the total opening UK regulatory asset value, the total opening US rate base plus goodwill plus opening net book value of National Grid Ventures and Other activities and our share of joint ventures and associates, minus opening net debt as reported under IFRS restated to the weighted average £/$ exchange rate for the year. National Grid plc Annual Report and Accounts 2020/21 Additional Information Other unaudited financial information continued 258

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2021 2020¹ 2019¹ Year ended 31 March £m £m £m Regulated financial performance 3,418 3,546 3,318 Operating profit of other activities 264 269 424 Group financial performance 3,682 3,815 3,742 Share of post-tax results of joint ventures and associates 66 88 40 Non-controlling interests (1) (1) (3) Adjusted Group interest charge (882) (1,069) (1,037) Group tax charge (416) (433) (488) Tax on adjustments (175) (117) (34) Group financial performance after interest and tax 2,274 2,283 2,220 Opening rate base/RAV 39,552 37,459 35,045 Opening other balances 3,984 3,304 2,298 Opening goodwill 5,295 5,435 5,356 Opening capital employed 48,831 46,198 42,699 Opening net debt (27,398) (27,194) (24,345) Opening equity 21,433 19,004 18,354 Return on Equity 10.6 % 12.0 % 12.1 % 1. Group ROE in 2020 and 2019 have been recalculated to reflect the revision to decrease the comparative goodwill balances (see note 1F for details). UK and US regulated RoE Year ended 31 March Regulatory Debt: Equity assumption Achieved Return on Equity Base or Allowed Return on Equity 2021 2020 2021 2020 % % % % UK Electricity Transmission 60/40 13.9 13.5 10.2 10.2 UK Gas Transmission 62.5/37.5 9.6 9.8 10.0 10.0 US Regulated Avg. 50/50 7.2 9.3 9.4 9.4 UK regulated RoE UK regulated RoEs are a measure of how the businesses are performing against the assumptions used by our UK regulator. These returns are calculated using the assumption that the businesses are financed in line with the regulatory adjudicated capital structure, at the cost of debt assumed by the regulator, and that RPI inflation is equal to a long-run assumption of 3%. They are calculated by dividing elements of out/under-performance versus the regulatory contract (i.e., regulated financial performance disclosed above) by the average equity RAV in line with the regulatory assumed capital structure and adding to the base allowed RoE. This is an important measure of UK regulated business performance, and our operational strategy continues to focus on this metric. This measure can be used to determine how we are performing under the RIIO framework and also helps investors to compare our performance with similarly regulated UK entities. Reflecting the importance of this metric, it is also a key component of the APP scheme. The UK RoE is underpinned by the UK RAV. For the reasons noted above, no reconciliation to IFRS has been presented, as we do not believe it would be practical. US regulated RoE US regulated RoE is a measure of how a business is performing against the assumptions used by the US regulators. This US operational return measure is calculated using the assumption that the businesses are financed in line with the regulatory adjudicated capital structure and allowed cost of debt. The returns are divided by the average rate base (or where a reported rate base is not available, an estimate based on rate base calculations used in previous rate filings) multiplied by the adjudicated equity portion in the regulatory adjudicated capital structure. This is an important measure of our US regulated business performance, and our operational strategy continues to focus on this metric. This measure can be used to determine how we are performing and also helps investors compare our performance with similarly regulated US entities. Reflecting the importance of this metric, it is also a key component of the APP scheme. The US return is based on a calculation which gives proportionately more weighting to those jurisdictions which have a greater rate base. For the reasons noted above, no reconciliation to IFRS for the RoE measure has been presented, as we do not believe it would be practical to reconcile our IFRS balance sheet to the equity base. The table below shows the principal differences between the IFRS result of the US Regulated segment, and the ‘return’ used to derive the US RoE. In outlining these differences, we also include the result for the US regulated Operating Companies (OpCo) entities aggregated under US GAAP. In respect of 2019/20 and 2018/19, this measure is the aggregate operating profit of our US OpCo entities’ publicly available financial statements prepared under US GAAP. For 2020/21, this measure represents our current estimate, since local financial statements have yet to be prepared. National Grid plc Annual Report and Accounts 2020/21 Additional Information | Other unaudited financial information 259

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2021 2020 2019 £m £m £m Underlying IFRS operating profit for US regulated segment 1,486 1,636 1,594 Weighted average £/$ exchange rate $1.341 $1.287 $1.305 2021 2020 2019 $m $m $m Underlying IFRS operating profit for US regulated segment 1,993 2,105 2,081 Adjustments to convert to US GAAP as applied in our US OpCo entities Adjustment in respect of customer contributions (59) (50) (50) Pension accounting differences¹ — (13) (10) Environmental charges recorded under US GAAP (108) (94) (117) Storm costs and recoveries recorded under US GAAP (113) (9) (112) Other regulatory deferrals, amortisation and other items 100 3 121 Results for US regulated OpCo entities, aggregated under US GAAP² 1,813 1,942 1,913 Adjustments to determine regulatory operating profit used in US RoE Levelisation revenue adjustment — (122) (48) Adjustment for COVID-19-related provision for bad and doubtful debts³ 127 150 — Net other (32) 51 (1) Regulatory operating profit 1,908 2,021 1,864 Pensions¹ (46) 19 (95) Regulatory interest charge (539) (491) (457) Regulatory tax charge (348) (408) (345) Regulatory earnings used to determine US RoE 975 1,141 967 1. Following a change in US GAAP accounting rules, an element of the pensions charge is reported outside operating profit with effect from 2019. 2. Based on US GAAP accounting policies as applied by our US regulated OpCo entities. 3. US RoE includes an adjustment reflecting our expectation for future recovery of COVID-19-related bad and doubtful debt costs. 2021 2020 2019 $m $m $m US equity base (average for the year) 13,621 12,331 11,045 US RoE 7.2 % 9.3 % 8.8 % Value Added and Value Added per share and Value Growth Value Added is a measure that reflects the value to shareholders of our cash dividend and the growth in National Grid’s regulated and non-regulated assets (as measured in our regulated asset base, for regulated entities), and corresponding growth in net debt. It is a key metric used to measure our performance and underpins our approach to sustainable decision-making and long-term management incentive arrangements. Value Added is derived using our regulated asset base and, as such, it is not practical to provide a meaningful reconciliation from this measure to an equivalent IFRS measure due to the reasons set out for our regulated asset base. However, the calculation is set out in the Financial review. Value Added per share is calculated by dividing Value Added by the weighted average number of shares (3,523 million) set out in note 8. Value Growth of 9.4% (2020: 10.7%) is derived from Value Added by adjusting Value Added to normalise for a 3% long-run RPI inflation rate. In 2021, the numerator for Value Growth was £1,995 million (2020: £2,068 million). The denominator is Group equity as used in the Group RoE calculation, adjusted for foreign exchange movements. Value Growth in 2020 has been recalculated from the previously reported 10.4% to reflect the revision to decrease the comparative goodwill balance (see note 1F for details). Asset growth Asset growth is the annual percentage increase in our RAV and rate base and other business balances (including the assets of NGV and NGP) calculated at constant currency. Regulatory gearing Regulatory gearing is a measure of how much of our investment in RAV and rate base and other elements of our invested capital (including our investments in NGV, UK property and other assets and US other assets) is funded through debt. Comparative amounts as at 31 March 2020 are presented at historical exchange rates and have not been restated for opening balance adjustments. 2021 2020 As at 31 March £m £m UK RAV 20,872 20,431 US rate base 20,041 20,644 Other invested capital included in gearing calculation 4,458 4,105 Total assets included in gearing calculation 45,371 45,180 Net debt (including 100% of hybrid debt) (29,665) (28,590) change  Group gearing (based on 100% of net debt) 65 % 63 % 2 % pts Group gearing (excluding 50% of hybrid debt from net debt) 63 % 61 % 2 % pts National Grid plc Annual Report and Accounts 2020/21 Additional Information Other unaudited financial information continued 260

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In compliance with SEC rules, we present a summarised analysis of movements in the income statement and an analysis of movements in adjusted operating profit (for the continuing group) by operating segment. This should be read in conjunction with the 31 March 2021 financial review included on pages 30 – 39. Analysis of the income statement for the year ended 31 March 2020  Revenue Revenue for the year ended 31 March 2020 decreased by £393 million to £14,540 million. This decrease was driven by lower revenues in our US Regulated, in our UK Gas Transmission business and in our NGV & Other businesses, partially offset by higher revenues in our UK Electricity Transmission business. US Regulated revenues were £641 million lower year-on-year, principally due to the impact of lower commodity pass-through costs, partly offset by new rates and the benefit of foreign exchange. UK Gas Transmission revenues were £27 million higher, driven by the return of allowances related to Avonmouth in the year ended 31 March 2019, partly offset by timing under-recoveries. UK Electricity Transmission revenues increased by £363 million, mainly as the result of higher BSIS pass-through costs (due to increased levels of renewable generation) and favourable timing over-collections (higher volumes and collection of prior period under- recoveries). Revenue from NGV and Other businesses decreased by £142 million, primarily driven by the significant level of sales in our Commercial Property business in the year ended 31 March 2019 and lower income from other support services.  Operating costs Operating costs for the year ended 31 March 2020 of £11,760 million were £303 million lower than the prior year. This decrease in costs included a £45 million reduction in exceptional items and remeasurements. Lower operating costs were driven by the reduction in US commodity pass-through costs and lower UK BSIS pass-through costs, partially offset by higher workforce costs, increased rates and property taxes, higher depreciation as a result of continued asset investment and the impact of movement in exchange rates. Net finance costs For the year ended 31 March 2020, net finance costs before exceptional items and remeasurements were £56 million higher than the year ended   31 March 2019 at £1,049 million, mainly as a result of swap termination and debt buy-back costs, lower capitalised interest, higher lease interest (as a result of IFRS16) and the impact of the stronger US dollar, partially offset by favourable tax interest and the impact of higher UK RPI inflation. Net finance costs in the year ended 31 March 2020 included remeasurement losses of £64 million on derivative financial instruments used to hedge our borrowings, compared to £76 million of remeasurement losses in the year ended 31 March 2019.  Tax  The tax charge on profits before exceptional items and remeasurements of £433 million was £55 million lower than the year ended 31 March 2019. This was mainly related to a lower level of profit before tax in the year ended 31 March 2020 compared to the year ended 31 March 2019, but was also the result of a benefit from the release of reserves following settlement of tax audits relating to earlier years and gains on chargeable disposals which were offset by previously unrecognised capital losses. In the year ended 31 March 2019, significantly higher gains on property disposals that were offset by previously unrecognised capital losses resulted in a lower underlying effective tax rate.  Exceptional items and remeasurements  In the year ended 31 March 2020, exceptional items included a £402 million charge associated with changes in our environmental provisions and an additional deferred tax charge of £192 million reflecting the impact of the remeasurement of the Group’s deferred tax liabilities as a result of a change in the substantively enacted UK corporation tax rate. Remeasurement losses of £125 million on commodity contracts were recognised in the year ended 31 March 2020. In the previous year, operating costs included £283 million of costs arising from the workforce contingency plan related to the Massachusetts Gas labour dispute, £204 million of restructuring charges in our UK and US businesses and £137 million related to the impairment of nuclear connection development costs following the cancellation of the NuGen and Horizon projects. These were partially offset by a net £52 million gain on remeasurement of commodity contracts. Finance costs for the year ended 31 March 2020 included a net loss of £64 million on financial remeasurements of derivative financial instruments used to hedge our borrowings, compared to a loss of £76 million on financial remeasurements in the year ended 31 March 2019. Share of post-tax results of joint ventures and associates before exceptional items for the year ended 31 March 2020 were £88 million compared to £40 million in the year ended 31 March 2019, principally due to increased profits in St William, our Property joint venture. Adjusted earnings and EPS from continuing operations  Adjusted earnings and EPS, which exclude exceptional items and remeasurements, are provided to reflect the Group’s results on an ‘adjusted profit’ basis, described further in note 5. See page 252 for a reconciliation of adjusted basic EPS to EPS. The above earnings performance translated into adjusted EPS in the year ended 31 March 2020 of 55.2p, compared to 59.0p in the year ended 31 March 2019. Exchange rates  Our financial results are reported in sterling. Transactions for our US operations are denominated in dollars, so the related amounts that are reported in sterling depend on the dollar to sterling exchange rate. The table below shows the average and closing exchange rates of sterling to US dollars. 2019/20 2018/19 % change  Weighted average (income statement) 1.29 1.31 -1.42 % Year-end (statement of financial position) 1.24 1.30 4.79 % The movement in foreign exchange during the year ended 31 March 2020 has resulted in a £143 million increase in revenue, a £25 million increase in adjusted operating profit and a £21 million increase in operating profit. Analysis of the adjusted operating profit by segment for the year ended 31 March 2020 UK Electricity Transmission For the year ended 31 March 2020, revenue in the UK Electricity Transmission segment decreased by £351 million to £3,702 million, and adjusted operating profit increased by £305 million to £1,320 million. Revenue was significantly impacted by higher levels of pass-through costs related to balancing services in ESO, as a result of record levels of renewable generation in the year ended 31 March 2020. Excluding pass-through costs, net revenue was £220 million higher, principally reflecting timing over- recoveries (higher volumes and collection of prior period under-recoveries) along with higher revenues as a result of MOD impact from cyber and data centre allowances, offset by the true-up of totex allowances and RAV indexation from inflation. Regulated controllable costs were £26 million lower, reflecting inflation and higher IT costs more than offset by efficiency savings and the non-recurrence of ESO legal separation costs in the year ended 31 March 2019. Depreciation and amortisation was £24 million lower due to lower levels of asset commissioning and provision releases in the year ended 31 March 2020. Other costs were £34 million lower, principally relating to provision against income recognised on early termination of connections in the prior year.  Capital expenditure increased by £118 million compared with the year ended 31 March 2019 to £1,043 million reflecting increased activity on Hinkley Seabank, London Power Tunnels 2 and higher capex on the Dorset Visual Impact Provision project in the year ended 31 March 2020.  National Grid plc Annual Report and Accounts 2020/21 Additional Information Commentary on consolidated financial statements for the year ended 31 March 2020 261

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UK Gas Transmission  Revenue in the UK Gas Transmission segment increased by £31 million to £927 million, and adjusted operating profit increased by £45 million to £348 million.  After deducting pass-through costs, net revenue was £16 million higher than the yeard ended 31 March 2019, reflecting the prior year refund of revenues previously received in respect of the proposed Avonmouth pipeline project that is no longer required. Regulated controllable costs were £17 million lower than the year ended 31 March 2019, with efficiency savings and an environmental provision release offsetting the higher IT run-the-business costs and the impact of inflation. Pension costs were £8 million lower mainly related to the Guaranteed Minimum Pension equalisation ruling in the year ended 31 March 2019. Depreciation and amortisation costs were £10 million lower following a full year impact of asset lives changes made in the year ended 31 March 2019. Other operating costs were £6 million higher than the year ended 31 March 2019, as a result of the release of unused provisions in the prior year.  Capital expenditure decreased by £59 million to £249 million, as a result of lower expenditure on Feeder 9 project (Humber Estuary), lower investment in Peterborough and Huntingdon compressor project and reduced asset health investment.  US Regulated  Revenue in our US Regulated business reduced by £641 million to £9,205 million, and adjusted operating profit decreased by £327 million to £1,397 million.  The stronger US dollar decreased revenue and operating profit in the year ended 31 March 2020. Excluding the impact of foreign exchange rate movements, revenue decreased by £783 million. Of this decrease, £575 million was due to increases in commodity pass-through costs charged on to customers, and £465 million was due to year-on-year timing movements as a result of under-collection of revenues compared to our regulatory allowances in the year ended 31 March 2020 of £239 million (2019: £226 million over-recovery). Excluding pass-through costs and timing swings, net revenue increased by £257 million at constant currency, principally reflecting increased revenue allowances under rate plans in upstate and downstate New York, in Massachusetts and in Rhode Island.  We incurred £76 million of deferrable storm costs in the year ended 31 March 2020 through a number of storms that caused substantial damage to our electricity networks, but this fell below our $100 million threshold to qualify as ‘major’ and be excluded from our underlying results. This compared to £95 million in the year ended 31 March 2019, which as these this did exceed our threshold were stripped out of our underlying results in the previous year. Excluding the impact of foreign exchange movements, regulated controllable costs decreased by £51 million as a result of cost efficiencies (principally from the benefit of restructurings and contract management), partly offset by workload increases and inflation. Bad debt expense increased by £85 million at constant currency, driven by £117 million additional provision for receivables related to the impact of COVID-19. Depreciation and amortisation increased due to ongoing investment in our networks. Other operating costs were £61 million higher at constant currency, as a result of higher storms in underlying in the year ending 31 March 2020 partly offset by lower cost of removal.  Capital expenditure in the US Regulated business increased to £3,228 million in the year ending 31 March 2020, £578 million more than in the year ending 31 March 2019. At constant currency, this represented a £540 million increase in investment driven by higher investment in new and replacement gas mains and gas business enablement investment, the impact of the Massachusetts Gas labour dispute on capex in the year ending 31 March 2019 and increased investment in IT.  NGV and Other Revenue in NGV and Other reduced by £140 million to £736 million, and adjusted operating profit increased by £5 million to £242 million. This reflects lower revenues and profit on disposal of property sites in our UK commercial property business (due to significant sales made in the year ending 31 March 2019) and reduced income from support services supplied to Cadent compared to the prior year.  Capital expenditure in NGV and Other was £121 million higher than the year ending 31 March 2019 at £559 million, including the increased investment in a second French Interconnector, the North Sea Link interconnector to Norway and the Viking interconnector to Denmark. National Grid plc Annual Report and Accounts 2020/21 Additional Information Commentary on consolidated financial statements for the year ended 31 March 2019 continued 262

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Financial summary (unaudited)  The financial summary set out below has been derived from the audited consolidated financial statements of National Grid for the five financial years ended 31 March 2021. It should be read in conjunction with the consolidated financial statements and related notes, together with the Strategic Report. The information presented below is adjusted for the matters described in the footnotes below for the years ended 31 March 2021, 2020, 2019, 2018 and 2017 where relevant and has been prepared under IFRS as issued by the IASB and as adopted by the EU.  Summary income statement (£m)  2021 2020 2019 2018¹ 2017 Continuing operations Revenue 14,779 14,540 14,933 15,250 15,035 Operating profit 2,895 2,780 2,870 3,493 3,208 Profit before tax 2,083 1,754 1,841 2,660 2,184 Profit after tax from continuing operations 1,641 1,274 1,502 3,549 1,810 (Loss)/profit after tax from discontinued operations — (9) 12 2 663 Total profit for the year 1,641 1,265 1,514 3,551 7,794 Profit for the year attributable to equity shareholders 1,640 1,264 1,511 3,550 7,795 Earnings per share Basic – continuing operations (pence) 46.6 36.8 44.3 102.5 48.1 Diluted – continuing operations (pence) 46.3 36.6 44.1 102.1 47.9 Basic – total (pence) 46.6 36.5 44.6 102.6 207.1 Diluted – total (pence) 46.3 36.3 44.4 102.1 206.2 Weighted average number of shares – basic (millions) 3,523 3,461 3,386 3,461 3,763 Weighted average number of shares – diluted (millions) 3,540 3,478 3,401 3,476 3,780 Dividends per ordinary share Paid during the year (pence) 49.00 47.83 46.52 128.97 43.51 Approved or proposed during the year (pence)² 49.16 48.57 47.34 45.93 128.65 Paid during the year ($) 0.628 0.615 0.607 1.751 0.555 Approved or proposed during the year ($) 0.682 0.625 0.618 0.624 1.642 1. Items previously reported for 2018 have been re-presented to reflect our investment in Quadgas HoldCo Limited being presented as a discontinued operation in 2019. 2. Following the disposal of UK Gas Distribution, 2017 includes a special interim dividend of 84.375 pence per share that was paid on 2 June 2017. Summary statement of net assets (£m)  2021 2020¹ 2019¹ 2018 2017 Non-current assets 57,278 61,759 55,466 52,106 52,266 Current assets 9,938 5,801 7,946 6,681 13,574 Total assets 67,216 67,560 63,412 58,787 65,840 Current liabilities (9,368) (8,564) (9,129) (8,697) (10,511) Non-current liabilities (37,988) (39,203) (34,715) (31,242) (34,945) Total liabilities (47,356) (47,767) (43,844) (39,939) (45,456) Net assets 19,860 19,793 19,568 18,848 20,384 Total shareholders’ equity 19,839 19,771 19,548 18,832 20,368 1. Items previously reported for 2019 and 2020 have been revised as detailed in note 1F. National Grid plc Annual Report and Accounts 2020/21 Additional Information Five year summary financial information 263
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NGGTF-20210331_G173.JPG
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NGGTF-20210331_G174.JPG
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NGGTF-20210331_G176.JPG
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Further Information


Share ownership

At 3 June 2021, the latest practicable date, none of the directors had an individual beneficial interest amounting to greater than 1% of the Company’s shares.

Material interests in share

The following summarizes the significant changes in the percentage ownership held by our major shareholders during the past three years:

BlackRock, Inc. has held 7.29% of our outstanding share capital as at 31 March 2018, which percentage remained the same as at 31 March 2019 and as at 31 March 2020. As noted on page 242 of the 2020/2021 Annual Report and Accounts, we have been notified that BlackRock, Inc. held 7.21% of our outstanding share capital as at 31 March 2021, and such holdings decreased as at 31 May 2021 to 7.16% and remained the same as at 3 June 2021.

The Capital Group Companies, Inc. held 3.88% of our outstanding share capital as at each of 31 March 2018, 31 March 2019, 31 March 2020 and 31 March 2021, and such holdings remained unchanged as at 3 June 2021.

Competrol International Investments Limited held 3.72% of our outstanding share capital as at 31 March 2018, which percentage decreased to 3.69% of our outstanding share capital as at 31 March 2019 and to 2.97% as at 7 February 2020. Competrol International Investments Limited held 2.97% of our outstanding share capital as at 31 March 2021, and such holdings remained unchanged as at 3 June 2021.

Since 31 March 2021, we have not been notified of any other subsequent significant change in the percentage of shares held by the shareholders listed on page 242 of the 2020/2021 Annual Report and Accounts.
Material interest in American Depositary Shares

As at 3 June 2021, we had 12,103 registered holders of our American Depositary Shares (ADSs) representing ownership of 8.41% of our issued and outstanding share capital, excluding ordinary shares held in treasury. As at 3 June 2021, based on information available to us, we believe that approximately 8.45% of our issued and outstanding share capital (whether in the form of shares or ADSs), excluding shares held in treasury, was held beneficially in the United States.

Subsequent Events

Further to the announcement on 18 March 2021 of the WPD Acquisition, all regulatory approvals have now been received and completion of the transaction is expected to occur by on or about mid-June 2021.

Representations and Warranties in the Exhibits

Pursuant to the rules and regulations of the SEC, National Grid has filed certain agreements as exhibits to this Annual Report on Form 20-F. These agreements may contain representations and warranties by the parties to them. These representations and warranties have been made solely for the benefit of the other party or parties to such agreement and (i) may be intended not as statements of fact, but rather as a way of allocating the risk to one of the parties to such agreements if those statements turn out to be inaccurate, (ii) may have been qualified by disclosures that were made to such other party or parties and that either have been reflected in the company’s filings or are not required to be disclosed in those filings, (iii) may apply materiality standards different from what may be viewed as material to investors and (iv) were made only as of the date of such agreements or such other date or dates as may be specified in such agreements.

In accordance with the instructions to Item 2(b)(i) of the Instructions to Exhibits to the Form 20-F, National Grid agrees to furnish to the SEC, upon request, a copy of any instrument relating to long-term debt that does not exceed 10 percent of the total assets of National Grid and its subsidiaries on a consolidated basis.

Reports of Independent Registered Public Accounting Firms—Audit opinions for Form 20-F

In addition to the financial information set forth on the pages referenced under Item 18 in the Form 20-F Cross Reference Table on page vii, the reports of Deloitte LLP, Independent Registered Public Accounting Firm, are presented below:






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of National Grid plc.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of National Grid plc (the "Company") and subsidiaries (together the “Group”) as at 31 March 2021 and 2020, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended 31 March 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Group as at 31 March 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended 31 March 2021, in conformity with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Group's internal control over financial reporting as at 31 March 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated 19 May 2021, expressed an unqualified opinion on the Group's internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 37 to the financial statements, the Group changed its method of accounting for leases in the year ended 31 March 2020 due to the adoption of IFRS 16, Leases.
Basis for Opinion
These financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on the Group's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
The impact of climate change on property, plant and equipment - Refer to Notes 1E and 13 to the financial statements
Critical Audit Matter Description
The UK government and certain US states in which the Group operates have enacted legislation and established targets in respect of net zero carbon emissions by 2050. Accordingly climate change represents a strategic challenge for the Group, which has also set targets for reducing direct greenhouse gas emissions by the same date.
Natural gas, when burned, emits carbon dioxide and is considered a greenhouse gas. Therefore, the strategic challenge relates to the potential future use of the Group’s assets used to facilitate gas transmission services in the UK and gas distribution services in the US in the period approaching 2050 and beyond. The remaining useful economic life of the Group’s gas assets is up to 50 years in the UK and 80 in the US, extending well beyond the 2050 “net zero” commitment date. As described in note 13 to the financial statements, the impact of changing the useful economic lives of all of the Group’s gas assets, such that they would be fully depreciated by 2050, would be an increase in the annual depreciation expense of £195 million, and such that they would be fully depreciated by 2060, would be an increase in the annual depreciation expense of £82 million.
As the continued use of natural gas as a primary energy source beyond 2050 appears to be in conflict with net zero targets and the impact of shortening the useful lives of the gas assets to 2050 has a material impact on annual depreciation, we identified a ‘higher’ risk related to the financial statement impact of those commitments, specifically pinpointed to management’s judgement in determining the useful lives of gas assets in the context of the net zero commitments.
As described in note 13 to the financial statements management performed a detailed assessment of the potential uses for the Group’s gas assets as part of their consideration around whether developments in the UK and US towards binding carbon reduction targets should trigger any changes to National Grid’s estimates, judgements or disclosures, especially regarding gas



asset lives. Management’s assessment included an overview of the legislative changes in the UK and US, and an evaluation of the possible future use of National Grid’s networks in a net zero carbon energy system.
Management’s best estimate of the useful economic lives of US gas assets, across all states in which it operates, is based on the depreciable life identified through depreciation studies for each asset and are approved by the respective state regulator. Accordingly, in the US, the IFRS asset depreciable lives are identical to those agreed by the Group’s regulators for regulatory purposes. Management concluded it is probable that there will be a role for its US gas networks post 2050 under a range of possible scenarios, and there is nothing at present to suggest that asset lives should be shortened at this point.
In the UK, National Grid Gas Transmission (NGGT) owns and operates the National Transmission System (NTS). Pipelines represent the vast majority of the value that will be undepreciated by 2050. Having analysed the potential decarbonisation pathways, management has identified numerous potential uses for the Group’s UK gas pipeline assets in a net zero energy system including for the continued transmission of natural gas as a back-up fuel or in order for the transmission of hydrogen or other low or zero carbon gases.
Management concluded that the National Transmission System (NTS) pipeline assets in the UK will continue to have an economic use until 2070.
Management operated an entity level control to assess the accounting and disclosure impacts associated with the transitional and reputational risks of climate change to ensure these are considered and reflected appropriately in external reporting.
Management determined that disclosure of a key judgement in relation to the potential future use of the Group’s gas assets post-2050 and disclosure of the gas asset lives as a key estimate (note 1E to the financial statements), with appropriate sensitivity analysis (note 13 to the financial statements), was appropriate.
How the Critical Audit Matter Was Addressed in the Audit
We tested management’s internal control over the accounting for and disclosure of the potential impacts associated with the energy transition and climate change.
We challenged management’s judgement that the useful lives of the Group’s gas assets extend beyond 2050 in light of the different goals, commitments and legislation relating to net zero in the UK and the US states in which the Group operates by:
assessing potential strategic pathways to achieve net zero targets;
obtaining and reviewing government plans in the US and UK for achieving net zero which we compared to the potential strategic pathways;
evaluating information from the Group’s regulators, including price controls in the UK and rate cases in the US, to consider whether they presented any contradictory evidence;
performing an assessment of the likelihood of occurrence of alternative scenarios for achieving net zero targets;
considering the potential for re-purposing the Group’s gas networks for alternative uses, and in particular for transporting hydrogen; and
reading a number of external reports including: The Sixth Carbon Budget, produced by the Committee on Climate Change; the UK’s Climate Change White Paper, produced by the Department for Business, Energy & Industrial Strategy; and searching for contradictory evidence in respect of management’s judgements.
We utilised our sustainability specialists to review management’s key assumptions and to challenge the viability of some of the technological advances presented within the strategic pathways. We also consulted with Deloitte specialists in other countries regarding the suitability of existing gas infrastructure for transporting hydrogen.
We assessed the disclosures set out in note 1 to the financial statements and the sensitivity analysis set out in note 13 to the financial statements regarding the carrying value of the useful economic lives of the Group’s gas assets.
/s/ Deloitte LLP
London, United Kingdom
19 May 2021


The first accounting period we audited was 31 March 2018. In 2017, we began preparing for audit firm transition.










REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of National Grid plc

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of National Grid plc (the “Company”) and subsidiaries (the “Group”) as of 31 March 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of 31 March 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended 31 March 2021, of the Group and our report dated 19 May 2021, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Group’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Internal control over financial reporting section appearing on page 236 of the Additional Information section. Our responsibility is to express an opinion on the Group’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte LLP
London, United Kingdom
19 May 2021








Description
1.1

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8
List of subsidiaries - The list of the Company’s significant subsidiaries as of 31 March 2021 is incorporated by reference to “Financial Statements—Notes to the consolidated financial statements—34. Subsidiary undertakings, joint venture and associates—Subsidiary undertakings” on pages 204-208 included in the Annual Report on Form 20-F for the financial year ended 31 March 2021. This list excludes subsidiaries that do not, in aggregate, constitute a “significant subsidiary” as defined in Rule 1-02(w) of Regulation S-X as at 31 March 2021.

Filed herewith

Filed herewith



Filed herewith



Filed herewith


 

Filed herewith
Filed herewith







The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorised the undersigned to sign this annual report on its behalf.

NATIONAL GRID PLC

By: /s/ Andrew Agg
Andrew Agg
Chief Financial Officer

London, England
8 June 2021



EXECUTION VERSION Dated 7 August 2020 NATIONAL GRID plc and NATIONAL GRID ELECTRICITY TRANSMISSION plc as Issuers and THE LAW DEBENTURE TRUST CORPORATION p.l.c. as Trustee AMENDED AND RESTATED TRUST DEED relating to National Grid plc and National Grid Electricity Transmission plc Euro 15,000,000,000 Euro Medium Term Note Programme arranged by HSBC Bank plc Ref: EXM/RAR/BB Linklaters LLP Exhibit 2(b).12


 
A41941146 i Table of Contents Contents Page 1 Interpretation ......................................................................................................................... 1 2 Issue of Instruments and Covenant to Pay ........................................................................... 7 3 Form of the Instruments ........................................................................................................ 9 4 Stamp Duties and Taxes ..................................................................................................... 10 5 Application of Moneys Received by the Trustee ................................................................. 10 6 Covenants ............................................................................................................................11 7 Remuneration and Indemnification of the Trustee .............................................................. 14 8 Provisions Supplemental to the Trustee Acts ...................................................................... 16 9 Disapplication and Trustee Liability ..................................................................................... 19 10 Waiver and Proof of Default ................................................................................................ 20 11 Trustee not Precluded from Entering into Contracts ........................................................... 20 12 Modification and Substitution .............................................................................................. 20 13 Appointment, Retirement and Removal of the Trustee ....................................................... 22 14 Instruments held in Clearing Systems and Couponholders ................................................ 23 15 Currency Indemnity ............................................................................................................. 24 16 Enforcement ........................................................................................................................ 25 17 Communications ................................................................................................................. 26 18 Governing Law and Jurisdiction .......................................................................................... 26 Schedule 1 Part A Form of CGN Temporary Global Instrument ...................................................... 28 Schedule 1 Part B Form of CGN Permanent Global Instruments ................................................... 35 Schedule 1 Part C Form of NGN Temporary Global Instrument ..................................................... 55 Schedule 1 Part D Form of NGN Permanent Global Instrument .................................................... 61 Schedule 2 Part A Form of Definitive Instrument ............................................................................ 68


 
A41941146 ii Schedule 2 Part B Terms and Conditions of the Instruments .......................................................... 71 Schedule 2 Part C Form of Coupon ...............................................................................................118 Schedule 2 Part D Form of Talon .................................................................................................. 120 Schedule 3 Provisions for Meetings of Instrumentholders ............................................................ 122


 
A41941146 1 This Amended and Restated Trust Deed is made on 7 August 2020 between: (1) NATIONAL GRID plc (“National Grid”) AND NATIONAL GRID ELECTRICITY TRANSMISSION plc (“NGET”), (each an “Issuer” and together, the “Issuers”); and (2) THE LAW DEBENTURE TRUST CORPORATION p.l.c., (the “Trustee”, which expression, where the meaning so admits, includes any other trustee for the time being of this Trust Deed). Whereas: (A) The Issuers propose to issue from time to time bearer debt instruments and Australian Domestic Instruments (as defined below) (collectively, the “Instruments”) in an aggregate nominal amount outstanding at any one time, including Instruments previously issued under the Programme, not exceeding the Programme Limit in accordance with the Dealer Agreement (the “Programme”) and to be constituted by this Trust Deed (other than the Australian Domestic Instruments, which are to be constituted by the Deed Poll). (B) The Trustee has agreed to act as trustee of this Trust Deed on the following terms and conditions. (C) For the purposes of the Programme, the Issuers and the Trustee entered into an amended and restated trust deed dated 30 July 2019 (the “Original Trust Deed”) and have agreed to make certain amendments to the Original Trust Deed. This Deed witnesses and it is declared as follows: 1 Interpretation 1.1 Definitions In this Trust Deed: “Agency Agreement” means the amended and restated agency agreement (as amended, supplemented and/or restated from time to time) relating to the Programme dated 30 July 2019, between the Issuers, the Trustee, The Bank of New York Mellon as Issuing and Paying Agent and the other agent(s) mentioned in it; “Agents” has the meaning given to it in the Agency Agreement; “Australian Domestic Instruments” means Instruments in registered uncertificated (or inscribed) form, constituted by the Deed Poll and issued by an Issuer in the Australian domestic capital markets; “Australian Issuing and Paying Agent” means, in relation to all or any series of Australian Domestic Instruments, the person named as such in the Conditions or any Successor Australian Issuing and Paying Agent in each case at its specified office; “Australian Registrar” means, in relation to all or any series of Australian Domestic Instruments, BTA Institutional Services Australia Limited ACN 002 916 393 or, if applicable, any Successor Australian Registrar; “Australian Agency and Registry Agreement” means the agreement, as amended and/or supplemented from time to time, dated 10 September 2012 between the Issuers and the Australian Registrar pursuant to which the Issuers have appointed the Australian Registrar, and any other agreement for the time being in force appointing further or other Australian registrars, or in connection with its or their duties, the terms of which have


 
A41941146 2 previously been approved in writing by the Trustee, together with any agreement for the time being in force amending, modifying or replacing with the prior written approval of the Trustee any of the aforesaid agreements; “Calculation Agent” means any person named as such in the Conditions or any Successor Calculation Agent; “Canadian Paying Agent” means BNY Trust Company of Canada as Canadian Paying Agent under the Agency Agreement (or such other Canadian Paying Agent as may be appointed from time to time under the Agency Agreement); “CGN” means a temporary Global Instrument in the form set out in Part A of Schedule 1 or a permanent Global Instrument in the form set out in Part B of Schedule 1; “Common Safekeeper” means, in relation to a Series, the common safekeeper for Euroclear and Clearstream, Luxembourg appointed in respect of such Instruments. “Clearstream, Luxembourg” means Clearstream Banking S.A.; “Conditions” means in respect of the Instruments of each Series the terms and conditions applicable to them which shall be substantially in the form set out in Part B of Schedule 2 (Terms and Conditions of the Instruments) as modified, with respect to any Instruments represented by a Global Instrument, by the provisions of such Global Instrument, and shall incorporate any additional provisions forming part of such terms and conditions set out in Part A of the Final Terms relating to the Instruments of that Series and shall be endorsed on the Definitive Instruments subject to amendment and completion as referred to in the first paragraph of Part A of Schedule 2 (Form of Definitive Instrument) and any reference to a particularly numbered Condition shall be construed accordingly; “Contractual Currency” means, in relation to any payment obligation of any Instrument, the currency in which that payment obligation is expressed and, in relation to Clause 8 (Provisions supplemental to the Trustee Acts), pounds sterling or such other currency as may be agreed between the relevant Issuer and the Trustee from time to time; “Coupons” means the coupons relating to interest bearing Instruments or, as the context may require, a specific number of them and includes any replacement Coupons issued pursuant to the Conditions; “Dealer Agreement” means the amended and restated dealer agreement (as amended, supplemented and/or restated from time to time) relating to the Programme dated 7 August 2020 between the Issuers, the Arranger and the dealers named in it; “Deed Poll” means the deed poll dated 10 September 2012 made by the Issuers and by which the Australian Domestic Instruments are constituted; “Definitive Instrument” means an Instrument in definitive form having, where appropriate, Coupons and/or a Talon attached on issue and, unless the context requires otherwise, includes any replacement Instrument issued pursuant to the Conditions; “Effective Date” means the date on which the Arranger has received, on behalf of the Dealers, each of the condition precedent documents listed in Schedule 2 to the Dealer Agreement and that each is, in form and substance, satisfactory to it; “Euroclear” means Euroclear Bank SA/NV;


 
A41941146 3 “Event of Default” means an event described in Condition 9 and that, if so required by that Condition, has been certified by the Trustee to be, in its opinion, materially prejudicial to the interests of the Instrumentholders; “Extraordinary Resolution” has the meaning set out in Schedule 3 (Provisions for Meetings of Instrumentholders); “Final Terms” means, in relation to a Tranche, the final terms document substantially in the form set out in the Prospectus which will be completed at or around the time of the agreement to issue each Tranche of Instruments and which will constitute final terms for the purposes of the Prospectus Regulation. For avoidance of doubt, in the case of Instruments issued under the Programme which are not admitted to trading on the London Stock Exchange’s regulated market, all references to the Final Terms shall be construed as references to the pricing supplement substantially in the form set forth in the Prospectus; “Global Instrument” means a temporary Global Instrument and/or, as the context may require, a permanent Global Instrument, a CGN or a NGN, as the context may require; “holder” in relation to an Instrument, Coupon or Talon, and “Couponholder” and “Instrumentholder” have the meanings given to them in the Conditions; “Instruments” means the bearer debt instruments and the Australian Domestic Instruments to be issued by each of the Issuers pursuant to the Dealer Agreement, constituted by this Trust Deed, or in the case of the Australian Domestic Instruments, by the Deed Poll, and for the time being outstanding or, as a specific context may require, a specific number of them. For the avoidance of doubt, the provisions of this Trust Deed relating to Global Instruments, Coupons and Talons do not apply to Australian Domestic Instruments; “Issuing and Paying Agent” means the person named as such in the Conditions or any Successor Issuing and Paying Agent in each case at its specified office; “month” means a calendar month; “NGN” means a temporary Global Instrument in the form set out in Part C of Schedule 1 or a permanent Global Instrument in the form set out in Part D of Schedule 1; “outstanding” means, in relation to the Instruments, all the Instruments issued except (a) those that have been redeemed in accordance with the Conditions, (b) those in respect of which the date for redemption has occurred and the redemption moneys (including all interest accrued on such Instruments to the date for such redemption and any interest payable after such date) have been duly paid to the Trustee or to the Issuing and Paying Agent as provided in Clause 2 (Issue of Instruments and Covenant to Pay) and remain available for payment against presentation and surrender of Instruments and/or Coupons, as the case may be, (c) those which have become void or in respect of which claims have become prescribed, (d) those which have been purchased and cancelled as provided in the Conditions, (e) those mutilated or defaced Instruments which have been surrendered in exchange for replacement Instruments, (f) (for the purpose only of determining how many Instruments are outstanding and without prejudice to their status for any other purpose) those Instruments alleged to have been lost, stolen or destroyed and in respect of which replacement Instruments have been issued, and (g) any temporary Global Instrument to the extent that it shall have been exchanged for a permanent Global Instrument and any Global Instrument to the extent that it shall have been exchanged for one or more Definitive Instruments, in either case pursuant to its provisions provided that for the


 
A41941146 4 purposes of (i) ascertaining the right to attend and vote at any meeting of the Instrumentholders, (ii) the determination of how many Instruments are outstanding for the purposes of Conditions 9 and 11 and Schedule 3 (Provisions for Meetings of Instrumentholders), (iii) the exercise of any discretion, power or authority that the Trustee is required, expressly or impliedly, to exercise in or by reference to the interests of the Instrumentholders and (iv) the certification (where relevant) by the Trustee as to whether a Potential Event of Default is in its opinion materially prejudicial to the interests of the Instrumentholders, those Instruments which are beneficially held by or on behalf of the relevant Issuer or any of its subsidiary undertakings and not cancelled shall (unless no longer so held) be deemed not to remain outstanding. Save for the purposes of the proviso herein, in the case of each NGN, the Trustee shall rely on the records of Euroclear and Clearstream, Luxembourg in relation to any determination of the nominal amount outstanding of each NGN. In relation to Australian Domestic Instruments, the definition of “Outstanding” in the schedule to the Deed Poll shall apply in lieu of the foregoing definition; “Paying Agents” means the persons (including the Issuing and Paying Agent) referred to as such in the Conditions or any Successor Paying Agents in each case at their respective specified offices; “permanent Global Instrument” means a Global Instrument representing Instruments of one or more Tranches of the same Series, either on issue or upon exchange of a temporary Global Instrument, or part of it, and which shall be substantially in the form set out in Part B or Part D of Schedule 1, as the case may be (Form of Permanent Global Instrument); “Potential Event of Default” means an event or circumstance that could with the giving of notice, lapse of time, issue of a certificate and/or fulfilment of any other requirement provided for in Condition 9 become an Event of Default; “Programme Limit” means the maximum aggregate nominal amount of Instruments which may be issued and outstanding at any time under the Programme, as such limit may be increased pursuant to the Dealer Agreement; “Procedures Memorandum” means administrative procedures and guidelines in respect of non-syndicated issues relating to the terms of Instruments which may be issued and the settlement of issues of Instruments as shall be agreed upon from time to time by the relevant Issuer, the Trustee, the Permanent Dealers and the Issuing and Paying Agent and which are set out in Schedule 5 (Procedures Memorandum) of the Agency Agreement, where “Permanent Dealers” means all Dealers other than those appointed as such solely in respect of one or more specified Tranches; "Prospectus" means the prospectus prepared in connection with the Programme and constituting (i) a base prospectus in respect of each Issuer for the purposes of the Prospectus Regulation and (ii) listing particulars in respect of each Issuer for the purposes of Listing Rule 2.2.11 of the Listing Rules of the Financial Conduct Authority, as revised, supplemented or amended from time to time by the Issuers including any documents which are from time to time incorporated in the Prospectus by reference except that in relation to each Tranche of Instruments only the applicable Final Terms shall be deemed to be included in the Prospectus; “Prospectus Regulation” means Regulation 2017/1129;


 
A41941146 5 “Redemption Amount” means the Final Redemption Amount, Early Redemption Amount or Optional Redemption Amount, as the case may be, all as defined in the Conditions; “Series” means a series of Instruments comprising one or more Tranches, whether or not issued on the same date, that (except in respect of the first payment of interest and their issue price) have identical terms on issue and are expressed to have the same series number; “specified office” means, in relation to a Paying Agent, the office identified with its name at the end of the Conditions or any other office approved by the Trustee and notified to Instrumentholders pursuant to Clause 6.6 (Notices to Instrumentholders); “Successor” means, in relation to an Agent, the Australian Issuing and Paying Agent or the Australian Registrar, such other or further person as may from time to time be appointed by either of the Issuers as such Agent, Australian Issuing and Paying Agent or Australian Registrar, as the case may be, with the written approval of, and on terms approved in writing by, the Trustee and notice of whose appointment is given to Instrumentholders pursuant to Clause 6.6 (Notices to Instrumentholders); “successor in business” means (a) an entity which acquires all or substantially all of the undertaking and/or assets of either Issuer or of a successor in business of either Issuer; or (b) any entity into which any of the previously referred to entity is amalgamated, merged or reconstructed and is itself not the continuing company; “Talons” mean talons for further Coupons or, as the context may require, a specific number of them and includes any replacement Talons issued pursuant to the Conditions; “TARGET System” means the Trans-European Automated Real-Time Gross Settlement Express Transfer (known as TARGET2) System which was launched on 19 November 2007 or any successor thereto; “temporary Global Instrument” means a Global Instrument representing Instruments of one or more Tranches of the same Series on issue and which shall be substantially in the form set out in Part A or Part C of Schedule 1, as the case may be (Form of Temporary Global Instrument); “Tranche” means, in relation to a Series, those Instruments of that Series which are issued on the same date at the same issue price and in respect of which the first payment of interest is identical; “trust corporation” means a trust corporation (as defined in the Law of Property Act 1925) or a corporation entitled to act as a trustee pursuant to applicable foreign legislation relating to trustees; and “Trustee Acts” means both the Trustee Act 1925 and the Trustee Act 2000 of England and Wales. 1.2 Construction of Certain References Unless the context otherwise requires, all references in this Trust Deed to: 1.2.1 the records of Euroclear and Clearstream, Luxembourg shall be to the records that each of Euroclear and Clearstream, Luxembourg holds for its customers which reflect the amount of such customers’ interests in the Instruments;


 
A41941146 6 1.2.2 costs, charges, remuneration or expenses include any value added, turnover or similar tax charged in respect of them; 1.2.3 an action, remedy or method of judicial proceedings for the enforcement of creditors’ rights include references to the action, remedy or method of judicial proceedings in jurisdictions other than England as shall most nearly approximate to it; 1.2.4 the Trustee’s approval or consent shall, unless expressed otherwise, be subject to the requirement that any such approval or consent shall not be unreasonably withheld or delayed, such reasonableness to be determined by reference to acting in the interests of Instrumentholders as a whole; and 1.2.5 the appointment or employment of or delegation to any person by the Trustee shall be deemed to include a reference to, if in the opinion of the Trustee it is reasonably practicable, the prior notification of and consultation with the Issuers and, in any event, the notification forthwith of such appointment, employment or delegation, as the case may be. 1.3 Amendment and Restatement The Original Trust Deed shall be amended and restated on the terms of this Trust Deed, such amendment and restatement to take effect from the Effective Date. Any Instruments issued on or after the Effective Date shall be issued pursuant to this Trust Deed. This does not affect any Instruments issued prior to the Effective Date or any Instruments issued on or after the Effective Date so as to be consolidated and form a single Series with the Instruments of any Series issued prior to the Effective Date. Subject to such amendment and restatement, the Original Trust Deed shall continue in full force and effect. 1.4 Headings Headings shall be ignored in construing this Trust Deed. 1.5 Contracts References in this Amended and Restated Trust Deed to this Trust Deed or any other document are to this Amended and Restated Trust Deed or those documents as amended, supplemented or replaced from time to time in relation to the Programme and include any document that amends, supplements or replaces them. 1.6 Schedules The Schedules are part of this Trust Deed and have effect accordingly. 1.7 Alternative Clearing System References in this Trust Deed to Euroclear and/or Clearstream, Luxembourg shall, wherever the context so permits, be deemed to include reference to any additional or alternative clearing system approved by the relevant Issuer, the Trustee and the Issuing and Paying Agent. In the case of NGNs, such alternative clearing system must also be authorised to hold Instruments as eligible collateral for Eurosystem monetary policy and intra-day credit operations.


 
A41941146 7 1.8 Other Terms Other terms defined in the Conditions have the same meaning in this Trust Deed. 1.9 Contracts (Rights of Third Parties) Act 1999 A person who is not a party to this Trust Deed has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Trust Deed. 2 Issue of Instruments and Covenant to Pay 2.1 Issue of Instruments Each of the Issuers may from time to time issue Instruments in Tranches of one or more Series on a continuous basis with no minimum issue size in accordance with the Dealer Agreement. Before issuing any Tranche and not later than, (i) in case of Instruments other than Australian Domestic Instruments, 3.00 p.m. (London time) on the second business day in London which for this purpose shall be a day on which commercial banks are open for general business in London preceding each proposed issue date; or (ii) in case of Australian Domestic Instruments, 3.00 p.m. (Sydney time) on the second business day in Sydney which for this purpose shall be a day on which commercial banks are open for general business in Sydney preceding each proposed issue date, the relevant Issuer shall give written notice or procure that it is given to the Trustee of the proposed issue of such Tranche, specifying the details to be included in the relevant Final Terms. Upon the issue by either of the Issuers of any Instruments expressed to be constituted by this Trust Deed, such Instruments shall forthwith be constituted by this Trust Deed without any further formality and irrespective of whether or not the issue of such debt securities contravenes any covenant or other restriction in this Trust Deed or the Programme Limit. For the avoidance of doubt, the parties acknowledge that the Australian Domestic Instruments are not constituted by this Trust Deed. 2.2 Separate Series The provisions of Clauses 2.3 (Covenant to Pay), 2.4 (Discharge), 2.5 (Payment after a Default) and 2.6 (Rate of Interest after a Default) and of Clauses 3 (Form of the Instruments) to 15 (Currency Indemnity) and Schedule 3 (Provisions for Meetings of Instrumentholders) (all inclusive) shall apply mutatis mutandis separately and independently to the Instruments of each Series and in such Clauses and Schedule the expressions “Instrumentholders”, “Coupons”, “Couponholders” and “Talons”, together with all other terms that relate to Instruments or their Conditions, shall be construed as referring to those of the particular Series in question and not of all Series unless expressly so provided, so that each Series shall be constituted by a separate trust pursuant to Clause 2.3 (Covenant to Pay) and that, unless expressly provided, events affecting one Series shall not affect any other. 2.3 Covenant to Pay The relevant Issuer shall on any date when any Instruments become due to be redeemed, in whole or in part, unconditionally pay to or to the order of the Trustee in the Contractual Currency, in the case of any Contractual Currency other than Euro, in the principal financial centre for the Contractual Currency and, in the case of Euro, in a city in which banks have access to the TARGET System, in same day funds the Redemption Amount of the Instruments becoming due for redemption on that date together with any applicable


 
A41941146 8 premium and shall (subject to the Conditions and other than in respect of Zero Coupon Instruments) until such payment (both before and after judgment) unconditionally so pay to or to the order of the Trustee interest in respect of the nominal amount of the Instruments outstanding as set out in the Conditions (subject to Clause 2.6 (Rate of Interest after a Default)) provided that (a) subject to the provisions of Clause 2.5, payment of any sum due in respect of the Instruments made to the Issuing and Paying Agent or Canadian Paying Agent, as applicable, as provided in the Agency Agreement shall, to that extent, satisfy such obligation except to the extent that there is failure in its subsequent payment to the relevant Instrumentholders or Couponholders under the Conditions and (b) a payment made after the due date or as a result of the Instrument becoming repayable following an Event of Default shall be deemed to have been made when the full amount due has been received by the Issuing and Paying Agent or Canadian Paying Agent, as applicable, or the Trustee and notice to that effect has been given to the Instrumentholders (if required under Clause 6.8 (Notice of Late Payment)), except to the extent that there is failure in its subsequent payment to the relevant Instrumentholders or Couponholders under the Conditions. This covenant shall only have effect each time Instruments are issued and outstanding, when the Trustee shall hold the benefit of this covenant on trust for the Instrumentholders and Couponholders of the relevant Series. For the avoidance of doubt, the parties acknowledge that this Clause does not apply to Australian Domestic Instruments. 2.4 Discharge Subject to Clause 2.5 (Payment after a Default), any payment to be made in respect of the Instruments or the Coupons by the relevant Issuer or the Trustee may be made as provided in the Conditions and any payment so made shall (subject to Clause 2.5 (Payment after a Default)) to that extent be a good discharge to such Issuer or the Trustee, as the case may be (including, in the case of Instruments represented by a NGN, whether or not the corresponding entries have been made in the records of Euroclear and Clearstream, Luxembourg), except to the extent that there is failure in its subsequent payment to the relevant Instrumentholders or Couponholders under the Conditions. 2.5 Payment after a Default At any time after an Event of Default or a Potential Event of Default has occurred the Trustee may: 2.5.1 by notice in writing to the relevant Issuer and the Paying Agents, require the Paying Agents, until notified by the Trustee to the contrary, so far as permitted by applicable law: (i) to act as Paying Agents of the Trustee under this Trust Deed and the Instruments (other than the Australian Domestic Instruments) on the terms of the Agency Agreement (with consequential amendments as necessary and except that the Trustee’s liability for the indemnification, remuneration and expenses of the Paying Agents shall be limited to the amounts for the time being held by the Trustee in respect of the Instruments (other than the Australian Domestic Instruments) on the terms of this Trust Deed) and thereafter to hold all Instruments (other than the Australian Domestic Instruments), Coupons and Talons and all moneys, documents and records held by them in respect of Instruments (other than the Australian Domestic Instruments), Coupons and Talons to the order of the Trustee; or


 
A41941146 9 (ii) to deliver all Instruments (other than the Australian Domestic Instruments), Coupons and Talons and all moneys, documents and records held by them in respect of the Instruments (other than the Australian Domestic Instruments), Coupons and Talons to the Trustee or as the Trustee directs in such notice; and 2.5.2 2.5.2 by notice in writing to the relevant Issuer, require such Issuer to make all subsequent payments in respect of the Instruments (other than the Australian Domestic Instruments), Coupons and Talons to or to the order of the Trustee and not to the Issuing and Paying Agent or Canadian Paying Agent, as applicable, and with effect from the receipt of any such notice by such Issuer, until such notice is withdrawn, the first proviso to Clause 2.3 (Covenant to Pay) shall cease to have effect. 2.6 Rate of Interest after a Default If the Instruments bear interest at a floating or other variable rate and they become immediately payable under the Conditions following an Event of Default, the rate of interest payable in respect of them shall continue to be calculated by the Calculation Agent in accordance with the Conditions (with consequential amendments as necessary) except that the rates of interest need not be notified to Instrumentholders. The first period in respect of which interest shall be so calculable shall commence on the expiry of the Interest Period during which the Instruments become so repayable. 3 Form of the Instruments 3.1 The Global Instruments The Instruments (other than the Australian Domestic Instruments) shall initially be represented by a temporary Global Instrument or a permanent Global Instrument in the nominal amount of the Tranche being issued. Interests in a temporary Global Instrument shall be exchangeable for Definitive Instruments or interests in a permanent Global Instrument as set out in each temporary Global Instrument. Interests in a permanent Global Instrument shall be exchangeable for Definitive Instruments as set out in such permanent Global Instrument. 3.2 The Definitive Instruments The Definitive Instruments, Coupons and Talons shall be security printed in accordance with applicable legal and stock exchange requirements substantially in the forms set out in Schedule 2. The Instruments shall be endorsed with the Conditions. 3.3 Signature The Instruments (other than the Australian Domestic Instruments and Instruments settling in CDS Clearing and Depository Services Inc. (“CDS”)), Coupons and Talons shall be signed manually or in facsimile by an authorised signatory of the relevant Issuer and the Instruments (other than the Australian Domestic Instruments) shall be authenticated by or on behalf of the Issuing and Paying Agent. The relevant Issuer may use the facsimile signature of any person who at the date of this Trust Deed is such an authorised signatory even if at the time of issue of any Instruments, Coupons or Talons he no longer holds that office. In the case of a Global Instrument which is a NGN, the Issuing and Paying Agent shall also instruct the Common Safekeeper to effectuate the same. Instruments settling in


 
A41941146 10 CDS will be signed manually by an authorised signatory of the relevant Issuer (unless CDS agrees that it will accept a facsimile or electronic signature) and the Instruments shall be authenticated manually by or on behalf of the Canadian Paying Agent (unless CDS agrees that it will accept a facsimile or electronic authentication signature). The Australian Domestic Instruments will be inscribed in a register maintained by the Australian Registrar in accordance with the Australian Agency and Registry Agreement. Instruments, Coupons and Talons so executed and authenticated (and effectuated, if applicable) shall be binding and valid obligations of the relevant Issuer. Execution in facsimile of any Instruments and any photostatic copying or other duplication of any Global Instruments (in unauthenticated form, but executed manually on behalf of the relevant Issuer as stated above) shall be binding upon such Issuer in the same manner as if such Instruments were signed manually by such signatories. 3.4 Title The holder of any Instrument, Coupon or Talon shall (save as otherwise required by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it, any writing on it or its theft or loss) and no person will be liable for so treating the holder. 4 Stamp Duties and Taxes 4.1 Stamp Duties Each Issuer shall pay any stamp, issue, documentary or other taxes and duties, payable in the United Kingdom or Australia, in respect of the creation, issue and offering of the Instruments issued by it and the related Coupons and Talons and the execution or delivery of this Trust Deed. Each Issuer shall also indemnify the Trustee, the relevant Instrumentholders and the Couponholders from and against all stamp, issue, documentary or other taxes paid by any of them in any jurisdiction in connection with any action taken by or on behalf of the Trustee or, as the case may be (where entitled to do so), the relevant Instrumentholders or the Couponholders to enforce the relevant Issuer’s obligations under this Trust Deed or the relevant Instruments, Coupons or Talons. 4.2 Change of Taxing Jurisdiction If an Issuer becomes subject generally to the taxing jurisdiction of a territory or a taxing authority of or in that territory with power to tax other than or in addition to the United Kingdom or any such authority of or in such territory then such Issuer shall (unless the Trustee otherwise agrees) give the Trustee an undertaking satisfactory to the Trustee in terms corresponding to the terms of Condition 7 with the substitution for, or (as the case may require) the addition to, the references in that Condition to the United Kingdom of references to that other or additional territory or authority to whose taxing jurisdiction such Issuer has become so subject. In such event this Trust Deed and the relevant Instruments, Coupons and Talons shall be read accordingly. 5 Application of Moneys Received by the Trustee 5.1 Declaration of Trust All moneys received by the Trustee in respect of the Instruments or amounts payable under this Trust Deed shall, despite any appropriation of all or part of them by the relevant


 
A41941146 11 Issuer, be held by the Trustee on trust to apply them (subject to Clause 5.2 (Accumulation)): 5.1.1 first, in payment of all costs, charges, expenses and liabilities properly incurred by the Trustee (including remuneration payable to it) in carrying out its functions under this Trust Deed; 5.1.2 secondly, in payment of any amounts owing in respect of the relevant Instruments or Coupons pari passu and rateably; and 5.1.3 thirdly, in payment of any balance to such Issuer for itself. If the Trustee holds any moneys which represent principal, premium or interest in respect of Instruments or Coupons which have become void in accordance with the Conditions the Trustee shall hold them on these trusts. 5.2 Accumulation If the amount of the moneys at any time available for payment in respect of the Instruments under Clause 5.1 (Declaration of Trust) is less than 10 per cent. of the nominal amount of the Instruments then outstanding, the Trustee may, at its discretion, invest such moneys as provided in Clause 5.3 (Investment). The Trustee may retain such investments and accumulate the resulting income until the investments and the accumulations, together with any other funds for the time being under its control and available for such payment, amount to at least 10 per cent. of the nominal amount of the Instruments then outstanding and then such investments, accumulations and funds (after deduction of, or provision for, any applicable taxes) shall be applied as specified in Clause 5.1 (Declaration of Trust). 5.3 Investment Moneys held by the Trustee may be invested in its name or under its control in any investments or other assets anywhere, whether or not they produce income, or deposited in its name or under its control at such bank or other financial institution in such currency as the Trustee may, in its absolute discretion, think fit. If that bank or institution is the Trustee or a subsidiary, parent or associated undertaking of the Trustee, it need only account for an amount of interest equal to the standard amount of interest payable by it on such a deposit to an independent customer. The Trustee may at any time vary or transpose any such investments or assets or convert any moneys so deposited into any other currency, and shall not be responsible for any resulting loss, whether by depreciation in value, change in exchange rates or otherwise. 6 Covenants So long as any Instrument issued by it is outstanding, each of the Issuers shall: 6.1 Books of Account Keep, and procure that each of its subsidiary undertakings keeps, proper books of account and, at any time after an Event of Default has occurred or if the Trustee reasonably believes that such an event has occurred, so far as permitted by applicable law, allow, and procure that each such subsidiary undertaking shall allow, the Trustee and anyone appointed by it to whom the relevant Issuer and/or the relevant subsidiary undertaking has no reasonable objection, access to its books of account at all reasonable times during normal business hours.


 
A41941146 12 6.2 Notice of Events of Default Notify the Trustee in writing immediately on becoming aware of the occurrence of any Event of Default or Potential Event of Default. 6.3 Information So far as permitted by applicable law, give the Trustee such information as it reasonably requires to perform its functions. 6.4 Financial Statements etc. 6.4.1 send to the Trustee at the time of their issue and, in the case of annual financial statements, in any event within 180 days of the end of each financial year, three copies in English of every balance sheet, profit and loss account, report or other notice, statement or circular issued, or that legally or contractually should be issued, to the members or creditors (or any class of them) of the relevant Issuer or any parent undertaking of it generally in their capacity as such; and 6.4.2 National Grid shall, forthwith upon becoming aware of the occurrence of a National Grid Restructuring Event, provide or procure that the Reporting Accountants provide the Trustee with the Accountants’ Report. 6.5 Certificate of Director, etc. 6.5.1 send to the Trustee, within 14 days of its annual audited financial statements being made available to its members, and also within 21 days of any request by the Trustee a certificate of the relevant Issuer signed by a director that, having made all reasonable enquiries, to the best of the knowledge, information and belief of such Issuer as at a date (the “Certification Date”) not more than five days before the date of the certificate no Event of Default or Potential Event of Default had occurred (and, in the case of a Potential Event of Default, was continuing) since the Certification Date of the last such certificate or (if none) the date of this Trust Deed or, if such an event had occurred (and, in the case of a Potential Event of Default, was continuing), giving details of it and certifying that it has complied with its obligations under this Trust Deed or, to the extent that it has failed so to comply, stating such; 6.5.2 National Grid shall, forthwith upon becoming aware of the occurrence of a National Grid Restructuring Event, notify the Trustee in writing of the occurrence of an National Grid Restructuring Event and provide the Trustee with the directors’ Report; and 6.5.3 in relation to Instruments issued by it, National Grid shall give to the Trustee, as soon as reasonably practicable after the acquisition or disposal of any company which thereby becomes a Principal Subsidiary or after any transfer is made to any member of the National Grid Group (as defined in Condition 9(c)) which thereby becomes a Principal Subsidiary, a certificate by the auditors of National Grid at that time (the “Auditors”) addressed to the Trustee to such effect. 6.6 Notices to Instrumentholders Obtain the prior written approval of the Trustee to, and promptly give to the Trustee two copies of, the form of every notice given to the Instrumentholders in accordance with Condition 14 (such approval, unless so expressed, not to constitute approval for the


 
A41941146 13 purposes of Section 21 of the Financial Services and Markets Act 2000 any such notice which is a communication within the meaning of that section). 6.7 Further Acts So far as permitted by applicable law, do such further things as may be necessary in the reasonable opinion of the Trustee to give effect to this Trust Deed. 6.8 Notice of Late Payment Forthwith upon request by the Trustee (if the Trustee determines such notice is necessary) give notice to the Instrumentholders of any unconditional payment to the Issuing and Paying Agent (or the Australian Issuing and Paying Agent or the Canadian Paying Agent, as applicable) or the Trustee of any sum due in respect of the Instruments or Coupons made after the due date for such payment. 6.9 Listing If the Instruments are so listed, use all reasonable endeavours to maintain the listing of the Instruments but, if it is unable to do so, having used such endeavours, or if the maintenance of such listing is agreed by the Trustee to be unduly onerous and the Trustee is satisfied that the interests of the Instrumentholders would not by such action be materially prejudiced, instead use all reasonable endeavours to obtain and maintain a listing of the Instruments on another stock exchange approved in writing by the Trustee. 6.10 Change in Agents 6.10.1 Give at least 14 days’ prior notice to the Instrumentholders (other than holders of an Australian Domestic Instrument) in accordance with the Conditions of any future appointment, resignation or removal of an Agent or of any change by an Agent of its specified office; and 6.10.2 Give at least 14 days’ prior notice to the holders of Australian Domestic Instruments in accordance with the Conditions of any future appointment, resignation or removal of the Australian Issuing and Paying Agent or Australian Registrar. 6.11 Provision of Legal Opinions Procure the delivery of legal opinions addressed to the Trustee dated the date of such delivery, in form and content acceptable to the Trustee: 6.11.1 from Allen & Overy LLP (or such other firm of legal advisers as may be agreed between the relevant Issuer and the Trustee) as to the laws of England before the first issue of Instruments occurring after each anniversary of this Trust Deed or, if later, 12 months after the date of delivery of the latest such legal opinion and on the date of any amendment to this Trust Deed; 6.11.2 from Herbert Smith Freehills (or such other firm of legal advisers as may be agreed between the relevant Issuer and the Trustee) as to the laws of New South Wales before the first issue of Australian Domestic Instruments occurring after the date of this Trust Deed and after each anniversary of this Trust Deed and on the date of any amendment to the Deed Poll or the Australian Agency and Registry Agreement;


 
A41941146 14 6.11.3 unless the relevant Issuer has notified the Dealers and the Trustee in writing that it does not intend to issue Instruments under the Programme for the time being, from legal advisers reasonably acceptable to the Trustee as to such law as may reasonably be requested by the Trustee and in such form and with such content as the Trustee may require, on such occasions as the Trustee so requests on the basis that the Trustee considers it prudent in view of a change (or proposed change) in (or in the interpretation or application of) any applicable law, regulation or circumstance materially affecting the relevant Issuer, the Trustee, the relevant Instruments, the Coupons, the Talons, this Trust Deed or the Agency Agreement; and 6.11.4 on each occasion on which a legal opinion is given to any Dealer pursuant to the Dealer Agreement from the legal adviser giving such opinion; 6.12 Instruments Held by an Issuer Send to the Trustee as soon as practicable after being so requested by the Trustee a certificate of the relevant Issuer signed by any director or the Company Secretary stating the number of Instruments held at the date of such certificate by or on behalf of such Issuer or its subsidiary undertakings. 6.13 Obligations of Agents Comply with and perform all its obligations under the Agency Agreement and the Australian Agency and Registry Agreement and use all reasonable endeavours to procure that the Agents and the Australian Registrar comply with and perform all their respective obligations thereunder and not make any amendment or modification to the Agency Agreement or the Australian Agency and Registry Agreement without the prior written approval of the Trustee. 6.14 Copies of Dealer Agreement Provide the Trustee promptly with copies of all supplements and/or amendments to, and/or restatements of, the Dealer Agreement. 7 Remuneration and Indemnification of the Trustee 7.1 Normal Remuneration So long as any Instrument is outstanding the relevant Issuer shall pay the Trustee as remuneration for its services as Trustee such sum on such dates in each case as they may from time to time agree. Such remuneration shall accrue from day to day from the date of this Trust Deed. However, if any payment to an Instrumentholder or Couponholder of moneys due in respect of any Instrument or Coupon is improperly withheld or refused, such remuneration shall again accrue as from the date of such withholding or refusal until payment to such Instrumentholder or Couponholder is duly made. 7.2 Extra Remuneration If (i) an Event of Default, Potential Event of Default or Benchmark Event shall have occurred or (ii) in any other case, the Trustee finds it expedient or necessary or is requested by an Issuer to undertake duties that the Trustee and the relevant Issuer both agree to be of an exceptional nature or otherwise outside the scope of the Trustee’s


 
A41941146 15 normal duties under this Trust Deed, such Issuer shall pay such additional remuneration as shall be agreed between them (and which may be calculated by reference to the Trustee's normal hourly rates in force from time to time). In the event of the Trustee and the relevant Issuer failing to agree as to any of the matters in this Clause 7 (or as to such sums referred to in Clause 7.1 (Normal Remuneration)), such matters shall be determined by a financial institution (acting as an expert) selected by the Trustee and approved by such Issuer or, failing such approval, nominated by the President for the time being of The Law Society of England and Wales. The expenses involved in such nomination and such financial institution’s fee shall be shared equally between the Trustee and the relevant Issuer. The determination of the relevant financial institution shall be conclusive and binding on the relevant Issuer, the Trustee, the relevant Instrumentholders and the relevant Couponholders. 7.3 Expenses Each of the Issuers (in respect of itself and, where applicable, Instruments issued by it) shall also, on demand by the Trustee, pay or discharge all costs, charges, liabilities and expenses properly incurred by the Trustee in the preparation and execution of this Trust Deed and the performance of its functions under this Trust Deed in relation to that Issuer including, but not limited to, legal and travelling expenses and any United Kingdom or Australian stamp, documentary or other taxes or duties paid by the Trustee in connection with any legal proceedings reasonably brought or contemplated by the Trustee against an Issuer (in respect of Instruments issued by it) to enforce any provision of this Trust Deed, the relevant Instruments, the Coupons or the Talons and in addition shall pay to the Trustee (if required) an amount equal to the amount of any value added tax or similar tax chargeable in respect of the Trustee’s remuneration under this Trust Deed. Such costs, charges, liabilities and expenses shall: 7.3.1 in the case of payments made by the Trustee before such demand, carry interest from the date specified in the demand at the rate of Trustee’s cost of funding on the date on which the Trustee made such payments; and 7.3.2 in other cases, carry interest at such rate from 30 days after the date of the demand or (where the demand specifies that payment is to be made on an earlier date) from such earlier date provided that in such event no such interest shall accrue unless payment is actually made on such earlier date. 7.4 Notice of Costs The Trustee shall wherever practicable give prior notice to the relevant Issuer of any costs, charges and expenses properly to be incurred and of payments to be made by the Trustee in the lawful exercise of its powers under this Trust Deed so as to afford such Issuer a reasonable opportunity to meet such costs, charges and expenses itself or to put the Trustee in funds to make payment of such costs, charges and expenses. However, failure of the Trustee to give any such prior notice shall not prejudice its rights to reimbursement of such costs, charges and expenses under this Clause 7. 7.5 Indemnity Each of the Issuers (in respect of itself and, where applicable, any Instruments issued by it) shall indemnify the Trustee in respect of all liabilities and expenses properly incurred by it or by anyone appointed by it or to whom any of its functions may be delegated by it in the carrying out of its functions and against any loss, liability, cost, claim, action, demand or


 
A41941146 16 expense (including, but not limited to, all costs, charges and expenses properly paid or incurred in disputing or defending any of the foregoing) which any of them may incur in relation to the relevant Issuer or that may be made against any of them arising out of or in relation to or in connection with, its appointment or the exercise of its functions in relation to that Issuer. 7.6 Continuing Effect Clauses 7.3 (Expenses) and 7.5 (Indemnity) shall continue in full force and effect as regards the Trustee even if it no longer is Trustee. 7.7 Determination of Series The Trustee shall be entitled in its absolute discretion to determine in respect of which Series of Instruments any costs, charge, liabilities and expenses incurred under this Trust Deed have been incurred or to allocate any such costs, charges, liabilities and expenses between the Instruments of any two or more Series. 8 Provisions Supplemental to the Trustee Acts 8.1 Advice The Trustee may act on the opinion or advice of, or information obtained from, any expert (including, without limitation, any report or advice received from an independent financial adviser or from any accountant pursuant to the Conditions), whether or not (1) such opinion, advice or information is addressed to the Trustee or any other person, and (2) such expert’s liability in respect of the same is limited by reference to a monetary cap or otherwise and shall not be responsible to anyone for any loss occasioned by so acting. Any such opinion, advice or information may be sent or obtained by letter, email or fax and the Trustee shall not be liable to anyone for acting in good faith on any opinion, advice or information purporting to be conveyed by such means even if it contains some error or is not authentic. 8.2 Trustee to Assume Performance The Trustee need not notify anyone of the execution of this Trust Deed or do anything to find out if a National Grid Restructuring Event, NGET Restructuring Event, an Event of Default, Potential Event of Default or Benchmark Event has occurred. Until it has actual knowledge or express notice to the contrary, the Trustee may assume that no such event has occurred and that each Issuer is performing all of its obligations under this Trust Deed and the relevant Instruments, Coupons and Talons provided that the Trustee shall not be treated for any purposes as having any notice or knowledge which has been obtained by it or any officer or employee of it in some capacity other than as Trustee under this Trust Deed or in a private or confidential capacity such that it would not be proper to disclose to third parties. 8.3 Resolutions of Instrumentholders The Trustee shall not be responsible for having acted in good faith on a resolution purporting: (i) to have been passed at a meeting of Instrumentholders in respect of which minutes have been made and signed, or (ii) to be a written resolution or by way of electronic consent made in accordance with paragraph 31 of Schedule 3, even if it is later found that there was a defect in the constitution of the meeting or the passing of the


 
A41941146 17 resolution or that the resolution was not valid or binding on the Instrumentholders or Couponholders. 8.4 Certificate Signed by Directors, etc. If the Trustee, in the exercise of its functions, requires to be satisfied or to have information as to any fact or the expediency of any act, it may call for and accept as sufficient evidence of that fact or the expediency of that act a certificate signed by any two directors of the relevant Issuer as to that fact or to the effect that, in their opinion, that act is expedient and the Trustee need not call for further evidence and shall not be responsible for any loss occasioned by acting on such a certificate. 8.5 Deposit of Documents The Trustee may deposit this Trust Deed and any other documents with any bank or entity whose business includes the safe custody of documents or with any lawyer or firm of lawyers believed by it to be of good repute and may pay all sums due in respect of them. 8.6 Discretion The Trustee shall have absolute and uncontrolled discretion as to the exercise of its functions and shall not be responsible for any loss, liability, cost, claim, action, demand, expense or inconvenience which may result from their exercise or non-exercise. 8.7 Agents Whenever it considers it expedient in the interests of the Instrumentholders, the Trustee may, in the conduct of its trust business, instead of acting personally, employ and pay an agent selected by it, whether or not a lawyer or other professional person, to transact or conduct, or concur in transacting or conducting, any business and to do or concur in doing all acts required to be done by the Trustee (including the receipt and payment of money). The Trustee shall not be responsible to anyone for any misconduct or omission by any such agent so employed by it or be bound to supervise the proceedings or acts of any such agent. 8.8 Delegation Whenever it considers it expedient in the interests of the Instrumentholders, the Trustee may delegate to any person on any terms (including power to sub-delegate) all or any of its functions. If the Trustee exercises reasonable care in selecting such delegate, it shall not have any obligation to supervise such delegate or be responsible for any loss, liability, cost, claim, action, demand or expense incurred by reason of any misconduct or default by any such delegate or sub-delegate. 8.9 Nominees In relation to any asset held by it under this Trust Deed, the Trustee may appoint any person to act as its nominee on any terms. 8.10 Forged Instruments The Trustee shall not be liable to the relevant Issuer or any relevant Instrumentholder or Couponholder by reason of having accepted as valid or not having rejected any relevant Instrument, Certificate, Coupon or Talon purporting to be such and later found to be forged or not authentic.


 
A41941146 18 8.11 Confidentiality Unless ordered to do so by a court of competent jurisdiction, the Trustee shall not be required to disclose to any Instrumentholder or Couponholder any confidential financial or other information made available to the Trustee by the relevant Issuer. 8.12 Determinations Conclusive As between itself and the Instrumentholders and Couponholders, the Trustee may determine all questions and doubts arising in relation to any of the provisions of this Trust Deed. Such determinations, whether made upon such a question actually raised or implied in the acts or proceedings of the Trustee, shall be conclusive and shall bind the Trustee, the Instrumentholders and the Couponholders. 8.13 Currency Conversion Where it is necessary or desirable to convert any sum from one currency to another, it shall (unless otherwise provided hereby or required by law) be converted at such rate or rates, in accordance with such method and as at such date as may reasonably be specified by the Trustee but having regard to current rates of exchange, if available. Any rate, method and date so specified shall be binding on the relevant Issuer and the relevant Instrumentholders and Couponholders. 8.14 Payment for and Delivery of Instruments The Trustee shall not be responsible for the receipt or application by the relevant Issuer of the proceeds of the issue of any relevant Instruments, any exchange of relevant Instruments or the delivery of relevant Instruments to the persons entitled to them. 8.15 Trustee’s consent Any consent given by the Trustee for the purposes of this Trust Deed may be given on such terms as the Trustee thinks fit. In giving such consent the Trustee may require the Issuers to agree to such modifications or additions to this Trust Deed as the Trustee may deem expedient in the interest of the Instrumentholders. 8.16 Instruments Held by an Issuer etc. In the absence of knowledge or express notice to the contrary, the Trustee may assume without enquiry (other than requesting a certificate under Clause 6.12 (Instruments Held by an Issuer)) that no Instruments are for the time being held by or on behalf of an Issuer or its subsidiary undertakings. 8.17 Legal Opinions The Trustee shall not be responsible to any person for failing to request, require or receive any legal opinion relating to any Instruments or for checking or commenting upon the content of any such legal opinion. 8.18 Programme Limit The Trustee shall not be concerned, and need not enquire, as to whether or not any Instruments are issued in breach of the Programme Limit.


 
A41941146 19 8.19 Events of Default The Trustee may determine whether or not an Event of Default is in its opinion capable of remedy or (in relation to Condition 9(b)) materially prejudicial to the interests of relevant Instrumentholders. Any such determination shall be conclusive and binding on the relevant Issuer and the relevant Instrumentholders. 8.20 Appointment of Independent Financial Adviser In connection with the Trustee’s right to appoint an independent financial adviser pursuant to Condition 5.6.2 (if applicable), the Trustee: 8.20.1 shall use its reasonable endeavours to identify and appoint the independent financial adviser but shall have no liability to any person if, having used its reasonable endeavours, it is unable to identify and appoint a suitable independent financial adviser; 8.20.2 shall not be responsible for carrying on the role of independent financial adviser itself during the time it is attempting to identify such independent financial adviser or thereafter if it is unable to find such independent financial adviser; and 8.20.3 shall not be required to take any action to find an independent financial adviser unless it has been previously indemnified and/or secured to its satisfaction or expend any of its own funds in the appointment of such an independent financial adviser. 8.21 Illegality No provision of the Trust Deed or the Conditions shall require the Trustee to do anything which may in its opinion be illegal or contrary to applicable law or regulation. 9 Disapplication and Trustee Liability 9.1 Disapplication Section 1 of the Trustee Act 2000 shall not apply to the duties of the Trustee in relation to the trusts constituted by this Trust Deed. Where there are any inconsistencies between the Trustee Acts and the provisions of this Trust Deed, the provisions of this Trust Deed shall, to the extent allowed by law, prevail and, in the case of any such inconsistency with the Trustee Act 2000, the provisions of this Trust Deed shall constitute a restriction or exclusion for the purposes of that Act. 9.2 Trustee Liability Subject to Sections 750 and 751 of the Companies Act 2006 (if applicable) and notwithstanding anything to the contrary in this Trust Deed, the Instruments or the Paying Agency Agreement, the Trustee shall not be liable to any person for any matter or thing done or omitted in any way in connection with or in relation to this Trust Deed, the Instruments or the Agency Agreement save in relation to its own gross negligence, wilful default or fraud.


 
A41941146 20 10 Waiver and Proof of Default 10.1 Waiver The Trustee may, without the consent of the Instrumentholders or Couponholders and without prejudice to its rights in respect of any subsequent breach, from time to time and at any time, if in its opinion the interests of the Instrumentholders will not be materially prejudiced thereby, waive or authorise, on such terms as seem expedient to it, any breach or proposed breach by an Issuer of this Trust Deed or the Conditions or determine that an Event of Default or Potential Event of Default shall not be treated as such provided that the Trustee shall not do so in contravention of an express direction given by an Extraordinary Resolution or a request made pursuant to Condition 9. No such direction or request shall affect a previous waiver, authorisation or determination. Any such waiver, authorisation or determination shall be binding on the relevant Instrumentholders and the Couponholders and, if the Trustee so requires, shall be notified to the Instrumentholders as soon as practicable. 10.2 Proof of Default Proof that the relevant Issuer has failed to pay a sum due to the holder of any one Instrument or Coupon shall (unless the contrary be proved) be sufficient evidence that it has made the same default as regards all other Instruments or Coupons which are then payable. 11 Trustee not Precluded from Entering into Contracts The Trustee and any other person, whether or not acting for itself, may acquire, hold or dispose of any Instrument, Coupon, Talon or other security (or any interest therein) of either of the Issuers or any other person, may enter into or be interested in any contract or transaction with any such person and may act on, or as depositary or agent for, any committee or body of holders of any securities of any such person in each case with the same rights as it would have had if the Trustee were not acting as Trustee and need not account for any profit. 12 Modification and Substitution 12.1 Modification The Trustee may agree without the consent of the Instrumentholders or Couponholders to any modification to this Trust Deed of a formal, minor or technical nature or to correct a manifest error. The Trustee may also so agree to any other modification to this Trust Deed which is in its opinion not materially prejudicial to the interests of the Instrumentholders of the relevant Series, but such power does not extend to any such modification as is mentioned in the proviso to paragraph 2 of Schedule 3 (Provisions for Meetings of Instrumentholders). In addition, the Trustee shall be obliged to concur with the relevant Issuer in using its reasonable endeavours to effect any Benchmark Amendments in the circumstances and as otherwise set out in Condition 3.10 without the consent or approval of the Instumentholders or Couponholders, provided that the Trustee shall not be obliged so to concur if in the opinion of the Trustee doing so would impose more onerous obligations upon it or expose it to any additional duties, responsibilities or liabilities or reduce or amend the rights and/or the protective provisions afforded to it in the Conditions and/or any documents to which it is a party (including, for the avoidance of doubt, any


 
A41941146 21 supplemental trust deed) in any way. Any such modification, authorisation or waiver shall be binding on the relevant Instrumentholders and Couponholders and if the Trustee so requires, such modification shall be notified to the relevant Instrumentholders as soon as practicable. 12.2 Substitution 12.2.1 The Trustee may, without the consent of the Instrumentholders or Couponholders, agree to the substitution of any other company (the “Substituted Obligor”) in place of such Issuer (or of any previous substitute under this Clause 12) as the principal debtor under this Trust Deed (or, in the case of Australian Domestic Instruments, under the Deed Poll) and the relevant Instruments, Coupons and Talons provided that such substitution would not, in the opinion of the Trustee, be materially prejudicial to the interests of the Instrumentholders, and further provided that: (i) a deed is executed or undertaking given by the Substituted Obligor to the Trustee, in form and manner satisfactory to the Trustee, agreeing to be bound by this Trust Deed (and, in the case of Australian Domestic Instruments, the Deed Poll) and the relevant Instruments, Coupons and Talons (with consequential amendments as the Trustee may deem appropriate) as if the Substituted Obligor had been named in this Trust Deed (and, in the case of Australian Domestic Instruments, the Deed Poll) and the relevant Instruments, Coupons and Talons as the principal debtor in place of such Issuer; (ii) if the Substituted Obligor is subject generally to the taxing jurisdiction of a territory or any authority of or in that territory with power to tax (the “Substituted Territory”) other than the territory to the taxing jurisdiction of which (or to any such authority of or in which) such Issuer is subject generally (the “Issuer’s Territory”), the Substituted Obligor shall (unless the Trustee otherwise agrees) give to the Trustee an undertaking satisfactory to the Trustee in terms corresponding to Condition 7 with the substitution for the references in that Condition to such Issuer’s Territory of references to the Substituted Territory whereupon the Trust Deed (and, in the case of Australian Domestic Instruments, the Deed Poll), and the relevant Instruments, Coupons and Talons shall be read accordingly; (iii) if any two directors of the Substituted Obligor certify that it will be solvent immediately after such substitution, the Trustee need not have regard to the Substituted Obligor’s financial condition, profits or prospects or compare them with those of such Issuer; (iv) such Issuer and the Substituted Obligor comply with such other requirements as the Trustee may direct in the interests of the relevant Instrumentholders; and (v) the Trustee is satisfied (i) the Substituted Obligor has obtained all necessary governmental and regulatory approvals and consents necessary for its assumption of liability as principal debtor in respect of the relevant Instruments in place of such Issuer (or a previous substitute), (ii) all necessary governmental and regulatory approvals and consents necessary for or in connection with the assumption by the Substituted Obligor of its


 
A41941146 22 obligations under the relevant Instruments and Coupons and (iii) such approvals and consents are at the time of substitution in full force and effect. 12.2.2 Release of Substituted Issuer An agreement by the Trustee pursuant to Clause 12.2 (Substitution) shall, if so expressed, release the relevant Issuer (or a previous substitute) from any or all of its obligations under this Trust Deed (and, in the case of Australian Domestic Instruments, under the Deed Poll) and the relevant Instruments, Coupons and Talons. Notice of the substitution shall be given to the Instrumentholders within 14 days of the execution of such documents and compliance with such requirements. 12.2.3 Completion of Substitution On completion of the formalities set out in Clause 12.2 (Substitution), the Substituted Obligor shall be deemed to be named in this Trust Deed (and, in the case of Australian Domestic Instruments, the Deed Poll) and the relevant Instruments, Coupons and Talons as the principal debtor in place of the relevant Issuer (or of any previous substitute) and this Trust Deed (and, in the case of Australian Domestic Instruments, the Deed Poll) and the relevant Instruments, Coupons and Talons shall be deemed to be amended as necessary to give effect to the substitution. 13 Appointment, Retirement and Removal of the Trustee 13.1 Appointment Each of the Issuers has the power of appointing new trustees but no one may be so appointed unless previously approved by an Extraordinary Resolution. The Trustee shall at all times be a trust corporation and such trust corporation may be the sole Trustee. Any appointment of a new Trustee shall be notified by each of the Issuers to its Instrumentholders in accordance with Condition 14 as soon as practicable. 13.2 Retirement and Removal Any Trustee may retire at any time on giving at least three months’ written notice to each of the Issuers without giving any reason or being responsible for any costs occasioned by such retirement and the Instrumentholders may by Extraordinary Resolution remove any Trustee provided that the retirement or removal of a sole trust corporation shall not be effective until a trust corporation is appointed as successor Trustee. If a sole trust corporation gives notice of retirement or an Extraordinary Resolution is passed for its removal, it shall use all reasonable endeavours to procure that another trust corporation is appointed as Trustee. 13.3 Co-Trustees The Trustee may, despite Clause 13.1 (Appointment), by written notice to each of the Issuers, appoint anyone to act either as a separate Trustee in respect of any Issue or as an additional Trustee jointly with the Trustee: 13.3.1 if the Trustee considers the appointment to be in the interests of the Instrumentholders and/or the Couponholders;


 
A41941146 23 13.3.2 to conform with a legal requirement, restriction or condition in a jurisdiction in which a particular act is to be performed; or 13.3.3 to obtain a judgment or to enforce a judgment or any provision of this Trust Deed in any jurisdiction. Subject to the provisions of this Trust Deed the Trustee may, in the instrument of appointment, confer on any person so appointed such functions as it thinks fit. The Trustee may by written notice to each of the Issuers and that person remove that person. At the Trustee’s request, each Issuer shall forthwith do all things as may be required to perfect such appointment or removal and each of the Issuers irrevocably appoints the Trustee as its attorney in its name and on its behalf to do so. Before appointing such person to act as separate Trustee or additional Trustee the Trustee shall (unless it is not, in the opinion of the Trustee, reasonably practicable to do so) give notice to each of the Issuers of its intention to make such appointment (and the reason for that) and shall give due consideration to representations made by each of the Issuers concerning such appointment. Where, as a result of this provision, not all the Instruments have the same Trustee, the provisions of this Trust Deed shall apply in respect of each such Trustee as if each were named as a party to this Trust Deed. 13.4 Competence of a Majority of Trustees If there are more than two Trustees the majority of them shall be competent to perform the Trustee’s functions provided the majority includes a trust corporation. 14 Instruments held in Clearing Systems and Couponholders 14.1 Instruments Held in Clearing Systems 14.1.1 So long as any Global Instrument is held on behalf of a clearing system, in considering the interests of Instrumentholders, the Trustee may have regard to any information provided to it by the relevant clearing system or its operator as to the identity (either individually or by category) of its accountholders or participants with entitlements to any such Global Instrument and may consider such interests on the basis that such accountholders or participants were the holder(s) of such Global Instrument; 14.1.2 Subject to Clause 3.4, so long as any Australian Domestic Instrument is held in a clearing system, in considering the interests of Instrumentholders, the Trustee may have regard to any information provided to it by the relevant clearing system or its operator as to the identity (either individually or by category) of its accountholders or participants with entitlements to any such Australian Domestic Instrument and may consider such interests on the basis that such accountholders or participants were the holder(s) of such Australian Domestic Instrument. 14.2 Reliance on Instruments Held in Clearing Systems The Trustee and any Issuer may call for and, except in the case of manifest error, shall be at liberty to accept and place full reliance on as sufficient evidence thereof any certificate, letter of confirmation or other document issued on behalf of the relevant clearing system or any form of record made by any of them or such other evidence and/or information and/or certification as it shall, in its absolute discretion, think fit to the effect that at any particular time or throughout any particular period any particular person is, was, or will be, shown in


 
A41941146 24 its records as the holder of a particular nominal amount of Instruments represented by a Global Instrument or an Australian Domestic Instrument and if the Trustee or any Issuer does so rely, such letter of confirmation, form of record, evidence, information or certification shall be conclusive and binding on all concerned for all purposes. Any such certificate may comprise any form of statement or print out of electronic records provided by the relevant clearing system (including Euroclear’s EUCLID or Clearstream, Luxembourg’s Creation Online system) in accordance with its usual procedures and in which the holder of a particular nominal amount of Instruments is clearly identified together with the amount of such holding. Neither an Issuer nor the Trustee shall be liable to any person by reason of having accepted as valid or not having rejected any certificate or other document to such effect purporting to be issued by the relevant clearing system and subsequently found to be forged or not authentic. 14.3 Couponholders No notices need be given to Couponholders. They shall be deemed to have notice of the contents of any notice given to Instrumentholders. Even if it has express notice to the contrary, in exercising any of its functions by reference to the interests of the Instrumentholders, the Trustee shall assume that the holder of each Instrument is the holder of all Coupons and Talons relating to it. 15 Currency Indemnity 15.1 Currency of Account and Payment The Contractual Currency is the sole currency of account and payment for all sums payable by each of the Issuers under or in connection with this Trust Deed, the Instruments and the Coupons, including damages. 15.2 Extent of Discharge An amount received or recovered in a currency other than the Contractual Currency (whether as a result of, or of the enforcement of, a judgment or order of a court of any jurisdiction, in the insolvency, winding-up or dissolution of either of the Issuers or otherwise), by the Trustee or any Instrumentholder or Couponholder in respect of any sum expressed to be due to it from the relevant Issuer, shall only discharge such Issuer to the extent of the Contractual Currency amount which the recipient is able to purchase with the amount so received or recovered in that other currency on the date of that receipt or recovery (or, if it is not practicable to make that purchase on that date, on the first date on which it is practicable to do so). 15.3 Indemnity If that Contractual Currency amount is less than the Contractual Currency amount expressed to be due to the recipient under this Trust Deed, the Instruments or the Coupons, the relevant Issuer shall indemnify the recipient against any loss sustained by it as a result. In any event, the relevant Issuer shall indemnify the recipient against the cost of making any such purchase. 15.4 Indemnity Separate The indemnities in this Clause 15 and in Clause 7.5 (Indemnity) constitute separate and independent obligations from the other obligations in this Trust Deed, shall give rise to a


 
A41941146 25 separate and independent course of action, shall apply irrespective of any indulgence granted by the Trustee and/or any Instrumentholder or Couponholder and shall continue in full force and effect despite any judgment, order, claim or proof for a liquidated amount in respect of any sum due under this Trust Deed, the Instruments and/or the Coupons or any other judgment or order. 16 Enforcement 16.1 Trustee to enforce Only the Trustee may enforce the rights of the Instrumentholders and Couponholders against the relevant Issuer, whether the same arise under the general law, this Trust Deed, the Instruments, the Coupons or otherwise, and no Instrumentholder or Couponholder shall be entitled to proceed directly against the relevant Issuer unless the Trustee, having become bound to proceed, fails to do so within a reasonable time and such failure is continuing. 16.2 Trustee’s Indemnity The Trustee shall not be bound to take any steps to enforce the performance of any provisions of this Trust Deed, the Instruments or the Coupons or to appoint an independent financial advisor pursuant to the Conditions of the Instruments unless it shall be indemnified and/or secured and/or prefunded by the relevant Instrumentholders and/or Couponholders to its satisfaction against all proceedings, claims and demands to which it may be liable and against all costs, charges, liabilities and expenses which may be incurred by it in connection with such enforcement or appointment, including the costs of its managements’ time and/or other internal resources, calculated using its normal hourly rates in force from time to time. 16.3 Legal proceedings If the Trustee (or any Instrumentholder or Couponholder where entitled in accordance with this Trust Deed so to do) institutes legal proceedings against the relevant Issuer to enforce any obligations under this Trust Deed: 16.3.1 proof in such proceedings that as regards any specified Instrument such Issuer has made default in paying any principal or interest due to the relevant Instrumentholder shall (unless the contrary be proved) be sufficient evidence that such Issuer has made the same default as regards all other Instruments which are then repayable or, as the case may be, in respect of which interest is then payable; and 16.3.2 proof in such proceedings that as regards any specified Coupon such Issuer has made default in paying any sum due to the relevant Couponholder shall (unless the contrary be proved) be sufficient evidence that such Issuer has made the same default as regards all other Coupons which are then payable. 16.4 Powers additional to general powers The powers conferred on the Trustee by this Clause 16 shall be in addition to any powers which may from time to time be vested in the Trustee by general law or as the holder of any Instruments or Coupons.


 
A41941146 26 17 Communications 17.1 Method Each communication under this Trust Deed shall be made by email, fax or otherwise in writing. Each communication or document to be delivered to any party under this Trust Deed shall be sent to that party at the email address, fax number or postal address, and marked for the attention of the person (if any), from time to time designated by that party to each other party for the purpose of this Trust Deed. The initial telephone number, email address, fax number, postal address and person so designated by the parties under this Trust Deed are set out in the Procedures Memorandum. 17.2 Deemed Receipt Any communication from any party to any other under this Trust Deed shall be effective, (if by fax) when the relevant delivery receipt is received by the sender, (if in writing) when delivered and (if by electronic communication) when the relevant receipt of such communication being read is given, or where no read receipt is requested by the sender, at the time of sending, provided that no delivery failure notification is received by the sender within 24 hours of sending such communication (provided always that any email communication to the Trustee shall only be treated as having been received upon confirmation of receipt by the Trustee and an automatically generated “read” or “received” receipt shall not constitute such confirmation); provided that any email communication which is received (or deemed to take effect in accordance with the foregoing) after 5:00pm on a business day or on a non-business day in the place of receipt shall be deemed to take effect at the opening of business on the next following business day in such place. Any communication delivered to any party under this Trust Deed which is to be sent by fax or electronic communication will be written legal evidence. 18 Governing Law and Jurisdiction 18.1 Governing Law This Trust Deed and any non-contractual obligations arising out of in connection with it shall be governed by, and construed in accordance with, English law. 18.2 Jurisdiction The courts of England are to have jurisdiction to settle any disputes that may arise out of or in connection with this Trust Deed, the Instruments (other than the Australian Domestic Instruments), the Coupons or the Talons and accordingly any legal action or proceedings arising out of or in connection with this Trust Deed, the Instruments (other than the Australian Domestic Instruments), the Coupons or the Talons (“Proceedings”) may be brought in such courts. Each of the Issuers irrevocably submits to the jurisdiction of such courts and waives any objection to Proceedings in such courts on the ground of venue or on the ground that the Proceedings have been brought in an inconvenient forum. This clause is for the benefit of each of the Trustee and the relevant Instrumentholders (other than the holders of Australian Domestic Instruments) and Couponholders and shall not limit the right of any of them to take Proceedings in any other court of competent jurisdiction nor shall the taking of Proceedings in any one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction (whether concurrently or not).


 
A41941146 27 18.3 Australian Courts Jurisdiction The courts of New South Wales, Australia and any courts of appeal from them are to have jurisdiction to settle any disputes that may arise out of or in connection with the Australian Domestic Instruments and accordingly any legal action or proceedings arising out of or in connection with the Australian Domestic Instruments (“Australian Proceedings”) may be brought in such courts. Each of the Issuers irrevocably submits to the jurisdiction of such courts and waives any objections to Australian Proceedings in such courts on the ground of venue or on the ground that the Australian Proceedings have been brought in an inconvenient forum. This submission is for the benefit of each of the Trustee and the holders of Australian Domestic Instruments and shall not limit the right of any of them to take Australian Proceedings in any other court of competent jurisdiction nor shall the taking of Australian Proceedings in any one or more jurisdictions preclude the taking of Australian Proceedings in any other jurisdiction (whether concurrently or not). For so long as any Australian Domestic Instruments are outstanding, each Issuer will appoint an agent as specified in the relevant Final Terms for the time being to accept service of process on its behalf in New South Wales in respect of any Australian Proceedings. In the event of such agent ceasing to act, the relevant Issuer will appoint another agent.


 
A41941146 28 Schedule 1 Part A Form of CGN Temporary Global Instrument Form of Global CGN Temporary Global Instrument (Euroclear, Clearstream, Luxembourg and other Clearing Systems (other than CDS)) [NATIONAL GRID plc/ NATIONAL GRID ELECTRICITY TRANSMISSION plc]* (Incorporated with limited liability in England and Wales under the Companies Act 1985 with registered number [04031152/02366977]*) EURO MEDIUM TERM NOTE PROGRAMME Series No. [●] Tranche No. [●] TEMPORARY GLOBAL INSTRUMENT Temporary Global Instrument No. [●] This temporary Global Instrument is issued without Coupons in respect of the Instruments (the “Instruments”) of the Tranche and Series specified in the Second Schedule to this temporary Global Instrument of [National Grid plc/National Grid Electricity Transmission plc]* (the “Issuer”). 1 Interpretation and Definitions References in this temporary Global Instrument to the “Conditions” are to the Terms and Conditions applicable to the Instruments (which are in the form set out in Part B of Schedule 2 (Terms and Conditions of the Instruments) to the amended and restated trust deed (as amended or supplemented as at the Issue Date, the “Trust Deed”) dated 30 July 2019 between, inter alios, the Issuer and The Law Debenture Trust Corporation p.l.c. as trustee, as such form is supplemented and/or modified and/or superseded by the provisions of this temporary Global Instrument (including the supplemental definitions and any modifications or additions set out in the Second Schedule hereto), which in the event of any conflict shall prevail). Other capitalised terms used in this temporary Global Instrument shall have the meanings given to them in the Conditions or the Trust Deed. If the Second Schedule to this temporary Global Instrument specifies that the applicable TEFRA exemption is either “C Rules” or “not applicable”, this temporary Global Instrument is a “C Rules Instrument”, otherwise this temporary Global Instrument is a “D Rules Instrument”. 2 Aggregate Nominal Amount The aggregate nominal amount from time to time of this temporary Global Instrument shall be an amount equal to the aggregate nominal amount of the Instruments as shall be shown by the latest entry in the fourth column of the First Schedule to this temporary Global Instrument, which shall be completed by or on behalf of the Issuing and Paying Agent upon (a) the issue of Instruments represented by this temporary Global Instrument, (b) the exchange of the whole or a part of this temporary Global Instrument for a * Delete as applicable.


 
A41941146 29 corresponding interest in a permanent Global Instrument or, as the case may be, for Definitive Instruments and/or (c) the redemption or purchase and cancellation of Instruments represented by this temporary Global Instrument all as described below. 3 Promise to Pay Subject as provided in this temporary Global Instrument, the Issuer, for value received, by this temporary Global Instrument promises to pay to the bearer of this temporary Global Instrument, upon presentation and (when no further payment is due in respect of this temporary Global Instrument) surrender of this temporary Global Instrument, on the Maturity Date (or on such earlier date or, if the Maturity Date is specified to be perpetual, on such date as the amount payable upon redemption under the Conditions may become repayable in accordance with the Conditions) the amount payable upon redemption under the Conditions in respect of the aggregate nominal amount of Instruments represented by this temporary Global Instrument and (unless this temporary Global Instrument does not bear interest) to pay interest in respect of the Instruments from the Interest Commencement Date in arrear at the rates, on the dates for payment, and in accordance with the methods of calculation provided for in the Conditions, save that the calculation is made in respect of the total aggregate amount of the Instruments, together with such other sums and additional amounts (if any) as may be payable under the Conditions, in accordance with the Conditions. 4 Exchange On or after the first day following the expiry of 40 days after the Issue Date (the “Exchange Date”), this temporary Global Instrument may be exchanged (free of charge to the holder) in whole or (in the case of a D Rules Instrument only) from time to time in part by its presentation and, on exchange in full, surrender to or to the order of the Issuing and Paying Agent for interests in a permanent Global Instrument or, if so specified in the Second Schedule to this temporary Global Instrument, for Definitive Instruments in an aggregate nominal amount equal to the nominal amount of this temporary Global Instrument submitted for exchange provided that, in the case of any part of a D Rules Instrument submitted for exchange for a permanent Global Instrument or Definitive Instruments, there shall have been Certification with respect to such nominal amount submitted for such exchange dated no earlier than the Exchange Date. “Certification” means the presentation to the Issuing and Paying Agent of a certificate or certificates with respect to one or more interests in this temporary Global Instrument, signed by Euroclear or Clearstream, Luxembourg, substantially to the effect set out in Schedule 3 (Provisions for Meetings of Instrumentholders) to the Trust Deed to the effect that it has received a certificate or certificates substantially to the effect set out in Schedule 3 to the Agency Agreement with respect to it and that no contrary advice as to the contents of the certificate has been received by Euroclear or Clearstream, Luxembourg, as the case may be. Upon the whole or a part of this temporary Global Instrument being exchanged for a permanent Global Instrument, such permanent Global Instrument shall be exchangeable in accordance with its terms for Definitive Instruments. The Definitive Instruments, for which this temporary Global Instrument or a permanent Global Instrument may be exchangeable, shall be duly executed and authenticated, shall, in the case of Definitive Instruments, have attached to them all Coupons (and, where


 
A41941146 30 appropriate, Talons) in respect of interest which have not already been paid on this temporary Global Instrument or the permanent Global Instrument, as the case may be, shall be security printed and shall be substantially in the form set out in the relevant Schedules to the Trust Deed as supplemented and/or modified and/or superseded by the terms of the Second Schedule to this temporary Global Instrument. On any exchange of a part of this temporary Global Instrument for an equivalent interest in a permanent Global Instrument or for Definitive Instruments, as the case may be, the portion of the nominal amount of this temporary Global Instrument so exchanged shall be endorsed by or on behalf of the Issuing and Paying Agent in Part 1 of the First Schedule to this temporary Global Instrument, whereupon the nominal amount of this temporary Global Instrument shall be reduced for all purposes by the amount so exchanged and endorsed. 5 Benefit of Conditions Except as otherwise specified in this temporary Global Instrument, this temporary Global Instrument is subject to the Conditions and the Trust Deed and, until the whole of this temporary Global Instrument is exchanged for equivalent interests in a permanent Global Instrument or for Definitive Instruments, as the case may be, the holder of this temporary Global Instrument shall in all respects be entitled to the same benefits as if it were the holder of the permanent Global Instrument (or the relevant part of it) or the Definitive Instruments, as the case may be, for which it may be exchanged as if such permanent Global Instrument or Definitive Instruments had been issued on the Issue Date. 6 Payments No person shall be entitled to receive any payment in respect of the Instruments represented by this temporary Global Instrument which falls due on or after the Exchange Date unless, upon due presentation of this temporary Global Instrument for exchange, delivery of (or, in the case of a subsequent exchange, due endorsement of) a permanent Global Instrument or delivery of Definitive Instruments, as the case may be, is improperly withheld or refused by or on behalf of the Issuer. Payments due in respect of a D Rules Instrument before the Exchange Date shall only be made in relation to such nominal amount of this temporary Global Instrument with respect to which there shall have been Certification dated no earlier than such due date for payment. Any payments which are made in respect of this temporary Global Instrument shall be made to its holder against presentation and (if no further payment falls to be made on it) surrender of it at the specified office of the Issuing and Paying Agent or of any other Paying Agent provided for in the Conditions. If any payment in full of principal is made in respect of any Instrument represented by this temporary Global Instrument, the portion of this temporary Global Instrument representing such Instrument shall be cancelled and the amount so cancelled shall be endorsed by or on behalf of the Issuing and Paying Agent in the First Schedule to this temporary Global Instrument (such endorsement being prima facie evidence that the payment in question has been made) upon which the nominal amount of this temporary Global Instrument shall be reduced for all purposes by the amount so cancelled and endorsed. If any other payments are made in respect of the Instruments represented by this temporary Global Instrument, a record of each such payment shall be endorsed by or on behalf of the Issuing and Paying Agent on an


 
A41941146 31 additional schedule to this temporary Global Instrument (such endorsement being prima facie evidence that the payment in question has been made). For the purposes of any payments made in respect of this temporary Global Instrument, the words “in the relevant place of presentation” shall not apply in the definition of “business day” in Condition 6.7 (Non-Business Days). 7 Cancellation Cancellation of any Instrument represented by this temporary Global Instrument which is required by the Conditions to be cancelled (other than upon its redemption) shall be effected by reduction in the nominal amount of this temporary Global Instrument representing such Instrument on its presentation to or to the order of the Issuing and Paying Agent for endorsement in the First Schedule to this temporary Global Instrument, upon which the nominal amount of this temporary Global Instrument shall be reduced for all purposes by the amount so cancelled and endorsed. 8 Notices Notices required to be given in respect of the Instruments represented by this temporary Global Instrument may be given by their being delivered (so long as this temporary Global Instrument is held on behalf of Euroclear and Clearstream, Luxembourg or any other clearing system) to Euroclear, Clearstream, Luxembourg or such other clearing system, as the case may be, or otherwise to the holder of this temporary Global Instrument, rather than by publication as required by the Conditions, except that, so long as the Instruments are listed and/or admitted to trading, notices required to be given to the holders of the Notes pursuant to the Conditions shall also be published (if such publication is required) in a manner which complies with the rules and regulations of any stock exchange or other relevant authority on which the Notes are listed/and or admitted to trading. No provision of this temporary Global Instrument shall alter or impair the obligation of the Issuer to pay the principal and premium of and interest on the Instruments when due in accordance with the Conditions. This temporary Global Instrument shall not be valid or become obligatory for any purpose until authenticated by or on behalf of the Issuing and Paying Agent. This temporary Global Instrument and all matters arising from or connected with it shall be governed by and construed in accordance with English law.


 
A41941146 32 In witness of which the Issuer has caused this temporary Global Instrument to be duly signed on its behalf. Dated as of the Issue Date. [NATIONAL GRID plc/NATIONAL GRID ELECTRICITY TRANSMISSION plc]* By: CERTIFICATE OF AUTHENTICATION OF THE ISSUING AND PAYING AGENT This temporary Global Instrument is authenticated by or on behalf of the Issuing and Paying Agent. THE BANK OF NEW YORK MELLON as Issuing and Paying Agent By: Authorised Signatory For the purposes of authentication only ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE. * Delete as applicable.


 
A41941146 33 The First Schedule Nominal amount of Instruments represented by this temporary Global Instrument The following (i) issue of Instruments initially represented by this temporary Global Instrument, (ii) exchanges of the whole or a part of this temporary Global Instrument for interests in a permanent Global Instrument or for Definitive Instruments and/or (iii) cancellations or forfeitures of interests in this temporary Global Instrument have been made, resulting in the nominal amount of this temporary Global Instrument specified in the latest entry in the fourth column below: Date Amount of decrease in nominal amount of this temporary Global Instrument Reason for decrease in nominal amount of this temporary Global Instrument (exchange, cancellation or forfeiture) Nominal amount of this temporary Global Instrument on issue or following such decrease Notation made by or on behalf of the Issuing and Paying Agent Issue Date not applicable not applicable


 
A41941146 34 The Second Schedule [Insert the provisions of Part A of the relevant Final Terms that relate to the Conditions or the Global Instruments as the Second Schedule]


 
A41941146 35 Schedule 1 Part B Form of CGN Permanent Global Instruments Form of Global CGN Permanent Global Instrument (Euroclear, Clearstream, Luxembourg and other Clearing Systems (other than CDS)) [NATIONAL GRID plc/ NATIONAL GRID ELECTRICITY TRANSMISSION plc]* (Incorporated with limited liability in England and Wales under the Companies Act 1985 with registered number [04031152/02366977]*) EURO MEDIUM TERM NOTE PROGRAMME Series No. [●] Tranche No. [●] PERMANENT GLOBAL INSTRUMENT Permanent Global Instrument No. [●] This permanent Global Instrument is issued without Coupons in respect of the Instruments (the “Instruments”) of the Tranche(s) and Series specified in the Third Schedule to this permanent Global Instrument of [National Grid plc/National Grid Electricity Transmission plc]* (the “Issuer”). 1 Interpretation and Definitions References in this permanent Global Instrument to the “Conditions” are to the Terms and Conditions applicable to the Instruments (which are in the form set out in Part B of Schedule 2 (Terms and Conditions of the Instruments) to the amended and restated trust deed (as amended or supplemented as at the Issue Date, the “Trust Deed”) dated 30 July 2019 between, inter alios, the Issuer and The Law Debenture Trust Corporation p.l.c. as trustee, as such form is supplemented and/or modified and/or superseded by the provisions of this permanent Global Instrument (including the supplemental definitions and any modifications or additions set out in the Third Schedule to this permanent Global Instrument), which in the event of any conflict shall prevail). Other capitalised terms used in this permanent Global Instrument shall have the meanings given to them in the Conditions or the Trust Deed. 2 Aggregate Nominal Amount The aggregate nominal amount from time to time of this permanent Global Instrument shall be an amount equal to the aggregate nominal amount of the Instruments as shall be shown by the latest entry in the fourth column of the First Schedule to this permanent Global Instrument, which shall be completed by or on behalf of the Issuing and Paying Agent upon (a) the exchange of the whole or a part of the temporary Global Instrument initially representing the Instruments for a corresponding interest in this permanent Global Instrument (in the case of Instruments represented by a temporary Global Instrument upon issue), (b) the issue of the Instruments represented by this permanent Global Instrument (in the case of Instruments represented by this permanent Global Instrument upon issue), (c) the exchange of the whole of this permanent Global Instrument for Definitive * Delete as applicable.


 
A41941146 36 Instruments and/or (d) the redemption or purchase and cancellation of Instruments represented by this permanent Global Instrument, all as described below. 3 Promise to Pay Subject as provided in this permanent Global Instrument, the Issuer, for value received, by this permanent Global Instrument promises to pay to the bearer of this permanent Global Instrument, upon presentation and (when no further payment is due in respect of this permanent Global Instrument) surrender of this permanent Global Instrument, on the Maturity Date (or on such earlier date or, if the Maturity Date is specified to be perpetual on such date as the amount payable upon redemption under the Conditions may become repayable in accordance with the Conditions), the amount payable upon redemption under the Conditions in respect of the aggregate nominal amount of Instruments represented by this permanent Global Instrument and (unless this permanent Global Instrument does not bear interest) to pay interest in respect of the Instruments from the Interest Commencement Date in arrear at the rates, on the dates for payment, and in accordance with the methods of calculation provided for in the Conditions, save that the calculation is made in respect of the total aggregate amount of the Instruments, together with such other sums and additional amounts (if any) as may be payable under the Conditions, in accordance with the Conditions. 4 Exchange This permanent Global Instrument is exchangeable (free of charge to the holder) on or after the Exchange Date in whole but not in part for the Definitive Instruments if this permanent Global Instrument is held on behalf of Euroclear or Clearstream, Luxembourg or any other clearing system (an “Alternative Clearing System”) and any such clearing system is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so. “Exchange Date” means a day falling not less than 60 days, or in the case of failure to pay principal when due 30 days, after that on which the notice requiring exchange is given and on which banks are open for business in the city in which the specified office of the Issuing and Paying Agent is located and, except in the case of exchange pursuant to the first paragraph of this section above, in the cities in which Euroclear and Clearstream, Luxembourg or, if relevant, the Alternative Clearing System, are located. Any such exchange may be effected on or after an Exchange Date by the holder of this permanent Global Instrument surrendering this permanent Global Instrument. In exchange for this permanent Global Instrument the Issuer shall deliver, or procure the delivery of, duly executed and authenticated Definitive Instruments in an aggregate nominal amount equal to the nominal amount of this permanent Global Instrument submitted for exchange (if appropriate, having attached to them all Coupons (and, where appropriate, Talons) in respect of interest which have not already been paid on this permanent Global Instrument), security printed and substantially in the form set out in Schedule 2 to the Trust Deed as supplemented and/or modified and/or superseded by the terms of the Third Schedule to this permanent Global Instrument.


 
A41941146 37 5 Benefit of Conditions Except as otherwise specified in this permanent Global Instrument, this permanent Global Instrument is subject to the Conditions and the Trust Deed and, until the whole of this permanent Global Instrument is exchanged for Definitive Instruments, the holder of this permanent Global Instrument shall in all respects be entitled to the same benefits as if it were the holder of the Definitive Instruments for which it may be exchanged and as if such Definitive Instruments had been issued on the Issue Date. 6 Payments No person shall be entitled to receive any payment in respect of the Instruments represented by this permanent Global Instrument that falls due after an Exchange Date for such Instruments, unless upon due presentation of this permanent Global Instrument for exchange, delivery of Definitive Instruments is improperly withheld or refused by or on behalf of the Issuer or the Issuer does not perform or comply with any one or more of what are expressed to be its obligations under any Definitive Instruments. Payments in respect of this permanent Global Instrument shall be made to its holder against presentation and (if no further payment falls to be made on it) surrender of it at the specified office of the Issuing and Paying Agent or of any other Paying Agent provided for in the Conditions. A record of each such payment shall be endorsed on the First or Second Schedule to this permanent Global Instrument, as appropriate, by the Issuing and Paying Agent or by the relevant Paying Agent, for and on behalf of the Issuing and Paying Agent, which endorsement shall (until the contrary is proved) be prima facie evidence that the payment in question has been made. For the purposes of any payments made in respect of this permanent Global Instrument, the words “in the relevant place of presentation” shall not apply in the definition of “business day” in Condition 6.7 (Non-Business Days). 7 Prescription Claims in respect of principal and interest (as each such term is defined in the Conditions) in respect of this permanent Global Instrument shall become void unless it is presented for payment within a period of 10 years (in the case of principal) and five years (in the case of interest) from the appropriate Relevant Date. 8 Meetings For the purposes of any meeting of Instrumentholders, the holder of this permanent Global Instrument shall (unless this permanent Global Instrument represents only one Instrument) be treated as two persons for the purposes of any quorum requirements of a meeting of Instrumentholders and, at any such meeting, as having one vote in respect of each integral currency unit of the Specified Currency of the Instruments. 9 Cancellation Cancellation of any Instrument represented by this permanent Global Instrument which is required by the Conditions to be cancelled (other than upon its redemption) shall be effected by reduction in the nominal amount of this permanent Global Instrument representing such Instrument on its presentation to or to the order of the Issuing and


 
A41941146 38 Paying Agent for endorsement in the First Schedule to this permanent Global Instrument, upon which the nominal amount of this permanent Global Instrument shall be reduced for all purposes by the amount so cancelled and endorsed. 10 Purchase Instruments may only be purchased by the Issuer, or any of its subsidiary undertakings if they are purchased together with the right to receive all future payments of interest (if any) on the Instruments being purchased. 11 Issuer’s Options Any option of the Issuer provided for in the Conditions shall be exercised by the Issuer giving notice to the Instrumentholders within the time limits set out in and containing the information required by the Conditions, except that the notice shall not be required to contain the serial numbers of Instruments drawn in the case of a partial exercise of an option and accordingly no drawing of Instruments shall be required. 12 Instrumentholders’ Redemption Option [and Restructuring Redemption Option]* Any option of the Instrumentholders provided for in the Conditions may be exercised by the holder of this permanent Global Instrument giving notice to the Issuing and Paying Agent within the time limits relating to the deposit of Instruments with a Paying Agent set out in the Conditions substantially in the form of the relevant notice available from any Paying Agent and stating the nominal amount of Instruments in respect of which the option is exercised and at the same time presenting this permanent Global Instrument to the Issuing and Paying Agent, or to a Paying Agent acting on behalf of the Issuing and Paying Agent, for notation accordingly in the Fourth Schedule to this permanent Global Instrument. 13 Notices Notices required to be given in respect of the Instruments represented by this permanent Global Instrument may be given by their being delivered (so long as this permanent Global Instrument is held on behalf of Euroclear, Clearstream, Luxembourg or any Alternative Clearing System) to Euroclear, Clearstream, Luxembourg or such Alternative Clearing System, as the case may be, or otherwise to the holder of this permanent Global Instrument, rather than by publication as required by the Conditions, except that, so long as the Instruments are listed and/or admitted to trading, notices required to be given to the holders of the Notes pursuant to the Conditions shall also be published (if such publication is required) in a manner which complies with the rules and regulations of any stock exchange or other relevant authority on which the Notes are listed/and or admitted to trading. 14 Negotiability This permanent Global Instrument is a bearer document and negotiable and accordingly: (a) is freely transferable by delivery and such transfer shall operate to confer upon the transferee all rights and benefits appertaining to this permanent Global Instrument * If applicable.


 
A41941146 39 and to bind the transferee with all obligations appertaining to this permanent Global Instrument pursuant to the Conditions; (b) the holder of this permanent Global Instrument is and shall be absolutely entitled as against all previous holders to receive all amounts by way of amounts payable upon redemption, interest or otherwise payable in respect of this permanent Global Instrument and the Issuer has waived against such holder and any previous holder of this permanent Global Instrument all rights of set-off or counterclaim which would or might otherwise be available to it in respect of the obligations evidenced by this permanent Global Instrument; and (c) payment upon due presentation of this permanent Global Instrument as provided in this permanent Global Instrument shall operate as a good discharge against such holder and all previous holders of this permanent Global Instrument. No provisions of this permanent Global Instrument shall alter or impair the obligation of the Issuer to pay the principal and premium of and interest on the Instruments when due in accordance with the Conditions. This permanent Global Instrument shall not be valid or become obligatory for any purpose until authenticated by or on behalf of the Issuing and Paying Agent. This permanent Global Instrument and all matters arising from or connected with it shall be governed by, and construed in accordance with, English law.


 
A41941146 40 In witness of which the Issuer has caused this permanent Global Instrument to be duly signed on its behalf. Dated as of the Issue Date. [NATIONAL GRID plc/NATIONAL GRID ELECTRICITY TRANSMISSION plc]* By: CERTIFICATE OF AUTHENTICATION OF THE ISSUING AND PAYING AGENT This permanent Global Instrument is authenticated by or on behalf of the Issuing and Paying Agent. THE BANK OF NEW YORK MELLON as Issuing and Paying Agent By: Authorised Signatory For the purposes of authentication only ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE. * Delete as applicable.


 
A41941146 41 The First Schedule Nominal amount of Instruments represented by this permanent Global Instrument The following (i) issue of Instruments initially represented by this permanent Global Instrument, (ii) exchanges of interests in a temporary Global Instrument for interests in this permanent Global Instrument or for Definitive Instruments and/or (iii) cancellations or forfeitures of interests in this permanent Global Instrument have been made, resulting in the nominal amount of this permanent Global Instrument specified in the latest entry in the fourth column below: Date Amount of increase/decrease in nominal amount of this permanent Global Instrument Reason for increase/decrease in nominal amount of this permanent Global Instrument (initial issue, exchange, cancellation, forfeiture or payment, stating amount of payment made) Nominal amount of this permanent Global Instrument on issue or following such increase/decrease Notation made by or on behalf of the Issuing and Paying Agent


 
A41941146 42 The Second Schedule Payments of Interest The following payments of interest or Interest Amount in respect of this permanent Global Instrument have been made: Due date of payment Date of payment Amount of interest Notation made by or on behalf of the Issuing and Paying Agent


 
A41941146 43 The Third Schedule [Insert the provisions of Part A of the relevant Final Terms that relate to the Conditions or the Global Instruments as the Third Schedule.]


 
A41941146 44 The Fourth Schedule Exercise of Instrumentholders’ Redemption Option [and Restructuring Redemption Option]* The following exercises of the option of the Instrumentholders provided for in the Conditions have been made in respect of the stated nominal amount of this permanent Global Instrument: Date of exercise Nominal amount of this permanent Global Instrument in respect of which exercise is made Date on which exercise of such option is effective Notation made by or on behalf of the Issuing and Paying Agent * If applicable.


 
A41941146 45 Form of Global CGN Permanent Global Instrument (CDS) [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF CDS CLEARING AND DEPOSITORY SERVICES INC. ("CDS") TO [NATIONAL GRID PLC] [NATIONAL GRID ELECTRICITY TRANSMISSION PLC] (THE "ISSUER") OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN RESPECT THEREOF IS REGISTERED IN THE NAME OF CDS & CO., OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CDS (AND ANY PAYMENT IS MADE TO CDS & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CDS), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED HOLDER HEREOF, CDS & CO., HAS A PROPERTY INTEREST IN THE SECURITIES REPRESENTED BY THIS CERTIFICATE HEREIN AND IT IS A VIOLATION OF ITS RIGHTS FOR ANOTHER PERSON TO HOLD, TRANSFER OR DEAL WITH THIS CERTIFICATE.] [NATIONAL GRID plc/ NATIONAL GRID ELECTRICITY TRANSMISSION plc]* (Incorporated with limited liability in England and Wales under the Companies Act 1985 with registered number [04031152/02366977]*) EURO MEDIUM TERM NOTE PROGRAMME Series No. [●] Tranche No. [●] PERMANENT GLOBAL INSTRUMENT Permanent Global Instrument No. [●] This permanent Global Instrument is issued without Coupons in respect of the Instruments (the “Instruments”) of the Tranche(s) and Series specified in the Third Schedule to this permanent Global Instrument of [National Grid plc/National Grid Electricity Transmission plc]* (the “Issuer”). 1 Interpretation and Definitions References in this permanent Global Instrument to the “Conditions” are to the Terms and Conditions applicable to the Instruments (which are in the form set out in Part B of Schedule 2 (Terms and Conditions of the Instruments) to the amended and restated trust deed (as amended or supplemented as at the Issue Date, the “Trust Deed”) dated 30 July 2019 between, inter alios, the Issuer and The Law Debenture Trust Corporation p.l.c. as trustee, as such form is supplemented and/or modified and/or superseded by the provisions of this permanent Global Instrument (including the supplemental definitions and any modifications or additions set out in the Third Schedule to this permanent Global Instrument), which in the event of any conflict shall prevail). Other capitalised terms used in this permanent Global Instrument shall have the meanings given to them in the Conditions or the Trust Deed. * Delete as applicable.


 
A41941146 46 2 Aggregate Nominal Amount The aggregate nominal amount from time to time of this permanent Global Instrument shall be an amount equal to the aggregate nominal amount of the Instruments as shall be shown by the latest entry in the fourth column of the First Schedule to this permanent Global Instrument, which shall be completed by or on behalf of the Canadian Paying Agent upon (a) the issue of the Instruments represented by this permanent Global Instrument (in the case of Instruments represented by this permanent Global Instrument upon issue), (b) the exchange of the whole of this permanent Global Instrument for Definitive Instruments and/or (c) the redemption or purchase and cancellation of Instruments represented by this permanent Global Instrument, all as described below. 3 Promise to Pay Subject as provided in this permanent Global Instrument, the Issuer, for value received, by this permanent Global Instrument promises to pay to the bearer of this permanent Global Instrument, upon presentation and (when no further payment is due in respect of this permanent Global Instrument) surrender of this permanent Global Instrument, on the Maturity Date (or on such earlier date or, if the Maturity Date is specified to be perpetual on such date as the amount payable upon redemption under the Conditions may become repayable in accordance with the Conditions), the amount payable upon redemption under the Conditions in respect of the aggregate nominal amount of Instruments represented by this permanent Global Instrument and (unless this permanent Global Instrument does not bear interest) to pay interest in respect of the Instruments from the Interest Commencement Date in arrear at the rates, on the dates for payment, and in accordance with the methods of calculation provided for in the Conditions, save that the calculation is made in respect of the total aggregate amount of the Instruments, together with such other sums and additional amounts (if any) as may be payable under the Conditions, in accordance with the Conditions. 4 Exchange This permanent Global Instrument is exchangeable (free of charge to the holder) on or after the Exchange Date in whole but not in part for the Definitive Instruments if this permanent Global Instrument is held on behalf of CDS Clearing and Depository Services Inc. (“CDS”) and (i) CDS has notified the Issuer that it is unwilling or unable to continue to act as a depository for the Instruments and a successor depository is not appointed by the Issuer within 90 working days after receiving such notice; or (ii) CDS ceases to be a recognised clearing agency under applicable Canadian or provincial securities legislation and no successor clearing system satisfactory to the Trustee is available within 90 working days after the Issuer becoming aware that CDS is no longer so recognised. “Exchange Date” means a day falling not less than 60 days, or in the case of failure to pay principal when due 30 days, after that on which the notice requiring exchange is given and on which banks are open for business in the city in which the specified office of the Canadian Paying Agent is located and, except in the case of exchange pursuant to the first paragraph of this section above, in the cities in which CDS is located. Any such exchange may be effected on or after an Exchange Date by the holder of this permanent Global Instrument surrendering this permanent Global Instrument. In exchange for this permanent Global Instrument the Issuer shall deliver, or procure the delivery of, duly executed and authenticated Definitive Instruments in an aggregate nominal amount


 
A41941146 47 equal to the nominal amount of this permanent Global Instrument submitted for exchange (if appropriate, having attached to them all Coupons (and, where appropriate, Talons) in respect of interest which have not already been paid on this permanent Global Instrument), security printed and substantially in the form set out in Schedule 2 to the Trust Deed as supplemented and/or modified and/or superseded by the terms of the Third Schedule to this permanent Global Instrument. 5 Benefit of Conditions Except as otherwise specified in this permanent Global Instrument, this permanent Global Instrument is subject to the Conditions and the Trust Deed and, until the whole of this permanent Global Instrument is exchanged for Definitive Instruments, the holder of this permanent Global Instrument shall in all respects be entitled to the same benefits as if it were the holder of the Definitive Instruments for which it may be exchanged and as if such Definitive Instruments had been issued on the Issue Date. 6 Payments No person shall be entitled to receive any payment in respect of the Instruments represented by this permanent Global Instrument that falls due after an Exchange Date for such Instruments, unless upon due presentation of this permanent Global Instrument for exchange, delivery of Definitive Instruments is improperly withheld or refused by or on behalf of the Issuer or the Issuer does not perform or comply with any one or more of what are expressed to be its obligations under any Definitive Instruments. Payments in respect of this permanent Global Instrument shall be made to its holder against presentation and (if no further payment falls to be made on it) surrender of it at the specified office of the Canadian Paying Agent or of any other Paying Agent provided for in the Conditions. A record of each such payment shall be endorsed on the First or Second Schedule to this permanent Global Instrument, as appropriate, by the Canadian Paying Agent or by the relevant Paying Agent, for and on behalf of the Canadian Paying Agent, which endorsement shall (until the contrary is proved) be prima facie evidence that the payment in question has been made. For the purposes of any payments made in respect of this permanent Global Instrument, the words “in the relevant place of presentation” shall not apply in the definition of “business day” in Condition 6.7 (Non-Business Days). 7 Prescription Claims in respect of principal and interest (as each such term is defined in the Conditions) in respect of this permanent Global Instrument shall become void unless it is presented for payment within a period of 10 years (in the case of principal) and five years (in the case of interest) from the appropriate Relevant Date. 8 Meetings For the purposes of any meeting of Instrumentholders, the holder of this permanent Global Instrument shall (unless this permanent Global Instrument represents only one Instrument) be treated as two persons for the purposes of any quorum requirements of a meeting of Instrumentholders and, at any such meeting, as having one vote in respect of each integral currency unit of the Specified Currency of the Instruments.


 
A41941146 48 9 Cancellation Cancellation of any Instrument represented by this permanent Global Instrument which is required by the Conditions to be cancelled (other than upon its redemption) shall be effected by reduction in the nominal amount of this permanent Global Instrument representing such Instrument on its presentation to or to the order of the Canadian Paying Agent for endorsement in the First Schedule to this permanent Global Instrument, upon which the nominal amount of this permanent Global Instrument shall be reduced for all purposes by the amount so cancelled and endorsed. 10 Purchase Instruments may only be purchased by the Issuer, or any of its subsidiary undertakings if they are purchased together with the right to receive all future payments of interest (if any) on the Instruments being purchased. 11 Issuer’s Options Any option of the Issuer provided for in the Conditions shall be exercised by the Issuer giving notice to the Instrumentholders within the time limits set out in and containing the information required by the Conditions, except that the notice shall not be required to contain the serial numbers of Instruments drawn in the case of a partial exercise of an option and accordingly no drawing of Instruments shall be required. 12 Instrumentholders’ Redemption Option [and Restructuring Redemption Option]† Any option of the Instrumentholders provided for in the Conditions may be exercised by the holder of this permanent Global Instrument giving notice to the Canadian Paying Agent within the time limits relating to the deposit of Instruments with a Paying Agent set out in the Conditions substantially in the form of the relevant notice available from any Paying Agent and stating the nominal amount of Instruments in respect of which the option is exercised and at the same time presenting this permanent Global Instrument to the Canadian Paying Agent, or to a Paying Agent acting on behalf of the Canadian Paying Agent, for notation accordingly in the Fourth Schedule to this permanent Global Instrument. 13 Notices Notices required to be given in respect of the Instruments represented by this permanent Global Instrument may be given by their being delivered (so long as this permanent Global Instrument is held on behalf of CDS or any alternative clearing system) CDS or such alternative clearing system, as the case may be, or otherwise to the holder of this permanent Global Instrument, rather than by publication as required by the Conditions, except that, so long as the Instruments are listed and/or admitted to trading, notices required to be given to the holders of the Notes pursuant to the Conditions shall also be published (if such publication is required) in a manner which complies with the rules and regulations of any stock exchange or other relevant authority on which the Notes are listed/and or admitted to trading. † If applicable.


 
A41941146 49 14 Negotiability This permanent Global Instrument is a bearer document and negotiable and accordingly: (d) is freely transferable by delivery and such transfer shall operate to confer upon the transferee all rights and benefits appertaining to this permanent Global Instrument and to bind the transferee with all obligations appertaining to this permanent Global Instrument pursuant to the Conditions; (e) the holder of this permanent Global Instrument is and shall be absolutely entitled as against all previous holders to receive all amounts by way of amounts payable upon redemption, interest or otherwise payable in respect of this permanent Global Instrument and the Issuer has waived against such holder and any previous holder of this permanent Global Instrument all rights of set-off or counterclaim which would or might otherwise be available to it in respect of the obligations evidenced by this permanent Global Instrument; and (f) payment upon due presentation of this permanent Global Instrument as provided in this permanent Global Instrument shall operate as a good discharge against such holder and all previous holders of this permanent Global Instrument. No provisions of this permanent Global Instrument shall alter or impair the obligation of the Issuer to pay the principal and premium of and interest on the Instruments when due in accordance with the Conditions. This permanent Global Instrument shall not be valid or become obligatory for any purpose until authenticated by or on behalf of the Canadian Paying Agent. This permanent Global Instrument and all matters arising from or connected with it shall be governed by, and construed in accordance with, English law.


 
A41941146 50 In witness of which the Issuer has caused this permanent Global Instrument to be duly signed on its behalf. Dated as of the Issue Date. [NATIONAL GRID plc/NATIONAL GRID ELECTRICITY TRANSMISSION plc]* By: CERTIFICATE OF AUTHENTICATION OF THE ISSUING AND PAYING AGENT This permanent Global Instrument is authenticated by or on behalf of the Issuing and Paying Agent. BNY TRUST COMPANY OF CANADA as Canadian Paying Agent By: Authorised Signatory For the purposes of authentication only ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE. * Delete as applicable.


 
A41941146 51 The First Schedule Nominal amount of Instruments represented by this permanent Global Instrument The following (i) issue of Instruments initially represented by this permanent Global Instrument, (ii) exchanges of interests in a temporary Global Instrument for interests in this permanent Global Instrument or for Definitive Instruments and/or (iii) cancellations or forfeitures of interests in this permanent Global Instrument have been made, resulting in the nominal amount of this permanent Global Instrument specified in the latest entry in the fourth column below: Date Amount of increase/decrease in nominal amount of this permanent Global Instrument Reason for increase/decrease in nominal amount of this permanent Global Instrument (initial issue, exchange, cancellation, forfeiture or payment, stating amount of payment made) Nominal amount of this permanent Global Instrument on issue or following such increase/decrease Notation made by or on behalf of the Canadian Paying Agent


 
A41941146 52 The Second Schedule Payments of Interest The following payments of interest or Interest Amount in respect of this permanent Global Instrument have been made: Due date of payment Date of payment Amount of interest Notation made by or on behalf of the Canadian Paying Agent


 
A41941146 53 The Third Schedule [Insert the provisions of Part A of the relevant Final Terms that relate to the Conditions or the Global Instruments as the Third Schedule.]


 
A41941146 54 The Fourth Schedule Exercise of Instrumentholders’ Redemption Option [and Restructuring Redemption Option]* The following exercises of the option of the Instrumentholders provided for in the Conditions have been made in respect of the stated nominal amount of this permanent Global Instrument: Date of exercise Nominal amount of this permanent Global Instrument in respect of which exercise is made Date on which exercise of such option is effective Notation made by or on behalf of the Canadian Paying Agent * If applicable.


 
A41941146 55 Schedule 1 Part C Form of NGN Temporary Global Instrument [NATIONAL GRID plc/NATIONAL GRID ELECTRICITY TRANSMISSION plc]* (Incorporated with limited liability in England and Wales under the Companies Act 1985 with registered number [04031152/02366977]*) EURO MEDIUM TERM NOTE PROGRAMME Series No. [•] Tranche No. [•] TEMPORARY GLOBAL INSTRUMENT Temporary Global Instrument No. [•] This temporary Global Instrument is issued without Coupons in respect of the Instruments (the “Instruments”) of the Tranche and Series specified in Part A of the Schedule to this temporary Global Instrument of [National Grid plc/National Grid Electricity Transmission plc]* (the “Issuer”). 1 Interpretation and Definitions References in this temporary Global Instrument to the “Conditions” are to the Terms and Conditions applicable to the Instruments (which are in the form set out in Part B of Schedule 2 (Terms and Conditions of the Instruments) to the amended and restated trust deed (as amended or supplemented as at the Issue Date, the “Trust Deed”) dated 30 July 2019 between, inter alios, the Issuer and The Law Debenture Trust Corporation p.l.c. as trustee, as such form is supplemented and/or modified and/or superseded by the provisions of this temporary Global Instrument (including the supplemental definitions and any modifications or additions set out in Part A of the Schedule hereto), which in the event of any conflict shall prevail). Other capitalised terms used in this temporary Global Instrument shall have the meanings given to them in the Conditions or the Trust Deed. If the Schedule to this temporary Global Instrument specifies that the applicable TEFRA exemption is either “C Rules” or “not applicable”, this temporary Global Instrument is a “C Rules Instrument”, otherwise this temporary Global Instrument is a “D Rules Instrument”. 2 Aggregate Nominal Amount The aggregate nominal amount from time to time of this temporary Global Instrument shall be an amount equal to the aggregate nominal amount of the Instruments from time to time entered in the records of both Euroclear and Clearstream, Luxembourg (together the “relevant Clearing Systems”), which shall be completed by or on behalf of the Issuing and Paying Agent upon (a) the issue of Instruments represented by this temporary Global Instrument, (b) the exchange of the whole or a part of this temporary Global Instrument for a corresponding interest recorded in the records of the relevant Clearing Systems in a permanent Global Instrument or, as the case may be, for Definitive Instruments and/or (c) the redemption or purchase and cancellation of Instruments represented by this temporary Global Instrument, all as described below. The records of the relevant Clearing Systems (which expression in this temporary Global Instrument means the records that each relevant Clearing System holds for its customers which reflect the amount of such customers’ interests in the Instruments) shall be conclusive evidence of the nominal amount of the Instruments represented by this temporary Global Instrument and, for * Delete as applicable.


 
A41941146 56 these purposes, a statement issued by a relevant Clearing System (which statement shall be made available to the bearer upon request) stating the nominal amount of Instruments represented by the temporary Global Instrument at any time shall be conclusive evidence of the records of the relevant Clearing Systems at that time. 3 Promise to Pay Subject as provided in this temporary Global Instrument, the Issuer, for value received by this temporary Global Instrument, promises to pay to the bearer of this temporary Global Instrument, upon presentation and (when no further payment is due in respect of this temporary Global Instrument) surrender of this temporary Global Instrument, on the Maturity Date (or on such earlier date or, if the Maturity Date is specified to be perpetual, on such date as the amount payable upon redemption under the Conditions may become repayable in accordance with the Conditions) the amount payable upon redemption under the Conditions in respect of the aggregate nominal amount of Instruments represented by this temporary Global Instrument and (unless this temporary Global Instrument does not bear interest) to pay interest in respect of the Instruments from the Interest Commencement Date in arrear at the rates, on the dates for payment, and in accordance with the methods of calculation provided for in the Conditions, save that the calculation is made in respect of the total aggregate amount of the Instruments, together with such other sums and additional amounts (if any) as may be payable under the Conditions, in accordance with the Conditions. 4 Exchange On or after the first day following the expiry of 40 days after the Issue Date (the “Exchange Date”), this temporary Global Instrument may be exchanged (free of charge to the holder) in whole or (in the case of a D Rules Instrument only) from time to time in part by its presentation and, on exchange in full, surrender to or to the order of the Issuing and Paying Agent for interests recorded in the records of the relevant Clearing Systems in a permanent Global Instrument or, if so specified in Part A of the Schedule to this temporary Global Instrument, for Definitive Instruments in an aggregate nominal amount equal to the nominal amount of this temporary Global Instrument submitted for exchange provided that, in the case of any part of a D Rules Instrument submitted for exchange for interests recorded in the records of the relevant Clearing Systems in a permanent Global Instrument or Definitive Instruments, there shall have been Certification with respect to such nominal amount submitted for such exchange dated no earlier than the Exchange Date. “Certification” means the presentation to the Issuing and Paying Agent of a certificate or certificates with respect to one or more interests in this temporary Global Instrument, signed by Euroclear or Clearstream, Luxembourg, substantially to the effect set out in Schedule 3 (Provisions for Meetings of Instrumentholders) to the Trust Deed to the effect that it has received a certificate or certificates substantially to the effect set out in Schedule 2 to the Trust Deed with respect to it and that no contrary advice as to the contents of the certificate has been received by Euroclear or Clearstream, Luxembourg, as the case may be. Upon the whole or a part of this temporary Global Instrument being exchanged for a permanent Global Instrument, such permanent Global Instrument shall be exchangeable in accordance with its terms for Definitive Instruments. The Definitive Instruments, for which this temporary Global Instrument or a permanent Global Instrument may be exchangeable, shall be duly executed and authenticated, shall, in the case of Definitive Instruments, have attached to them all Coupons (and, where appropriate, Talons) in respect of interest which have not already been paid on this temporary Global Instrument or the permanent Global Instrument, as the case may be, shall be security printed and shall be


 
A41941146 57 substantially in the form set out in the relevant Schedules to the Trust Deed as supplemented and/or modified and/or superseded by the terms of Part A of the Schedule to this temporary Global Instrument. On any exchange of a part of this temporary Global Instrument for an equivalent interest recorded in the records of the relevant Clearing Systems in a permanent Global Instrument or for Definitive Instruments, as the case may be, the Issuer shall procure that details of the portion of the nominal amount hereof so exchanged shall be entered pro rata in the records of the relevant Clearing Systems and upon any such entry being made, the nominal amount of the Instruments recorded in the records of the relevant Clearing Systems and represented by this temporary Global Instrument shall be reduced for all purposes by an amount equal to such portion so exchanged. 5 Benefit of Conditions Except as otherwise specified in this temporary Global Instrument, this temporary Global Instrument is subject to the Conditions and the Trust Deed and, until the whole of this temporary Global Instrument is exchanged for equivalent interests in a permanent Global Instrument or for Definitive Instruments, as the case may be, the holder of this temporary Global Instrument shall in all respects be entitled to the same benefits as if it were the holder of the permanent Global Instrument (or the relevant part of it) or the Definitive Instruments, as the case may be, for which it may be exchanged as if such permanent Global Instrument or Definitive Instruments had been issued on the Issue Date. 6 Payments No person shall be entitled to receive any payment in respect of the Instruments represented by this temporary Global Instrument which falls due on or after the Exchange Date unless, upon due presentation of this temporary Global Instrument for exchange, delivery of (or, in the case of a subsequent exchange, a corresponding entry being recorded in the records of the relevant Clearing Systems) a permanent Global Instrument or delivery of Definitive Instruments, as the case may be, is improperly withheld or refused by or on behalf of the Issuer. Payments due in respect of a D Rules Instrument before the Exchange Date shall only be made in relation to such nominal amount of this temporary Global Instrument with respect to which there shall have been Certification dated no earlier than such due date for payment. Any payments which are made in respect of this temporary Global Instrument shall be made to its holder against presentation and (if no further payment falls to be made on it) surrender of it at the specified office of the Issuing and Paying Agent or of any other Paying Agent provided for in the Conditions and each payment so made will discharge the Issuer’s obligations in respect thereof. Any failure to make the entries in the records of the relevant Clearing Systems referred to herein shall not affect such discharge. If any payment in full or in part of principal is made in respect of any Instrument represented by this temporary Global Instrument, the Issuer shall procure that details of such payment shall be entered pro rata in the records of the relevant Clearing Systems and, upon any such entry being made, the nominal amount of the Instruments recorded in the records of the relevant Clearing Systems and represented by this temporary Global Instrument shall be reduced by the aggregate nominal amount of the Instruments so redeemed. If any other payments are made in respect of the Instruments represented by this temporary Global Instrument, the Issuer shall procure that a record of each such payment shall be entered pro rata in the records of the relevant Clearing Systems).


 
A41941146 58 For the purposes of any payments made in respect of this temporary Global Instrument, the words “in the relevant place of presentation” shall not apply in the definition of “business day” in Condition 6.7 (Non-Business Days). 7 Cancellation On cancellation of any Instrument represented by this temporary Global Instrument which is required by the Conditions to be cancelled (other than upon its redemption), the Issuer shall procure that details of such cancellation shall be entered pro rata in the records of the relevant Clearing Systems and, upon any such entry being made, the nominal amount of the Instrument recorded in the records of the relevant Clearing Systems and represented by this temporary Global Instrument shall be reduced by the aggregate nominal amount of the Instruments so cancelled. 8 Notices Notices required to be given in respect of the Instruments represented by this temporary Global Instrument may be given by their being delivered (so long as this temporary Global Instrument is held on behalf of Euroclear and Clearstream, Luxembourg or any other clearing system) to Euroclear, Clearstream, Luxembourg or such other clearing system, as the case may be, or otherwise to the holder of this temporary Global Instrument, rather than by publication as required by the Conditions, except that, so long as the Instruments are listed and/or admitted to trading, notices required to be given to the holders of the Notes pursuant to the Conditions shall also be published (if such publication is required) in a manner which complies with the rules and regulations of any stock exchange or other relevant authority on which the Notes are listed/and or admitted to trading. No provision of this temporary Global Instrument shall alter or impair the obligation of the Issuer to pay the principal and premium of and interest on the Instruments when due in accordance with the Conditions. This temporary Global Instrument shall not be valid or become obligatory for any purpose until authenticated by or on behalf of the Issuing and Paying Agent and effectuated by the entity appointed as Common Safekeeper by the relevant Clearing Systems. This temporary Global Instrument and all matters arising from or connected with it shall be governed by and construed in accordance with English law.


 
A41941146 59 In witness of which the Issuer has caused this temporary Global Instrument to be duly signed on its behalf. Dated as of the Issue Date. [NATIONAL GRID plc/NATIONAL GRID ELECTRICITY TRANSMISSION plc] * By: Authorised Signatory CERTIFICATE OF AUTHENTICATION OF THE ISSUING AND PAYING AGENT This temporary Global Instrument is authenticated by or on behalf of the Issuing and Paying Agent. THE BANK OF NEW YORK MELLON as Issuing and Paying Agent By: Authorised Signatory For the purposes of authentication only Effectuation This temporary Global Instrument Is effectuated by [COMMON SAFEKEEPER] As Common Safekeeper By: Authorised Signatory For the purposes of effectuation only ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE. * Delete as applicable.


 
A41941146 60 The Schedule [Insert the provisions of the relevant Final Terms that relate to the Conditions or the Global Instruments as the Schedule]


 
A41941146 61 Schedule 1 Part D Form of NGN Permanent Global Instrument [NATIONAL GRID plc/NATIONAL GRID ELECTRICITY TRANSMISSION plc]* (Incorporated with limited liability in England and Wales under the Companies Act 1985 with registered number [04031152/02366977]*) EURO MEDIUM TERM NOTE PROGRAMME Series No. [•] Tranche No. [•] PERMANENT GLOBAL INSTRUMENT Permanent Global Instrument No. [•] This permanent Global Instrument is issued without Coupons in respect of the Instruments (the “Instruments”) of the Tranche(s) and Series specified in Part A of the Schedule to this permanent Global Instrument of [National Grid plc/National Grid Electricity Transmission plc]* (the “Issuer”). 1 Interpretation and Definitions References in this permanent Global Instrument to the “Conditions” are to the Terms and Conditions applicable to the Instruments (which are in the form set out in Part B of Schedule 2 (Terms and Conditions of the Instruments) to the amended and restated trust deed (as amended or supplemented as at the Issue Date, the “Trust Deed”) dated 30 July 2019 between, inter alios, the Issuer and The Law Debenture Trust Corporation p.l.c. as trustee, as such form is supplemented and/or modified and/or superseded by the provisions of this permanent Global Instrument (including the supplemental definitions and any modifications or additions set out in the Third Schedule to this permanent Global Instrument), which in the event of any conflict shall prevail). Other capitalised terms used in this permanent Global Instrument shall have the meanings given to them in the Conditions or the Trust Deed. 2 Aggregate Nominal Amount The aggregate nominal amount from time to time of this permanent Global Instrument shall be an amount equal to the aggregate nominal amount of the Instruments from time to time entered in the records of both Euroclear and Clearstream, Luxembourg (together, the “relevant Clearing Systems”), which shall be completed and/or amended as the case may be upon (a) the exchange of the whole or a part of the interests recorded in the records of the relevant Clearing Systems in the temporary Global Instrument initially representing the Instruments for a corresponding interest in this permanent Global Instrument (in the case of Instruments represented by a temporary Global Instrument upon issue), (b) the issue of the Instruments represented by this permanent Global Instrument (in the case of Instruments represented by this permanent Global Instrument upon issue), (c) the exchange of the whole of this permanent Global Instrument for Definitive Instruments and/or (d) the redemption or purchase and cancellation of Instruments represented by this permanent Global Instrument, all as described below. The records of the relevant Clearing Systems (which expression in this permanent Global Instrument means the records that each relevant Clearing System holds for its customers which reflect the amount of such customers’ interests in the Instruments) shall be conclusive evidence of the nominal amount of the Instruments represented by this permanent Global Instrument and, for * Delete as applicable.


 
A41941146 62 these purposes, a statement issued by a relevant Clearing System (which statement shall be made available to the bearer upon request) stating the nominal amount of Instruments represented by this permanent Global Instrument at any time shall be conclusive evidence of the records of the relevant Clearing System at that time. 3 Promise to Pay Subject as provided in this permanent Global Instrument, the Issuer, for value received, by this permanent Global Instrument promises to pay to the bearer of this permanent Global Instrument, upon presentation and (when no further payment is due in respect of this permanent Global Instrument) surrender of this permanent Global Instrument, on the Maturity Date (or on such earlier date or, if the Maturity Date is specified to be perpetual on such date as the amount payable upon redemption under the Conditions may become repayable in accordance with the Conditions), the amount payable upon redemption under the Conditions in respect of the aggregate nominal amount of Instruments represented by this permanent Global Instrument and (unless this permanent Global Instrument does not bear interest) to pay interest in respect of the Instruments from the Interest Commencement Date in arrear at the rates, on the dates for payment, and in accordance with the methods of calculation provided for in the Conditions, save that the calculation is made in respect of the total aggregate amount of the Instruments, together with such other sums and additional amounts (if any) as may be payable under the Conditions, in accordance with the Conditions. 4 Exchange This permanent Global Instrument is exchangeable (free of charge to the holder) on or after the Exchange Date in whole but not in part for the Definitive Instruments if this permanent Global Instrument is held on behalf of Euroclear or Clearstream, Luxembourg or any other clearing system (an “Alternative Clearing System”) and any such clearing system is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so. “Exchange Date” means a day falling not less than 60 days, or in the case of failure to pay principal when due, 30 days after that on which the notice requiring exchange is given and on which banks are open for business in the city in which the specified office of the Issuing and Paying Agent is located and, except in the case of exchange pursuant to the first paragraph of this section above, in the cities in which Euroclear and Clearstream, Luxembourg or, if relevant, the Alternative Clearing System, are located. Any such exchange may be effected on or after an Exchange Date by the holder of this permanent Global Instrument surrendering this permanent Global Instrument. In exchange for this permanent Global Instrument the Issuer shall deliver, or procure the delivery of, duly executed and authenticated Definitive Instruments in an aggregate nominal amount equal to the nominal amount of this permanent Global Instrument submitted for exchange (if appropriate, having attached to them all Coupons (and, where appropriate, Talons) in respect of interest which have not already been paid on this permanent Global Instrument), security printed and substantially in the form set out in Schedule 2 to the Trust Deed as supplemented and/or modified and/or superseded by the terms of Part A of the Schedule to this permanent Global Instrument. 5 Benefit of Conditions Except as otherwise specified in this permanent Global Instrument, the Issuer shall procure that this permanent Global Instrument is subject to the Conditions and the Trust Deed and, until the whole of this permanent Global Instrument is exchanged for Definitive Instruments, the holder of


 
A41941146 63 this permanent Global Instrument shall in all respects be entitled to the same benefits as if it were the holder of the Definitive Instruments for which it may be exchanged and as if such Definitive Instruments had been issued on the Issue Date. 6 Payments No person shall be entitled to receive any payment in respect of the Instruments represented by this permanent Global Instrument that falls due after an Exchange Date for such Instruments, unless upon due presentation of this permanent Global Instrument for exchange, delivery of Definitive Instruments is improperly withheld or refused by or on behalf of the Issuer or the Issuer does not perform or comply with any one or more of what are expressed to be its obligations under any Definitive Instruments. Payments in respect of this permanent Global Instrument shall be made to its holder against presentation and (if no further payment falls to be made on it) surrender of it at the specified office of the Issuing and Paying Agent or of any other Paying Agent provided for in the Conditions and each payment so made will discharge the Issuer’s obligations in respect thereof. Any failure to make the entries in the records of the relevant Clearing Systems referred to herein shall not affect such discharge. The Issuer shall procure that details of each such payment shall be entered pro rata in the records of the relevant Clearing Systems and in the case of any payment of principal and upon any such entry being made, the nominal amount of the Instruments recorded in the records of the relevant Clearing Systems and represented by this permanent Global Instrument shall be reduced by the aggregate nominal amount of the Instruments so redeemed. For the purposes of any payments made in respect of this permanent Global Instrument, the words “in the relevant place of presentation” shall not apply in the definition of “business day” in Condition 6.7 (Non-Business Days). 7 Prescription Claims in respect of principal and interest (as each is defined in the Conditions) in respect of this permanent Global Instrument shall become void unless it is presented for payment within a period of 10 years (in the case of principal) and 5 years (in the case of interest) from the appropriate Relevant Date. 8 Meetings For the purposes of any meeting of Instrumentholders the holder of this permanent Global Instrument shall (unless this permanent Global Instrument represents only one Instrument) be treated as two persons for the purposes of any quorum requirements of a meeting of Instrumentholders and, at any such meeting, as having one vote in respect of each integral currency unit of the specified currency of the Instruments. 9 Cancellation On cancellation of any Instrument represented by this permanent Global Instrument which is required by the Conditions to be cancelled (other than upon its redemption) the Issuer shall procure that details of such cancellation shall be entered pro rata in the records of the relevant Clearing Systems and, upon any such entry being made, the nominal amount of the Instruments recorded in the records of the relevant Clearing Systems and represented by this permanent Global Instrument shall be reduced by the aggregate nominal amount of the Instruments so cancelled.


 
A41941146 64 10 Purchase Instruments may only be purchased by the Issuer or any of its subsidiary undertakings if they are purchased together with the right to receive all future payments of interest on the Instruments being purchased. 11 Issuer’s Options Any option of the Issuer provided for in the Conditions shall be exercised by the Issuer giving notice to the Instrumentholders and the relevant Clearing Systems (or procuring that such notice is given on its behalf) within the time limits set out in and containing the information required by the Conditions, except that the notice shall not be required to contain the serial numbers of Instruments drawn in the case of a partial exercise of an option and accordingly no drawing of Instruments shall be required. In the case of a partial exercise of an option, the rights of accountholders with a clearing system in respect of the Instruments will be governed by the standard procedures of Euroclear and/or Clearstream, Luxembourg and shall be reflected in the records of Euroclear and/or Clearstream, Luxembourg as either a pool factor or a reduction in nominal amount, at their discretion. Following the exercise of any such option, the Issuer shall procure that the nominal amount of the Instruments recorded in the records of the relevant Clearing Systems and represented by this permanent Global Instrument shall be reduced accordingly. 12 Instrumentholders’ Options Option [and Restructuring Redemption Option]‡ Any option of the Instrumentholders provided for in the Conditions may be exercised by the holder of this permanent Global Instrument giving notice to the Issuing and Paying Agent within the time limits relating to the deposit of Instruments with a Paying Agent set out in the Conditions substantially in the form of the notice available from any Paying Agent, except that the notice shall not be required to contain the certificate numbers of the Instruments in respect of which the option has been exercised, following the exercise of any such option, the Issuer shall procure that the nominal amount of the Instruments recorded in the records of the relevant Clearing Systems and represented by this permanent Global Instrument shall be reduced by the aggregate nominal amount stated in the relevant exercise notice. 13 Notices Notices required to be given in respect of the Instruments represented by this permanent Global Instrument may be given by their being delivered (so long as this permanent Global Instrument is held on behalf of Euroclear and Clearstream, Luxembourg or any other clearing system) to Euroclear, Clearstream, Luxembourg or such other clearing system, as the case may be, or otherwise to the holder of this permanent Global Instrument, rather than by publication as required by the Conditions, except that, so long as the Instruments are listed and/or admitted to trading, notices required to be given to the holders of the Notes pursuant to the Conditions shall also be published (if such publication is required) in a manner which complies with the rules and regulations of any stock exchange or other relevant authority on which the Notes are listed/and or admitted to trading. 14 Negotiability This permanent Global Instrument is a bearer document and negotiable and accordingly: ‡ If applicable.


 
A41941146 65 (a) is freely transferable by delivery and such transfer shall operate to confer upon the transferee all rights and benefits appertaining to this permanent Global Instrument and to bind the transferee with all obligations appertaining to this permanent Global Instrument pursuant to the Conditions; (b) the holder of this permanent Global Instrument is and shall be absolutely entitled as against all previous holders to receive all amounts by way of amounts payable upon redemption, interest or otherwise payable in respect of this permanent Global Instrument and the Issuer has waived against such holder and any previous holder of this permanent Global Instrument all rights of set-off or counterclaim which would or might otherwise be available to it in respect of the obligations evidenced by this permanent Global Instrument; and (c) payment upon due presentation of this permanent Global Instrument as provided in this permanent Global Instrument shall operate as a good discharge against such holder and all previous holders of this permanent Global Instrument. No provisions of this permanent Global Instrument shall alter or impair the obligation of the Issuer to pay the principal and premium of and interest on the Instruments when due in accordance with the Conditions. This permanent Global Instrument shall not be valid or become obligatory for any purpose until authenticated by or on behalf of the Issuing and Paying Agent and effectuated by the entity appointed as common safekeeper by the relevant Clearing Systems. This permanent Global Instrument and all matters arising from or connected with it shall be governed by, and construed in accordance with, English law.


 
A41941146 66 In witness of which the Issuer has caused this permanent Global Instrument to be duly signed on its behalf. Dated as of the Issue Date. [NATIONAL GRID plc/NATIONAL GRID ELECTRICITY TRANSMISSION plc]* By: Authorised Signatory CERTIFICATE OF AUTHENTICATION OF THE ISSUING AND PAYING AGENT This permanent Global Instrument is authenticated by or on behalf of the Issuing and Paying Agent. THE BANK OF NEW YORK MELLON as Issuing and Paying Agent By: Authorised Signatory For the purposes of authentication only Effectuation This permanent Global Instrument is effectuated by [COMMON SAFEKEEPER] As Common Safekeeper By: Authorised Signatory For the purposes of effectuation only. ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE. * Delete as applicable.


 
A41941146 67 The Schedule [Insert the provisions of the relevant Final Terms that relate to the Conditions or the Global Instruments as the Schedule.]


 
A41941146 68 Schedule 2 Part A Form of Definitive Instrument On the front: [Denomination] [ISIN] [Series] [Certif. No.] [Currency and denomination] [NATIONAL GRID plc/ NATIONAL GRID ELECTRICITY TRANSMISSION plc]* (Incorporated with limited liability in England and Wales under the Companies Act 1985 with registered number [04031152/02366977]*) EURO MEDIUM TERM NOTE PROGRAMME Series No. [●] Tranche No. [●] [Title of issue] This Instrument forms one of the Series of Instruments referred to above (the “Instruments”) of [National Grid plc/National Grid Electricity Transmission plc]* (the “Issuer”) designated as specified in the title of this Instrument. The Instruments are subject to the Terms and Conditions (the “Conditions”) endorsed on this Instrument and are issued subject to, and with the benefit of, the Trust Deed referred to in the Conditions. Expressions defined in the Conditions have the same meanings in this Instrument. The Issuer, for value received, promises to pay to the bearer of this Instrument, on presentation, and (when no further payment is due in respect of this Instrument) surrender, of this Instrument on the Maturity Date (or on such earlier date or, if the Maturity Date is specified to be perpetual, on such date as the amount payable upon redemption under the Conditions may become repayable in accordance with the Conditions) the amount payable upon redemption under the Conditions and (unless this Instrument does not bear interest) to pay interest from the Interest Commencement Date in arrear at the rates, in the amounts and on the dates for payment provided for in the Conditions together with such other sums and additional amounts (if any) as may be payable under the Conditions, in accordance with the Conditions. This Instrument shall not become valid or obligatory for any purpose until authenticated by or on behalf of the Issuing and Paying Agent. * Delete as applicable.


 
A41941146 69 In witness of which the Issuer has caused this Instrument to be signed on its behalf. Dated as of the Issue Date. [NATIONAL GRID plc/NATIONAL GRID ELECTRICITY TRANSMISSION plc]* By: CERTIFICATE OF AUTHENTICATION OF THE ISSUING AND PAYING AGENT This Instrument is authenticated by or on behalf of the Issuing and Paying Agent. THE BANK OF NEW YORK MELLON as Issuing and Paying Agent By: Authorised Signatory For the purposes of authentication only ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.


 
A41941146 70 On the back: Terms and Conditions of the Instruments [The Terms and Conditions which are set out in Part B of Schedule 2 (Terms and Conditions of the Instruments) to the Trust Deed, as amended by and incorporating any additional provisions forming part of such Terms and Conditions, and set out in Part A of the relevant Final Terms shall be set out here.] ISSUING AND PAYING AGENT The Bank of New York Mellon One Canada Square London E14 5AL PAYING AGENTS Quintet Private Bank (Europe) S.A. 43 Boulevard Royal L-2955 Luxembourg BNY Trust Company of Canada 320 Bay Street, 11th Floor Toronto, ON Canada M5H 4A6


 
A41941146 71 Schedule 2 Part B Terms and Conditions of the Instruments References in these terms and conditions (the “Conditions”) to “Instruments” (as defined below) are to the Instruments of one Series only of the relevant Issuer (as defined below), not to all Instruments that may be issued under the Programme. National Grid plc (“National Grid”) and National Grid Electricity Transmission plc (“NGET”) (each an “Issuer” and together, the “Issuers”) have established a Euro Medium Term Note Programme (the “Programme”) for the issuance of up to Euro 15,000,000,000 in aggregate principal amount of debt instruments (the “Instruments”). The Instruments, other than the Australian Domestic Instruments (as defined below), are constituted by a Trust Deed (as amended or supplemented from time to time, the “Trust Deed”) dated 7 August 2020 between the Issuers and The Law Debenture Trust Corporation p.l.c. (the “Trustee”, which expression shall include all persons for the time being the trustee or trustees under the Trust Deed) as trustee for the Instrumentholders (as defined below). These Conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed, which includes the form of the Definitive Instruments, Coupons and Talons referred to below. An Agency Agreement (as amended or supplemented from time to time, the “Agency Agreement”) dated 30 July 2019 has been entered into in relation to the Instruments (other than the Australian Domestic Instruments) between the Issuers, the Trustee, The Bank of New York Mellon, London Branch as initial issuing and paying agent and the other agent(s) named in it. The issuing and paying agent, the paying agent(s) and the calculation agent(s) for the time being (if any) are referred to below respectively as the “Issuing and Paying Agent”, the “Paying Agents” (which expression shall include the Issuing and Paying Agent) and the “Calculation Agent(s)”. Instruments (the “Australian Domestic Instruments”) may be issued under a deed poll (as amended or supplemented from time to time, the “Australian Deed Poll”) dated 10 September 2012 made by the Issuers in favour of the Trustee and the holders of those Instruments. The provisions of these Conditions relating to Coupons and Talons (each as defined below) do not apply to Australian Domestic Instruments. An agency and registry agreement (as amended or supplemented from time to time, the “Australian Agency and Registry Agreement”) dated 10 September 2012 has been entered into in relation to the Australian Domestic Instruments between the Issuers and BTA Institutional Services Australia Ltd as issuing and paying agent and registrar (the “Australian Issuing and Paying Agent” and the “Australian Registrar”). The Australian Registrar will maintain a register of holders of the Australian Domestic Instruments (the “Australian Register”). References in these terms and conditions to the Agent and the Paying Agent and the Agency Agreement shall, in relation to the Australian Domestic Instruments, be a reference to the Australian Issuing and Paying Agent and the Australian Agency and Registry Agreement respectively. Copies of the Trust Deed, the Agency Agreement and the Australian Agency and Registry Agreement are available for inspection during usual business hours at the registered office of the Trustee (as at 7 August 2020 at Fifth Floor, 100 Wood Street, London EC2V 7EX) and at the specified offices of the Paying Agents. The Instrumentholders, the holders of the interest coupons (the “Coupons”) appertaining to interest bearing Instruments and, where applicable in the case of such Instruments, talons for further Coupons (the “Talons”) (the “Couponholders”) are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and are deemed to have notice of those provisions of the Agency Agreement applicable to them. 1 Form, Denomination and Title The Instruments are issued in:


 
A41941146 72 (a) bearer form in the Specified Denomination(s) specified in the relevant Final Terms and are serially numbered; or (b) in the case of Australian Domestic Instruments, registered uncertificated (or inscribed) form and are constituted by the Australian Deed Poll, as specified in the relevant Final Terms. Instruments of one Specified Denomination are not exchangeable for Instruments of another Specified Denomination. Australian Domestic Instruments may not be exchanged for Instruments in bearer form and Instruments in bearer form may not be exchanged for Australian Domestic Instruments. This Instrument is a Fixed Rate Instrument, a Floating Rate Instrument, a Zero Coupon Instrument, an Index Linked Interest Instrument or an Index Linked Redemption Instrument or a combination of any of the preceding, depending upon the Interest and Redemption/Payment Basis specified in the relevant Final Terms. Instruments are issued with Coupons (and, where appropriate, a Talon) attached, save in the case of Zero Coupon Instruments in which case references to interest (other than in relation to interest due after the Maturity Date), Coupons and Talons in these Conditions are not applicable. Talons may be required if more than twenty seven coupon payments are to be made with regards to the relevant Instruments. Title to the Instruments and Coupons and Talons shall pass by delivery and except as ordered by a court of competent jurisdiction or as required by law, the Issuer and the Paying Agents shall be entitled to treat the bearer of any Instrument, Coupon or Talon as the absolute owner of that Instrument, Coupon or Talon, as the case may be, and shall not be required to obtain any proof of ownership as to the identity of the bearer. In these Conditions, “Instrumentholder” means the bearer of any Instrument of one Series only of an Issuer, “holder” (in relation to an Instrument, Coupon or Talon) means the bearer of any Instrument, Coupon or Talon and capitalised terms have the meanings given to them herein, the absence of any such meaning indicating that such term is not applicable to the Instruments. In the case of Australian Domestic Instruments, the following provisions apply and prevail over the foregoing provisions of this Condition 1 to the extent of any inconsistency. Australian Domestic Instruments will be debt obligations of the Issuer constituted by the Australian Deed Poll and will take the form of entries in the Australian Register to be established and maintained by the Australian Registrar in Sydney, or such other place specified in the applicable Final Terms agreed by the Issuer with the Australian Registrar. The relevant Issuer will arrange for the Australian Registrar to maintain the Australian Register so as to show at all times such details of the Instrumentholders and the Australian Domestic Instruments as are required to be shown on the Australian Register by or for the effective operation of these Conditions or by law or which the relevant Issuer and Australian Registrar determine should be shown in the Australian Register. Although Australian Domestic Instruments will not be constituted by the Trust Deed, Australian Domestic Instruments will have the benefit of, and be issued subject to, certain other provisions of the Trust Deed. The Agency Agreement is not applicable to Australian Domestic Instruments. In relation to Australian Domestic Instruments, the expression “Instrumentholder” or “holder” means a person (or persons) whose name is for the time being entered in the Australian Register as the holder of an Australian Domestic Instrument. For the avoidance of doubt, where an Australian Domestic Instrument is entered into the Austraclear System, the expressions “Instrumentholder” or “holder” in respect of that Australian Domestic Instrument means Austraclear as operator of the Austraclear System. Australian Domestic Instruments will not be serially numbered, unless otherwise agreed with the Australian Registrar. Each entry in the Australian Register constitutes a separate and individual acknowledgement to


 
A41941146 73 the Trustee on behalf of, and to, the relevant Instrumentholder of the indebtedness of the relevant Issuer to the Trustee on behalf of, and to, the relevant Instrumentholder. The obligations of the relevant Issuer in respect of each Australian Domestic Instrument constitute separate and independent obligations which the Instrumentholder and the Trustee are entitled to enforce in accordance with (and subject to) these Conditions, the Trust Deed and the Australian Deed Poll. No certificate or other evidence of title will be issued by or on behalf of the relevant Issuer to evidence title to an Australian Domestic Instrument unless the relevant Issuer determines that certificates should be made available or it is required to do so pursuant to any applicable law or regulation. No Australian Domestic Instrument will be registered in the name of more than four persons. Australian Domestic Instruments registered in the name of more than one person are held by those persons as joint tenants. Australian Domestic Instruments will be registered by name only, without reference to any trusteeship and an entry in the Australian Register in relation to an Australian Domestic Instrument constitutes conclusive evidence that the person so entered is the absolute owner of such Instrument, subject to rectification for fraud or error. Title to an Australian Domestic Instrument and all rights and entitlements arising by virtue of the Australian Deed Poll or the Trust Deed in respect of that Australian Domestic Instrument vest absolutely in the registered owner of the Australian Domestic Instrument, subject to rectification of the Australian Register for fraud or error, such that no person who has previously been registered as the owner of the Australian Domestic Instrument has or is entitled to assert against the Issuer or the Australian Registrar or the registered owner of the Australian Domestic Instrument for the time being and from time to time any rights, benefits or entitlements in respect of the Australian Domestic Instrument. Australian Domestic Instruments may be transferred in whole but not in part. Australian Domestic Instruments will be transferred by duly completed and (if applicable) stamped transfer and acceptance forms in the form specified by, and obtainable from, the Australian Registrar or by any other manner approved by the Issuer and the Australian Registrar. Australian Domestic Instruments entered in the Austraclear System (as defined below) will be transferable only in accordance with the Austraclear Regulations (as defined below). Unless the Australian Domestic Instruments are lodged in the Austraclear System, application for the transfer of Australian Domestic Instruments must be made by the lodgement of a transfer and acceptance form with the Australian Registrar. Each transfer and acceptance form must be accompanied by such evidence (if any) as the Australian Registrar may require to prove the title of the transferor or the transferor’s right to transfer the Australian Domestic Instruments and must be signed by both the transferor and the transferee. The transferor of an Australian Domestic Instrument is deemed to remain the holder of that Australian Domestic Instrument until the name of the transferee is entered in the Australian Register in respect of that Australian Domestic Instrument. Transfers will not be registered later than eight days prior to the Maturity Date of the Australian Domestic Instrument. Australian Domestic Instruments may only be transferred within, to or from Australia if: (a) the aggregate consideration payable by the transferee at the time of transfer is at least A$500,000 (disregarding moneys lent by the transferor or its associates) or the offer or invitation giving rise to the transfer otherwise does not require disclosure to investors in accordance with Part 6D.2 or Part 7.9 of the Corporations Act 2001 of Australia (“Australian Corporations Act”); (b) the transferee is not a “retail client” as defined in section 761G of the Australian Corporations Act; (c) the transfer is in compliance with all applicable laws, regulations and directives (including, without limitation, in the case of a transfer to or from Australia, the laws of the jurisdiction in which the transfer takes place); and


 
A41941146 74 (d) in the case of a transfer between persons outside Australia, if a transfer and acceptance form is signed outside Australia. A transfer to an unincorporated association is not permitted. Transfers will be registered without charge provided taxes, duties or other governmental charges (if any) imposed in relation to the transfer have been paid. A person becoming entitled to an Australian Domestic Instrument as a consequence of the death or bankruptcy of a Holder or of a vesting order or a person administering the estate of a Holder may, upon producing such evidence as to that entitlement or status as the Australian Registrar considers sufficient, transfer the Australian Domestic Instrument or, if so entitled, become registered as the holder of the Australian Domestic Instrument. Where the transferor executes a transfer of less than all Australian Domestic Instruments registered in its name, and the specific Australian Domestic Instruments to be transferred are not identified, the Australian Registrar may register the transfer in respect of such of the Australian Domestic Instruments registered in the name of the transferor as the Australian Registrar thinks fit, provided the aggregate principal amount of the Australian Domestic Instruments registered as having been transferred equals the aggregate principal amount of the Australian Domestic Instruments expressed to be transferred in the transfer. In this Condition 1: “Austraclear” means Austraclear Limited (ABN 94 002 060 773). “Austraclear Regulations” means the rules and regulations established by Austraclear (as amended or replaced from time to time) to govern the use of the Austraclear System. “Austraclear System” means the system operated by Austraclear for holding securities and the electronic recording and settling of transactions in those securities between members of that system. 2 Status and Negative Pledge 2.1 Status The Instruments and the Coupons relating to them constitute direct, unconditional and unsecured obligations of the Issuer and rank pari passu without any preference or priority among themselves. The payment obligations of the Issuer under the Instruments and Coupons shall, subject to such exceptions as are from time to time applicable under the laws of England and, in relation to Instruments issued by National Grid, as provided in Condition 2.2, rank equally with all other present and future unsecured obligations (other than subordinated obligations, if any) of the Issuer. 2.2 Negative Pledge So long as any Instrument or Coupon of National Grid remains outstanding (as defined in the Trust Deed) National Grid will not create or permit to subsist any mortgage, charge, pledge, lien or other form of encumbrance or security interest (“Security”) upon the whole or any part of its undertaking, assets or revenues present or future to secure any Relevant Indebtedness, or any guarantee of or indemnity in respect of any Relevant Indebtedness unless, at the same time or prior thereto, National Grid’s obligations under the Instruments, the Coupons and the Trust Deed (a) are secured equally and rateably therewith or benefit from a guarantee or indemnity in substantially identical terms thereto, as the case may be, in each case to the satisfaction of the Trustee, or (b) have the benefit of such other security, guarantee, indemnity or other arrangement as the Trustee in its absolute discretion shall deem to be not materially less beneficial to the Instrumentholders or as shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Instrumentholders.


 
A41941146 75 For the purposes of these Conditions, “Relevant Indebtedness” means any present or future indebtedness in the form of, or represented by, bonds, notes, debentures, loan stock or other securities which (in each case, with the agreement of the Issuer) is quoted, listed or ordinarily dealt in on any stock exchange. 3 Interest 3.1 Interest on Fixed Rate Instruments Each Fixed Rate Instrument bears interest on its outstanding nominal amount from the Interest Commencement Date at the rate per annum (expressed as a percentage) equal to the Rate of Interest, payable in arrear on each Interest Payment Date. The amount of Interest payable shall be determined in accordance with Condition 3.6. If a Fixed Coupon Amount or a Broken Amount is specified in the relevant Final Terms, the amount of interest payable on each Interest Payment Date will amount to the Fixed Coupon Amount, or, if applicable, the Broken Amount so specified and in the case of a Broken Amount will be payable on the particular Interest Payment Date(s) specified in the relevant Final Terms. 3.2 Interest on Floating Rate Instruments and Index Linked Interest Instruments 3.2.1 Interest Payment Dates Each Floating Rate Instrument and Index Linked Interest Instrument bears interest on its outstanding nominal amount from the Interest Commencement Date at the rate per annum (expressed as a percentage) equal to the Rate of Interest, such interest being payable in arrear on each Interest Payment Date. The amount of Interest payable shall be determined in accordance with Condition 3.6. Such Interest Payment Date(s) is/are either specified in the relevant Final Terms as Specified Interest Payment Dates or, if no Specified Interest Payment Date(s) is/are specified in the relevant Final Terms, Interest Payment Date shall mean each date which falls the number of months or other period specified in the relevant Final Terms as the Interest Period after the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the Interest Commencement Date. 3.2.2 Business Day Convention If any date which is specified to be subject to adjustment in accordance with a Business Day Convention would otherwise fall on a day which is not a Business Day, then, if the Business Day Convention specified is (a) the Floating Rate Convention, such date shall be postponed to the next day which is a Business Day unless it would then fall into the next calendar month, in which event (x) such date shall be brought forward to the immediately preceding Business Day and (y) each subsequent such date shall be the last Business Day of the month in which such date would have fallen had it not been subject to adjustment, (b) the Following Business Day Convention, such date shall be postponed to the next day which is a Business Day, (c) the Modified Following Business Day Convention, such date shall be postponed to the next day which is a Business Day unless it would then fall into the next calendar month, in that event such date shall be brought forward to the immediately preceding Business Day or (d) the Preceding Business Day Convention, such date shall be brought forward to the immediately preceding Business Day. 3.2.3 Rate of Interest for Floating Rate Instruments The Rate of Interest in respect of Floating Rate Instruments for each Interest Accrual Period shall be determined in the manner specified in the relevant Final Terms and the provisions


 
A41941146 76 below relating to either ISDA Determination or Screen Rate Determination shall apply, depending upon which is specified in the relevant Final Terms. (a) ISDA Determination: Where ISDA Determination is specified in the relevant Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Accrual Period shall be determined by the Calculation Agent as a rate equal to the relevant ISDA Rate. For the purposes of this sub-paragraph (a), “ISDA Rate” for an Interest Accrual Period means a rate equal to the Floating Rate which would be determined by the Calculation Agent under a Swap Transaction under the terms of an agreement incorporating the ISDA Definitions and under which: (i) the Floating Rate Option is as specified in the relevant Final Terms; (ii) the Designated Maturity is a period specified in the relevant Final Terms; and (iii) the relevant Reset Date is the first day of that Interest Accrual Period unless otherwise specified in the relevant Final Terms. For the purposes of this sub-paragraph (a), “Floating Rate”, “Calculation Agent”, “Floating Rate Option”, “Designated Maturity”, “Reset Date” and “Swap Transaction” have the meanings given to those terms in the ISDA Definitions. (b) Screen Rate Determination: (i) Where Screen Rate Determination is specified in the relevant Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Accrual Period will, subject as provided below, be either: (x) the offered quotation; or (y) the arithmetic mean of the offered quotations, (expressed as a percentage rate per annum) for the Reference Rate which appears or appear, as the case may be, on the Relevant Screen Page as at (1) 11.00 a.m. London time, in the case of LIBOR (“LIBOR”); or (2) 11:00 a.m. Brussels time, in the case of EURIBOR (“EURIBOR”); or (3) 10:10 a.m. Sydney time, in the case of AUD-BBR-BBSW; or (4) 10:00 a.m. Toronto time, in the case of CAD-BA-CDOR; or (5) 11:00 a.m. Hong Kong time, in the case of HKD- HIBOR-HIBOR=; or (6) 11:00 a.m. Frankfurt time, in the case of EUR-ISDA- EURIBOR Swap Rate-11:00, on the Interest Determination Date in question as determined by the Calculation Agent. If five or more of such offered quotations are available on the Relevant Screen Page, the highest (or, if there is more than one such highest quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest quotation, one only of such quotations) shall be disregarded by the Calculation Agent for the purpose of determining the arithmetic mean of such offered quotations. (ii) If the Relevant Screen Page is not available or if, sub-paragraph (i)(x) applies and no such offered quotation appears on the Relevant Screen Page or if sub- paragraph (i)(y) above applies and fewer than three such offered quotations appear on the Relevant Screen Page in each case as at the time specified above, subject as provided below, the Calculation Agent shall request, if the Reference Rate is LIBOR, the principal London office of each of the Reference Banks or, if the Reference Rate is EURIBOR, the principal Euro-zone office of each of the Reference Banks or, if the Reference Rate is AUD-BBR-BBSW, the principal office of each of the Reference Banks or, if the Reference Rate is


 
A41941146 77 CAD-BA-CDOR, the principal Toronto office of each of the Reference Banks or, if the Reference Rate is EUR-ISDA-EURIBOR Swap Rate-11:00, the principal office of each of the Reference Banks or, if the Reference Rate is HKD-HIBOR-HIBOR=, the principal Hong Kong office of each of the Reference Banks, to provide the Calculation Agent with its offered quotation (expressed as a percentage rate per annum) for the Reference Rate if the Reference Rate is: (1) LIBOR, at approximately 11.00 a.m. (London time), or (2) EURIBOR, at approximately 11.00 a.m. (Brussels time), or (3) AUD-BBR-BBSW, at approximately 10:00 a.m. (Sydney time), or (4) CAD-BA-CDOR, at 10:00 a.m. (Toronto time) or (5) EUR-ISDA-EURIBOR Swap Rate-11:00, at approximately 11:00 a.m. (Frankfurt time), or (6) HKD-HIBOR-HIBOR=, at approximately 11:00 a.m. (Hong Kong time), on the Interest Determination Date in question. If, two (in the case of LIBOR, EURIBOR, CAD-BA-CDOR or HKD-HIBOR- HIBOR=); or five (in the case of AUD-BBR-BBSW); or three (in the case of EUR-ISDA-EURIBOR Swap Rate-11:00), or more of the Reference Banks provide the Calculation Agent with such offered quotations, the Rate of Interest for such Interest Period shall be the arithmetic mean of such offered quotations as determined by the Calculation Agent.; (iii) If paragraph (ii) above applies and the Calculation Agent determines that fewer than the specified number of Reference Banks are providing offered quotations, subject as provided below, the Rate of Interest shall be (1) in case the Reference Rate is either LIBOR or EURIBOR, the arithmetic mean of the rates per annum (expressed as a percentage) as communicated to (and at the request of) the Calculation Agent by the Reference Banks or any two or more of them, at which such banks were offered, if the Reference Rate is LIBOR, at approximately 11.00 a.m. (London time) or, if the Reference Rate is EURIBOR, at approximately 11.00 a.m. (Brussels time) on the relevant Interest Determination Date, deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate by leading banks in, if the Reference Rate is LIBOR, the London inter-bank market or, if the Reference Rate is EURIBOR, the Euro-zone inter-bank market, as the case may be, or, if fewer than two of the Reference Banks provide the Calculation Agent with such offered rates, the offered rate for deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate, or the arithmetic mean of the offered rates for deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate, at which, if the Reference Rate is LIBOR, at approximately 11.00 a.m. (London time) or, if the Reference Rate is EURIBOR, at approximately 11.00 a.m. (Brussels time), on the relevant Interest Determination Date, any one or more banks (which bank or banks is or are in the opinion of the Trustee and the Issuer suitable for such purpose) informs the Calculation Agent it is quoting to leading banks in, if the Reference Rate is LIBOR, the London inter-bank market or, if the Reference Rate is EURIBOR, the Euro-zone inter-bank market, as the case may be; (2) in case the Reference Rate is AUD-BBR-BBSW, the rate shall then be determined by the Calculation Agent having regard to the comparable indices then available; (3) in case the Reference Rate is EUR-ISDA-EURIBOR Swap Rate-11:00, the rate shall be the arithmetic mean of the mid-market annual swap rate quotations provided by the principal office of each of the Reference Banks, eliminating the highest quotation (or, in the event of equality, on of the highest) and the lowest


 
A41941146 78 quotation (or, in the event of equality, one of the lowest); (4) in case the Reference Rate is CAD-BA-CDOR, the arithmetic mean of the bid rates as communicated to (and at the request of) the Calculation Agent by Schedule I chartered banks in Toronto, for Canadian Dollar bankers acceptances for a period of the applicable Interest Period in an amount representative for a single transaction in the relevant market at the relevant time accepted by those banks as of 10:00 a.m. Toronto time; and (5) in the case of HKD-HIBOR-HIBOR, the arithmetic mean of the quotations as communicated to (and at the request of) the Calculation Agent by major banks in Hong Kong, for loans in Hong Kong Dollars to leading European banks for a period of the applicable maturity as at approximately 11:00 a.m. Hong Kong time, provided that, if the Rate of Interest cannot be determined in accordance with the foregoing provisions of this paragraph, the Rate of Interest shall be determined as at the last preceding Interest Determination Date (though substituting, where a different Margin or Maximum or Minimum Rate of Interest is to be applied to the relevant Interest Accrual Period from that which applied to the last preceding Interest Accrual Period, the Margin or Maximum or Minimum Rate of Interest relating to the relevant Interest Accrual Period, in place of the Margin or Maximum or Minimum Rate of Interest relating to that last preceding Interest Accrual Period). (iv) If the Reference Rate from time to time in respect of Floating Rate Instruments is specified in the applicable Final Terms as being “BBSW”, the Rate of Interest in respect of such Instruments for the relevant Interest Period shall be the average mid rate for Bills (having the meaning that term has in the Bills of Exchange Act 1909 of Australia) having a tenor closest to the relevant Interest Period displayed on the “BBSW” page of the Reuters Monitor System on the first day of that Interest Period, plus or minus (as indicated in the applicable Final Terms) the Margin (if any), all as determined by the Calculation Agent. However, if the average mid rate is not displayed by 10:30 am on that day, or if it is displayed but the Calculation Agent determines that there is an obvious error in that rate, the Rate of Interest in respect of such Instruments for the relevant Interest Period shall be determined by the Calculation Agent in good faith at approximately 10:30 am on that day, having regard, to the extent possible, to the mid rate of the rates otherwise bid and offered for bank accepted Bills of that tenor at or around that time. (c) Linear Interpolation: Where Linear Interpolation is specified in the relevant Final Terms as applicable in respect of an Interest Accrual Period, the Rate of Interest for such Interest Accrual Period shall be calculated by the Calculation Agent by straight line linear interpolation by reference to two rates based on the relevant Reference Rate (where Screen Rate Determination is specified in the relevant Final Terms as applicable) or the relevant Floating Rate Option (where ISDA Determination is specified in the relevant Final Terms as applicable), one of which shall be determined as if the Applicable Maturity were the period of time for which rates are available next shorter than the length of the relevant Interest Accrual Period and the other of which shall be determined as if the Applicable Maturity were the period of time for which rates are available next longer than the length of the relevant Interest Accrual Period provided however that if there is no rate available for the period of time next shorter or, as the case may be, next longer, then the Calculation Agent shall determine such rate at such time and by reference to such sources as the Issuer, in consultation with an Independent Adviser (as defined in Condition 3.10.7) appointed by the Issuer acting


 
A41941146 79 in good faith and in a commercially reasonable manner in its reasonable discretion, determines appropriate. “Applicable Maturity” means: (a) in relation to Screen Rate Determination, the period of time designated in the Reference Rate, and (b) in relation to ISDA Determination, the Designated Maturity. 3.2.4 Rate of Interest for Index Linked Interest Instruments The Rate of Interest in respect of Index Linked Interest Instruments for each Interest Accrual Period shall be determined in the manner specified in the relevant Final Terms and interest will accrue accordingly. 3.3 Zero Coupon Instruments Where an Instrument, the Interest Basis of which is specified to be Zero Coupon, is repayable prior to the Maturity Date and is not paid when due, the amount due and payable prior to the Maturity Date shall be the Early Redemption Amount of such Instrument. As from the Maturity Date, the Rate of Interest for any overdue principal of such an Instrument shall be a rate per annum (expressed as a percentage) equal to the Amortisation Yield (as defined in Condition 5.4.1(ii)). 3.4 Accrual of Interest Interest shall cease to accrue on each Instrument on the due date for redemption unless, upon due presentation, payment is improperly withheld or refused, in which event interest shall continue to accrue (as well after as before judgment) at the Rate of Interest in the manner provided in this Condition 3 to the Relevant Date (as defined in Condition 7). 3.5 Margin, Maximum/Minimum Rates of Interest, Redemption Amounts and Rounding (i) If any Margin is specified in the relevant Final Terms (either (x) generally, or (y) in relation to one or more Interest Accrual Periods), an adjustment shall be made to all Rates of Interest, in the case of (x), or the Rates of Interest for the specified Interest Accrual Periods, in the case of (y), calculated in accordance with Condition 3.2.3(b) above, by adding (if a positive number) or subtracting (if a negative number) the absolute value of such Margin, subject always to the next paragraph. (ii) If any Maximum or Minimum Rate of Interest or Redemption Amount is specified in the relevant Final Terms, then any Rate of Interest or Redemption Amount shall be subject to such maximum or minimum, as the case may be. (iii) For the purposes of any calculations required pursuant to these Conditions (unless otherwise specified), (x) all percentages resulting from such calculations shall be rounded, if necessary, to the nearest one hundred thousandth of a percentage point (with halves being rounded up), (y) all figures shall be rounded to seven significant figures (with halves being rounded up) and (z) all currency amounts that fall due and payable shall be rounded to the nearest unit of such currency (with halves being rounded up), save in the case of yen, which shall be rounded down to the nearest yen. For these purposes “unit” means the lowest amount of such currency which is available as legal tender in the country of such currency. 3.6 Calculations The amount of interest payable per Calculation Amount in respect of any Instrument for any Interest Accrual Period shall be equal to the product of the Rate of Interest, the Calculation Amount as specified in the relevant Final Terms, and the Day Count Fraction for such Interest Accrual Period, unless an Interest Amount (or a formula for its calculation) is applicable to such Interest Accrual Period, in which case the amount of interest payable per Calculation Amount in respect of such


 
A41941146 80 Instrument for such Interest Accrual Period shall equal such Interest Amount (or be calculated in accordance with such formula). Where any Interest Period comprises two or more Interest Accrual Periods, the amount of interest payable per Calculation Amount in respect of such Interest Period shall be the sum of the Interest Amounts payable in respect of each of those Interest Accrual Periods. In respect of any other period for which interest is required to be calculated, the provisions above shall apply save that the Day Count Fraction shall be for the period for which interest is required to be calculated. 3.7 Determination and Publication of Rates of Interest, Interest Amounts, Final Redemption Amounts, Early Redemption Amounts and Optional Redemption Amounts The Calculation Agent shall as soon as practicable on each Interest Determination Date or such other time on such date as the Calculation Agent may be required to calculate any rate or amount, obtain any quotation or make any determination or calculation, determine such rate and calculate the Interest Amounts for the relevant Interest Accrual Period, calculate the Redemption Amount, obtain such quote or make such determination or calculation, as the case may be, and cause the Rate of Interest and the Interest Amounts for each Interest Accrual Period and the relevant Interest Payment Date and, if required to be calculated, the Final Redemption Amount, Early Redemption Amount or Optional Redemption Amount to be notified to the Trustee, the Issuer, each of the Paying Agents, the Instrumentholders, any other Calculation Agent appointed in respect of the Instruments that is to make a further calculation upon receipt of such information and, if the Instruments are listed on a stock exchange and the rules of such exchange so require, such exchange as soon as possible after their determination but in no event later than (i) the commencement of the relevant Interest Period, if determined prior to such time, in the case of notification to such exchange of a Rate of Interest and Interest Amount, or (ii) in all other cases, the fourth Business Day after such determination. Where any Interest Payment Date or Interest Period Date is subject to adjustment pursuant to Condition 3.2.3(b)(ii), the Interest Amounts and the Interest Payment Date so published may subsequently be amended (or appropriate alternative arrangements made with the consent of the Trustee by way of adjustment) without notice in the event of an extension or shortening of the Interest Period. If the Instruments become due and payable under Condition 9, the accrued interest and the Rate of Interest payable in respect of the Instruments shall nevertheless continue to be calculated as previously in accordance with this Condition but no publication of the Rate of Interest or the Interest Amount so calculated need be made unless the Trustee otherwise requires. The determination of any rate or amount, the obtaining of each quotation and the making of each determination or calculation by the Calculation Agent(s) shall (in the absence of manifest error) be final and binding upon all parties. 3.8 Definitions In these Conditions, unless the context otherwise requires, the following defined terms shall have the meanings set out below: “Business Day” means: (a) in the case of a currency other than Euro, a day (other than a Saturday or Sunday) on which commercial banks and foreign exchange markets settle payments in the principal financial centre for such currency (which in the case of: (i) Canadian dollars is Toronto except when the Reference Rate is LIBOR, then the financial centres are London and Toronto; and (ii) in the case of Australian dollars is Sydney); and/or (b) in the case of Euro, a day on which the TARGET System is operating (a “TARGET Business Day”); and/or


 
A41941146 81 (c) in the case of a currency and/or one or more Business Centres as specified in the relevant Final Terms, a day (other than a Saturday or a Sunday) on which commercial banks and foreign exchange markets settle payments in such currency or, if no currency is indicated, generally in each of the Business Centres. “Day Count Fraction” means, in respect of the calculation of an amount of interest on any Instrument for any period of time (from and including the first day of such period to but excluding the last) (whether or not constituting an Interest Period or Interest Accrual Period, the “Calculation Period”): (a) if “Actual/Actual” or “Actual/Actual-ISDA” is specified in the relevant Final Terms, the actual number of days in the Calculation Period divided by 365 (or, if any portion of that Calculation Period falls in a leap year, the sum of (i) the actual number of days in that portion of the Calculation Period falling in a leap year divided by 366 and (ii) the actual number of days in that portion of the Calculation Period falling in a non-leap year divided by 365); (b) if “Actual/365 (Fixed)” is specified in the relevant Final Terms, the actual number of days in the Calculation Period divided by 365; (c) if “Actual/360” is specified in the relevant Final Terms, the actual number of days in the Calculation Period divided by 360; (d) “if “30/360”, “360/360” or “Bond Basis” is specified in the relevant Final Terms, the number of days in the Calculation Period divided by 360 calculated on a formula basis as follows: Day Count Fraction = 360 × Y2 - Y1 + 30 × M2 - M1 + D2 - D1 360 where: “Y1” is the year, expressed as a number, in which the first day of the Calculation Period falls; “Y2” is the year, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls; “M1” is the calendar month, expressed as a number, in which the first day of the Calculation Period falls; “M2” is the calendar month, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls; “D1” is the first calendar day, expressed as a number, of the Calculation Period, unless such number would be 31, in which case D1 will be 30; and “D2” is the calendar day, expressed as a number, immediately following the last day included in the Calculation Period, unless such number would be 31 and D1 is greater than 29, in which case D2 will be 30; (e) “if “30E/360” or “Eurobond Basis” is specified in the relevant Final Terms, the number of days in the Calculation Period divided by 360 calculated on a formula basis as follows: Day Count Fraction = 360 × Y2 - Y1 + 30 × M2 - M1 + D2 - D1 360 where: “Y1” is the year, expressed as a number, in which the first day of the Calculation Period falls; “Y2” is the year, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;


 
A41941146 82 “M1” is the calendar month, expressed as a number, in which the first day of the Calculation Period falls; ”M2” is the calendar month, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls; “D1” is the first calendar day, expressed as a number, of the Calculation Period, unless such number would be 31, in which case D1 will be 30; and “D2” is the calendar day, expressed as a number, immediately following the last day included in the Calculation Period, unless such number would be 31, in which case D2 will be 30; (f) “if “30E/360 (ISDA)” is specified in the relevant Final Terms, the number of days in the Calculation Period divided by 360, calculated on a formula basis as follows: Day Count Fraction = 360 × Y2 - Y1 + 30 × M2 - M1 + D2 - D1 360 where: “Y1” is the year, expressed as a number, in which the first day of the Calculation Period falls; “Y2” is the year, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls; “M1” is the calendar month, expressed as a number, in which the first day of the Calculation Period falls; “M2” is the calendar month, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls; “D1” is the first calendar day, expressed as a number, of the Calculation Period, unless (i) that day is the last day of February or (ii) such number would be 31, in which case D1 will be 30; and “D2” is the calendar day, expressed as a number, immediately following the last day included in the Calculation Period, unless (i) that day is the last day of February but not the Maturity Date or (ii) such number would be 31, in which case D2 will be 30; (g) if “Actual/Actual-ICMA” is specified in the relevant Final Terms: (i) if the Calculation Period is equal to or shorter than the Determination Period during which it falls, the actual number of days in the Calculation Period divided by the product of (x) the actual number of days in such Determination Period and (y) the number of Determination Periods in any year; and (ii) if the Calculation Period is longer than one Determination Period, the sum of: (1) the actual number of days in such Calculation Period falling in the Determination Period in which it begins divided by the product of (a) the actual number of days in such Determination Period and (b) the number of Determination Periods in any year; and (2) the actual number of days in such Calculation Period falling in the next Determination Period divided by the product of (a) the actual number of days in such Determination Period and (b) the number of Determination Periods in any year, where:


 
A41941146 83 “Determination Period” means the period from and including a Determination Date in any year to but excluding the next Determination Date; and “Determination Date” means the date specified as such in the relevant Final Terms or, if none is so specified, the Interest Payment Date; (h) if “RBA Bond Basis” or “Australian Bond Basis” is specified in the relevant Final Terms, one divided by the number of Interest Payment Dates in each 12 month period or, where the relevant period does not constitute an Interest Period, the product of: (i) one divided by the number of Interest Payment Dates in each 12 month period; and (ii) the number of days in the relevant period divided by the actual number of days in the Interest Period ending on the next Interest Payment Date; and (i) if “Actual/Actual Canadian Compound Method” is specified in the applicable Final Terms, whenever it is necessary to compute any amount of accrued interest in respect of the Instruments for a period of less than one full year, other than in respect of any specified Interest Amount, such interest will be calculated on the basis of the actual number of days in the Calculation Period and a year of 365 days. “Euro-zone” means the region comprising of member states of the European Union that adopt the single currency in accordance with the Treaty establishing the European Community as amended. “Interest Accrual Period” means the period beginning on (and including) the Interest Commencement Date and ending on (but excluding) the first Interest Period Date and each successive period beginning on (and including) an Interest Period Date and ending on (but excluding) the next succeeding Interest Period Date. “Interest Amount” means: (i) in respect of an Interest Accrual Period, the amount of interest payable per Calculation Amount for that Interest Accrual Period and which, in the case of Fixed Rate Instruments, and unless otherwise specified in the relevant Final Terms, shall mean the Fixed Coupon Amount or Broken Amount specified in the relevant Final Terms as being payable on the Interest Payment Date ending the Interest Period of which such Interest Accrual Period forms part; and (ii) in respect of any other period, the amount of interest payable per Calculation Amount for that period. “Interest Commencement Date” means the Issue Date or such other date as may be specified in the relevant Final Terms. “Interest Determination Date” means, with respect to a Rate of Interest and Interest Accrual Period, the date specified as such in the relevant Final Terms or, if none is so specified, (a) the first day of such Interest Accrual Period if the Specified Currency is Sterling or (b) the day falling two Business Days in London prior to the first day of such Interest Accrual Period if the Specified Currency is neither Sterling nor Euro or (c) the day falling two TARGET Business Days prior to the first day of such Interest Accrual Period if the Specified Currency is Euro. “Interest Payment Date” means the date or dates specified as such in, or determined in accordance with the provisions of, the relevant Final Terms and, if a Business Day Convention is specified in the relevant Final Terms, as the same may be adjusted in accordance with the relevant Business Day Convention.


 
A41941146 84 “Interest Period” means the period beginning on (and including) the Interest Commencement Date and ending on (but excluding) the first Interest Payment Date and each successive period beginning on (and including) an Interest Payment Date and ending on (but excluding) the next succeeding Interest Payment Date unless otherwise specified in the applicable Final Terms. “Interest Period Date” means each Interest Payment Date unless otherwise specified in the relevant Final Terms. “ISDA Definitions” means the 2006 ISDA Definitions as published by the International Swaps and Derivatives Association, Inc., as may be supplemented or amended from time to time. “Rate of Interest” means the rate of interest payable from time to time in respect of this Instrument and that is either specified on, or calculated in accordance with the provisions of, the relevant Final Terms. “Redemption Amount” means, as appropriate, the Final Redemption Amount, the Early Redemption Amount (Tax), the Optional Redemption Amount (Call), the Optional Redemption Amount (Put), the Early Termination Amount or such other amount in the nature of a redemption amount as may be specified in, or determined in accordance with the provisions of the relevant Final Terms. “Reference Banks” means, in the case of a determination of LIBOR, the principal London office of four major banks in the London inter-bank market, in the case of a determination of EURIBOR, the principal Euro-zone office of four major banks in the Euro-zone inter-bank market, in each case selected by the Issuer or as specified in the relevant Final Terms, in the case of AUD-BBR-BBSW, the financial institutions authorised to quote on the Reuters Screen BBSW Page, in the case of CAD-BA-CDOR, four major Canadian Schedule I chartered banks, in the case of HKD-HIBOR-HIBOR=, four major banks in the Hong Kong interbank market and in the case of EUR-ISDA-EURIBOR Swap Rate-11:00, five leading swap dealers in the interbank market. “Reference Rate” means the rate specified as such in the relevant Final Terms. “Relevant Screen Page” means such page, section, caption, column or other part of a particular information service as may be specified in the relevant Final Terms. “Specified Currency” means the currency specified as such in the relevant Final Terms or, if none is specified, the currency in which the Instruments are denominated. “TARGET System” means the Trans-European Automated Real-Time Gross Settlement Express Transfer (known as TARGET2) System which was launched on 19 November 2007 or any successor to it. 3.9 Calculation Agent The Issuer shall procure that there shall at all times be one or more Calculation Agents if provision is made for them in the relevant Final Terms and for so long as any Instrument is outstanding. Where more than one Calculation Agent is appointed in respect of the Instruments, references in these Conditions to the Calculation Agent shall be construed as each Calculation Agent performing its respective duties under these Conditions. If the Calculation Agent is unable or unwilling to act as such or if the Calculation Agent fails duly to establish the Rate of Interest for an Interest Period or Interest Accrual Period or to calculate any Interest Amount, Final Redemption Amount, Early Redemption Amount or Optional Redemption Amount, as the case may be, or to comply with any other requirement, the Issuer shall (with the prior approval of the Trustee) appoint a leading bank or investment banking firm engaged in the interbank market (or, if appropriate, money, swap or


 
A41941146 85 over-the-counter index options market) which is most closely connected with the calculation or determination to be made by the Calculation Agent (acting through its principal London office or any other office actively involved in such market) to act as such in its place. The Calculation Agent may not resign its duties without a successor having been appointed as specified in this paragraph. 3.10 Benchmark Discontinuation This Condition 3.10 applies only where Screen Rate Determination is specified in the relevant Final Terms as the manner in which the Rate of Interest is to be determined. 3.10.1 Independent Adviser Notwithstanding Conditions 3.2.3(b)(ii) and 3.2.3(b)(iii), if the Issuer determines that a Benchmark Event has occurred in relation to an Original Reference Rate when any Rate of Interest (or any component part thereof) remains to be determined by reference to such Original Reference Rate, the Issuer shall use its reasonable endeavours to appoint and consult with an Independent Adviser, as soon as reasonably practicable, to advise the Issuer in determining a Successor Rate, failing which an Alternative Rate (in accordance with Condition 3.10.2) and, in either case, an Adjustment Spread and any Benchmark Amendments (in accordance with Condition 3.10.4). In making such determination and any other determination pursuant to this Condition 3.10, the Issuer shall act in good faith and in a commercially reasonable manner. In the absence of fraud, the Independent Adviser shall have no liability whatsoever to the Trustee, the Paying Agents, or the Instrumentholders for any advice given to the Issuer in connection with any determination made by the Issuer, pursuant to this Condition 3.10. If the Issuer fails to determine a Successor Rate or, failing which, an Alternative Rate in accordance with this Condition 3.10.1 prior to the date three Business Days prior to the relevant Interest Determination Date, the Rate of Interest applicable to the next succeeding Interest Accrual Period shall be equal to the Rate of Interest last determined in relation to the Instruments in respect of the immediately preceding Interest Accrual Period. If there has not been a first Interest Payment Date, the Rate of Interest shall be the initial Rate of Interest. Where a different Margin or Maximum or Minimum Rate of Interest is to be applied to the relevant Interest Accrual Period from that which applied to the last preceding Interest Accrual Period, the Margin or Maximum or Minimum Rate of Interest relating to the relevant Interest Accrual Period shall be substituted in place of the Margin or Maximum or Minimum Rate of Interest relating to that last preceding Interest Accrual Period. For the avoidance of doubt, this paragraph shall apply to the relevant next succeeding Interest Accrual Period only and any subsequent Interest Accrual Periods are subject to the subsequent operation of, and to adjustment as provided in, the first paragraph of this Condition 3.10. 3.10.2 Successor Rate or Alternative Rate If the Issuer, following consultation with the Independent Adviser or acting alone, as the case may be, determines that: (a) there is a Successor Rate, then such Successor Rate and any applicable Adjustment Spread shall subsequently be used in place of the Original Reference Rate to determine the Rate of Interest (or the relevant component part thereof) for all future payments of interest on the Instruments (subject to the operation of this Condition 3.10); or (b) there is no Successor Rate but that there is an Alternative Rate, then such Alternative Rate and any applicable Adjustment Spread shall subsequently be used in place of the Original Reference Rate to determine the Rate of Interest (or the relevant


 
A41941146 86 component part thereof) for all future payments of interest on the Instruments (subject to the operation of this Condition 3.10). 3.10.3 Adjustment Spread The Adjustment Spread (or the formula or methodology for determining the Adjustment Spread) shall be applied to the Successor Rate or the Alternative Rate (as the case may be). If the Issuer, following consultation with the Independent Adviser is unable to determine the quantum of, or a formula or methodology for determining, such Adjustment Spread, then the Successor Rate or Alternative Rate (as applicable) will apply without an Adjustment Spread. 3.10.4 Benchmark Amendments If any Successor Rate or Alternative Rate and, in either case, any applicable Adjustment Spread is determined in accordance with this Condition 3.10 and the Issuer, following consultation with the Independent Adviser, determines (i) that amendments to these Terms and Conditions, the Agency Agreement and/or the Trust Deed are necessary to ensure the proper operation of such Successor Rate or Alternative Rate and/or (in either case) any applicable Adjustment Spread (provided that the amendments do not, without the consent of the Calculation Agent, impose more onerous obligations upon it or expose it to any additional duties, responsibilities or liabilities or reduce or amend the protective provisions attached to it) (such amendments, the “Benchmark Amendments”) and (ii) the terms of the Benchmark Amendments, then the Issuer shall, subject to giving notice thereof in accordance with Condition 3.10.5, without any requirement for the consent or approval of Instrumentholders, vary these Conditions, the Agency Agreement and/or the Trust Deed to give effect to such Benchmark Amendments with effect from the date specified in such notice. At the request of the Issuer, but subject to receipt by the Trustee and the Issuing and Paying Agent of a certificate signed by two Directors of the Issuer pursuant to Condition 3.10.5, the Trustee and the Issuing and Paying Agent shall (at the expense and direction of the Issuer), without any requirement for the consent or approval of the Instrumentholders, be obliged to concur with the Issuer in using its reasonable endeavours to effect any Benchmark Amendments (including, inter alia, by the execution of a deed supplemental to or amending the Trust Deed) and the Trustee and the Issuing and Paying Agent shall not be liable to any party for any consequences thereof, provided that the Trustee and the Issuing and Paying Agent shall not be obliged so to concur if in the opinion of the Trustee or the Issuing and Paying Agent doing so would impose more onerous obligations upon it or expose it to any additional duties, responsibilities or liabilities or reduce or amend the rights and/or the protective provisions afforded to it in these Conditions and/or any documents to which it is a party (including, for the avoidance of doubt, any supplemental trust deed) in any way. In connection with any such variation in accordance with this Condition 3.10.4, the Issuer shall comply with the rules of any stock exchange on which the Instruments are for the time being listed or admitted to trading. 3.10.5 Notices, etc. Any Successor Rate, Alternative Rate, Adjustment Spread and the specific terms of any Benchmark Amendments determined under this Condition 3.10 will be notified promptly by the Issuer to the Trustee, the Calculation Agent, the Paying Agents and, in accordance with Condition 13, the Instrumentholders. Such notice shall be irrevocable and shall specify the effective date of the Benchmark Amendments, if any. No later than notifying the Trustee and the Issuing and Paying Agent of the same, the Issuer shall deliver to the Trustee and the Issuing and Paying Agent a certificate signed by two Directors of the Issuer:


 
A41941146 87 (a) confirming (i) that a Benchmark Event has occurred, (ii) the Successor Rate or, as the case may be, the Alternative Rate, (iii) any applicable Adjustment Spread and (iv) the specific terms of the Benchmark Amendments (if any), in each case as determined in accordance with the provisions of this Condition 3.10; and (b) certifying that the Benchmark Amendments (if any) are necessary to ensure the proper operation of such Successor Rate or Alternative Rate and (in either case) any applicable Adjustment Spread. The Trustee and the Issuing and Paying Agent shall be entitled to rely on such certificate (without enquiry or liability to any person) as sufficient evidence thereof. The Successor Rate or Alternative Rate and the Adjustment Spread and the Benchmark Amendments (if any) specified in such certificate will (in the absence of manifest error in the determination of the Successor Rate or Alternative Rate and the Adjustment Spread and the Benchmark Amendments (if any) and without prejudice to the Trustee’s and the Issuing and Paying Agent’s ability to rely on such certificate as aforesaid) be binding on the Issuer, the Trustee, the Calculation Agent, the Paying Agents and the Instrumentholders. 3.10.6 Survival of Original Reference Rate Without prejudice to the obligations of the Issuer under Condition 3.10.1, 3.10.2, 3.10.3 and 3.10.4, the Original Reference Rate and the fallback provisions provided for in Condition 3.2.3 will continue to apply unless and until the Issuer determines that a Benchmark Event has occurred and the relevant Paying Agent has been notified of the Successor Rate or the Alternative Rate (as the case may be), and any Adjustment Spread and Benchmark Amendments, in accordance with Condition 3.10.5. 3.10.7 Definitions As used in this Condition 3.10: “Adjustment Spread” means either (a) a spread (which may be positive, negative or zero) or (b) a formula or methodology for calculating a spread, in each case to be applied to the Successor Rate or the Alternative Rate (as the case may be) and is the spread, formula or methodology which: (a) in the case of a Successor Rate, is formally recommended in relation to the replacement of the Original Reference Rate with the Successor Rate by any Relevant Nominating Body; or (if no such recommendation has been made, or in the case of an Alternative Rate) (b) the Issuer, following consultation with the Independent Adviser or acting alone, as the case may be, determines is customarily applied to the relevant Successor Rate or the Alternative Rate (as the case may be) in international debt capital markets transactions to produce an industry-accepted replacement rate for the Original Reference Rate; or (if the Issuer determines that no such spread is customarily applied) (c) the Issuer, following consultation with the Independent Adviser or acting alone, as the case may be, determines is recognised or acknowledged as being the industry standard for over-the-counter derivative transactions which reference the Original Reference Rate, where such rate has been replaced by the Successor Rate or the Alternative Rate (as the case may be). “Alternative Rate” means an alternative benchmark or screen rate which the Issuer following consultation with the Independent Adviser, determines is customarily applied in international


 
A41941146 88 debt capital markets transactions for the purposes of determining floating rates of interest (or the relevant component part thereof) in the same Specified Currency as the Instruments. “Benchmark Amendments” has the meaning given to it in Condition 3.10.4. “Benchmark Event” means: (1) the Original Reference Rate ceasing to be published for a period of at least five Business Days or ceasing to exist; or (2) a public statement by the administrator of the Original Reference Rate that it has ceased or that it will cease publishing the Original Reference Rate permanently or indefinitely (in circumstances where no successor administrator has been appointed that will continue publication of the Original Reference Rate); or (3) a public statement by the supervisor of the administrator of the Original Reference Rate that the Original Reference Rate has been or will be permanently or indefinitely discontinued; or (4) a public statement by the supervisor of the administrator of the Original Reference Rate as a consequence of which the Original Reference Rate will be prohibited from being used either generally, or in respect of the Instruments; or (5) the making of a public statement by the supervisor of the administrator of the Original Reference Rate that the Original Reference Rate is or will be (or is or will be deemed by such supervisor to be) no longer representative of its relevant underlying market; or (6) it has or will become unlawful for any Paying Agent, the Calculation Agent or the Issuer to calculate any payments due to be made to any Instrumentholders using the Original Reference Rate, provided that the Benchmark Event shall be deemed to occur (a) in the case of sub- paragraphs (2) and (3) above, on the date of the cessation of publication of the Original Reference Rate or the discontinuation of the Original Reference Rate, respectively, (b) in the case of sub-paragraph (4) above, on the date of the prohibition of use of the Original Reference Rate and (c) in the case of sub-paragraph (5) above, on the date with effect from which the Original Reference Rate will no longer be (or will be deemed by the relevant supervisor to no longer be) representative of its relevant underlying market and which is specified in the relevant public statement, and, in each case, not the date of the relevant public statement. “Independent Adviser” means an independent financial institution of international repute or an independent financial adviser with appropriate expertise appointed by the Issuer at its own expense and notified in writing to the Trustee. “Original Reference Rate” means the originally-specified benchmark or screen rate (as applicable) used to determine the Rate of Interest (or any component part thereof) on the Instruments or, if applicable, any other Successor or Alternative Rate (or any component part thereof) determined and applicable to the Instruments pursuant to the earlier operation of Condition 3.10. “Relevant Nominating Body” means, in respect of a benchmark or screen rate (as applicable): (i) the central bank for the currency to which the benchmark or screen rate (as applicable) relates, or any central bank or other supervisory authority which is responsible for supervising the administrator of the benchmark or screen rate (as applicable); or


 
A41941146 89 (ii) any working group or committee sponsored by, chaired or co-chaired by or constituted at the request of (a) the central bank for the currency to which the benchmark or screen rate (as applicable) relates, (b) any central bank or other supervisory authority which is responsible for supervising the administrator of the benchmark or screen rate (as applicable), (c) a group of the aforementioned central banks or other supervisory authorities or (d) the Financial Stability Board or any part thereof. “Successor Rate” means a successor to or replacement of the Original Reference Rate which is formally recommended by any Relevant Nominating Body 4 Indexation This Condition 4 is applicable only if the relevant Final Terms specifies the Instruments as Index Linked Instruments. 4.1 Definitions For the purposes of Conditions 4.1 to 4.6, unless the context otherwise requires, the following defined terms shall have the following meanings: “Base Index Figure” means (subject to Condition 4.3(i)) the base index figure as specified in the relevant Final Terms; “CPI” means the U.K. Consumer Prices Index (for all items) published by the Office for National Statistics (2015 = 100) or any comparable index which may replace the U.K. Consumer Prices Index for the purpose of calculating the amount payable on repayment of the Indexed Benchmark Gilt (if any). Where CPI is specified as the Index in the relevant Final Terms, any reference to the “Index Figure” which is specified in the relevant Final Terms as: (i) applicable to the first calendar day of any month shall, subject as provided in Conditions 4.3 and 4.5, be construed as a reference to the Index Figure published in the second month prior to that particular month and relating to the month before that of publication; or (ii) applicable to any other day in any month shall, subject as provided in Conditions 4.3 and 4.5, be calculated by linear interpolation between (x) the Index Figure applicable to the first calendar day of the month in which the day falls, calculated as specified in paragraph (i) above and (y) the Index Figure applicable to the first calendar day of the month following, calculated as specified in paragraph (i) above and rounded to the nearest fifth decimal place. “CPIH” means the all items consumer prices index including owner occupiers’ housing costs and council tax for the United Kingdom published by the Office for National Statistics (January 2015 = 100) or any comparable index which may replace the all items consumer prices index including owner occupiers’ housing costs and council tax for the United Kingdom for the purpose of calculating the amount payable on repayment of the Indexed Benchmark Gilt (if any). Where CPIH is specified as the Index in the relevant Final Terms, any reference to the “Index Figure” which is specified in the relevant Final Terms as: (i) applicable to the first calendar day of any month shall, subject as provided in Conditions 4.3 and 4.5, be construed as a reference to the Index Figure published in the second month prior to that particular month and relating to the month before that of publication; or (ii) applicable to any other day in any month shall, subject as provided in Conditions 4.3 and 4.5, be calculated by linear interpolation between (x) the Index Figure applicable to the first calendar day of the month in which the day falls, calculated as specified in paragraph (i) above and (y) the Index Figure applicable to the first calendar day of the month following, calculated as specified in paragraph (i) above and rounded to the nearest fifth decimal place;


 
A41941146 90 “Her Majesty’s Treasury” means Her Majesty’s Treasury or any officially recognised party performing the function of a calculation agent (whatever such party’s title), on its or its successor’s behalf, in respect of the Reference Gilt; “Index” means, subject as provided in Condition 4.3(i), either CPI, CPIH or RPI as specified in the relevant Final Terms; “Indexed Benchmark Gilt” means the index-linked sterling obligation of the United Kingdom Government listed on the Official List of the Financial Conduct Authority (in its capacity as competent authority under the Financial Services and Markets Act 2000, as amended) and traded on the London Stock Exchange whose average maturity most closely matches that of the Instruments as a gilt-edged market maker or other adviser selected by the Issuer (an “Indexation Adviser”) shall determine to be appropriate; “Index Figure” has the definition given to such term in the definition of “CPI”, “CPIH” or “RPI”, as applicable; “Index Ratio” applicable to any month or date, as the case may be, means the Index Figure applicable to such month or date, as the case may be, divided by the Base Index Figure and rounded to the nearest fifth decimal place; “Limited Index Ratio” means (a) in respect of any month or date, as the case may be, prior to the relevant Issue Date, the Index Ratio for that month or date, as the case may be, (b) in respect of any Limited Indexation Date after the relevant Issue Date, the product of the Limited Indexation Factor for that month or date, as the case may be, and the Limited Index Ratio as previously calculated in respect of the month or date, as the case may be, twelve months prior thereto; and (c) in respect of any other month, the Limited Index Ratio as previously calculated in respect of the most recent Limited Indexation Month; “Limited Indexation Date” means any date falling during the period specified in the relevant Final Terms for which a Limited Indexation Factor is to be calculated; “Limited Indexation Factor” means, in respect of a Limited Indexation Month or Limited Indexation Date, as the case may be, the ratio of the Index Figure applicable to that month or date, as the case may be, divided by the Index Figure applicable to the month or date, as the case may be, twelve months prior thereto, provided that (a) if such ratio is greater than the Maximum Indexation Factor specified in the relevant Final Terms, it shall be deemed to be equal to such Maximum Indexation Factor and (b) if such ratio is less than the Minimum Indexation Factor specified in the relevant Final Terms, it shall be deemed to be equal to such Minimum Indexation Factor; “Limited Indexation Month” means any month specified in the relevant Final Terms for which a Limited Indexation Factor is to be calculated; “Limited Index Linked Instruments” means Index Linked Instruments to which a Maximum Indexation Factor and/or a Minimum Indexation Factor (as specified in the relevant Final Terms) applies; “Redemption Date” means any date on which the Instruments are redeemed in accordance with Condition 4.6, Condition 5.1, Condition 5.2, Condition 5.4, Condition 5.5, Condition 5.6 or Condition 5.7; “Reference Gilt” means the index-linked Treasury Stock/Treasury Gilt specified as such in the relevant Final Terms for so long as such gilt is in issue, and thereafter such issue of index-linked Treasury Stock/Treasury Gilt determined to be appropriate by an Indexation Adviser; and


 
A41941146 91 “RPI” means the U.K. Retail Prices Index (for all items) published by the Office for National Statistics (January 1987 = 100) or any comparable index which may replace the U.K. Retail Prices Index for the purpose of calculating the amount payable on repayment of the Reference Gilt. Where RPI is specified as the Index in the relevant Final Terms, any reference to the “Index Figure” which is specified in the relevant Final Terms as: (i) applicable to a particular month, shall, subject as provided in Conditions 4.3 and 4.5, be construed as a reference to the Index Figure published in the seventh month prior to that particular month and relating to the month before that of publication; or (ii) applicable to the first calendar day of any month shall, subject as provided in Conditions 4.3 and 4.5, be construed as a reference to the Index Figure published in the second month prior to that particular month and relating to the month before that of publication; or (iii) applicable to any other day in any month shall, subject as provided in Conditions 4.3 and 4.5, be calculated by linear interpolation between (x) the Index Figure applicable to the first calendar day of the month in which the day falls, calculated as specified in paragraph (ii) above and (y) the Index Figure applicable to the first calendar day of the month following, calculated as specified in paragraph (ii) above and rounded to the nearest fifth decimal place. 4.2 Application of the Index Ratio Each payment of interest and principal in respect of the Instruments shall be the amount provided in, or determined in accordance with, these Conditions, multiplied by the Index Ratio or Limited Index Ratio in the case of Limited Index Linked Instruments applicable to the month or date, as the case may be, in or on which such payment falls to be made and rounded in accordance with Condition 3.5. 4.3 Changes in Circumstances Affecting the Index (i) Change in base: If at any time and from time to time the Index is changed by the substitution of a new base therefor, then with effect from the month from and including that in which such substitution takes effect or the first date from and including that on which such substitution takes effect, as the case may be, (1) the definition of “Index” and “Index Figure” in Condition 4.1 shall be deemed to refer to the new date, or month or year (as applicable) in substitution for January 1987 (where RPI is specified as the Index in the relevant Final Terms) or 2015 (where CPI or CPIH is specified as the Index in the relevant Final Terms) (or, as the case may be, to such other date, month or year as may have been substituted therefor), and (2) the new Base Index Figure shall be the product of the existing Base Index Figure and the Index Figure for the date on which such substitution takes effect, divided by the Index Figure for the date immediately preceding the date on which such substitution takes effect. (ii) Delay in publication of RPI if paragraph (i) of the definition of Index Figure for RPI is applicable: If the Index Figure which is normally published in the seventh month and which relates to the eighth month (the “relevant month”) before the month in which a payment is due to be made is not published on or before the fourteenth business day before the date on which such payment is due (the “date for payment”), the Index Figure applicable to the month in which the date for payment falls shall be (1) such substitute index figure (if any) as the Trustee considers (acting solely on the advice of the Indexation Adviser) to have been published by the United Kingdom Debt Management Office or the Bank of England, as the case may be, (or such other body designated by the U.K. Government for such purpose) for the purposes of indexation of payments on the Reference Gilt or, failing such publication, on any one or more issues of index-linked Treasury Stock selected by an Indexation Adviser (and approved by the Trustee (acting solely on the advice of the Indexation Adviser)) or (2) if no such determination is made by such Indexation Adviser within seven days, the Index


 
A41941146 92 Figure last published (or, if later, the substitute index figure last determined pursuant to Condition 4.3(i)) before the date for payment. (iii) Delay in publication of relevant Index if paragraph (i) and/or (ii) of the definition of Index Figure for CPI or CPIH is applicable or if paragraph (ii) and/or (iii) of the definition of Index Figure for RPI is applicable: If the Index Figure relating to any month (the “calculation month”) which is required to be taken into account for the purposes of the determination of the Index Figure for any date is not published on or before the fourteenth business day before the date on which such payment is due (the “date for payment”), the Index Figure applicable for the relevant calculation month shall be (1) such substitute index figure (if any) as the Trustee considers (acting solely on the advice of the Indexation Adviser) to have been published by the United Kingdom Debt Management Office or the Bank of England, as the case may be, (or such other body designated by the U.K. Government for such purpose) for the purposes of indexation of payments on the Reference Gilt or the Indexed Benchmark Gilt (as applicable) or, failing such publication, on any one or more issues of index-linked Treasury Stock selected by an Indexation Adviser (and approved by the Trustee (acting solely on the advice of the Indexation Adviser)) or (2) if no such determination is made by such Indexation Adviser within seven days, the Index Figure last published (or, if later, the substitute index figure last determined pursuant to Condition 4.3(i)) before the date for payment. 4.4 Application of Changes Where the provisions of Condition 4.3(ii) or Condition 4.3(iii) apply, the determination of the Indexation Adviser as to the Index Figure applicable to the month in which the date for payment falls or the date for payment, as the case may be, shall be conclusive and binding. If, an Index Figure having been applied pursuant to Condition 4.3(ii)(2) or Condition 4.3(iii)(2), the Index Figure relating to the relevant month or relevant calculation month, as the case may be, is subsequently published while an Instrument is still outstanding, then: (i) in relation to a payment of principal or interest in respect of such Instrument other than upon final redemption of such Instrument, the principal or interest (as the case may be) next payable after the date of such subsequent publication shall be increased or reduced, as the case may be, by an amount equal to the shortfall or excess, as the case may be, of the amount of the relevant payment made on the basis of the Index Figure applicable by virtue of Condition 4.3(ii)(2) or Condition 4.3(iii)(2) below or above the amount of the relevant payment that would have been due if the Index Figure subsequently published had been published on or before the fourteenth business day before the date for payment; and (ii) in relation to a payment of principal or interest upon final redemption, no subsequent adjustment to amounts paid will be made. 4.5 Material Changes to or Cessation of the Index (i) Material changes to the relevant Index: (a) CPI and CPIH: Where CPI or CPIH is specified in the relevant Final Terms as the Index and: (1) if notice is published by Her Majesty’s Treasury, or on its behalf, following a change to the coverage or the basic calculation of such Index, then the Calculation Agent shall make any such adjustments to the Index consistent with any adjustments made to the Index as applied to the relevant Indexed Benchmark Gilt; or (2) any change is made to the coverage or the basic calculation of such Index which constitutes a fundamental change which would, in the opinion of either


 
A41941146 93 the Issuer or the Trustee (acting solely on the advice of an Indexation Adviser), be materially prejudicial to the interests of the Issuer or the Instrumentholders, as the case may be, the Issuer or the Trustee (as applicable) shall give written notice of such occurrence to the other party. Promptly after the giving of such notice, the Issuer and the Trustee (acting solely on the advice of the Indexation Adviser) together shall seek to agree for the purpose of the Instruments one or more adjustments to CPI or CPIH (as applicable) or a substitute index (with or without adjustments) with the intention that the same should leave the Issuer and the Instrumentholders in no materially better and no materially worse position than they would have been had the relevant fundamental change to CPI or CPIH (as applicable) not been made. If the Issuer and the Trustee (acting solely on the advice of the Indexation Adviser) fail to reach agreement as mentioned above within 20 Business Days following the giving of notice as mentioned above, a bank or other person in London shall be appointed by the Issuer and the Trustee or, failing agreement on and the making of such appointment within 20 Business Days following the expiry of the 20 day period referred to above, by the Trustee (acting solely on the advice of the Indexation Adviser) (in each case, such bank or other person so appointed being referred to as the “Expert”), to determine for the purpose of the Instruments one or more adjustments to CPI or CPIH (as applicable) or a substitute index (with or without adjustments) with the intention that the same should leave the Issuer and the Instrumentholders in no materially better and no materially worse position than they would have been had the relevant fundamental change to CPI or CPIH (as applicable) not been made. Any Expert so appointed shall act as an expert and not as an arbitrator and all fees, costs and expenses of the Expert and of any Indexation Adviser and of any of the Issuer and the Trustee in connection with such appointment shall be borne by the Issuer. (b) RPI: Where RPI is specified in the relevant Final Terms as the Index and if notice is published by Her Majesty’s Treasury, or on its behalf, following a change to the coverage or the basic calculation of such Index, then the Calculation Agent shall make any such adjustments to the Index consistent with any adjustments made to the Index as applied to the Reference Gilt. (ii) Cessation of the relevant Index: If the Trustee and the Issuer have been notified by the Calculation Agent that the relevant Index has ceased to be published, or if Her Majesty’s Treasury or the Office for National Statistics, as the case may be, or a person acting on its behalf, announces that it has ceased to publish the relevant Index, then the Calculation Agent shall determine a successor index in lieu of any previously applicable index (the “Successor Index”) by using the following methodology: (a) if at any time a successor index has been designated by Her Majesty’s Treasury in respect of the Reference Gilt, such successor index shall be designated the “Successor Index” for the purposes of all subsequent Interest Payment Dates, notwithstanding that any other Successor Index may previously have been determined under paragraph (b) or (c) below. This provision will only be applicable when RPI is specified in the relevant Final Terms as the Index; or


 
A41941146 94 (b) the Issuer and the Trustee (acting solely on the advice of the Indexation Adviser) together shall seek to agree for the purpose of the Instruments one or more adjustments to the Index or a substitute index (with or without adjustments) with the intention that the same should leave the Issuer and the Instrumentholders in no materially better and no materially worse position than they would have been had the Index not ceased to be published. If the relevant Final Terms specify RPI as the Index then this paragraph (b) will only be applicable provided the Successor Index has not been determined under paragraph (a) above; or (c) if the Issuer and the Trustee (acting solely on the advice of the Indexation Adviser) fail to reach agreement as mentioned above within 20 business days following the giving of notice as mentioned in paragraph (ii), a bank or other person in London shall be appointed by the Issuer and the Trustee or, failing agreement on and the making of such appointment within 20 business days following the expiry of the 20 day period referred to above, by the Trustee (acting solely on the advice of the Indexation Adviser) (in each case, such bank or other person so appointed being referred to as the “Expert”), to determine for the purpose of the Instruments one or more adjustments to the Index or a substitute index (with or without adjustments) with the intention that the same should leave the Issuer and the Instrumentholders in no materially better and no materially worse position than they would have been had the Index not ceased to be published. Any Expert so appointed shall act as an expert and not as an arbitrator and all fees, costs and expenses of the Expert and of any Indexation Adviser and of any of the Issuer and the Trustee in connection with such appointment shall be borne by the Issuer. (iii) Adjustment or replacement: The Index shall be adjusted or replaced by a substitute index pursuant to the foregoing paragraphs, as the case may be, and references in these Conditions to the Index and to any Index Figure shall be deemed amended in such manner as the Trustee (acting solely on the advice of the Indexation Adviser) and the Issuer agree are appropriate to give effect to such adjustment or replacement. Such amendments shall be effective from the date of such notification and binding upon the Issuer, the Trustee and the Instrumentholders, and the Issuer shall give notice to the Instrumentholders in accordance with Condition 14 of such amendments as promptly as practicable following such notification or adjustment. 4.6 Redemption for Index Reasons If either (i) the Index Figure for three consecutive months is required to be determined on the basis of an Index Figure previously published as provided in Condition 4.3(ii)(2) or 4.3 (iii)(2), as applicable and the Trustee has been notified by the Calculation Agent that publication of the Index has ceased or (ii) notice is published by Her Majesty’s Treasury, or on its behalf, following a change in relation to the Index, offering a right of redemption to the holders of the Reference Gilt or the Indexed Benchmark Gilt (as applicable), and (in either case) no amendment or substitution of the Index shall have been designated by Her Majesty’s Treasury in respect of the Reference Gilt or the Indexed Benchmark Gilt (as applicable) to the Issuer and such circumstances are continuing, the Issuer may, upon giving not more than 60 nor less than 30 days’ notice to the Instrumentholders (or such other notice period as may be specified in the relevant Final Terms) in accordance with Condition 14, redeem all, but not some only, of the Instruments at their principal amount together with interest accrued but unpaid up to and including the date of redemption (in each case adjusted in accordance with Condition 4.2).


 
A41941146 95 4.7 HICP Where HICP (as defined below) is specified as the Index or Index Level (each as defined below) in the relevant Final Terms, the Conditions 4.7 to 4.10 will apply. For purposes of Conditions 4.7 to 4.10, unless the context otherwise requires, the following defined terms shall have the meanings set out below: “Base Index Level” means the base index level as specified in the relevant Final Terms; “Index” or “Index Level” means (subject as provided in Condition 4.9) the non-revised Harmonised Index of Consumer Prices excluding tobacco or relevant Successor Index (as defined in Condition 4.9 (i)), measuring the rate of inflation in the European Monetary Union excluding tobacco, expressed as an index and published by Eurostat (the “HICP”). The first publication or announcement of a level of such index for a calculation month (as defined in Condition 4.9 (i)) shall be final and conclusive and later revisions to the level for such calculation month will not be used in any calculations. Any reference to the Index Level which is specified in these Conditions as applicable to any day (“d”) in any month (“m”) shall, subject as provided in Condition 4.9, be calculated as follows: Id = HICP m-3 + x (HICP m-2 – HICP m-3) where: Id is the Index Level for the day d HICP m-2 is the level of HICP for month m-2 HICP m-3 is the level of HICP for month m-3 nbd is the actual number of days from and excluding the first day of month m to but including day d; and qm is the actual number of days in month m, provided that if Condition 4.9 applies, the Index Level shall be the Substitute Index Level determined in accordance with such Condition. “Index Business Day” means a day on which the TARGET System is operating; “Index Determination Date” means in respect of any date for which the Index Level is required to be determined, the fifth Index Business Day prior to such date; “Index Ratio” applicable to any date means the Index Level applicable to the relevant Index Determination Date divided by the Base Index Level and rounded to the nearest fifth decimal place, 0.000005 being rounded upwards; “Related Instrument” means an inflation-linked bond selected by the Calculation Agent that is a debt obligation of one of the governments (but not any government agency) of France, Italy, Germany or Spain and which pays a coupon or redemption amount which is calculated by reference to the level of inflation in the European Monetary Union with a maturity date which falls on (a) the same day as the Maturity Date, (b) the next longest maturity date after the Maturity Date if there is no such bond maturing on the Maturity Date, or (c) the next shortest maturity before the Maturity Date if no bond defined in (a) or (b) is selected by the Calculation Agent. The Calculation Agent will select the Related Instrument from such of those inflation-linked bonds issued on or before the relevant Issue Date and, if there is more than one such inflation-linked bond maturing on the same date, the Related Instrument shall be selected by the Calculation Agent from such of those bonds. If the Related Instrument is redeemed the Calculation Agent will select a new Related Instrument on the


 
A41941146 96 same basis, but selected from all eligible bonds in issue at the time the originally selected Related Instrument is redeemed (including any bond for which the redeemed originally selected Related Instrument is exchanged). 4.8 Application of the Index Ratio Each payment of interest and principal in respect of the Instruments shall be the amount provided in, or determined in accordance with, these Conditions, multiplied by the Index Ratio applicable to the date on which such payment falls to be made and rounded in accordance with Condition 3.5. 4.9 Changes in Circumstances Affecting the Index (i) Delay in publication of Index (a) If the Index Level relating to any month (the “calculation month”) which is required to be taken into account for the purposes of the determination of the Index Level for any date (the “Relevant Level”) has not been published or announced by the day that is five Business Days before the date on which such payment is due (the “Affected Payment Date”), the Calculation Agent shall determine a Substitute Index Level (as defined below) (in place of such Relevant Level) by using the following methodology: (1) if applicable, the Calculation Agent will take the same action to determine the “Substitute Index Level” for the Affected Payment Date as that taken by the calculation agent (or any other party performing the function of a calculation agent (whatever such party’s title)) pursuant to the terms and conditions of the Related Instrument; (2) if (1) above does not result in a Substitute Index Level for the Affected Payment Date for any reason, then the Calculation Agent shall determine the Substitute Index Level as follows: Substitute Index Level = Base Level x (Latest Level / Reference Level) Where: “Base Level” means the level of the Index (excluding any flash estimates) published or announced by Eurostat (or any successor entity which publishes such index) in respect of the month which is 12 calendar months prior to the month for which the Substitute Index Level is being determined; “Latest Level” means the latest level of the Index (excluding any flash estimates) published or announced by Eurostat (or any successor entity which publishes such index) prior to the month in respect of which the Substitute Index Level is being calculated; and “Reference Level” means the level of the Index (excluding any flash estimates) published or announced by Eurostat (or any successor entity which publishes such index) in respect of the month that is 12 calendar months prior to the month referred to in “Latest Level” above. (b) If a Relevant Level is published or announced at any time after the day that is five Business Days prior to the next Interest Payment Date, such Relevant Level will not be used in any calculations. The Substitute Index Level so determined pursuant to this Condition 4.9(i) will be the definitive level for that calculation month. (ii) Cessation of publication: If the Index Level has not been published or announced for two consecutive months or Eurostat announces that it will no longer continue to publish or


 
A41941146 97 announce the Index then the Calculation Agent shall determine a successor index in lieu of any previously applicable Index (the “Successor Index”) by using the following methodology: (a) if at any time (other than after an Early Termination Event (as defined below) has been designated by the Calculation Agent pursuant to paragraph (e) below) a successor index has been designated by the calculation agent (or any other party performing the function of a calculation agent (whatever such party’s title)) pursuant to the terms and conditions of the Related Instrument, such successor index shall be designated the “Successor Index” for the purposes of all subsequent Interest Payment Dates, notwithstanding that any other Successor Index may previously have been determined under paragraph (b), (c) or (d) below; or (b) if a Successor Index has not been determined under paragraph (a) above (and there has been no designation of an Early Termination Event pursuant to paragraph (e) below), and a notice has been given or an announcement has been made by Eurostat (or any successor entity which publishes such index) specifying that the Index will be superseded by a replacement index specified by Eurostat (or any such successor), and the Calculation Agent determines that such replacement index is calculated using the same or substantially similar formula or method of calculation as used in the calculation of the previously applicable Index, such replacement index shall be the Index from the date that such replacement index comes into effect; or (c) if a Successor Index has not been determined under paragraph (a) or (b) above (and there has been no designation of an Early Termination Event pursuant to paragraph (e) below), the Calculation Agent shall ask five leading independent dealers to state what the replacement index for the Index should be. If between four and five responses are received, and of those four or five responses, three or more leading independent dealers state the same index, this index will be deemed the “Successor Index”. If three responses are received, and two or more leading independent dealers state the same index, this index will be deemed the “Successor Index”. If fewer than three responses are received, the Calculation Agent will proceed to paragraph (d) below; (d) if no Successor Index has been determined under paragraph (a), (b) or (c) above on or before the fifth Index Business Day prior to the next Affected Payment Date the Calculation Agent will determine an appropriate alternative index for such Affected Payment Date, and such index will be deemed the “Successor Index”; (e) if the Calculation Agent determines that there is no appropriate alternative index, the Issuer and the Instrumentholders shall, in conjunction with the Calculation Agent, determine an appropriate alternative index. If the Issuer and the Instrumentholders, in conjunction with the Calculation Agent, do not reach agreement on an appropriate alternative index within a period of ten Business Days, then an Early Termination Event will be deemed to have occurred and the Issuer will redeem the Instruments pursuant to Condition 4.10. (iii) Rebasing of the Index: If the Calculation Agent determines that the Index has been or will be rebased at any time, the Index as so rebased (the “Rebased Index”) will be used for the purposes of determining each relevant Index Level from the date of such rebasing; provided, however, that the Calculation Agent shall make such adjustments as are made by the calculation agent (or any other party performing the function of a calculation agent (whatever such party’s title)) pursuant to the terms and conditions of the Related Instrument to the levels


 
A41941146 98 of the Rebased Index so that the Rebased Index levels reflect the same rate of inflation as the Index before it was rebased. Any such rebasing shall not affect any prior payments made. (iv) Material Modification Prior to Interest Payment Date: If, on or prior to the day that is five Business Days before an Interest Payment Date, Eurostat announces that it will make a material change to the Index then the Calculation Agent shall make any such adjustments to the Index consistent with adjustments made to the Related Instrument. (v) Manifest Error in Publication: If, within 30 days of publication, the Calculation Agent determines that Eurostat (or any successor entity which publishes such index) has corrected the level of the Index to remedy a manifest error in its original publication, the Calculation Agent will notify the parties of (a) that correction, (b) the amount that is payable as a result of that correction and (c) take such other action as it may deem necessary to give effect to such correction. 4.10 Redemption for Index Reasons If an Early Termination Event as described under Condition 4.9(ii)(e) is deemed to have occurred, the Issuer will, upon giving not more than 60 nor less than 30 days’ notice to the Instrumentholders (or such other notice period as may be specified in the relevant Final Terms) in accordance with Condition 14, redeem all, but not some only, of the Instruments at their principal amount together with interest accrued but unpaid up to and including the date of redemption (in each case adjusted in accordance with Condition 4.8). 5 Redemption, Purchase and Options 5.1 Final Redemption Unless previously redeemed, purchased and cancelled as provided below, this Instrument will be redeemed at its Final Redemption Amount (which, unless otherwise provided, is its nominal amount) on the Maturity Date specified in the relevant Final Terms provided, however, that if this Instrument is a Perpetual Instrument it will only be redeemable and repayable in accordance with the following provisions of this Condition 5. 5.2 Redemption for Taxation Reasons If, on the occasion of the next payment in respect of the Instruments the Issuer satisfies the Trustee immediately before the giving of the notice referred to below that it would be unable to make such payment without having to pay additional amounts as described in Condition 7, and such requirement to pay such additional amounts arises by reason of a change in the laws of the United Kingdom or any political sub-division of the United Kingdom or taxing authority in the United Kingdom or any political sub-division of the United Kingdom or in the interpretation or application of the laws of the United Kingdom or any political sub-division of the United Kingdom or in any applicable double taxation treaty or convention, which change becomes effective on or after the date on which agreement is reached to issue the first Tranche of the Instruments, and such requirement cannot be avoided by the Issuer taking reasonable measures (such measures not involving any material additional payments by, or expense for, the Issuer), the Issuer may, at its option, at any time, having given not less than 30 nor more than 45 days’ notice to the Instrumentholders (or such other notice period as may be specified in the relevant Final Terms) in accordance with Condition 14, redeem all, but not some only, of the Instruments at their Early Redemption Amount together with interest accrued to the date of redemption provided that the date fixed for redemption shall not be earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay such additional amounts or make such withholding or deduction, as the case may be, were a payment in respect of the Instruments then due. Prior to the publication of any notice of redemption pursuant to this Condition 5.2, the Issuer shall deliver to the Trustee a


 
A41941146 99 certificate signed by two Directors of the Issuer stating that the requirement referred to above cannot be avoided by the Issuer taking reasonable measures available to it and the Trustee shall be entitled to accept such certificate as sufficient evidence of the satisfaction of the condition precedent set out above in which event it shall be conclusive and binding on Instrumentholders and Couponholders. 5.3 Purchases The Issuer and any of its subsidiary undertakings may at any time purchase Instruments (provided that all unmatured Coupons and unexchanged Talons appertaining to them are attached or surrendered with them) in the open market or otherwise at any price. 5.4 Early Redemption 5.4.1 Zero Coupon Instruments (i) The Early Redemption Amount payable in respect of any Zero Coupon Instrument, the Early Redemption Amount of which is not linked to an index and/or a formula, upon redemption of such Instrument pursuant to Condition 5.2 or upon it becoming due and payable as provided in Condition 9 shall be the Amortised Face Amount (calculated as provided below) of such Instrument unless otherwise specified in the relevant Final Terms. (ii) Subject to the provisions of sub-paragraph (iii) below, the Amortised Face Amount of any such Instrument shall be the scheduled Final Redemption Amount of such Instrument on the Maturity Date discounted at a rate per annum (expressed as a percentage) equal to the Amortisation Yield (which, if none is specified in the relevant Final Terms, shall be such rate as would produce an Amortised Face Amount equal to the issue price of the Instruments if they were discounted back to their issue price on the Issue Date) compounded annually. (iii) If the Early Redemption Amount payable in respect of any such Instrument upon its redemption pursuant to Condition 5.2 or, if applicable, Condition 5.5 or 5.6 or upon it becoming due and payable as provided in Condition 9, is not paid when due, the Early Redemption Amount due and payable in respect of such Instrument shall be the Amortised Face Amount of such Instrument as defined in sub-paragraph (ii) above, except that such sub-paragraph shall have effect as though the reference in that sub- paragraph to the date on which the Instrument becomes due and payable was replaced by a reference to the Relevant Date as defined in Condition 7. The calculation of the Amortised Face Amount in accordance with this sub-paragraph shall continue to be made (both before and after judgment) until the Relevant Date, unless the Relevant Date falls on or after the Maturity Date, in which case the amount due and payable shall be the scheduled Final Redemption Amount of such Instrument on the Maturity Date together with any interest that may accrue in accordance with Condition 3.2. Where such calculation is to be made for a period of less than one year, it shall be made on the basis of the Day Count Fraction specified in the relevant Final Terms. 5.4.2 Other Instruments The Early Redemption Amount payable in respect of any Instrument (other than Instruments described in Condition 5.4.1), upon redemption of such Instrument pursuant to this Condition 5.4 or upon it becoming due and payable as provided in Condition 9, shall be the Final Redemption Amount unless otherwise specified in the relevant Final Terms.


 
A41941146 100 5.5 Redemption at the Option of the Issuer and Exercise of Issuer’s Options 5.5.1 If (i) Residual Holding Call Option is specified in the relevant Final Terms, and (ii) if at any time the Residual Holding Percentage or more of the aggregate nominal amount of Instruments originally issued shall have been redeemed or purchased and cancelled, the Issuer shall have the option to redeem such outstanding Instruments in whole, but not in part, at their Residual Holding Redemption Amount. Unless otherwise specified in the relevant Final Terms, the Residual Holding Redemption Amount will be calculated by the Calculation Agent by discounting the outstanding nominal amount of the Instruments and the remaining interest payments (if applicable) to the Maturity Date by a rate per annum (expressed as a percentage to the nearest one hundred thousandth of a percentage point (with halves being rounded up)) equal to the Benchmark Yield, being the yield on the Benchmark Security at the close of business on the third Business Day prior to the date fixed for such redemption, plus the Benchmark Spread. Where the specified calculation is to be made for a period of less than one year, it shall be calculated using the Benchmark Day Count Fraction. The Issuer will give not less than 15 nor more than 30 days’ irrevocable notice to the Instrumentholders and the Trustee of any such redemption pursuant to this Condition 5.5.1. 5.5.2 If Call Option is specified in the relevant Final Terms, the Issuer may, unless an Exercise Notice has been given pursuant to Condition 5.6 or 5.7, on giving not less than 15 nor more than 30 days’ irrevocable notice to the Instrumentholders (or such other notice period as may be specified in the relevant Final Terms), redeem, or exercise any Issuer’s option in relation to, all or, if so provided, some of such Instruments on any Optional Redemption Date(s) or Option Exercise Date, as the case may be. Any such redemption of Instruments shall be at their Optional Redemption Amount together with interest accrued to but excluding the date fixed for redemption. Any such redemption or exercise must relate to Instruments of a nominal amount at least equal to the minimum nominal amount (if any) permitted to be redeemed specified in the relevant Final Terms and no greater than the maximum nominal amount (if any) permitted to be redeemed specified in the relevant Final Terms. All Instruments in respect of which any such notice is given shall be redeemed, or the Issuer’s option shall be exercised, on the date specified in such notice in accordance with this Condition. In the case of a partial redemption or a partial exercise of an Issuer’s option, the notice to Instrumentholders shall also contain the serial numbers of the Instruments to be redeemed, which shall have been drawn in such place as the Trustee may approve and in such manner as it deems appropriate, subject to compliance with any applicable laws, listing authority and stock exchange requirements. 5.5.3 If Make-whole Redemption Option is specified in the relevant Final Terms as applicable, the Issuer may, unless an Exercise Notice has been given pursuant to Condition 5.6 or 5.7, on giving not less than 15 nor more than 30 days’ irrevocable notice to the Instrumentholders (or such other notice period as may be specified in the relevant Final Terms), redeem, or exercise any Issuer’s option in relation to, all or, if so provided, some of such Instruments on any Make-whole Redemption Date(s). Any such redemption of Instruments shall be at an amount equal to the higher of the following, in each case together with interest accrued to but excluding the date fixed for redemption: (i) the nominal amount of the Instrument; and (ii) the nominal amount of the Instrument multiplied by the price (as reported in writing to the Issuer and the Trustee by a financial adviser (the “Financial Adviser”) appointed by the Issuer and approved by the Trustee) expressed as a percentage (rounded to


 
A41941146 101 the nearest fifth decimal places, 0.000005 being rounded upwards) at which the Gross Redemption Yield on the Instruments on the Determination Date specified in the Final Terms is equal to the Gross Redemption Yield at the Quotation Time specified in the relevant Final Terms on the Determination Date of the Reference Bond specified in the relevant Final Terms (or, where the Financial Adviser advises the Trustee that, for reasons of illiquidity or otherwise, such Reference Bond is not appropriate for such purpose, such other government stock as such Financial Adviser may recommend) plus any applicable Redemption Margin specified in the Final Terms. Any such redemption or exercise must relate to Instruments of a nominal amount at least equal to the minimum nominal amount (if any) permitted to be redeemed specified in the relevant Final Terms and no greater than the maximum nominal amount (if any) permitted to be redeemed specified in the relevant Final Terms. All Instruments in respect of which any such notice is given shall be redeemed, or the Issuer’s option shall be exercised, on the date specified in such notice in accordance with this Condition. In the case of a partial redemption or a partial exercise of an Issuer’s option, the notice to Instrumentholders shall also contain the serial numbers of the Instruments to be redeemed, which shall have been drawn in such place as the Trustee may approve and in such manner as it deems appropriate, subject to compliance with any applicable laws, listing authority and stock exchange requirements. In this Condition: “Gross Redemption Yield” means a yield calculated in accordance with generally accepted market practice at such time, as advised to the Trustee by the Financial Adviser. 5.6 Redemption at the Option of Instrumentholders following a Restructuring Event 5.6.1 *[Redemption of Instruments issued by National Grid at the option of Instrumentholders If at any time whilst any of the Instruments issued by National Grid remains outstanding, there occurs the National Grid Restructuring Event, a Public Announcement shall be made and if, within the National Grid Restructuring Period, either: (i) (if at the time that the National Grid Restructuring Event occurs there are Rated Securities) a Rating Downgrade in respect of the National Grid Restructuring Event occurs; or (ii) (if at the time that the National Grid Restructuring Event occurs there are no Rated Securities) a Negative Rating Event in respect of the National Grid Restructuring Event occurs, (the National Grid Restructuring Event and Rating Downgrade or the National Grid Restructuring Event and Negative Rating Event, as the case may be, occurring within the National Grid Restructuring Period, together called a “Put Event”), then the holder of each Instrument issued by National Grid will have the option upon the giving of a Put Notice (as defined in Condition 5.6.4) to require National Grid to redeem or, at the option of National Grid, purchase (or procure the purchase of) such Instrument on the Put Date (as defined in Condition 5.6.4) at its principal amount together with accrued interest to the Put Date. * Only applicable where National Grid is the Issuer.


 
A41941146 102 Promptly upon National Grid becoming aware that a Put Event has occurred, National Grid shall, or at any time upon the Trustee becoming similarly so aware the Trustee may, and if so requested in writing by the holders of at least one-quarter in principal amount of the Instruments then outstanding or if so directed by an Extraordinary Resolution of the Instrumentholders, the Trustee shall, give notice (a “Put Event Notice”) to the Instrumentholders in accordance with Condition 14 specifying the nature of the Put Event and the procedure (as set out in Condition 5.6.4) for exercising the option contained in this Condition 5.6.1. National Grid shall, forthwith upon becoming aware of the occurrence of the National Grid Restructuring Event (a) provide the Trustee with the relevant Directors’ Report and (b) provide or procure that the Reporting Accountants provide the Trustee with the Accountants’ Report. The Directors’ Report and the Accountants’ Report shall, in the absence of manifest error, be conclusive and binding on all concerned, including the Trustee and the Instrumentholders. The Trustee shall be entitled to act, or not act, and rely on without being expected to verify the accuracy of the same (and shall have no liability to Instrumentholders for doing so) any Directors’ Report and/or any Accountants’ Report (whether or not addressed to it). 5.6.2 For the purposes of this Condition “Accountants’ Report” means a report of the Reporting Accountants stating whether the amounts included in the calculation of the Operating Profit and the amount for Consolidated Operating Profit as included in the Directors’ Report have been accurately extracted from the accounting records of National Grid and its Subsidiaries and whether the Disposal Percentage included in the Directors’ Report has been correctly calculated which will be prepared pursuant to an engagement letter to be entered into by the Reporting Accountants, National Grid and the Trustee. National Grid shall use reasonable endeavours to procure that there shall at the relevant time be Reporting Accountants who have (a) entered into an engagement letter with National Grid and the Trustee which shall (i) not limit the liability of the Reporting Accountants to the Trustee by reference to a monetary cap and (ii) be available for inspection by Instrumentholders at the principal office of the Trustee or (b) agreed to provide Accountants’ Reports on such other terms as National Grid and the Trustee shall approve. If National Grid, having used reasonable endeavours, is unable to procure that there shall at the relevant time be Reporting Accountants who have entered into an engagement letter complying with (i) above, the Trustee may rely on an Accountants’ Report which contains a limit on the liability of the Reporting Accountants by reference to a monetary cap or otherwise. Investors should be aware that the engagement letter may contain a limit on the liability of the Reporting Accountants which may impact on the interests of Instrumentholders. National Grid shall give notice to the Trustee of the identity of the Reporting Accountants; “Consolidated Operating Profit” means the consolidated operating profit on ordinary activities before tax and interest and before taking account of depreciation and amortisation of goodwill and regulatory assets (for the avoidance of doubt, exceptional items, as reflected in the Relevant Accounts shall not be included) of National Grid and its subsidiaries (including any share of operating profit of associates and joint ventures) determined in accordance with International Financial Reporting Standards (“IFRS”) by reference to the Relevant Accounts; “Directors’ Report” means a report prepared and signed by two directors of National Grid addressed to the Trustee setting out the Operating Profit, the Consolidated Operating Profit


 
A41941146 103 and the Disposal Percentage and stating any assumptions which the Directors of National Grid have employed in determining the Operating Profit; “Disposal Percentage” means, in relation to a sale, transfer, lease or other disposal or dispossession of any Disposed Assets, the ratio of (a) the aggregate Operating Profit to (b) the Consolidated Operating Profit, expressed as a percentage; “Disposed Assets” means, where National Grid and/or any of its Subsidiaries sells, transfers, leases or otherwise disposes of or is dispossessed by any means (but excluding sales, transfers, leases, disposals or dispossessions which, when taken together with any related lease back or similar arrangements entered into in the ordinary course of business, have the result that Operating Profit directly attributable to any such undertaking, property or assets continues to accrue to National Grid or, as the case may be, such Subsidiary), otherwise than to a wholly-owned Subsidiary of National Grid or to National Grid, of the whole or any part (whether by a single transaction or by a number of transactions whether related or not) of its undertaking or (except in the ordinary course of business of National Grid or any such Subsidiary) property or assets, the undertaking, property or assets sold, transferred, leased or otherwise disposed of or of which it is so dispossessed; “Negative Rating Event” shall be deemed to have occurred if either (a) National Grid does not, either prior to or not later than 21 days after the relevant National Grid Restructuring Event, seek, and thereupon use all reasonable endeavours to obtain, a rating of the Instruments or any other unsecured and unsubordinated debt of National Grid having an initial maturity of five years or more (“Rateable Debt”) from a Rating Agency or (b) if National Grid does so seek and use such endeavours, it is unable, as a result of such National Grid Restructuring Event, to obtain such a rating of at least investment grade (BBB- or Baa3 or their respective equivalents for the time being), provided that a Negative Rating Event shall not be deemed to have occurred in respect of a particular National Grid Restructuring Event if the Rating Agency declining to assign a rating of at least investment grade (as described above) does not announce or publicly confirm that its declining to assign a rating of at least investment grade was the result, in whole or in part, of any event or circumstance comprised in or arising as a result of, or in respect of, the applicable National Grid Restructuring Event (whether or not the National Grid Restructuring Event shall have occurred at the time such investment grade rating is declined); “National Grid Restructuring Event” shall be deemed to have occurred at any time (whether or not approved by the Board of Directors of National Grid) that the sum of Disposal Percentages for National Grid within any period of 36 months commencing on or after the issue date of the first Tranche of the Instruments is greater than 50 per cent.; “National Grid Restructuring Period” means the period ending 90 days after a Public Announcement (or such longer period in which the Rated Securities or Rateable Debt, as the case may be, is or are under consideration (announced publicly within the first mentioned period) for rating review or, as the case may be, rating by a Rating Agency); “Operating Profit”, in relation to any Disposed Assets, means the operating profits on ordinary activities before tax and interest and before taking account of depreciation and amortisation of goodwill and regulatory assets (for the avoidance of doubt, exceptional items, as reflected in the Relevant Accounts, shall not be included) of National Grid and its Subsidiaries directly attributable to such Disposed Assets as determined in accordance with IFRS by reference to the Relevant Accounts and, if Relevant Accounts do not yet exist, determined in a manner consistent with the assumptions upon which the Directors’ Report is to be based. Where the


 
A41941146 104 Directors of National Grid have employed assumptions in determining the Operating Profit, those assumptions should be clearly stated in the Directors’ Report; “Public Announcement” means an announcement by National Grid or the Trustee, of the occurrence of the National Grid Restructuring Event published in a leading national newspaper having general circulation in the United Kingdom (which is expected to be the Financial Times); “Rated Securities” means the Instruments, if and for so long as they shall have an effective rating from a Rating Agency and otherwise any Rateable Debt which is rated by a Rating Agency; provided that if there shall be no such Rateable Debt outstanding prior to the maturity of the Instruments, the holders of not less than one-quarter in principal amount of outstanding Instruments may require National Grid to obtain and thereafter update on an annual basis a rating of the Instruments from a Rating Agency. In addition, National Grid may at any time obtain and thereafter update on an annual basis a rating of the Instruments from a Rating Agency, provided that, except as provided above, National Grid shall not have any obligation to obtain such a rating of the Instruments; “Rating Agency” means S&P Global Ratings Europe Limited and its successors or Moody’s Investors Service Ltd. and its successors or any rating agency substituted for either of them (or any permitted substitute of them) by National Grid from time to time with the prior written approval of the Trustee; “Rating Downgrade” shall be deemed to have occurred in respect of the National Grid Restructuring Event if the then current rating whether provided by a Rating Agency at the invitation of National Grid or by its own volition assigned to the Rated Securities by any Rating Agency is withdrawn or reduced from an investment grade rating (BBB- or Baa3 or their respective equivalents for the time being or better) to a non-investment grade rating (BB+ or Ba1 or their respective equivalents for the time being or worse) or, if a Rating Agency shall already have rated the Rated Securities below investment grade (as described above), the rating is lowered one full rating category; provided that a Rating Downgrade otherwise arising by virtue of a particular reduction in rating shall not be deemed to have occurred in respect of a particular National Grid Restructuring Event if the Rating Agency making the reduction in rating to which this definition would otherwise apply does not announce or publicly confirm that the reduction was the result, in whole or part, of any event or circumstance comprised in or arising as a result of, or in respect of, the applicable National Grid Restructuring Event (whether or not the applicable National Grid Restructuring Event shall have occurred at the time of the Rating Downgrade); “Relevant Accounts” means the most recent annual audited consolidated financial accounts of National Grid and its Subsidiaries preceding the relevant sale, transfer, lease or other disposal or dispossession of any Disposed Asset; “Reporting Accountants” means the Auditors of National Grid (but not acting in their capacity as auditors) or such other firm of accountants as may be nominated by National Grid and approved in writing by the Trustee for the purpose or, failing which, as may be selected by the Trustee for the purpose; and “Subsidiary” means a subsidiary within the meaning of Section 1159 of the Companies Act 2006 and “Subsidiaries” shall be construed accordingly. 5.6.3 The Trustee shall not be responsible for ascertaining or monitoring whether or not the National Grid Restructuring Event, a Negative Rating Event or a Rating Downgrade in relation


 
A41941146 105 to National Grid has occurred and, unless and until it has actual knowledge to the contrary, shall be entitled to assume that no such event has occurred. 5.6.4 To exercise the option of redemption of an Instrument under Condition 5.6.1 the Instrumentholder must deliver each Instrument to be redeemed accompanied by a duly signed and completed notice of exercise in the form (for the time being current) obtainable from the specified office of any Paying Agent (a “Put Notice”) and, in which the Instrumentholder may specify an account to which payment is to be made under this Condition 5.6 to the specified office of any Paying Agent on any business day falling within the period (the “Put Period”) of 45 days after a Put Event Notice is given. The Instrument should be delivered together with all Coupons (and Talons) appertaining thereto maturing after the date (the “Put Date”) falling seven days after the expiry of the Put Period, failing which (unless Condition 6.6.1 applies) the Paying Agent will require payment of an amount equal to the face value of any such missing Coupon and/or Talon. Any amount so paid will be reimbursed in the manner provided in Condition 6 against presentation and surrender of the relevant missing Coupon and/or Talon, subject to Condition 8. The Paying Agent to which such Instrument and Put Notice are delivered will issue to the Instrumentholder concerned a non-transferable receipt in respect of the Instrument so delivered. Payment in respect of any Instrument so delivered will be made, if the Instrumentholder duly specified a bank account in the Put Notice to which payment is to be made, on the Put Date by transfer to that bank account and, in every other case, on or after the Put Date in the manner provided in Condition 6 against presentation and surrender (or, in the case of part payment, endorsement) of such receipt at the specified office of any Paying Agent. A Put Notice, once given, shall be irrevocable. For the purposes of the Conditions and the Trust Deed, receipts issued pursuant to this Condition 5.6 shall be treated as if they were Instruments. National Grid shall redeem the relevant Instruments on the Put Date unless previously redeemed or purchased.] 5.6.1 *[Redemption of Instruments issued by NGET at the option of Instrumentholders If NGET Restructuring Put Option is specified in the relevant Final Terms and at any time whilst any of the Instruments issued by NGET remains outstanding there occurs an NGET Restructuring Event and in relation to that NGET Restructuring Event, a Negative Certification is made and, within the NGET Restructuring Period either: (i) (if at the time that an NGET Restructuring Event occurs there are Rated Securities) a Rating Downgrade in respect of the relevant NGET Restructuring Event occurs; or (ii) (if at the time that an NGET Restructuring Event occurs there are no Rated Securities) a Negative Rating Event in respect of the relevant NGET Restructuring Event occurs, (the NGET Restructuring Event and Rating Downgrade or the NGET Restructuring Event and Negative Rating Event, as the case may be, occurring within the NGET Restructuring Period, together with a Negative Certification, shall be called a “Put Event”), then the holder of each Instrument of NGET will have the option upon the giving of a Put Notice (as defined in Condition 5.6.4) to require NGET to redeem or, at the option of NGET, purchase (or procure the purchase of) such Instrument on the Put Date (as defined in Condition 5.6.4) at its principal amount together with accrued interest to the Put Date. Promptly upon NGET becoming aware that a Put Event has occurred, and in any event no later than 14 days after the occurrence of a Put Event, NGET shall, or at any time upon the Trustee becoming similarly so aware the Trustee may, and if so requested in writing by the * Only applicable where NGET is the Issuer.


 
A41941146 106 holders of at least one-quarter in principal amount of the Instruments then outstanding or if so directed by an Extraordinary Resolution of the Instrumentholders, the Trustee shall, give notice (a “Put Event Notice”) to the Instrumentholders in accordance with Condition 14 specifying the nature of the Put Event and the procedure (as set out in Condition 5.6.4) for exercising the option contained in this Condition 5.6.1. 5.6.2 For the purposes of this Condition “Electricity Act” means the Electricity Act 1989 as amended or re-enacted from time to time and all subordinate legislation made pursuant thereto; “Electricity Transmission Licence” means the transmission licence, as subsequently amended from time to time, originally granted by the Secretary of State for Energy to NGET under the Electricity Act; “Negative Certification” means, on the occurrence of an NGET Restructuring Event, such event or events being certified in writing by an independent financial adviser appointed by NGET and approved by the Trustee (or, if NGET shall not have appointed such an adviser within 21 days after becoming aware of the occurrence of such NGET Restructuring Event, appointed by the Trustee (following consultation with NGET)) as being in its opinion materially prejudicial to the interests of the Instrumentholders. Any Negative Certification by an independent financial adviser as to whether or not, in its opinion, any event defined as an NGET Restructuring Event is materially prejudicial to the interests of the Instrumentholders shall, in the absence of manifest error, be conclusive and binding upon NGET, the Trustee, the Instrumentholders and the Couponholders; “Negative Rating Event” shall be deemed to have occurred if NGET is unable as a result of an NGET Restructuring Event to obtain a rating of the Instruments or of any other comparable unsecured and unsubordinated debt of NGET (or of any Subsidiary of NGET and which is guaranteed on an unsecured and unsubordinated basis by NGET) having an initial maturity of five years or more (“Rateable Debt”) from a Rating Agency of at least investment grade (BBB-/Baa3, or their respective equivalents for the time being), which rating NGET shall use all reasonable endeavours to obtain, provided that a Negative Rating Event shall not be deemed to have occurred in respect of a particular NGET Restructuring Event if the Rating Agency making the relevant reduction or declining to assign a rating of at least investment grade (as described above) does not announce or publicly confirm or otherwise inform the Trustee that the reduction or its declining to assign a rating of at least investment grade was the result, in whole or in part, of any event or circumstance comprised in or arising as a result of, or in respect of, the applicable NGET Restructuring Event; “NGET Restructuring Event” means the occurrence of any one or more of the following events: (a) the Secretary of State for Trade and Industry or any official succeeding to his functions gives NGET written notice of revocation of the Electricity Transmission Licence in accordance with the terms as to revocation set out in Schedule 2 of the Electricity Transmission Licence, such revocation to become effective not later than the Maturity Date of the Instruments or NGET agrees in writing with the Secretary of State for Trade and Industry or any official succeeding to his functions to any revocation or surrender of the Electricity Transmission Licence or any legislation (whether primary or subordinate) is enacted terminating or revoking the Electricity Transmission Licence; (b) any modification is made to the terms and conditions of the Electricity Transmission Licence other than such a modification which the Trustee, in its opinion, considers to


 
A41941146 107 be not materially prejudicial to the interests of the Instrumentholders and has so confirmed in writing to NGET; or (c) any legislation (whether primary or subordinate) is enacted removing, reducing or qualifying the duties or powers of the Secretary of State for Trade and Industry or any official succeeding to his functions and/or the Gas and Electricity Markets Authority under Section 3A of the Electricity Act as compared with those in effect on the issue date of the first Tranche of the Instruments other than such legislation which the Trustee, in its opinion, considers to be not materially prejudicial to the interests of the Instrumentholders and has so confirmed in writing to NGET; “NGET Restructuring Period” means: (a) if at the time at which the NGET Restructuring Event occurs there are Rated Securities, the period of 90 days starting from and including the day on which an NGET Restructuring Event occurs or such longer period in which the Rated Securities are under consideration (announced publicly within such 90 day period) for rating review by a Rating Agency; or (b) if at the time at which an NGET Restructuring Event occurs there are no Rated Securities, the period starting from and including the day on which an NGET Restructuring Event occurs and ending on the day 90 days following the date on which a Negative Certification shall have been given to NGET in respect of that NGET Restructuring Event; “Rated Securities” means (a) the Instruments or (b) such other comparable unsecured and unsubordinated debt of NGET (or of any Subsidiary of NGET and which is guaranteed on an unsecured and unsubordinated basis by NGET) having an initial maturity of five years or more selected by NGET from time to time for the purpose of this definition with the approval of the Trustee and which possesses an investment grade rating (BBB-/Baa3, or their respective equivalents for the time being, or better) by any Rating Agency (whether at the invitation of NGET or by its own volition); “Rating Agency” means S&P Global Ratings Europe Limited or any of its Subsidiaries and their successors or Moody’s Investors Service Ltd., or any of its Subsidiaries and their successors or any rating agency substituted for either of them (or any permitted substitute of them) by NGET from time to time with the prior written approval of the Trustee; “Rating Downgrade” shall be deemed to have occurred in respect of an NGET Restructuring Event if the rating assigned to the Rated Securities by any Rating Agency which is current immediately prior to the occurrence of an NGET Restructuring Event (whether provided by a Rating Agency at the invitation of NGET or by its own volition) is withdrawn or reduced from an investment grade rating (BBB-/Baa3, or their respective equivalents for the time being, or better) to a non-investment grade rating (BB+/Ba1, or their respective equivalents for the time being, or worse) or, if the Rating Agency shall have already rated the Rated Securities below investment grade (as described above), the rating is lowered one full rating category (from BB+/Ba1 to BB/Ba2 or such similar lowering) provided that a Rating Downgrade shall not be deemed to have occurred in respect of or as a result of a particular NGET Restructuring Event if the Rating Agency making the relevant reduction in rating or declining to assign a rating of at least investment grade as provided in these Conditions does not announce or publicly confirm, or otherwise inform the Trustee, that the reduction or declining was the result, in whole or part, of any event or circumstance comprised in or arising as a result of, or in respect of, the applicable NGET Restructuring Event;


 
A41941146 108 “Subsidiary” means a subsidiary within the meaning of Section 1159 of the Companies Act 2006 and “Subsidiaries” shall be construed accordingly. 5.6.3 The Trustee shall not be responsible for ascertaining whether or not an NGET Restructuring Event, a Negative Rating Event or a Rating Downgrade in relation to NGET has occurred and, unless and until it has actual knowledge to the contrary, shall be entitled to assume that no such event has occurred. 5.6.4 To exercise the option of redemption of an Instrument under Condition 5.6.1 the Instrumentholder must deliver each Instrument to be redeemed accompanied by a duly signed and completed notice of exercise in the form (for the time being current) obtainable from the specified office of any Paying Agent (a “Put Notice”) and, in which the Instrumentholder may specify an account to which payment is to be made under this Condition 5.6 to the specified office of any Paying Agent on any business day falling within the period (the “Put Period”) of 45 days after a Put Event Notice is given. The Instrument should be delivered together with all Coupons (and Talons) appertaining thereto maturing after the date (the “Put Date”) falling seven days after the expiry of the Put Period, failing which (unless Condition 6.6.1 applies) the Paying Agent will require payment of an amount equal to the face value of any such missing Coupon and/or Talon. Any amount so paid will be reimbursed in the manner provided in Condition 6 against presentation and surrender of the relevant missing Coupon and/or Talon, subject to Condition 8. The Paying Agent to which such Instrument and Put Notice are delivered will issue to the Instrumentholder concerned a non-transferable receipt in respect of the Instrument so delivered. Payment in respect of any Instrument so delivered will be made, if the Instrumentholder duly specified a bank account in the Put Notice to which payment is to be made, on the Put Date by transfer to that bank account and, in every other case, on or after the Put Date in the manner provided in Condition 6 against presentation and surrender (or, in the case of part payment, endorsement) of such receipt at the specified office of any Paying Agent. A Put Notice, once given, shall be irrevocable. For the purposes of the Conditions and the Trust Deed, receipts issued pursuant to this Condition 5.6 shall be treated as if they were Instruments. NGET shall redeem the relevant Instruments on the Put Date unless previously redeemed or purchased.] 5.7 Redemption at the Option of Instrumentholders If Put Option is specified in the relevant Final Terms, the Issuer shall, at the option of any Instrumentholder, upon such Instrumentholder giving not less than 15 nor more than 30 days’ notice to the Issuer (or such other notice period as may be specified in the relevant Final Terms) redeem such Instrument on the Optional Redemption Date(s) (as specified in the relevant Final Terms) at its Optional Redemption Amount (as specified in the relevant Final Terms) together with interest accrued to the date fixed for redemption. To exercise such option (which must be exercised on an Option Exercise Date) the holder must deposit such Instrument with any Paying Agent at its specified office, together with a duly completed option exercise notice (“Exercise Notice”) in the form obtainable from any Paying Agent within the Instrumentholders’ Option Period (as specified in the Final Terms). No Instrument so deposited and option exercised may be withdrawn (except as provided in the Agency Agreement) without the prior consent of the Issuer.


 
A41941146 109 5.8 Cancellation All Instruments redeemed pursuant to any of the foregoing provisions will be cancelled forthwith together with all unmatured Coupons and unexchanged Talons attached thereto. All Instruments purchased by or on behalf of the Issuer or any of its Subsidiaries may, at the option of the Issuer be held by or may be surrendered together with all unmatured Coupons and all unexchanged Talons attached to them to a Paying Agent for cancellation, but may not be resold and when held by the Issuer or any of its respective Subsidiaries shall not entitle the holder to vote at any meeting of Instrumentholders and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of Instrumentholders or for the purposes of Condition 11. 6 Payments and Talons 6.1 Payments Payments of principal and interest in respect of Instruments (other than Australian Domestic Instruments) will, subject as mentioned below, be made against presentation and surrender of the relevant Instruments (in the case of all payments of principal and, in the case of interest, as specified in Condition 6.6.4) or Coupons (in the case of interest, save as specified in Condition 6.6.4), as the case may be, at the specified office of any Paying Agent outside the United States by a cheque payable in the currency in which such payment is due drawn on, or, at the option of the holder, by transfer to an account denominated in that currency with, a bank in the principal financial centre for that currency; provided that in the case of Euro, the transfer shall be in a city in which banks have access to the TARGET System. 6.2 Payments in respect of Australian Domestic Instruments Payments of principal and interest in respect of Australian Domestic Instruments will be made in Australian dollars to the persons registered in the Australian Register on the relevant Record Date (as defined below) as the holders of such Australian Domestic Instruments. Payments to holders in respect of each Australian Domestic Instrument will be made: (i) if the Australian Domestic Instrument is held by Austraclear and entered in the Austraclear System, by crediting on the relevant Interest Payment Date, the Maturity Date or other date on which payment is due the amount then due to the account or accounts to which payments should be made in accordance with the Austraclear Regulations or as otherwise agreed with Austraclear; and (ii) if the Australian Domestic Instrument is not held by Austraclear and entered in the Austraclear System, by crediting on the Interest Payment Date, the Maturity Date or other date on which payment is due, the amount then due to an account in Australia previously notified by the Instrumentholder(s) of the Australian Domestic Instrument to the relevant Issuer and the Australian Registrar. Payment of an amount due in respect of an Australian Domestic Instrument to the holder or otherwise in accordance with this Condition or to the Trustee discharges the obligation of the Issuer to all persons to pay that amount. Payments will for all purposes be taken to be made when the relevant Issuer or the Agent gives irrevocable instructions for the making of the relevant payment by electronic transfer, being instructions which would be reasonably expected to result, in the ordinary course of banking business, in the funds transferred reaching the account to which the payment is to be made on the same day as the day on which the instructions are given. If, following the application of Condition 6.7 (Non-business days), a payment is due to be made under an Australian Domestic Instrument to an account on a business day on which banks are not


 
A41941146 110 open for general banking business in the city in which the account is located, the Instrumentholder is not entitled to payment of such amount until the next business day on which banks in such city are open for general banking business and is not entitled to any interest or other payment in respect of any such delay. In this Condition, in relation to Australian Domestic Instruments, “Record Date” means, in the case of payments of principal or interest, close of business on the date which is the eighth calendar day before the due date for the relevant payment of principal or interest. 6.3 Payments in the United States Notwithstanding the above, if any Instruments are denominated in U.S. dollars, payments in respect of them may be made at the specified office of any Paying Agent in New York City in the same manner as specified above if (a) the Issuer shall have appointed Paying Agents with specified offices outside the United States with the reasonable expectation that such Paying Agents would be able to make payment of the amounts on the Instruments in the manner provided above when due, (b) payment in full of such amounts at all such offices is illegal or effectively precluded by exchange controls or other similar restrictions on payment or receipt of such amounts and (c) such payment is then permitted by United States law, without involving, in the opinion of the Issuer, any adverse tax consequence to the Issuer. 6.4 Payments subject to Fiscal Laws etc. Save as provided in Condition 7, payments will be subject in all cases to any applicable fiscal or other laws, regulations and directives in the place of payment and the Issuer will not be liable for any taxes or duties of whatever nature imposed or levied by such laws, regulations, directives or agreements. No commission or expenses shall be charged to the Instrumentholders or Couponholders in respect of such payments. 6.5 Appointment of Agents The Issuing and Paying Agent, the Paying Agents and the Calculation Agent initially appointed by the Issuer and their respective specified offices are listed below. The Issuing and Paying Agent, the Paying Agents and the Calculation Agent act solely as agents of the Issuer and do not assume any obligation or relationship of agency or trust for or with any holder. The Issuer reserves the right at any time with the approval of the Trustee to vary or terminate the appointment of the Issuing and Paying Agent, any other Paying Agent or the Calculation Agent and to appoint additional or other Paying Agents, provided that the Issuer shall at all times maintain (a) an Issuing and Paying Agent, (b) a Paying Agent having its specified office in a major European city, (c) a Calculation Agent where the Conditions so require one, (d) so long as the Instruments are listed on any stock exchange or admitted to listing by any other relevant authority, a Paying Agent having a specified office in such place as may be required by the rules and regulations of any other relevant stock exchange or other relevant authority, and (e) so long as the Instruments clear in a clearing system other than or in addition to Euroclear and Clearstream, Luxembourg, a Paying Agent that is able to make payments to such clearing system in accordance with the rules and procedure of such clearing system. As used in these Conditions, the terms “Issuing and Paying Agent”, “Calculation Agent”, and “Paying Agent” include any additional or replacement Issuing and Paying Agent, Calculation Agent or Paying Agent appointed under this Condition. In addition, the Issuer shall forthwith appoint a Paying Agent in New York City in respect of any Instruments denominated in U.S. dollars in the circumstances described in Condition 6.3. Notice of any such change or any change of any specified office shall promptly be given to the Instrumentholders in accordance with Condition 14.


 
A41941146 111 6.6 Unmatured Coupons and unexchanged Talons 6.6.1 Upon the due date for redemption of any Instrument, unmatured Coupons relating to such Instrument (whether or not attached) shall become void and no payment shall be made in respect of them. 6.6.2 Upon the due date for redemption of any Instrument, any unexchanged Talon relating to such Instrument (whether or not attached) shall become void and no Coupon shall be delivered in respect of such Talon. 6.6.3 Where any Instrument which provides that the relevant Coupons are to become void upon the due date for redemption of those Instruments is presented for redemption without all unmatured Coupons, and where any Instrument is presented for redemption without any unexchanged Talon relating to it, redemption shall be made only against the provision of such indemnity as the Issuer may require. 6.6.4 If the due date for redemption of any Instrument is not a due date for payment of interest, interest accrued from the preceding due date for payment of interest or the Interest Commencement Date, as the case may be, shall only be payable against presentation (and surrender if appropriate) of the relevant Instrument. Interest accrued on an Instrument that only bears interest after its Maturity Date shall be payable on redemption of that Instrument against presentation of that Instrument. 6.7 Non-business Days If any date for payment in respect of any Instrument or Coupon is not a business day, the holder shall not be entitled to payment until the next following business day nor to any interest or other sum in respect of such postponed payment. In this paragraph, “business day” means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for business in the relevant place of presentation, in such jurisdictions as shall be specified as “Financial Centres” in the relevant Final Terms and: 6.7.1 (in the case of a payment in a currency other than Euro) where payment is to be made by transfer to an account maintained with a bank in the relevant currency, on which foreign exchange transactions may be carried on in the relevant currency in the principal financial centre of the country of such currency (which in the case of Australian dollars is Sydney); or 6.7.2 (in the case of a payment in Euro) which is a TARGET Business Day. 6.8 Talons On or after the Interest Payment Date for the final Coupon forming part of a Coupon sheet issued in respect of any Instrument, the Talon forming part of such Coupon sheet may be surrendered at the specified office of the Issuing and Paying Agent in exchange for a further Coupon sheet (but excluding any Coupons which may have become void pursuant to Condition 8). 7 Taxation All payments of principal and interest by or on behalf of the Issuer in respect of the Instruments and the Coupons will be made without withholding or deduction for or on account of, any present or future taxes or duties of whatever nature imposed or levied by or on behalf of the United Kingdom or any political sub- division of the United Kingdom or any authority in or of the United Kingdom having power to tax, unless such withholding or deduction is compelled by law. In that event, the Issuer will pay such additional amounts of principal and interest as will result in the receipt by the Instrumentholders or, as the case may be, the Couponholders of the amounts which would otherwise have been received by them in respect of


 
A41941146 112 the Instruments or Coupons had no withholding or deduction been made, except that no such additional amounts shall be payable in respect of any Instrument or Coupon presented for payment: (a) by or on behalf of, a person who is liable to such taxes or duties in respect of such Instrument or Coupon by reason of his having some connection with the United Kingdom other than the mere holding of such Instrument or Coupon; or (b) by or on behalf of a person who would not be liable or subject to such deduction or withholding by making a declaration of non-residence or other claim for exemption to a tax authority; or (c) more than 30 days after the Relevant Date except to the extent that the holder would have been entitled to such additional amounts on presenting the same for payment on such 30th day. Notwithstanding any other provision of the Terms and Conditions or the Trust Deed, any amounts to be paid on the Instruments by or on behalf of the Issuer, will be paid net of any deduction or withholding imposed or required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), or otherwise imposed pursuant to Sections 1471 through 1474 of the Code (or any regulations thereunder or official interpretations thereof) or an intergovernmental agreement between the United States and another jurisdiction facilitating the implementation thereof (or any fiscal or regulatory legislation, rules or practices implementing such an intergovernmental agreement) (any such withholding or deduction, a “FATCA Withholding”). Neither the Issuer nor any other person will be required to pay any additional amounts in respect of FATCA Withholding. As used in these Conditions, “Relevant Date” in respect of any Instrument or Coupon means the date on which payment in respect of it first becomes due or (if any amount of the money payable is improperly withheld or refused) the date on which payment in full of the amount outstanding is made or (if earlier) the date on which notice is duly given to the Instrumentholders in accordance with Condition 14 that, upon further presentation of the Instrument or Coupon being made in accordance with the Conditions, such payment will be made, provided that payment is in fact made upon such presentation. References in these Conditions to (a) “principal” shall be deemed to include any premium payable in respect of the Instruments, Final Redemption Amounts, Early Redemption Amounts, Optional Redemption Amounts, Amortised Face Amounts and all other amounts in the nature of principal payable pursuant to Condition 5 or any amendment or supplement to it, (b) “interest” shall be deemed to include all Interest Amounts and all other amounts payable pursuant to Condition 3 or any amendment or supplement to it and (c) “principal” and/or “interest” shall be deemed to include any additional amounts which may be payable under this Condition or any undertaking given in addition to or in substitution for it under the Trust Deed. 8 Prescription Instruments and Coupons (which, for this purpose, shall not include Talons) shall be prescribed and become void unless presented for payment within 10 years (in the case of principal) or five years (in the case of interest) from the appropriate Relevant Date in respect of them. 9 Events of Default If any of the following events (each an “Event of Default”) occurs and is continuing, the Trustee at its discretion may, and if so requested by the holders of at least one-quarter in nominal amount of the Instruments then outstanding or if so directed by an Extraordinary Resolution shall (subject in each case to being indemnified and/or secured and/or prefunded to its satisfaction), give notice to the Issuer at its registered office that the Instruments are, and they shall accordingly immediately become due and repayable at their Redemption Amount together with accrued interest (if any) to the date of payment: (a) Non-Payment: there is default for more than 30 days in the payment of any principal or interest due in respect of the Instruments; or


 
A41941146 113 (b) Breach of Other Obligations: there is default in the performance or observance by the Issuer of any other obligation or provision under the Trust Deed or the Instruments (other than any obligation for the payment of any principal or interest in respect of the Instruments) which default is incapable of remedy or, if in the opinion of the Trustee capable of remedy, is not remedied within 90 days after notice of such default shall have been given to the Issuer by the Trustee; or (c) Cross-Acceleration: if (i) any other present or future Relevant Indebtedness of the Issuer [(or a Principal Subsidiary)]* becomes due and payable prior to its stated maturity by reason of any actual event of default or (ii) any amount in respect of such Relevant Indebtedness is not paid when due or, as the case may be, within any applicable grace period, provided that the aggregate amount of the Relevant Indebtedness in respect of which one or more of the events mentioned above in this paragraph (c) have occurred equals or exceeds £100,000,000. [For the purposes of this Condition 9, “Principal Subsidiary” means National Grid Gas plc, NGET, National Grid North America Inc. and National Grid USA, and includes any successor entity thereto or any member of the group of companies comprising National Grid and each of its subsidiary undertakings (the “National Grid Group”) which the Auditors have certified to the Trustee as being a company to which all or substantially all of the assets of a Principal Subsidiary are transferred, provided that any such company shall cease to be a Principal Subsidiary for the purpose of this Condition if at any time the Issuer, or any Subsidiary of the Issuer, ceases to control (as defined below) such company. In the event that all or substantially all of the assets of a Principal Subsidiary are transferred to a member of the National Grid Group as described above, the transferor of such assets shall cease to be deemed to be a Principal Subsidiary for the purposes of this Condition. For the purposes of this Condition 9, “control” of a company means holding more than 50 per cent. of the issued or allotted ordinary shares in such company.]*; or (d) Winding-up: a resolution is passed, or a final order of a court in the United Kingdom is made and, where possible, not discharged or stayed within a period of 90 days, that the Issuer be wound up or dissolved; or (e) Enforcement Proceedings: attachment is made of the whole or substantially the whole of the assets or undertakings of the Issuer and such attachment is not released or cancelled within 90 days or an encumbrancer takes possession or an administrative or other receiver or similar officer is appointed of the whole or substantially the whole of the assets or undertaking of the Issuer or an administration or similar order is made in relation to the Issuer and such taking of possession, appointment or order is not released, discharged or cancelled within 90 days; or (f) Insolvency: the Issuer ceases to carry on all or substantially all of its business or is unable to pay its debts within the meaning of Section 123(1)(e) or Section 123(2) of the Insolvency Act 1986; or (g) Bankruptcy: the Issuer is adjudged bankrupt or insolvent by a court of competent jurisdiction in its country of incorporation, provided that in the case of paragraph (b) the Trustee shall have certified that in its opinion such event is materially prejudicial to the interests of the Instrumentholders. * Only applicable where National Grid is the Issuer.


 
A41941146 114 10 Enforcement The Trustee may, at its discretion and without further notice, institute such actions, steps or proceedings against the Issuer as it may think fit to enforce any obligation, condition or provision binding on the Issuer under the Instruments or under the Trust Deed, but shall not be bound to do so unless: (a) it has been so directed by an Extraordinary Resolution or in writing by the holders of at least one- quarter of the principal amount of the Instruments outstanding; and (b) it has been indemnified and/or secured and/or prefunded to its satisfaction. No Instrumentholder or Couponholder shall be entitled to institute such actions, steps or proceedings directly against the Issuer unless the Trustee, having become bound to proceed as specified above, fails or is unable to do so within 60 days and such failure or inability is continuing. 11 Meetings of Instrumentholders, Modifications and Substitution 11.1 Meetings of Instrumentholders The Trust Deed and the Australian Deed Poll (in the case of Australian Domestic Instruments) each contains provisions for convening meetings of Instrumentholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution (as defined in the Trust Deed or the Australian Deed Poll (as applicable)) of a modification of any of these Conditions or any provisions of the Trust Deed or the Australian Deed Poll (as applicable). An Extraordinary Resolution duly passed at any such meeting shall be binding on Instrumentholders (whether or not they were present at the meeting at which such resolution was passed) and on all Couponholders, except that any Extraordinary Resolution proposed, inter alia, (a) to amend the dates of maturity or redemption of the Instruments or any date for payment of interest on the Instruments, (b) to reduce or cancel the nominal amount of, or any premium payable on redemption of, the Instruments, (c) to reduce the rate or rates of interest in respect of the Instruments or to vary the method or basis of calculating the rate or rates or amount of interest or the basis for calculating any Interest Amount in respect of the Instruments, (d) if a Minimum and/or a Maximum Rate of Interest is shown on the face of the Instrument, to reduce any such Minimum and/or Maximum Rate of Interest, (e) to vary any method of calculating the Final Redemption Amount, the Early Redemption Amount or the Optional Redemption Amount, (f) to take any steps that as specified in this Instrument may only be taken following approval by an Extraordinary Resolution to which the special quorum provisions apply, and (g) to modify the provisions concerning the quorum required at any meeting of Instrumentholders or the majority required to pass the Extraordinary Resolution will only be binding if passed at a meeting of the Instrumentholders (or at any adjournment of that meeting) at which a special quorum (as defined in the Trust Deed or the Australian Deed Poll (as applicable)) is present. A resolution in writing signed by the holders of not less than 95 per cent. in nominal amount of the Instruments will be binding on all Instrumentholders and Couponholders. The Issuer may convene a meeting of Instrumentholders jointly with the holders of all other instruments issued pursuant to the Agency Agreement and the Australian Deed Poll and not forming a single series with the Instruments to which meeting the provisions referred to above apply as if all such instruments formed part of the same series, provided that the proposals to be considered at such meeting affect the rights of the holders of the instruments of each series attending the meeting in identical respects (save insofar as the Conditions applicable to each such series are not identical). 11.2 Modification of the Trust Deed and the Australian Deed Poll The Trustee may agree, without the consent of the Instrumentholders or Couponholders, to (a) any modification of any of the provisions of the Trust Deed or the Australian Deed Poll that is of a formal, minor or technical nature or is made to correct a manifest error, and (b) any other modification


 
A41941146 115 (except as mentioned in the Trust Deed or the Australian Deed Poll), and any waiver or authorisation of any breach or proposed breach, of any of the provisions of the Trust Deed or the Australian Deed Poll that is in the opinion of the Trustee not materially prejudicial to the interests of the Instrumentholders. In addition, the Trustee shall be obliged to concur with the Issuers in using its reasonable endeavours to effect any Benchmark Amendments in the circumstances and as otherwise set out in Condition 3.10 without the consent or approval of the Instrumentholders and Couponholders. Any such modification, authorisation or waiver shall be binding on the Instrumentholders and the Couponholders and, if the Trustee so requires, such modification shall be notified to the Instrumentholders as soon as practicable. 11.3 Substitution The Trust Deed contains provisions permitting the Trustee to agree, subject to such amendment of the Trust Deed and/or the Australian Deed Poll and such other conditions as the Trustee may require, but without the consent of the Instrumentholders or the Couponholders, to the substitution of any other company in place of the Issuer or of any previous substituted company, as principal debtor under the Trust Deed or the Australian Deed Poll (in the case of Australian Domestic Instruments) and the Instruments. In the case of such a substitution the Trustee may agree, without the consent of the Instrumentholders or the Couponholders, to a change of the law governing the Instruments, the Coupons, the Talons and/or the Trust Deed and/or the Australian Deed Poll (as applicable) provided that such change would not in the opinion of the Trustee be materially prejudicial to the interests of the Instrumentholders. 11.4 Entitlement of the Trustee In connection with the exercise of its functions (including but not limited to those referred to in this Condition) the Trustee shall have regard to the interests of the Instrumentholders as a class and shall not have regard to the consequences of such exercise for individual Instrumentholders or Couponholders and the Trustee shall not be entitled to require, nor shall any Instrumentholder or Couponholder be entitled to claim, from the Issuer any indemnification or payment in respect of any tax consequence of any such exercise upon individual Instrumentholders or Couponholders. 12 Replacement of Instruments, Coupons and Talons If an Instrument, Coupon or Talon is lost, stolen, mutilated, defaced or destroyed, it may be replaced, subject to applicable laws, listing authority and stock exchange regulations, at the specified office of such other Paying Agent as may from time to time be designated by the Issuer for the purpose and notice of whose designation is given to Instrumentholders in accordance with Condition 14 on payment by the claimant of the fees and costs incurred in connection with that replacement and on such terms as to evidence, security and indemnity (which may provide, inter alia, that if the allegedly lost, stolen or destroyed Instrument, Coupon or Talon is subsequently presented for payment or, as the case may be, for exchange for further Coupons, there shall be paid to the Issuer on demand the amount payable by the Issuer in respect of such Instruments, Coupons or further Coupons) and otherwise as the Issuer may require. Mutilated or defaced Instruments, Coupons or Talons must be surrendered before replacements will be issued. 13 Further Issues The Issuer may from time to time without the consent of the Instrumentholders or Couponholders create and issue further instruments having the same terms and conditions as the Instruments and so that such further issue shall be consolidated and form a single series with such Instruments. References in these Conditions to the Instruments include (unless the context requires otherwise) any other instruments issued pursuant to this Condition and forming a single series with the Instruments. Any


 
A41941146 116 such further instruments forming a single series with Instruments constituted by the Trust Deed or any deed supplemental to it or the Australian Deed Poll shall, and any other instruments may (with the consent of the Trustee), be constituted by the Trust Deed or the Australian Deed Poll (in the case of Australian Domestic Instruments). The Trust Deed and the Australian Deed Poll each contains provisions for convening a single meeting of the Instrumentholders and the holders of instruments of other series if the Trustee so decides. 14 Notices All notices to the Instrumentholders will be valid if published in a daily English language newspaper of general circulation in the United Kingdom (which is expected to be the Financial Times). If in the opinion of the Trustee any such publication is not practicable, notice shall be validly given if published in another leading daily English language newspaper with general circulation in Europe. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once or on different dates, on the first date on which publication is made, as provided above. In the case of Australian Domestic Instruments, the following provisions shall apply in lieu of any provisions of this Condition 14 which are inconsistent with the following provisions. Notices regarding Australian Domestic Instruments shall be published in a leading daily newspaper of general circulation in Australia. It is expected that such notices will normally be published in The Australian Financial Review. Any such notice will be deemed to have been given to the holders on the date of such publication. Couponholders shall be deemed for all purposes to have notice of the contents of any notice given to the holders of Instruments in accordance with this Condition. 15 Indemnification of Trustee The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility, including but not limited to provisions relieving it from any obligation to (a) appoint an independent financial adviser and (b) take proceedings to enforce repayment unless indemnified to its satisfaction. The Trustee is entitled to enter into business transactions with the Issuer or any of its subsidiary undertakings, parent undertakings, joint ventures or associated undertakings without accounting for any profit resulting from these transactions and to act as trustee for the holders of any other securities issued by the Issuer or any of its subsidiary undertakings, parent undertakings, joint ventures or associated undertakings. 16 Contracts (Rights of Third Parties) Act 1999 No person shall have any right to enforce any term or condition of the Instruments under the Contracts (Rights of Third Parties) Act 1999. 17 Governing Law and Jurisdiction 17.1 The Instruments (other than Australian Domestic Instruments) and any non-contractual obligations arising out of or connected with them are governed by, and shall be construed in accordance with, English law. 17.2 The courts of England have exclusive jurisdiction to settle any dispute (a “Dispute”), arising from or connected with the Instruments (other than Australian Domestic Instruments). 17.3 The Issuer agrees that the courts of England are the most appropriate and convenient courts to settle any Dispute and, accordingly, that it will not argue to the contrary.


 
A41941146 117 17.4 Nothing in this Condition 17 prevents the Trustee or any Instrumentholder from taking proceedings relating to a Dispute (“Proceedings”) in any other courts with jurisdiction. To the extent allowed by law, the Trustee or Instrumentholders may take concurrent Proceedings in any number of jurisdictions. 17.5 The Australian Domestic Instruments, the Australian Deed Poll and (unless otherwise specified in the applicable Final Terms) the Australian Agency and Registry Agreement will be governed by, and construed in accordance with, the laws in force in New South Wales, Australia, save that the provisions of Condition 9 (Events of Default) shall be interpreted so as to have the same meaning they would have if governed by English law. 17.6 In the case of Australian Domestic Instruments, each Issuer has irrevocably agreed for the benefit of Instrumentholders that the courts of New South Wales, Australia are to have jurisdiction to settle any disputes which may arise out of or in connection with the Australian Domestic Instruments, the Australian Deed Poll and the Australian Agency and Registry Agreement and that accordingly any suit, action or proceedings arising out of or in connection with the Australian Domestic Instruments, the Australian Deed Poll or the Australian Agency and Registry Agreement (together referred to as “Australian Proceedings”) may be brought in such courts. 17.7 Each Issuer has irrevocably waived any objection which it may have now or hereafter to the laying of the venue of any Australian Proceedings in any such court and any claim that any such Australian Proceedings have been brought in an inconvenient forum and has further irrevocably agreed that a judgment in any such Australian Proceedings brought in the courts of New South Wales shall be conclusive and binding upon it and may be enforced in the courts of any other jurisdiction.


 
A41941146 118 Schedule 2 Part C Form of Coupon On the front: [NATIONAL GRID plc/ NATIONAL GRID ELECTRICITY TRANSMISSION plc]* EURO MEDIUM TERM NOTE PROGRAMME Series No. [●] Tranche No. [●] [Title of issue] Coupon for [[set out amount due, if known]/the amount] due on [the Interest Payment Date falling in]** [●], [●]. [Coupon relating to the Instrument in the nominal amount of [●]]*** This Coupon is payable to bearer (subject to the Conditions endorsed on the Instrument to which this Coupon relates, which shall be binding upon the holder of this Coupon whether or not it is for the time being attached to such Instrument) at the specified offices of the Issuing and Paying Agent and the Paying Agents set out on the reverse of this Coupon (or any other Issuing and Paying Agent or further or other Paying Agents or specified offices duly appointed or nominated and notified to the Instrumentholders). [If the Instrument to which this Coupon relates shall have become due and payable before the maturity date of this Coupon, this Coupon shall become void and no payment shall be made in respect of it.]**** ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j)) AND 1287(a) OF THE INTERNAL REVENUE CODE. [NATIONAL GRID plc/ NATIONAL GRID ELECTRICITY TRANSMISSION plc]* By: [Cp. No.] [Denomination] [ISIN] [Series] [Certif. No.] * Delete as applicable. ** [Only necessary where Interest Payment Dates are subject to adjustment in accordance with a Business Day Convention, otherwise the particular Interest Payment Date should be specified.] *** [Only required for Coupons relating to Floating Rate or Index Linked Interest Instruments that are issued in more than one denomination.] **** [Delete if Coupons are not to become void upon early redemption of Instrument.]


 
A41941146 119 On the back: ISSUING AND PAYING AGENT The Bank of New York Mellon One Canada Square London E14 5AL PAYING AGENTS Quintet Private Bank (Europe) S.A. 43 Boulevard Royal L-2955 Luxembourg BNY Trust Company of Canada 320 Bay Street, 11th Floor Toronto, ON Canada M5H 4A6


 
A41941146 120 Schedule 2 Part D Form of Talon On the front: [NATIONAL GRID plc/ NATIONAL GRID ELECTRICITY TRANSMISSION plc]* EURO MEDIUM TERM NOTE PROGRAMME Series No. [●] Tranche No. [●] [Title of issue] Talon for further Coupons falling due on [the Interest Payment Dates falling in]** [●] [●]. [Talon relating to the Instrument in the nominal amount of [●]]*** After all the Coupons relating to the Instrument to which this Talon relates have matured, further Coupons (including if appropriate a Talon for further Coupons) shall be issued at the specified office of the Issuing and Paying Agent set out on the reverse of this Talon (or any other Issuing and Paying Agent or specified office duly appointed or nominated and notified to the Instrumentholders) upon production and surrender of this Talon. [If the Instrument to which this Talon relates shall have become due and payable before the original due date for exchange of this Talon, this Talon shall become void and no exchange shall be made in respect of it.]**** ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE. [NATIONAL GRID plc/ NATIONAL GRID ELECTRICITY TRANSMISSION plc]* By: [Talon No.] [ISIN] [Series] [Certif. No.] * Delete as applicable. ** [The maturity dates of the relevant Coupons should be set out if known, otherwise reference should be made to the months and years in which the Interest Payment Dates fall.] *** [Only when required where the Series comprises Instruments of more than one denomination.] **** [Delete if Talon is not to become void upon early redemption of the Instrument.]


 
A41941146 121 On the back: ISSUING AND PAYING AGENT The Bank of New York Mellon One Canada Square London E14 5AL PAYING AGENTS Quintet Private Bank (Europe) S.A. 43 Boulevard Royal L-2955 Luxembourg BNY Trust Company of Canada 320 Bay Street, 11th Floor Toronto, ON Canada M5H 4A6


 
A41941146 122 Schedule 3 Provisions for Meetings of Instrumentholders For the avoidance of doubt, these provisions do not apply to Australian Domestic Instruments. Interpretation 1 In this Schedule: 1.1 references to a meeting are to a meeting of Instrumentholders of a single Series of Instruments issued by the relevant Issuer and include, unless the context otherwise requires, any adjournment; 1.2 references to “Instruments” and “Instrumentholders” are only to the Instruments of the Series in respect of which a meeting has been, or is to be, called, and to the holders of these Instruments, respectively; 1.3 “agent” means a holder of a voting certificate or a proxy for, or representative of, an Instrumentholder; 1.4 “Alternative Clearing System” means any clearing system (including without limitation The Depositary Trust Company (“DTC”)) other than Euroclear or Clearstream, Luxembourg; 1.5 “block voting instruction” means an instruction issued in accordance with paragraphs 9 to 15; 1.6 “Electronic Consent” has the meaning set out in paragraph 31; 1.7 “Extraordinary Resolution” means a resolution passed (a) at a meeting duly convened and held in accordance with this Trust Deed by a majority of at least 75 per cent. of the votes cast, (b) by a Written Resolution or (c) by an Electronic Consent; 1.8 “voting certificate” means a certificate issued in accordance with paragraphs 6 to 8; 1.9 “Written Resolution” means a resolution in writing signed by the holders of not less than 95 per cent. in nominal amount of the Bonds outstanding; 1.10 references to persons representing a proportion of the Instruments are to Instrumentholders or agents holding or representing in the aggregate at least that proportion in nominal amount of the Instruments for the time being outstanding; and 1.11 where Instruments are held in Euroclear or Clearstream, Luxembourg or an Alternative Clearing System, references herein to the deposit or release or surrender of Instruments shall be construed in accordance with the usual practices (including in relation to the blocking of the relevant account) of Euroclear or Clearstream, Luxembourg or such Alternative Clearing System. Powers of meetings 2 A meeting shall, subject to the Conditions and without prejudice to any powers conferred on other persons by this Trust Deed, have power by Extraordinary Resolution: 2.1 to sanction any proposal by the relevant Issuer or the Trustee for any modification, abrogation, variation or compromise of, or arrangement in respect of, the rights of the


 
A41941146 123 Instrumentholders and/or the Couponholders against such Issuer whether or not those rights arise under this Trust Deed; 2.2 to sanction the exchange or substitution for the Instruments of, or the conversion of the Instruments into, shares, bonds or other obligations or securities of the relevant Issuer or any other entity; 2.3 to assent to any modification of this Trust Deed, the Instruments, the Talons or the Coupons proposed by the relevant Issuer or the Trustee; 2.4 to authorise anyone to concur in and do anything necessary to carry out and give effect to an Extraordinary Resolution; 2.5 to give any authority, direction or sanction required to be given by Extraordinary Resolution; 2.6 to appoint any persons (whether Instrumentholders or not) as a committee or committees to represent the Instrumentholders’ interests and to confer on them any powers or discretions which the Instrumentholders could themselves exercise by Extraordinary Resolution; 2.7 to approve a proposed new Trustee and to remove a Trustee; 2.8 to approve the substitution of any entity for the relevant Issuer (or any previous substitute) as principal debtor under this Trust Deed; and 2.9 to discharge or exonerate the Trustee from any liability in respect of any act or omission for which it may become responsible under this Trust Deed, the Instruments, the Talons or the Coupons, provided that the special quorum provisions in paragraph 19 shall apply to any Extraordinary Resolution (a “special quorum resolution”) for the purpose of sub- paragraph 2.2 or 2.7, any of the proposals listed in Condition 11.1 or any amendment to this proviso. Convening a meeting 3 The relevant Issuer or the Trustee may at any time convene a meeting. If it receives a written request by Instrumentholders holding at least 10 per cent. in nominal amount of the Instruments of any Series for the time being outstanding and is indemnified to its satisfaction against all costs and expenses, the Trustee shall convene a meeting of the Instrumentholders of that Series. Every meeting shall be held at a time and place approved by the Trustee. 4 At least 21 days’ notice (exclusive of the day on which the notice is given or deemed to be given and of the day of the meeting) shall be given to the Instrumentholders. A copy of the notice shall be given by the party convening the meeting to the other parties. The notice shall specify the day, time and place of meeting and, unless the Trustee otherwise agrees, the nature of the resolutions to be proposed and shall explain how Instrumentholders may appoint proxies or representatives, obtain voting certificates and use block voting instructions and the details of the time limits applicable.


 
A41941146 124 Cancellation of meeting 5 A meeting that has been validly convened in accordance with paragraph 3 above, may be cancelled by the person who convened such meeting by giving at least 5 days’ notice (exclusive of the day on which the notice is given or deemed to be given and of the day of the meeting) to the Instrumentholders (with a copy to the Trustee where such meeting was convened by the Issuer or to the Issuer where such meeting was convened by the Trustee). Any meeting cancelled in accordance with this paragraph 5 shall be deemed not to have been convened. Arrangements for voting on Instruments (whether in definitive form or represented by a Global Instrument and whether held within or outside a Clearing System) – Voting Certificates 6 If a holder of an Instrument wishes to obtain a voting certificate in respect of it for a meeting, he must deposit such Instrument for that purpose at least 48 hours before the time fixed for the meeting with a Paying Agent or to the order of a Paying Agent with a bank or other depositary nominated by the Paying Agent for the purpose. The Paying Agent shall then issue a voting certificate in respect of it. 7 A voting certificate shall: 7.1 be a document in the English language; 7.2 be dated; 7.3 specify the meeting concerned and the serial numbers of the Instruments deposited; 7.4 entitle, and state that it entitles, its bearer to attend and vote at that meeting in respect of those Instruments; and 7.5 specify details of evidence of the identity of the bearer of such voting certificate. 8 Once a Paying Agent has issued a voting certificate for a meeting in respect of an Instrument, it shall not release the Instrument until either: 8.1 the meeting has been concluded; or 8.2 the voting certificate has been surrendered to the Paying Agent. Arrangements for voting on Instruments (whether in definitive form or represented by a Global Instrument and whether held within or outside a Clearing System) – Block Voting Instructions 9 If a holder of an Instrument wishes the votes attributable to it to be included in a block voting instruction for a meeting, then, at least 48 hours before the time fixed for the meeting, (i) he must deposit the Instrument for that purpose with a Paying Agent or to the order of a Paying Agent with a bank or other depositary nominated by the Paying Agent for the purpose and (ii) he or a duly authorised person on his behalf must direct the Paying Agent how those votes are to be cast. The Paying Agent shall issue a block voting instruction in respect of the votes attributable to all Instruments so deposited. 10 A block voting instruction shall: 10.1 be a document in the English language;


 
A41941146 125 10.2 be dated; 10.3 specify the meeting concerned; 10.4 list the total number and serial numbers of the Instruments deposited, distinguishing with regard to each resolution between those voting for and those voting against it; 10.5 certify that such list is in accordance with Instruments deposited and directions received as provided in paragraphs 9, 12 and 15; and 10.6 appoint one or more named person (a “proxy”) to vote at that meeting in respect of those Instruments and in accordance with that list. A proxy need not be an Instrumentholder. 11 Once a Paying Agent has issued a block voting instruction for a meeting in respect of the votes attributable to any Instruments: 11.1 it shall not release the Instruments, except as provided in paragraph 12, until the meeting has been concluded; and 11.2 the directions to which it gives effect may not be revoked or altered during the 48 hours before the time fixed for the meeting. 12 If the receipt for an Instrument deposited with or to the order of a Paying Agent in accordance with paragraph 9 is surrendered to the Paying Agent at least 48 hours before the time fixed for the meeting, the Paying Agent shall release the Instrument and exclude the votes attributable to it from the block voting instruction. 13 Each block voting instruction shall be deposited at least 24 hours before the time fixed for the meeting at such place as the Trustee shall designate or approve, and in default the block voting instruction shall not be valid unless the chairman of the meeting decides otherwise before the meeting proceeds to business. If the Trustee requires, a certified copy of each block voting instruction shall be produced by the proxy at the meeting but the Trustee need not investigate or be concerned with the validity of the proxy’s appointment. 14 A vote cast in accordance with a block voting instruction shall be valid even if it or any of the Instrumentholders’ instructions pursuant to which it was executed has previously been revoked or amended, unless written intimation of such revocation or amendment is received from the relevant Paying Agent by the relevant Issuer or the Trustee at its registered office or by the chairman of the meeting in each case at least 24 hours before the time fixed for the meeting. 15 No Instrument may be deposited with or to the order of a Paying Agent at the same time for the purposes of both paragraph 6 and paragraph 9 for the same meeting. Chairman 16 The chairman of a meeting shall be such person as the Trustee may nominate in writing, but if no such nomination is made or if the person nominated is not present within 15 minutes after the time fixed for the meeting the Instrumentholders or agents present shall choose one of their number to be chairman, failing which the relevant Issuer may appoint a chairman. 17 The chairman need not be an Instrumentholder or agent. The chairman of an adjourned meeting need not be the same person as the chairman of the original meeting.


 
A41941146 126 Attendance 18 The following may attend and speak at a meeting: 18.1 Instrumentholders and agents; 18.2 the chairman; 18.3 the relevant Issuer and the Trustee (through their respective representatives) and their respective financial and legal advisers; and 18.4 the Dealers and their advisers. No one else may attend or speak. Quorum and Adjournment 19 No business (except choosing a chairman) shall be transacted at a meeting unless a quorum is present at the commencement of business. If a quorum is not present within 15 minutes from the time initially fixed for the meeting, it shall, if convened on the requisition of Instrumentholders or if the relevant Issuer and the Trustee agree, be dissolved. In any other case it shall be adjourned until such date, not less than 14 nor more than 42 days later, and time and place as the chairman may decide. If a quorum is not present within 15 minutes from the time fixed for a meeting so adjourned, the meeting shall be dissolved. 20 Two or more Instrumentholders or agents present in person shall be a quorum: 20.1 in the cases marked “No minimum proportion” in the table below, whatever the proportion of the Instruments which they represent; and 20.2 in any other case, only if they represent the proportion of the Instruments shown by the table below. Column 1 Column 2 Column 3 Purpose of meeting Any meeting except one referred to in column 3 Meeting previously adjourned through want of a quorum Required proportion Required proportion To pass a special quorum resolution Two thirds One third To pass any other Extraordinary Resolution A clear majority No minimum proportion Any other purpose 10 per cent. No minimum proportion 21 The chairman, may with the consent of (and shall if directed by) a meeting, adjourn the meeting from time to time and from place to place. Only business which could have been transacted at the original meeting may be transacted at a meeting adjourned in accordance with this paragraph or paragraph 18. 22 At least 10 days’ notice (exclusive of the day on which the notice is given or deemed to be given and of the day of the adjourned meeting) of a meeting adjourned through want of a


 
A41941146 127 quorum shall be given in the same manner as for an original meeting and that notice shall state the quorum required at the adjourned meeting. However, no notice need otherwise be given of an adjourned meeting. Voting 23 Each question submitted to a meeting shall be decided by a show of hands unless a poll is (before, or on the declaration of the result of, the show of hands) demanded by the chairman, the relevant Issuer, the Trustee or one or more persons holding one or more Instruments or voting certificates or representing not less than 2 per cent. of the Instruments. 24 Unless a poll is demanded a declaration by the chairman that a resolution has or has not been passed shall be conclusive evidence of the fact without proof of the number or proportion of the votes cast in favour of or against it. 25 If a poll is demanded, it shall be taken in such manner and (subject as provided below) either at once or after such adjournment as the chairman directs. The result of the poll shall be deemed to be the resolution of the meeting at which it was demanded as at the date it was taken. A demand for a poll shall not prevent the meeting continuing for the transaction of business other than the question on which it has been demanded. 26 A poll demanded on the election of a chairman or on a question of adjournment shall be taken at once. 27 On a show of hands every person who is present in person and who produces an Instrument or a voting certificate or is a proxy or representative has one vote. On a poll every such person has one vote in respect of each integral currency unit of the Specified Currency of such Series of Instruments so produced or represented by the voting certificate so produced or for which he is a proxy or representative. Without prejudice to the obligations of proxies, a person entitled to more than one vote need not use them all or cast them all in the same way. 28 In case of equality of votes the chairman shall both on a show of hands and on a poll have a casting vote in addition to any other votes which he may have. Effect and Publication of an Extraordinary Resolution 29 An Extraordinary Resolution shall be binding on all the Instrumentholders, whether or not present at the meeting, and on all the Couponholders and each of them shall be bound to give effect to it accordingly. The passing of such a resolution shall be conclusive evidence that the circumstances justify its being passed. The relevant Issuer shall give notice of the passing of an Extraordinary Resolution to Instrumentholders within 14 days but failure to do so shall not invalidate the resolution. Minutes 30 Minutes shall be made of all resolutions and proceedings at every meeting and, if purporting to be signed by the chairman of that meeting or of the next succeeding meeting, shall be conclusive evidence of the matters in them. Until the contrary is proved every meeting for which minutes have been so made and signed shall be deemed to have been


 
A41941146 128 duly convened and held and all resolutions passed or proceedings transacted at it to have been duly passed and transacted. Written Resolution and Electronic Consent 31 Subject to the following sentence, a Written Resolution may be contained in one document or in several documents in like form, each signed by or on behalf of one or more of the Instrumentholders. For so long as the Instruments are in the form of a Global Instrument held on behalf of one or more of Euroclear, Clearstream, Luxembourg or Alternative Clearing System, then, in respect of any resolution proposed by the Issuer or the Trustee: 32 Electronic Consent: where the terms of the resolution proposed by the Issuer or the Trustee (as the case may be) have been notified to the Instrumentholders through the relevant Clearing System(s) as provided in sub-paragraphs (i) and/or (ii) below, each of the Issuer and the Trustee shall be entitled to rely upon approval of such resolution given by way of electronic consents communicated through the electronic communications systems of the relevant Clearing System(s) to the Principal Paying Agent or another specified agent in accordance with their operating rules and procedures by or on behalf of the holders of not less than 95 per cent. in nominal amount of the Instruments outstanding (the “Required Proportion”) (“Electronic Consent”) by close of business on the Relevant Date. The Principal Paying Agent shall confirm the result of voting on any Electronic Consent in writing to the Issuer and the Trustee (in a form satisfactory to the Trustee), specifying (as of the Relevant Date): (i) the outstanding principal amount of the Instruments and (ii) the outstanding principal amount of the Instruments in respect of which consent to the resolution has been given in accordance with this provision. The Issuer and the Trustee may act without further enquiry on any such confirmation from the Principal Paying Agent and shall have no liability or responsibility to anyone as a result of such reliance or action. The Trustee shall not be bound to act on any Electronic Consent in the absence of such a confirmation from the Principal Paying agent in a form satisfactory to it. Any resolution passed in such manner shall be binding on all Instrumentholders and Couponholders, even if the relevant consent or instruction proves to be defective. The Issuer shall not be liable or responsible to anyone for such reliance: (i) When a proposal for a resolution to be passed as an Electronic Consent has been made, at least 14 days’ notice (exclusive of the day on which the notice is given or deemed to be given and of the day on which affirmative consents will be counted) shall be given to the Instrumentholders through the relevant Clearing System(s). The notice shall specify, in sufficient detail to enable Instrumentholders to give their consents in relation to the proposed resolution, the method by which their consents may be given (including, where applicable, blocking of their accounts in the relevant clearing system(s)) and the time and date (the “Relevant Date”) by which they must be received in order for such consents to be validly given, in each case subject to and in accordance with the operating rules and procedures of the relevant Clearing System(s). (ii) If, on the Relevant Date on which the consents in respect of an Electronic Consent are first counted, such consents do not represent the Required Proportion, the resolution shall be deemed to be defeated. Such determination shall be notified in writing to the other party or parties to the Trust Deed by the Principal Paying Agent. Alternatively, the party proposing such resolution (the “Proposer”) may give a


 
A41941146 129 further notice to Instrumentholders in accordance with (i) above that the resolution will be proposed again. Such notice must inform Instrumentholders that insufficient consents were received in relation to the original resolution and the information specified in sub-paragraph (a) above. For the purpose of such further notice, references to “Relevant Date” shall be construed accordingly. For the avoidance of doubt, an Electronic Consent may only be used in relation to a resolution proposed by the Issuer or the Trustee which is not then the subject of a meeting that has been validly convened in accordance with paragraph 3 above, unless that meeting is or shall be cancelled or dissolved; and 33 Written Resolution: where Electronic Consent is not being sought, for the purpose of determining whether a Written Resolution has been validly passed, the Issuer and the Trustee shall be entitled to rely on consent or instructions given in writing directly to the Issuer and/or the Trustee, as the case may be, (a) by accountholders in the clearing system(s) with entitlements to such Global Instruments and/or, (b) where the accountholders hold any such entitlement on behalf of another person, on written consent from or written instruction by the person identified by that accountholder as the person for whom such entitlement is held. For the purpose of establishing the entitlement to give any such consent or instruction, the Issuer and the Trustee shall be entitled to rely on any certificate or other document issued by, in the case of (a) above, Euroclear, Clearstream, Luxembourg or any other relevant alternative clearing system and, in the case of (b) above, the relevant Clearing Systems and the accountholder identified by the relevant Clearing Systems for the purposes of (b) above. Any resolution passed in such manner shall be binding on all Instrumentholders and Couponholders, even if the relevant consent or instruction proves to be defective. Any such certificate or other document shall, be conclusive and binding for all purposes. Any such certificate or other document may comprise any form of statement or print out of electronic records provided by the relevant Clearing Systems in accordance with its usual procedures and in which the accountholder of a particular principal or nominal amount of the Instruments is clearly identified together with the amount of such holding. Neither the Issuer, nor the Trustee shall be liable to any person by reason of having accepted as valid or not having rejected any certificate or other document to such effect purporting to be issued by any such person and subsequently found to be forged or not authentic. A Written Resolution or Electronic Consent shall take effect as an Extraordinary Resolution. A Written Resolution and/or Electronic Consent will be binding on all Instrumentholders and holders of Coupons and Talons, whether or not they participated in such Written Resolution and/or Electronic Consent. Trustee’s Power to Prescribe Regulations 34 Subject to all other provisions in this Trust Deed the Trustee may without the consent of the Instrumentholders prescribe such further regulations regarding the holding of meetings and attendance and voting at them as it in its sole discretion determines including (without limitation) such requirements as the Trustee thinks reasonable to satisfy itself that the persons who purport to make any requisition in accordance with this Trust Deed are entitled to do so and as to the form of voting certificates or block voting instructions so as to satisfy itself that persons who purport to attend or vote at a meeting are entitled to do so.


 
A41941146 130 35 The holder of a Global Instrument shall (unless such Global Instrument represents only one Instrument) be treated as two persons for the purposes of any quorum requirements of a meeting of Instrumentholders. 36 The above provisions of this Schedule shall have effect subject to the following provisions: 36.1 Meetings of Instrumentholders of separate Series will normally be held separately. However, the Trustee may from time to time determine that meetings of Instrumentholders of separate Series shall be held together. 36.2 A resolution that in the opinion of the Trustee affects one Series alone shall be deemed to have been duly passed if passed at a separate meeting of the Instrumentholders of the Series concerned. 36.3 A resolution that in the opinion of the Trustee affects the Instrumentholders of more than one Series but does not give rise to a conflict of interest between the Instrumentholders of the different Series concerned shall be deemed to have been duly passed if passed at a single meeting of the Instrumentholders of the relevant Series provided that for the purposes of determining the votes an Instrumentholder is entitled to cast pursuant to paragraph 26, each Instrumentholder shall have one vote in respect of each whole Euro 1.00 nominal amount of Instruments held, converted, if such Instruments are not denominated in Euro, in accordance with Clause 8.13 (Currency Conversion). 36.4 A resolution that in the opinion of the Trustee affects the Instrumentholders of more than one Series and gives or may give rise to a conflict of interest between the Instrumentholders of the different Series concerned shall be deemed to have been duly passed only if it shall be duly passed at separate meetings of the Instrumentholders of the relevant Series. 36.5 To all such meetings as previously set out all the preceding provisions of this Schedule shall mutatis mutandis apply as though references therein to Instruments and to Instrumentholders were references to the Instruments and Instrumentholders of the Series concerned.


 


 
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EXECUTION VERSION Dated 22 October 2020 NATIONAL GRID NORTH AMERICA INC. as Issuer and THE LAW DEBENTURE TRUST CORPORATION p.l.c. as Trustee AMENDED AND RESTATED TRUST DEED relating to National Grid North America Inc. Euro 8,000,000,000 Euro Medium Term Note Programme arranged by HSBC Bank plc Ref: EXM/RAR/BB Linklaters LLP Exhibit 2(b).13


 
i Table of Contents Contents Page 1 Interpretation ........................................................................................................................... 1 2 Issue of Instruments and Covenant to Pay ............................................................................. 6 3 Form of the Instruments .......................................................................................................... 8 4 Stamp Duties and Taxes ......................................................................................................... 9 5 Application of Moneys Received by the Trustee ................................................................... 10 6 Covenants ..............................................................................................................................11 7 Remuneration and Indemnification of the Trustee ................................................................ 13 8 Provisions Supplemental to the Trustee Acts ........................................................................ 15 9 Disapplication and Trustee Liability ....................................................................................... 19 10 Waiver and Proof of Default .................................................................................................. 19 11 Trustee not Precluded from Entering into Contracts ............................................................. 19 12 Modification and Substitution ................................................................................................ 20 13 Appointment, Retirement and Removal of the Trustee ......................................................... 21 14 Instruments held in Clearing Systems .................................................................................. 22 15 Currency Indemnity ............................................................................................................... 23 16 Enforcement .......................................................................................................................... 23 17 Communications ................................................................................................................... 24 18 Governing Law and Jurisdiction ............................................................................................ 25 Schedule 1 Part A Form of Global Certificates ................................................................................ 26 Schedule 1 Part B Form of Certificate ............................................................................................. 38 Schedule 2 Terms and Conditions of the Instruments ..................................................................... 43 Schedule 3 Provisions for Meetings of Instrumentholders .............................................................. 70


 
A42485973 1 This Trust Deed is made on 22 October 2020 between: (1) NATIONAL GRID NORTH AMERICA INC. (the “Issuer”); and (2) THE LAW DEBENTURE TRUST CORPORATION p.l.c. (the “Trustee”, which expression, where the meaning so admits, includes any other trustee for the time being of this Trust Deed). Whereas: (A) The Issuer proposes to issue from time to time debt instruments in registered form (the “Instruments”) in an aggregate nominal amount outstanding at any one time, not exceeding the Programme Limit in accordance with the Dealer Agreement (the “Programme”) and to be constituted by this Trust Deed. (B) This Trust Deed amends and restates the amended and restated trust deed dated 21 December 2018 between National Grid USA, National Grid North America Inc. and The Law Debenture Trust Corporation p.l.c. (the “Original Trust Deed”) in respect of all Instruments issued pursuant to the Programme on or after the date of this Trust Deed. The Original Trust Deed will continue in full force and effect in respect of all Instruments issued prior to the date of this Trust Deed and any Instruments issued on or after the date of this Trust Deed which are to be consolidated and form a single series with any Instruments issued prior to the date hereof. (C) The Trustee has agreed to act as trustee of this Trust Deed on the following terms and conditions. This Deed witnesses and it is declared as follows: 1 Interpretation 1.1 Definitions In this Trust Deed: “Agency Agreement” means the amended and restated agency agreement (as amended, supplemented and/or restated from time to time) relating to the Programme dated 9 December 2015, between the Issuer, the Trustee, The Bank of New York Mellon, London Branch as Issuing and Paying Agent, The Bank of New York Mellon (Luxembourg) S.A. as Registrar, BNY Trust Company of Canada as Canadian Paying Agent and the other agent(s) mentioned in it; “Agents” has the meaning given to it in the Agency Agreement; “Calculation Agent” means any person named as such in the Conditions or any Successor Calculation Agent; “Canadian Paying Agent” means BNY Trust Company as Canadian Paying Agent under the Agency Agreement (or such Canadian Paying Agent as may be appointed from time to time under the Agency Agreement); “CDS” means CDS Clearing and Depository Services Inc.; “Certificate” means a registered certificate representing one or more Instruments of the same Series and, save as provided in the Conditions, comprising the entire holding by an Instrumentholder of his Instruments of that Series and, save in the case of Global Certificates, being substantially in the form set out in Schedule1 Part B;


 
A42485973 2 “Common Safekeeper” means, in relation to a Series where the relevant Global Certificate is held under the NSS, the common safekeeper for Euroclear and Clearstream, Luxembourg appointed in respect of such Instruments; “Clearstream, Luxembourg” means Clearstream Banking S.A.; “Conditions” means in respect of the Instruments of each Series the terms and conditions applicable to them which shall be substantially in the form set out in Schedule 2 (Terms and Conditions of the Instruments) as modified, with respect to any Instruments represented by a Global Certificate, by the provisions of such Global Certificate, and shall incorporate any additional provisions forming part of such terms and conditions set out in Part A of the Final Terms relating to the Instruments of that Series and any reference to a particularly numbered Condition shall be construed accordingly; “Contractual Currency” means, in relation to any payment obligation of any Instrument, the currency in which that payment obligation is expressed and, in relation to Clause 8 (Provisions Supplemental to the Trustee Acts), such currency as may be agreed between the Issuer and the Trustee from time to time; “Dealer Agreement” means the amended and restated dealer agreement (as amended, supplemented and/or restated from time to time) relating to the Programme dated 22 October 2020 between the Issuer, the Arranger and the dealers named in it; “Definitive Instrument” means a Certificate other than a Global Certificate and includes any replacement Instrument or Certificate issued pursuant to the Conditions; “Effective Date” means the date on which the Arranger, has received, on behalf of the Dealers, each of the condition precedent documents listed in Schedule 2 to the Dealer Agreement and that each is, in form and substance, satisfactory to it; “Euroclear” means Euroclear Bank SA/NV; “Event of Default” means an event described in Condition 8 and that, if so required by that Condition, has been certified by the Trustee to be, in its opinion, materially prejudicial to the interests of the Instrumentholders; “Extraordinary Resolution” has the meaning set out in Schedule 3 (Provisions for Meetings of Instrumentholders); “Final Terms” means, in relation to a Tranche, the final terms document substantially in the form set out in the Prospectus which will be completed at or around the time of the agreement to issue each Tranche of Instruments and which will constitute final terms for the purposes of the Prospectus Regulation. For the avoidance of doubt, in the case of Instruments issued under the Programme which are not admitted to trading on the London Stock Exchange’s regulated market, all references to the Final Terms shall be construed as references to the pricing supplement substantially in the form set forth in the Prospectus; “Global Certificate” means a Temporary Global Certificate and/or the Permanent Global Certificate substantially in the forms set out in Part A of Schedule 1 representing Instruments of one or more Tranches of the same Series; “holder” in relation to an Instrument and “Instrumentholder” have the meanings given to them in the Conditions;


 
A42485973 3 “Instruments” means the debt instruments to be issued by the Issuer pursuant to the Dealer Agreement, constituted by this Trust Deed and for the time being outstanding or, as the context may require, a specific number of them; “Issuing and Paying Agent” means the person named as such in the Conditions or any Successor Issuing and Paying Agent in each case at its specified office; “month” means a calendar month; “NSS” means the new safekeeping structure which applies to Instruments held in global form by a Common Safekeeper for Euroclear and Clearstream, Luxembourg and which is required for such Instruments to be recognised as eligible collateral for Eurosystem monetary policy and intra-day credit operations; “outstanding” means, in relation to the Instruments, all the Instruments issued except (a) those that have been redeemed in accordance with the Conditions, (b) those in respect of which the date for redemption has occurred and the redemption moneys (including all interest accrued on such Instruments to the date for such redemption and any interest payable after such date) have been duly paid to the Trustee or to the Issuing and Paying Agent or the Canadian Paying Agent, as applicable, as provided in Clause 2 (Issue of Instruments and Covenant to Pay) and remain available for payment against presentation and surrender of such Instruments, (c) those which have become void or in respect of which claims have become prescribed, (d) those which have been purchased and cancelled as provided in the Conditions, (e) those mutilated or defaced Instrument(s) which have been surrendered in exchange for replacement Certificate(s), (f) those Instruments alleged to have been lost, stolen or destroyed and in respect of which replacement Instruments have been issued, and (g) any Temporary Global Certificate to the extent that such Certificates have been exchanged for a Permanent Global Certificate, provided that for the purposes of (i) ascertaining the right to attend at any meeting of Instrumentholders and vote at any meeting of the Instrumentholders or to participate in any Written Resolution or Electronic Consent, (ii) the determination of how many Instruments are outstanding for the purposes of Conditions 8 and 10 and Schedule 3 (Provisions for Meetings of Instrumentholders), (iii) the exercise of any discretion, power or authority that the Trustee is required, expressly or impliedly, to exercise in or by reference to the interests of the Instrumentholders and (iv) the certification (where relevant) by the Trustee as to whether a Potential Event of Default is in its opinion materially prejudicial to the interests of the Instrumentholders, those Instruments which are beneficially held by or on behalf of the Issuer or any of its subsidiary undertakings and not cancelled shall (unless no longer so held) be deemed not to remain outstanding; “Paying Agents” means the persons (including the Issuing and Paying Agent and the Canadian Paying Agent, as applicable) referred to as such in the Conditions or any Successor Paying Agents in each case at their respective specified offices; “Permanent Global Certificate” means a permanent Global Certificate in the form set out in Part A of Schedule 1 hereto, issued in a denomination equal to the outstanding principal amount of the Temporary Global Certificate upon expiration of the Restricted Period and certification of non-U.S. beneficial ownership; “Potential Event of Default” means an event or circumstance that could with the giving of notice, lapse of time, issue of a certificate and/or fulfilment of any other requirement provided for in Condition 8 become an Event of Default;


 
A42485973 4 “Programme Limit” means the maximum aggregate nominal amount of Instruments which may be issued and outstanding at any time under the Programme, as such limit may be increased pursuant to the Dealer Agreement; "Prospectus" means the prospectus prepared in connection with the Programme and constituting (i) a base prospectus in respect of the Issuer for the purposes of the Prospectus Regulation and (ii) listing particulars in respect of the Issuer for the purposes of Listing Rule 2.2.11 of the Listing Rules of the Financial Conduct Authority, as revised, supplemented or amended from time to time by the Issuer including any documents which are from time to time incorporated in the Prospectus by reference except that in relation to each Tranche of Instruments only the applicable Final Terms shall be deemed to be included in the Prospectus; “Prospectus Regulation” means Regulation 2017/1129; “Redemption Amount” means the Final Redemption Amount, Early Redemption Amount or Optional Redemption Amount, as the case may be, all as defined in the Conditions; “Register” means the register maintained by the Registrar; “Registrar” means the person named as such in the Conditions or any Successor Registrar in each case at its specified office; “Restricted Period” means the 40-day distribution compliance period as defined in Regulation S under the Securities Act; “Securities Act” means the U.S. Securities Act of 1933, as amended; “Series” means a series of Instruments comprising one or more Tranches, whether or not issued on the same date, that (except in respect of the first payment of interest and their issue price) have identical terms on issue and are expressed to have the same series number; “specified office” means, in relation to a Paying Agent, the Registrar or a Transfer Agent the office identified with its name at the end of the Conditions or any other office approved by the Trustee and notified to Instrumentholders pursuant to Clause 6.6 (Notices to Instrumentholders); “Successor” means, in relation to an Agent such other or further person as may from time to time be appointed by the Issuer as such Agent with the written approval of, and on terms approved in writing by, the Trustee and notice of whose appointment is given to Instrumentholders pursuant to Clause 6.6 (Notices to Instrumentholders); “successor in business” means (a) an entity which acquires all or substantially all of the undertaking and/or assets of the Issuer or of a successor in business of the Issuer; or (b) any entity into which any of the previously referred to entity is amalgamated, merged or reconstructed and is itself not the continuing company; “TARGET System” means the Trans-European Automated Real-Time Gross Settlement Express Transfer (known as TARGET2) System which was launched on 19 November 2007 or any successor thereto; “Temporary Global Certificate” means a temporary Global Certificate in the form set out in Part A of Schedule 1 hereto, bearing the Temporary Global Certificate Legend; “Temporary Global Certificate Legend” means the legend set forth in Clause 3;


 
A42485973 5 “Tranche” means, in relation to a Series, those Instruments of that Series which are issued on the same date at the same issue price and in respect of which the first payment of interest is identical; “Transfer Agents” means the persons (including the Registrar) referred to as such in the Conditions or any Successor Transfer Agents in each case at their specified offices; “trust corporation” means a trust corporation (as defined in the Law of Property Act 1925) or a corporation entitled to act as a trustee pursuant to applicable foreign legislation relating to trustees; and “Trustee Acts” means both the Trustee Act 1925 and the Trustee Act 2000 of England and Wales. 1.2 Construction of Certain References Unless the context otherwise requires, all references in this Trust Deed to: 1.2.1 the records of Euroclear and Clearstream, Luxembourg shall be to the records that each of Euroclear and Clearstream, Luxembourg holds for its customers which reflect the amount of such customers’ interests in the Instruments; 1.2.2 costs, charges, remuneration or expenses include any value added, turnover or similar tax charged in respect of them; 1.2.3 an action, remedy or method of judicial proceedings for the enforcement of creditors’ rights include references to the action, remedy or method of judicial proceedings in jurisdictions other than England as shall most nearly approximate to it; 1.2.4 the Trustee’s approval or consent shall, unless expressed otherwise, be subject to the requirement that any such approval or consent shall not be unreasonably withheld or delayed, such reasonableness to be determined by reference to acting in the interests of Instrumentholders as a whole; and 1.2.5 the appointment or employment of or delegation to any person by the Trustee shall be deemed to include a reference to, if in the opinion of the Trustee it is reasonably practicable, the prior notification of and consultation with the Issuer and, in any event, the notification forthwith of such appointment, employment or delegation, as the case may be. 1.3 Headings Headings shall be ignored in construing this Trust Deed. 1.4 Contracts References in this Trust Deed to this Trust Deed or any other document are to this Trust Deed or those documents as amended, supplemented or replaced from time to time in relation to the Programme and include any document that amends, supplements or replaces them. 1.5 Schedules The Schedules are part of this Trust Deed and have effect accordingly.


 
A42485973 6 1.6 Alternative Clearing System References in this Trust Deed to Euroclear and/or Clearstream, Luxembourg shall, wherever the context so permits, be deemed to include reference to any additional or alternative clearing system approved by the Issuer, the Trustee and the Issuing and Paying Agent. In the case of Global Certificates held under the NSS, such alternative clearing system must also be authorised to hold Instruments as eligible collateral for Eurosystem monetary policy and intra-day credit operations. 1.7 Other Terms Other terms defined in the Dealer Agreement or the Conditions have the same meaning in this Trust Deed. 1.8 Contracts (Rights of Third Parties) Act 1999 A person who is not a party to this Trust Deed has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Trust Deed. 1.9 Effectiveness Upon execution of this Trust Deed by all the parties hereto, the Original Trust Deed shall be replaced by this Trust Deed and the Original Trust Deed shall be of no further force and effect, except in respect of Instruments issued prior to the date of this Trust Deed. 2 Issue of Instruments and Covenant to Pay 2.1 Issue of Instruments The Issuer may from time to time issue Instruments in Tranches of one or more Series on a continuous basis with no minimum issue size in accordance with the Dealer Agreement. Before issuing any Tranche and not later than 3.00 p.m. (London time) on the second business day in London which for this purpose shall be a day on which commercial banks are open for general business in London preceding each proposed issue date, the Issuer shall give written notice or procure that it is given to the Trustee of the proposed issue of such Tranche, specifying the details to be included in the relevant Final Terms. Upon the issue by the Issuer of any Instruments expressed to be constituted by this Trust Deed, such Instruments shall forthwith be constituted by this Trust Deed without any further formality and irrespective of whether or not the issue of such debt securities contravenes any covenant or other restriction in this Trust Deed or the Programme Limit. 2.2 Separate Series The provisions of Clauses 2.3 (Covenant to Pay), 2.4 (Discharge), 2.5 (Payment after a Default) and 2.6 (Rate of Interest after a Default) and of Clauses 3 (Form of the Instruments) to 15 (Currency Indemnity) and Schedule 3 (Provisions for Meetings of Instrumentholders) (all inclusive) shall apply mutatis mutandis separately and independently to the Instruments of each Series and in such Clauses and Schedule the expressions “Instrumentholders”, and “Certificates”, together with all other terms that relate to Instruments or their Conditions, shall be construed as referring to those of the particular Series in question and not of all Series unless expressly so provided, so that each Series shall be constituted by a separate trust pursuant to Clause 2.3 (Covenant to Pay) and that, unless expressly provided, events affecting one Series shall not affect any other.


 
A42485973 7 2.3 Covenant to Pay The Issuer shall on any date when any Instruments become due to be redeemed, in whole or in part, unconditionally pay to or to the order of the Trustee in the Contractual Currency, in the case of any Contractual Currency other than Euro, in the principal financial centre for the Contractual Currency and, in the case of Euro, in a city in which banks have access to the TARGET System, in same day funds the Redemption Amount of the Instruments becoming due for redemption on that date together with any applicable premium and shall (subject to the Conditions and other than in respect of Zero Coupon Instruments) until such payment (both before and after judgment) unconditionally so pay to or to the order of the Trustee interest in respect of the nominal amount of the Instruments outstanding as set out in the Conditions (subject to Clause 2.6 (Rate of Interest after a Default)) provided that (a) subject to the provisions of Clause 2.5, payment of any sum due in respect of the Instruments made to the Issuing and Paying Agent or Canadian Paying Agent, as applicable, as provided in the Agency Agreement shall, to that extent, satisfy such obligation except to the extent that there is failure in its subsequent payment to the relevant Instrumentholders under the Conditions and (b) a payment made after the due date or as a result of the Instrument becoming repayable following an Event of Default shall be deemed to have been made when the full amount due has been received by the Issuing and Paying Agent or Canadian Paying Agent, as applicable, or the Trustee and notice to that effect has been given to the Instrumentholders (if required under Clause 6.8 (Notice of Late Payment)), except to the extent that there is failure in its subsequent payment to the relevant Instrumentholders under the Conditions. This covenant shall only have effect each time Instruments are issued and outstanding, when the Trustee shall hold the benefit of this covenant on trust for the Instrumentholders of the relevant Series. 2.4 Discharge Subject to Clause 2.5 (Payment after a Default), any payment to be made in respect of the Instruments by the Issuer or the Trustee may be made as provided in the Conditions and any payment so made shall (subject to Clause 2.5 (Payment after a Default)) to that extent be a good discharge to the Issuer or the Trustee, as the case may be, except to the extent that there is failure in its subsequent payment to the relevant Instrumentholders under the Conditions. 2.5 Payment after a Default At any time after an Event of Default or a Potential Event of Default has occurred the Trustee may: 2.5.1 by notice in writing to the Issuer and the Paying Agents, require the Paying Agents, until notified by the Trustee to the contrary, so far as permitted by applicable law: (i) to act as Paying Agents and the Transfer Agents of the Trustee under this Trust Deed and the Instruments on the terms of the Agency Agreement (with consequential amendments as necessary and except that the Trustee’s liability for the indemnification, remuneration and expenses of the Paying Agents shall be limited to the amounts for the time being held by the Trustee in respect of the Instruments on the terms of this Trust Deed) and thereafter to hold all Instruments and Certificates, and all moneys, documents and records held by them in respect of Instruments and Certificates to the order of the Trustee; or


 
A42485973 8 (ii) to deliver all Instruments and Certificates and all moneys, documents and records held by them in respect of the Instruments and Certificates to the Trustee or as the Trustee directs in such notice; and 2.5.2 by notice in writing to the Issuer, require the Issuer to make all subsequent payments in respect of the Instruments to or to the order of the Trustee and not to the Issuing and Paying Agent or Canadian Paying Agent, as applicable, and with effect from the receipt of any such notice by the Issuer, until such notice is withdrawn, the first proviso to Clause 2.3 (Covenant to Pay) shall cease to have effect. 2.6 Rate of Interest after a Default If the Instruments bear interest at a floating or other variable rate and they become immediately payable under the Conditions following an Event of Default, the rate of interest payable in respect of them shall continue to be calculated by the Calculation Agent in accordance with the Conditions (with consequential amendments as necessary) except that the rates of interest need not be notified to Instrumentholders. The first period in respect of which interest shall be so calculable shall commence on the expiry of the Interest Period during which the Instruments become so repayable. 3 Form of the Instruments 3.1 The Global Certificates The Instruments shall initially be represented by one or more Temporary Global Certificates in the nominal amount of the Tranche being issued. Each Global Certificate shall be printed or typed substantially in the form set out in Part A of Schedule 1 and may be a facsimile. Interests in the Temporary Global Certificate shall be exchangeable for interests in a Permanent Global Certificate upon expiration of the Restricted Period and certification of non-U.S. beneficial ownership. Following termination of the Restricted Period and receipt by the Issuing and Paying Agent of copies of certificates from Euroclear and Clearstream, Luxembourg (if available) certifying that they have received certification of non-U.S. beneficial ownership of 100 per cent. of the aggregate principal amount of each Temporary Global Certificate, the Issuing and Paying Agent or Canadian Paying Agent, as applicable, shall complete a Permanent Global Certificate (being substantially in the form set out in Schedule 1 Part A of the Trust Deed) in an aggregate nominal amount up to that of the relevant Tranche, authenticate it (or cause its agent on its behalf to do so), and deliver the Permanent Global Certificate to the Common Safekeeper which is holding the Temporary Global Certificate representing the Tranche for the time being on behalf of Euroclear and/or Clearstream, Luxembourg together with instructions to the Common Safekeeper to effectuate the same, and, in each case, procure the exchange of interests in such Temporary Global Certificate for interests in an equal nominal amount of such Permanent Global Certificate in accordance with such Temporary Global Certificate. In the case of a total exchange of interests in the Temporary Global Certificate, the Issuing and Paying Agent or Canadian Paying Agent, as applicable, shall cancel or arrange for the cancellation of the Temporary Global Certificate. 3.2 Temporary Global Certificate Legend The Temporary Global Certificate shall bear a legend in substantially the following form:


 
A42485973 9 “BY ITS ACQUISITION HEREOF, THE HOLDER HEREOF REPRESENTS THAT IT IS NOT A U.S. PERSON, AS DEFINED IN THE U.S. SECURITIES ACT OF 1933 (THE “SECURITIES ACT”), NOR IS IT PURCHASING FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON, AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT.” 3.3 The Certificates The Certificates shall be printed in accordance with applicable legal and stock exchange requirements substantially in the form set out in Part B of Schedule 1. The Certificates (other than the Global Certificates) shall be endorsed with the Conditions. 3.4 Signature The Instruments and Certificates (other than the Instruments settling in CDS) shall be signed manually or in facsimile by an authorised signatory of the Issuer and the Certificates shall be authenticated by or on behalf of the Registrar. Instruments and Certificates settling in CDS will be signed manually by an authorised signatory of the Issuer (unless CDS agrees that it will accept a facsimile or electronic signature) and such Certificates shall be authenticated manually by or on behalf of the Canadian Paying Agent (unless CDS agrees that it will accept a facsimile or electronic authentication signature). The Issuer may use the facsimile signature of any person who at the date of this Trust Deed is such an authorised signatory even if at the time of issue of any Instruments or Certificates he no longer holds that office. In the case of a Global Certificate which is held under the NSS, the Issuing and Paying Agent or the Registrar shall also instruct the Common Safekeeper to effectuate the same. Certificates so executed and authenticated (and effectuated, if applicable) shall represent binding and valid obligations of the Issuer. Execution in facsimile of any Instruments and any photostatic copying or other duplication of any Global Certificates (in unauthenticated form, but executed manually on behalf of the Issuer as stated above) shall represent binding obligations upon the Issuer in the same manner as if such Certificates were signed manually by such signatories. 3.5 Title The holder of any Instrument whose name is entered in the Register as being entitled to such Instrument shall (save as otherwise required by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it, any writing on it or its theft or loss) and no person will be liable for so treating the holder. 4 Stamp Duties and Taxes 4.1 Stamp Duties The Issuer shall pay any stamp, issue, documentary or other taxes and duties payable in the United States of America in respect of the creation, issue and offering of the Instruments and/or Certificates issued by it and the execution or delivery of this Trust Deed. The Issuer shall also indemnify the Trustee and the relevant Instrumentholders from and against all stamp, issue, documentary or other taxes paid by any of them in any jurisdiction in connection with any action taken by or on behalf of the Trustee or, as the case may be (where entitled to do so), the relevant Instrumentholders to enforce the Issuer’s obligations under this Trust Deed or the relevant Instruments or Certificates.


 
A42485973 10 4.2 Change of Taxing Jurisdiction If the Issuer becomes subject generally to the taxing jurisdiction of a territory or a taxing authority of or in that territory with power to tax other than, or in addition to, the United States of America or any political sub-division of the United States of America then the Issuer shall (unless the Trustee otherwise agrees) give the Trustee an undertaking satisfactory to the Trustee in terms corresponding to the terms of Condition 6 with the substitution for, or (as the case may require) the addition to, the references in that Condition to the United States of America of references to that other or additional territory or authority to whose taxing jurisdiction the Issuer has become so subject. In such event this Trust Deed and the relevant Instruments and Certificates shall be read accordingly. 5 Application of Moneys Received by the Trustee 5.1 Declaration of Trust All moneys received by the Trustee in respect of the Instruments or amounts payable under this Trust Deed shall, despite any appropriation of all or part of them by the Issuer, be held by the Trustee on trust to apply them (subject to Clause 5.2 (Accumulation)): 5.1.1 first, in payment of all costs, charges, expenses and liabilities properly incurred by the Trustee (including remuneration payable to it) in carrying out its functions under this Trust Deed; 5.1.2 secondly, in payment of any amounts owing in respect of the relevant Instruments pari passu and rateably; and 5.1.3 thirdly, in payment of any balance to the Issuer for itself. If the Trustee holds any moneys which represent principal, premium or interest in respect of Instruments which have become void in accordance with the Conditions the Trustee shall hold them on these trusts. 5.2 Accumulation If the amount of the moneys at any time available for payment in respect of the Instruments under Clause 5.1 (Declaration of Trust) is less than 10 per cent. of the nominal amount of the Instruments then outstanding, the Trustee may, at its discretion, invest such moneys as provided in Clause 5.3 (Investment). The Trustee may retain such investments and accumulate the resulting income until the investments and the accumulations, together with any other funds for the time being under its control and available for such payment, amount to at least 10 per cent. of the nominal amount of the Instruments then outstanding and then such investments, accumulations and funds (after deduction of, or provision for, any applicable taxes) shall be applied as specified in Clause 5.1 (Declaration of Trust). 5.3 Investment Moneys held by the Trustee may be invested in its name or under its control in any investments or other assets anywhere, whether or not they produce income, or deposited in its name or under its control at such bank or other financial institution in such currency as the Trustee may, in its absolute discretion, think fit. If that bank or institution is the Trustee or a subsidiary, parent or associated undertaking of the Trustee, it need only account for an amount of interest equal to the standard amount of interest payable by it on such a deposit to an independent customer. The Trustee may at any time vary or transpose any such


 
A42485973 11 investments or assets or convert any moneys so deposited into any other currency, and shall not be responsible for any resulting loss, whether by depreciation in value, change in exchange rates or otherwise. 6 Covenants So long as any Instrument issued by it is outstanding, the Issuer shall: 6.1 Books of Account Keep, and procure that each of its subsidiary undertakings keeps, proper books of account and, at any time after an Event of Default has occurred or if the Trustee reasonably believes that such an event has occurred, so far as permitted by applicable law, allow, and procure that each such subsidiary undertaking shall allow, the Trustee and anyone appointed by it to whom the Issuer and/or the relevant subsidiary undertaking has no reasonable objection, access to its books of account at all reasonable times during normal business hours. 6.2 Notice of Events of Default Notify the Trustee in writing immediately on becoming aware of the occurrence of any Event of Default or Potential Event of Default. 6.3 Information So far as permitted by applicable law, give the Trustee such information as it reasonably requires to perform its functions. 6.4 Financial Statements etc. Send to the Trustee at the time of their issue and, in the case of annual financial statements, in any event within 180 days of the end of each financial year, three copies in English of every balance sheet, profit and loss account, report or other notice, statement or circular issued, or that legally or contractually should be issued, to the members or creditors (or any class of them) of the Issuer or any parent undertaking of it generally in their capacity as such. 6.5 Certificate of a Director, etc. 6.5.1 Send to the Trustee, within 14 days of its annual audited financial statements being made available to its members, and also within 21 days of any request by the Trustee a certificate of the Issuer signed by a director that, having made all reasonable enquiries, to the best of the knowledge, information and belief of the Issuer as at a date (the “Certification Date”) not more than five days before the date of the certificate no Event of Default or Potential Event of Default had occurred (and, in the case of a Potential Event of Default, was continuing) since the Certification Date of the last such certificate or (if none) the date of this Trust Deed or, if such an event had occurred (and, in the case of a Potential Event of Default, was continuing), giving details of it and certifying that it has complied with its obligations under this Trust Deed or, to the extent that it has failed so to comply, stating such. 6.5.2 Give to the Trustee, as soon as reasonably practicable after the acquisition of any company which thereby becomes a Principal Subsidiary or after any transfer is made to any member of the Group (as defined in Condition 8) which thereby becomes a Principal Subsidiary, a certificate by the auditors of the Issuer at that time (the “Auditors”) addressed to the Trustee to such effect.


 
A42485973 12 6.6 Notices to Instrumentholders Obtain the prior written approval of the Trustee to, and promptly give to the Trustee two copies of, the form of every notice given to the Instrumentholders in accordance with Condition 13 (such approval, unless so expressed, not to constitute approval for the purposes of Section 21 of the Financial Services and Markets Act 2000 of a communication within the meaning of that section). 6.7 Further Acts So far as permitted by applicable law, do such further things as may be necessary in the reasonable opinion of the Trustee to give effect to this Trust Deed. 6.8 Notice of Late Payment Forthwith upon request by the Trustee (if the Trustee determines such notice is necessary) give notice to the Instrumentholders of any unconditional payment to the Issuing and Paying Agent (or the Canadian Paying Agent, as applicable) or the Trustee of any sum due in respect of the Instruments made after the due date for such payment. 6.9 Listing If the Instruments are so listed, use all reasonable endeavours to maintain the listing of the Instruments but, if it is unable to do so, having used such endeavours, or if the maintenance of such listing is agreed by the Trustee to be unduly onerous and the Trustee is satisfied that the interests of the Instrumentholders would not by such action be materially prejudiced, instead use all reasonable endeavours to obtain and maintain a listing of the Instruments on another stock exchange approved in writing by the Trustee. 6.10 Change in Agents Give at least 14 days’ prior notice to the Instrumentholders in accordance with the Conditions of any future appointment, resignation or removal of an Agent or of any change by an Agent of its specified office. 6.11 Provision of Legal Opinions Procure the delivery of legal opinions addressed to the Trustee dated the date of such delivery, in form and content acceptable to the Trustee: 6.11.1 from Allen & Overy LLP as to the laws of England and as New York Counsel and the Issuer’s internal counsel as to the laws of the United States (or such other legal advisers as may be agreed between the Issuer and the Trustee) before the first issue of Instruments occurring after each anniversary of this Trust Deed or, if later, 12 months after the date of delivery of the latest such legal opinion and on the date of any amendment to this Trust Deed; 6.11.2 unless the Issuer has notified the Dealers and the Trustee in writing that it does not intend to issue Instruments under the Programme for the time being, from legal advisers reasonably acceptable to the Trustee as to such law as may reasonably be requested by the Trustee and in such form and with such content as the Trustee may require, on such occasions as the Trustee so requests on the basis that the Trustee considers it prudent in view of a change (or proposed change) in (or in the interpretation or application of) any applicable law, regulation or circumstance


 
A42485973 13 materially affecting the Issuer, the Trustee, the relevant Instruments, the Certificates, this Trust Deed or the Agency Agreement; and 6.11.3 on each occasion on which a legal opinion is given to any Dealer pursuant to the Dealer Agreement from the legal adviser giving such opinion. 6.12 Instruments Held by the Issuer Send to the Trustee as soon as practicable after being so requested by the Trustee a certificate of the Issuer signed by any director or the Company Secretary stating the number of Instruments held at the date of such certificate by or on behalf of the Issuer or its subsidiary undertakings. 6.13 Obligations of Agents Comply with and perform all its obligations under the Agency Agreement and use all reasonable endeavours to procure that the Agents comply with and perform all their respective obligations thereunder and not make any amendment or modification to the Agency Agreement without the prior written approval of the Trustee. 6.14 Copies of Dealer Agreement Provide the Trustee promptly with copies of all supplements and/or amendments to, and/or restatements of, the Dealer Agreement. 7 Remuneration and Indemnification of the Trustee 7.1 Normal Remuneration So long as any Instrument is outstanding the Issuer shall pay the Trustee as remuneration for its services as Trustee such sum on such dates in each case as they may from time to time agree. Such remuneration shall accrue from day to day from the date of this Trust Deed. However, if any payment to an Instrumentholder of moneys due in respect of any Instrument is improperly withheld or refused, such remuneration shall again accrue as from the date of such withholding or refusal until payment to such Instrumentholder is duly made. 7.2 Extra Remuneration If (i) an Event of Default, Potential Event of Default or Benchmark Event shall have occurred or (ii) in any other case, the Trustee finds it expedient or necessary or is requested by the Issuer to undertake duties that they both agree to be of an exceptional nature or otherwise outside the scope of the Trustee’s normal duties under this Trust Deed, the Issuer shall pay such additional remuneration as they may agree (and which may be calculated by reference to the Trustee’s normal hourly rates in force from time to time) or, failing agreement as to any of the matters in this Clause 7 (or as to such sums referred to in Clause 7.1 (Normal Remuneration)), as such matters shall be determined by a financial institution (acting as an expert) selected by the Trustee and approved by the Issuer or, failing such approval, nominated by the President for the time being of The Law Society of England and Wales. The expenses involved in such nomination and such person’s fee shall be shared equally between the Trustee and the Issuer. The determination of the relevant financial institution shall be conclusive and binding on the Issuer, the Trustee and the relevant Instrumentholders.


 
A42485973 14 7.3 Expenses The Issuer shall also, on demand by the Trustee, pay or discharge all costs, charges, liabilities and expenses properly incurred by the Trustee in the preparation and execution of this Trust Deed and the performance of its functions under this Trust Deed including, but not limited to, legal and travelling expenses and any United Kingdom stamp, documentary or other taxes or duties paid by the Trustee in connection with any legal proceedings reasonably brought or contemplated by the Trustee against the Issuer to enforce any provision of this Trust Deed, the relevant Instruments and in addition shall pay to the Trustee (if required) an amount equal to the amount of any value added tax or similar tax chargeable in respect of the Trustee’s remuneration under this Trust Deed. Such costs, charges, liabilities and expenses shall: 7.3.1 in the case of payments made by the Trustee before such demand, carry interest from the date of the demand at the rate of the Trustee’s cost of funding on the date on which the Trustee made such payments; and 7.3.2 in other cases, carry interest at such rate from 30 days after the date of the demand or (where the demand specifies that payment is to be made on an earlier date) from such earlier date provided that in such event no such interest shall accrue unless payment is actually made on such earlier date. 7.4 Notice of Costs The Trustee shall wherever practicable give prior notice to the Issuer of any costs, charges and expenses properly to be incurred and of payments to be made by the Trustee in the lawful exercise of its powers under this Trust Deed so as to afford the Issuer a reasonable opportunity to meet such costs, charges and expenses itself or to put the Trustee in funds to make payment of such costs, charges and expenses. However, failure of the Trustee to give any such prior notice shall not prejudice its rights to reimbursement of such costs, charges and expenses under this Clause 7. 7.5 Indemnity The Issuer shall indemnify the Trustee in respect of all liabilities and expenses properly incurred by it or by anyone appointed by it or to whom any of its functions may be delegated by it in the carrying out of its functions and against any loss, liability, cost, claim, action, demand or expense (including, but not limited to, all costs, charges and expenses properly paid or incurred in disputing or defending any of the foregoing) which any of them may incur in relation to the Issuer or that may be made against any of them arising out of or in relation to or in connection with, its appointment or the exercise of its functions in relation to the Issuer. 7.6 Continuing Effect Clauses 7.3 (Expenses) and 7.5 (Indemnity) shall continue in full force and effect as regards the Trustee even if it no longer is Trustee. 7.7 Determination of Series The Trustee shall be entitled in its absolute discretion to determine in respect of which Series of Instruments any costs, charges, liabilities and expenses incurred under this Trust Deed have been incurred or to allocate any such costs, charges, liabilities and expenses between the Instruments of any two or more Series.


 
A42485973 15 8 Provisions Supplemental to the Trustee Acts 8.1 Advice The Trustee may act on the opinion or advice of, or information obtained from, any expert (including, without limitation, any report or advice received from an independent financial adviser or from any accountant pursuant to the Conditions), whether or not (1) such opinion, advice or information is addressed to the Trustee or any other person, and (2) such expert’s liability in respect of the same is limited by reference to a monetary cap or otherwise and shall not be responsible to anyone for any loss occasioned by so acting. Any such opinion, advice or information may be sent or obtained by letter, email or fax and the Trustee shall not be liable to anyone for acting in good faith on any opinion, advice or information purporting to be conveyed by such means even if it contains some error or is not authentic. 8.2 Trustee to Assume Performance The Trustee need not notify anyone of the execution of this Trust Deed or do anything to find out if an Event of Default, Potential Event of Default or Benchmark Event has occurred. Until it has actual knowledge or express notice to the contrary, the Trustee may assume that no such event has occurred and that the Issuer is performing all of its obligations under this Trust Deed and the relevant Instruments provided that the Trustee shall not be treated for any purposes as having any notice or knowledge which has been obtained by it or any officer or employee of it in some capacity other than as Trustee under this Trust Deed or in a private or confidential capacity such that it would not be proper to disclose to third parties. 8.3 Resolutions of Instrumentholders The Trustee shall not be responsible for having acted in good faith on a resolution purporting (i) to have been passed at a meeting of Instrumentholders in respect of which minutes have been made and signed, or (ii) to be a Written Resolution or an Electronic Consent made in accordance with paragraphs 24, 25 and 26 of Schedule 3 of this Trust Deed, even if it is later found that there was a defect in the constitution of the meeting or the passing of the resolution or that the resolution was not valid or binding on the Instrumentholders. 8.4 Certificate Signed by Directors, etc. If the Trustee, in the exercise of its functions, requires to be satisfied or to have information as to any fact or the expediency of any act, it may call for and accept as sufficient evidence of that fact or the expediency of that act a certificate signed by any two directors of the Issuer as to that fact or to the effect that, in their opinion, that act is expedient and the Trustee need not call for further evidence and shall not be responsible for any loss occasioned by acting on such a certificate. 8.5 Deposit of Documents The Trustee may deposit this Trust Deed and any other documents with any bank or entity whose business includes the safe custody of documents or with any lawyer or firm of lawyers believed by it to be of good repute and may pay all sums due in respect of them. 8.6 Discretion The Trustee shall have absolute and uncontrolled discretion as to the exercise of its functions and shall not be responsible for any loss, liability, cost, claim, action, demand, expense or inconvenience which may result from their exercise or non-exercise.


 
A42485973 16 8.7 Agents Whenever it considers it expedient in the interests of the Instrumentholders, the Trustee may, in the conduct of its trust business, instead of acting personally, employ and pay an agent selected by it, whether or not a lawyer or other professional person, to transact or conduct, or concur in transacting or conducting, any business and to do or concur in doing all acts required to be done by the Trustee (including the receipt and payment of money). The Trustee shall not be responsible to anyone for any misconduct or omission by any such agent so employed by it or be bound to supervise the proceedings or acts of any such agent. 8.8 Delegation Whenever it considers it expedient in the interests of the Instrumentholders, the Trustee may delegate to any person on any terms (including power to sub-delegate) all or any of its functions. If the Trustee exercises reasonable care in selecting such delegate, it shall not have any obligation to supervise such delegate or be responsible for any loss, liability, cost, claim, action, demand or expense incurred by reason of any misconduct or default by any such delegate or sub-delegate. 8.9 Nominees In relation to any asset held by it under this Trust Deed, the Trustee may appoint any person to act as its nominee on any terms. 8.10 Forged Instruments The Trustee shall not be liable to the Issuer or any relevant Instrumentholder by reason of having accepted as valid or not having rejected any relevant Instrument or Certificate purporting to be such and later found to be forged or not authentic. 8.11 Confidentiality Unless ordered to do so by a court of competent jurisdiction, the Trustee shall not be required to disclose to any Instrumentholder any confidential financial or other information made available to the Trustee by the Issuer. 8.12 Determinations Conclusive As between itself and the Instrumentholders, the Trustee may determine all questions and doubts arising in relation to any of the provisions of this Trust Deed. Such determinations, whether made upon such a question actually raised or implied in the acts or proceedings of the Trustee, shall be conclusive and shall bind the Trustee and the Instrumentholders. 8.13 Currency Conversion Where it is necessary or desirable to convert any sum from one currency to another, it shall (unless otherwise provided hereby or required by law) be converted at such rate or rates, in accordance with such method and as at such date as may reasonably be specified by the Trustee but having regard to current rates of exchange, if available. Any rate, method and date so specified shall be binding on the Issuer and the relevant Instrumentholders.


 
A42485973 17 8.14 Payment for and Delivery of Instruments The Trustee shall not be responsible for the receipt or application by the Issuer of the proceeds of the issue of any relevant Instruments, any exchange of relevant Instruments or the delivery of relevant Instruments to the persons entitled to them. 8.15 Trustee’s consent Any consent given by the Trustee for the purposes of this Trust Deed may be given on such terms as the Trustee thinks fit. In giving such consent the Trustee may require the Issuer to agree to such modifications or additions to this Trust Deed as the Trustee may deem expedient in the interest of the Instrumentholders. 8.16 Instruments Held by the Issuer etc. In the absence of knowledge or express notice to the contrary, the Trustee may assume without enquiry (other than requesting a certificate under Clause 6.12 (Instruments Held by the Issuer)) that no Instruments are for the time being held by or on behalf of the Issuer or its subsidiary undertakings. 8.17 Legal Opinions The Trustee shall not be responsible to any person for failing to request, require or receive any legal opinion relating to any Instruments or for checking or commenting upon the content of any such legal opinion. 8.18 Programme Limit The Trustee shall not be concerned, and need not enquire, as to whether or not any Instruments are issued in breach of the Programme Limit. 8.19 Events of Default The Trustee may determine whether or not an Event of Default is in its opinion capable of remedy or (in relation to Condition 8(b)) materially prejudicial to the interests of relevant Instrumentholders. Any such determination shall be conclusive and binding on the Issuer and the relevant Instrumentholders. 8.20 Appointment of Independent Financial Adviser In connection with the Trustee’s right to appoint an independent financial adviser pursuant to Clause 8.1 (if applicable), the Trustee: 8.20.1 shall use its reasonable endeavours to identify and appoint the independent financial adviser but shall have no liability to any person if, having used its reasonable endeavours, it is unable to identify and appoint a suitable independent financial adviser; 8.20.2 shall not be responsible for carrying on the role of independent financial adviser itself during the time it is attempting to identify such independent financial adviser or thereafter if it is unable to find such independent financial adviser; and 8.20.3 shall not be required to take any action to find an independent financial adviser unless it has been previously indemnified and/or secured to its satisfaction or expend any of its own funds in the appointment of such an independent financial adviser.


 
A42485973 18 8.21 Illegality No provision of this Trust Deed or the Conditions shall require the Trustee to do anything which may in its opinion be illegal or contrary to applicable law or regulation. 8.22 Banker, Lawyer, Broker or other Professional acting as Trustee Any trustee being a banker, lawyer, broker or other person engaged in any profession or business shall be entitled to charge and be paid all usual professional and other charges for business transacted and acts done by him or his partner or firm on matters arising in connection with the trusts of this Trust Deed and also his properly incurred charges in addition to disbursements for all other work and business done and all time spent by him or his partner or firm on matters arising in connection with the Trust Deed, including matters which might or should have been attended to in person by a trustee not being a banker, lawyer, broker or other professional person. 8.23 No Obligation to Risk Own Funds or Incur Financial Liability Nothing contained in this Trust Deed shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties or the exercise of any right, power, authority or discretion hereunder if it has grounds for believing the repayment of such funds or adequate indemnity against, or security for, such risk or liability is not assured to it. 8.24 No Obligation to Act without Indemnity, Security or Prefunding The Trustee shall not be bound to take any steps to enforce the performance of any provisions of this Trust Deed, the Instruments to appoint an independent financial advisor pursuant to the Conditions of the Instruments unless it shall be indemnified and/or secured and/or prefunded by the relevant Instrumentholders to its satisfaction against all proceedings, claims and demands to which it may be liable and against all costs, charges, liabilities and expenses which may be incurred by it in connection with such enforcement or appointment, including the cost of its managements’ time and/or other internal resources, calculated using its normal hourly rates in force from time to time. 8.25 Evaluation of Risk When determining whether an indemnity or any security is satisfactory to it, the Trustee shall be entitled to evaluate its risk in given circumstances by considering the worst-case scenario and, for this purpose, it may take into account, without limitation, the potential costs of defending or commencing proceedings in England or elsewhere and the risk however remote, of any award of damages against it in England or elsewhere. 8.26 Quality of Indemnity or Security The Trustee shall be entitled to require that any indemnity or security given to it by the Instrumentholders or any of them be given on a joint and several basis and be supported by evidence satisfactory to it as to the financial standing and creditworthiness of each counterparty and/or as to the value of the security and an opinion as to the capacity, power and authority of each counterparty and/or the validity and effectiveness of the security.


 
A42485973 19 9 Disapplication and Trustee Liability 9.1 Disapplication Section 1 of the Trustee Act 2000 shall not apply to the duties of the Trustee in relation to the trusts constituted by this Trust Deed. Where there are any inconsistencies between the Trustee Acts and the provisions of this Trust Deed, the provisions of this Trust Deed shall, to the extent allowed by law, prevail and, in the case of any such inconsistency with the Trustee Act 2000, the provisions of this Trust Deed shall constitute a restriction or exclusion for the purposes of that Act. 9.2 Trustee Liability Subject to Sections 750 and 751 of the Companies Act 2006 (if applicable) and notwithstanding anything to the contrary in this Trust Deed, the Instruments or the Agency Agreement, the Trustee shall not be liable to any person for any matter or thing done or omitted in any way in connection with or in relation to this Trust Deed, the Instruments or the Agency Agreement save in relation to its own gross negligence, wilful default or fraud. 10 Waiver and Proof of Default 10.1 Waiver The Trustee may, without the consent of the Instrumentholders and without prejudice to its rights in respect of any subsequent breach, from time to time and at any time, if in its opinion the interests of the Instrumentholders will not be materially prejudiced thereby, waive or authorise, on such terms as seem expedient to it, any breach or proposed breach by the Issuer of this Trust Deed or the Conditions or determine that an Event of Default or Potential Event of Default shall not be treated as such provided that the Trustee shall not do so in contravention of an express direction given by an Extraordinary Resolution or a request made pursuant to Condition 8. No such direction or request shall affect a previous waiver, authorisation or determination. Any such waiver, authorisation or determination shall be binding on the relevant Instrumentholders and, if the Trustee so requires, shall be notified to the Instrumentholders as soon as practicable. 10.2 Proof of Default Proof that the Issuer has failed to pay a sum due to the holder of any one Instrument shall (unless the contrary be proved) be sufficient evidence that it has made the same default as regards all other Instruments which are then payable. 11 Trustee not Precluded from Entering into Contracts The Trustee and any other person, whether or not acting for itself, may acquire, hold or dispose of any Instrument, Certificate or other security (or any interest therein) of the Issuer or any other person, may enter into or be interested in any contract or transaction with any such person and may act on, or as depositary or agent for, any committee or body of holders of any securities of any such person in each case with the same rights as it would have had if the Trustee were not acting as Trustee and need not account for any profit.


 
A42485973 20 12 Modification and Substitution 12.1 Modification The Trustee may agree without the consent of the Instrumentholders to any modification to this Trust Deed of a formal, minor or technical nature or to correct a manifest error. The Trustee may also agree to any other modification to this Trust Deed which is in its opinion not materially prejudicial to the interests of the Instrumentholders of the relevant Series, but such power does not extend to any such modification as is mentioned in the proviso to paragraph 2 of Schedule 3 (Provisions for Meetings of Instrumentholders). In addition, the Trustee shall be obliged to concur with the Issuer in using its reasonable endeavours to effect any Benchmark Amendments in the circumstances and as otherwise set out in Condition 3.10 without the consent or approval of the Instrumentholders, provided that the Trustee shall not be obliged so to concur if in the opinion of the Trustee doing so would impose more onerous obligations upon it or expose it to any additional duties, responsibilities or liabilities or reduce or amend the rights and/or the protective provisions afforded to it in the Conditions and/or any documents to which it is a party (including, for the avoidance of doubt, any supplemental trust deed) in any way. Any such modification, authorisation or waiver shall be binding on the relevant Instrumentholders and if the Trustee so requires, such modification shall be notified to the relevant Instrumentholders as soon as practicable. 12.2 Substitution 12.2.1 The Trustee may, without the consent of the Instrumentholders, agree to the substitution of any other company (the “Substituted Obligor”) in place of the Issuer (or of any previous substitute under this Clause 12) as the principal debtor under this Trust Deed and the relevant Instruments provided that such substitution would not, in the opinion of the Trustee, be materially prejudicial to the interests of the Instrumentholders, and further provided that: (i) a deed is executed or undertaking given by the Substituted Obligor to the Trustee, in form and manner satisfactory to the Trustee, agreeing to be bound by this Trust Deed and the relevant Instruments (with consequential amendments as the Trustee may deem appropriate) as if the Substituted Obligor had been named in this Trust Deed and the relevant Instruments and Certificates as the principal debtor in place of the Issuer; (ii) if the Substituted Obligor is subject generally to the taxing jurisdiction of a territory or any authority of or in that territory with power to tax (the “Substituted Territory”) other than the territory to the taxing jurisdiction of which (or to any such authority of or in which) the Issuer is subject generally (the “Issuer’s Territory”), the Substituted Obligor shall (unless the Trustee otherwise agrees) give to the Trustee an undertaking satisfactory to the Trustee in terms corresponding to Condition 6 with the substitution for the references in that Condition to the Issuer’s Territory of references to the Substituted Territory whereupon the Trust Deed, and the relevant Instruments and Certificates shall be read accordingly; (iii) if any two directors of the Substituted Obligor certify that it will be solvent immediately after such substitution, the Trustee need not have regard to the Substituted Obligor’s financial condition, profits or prospects or compare them with those of the Issuer;


 
A42485973 21 (iv) the Issuer and the Substituted Obligor comply with such other requirements as the Trustee may direct in the interests of the relevant Instrumentholders; and (v) the Trustee is satisfied that (i) the Substituted Obligor has obtained all necessary governmental and regulatory approvals and consents necessary for its assumption of liability as principal debtor in respect of the relevant Instruments in place of the Issuer (or a previous substitute), (ii) all necessary governmental and regulatory approvals and consents necessary for or in connection with the assumption by the Substituted Obligor of its obligations under the relevant Instruments and (iii) such approvals and consents are at the time of substitution in full force and effect. 12.2.2 Release of Substituted Issuer An agreement by the Trustee pursuant to Clause 12.2 (Substitution) shall, if so expressed, release the Issuer (or a previous substitute) from any or all of its obligations under this Trust Deed and the relevant Instruments. Notice of the substitution shall be given to the Instrumentholders within 14 days of the execution of such documents and compliance with such requirements. 12.2.3 Completion of Substitution On completion of the formalities set out in Clause 12.2 (Substitution), the Substituted Obligor shall be deemed to be named in this Trust Deed and the relevant Instruments and Certificates as the principal debtor in place of the Issuer (or of any previous substitute) and this Trust Deed and the relevant Instruments and Certificates, shall be deemed to be amended as necessary to give effect to the substitution. 13 Appointment, Retirement and Removal of the Trustee 13.1 Appointment The Issuer has the power of appointing new trustees but no one may be so appointed unless previously approved by an Extraordinary Resolution. The Trustee shall at all times be a trust corporation and such trust corporation may be the sole Trustee. Any appointment of a new Trustee shall be notified by the Issuer to its Instrumentholders in accordance with Condition 13 as soon as practicable. 13.2 Retirement and Removal Any Trustee may retire at any time on giving at least three months’ written notice to the Issuer without giving any reason or being responsible for any costs occasioned by such retirement and the Instrumentholders may by Extraordinary Resolution remove any Trustee provided that the retirement or removal of a sole trust corporation shall not be effective until a trust corporation is appointed as successor Trustee. If a sole trust corporation gives notice of retirement or an Extraordinary Resolution is passed for its removal, it shall use all reasonable endeavours to procure that another trust corporation is appointed as Trustee. 13.3 Co-Trustees The Trustee may, despite Clause 13.1 (Appointment), by written notice to (i) the Issuer, appoint anyone to act as an additional Trustee jointly with the Trustee, or (ii) the Issuer appoint anyone to act as a separate Trustee in respect of any issue or:


 
A42485973 22 13.3.1 if the Trustee considers the appointment to be in the interests of the Instrumentholders; or 13.3.2 to conform with a legal requirement, restriction or condition in a jurisdiction in which a particular act is to be performed; or 13.3.3 to obtain a judgment or to enforce a judgment or any provision of this Trust Deed in any jurisdiction. Subject to the provisions of this Trust Deed the Trustee may, in the instrument of appointment, confer on any person so appointed such functions as it thinks fit. The Trustee may by written notice to the Issuer and that person remove that person. At the Trustee’s request, the Issuer shall forthwith do all things as may be required to perfect such appointment or removal and the Issuer irrevocably appoints the Trustee as its attorney in its name and on its behalf to do so. Before appointing such person to act as separate Trustee or additional Trustee the Trustee shall (unless it is not, in the opinion of the Trustee, reasonably practicable to do so) give notice to the Issuer of its intention to make such appointment (and the reason for that) and shall give due consideration to representations made by the Issuer concerning such appointment. Where, as a result of this provision, not all the Instruments have the same Trustee, the provisions of this Trust Deed shall apply in respect of each such Trustee as if each were named as a party to this Trust Deed. 13.4 Competence of a Majority of Trustees If there are more than two Trustees the majority of them shall be competent to perform the Trustee’s functions provided the majority includes a trust corporation. 14 Instruments held in Clearing Systems 14.1 Instruments Held in Clearing Systems So long as any Instruments represented by a Global Certificate are held on behalf of a clearing system, in considering the interests of Instrumentholders, the Trustee may have regard to any information provided to it by such clearing system or its operator as to the identity (either individually or by category) of its accountholders or participants with entitlements to any such Instrument and may consider such interests on the basis that such accountholders or participants were the holder(s) of such Instrument. 14.2 Evidence of Holdings The Trustee and the Issuer may call for and, except in the case of manifest error, shall be at liberty to accept and place full reliance on as sufficient evidence thereof any certificate, letter of confirmation or other document issued on behalf of the relevant clearing system or any form of record made by the relevant clearing system or such other evidence and/or information and/or certification as it shall, in its absolute discretion, think fit to the effect that at any particular time or throughout any particular period any particular person is, was, or will be, shown in its records as the holder of a particular nominal amount of Instruments represented by a Global Certificate and if the Trustee or the Issuer does so rely, such letter of confirmation, form of record, evidence, information or certification shall be conclusive and binding on all concerned for all purposes. Any such certificate may comprise any form of statement or print out of electronic records provided by the relevant clearing system (including Euroclear's EUCLID or Clearstream, Luxembourg's Creation Online system) in


 
A42485973 23 accordance with its usual procedures and in which the holder of a particular nominal amount of Instruments is clearly identified together with the amount of such holding. Neither the Issuer nor the Trustee shall be liable to any person by reason of having accepted as valid or not having rejected any certificate or other document to such effect purporting to be issued by the relevant clearing system and subsequently found to be forged or not authentic. 15 Currency Indemnity 15.1 Currency of Account and Payment The Contractual Currency is the sole currency of account and payment for all sums payable by the Issuer under or in connection with this Trust Deed and the Instruments, including damages. 15.2 Extent of Discharge An amount received or recovered in a currency other than the Contractual Currency (whether as a result of, or of the enforcement of, a judgment or order of a court of any jurisdiction, in the insolvency, winding-up or dissolution of the Issuer), by the Trustee or any Instrumentholder in respect of any sum expressed to be due to it from the Issuer, shall only discharge the Issuer to the extent of the Contractual Currency amount which the recipient is able to purchase with the amount so received or recovered in that other currency on the date of that receipt or recovery (or, if it is not practicable to make that purchase on that date, on the first date on which it is practicable to do so). 15.3 Indemnity If that Contractual Currency amount is less than the Contractual Currency amount expressed to be due to the recipient under this Trust Deed or the Instruments, the Issuer shall indemnify the recipient against any loss sustained by it as a result. In any event, the Issuer shall indemnify the recipient against the cost of making any such purchase. 15.4 Indemnity Separate The indemnities in this Clause 15 and in Clause 7.5 (Indemnity) constitute separate and independent obligations from the other obligations in this Trust Deed, shall give rise to a separate and independent course of action, shall apply irrespective of any indulgence granted by the Trustee and/or any Instrumentholder and shall continue in full force and effect despite any judgment, order, claim or proof for a liquidated amount in respect of any sum due under this Trust Deed or the Instruments or any other judgment or order. 16 Enforcement 16.1 Trustee to enforce Only the Trustee may enforce the rights of the Instrumentholders against the Issuer, whether the same arise under the general law, this Trust Deed, the Instruments or otherwise, and no Instrumentholder shall be entitled to proceed directly against the Issuer unless the Trustee, having become bound to proceed, fails to do so within a reasonable time and such failure is continuing.


 
A42485973 24 16.2 Trustee’s Indemnity The Trustee shall not be bound to take any steps to enforce the performance of any provisions of this Trust Deed or the Instruments or to appoint an independent financial advisor pursuant to the Conditions of the Instruments unless it shall be indemnified and/or secured and/or prefunded by the relevant Instrumentholders to its satisfaction against all proceedings, claims and demands to which it may be liable and against all costs, charges, liabilities and expenses which may be incurred by it in connection with such enforcement or appointment, including the cost of its managements’ time and/or other internal resources, calculated using its normal hourly rates in force from time to time. 16.3 Legal proceedings If the Trustee (or any Instrumentholder where entitled in accordance with this Trust Deed so to do) institutes legal proceedings against the Issuer to enforce any obligations under this Trust Deed, proof in such proceedings that as regards any specified Instrument the Issuer has made default in paying any principal or interest due to the relevant Instrumentholder shall (unless the contrary be proved) be sufficient evidence that the Issuer has made the same default as regards all other Instruments which are then repayable or, as the case may be, in respect of which interest is then payable. 16.4 Powers additional to general powers The powers conferred on the Trustee by this Clause 16 shall be in addition to any powers which may from time to time be vested in the Trustee by general law or as the holder of any Instruments. 17 Communications 17.1 Method Each communication under this Trust Deed shall be made by email, fax or otherwise in writing. Each communication or document to be delivered to any party under this Trust Deed shall be sent to that party at the email address, fax number or address, and marked for the attention of the person (if any), from time to time designated by that party to each other party for the purpose of this Trust Deed. The initial telephone number, email address, fax number, address and person so designated by the parties under this Trust Deed are set out in the Procedures Memorandum. 17.2 Deemed Receipt Any communication from any party to any other under this Trust Deed shall be effective, (if by fax) when the relevant delivery receipt is received by the sender, (if in writing) when delivered and (if by electronic communication) when the relevant receipt of such communication being read is given, or where no read receipt is requested by the sender, at the time of sending, provided that no delivery failure notification is received by the sender within 24 hours of sending such communication (provided always that any email communication to the Trustee shall only be treated as having been received upon confirmation of receipt by the Trustee and an automatically generated “read” or “received” receipt shall not constitute such confirmation); provided that any email communication which is received (or deemed to take effect in accordance with the foregoing) after 5:00pm on a business day or on a non-business day in the place of receipt shall be deemed to take effect at the opening of business on the next following business day in such place. Any


 
A42485973 25 communication delivered to any party under this Trust Deed which is to be sent by fax or electronic communication will be written legal evidence. 18 Governing Law and Jurisdiction 18.1 Governing Law This Trust Deed and any non-contractual obligations arising out of or in connection with it shall be governed by, and construed in accordance with, English law. 18.2 Jurisdiction The courts of England are to have exclusive jurisdiction to settle any disputes that may arise out of or in connection with this Trust Deed or the Instruments and accordingly any legal action or proceedings arising out of or in connection with this Trust Deed or the Instruments (“Proceedings”) may be brought in such courts. The Issuer irrevocably submits to the jurisdiction of such courts and waives any objection to Proceedings in such courts on the ground of venue or on the ground that the Proceedings have been brought in an inconvenient forum. This Clause is for the benefit of each of the Trustee and the relevant Instrumentholders and shall not limit the right of any of them to take Proceedings in any other court of competent jurisdiction nor shall the taking of Proceedings in any one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction (whether concurrently or not). 18.3 Service of Process The Issuer irrevocably appoints National Grid plc of 1-3 Strand, London WC2N 5EH to receive, for it and on its behalf, service of process in any Proceedings in England. Such service shall be deemed completed on delivery to such process agent (whether or not it is forwarded to and received by the Issuer). If for any reason such process agent ceases to be able to act as such or no longer has an address in England the Issuer irrevocably agrees to appoint a substitute process agent acceptable to the Trustee and shall immediately notify the Trustee of such appointment. Nothing shall affect the right to serve process in any other manner permitted by law.


 
A42485973 26 Schedule 1 Part A Form of Global Certificates Form of Global Certificate (Euroclear, Clearstream, Luxembourg and other Clearing Systems (other than CDS)) ISIN: Common Code: [BY ITS ACQUISITION HEREOF, THE HOLDER HEREOF REPRESENTS THAT IT IS NOT A U.S. PERSON, AS DEFINED IN THE U.S. SECURITIES ACT OF 1933 (THE “SECURITIES ACT”), NOR IS IT PURCHASING FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON, AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT.]* NATIONAL GRID NORTH AMERICA INC. (incorporated in the State of Delaware, United States of America) EURO MEDIUM TERM NOTE PROGRAMME Series No. [•] Tranche No. [•] [TEMPORARY / PERMANENT] GLOBAL CERTIFICATE Global Certificate No. [●] This Global Certificate is issued in respect of the Instruments (the “Instruments”) of the Tranche and Series specified in Part A of the Schedule hereto of National Grid North America Inc. (the “Issuer”). This Global Certificate certifies that the person whose name is entered in the Register (the “Registered Holder”) is registered as the holder of an issue of Instruments of the nominal amount, specified currency and specified denomination set out in Part A of the Schedule hereto. Interpretation and Definitions References in this Global Certificate to the “Conditions” are to the Terms and Conditions applicable to the Instruments (which are in the form set out in Schedule 2 (Terms and Conditions of the Instruments) to the amended and restated trust deed (as amended or supplemented as at the Issue Date, the “Trust Deed”) dated 22 October 2020 between the Issuer and The Law Debenture Trust Corporation p.l.c. as trustee, as such form is supplemented and/or modified and/or superseded by the provisions of this Global Certificate (including the supplemental definitions and any modifications or additions set out the Schedule hereto), which in the event of any conflict shall prevail). Other capitalised terms used in this Global Certificate shall have the meanings given to them in the Conditions or the Trust Deed. Promise to Pay The Issuer, for value received, promises to pay to the holder of the Instruments represented by this Global Certificate (subject to surrender of this Global Certificate if no further payment falls to be made in respect of such Instruments) on the Maturity Date (or on such earlier date as the amount payable upon redemption under the Conditions may become repayable in accordance with the * To be included on the face of the Temporary Global Certificate and may be removed no earlier than 40 days after the issue date upon certification of non-U.S. beneficial ownership.


 
A42485973 27 Conditions) the amount payable upon redemption under the Conditions in respect of the Instruments represented by this Global Certificate and (unless the Instruments represented by this Certificate do not bear interest) to pay interest in respect of such Instruments from the Interest Commencement Date in arrear at the rates, on the dates for payment, and in accordance with the methods of calculation provided for in the Conditions, save that the calculation is made in respect of the total aggregate amount of the Instruments represented by this Global Certificate, together with such other sums and additional amounts (if any) as may be payable under the Conditions, in accordance with the Conditions. Each payment will be made to, or to the order of, the person whose name is entered on the Register at the close of business on the record date which shall be on the Clearing System Business Day immediately prior to the date for payment, where “Clearing System Business Day” means Monday to Friday inclusive except 25 December and 1 January. For the purposes of this Global Certificate, (a) the holder of the Instruments represented by this Global Certificate is bound by the provisions of the Agency Agreement, (b) the Issuer certifies that the Registered Holder is, at the date hereof, entered in the Register as the holder of the Instruments represented by this Global Certificate, (c) this Global Certificate is evidence of entitlement only, (d) title to the Instruments represented by this Global Certificate passes only on due registration on the Register, and (e) only the holder of the Instruments represented by this Global Certificate is entitled to payments in respect of the Instruments represented by this Global Certificate. Transfer of Instruments represented by Global Certificates If the Schedule hereto states that the Instruments are to be represented by a Global Certificate on issue, transfers of the holding of Instruments represented by this Global Certificate pursuant to Condition 17(a) may only be made in part: (i) if the Instruments represented by this Global Certificate are held on behalf of Euroclear or Clearstream, Luxembourg or any other clearing system (an “Alternative Clearing System”) other than CDS and any such clearing system is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so; or (ii) with the consent of the Issuer, provided that, in the case of the first transfer of part of a holding pursuant to (i) above, the holder of the Instruments represented by this Global Certificate has given the Registrar not less than 30 days’ notice at its specified office of such holder’s intention to effect such transfer. Where the holding of Instruments represented by this Global Certificate is only transferable in its entirety, the Certificate issued to the transferee upon transfer of such holding shall be a Global Certificate. Where transfers are permitted in part, Certificates issued to transferees shall not be Global Certificates unless the transferee so requests and certifies to the Registrar that it is, or is acting as a nominee for, Clearstream, Luxembourg, Euroclear and/or an Alternative Clearing System. Meetings For the purposes of any meeting of Instrumentholders, the holder of the Instruments represented by this Global Certificate shall (unless this Global Certificate represents only one Instrument) be treated as two persons for the purposes of any quorum requirements of a meeting of Instrumentholders and as being entitled to one vote in respect of each integral currency unit of the Specified Currency of the Instruments. This Global Certificate shall not become valid for any purpose until authenticated by or on behalf of the Registrar and in the case of instruments held under the NSS only, effectuated by the entity appointed as Common Safekeeper by the relevant Clearing Systems.


 
A42485973 28 This Global Certificate and any non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with English law.


 
A42485973 29 In witness whereof the Issuer has caused this Global Certificate to be signed on its behalf. Dated as of the Issue Date. NATIONAL GRID NORTH AMERICA INC. By: CERTIFICATE OF AUTHENTICATION This Global Certificate is authenticated by or on behalf of the Registrar. THE BANK OF NEW YORK MELLON (LUXEMBOURG) S.A. as Registrar By: Authorised Signatory For the purposes of authentication only. [Effectuation This Global Certificate is effectuated by or on behalf of the Common Safekeeper CLEARSTREAM BANKING S.A. as Common Safekeeper By: Authorised Signatory For the purposes of effectuation of Instruments held through the NSS only.]


 
A42485973 30 Form of Transfer For value received the undersigned transfers to .................................................................... .................................................................... (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF TRANSFEREE) [●] nominal amount of the Instruments represented by this Global Certificate, and all rights under them. Dated ........................................................ Signed ............................................. Certifying Signature Notes: (i) The signature of the person effecting a transfer shall conform to a list of duly authorised specimen signatures supplied by the holder of the Instruments represented by this Global Certificate or (if such signature corresponds with the name as it appears on the face of this Global Certificate) be certified by a notary public or a recognised bank or be supported by such other evidence as a Transfer Agent or the Registrar may reasonably require. (ii) A representative of the Instrumentholder should state the capacity in which he signs e.g. executor.


 
A42485973 31 Schedule [Insert the provisions of the relevant Final Terms that relate to the Conditions or the Global Certificate as the Schedule.]


 
A42485973 32 Form of Global Certificate (CDS) Unless this certificate is presented by an authorised representative of CDS Clearing and Depository Services Inc. (“CDS”) to National Grid North America Inc. or its agent for registration of transfer, exchange or payment, and any certificate issued in respect thereof is registered in the name of CDS & CO., or in such other name as is requested by an authorised representative of CDS (and any payment is made to CDS & CO. or to such other entity as is requested by an authorised representative of CDS), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered holder hereof, CDS & CO., has a property interest in the securities represented by this certificate herein and it is a violation of its rights for another person to hold, transfer or deal with this certificate. ISIN: [CUSIP:]* [BY ITS ACQUISITION HEREOF, THE HOLDER HEREOF REPRESENTS THAT IT IS NOT A U.S. PERSON, AS DEFINED IN THE U.S. SECURITIES ACT OF 1933 (THE “SECURITIES ACT”), NOR IS IT PURCHASING FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON, AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT.]* NATIONAL GRID NORTH AMERICA INC. (incorporated in the State of Delaware, United States of America) EURO MEDIUM TERM NOTE PROGRAMME Series No. [•] Tranche No. [•] [TEMPORARY / PERMANENT] GLOBAL CERTIFICATE Global Certificate No. [●] This Global Certificate is issued in respect of the Instruments (the “Instruments”) of the Tranche and Series specified in Part A of the Schedule hereto of National Grid North America Inc. (the “Issuer”). This Global Certificate certifies that the person whose name is entered in the Register being CDS & CO. of 100 Adelaide Street West, Toronto, Ontario, Canada M5H 1S3 (the “Registered Holder”) is registered as the holder of an issue of Instruments of the nominal amount, specified currency and specified denomination set out in Part A of the Schedule hereto. Interpretation and Definitions References in this Global Certificate to the “Conditions” are to the Terms and Conditions applicable to the Instruments (which are in the form set out in Schedule 2 (Terms and Conditions of the Instruments) to the amended and restated trust deed (as amended or supplemented as at the Issue Date, the “Trust Deed”) dated 22 October 2020 between the Issuer and The Law Debenture Trust Corporation p.l.c. as trustee, as such form is supplemented and/or modified and/or superseded by the provisions of this Global Certificate (including the supplemental definitions and any modifications or additions set out the Schedule hereto), which in the event of any conflict shall prevail). Other capitalised terms used in this Global Certificate shall have the meanings given to them in the Conditions or the Trust Deed. * To be included on the face of the Temporary Global Certificate and may be removed no earlier than 40 days after the issue date upon certification of non-U.S. beneficial ownership.


 
A42485973 33 Promise to Pay The Issuer, for value received, promises to pay to the holder of the Instruments represented by this Global Certificate (subject to surrender of this Global Certificate if no further payment falls to be made in respect of such Instruments) on the Maturity Date (or on such earlier date as the amount payable upon redemption under the Conditions may become repayable in accordance with the Conditions) the amount payable upon redemption under the Conditions in respect of the Instruments represented by this Global Certificate and (unless the Instruments represented by this Certificate do not bear interest) to pay interest in respect of such Instruments from the Interest Commencement Date in arrear at the rates, on the dates for payment, and in accordance with the methods of calculation provided for in the Conditions, save that the calculation is made in respect of the total aggregate amount of the Instruments represented by this Global Certificate, together with such other sums and additional amounts (if any) as may be payable under the Conditions, in accordance with the Conditions. Each payment will be made to, or to the order of, the person whose name is entered on the Register at the close of business on the record date which shall be on the Clearing System Business Day immediately prior to the date for payment, where “Clearing System Business Day” means a day on which CDS is open for business. For the purposes of this Global Certificate, (a) the holder of the Instruments represented by this Global Certificate is bound by the provisions of the Agency Agreement, (b) the Issuer certifies that the Registered Holder is, at the date hereof, entered in the Register as the holder of the Instruments represented by this Global Certificate, (c) this Global Certificate is evidence of entitlement only, (d) title to the Instruments represented by this Global Certificate passes only on due registration on the Register, (e) only the holder of the Instruments represented by this Global Certificate is entitled to payments in respect of the Instruments represented by this Global Certificate, and (f) the rights of a person holding an interest in any Instruments held in or through CDS are subject to the rules and procedures of CDS (as amended or replaced from time to time), established by CDS, together with any procedures (as amended or replaced from time to time), established by CDS in respect of the CDSX system. Transfer of Instruments represented by Global Certificates If the Schedule hereto states that the Instruments are to be represented by a Global Certificate on issue, transfers of the holding of Instruments represented by this Global Certificate pursuant to Condition 17(a) may only be made in part: (i) if the Global Certificate is held by or on behalf of CDS and (A) CDS has notified the Issuer that it is unwilling or unable to continue to act as a depositary for the Instruments and a successor depositary is not appointed by the Issuer within 90 working days after receiving such notice; or (B) CDS ceases to be a recognised clearing agency under applicable Canadian or provincial securities legislation and no successor clearing system satisfactory to the Trustee is available within 90 working days after the Issuer becomes aware that CDS is no longer so recognised; or (ii) if the Instruments represented by this Global Certificate are held by or on behalf of any other clearing system (an “Alternative Clearing System”) other than CDS and any such clearing system is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so; or (iii) with the consent of the Issuer,


 
A42485973 34 provided that, in the case of the first transfer of part of a holding pursuant to (ii) above, the holder of the Instruments represented by this Global Certificate has given the Registrar not less than 30 days’ notice at its specified office of such holder’s intention to effect such transfer. Where the holding of Instruments represented by this Global Certificate is only transferable in its entirety, the Certificate issued to the transferee upon transfer of such holding shall be a Global Certificate. Where transfers are permitted in part, Certificates issued to transferees shall not be Global Certificates unless the transferee so requests and certifies to the Registrar that it is, or is acting as a nominee for, CDS and/or an Alternative Clearing System. Meetings For the purposes of any meeting of Instrumentholders, the holder of the Instruments represented by this Global Certificate shall (unless this Global Certificate represents only one Instrument) be treated as two persons for the purposes of any quorum requirements of a meeting of Instrumentholders and as being entitled to one vote in respect of each integral currency unit of the Specified Currency of the Instruments. This Global Certificate shall not become valid for any purpose until authenticated by or on behalf of the Canadian Paying Agent and in the case of instruments held under the NSS only, effectuated by the entity appointed as Common Safekeeper by the relevant Clearing Systems. This Global Certificate and any non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with English law.


 
A42485973 35 In witness whereof the Issuer has caused this Global Certificate to be signed on its behalf. Dated [include actual issue date for Instruments settling in CDS]. NATIONAL GRID NORTH AMERICA INC. By: CERTIFICATE OF AUTHENTICATION This Global Certificate is authenticated by or on behalf of the Canadian Paying Agent. BNY TRUST COMPANY OF CANADA as Canadian Paying Agent By: Authorised Signatory For the purposes of authentication only. [Effectuation This Global Certificate is effectuated by or on behalf of the Common Safekeeper CLEARSTREAM BANKING S.A. as Common Safekeeper By: Authorised Signatory For the purposes of effectuation of Instruments held through the NSS only.]


 
A42485973 36 Form of Transfer For value received the undersigned transfers to .................................................................... .................................................................... (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF TRANSFEREE) [●] nominal amount of the Instruments represented by this Global Certificate, and all rights under them. Dated ........................................................ Signed ............................................. Certifying Signature Notes: (i) The signature of the person effecting a transfer shall conform to a list of duly authorised specimen signatures supplied by the holder of the Instruments represented by this Global Certificate or (if such signature corresponds with the name as it appears on the face of this Global Certificate) be certified by a notary public or a recognised bank or be supported by such other evidence as a Transfer Agent or the Registrar may reasonably require. (ii) A representative of the Instrumentholder should state the capacity in which he signs e.g. executor.


 
A42485973 37 Schedule [Insert the provisions of the relevant Final Terms that relate to the Conditions or the Global Certificate as the Schedule.]


 
A42485973 38 Schedule 1 Part B Form of Certificate NATIONAL GRID NORTH AMERICA INC. (incorporated in the State of Delaware, United States of America) EURO MEDIUM TERM NOTE PROGRAMME Series No. [●] Tranche No. [●] [Title of issue] This Certificate certifies that [●] of [●] (the “Registered Holder”) is, as at the date hereof, registered as the holder of [nominal amount] of Instruments of the Series of Instruments referred to above (the “Instruments”) of National Grid North America Inc. (the “Issuer”), designated as specified in the title hereof. The Instruments are subject to the Terms and Conditions (the “Conditions”) endorsed hereon and are issued subject to, and with the benefit of, the Trust Deed referred to in the Conditions. Expressions defined in the Conditions have the same meanings in this Certificate. The Issuer, for value received, promises to pay to the holder of the Instrument(s) represented by this Certificate (subject to surrender of this Certificate if no further payment falls to be made in respect of such Instruments) on the Maturity Date (or on such earlier date as the amount payable upon redemption under the Conditions may become repayable in accordance with the Conditions) the amount payable upon redemption under the Conditions in respect of the Instruments represented by this Certificate and (unless the Instrument(s) represented by this Certificate do not bear interest) to pay interest in respect of such Instruments from the Interest Commencement Date in arrear at the rates, in the amounts and on the dates for payment provided for in the Conditions together with such other sums and additional amounts (if any) as may be payable under the Conditions, in accordance with the Conditions. For the purposes of this Certificate, (a) the holder of the Instrument(s) represented by this Certificate is bound by the provisions of the Agency Agreement, (b) the Issuer certifies that the Registered Holder is, at the date hereof, entered in the Register as the holder of the Instrument(s) represented by this Certificate, (c) this Certificate is evidence of entitlement only, (d) title to the Instrument(s) represented by this Certificate passes only on due registration on the Register, and (e) only the holder of the Instrument(s) represented by this Certificate is entitled to payments in respect of the Instrument(s) represented by this Certificate. This Certificate shall not become valid for any purpose until authenticated by or on behalf of the Registrar or the Canadian Paying Agent, as the case may be.


 
A42485973 39 In witness whereof the Issuer has caused this Certificate to be signed on its behalf. Dated as of the Issue Date [to include actual issue date for Instruments settling in CDS]. NATIONAL GRID NORTH AMERICA INC. By: CERTIFICATE OF AUTHENTICATION This Certificate is authenticated by or on behalf of the [Registrar][Canadian Paying Agent]. [THE BANK OF NEW YORK MELLON (LUXEMBOURG) S.A. as Registrar] [BNY TRUST COMPANY OF CANADA as Canadian Paying Agent] By: Authorised Signatory For the purposes of authentication only.


 
A42485973 40 On the back: Terms and Conditions of the Instruments [The Terms and Conditions that are set out in Schedule 2 to the Trust Deed as amended by and incorporating any additional provisions forming part of such Terms and Conditions and set out in Part A of the relevant Final Terms shall be set out here.]


 
A42485973 41 Form of Transfer For value received the undersigned transfers to .................................................................... .................................................................... (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF TRANSFEREE) [●] nominal amount of the Instruments represented by this Certificate, and all rights under them. Dated ........................................................ Signed ............................................. Certifying Signature Notes: (i) The signature of the person effecting a transfer shall conform to a list of duly authorised specimen signatures supplied by the holder of the Instruments represented by this Certificate or (if such signature corresponds with the name as it appears on the face of this Certificate) be certified by a notary public or a recognised bank or be supported by such other evidence as a Transfer Agent or the Registrar may reasonably require. (i) A representative of the Instrumentholder should state the capacity in which he signs. Unless the context otherwise requires capitalised terms used in this Form of Transfer have the same meaning as in the amended and restated Trust Deed dated 22 October 2020 between the Issuer and the Trustee, [OTHER]. [TO BE COMPLETED BY TRANSFEREE: [INSERT ANY REQUIRED TRANSFEREE REPRESENTATIONS, CERTIFICATIONS, ETC.]] ISSUING AND PAYING AGENT, TRANSFER AGENT AND REGISTRAR ISSUING AND PAYING AGENT The Bank of New York Mellon, London Branch One Canada Square London E14 5AL CANADIAN PAYING AGENT BNY Trust Company of Canada 320 Bay Street, 11th Floor Toronto, ON Canada M5H 4A6 REGISTRAR The Bank of New York Mellon (Luxembourg) S.A. Vertigo Building - Polaris 2-4 rue Eugène Ruppert L-2453 Luxembourg


 
A42485973 42 PAYING AGENT AND TRANSFER AGENT Quintet Private Bank (Europe) S.A. 43 Boulevard Royal L-2955 Luxembourg


 
A42485973 43 Schedule 2 Terms and Conditions of the Instruments The full text of these terms and conditions together with the relevant provisions of Part A of the Final Terms shall be endorsed on the Certificates relating to the Instruments. All capitalised terms which are not defined in these terms and conditions will have the meanings given to them in the Trust Deed or Part A of the relevant Final Terms. Those definitions will be endorsed on the Certificates. References in these terms and conditions to “Instruments” (as defined below) are to the Instruments of one Series only of the Issuer, not to all Instruments that may be issued under the Programme. In the case of PSM Instruments issued under the Programme, references to the Final Terms in these Conditions shall be construed as references to the Pricing Supplement. National Grid North America Inc. (“NGNA” and, the “Issuer”) has established a Euro Medium Term Note Programme (the “Programme”) for the issuance of up to Euro 8,000,000,000 in aggregate principal amount of debt instruments (the “Instruments”). The Instruments are constituted by an amended and restated Trust Deed (as amended or supplemented from time to time, the “Trust Deed”) dated 22 October 2020 between the Issuer and The Law Debenture Trust Corporation p.l.c. (the “Trustee”, which expression shall include all persons for the time being the trustee or trustees under the Trust Deed) as trustee for the Instrumentholders (as defined below). These terms and conditions (the “Conditions”) include summaries of, and are subject to, the detailed provisions of the Trust Deed which includes the form of the Certificates. An amended and restated Agency Agreement (as amended or supplemented from time to time, the “Agency Agreement”) dated 9 December 2015 has been entered into in relation to the Instruments between the Issuer, the Trustee, The Bank of New York Mellon, London Branch as initial issuing and paying agent, The Bank of New York Mellon (Luxembourg) S.A. as the registrar and the other agent(s) named in it. The issuing and paying agent, the paying agent(s), the registrar, the transfer agents and the calculation agent(s) for the time being (if any) are referred to below respectively as the “Issuing and Paying Agent”, the “Paying Agents” (which expression shall include the Issuing and Paying Agent), the “Registrar”, the “Transfer Agents” (which expression shall include the Registrar) and the “Calculation Agent(s)”. Copies of the Trust Deed and the Agency Agreement are available for inspection by prior appointment during usual business hours at the registered office of the Trustee (as at 22 October 2020 at Fifth Floor, 100 Wood Street, London EC2V 7EX) and at the specified offices of the Paying Agents. 1 Form, Denomination and Title The Instruments are issued in registered form in the Specified Denomination(s) specified in the relevant Final Terms and are serially numbered. Instruments of one Specified Denomination are not exchangeable for Instruments of another Specified Denomination. This Instrument is a Fixed Rate Instrument, a Floating Rate Instrument, a Zero Coupon Instrument, or a combination of any of the preceding kinds of Instruments, depending upon the Interest and Redemption Basis specified in the relevant Final Terms. Instruments are represented by registered certificates (“Certificates”) and, save as provided in Condition 17(a), each Certificate shall represent the entire holding of Instruments by the same holder. Certificates will initially be represented by a Temporary Global Certificate. Beneficial interests in a Temporary Global Certificate will be exchangeable for a Permanent Global Certificate not earlier than 40 days after the issue date upon certification of non-U.S. beneficial ownership. Title to the Instruments shall pass by registration in the register (the “Register”) that the Issuer shall procure to be kept by the Registrar in accordance with the provisions of the Agency Agreement. Except as ordered by a court of competent jurisdiction or as required by law, the Issuer and the Paying Agents shall be entitled to treat the holder (as defined below) of any Instrument as the absolute owner of that


 
A42485973 44 Instrument, whether or not it is overdue and regardless of any notice of ownership, trust or an interest in it, any writing on it (or on the Certificate representing it) or its theft or loss (or that of the related Certificate) and shall not be required to obtain any proof of ownership as to the identity of the holder. In these Conditions, “Instrumentholder” and “holder” means the person in whose name an Instrument is registered and capitalised terms have the meanings given to them herein, the absence of any such meaning indicating that such term is not applicable to the Instruments. 2 Status and Negative Pledge 2.1 Status The Instruments constitute direct, unconditional and unsecured obligations of the Issuer and rank pari passu without any preference or priority among themselves. The payment obligations of the Issuer under the Instruments shall, subject to such exceptions as are from time to time applicable under the laws of England, rank equally with all other present and future unsecured obligations (other than subordinated obligations, if any) of the Issuer. 2.2 Negative Pledge So long as any Instrument remains outstanding (as defined in the Trust Deed) the Issuer will not create or permit to subsist any mortgage, charge, pledge, lien or other form of encumbrance or security interest (“Security”) upon the whole or any part of its undertaking, assets or revenues present or future to secure any Relevant Indebtedness, or any guarantee of or indemnity in respect of any Relevant Indebtedness unless, at the same time or prior thereto, the Issuer’s obligations under the Instruments and the Trust Deed (a) are secured equally and rateably therewith or benefit from a guarantee or indemnity in substantially identical terms thereto, as the case may be, in each case to the satisfaction of the Trustee, or (b) have the benefit of such other security, guarantee, indemnity or other arrangement as the Trustee in its absolute discretion shall deem to be not materially less beneficial to the Instrumentholders or as shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Instrumentholders. For the purposes of these Conditions, “Relevant Indebtedness” means any present or future indebtedness in the form of, or represented by, bonds, notes, debentures, loan stock or other securities which (in each case, with the agreement of the Issuer) is quoted, listed or ordinarily dealt in on any stock exchange. 3 Interest 3.1 Interest on Fixed Rate Instruments Each Fixed Rate Instrument bears interest on its outstanding nominal amount from the Interest Commencement Date at the rate per annum (expressed as a percentage) equal to the Rate of Interest, payable in arrear on each Interest Payment Date. The amount of Interest payable shall be determined in accordance with Condition 3.6. If a Fixed Coupon Amount or a Broken Amount is specified in the relevant Final Terms, the amount of interest payable on each Interest Payment Date will amount to the Fixed Coupon Amount, or, if applicable, the Broken Amount so specified and in the case of a Broken Amount will be payable on the particular Interest Payment Date(s) specified in the relevant Final Terms. 3.2 Interest on Floating Rate Instruments 3.2.1 Interest Payment Dates Each Floating Rate Instrument bears interest on its outstanding nominal amount from the Interest Commencement Date at the rate per annum (expressed as a percentage) equal to the Rate of Interest, such interest being payable in arrear on each Interest Payment


 
A42485973 45 Date. The amount of Interest payable shall be determined in accordance with Condition 3.6. Such Interest Payment Date(s) is/are either specified in the relevant Final Terms as Specified Interest Payment Dates or, if no Specified Interest Payment Date(s) is/are specified in the relevant Final Terms, Interest Payment Date shall mean each date which falls the number of months or other period shown on this Instrument as the Interest Period after the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the Interest Commencement Date. 3.2.2 Business Day Convention If any date which is specified to be subject to adjustment in accordance with a Business Day Convention would otherwise fall on a day which is not a Business Day, then, if the Business Day Convention specified is (a) the Floating Rate Convention, such date shall be postponed to the next day which is a Business Day unless it would then fall into the next calendar month, in which event (x) such date shall be brought forward to the immediately preceding Business Day and (y) each subsequent such date shall be the last Business Day of the month in which such date would have fallen had it not been subject to adjustment, (b) the Following Business Day Convention, such date shall be postponed to the next day which is a Business Day, (c) the Modified Following Business Day Convention, such date shall be postponed to the next day which is a Business Day unless it would then fall into the next calendar month, in that event such date shall be brought forward to the immediately preceding Business Day or (d) the Preceding Business Day Convention, such date shall be brought forward to the immediately preceding Business Day. 3.2.3 Rate of Interest for Floating Rate Instruments The Rate of Interest in respect of Floating Rate Instruments for each Interest Accrual Period shall be determined in the manner specified in the relevant Final Terms and the provisions below relating to either ISDA Determination or Screen Rate Determination shall apply, depending upon which is specified on this Instrument. (a) ISDA Determination for Floating Rate Instruments: Where ISDA Determination is specified in the relevant Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Accrual Period shall be determined by the Calculation Agent as a rate equal to the relevant ISDA Rate. For the purposes of this sub-paragraph (a), “ISDA Rate” for an Interest Accrual Period means a rate equal to the Floating Rate which would be determined by the Calculation Agent under a Swap Transaction under the terms of an agreement incorporating the ISDA Definitions and under which: (i) the Floating Rate Option is as specified in the relevant Final Terms; (ii) the Designated Maturity is a period specified in the relevant Final Terms; and (iii) the relevant Reset Date is the first day of that Interest Accrual Period unless otherwise specified in the relevant Final Terms. For the purposes of this sub-paragraph (a), “Floating Rate”, “Calculation Agent”, “Floating Rate Option”, “Designated Maturity”, “Reset Date” and “Swap Transaction” have the meanings given to those terms in the ISDA Definitions. (b) Screen Rate Determination for Floating Rate Instruments: (i) Where Screen Rate Determination is specified in the relevant Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Accrual Period will, subject as provided below, be either:


 
A42485973 46 (x) the offered quotation; or (y) the arithmetic mean of the offered quotations, (expressed as a percentage rate per annum) for the Reference Rate (being either LIBOR, EURIBOR or CDOR, as specified in the applicable Final Terms) which appears or appear, as the case may be, on the Relevant Screen Page (or such replacement page on that service which displays the information) as at either 11.00 a.m. (London time in the case of LIBOR or Brussels time in the case of EURIBOR) or 10:00 a.m. Toronto time, in the case of CDOR, on the Interest Determination Date in question as determined by the Calculation Agent. If five or more of such offered quotations are available on the Relevant Screen Page, the highest (or, if there is more than one such highest quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest quotation, one only of such quotations) shall be disregarded by the Calculation Agent for the purpose of determining the arithmetic mean of such offered quotations. (ii) if the Relevant Screen Page is not available or if, sub-paragraph (i)(x) applies and no such offered quotation appears on the Relevant Screen Page or if sub-paragraph (i)(y) above applies and fewer than three such offered quotations appear on the Relevant Screen Page in each case as at the time specified above, subject as provided below, the Calculation Agent shall request, if the Reference Rate is LIBOR, the principal London office of each of the Reference Banks or, if the Reference Rate is EURIBOR, the principal Euro-zone office of each of the Reference Banks or, if the Reference Rate is CDOR, the principal Toronto office of each of the Reference Banks, to provide the Calculation Agent with its offered quotation (expressed as a percentage rate per annum) for the Reference Rate if the Reference Rate is LIBOR, at approximately 11.00 a.m. (London time), or if the Reference Rate is EURIBOR, at approximately 11.00 a.m. (Brussels time) or, if the Reference Rate is CDOR, at approximately 10:00 a.m. (Toronto time) on the Interest Determination Date in question. If two or more of the Reference Banks provide the Calculation Agent with such offered quotations, the Rate of Interest for such Interest Period shall be the arithmetic mean of such offered quotations as determined by the Calculation Agent; and (iii) if paragraph (ii) above applies and the Calculation Agent determines that fewer than two Reference Banks are providing offered quotations, subject as provided below, the Rate of Interest shall be the arithmetic mean of the rates per annum (expressed as a percentage) as communicated to (and at the request of) the Calculation Agent by the Reference Banks or any two or more of them, at which such banks were offered, (A) if the Reference Rate is LIBOR, at approximately 11.00 a.m. (London time) or, if the Reference Rate is EURIBOR, at approximately 11.00 a.m. (Brussels time) on the relevant Interest Determination Date, deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate by leading banks in, if the Reference Rate is LIBOR, the London inter-bank market or, if the Reference Rate is EURIBOR, the Euro-zone inter-bank market, as the case may be, or, if fewer than two of the Reference Banks provide the Calculation Agent with such offered rates, the offered rate for deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate, or the arithmetic mean of the offered rates for deposits in the Specified Currency for a period equal to that which


 
A42485973 47 would have been used for the Reference Rate, at which, if the Reference Rate is LIBOR, at approximately 11.00 a.m. (London time) or, if the Reference Rate is EURIBOR, at approximately 11.00 a.m. (Brussels time), on the relevant Interest Determination Date, any one or more banks (which bank or banks is or are in the opinion of the Trustee and the Issuer suitable for such purpose) informs the Calculation Agent it is quoting to leading banks in, if the Reference Rate is LIBOR, the London inter-bank market or, if the Reference Rate is EURIBOR, the Euro-zone inter-bank market, as the case may be, or (B) if the Reference Rate is CDOR, the arithmetic mean of the bid rates as communicated to (and at the request of) the Calculation Agent by Schedule I chartered banks in Toronto, for Canadian Dollar bankers acceptances for a period of the applicable Interest Period in an amount representative for a single transaction in the relevant market at the relevant time accepted by those banks as of 10:00 a.m. (Toronto time), provided that, if the Rate of Interest cannot be determined in accordance with the foregoing provisions of this paragraph, the Rate of Interest shall be determined as at the last preceding Interest Determination Date (though substituting, where a different Margin or Maximum or Minimum Rate of Interest is to be applied to the relevant Interest Accrual Period from that which applied to the last preceding Interest Accrual Period, the Margin or Maximum or Minimum Rate of Interest relating to the relevant Interest Accrual Period, in place of the Margin or Maximum or Minimum Rate of Interest relating to that last preceding Interest Accrual Period). (c) Linear Interpolation: Where Linear Interpolation is specified hereon as applicable in respect of an Interest Accrual Period, the Rate of Interest for such Interest Accrual Period shall be calculated by the Calculation Agent by straight line linear interpolation by reference to two rates based on the relevant Reference Rate (where Screen Rate Determination is specified hereon as applicable) or the relevant Floating Rate Option (where ISDA Determination is specified hereon as applicable), one of which shall be determined as if the Applicable Maturity were the period of time for which rates are available next shorter than the length of the relevant Interest Accrual Period and the other of which shall be determined as if the Applicable Maturity were the period of time for which rates are available next longer than the length of the relevant Interest Accrual Period provided however that if there is no rate available for the period of time next shorter or, as the case may be, next longer, then the Issuer shall determine, or shall appoint an agent to determine, such rate at such time and by reference to such sources as it determines appropriate, acting in good faith and in a commercially reasonable manner. “Applicable Maturity” means: (a) in relation to Screen Rate Determination, the period of time designated in the Reference Rate and (b) in relation to ISDA Determination, the Designated Maturity. 3.3 Zero Coupon Instruments Where an Instrument, the Interest Basis of which is specified to be Zero Coupon, is repayable prior to the Maturity Date and is not paid when due, the amount due and payable prior to the Maturity Date shall be the Early Redemption Amount of such Instrument. As from the Maturity Date, the Rate of Interest for any overdue principal of such an Instrument shall be a rate per annum (expressed as a percentage) equal to the Amortisation Yield (as defined in Condition 4.4.1(b)).


 
A42485973 48 3.4 Accrual of Interest Interest shall cease to accrue on each Instrument on the due date for redemption unless, upon due presentation, payment is improperly withheld or refused, in which event interest shall continue to accrue (as well after as before judgment) at the Rate of Interest in the manner provided in this Condition 3 to the Relevant Date (as defined in Condition 6). 3.5 Margin, Maximum/Minimum Rates of Interest, Redemption Amounts and Rounding (i) If any Margin is specified in the relevant Final Terms (either (x) generally, or (y) in relation to one or more Interest Accrual Periods), an adjustment shall be made to all Rates of Interest, in the case of (x), or the Rates of Interest for the specified Interest Accrual Periods, in the case of (y), calculated in accordance with Condition 3.2.3 above, by adding (if a positive number) or subtracting (if a negative number) the absolute value of such Margin, subject always to the next paragraph. (ii) If any Maximum or Minimum Rate of Interest, or Redemption Amount is specified in the relevant Final Terms, then any Rate of Interest, or Redemption Amount shall be subject to such maximum or minimum, as the case may be. (iii) For the purposes of any calculations required pursuant to these Conditions (unless otherwise specified), (x) all percentages resulting from such calculations shall be rounded, if necessary, to the nearest one hundred thousandth of a percentage point (with halves being rounded up), (y) all figures shall be rounded to seven significant figures (with halves being rounded up) and (z) all currency amounts that fall due and payable shall be rounded to the nearest unit of such currency (with halves being rounded up), save in the case of yen, which shall be rounded down to the nearest yen. For these purposes “unit” means the lowest amount of such currency which is available as legal tender in the country of such currency. 3.6 Calculations The amount of interest payable per Calculation Amount in respect of any Instrument for any Interest Accrual Period shall be equal to the product of the Rate of Interest, the Calculation Amount as specified in the relevant Final Terms, and the Day Count Fraction for such Interest Accrual Period, unless an Interest Amount (or a formula for its calculation) is applicable to such Interest Accrual Period, in which case the amount of interest payable per Calculation Amount in respect of such Instrument for such Interest Accrual Period shall equal such Interest Amount (or be calculated in accordance with such formula). Where any Interest Period comprises two or more Interest Accrual Periods, the amount of interest payable per Calculation Amount in respect of such Interest Period shall be the sum of the Interest Amounts payable in respect of each of those Interest Accrual Periods. In respect of any other period for which interest is required to be calculated, the provisions above shall apply save that the Day Count Fraction shall be for the period for which interest is required to be calculated. 3.7 Determination and Publication of Rates of Interest, Interest Amounts, Final Redemption Amounts, Early Redemption Amounts and Optional Redemption Amounts The Calculation Agent shall as soon as practicable on each Interest Determination Date or such other time on such date as the Calculation Agent may be required to calculate any rate or amount, obtain any quotation or make any determination or calculation, determine such rate and calculate the Interest Amounts for the relevant Interest Accrual Period, calculate the Redemption Amount, obtain such quote or make such determination or calculation, as the case may be, and cause the Rate of Interest and the Interest Amounts for each Interest Accrual Period and the relevant Interest Payment Date and, if required to be calculated, the Final Redemption Amount, Early


 
A42485973 49 Redemption Amount, or any Optional Redemption Amount to be notified to the Trustee, the Issuer, each of the Paying Agents, the Instrumentholders, any other Calculation Agent appointed in respect of the Instruments that is to make a further calculation upon receipt of such information and, if the Instruments are listed on a stock exchange and the rules of such exchange so require, such exchange as soon as possible after their determination but in no event later than (i) the commencement of the relevant Interest Period, if determined prior to such time, in the case of notification to such exchange of a Rate of Interest and Interest Amount, or (ii) in all other cases, the fourth Business Day after such determination. Where any Interest Payment Date or Interest Period Date is subject to adjustment pursuant to Condition 3.2.3, the Interest Amounts and the Interest Payment Date so published may subsequently be amended (or appropriate alternative arrangements made with the consent of the Trustee by way of adjustment) without notice in the event of an extension or shortening of the Interest Period. If the Instruments become due and payable under Condition 8, the accrued interest and the Rate of Interest payable in respect of the Instruments shall nevertheless continue to be calculated as previously in accordance with this Condition but no publication of the Rate of Interest or the Interest Amount so calculated need be made unless the Trustee otherwise requires. The determination of any rate or amount, the obtaining of each quotation and the making of each determination or calculation by the Calculation Agent(s) shall (in the absence of manifest error) be final and binding upon all parties. 3.8 Definitions In these Conditions, unless the context otherwise requires, the following defined terms shall have the meanings set out below: “Business Day” means: (a) in the case of a currency other than Euro, a day (other than a Saturday or Sunday) on which commercial banks and foreign exchange markets settle payments in the principal financial centre for such currency (which in the case of Canadian dollars is Toronto, and where the Reference Rate is LIBOR, the financial centres shall be London and Toronto); and/or (b) in the case of Euro, a day on which the TARGET System is operating (a “TARGET Business Day”); and/or (c) in the case of a currency and/or one or more Business Centres as specified in the relevant Final Terms, a day (other than a Saturday or a Sunday) on which commercial banks and foreign exchange markets settle payments in such currency or, if no currency is indicated, generally in each of the Business Centres. “Day Count Fraction” means, in respect of the calculation of an amount of interest on any Instrument for any period of time (from and including the first day of such period to but excluding the last) (whether or not constituting an Interest Period or Interest Accrual Period, the “Calculation Period”): (a) if “Actual/Actual” or “Actual/Actual-ISDA” is specified in the relevant Final Terms, the actual number of days in the Calculation Period divided by 365 (or, if any portion of that Calculation Period falls in a leap year, the sum of (i) the actual number of days in that portion of the Calculation Period falling in a leap year divided by 366 and (ii) the actual number of days in that portion of the Calculation Period falling in a non-leap year divided by 365); (b) if “Actual/365 (Fixed)” is specified in the relevant Final Terms, the actual number of days in the Calculation Period divided by 365; (c) if “Actual/360” is specified in the relevant Final Terms, the actual number of days in the Calculation Period divided by 360;


 
A42485973 50 (d) if “30/360”, “360/360” or “Bond Basis” is specified in the relevant Final Terms, the number of days in the Calculation Period divided by 360 calculated on a formula basis as follows: Day Count Fraction = [360 x (Y2 -Y1)] + [30 x (M2 -M1)]+ (D2 -D1) 360 where: “Y1” is the year, expressed as a number, in which the first day of the Calculation Period falls; “Y2” is the year, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls; “M1” is the calendar month, expressed as a number, in which the first day of the Calculation Period falls; “M2” is the calendar month, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls; “D1” is the first calendar day, expressed as a number, of the Calculation Period, unless such number would be 31, in which case D1 will be 30; and “D2” is the calendar day, expressed as a number, immediately following the last day included in the Calculation Period, unless such number would be 31 and D1 is greater than 29, in which case D2 will be 30; (e) if “30E/360” or “Eurobond Basis” is specified in the relevant Final Terms, the number of days in the Calculation Period divided by 360 calculated on a formula basis as follows: Day Count Fraction = [360 x (Y2 -Y1)] + [30 x (M2 -M1)]+ (D2 -D1) 360 where: “Y1” is the year, expressed as a number, in which the first day of the Calculation Period falls; “Y2” is the year, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls; “M1” is the calendar month, expressed as a number, in which the first day of the Calculation Period falls; “M2” is the calendar month, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls; “D1” is the first calendar day, expressed as a number, of the Calculation Period, unless such number would be 31, in which case D1 will be 30; and “D2” is the calendar day, expressed as a number, immediately following the last day included in the Calculation Period, unless such number would be 31, in which case D2 will be 30; (f) if “30E/360 (ISDA)” is specified in the relevant Final Terms, the number of days in the Calculation Period divided by 360, calculated on a formula basis as follows: Day Count Fraction = [360 x (Y2 -Y1)] + [30 x (M2 -M1)]+ (D2 -D1) 360


 
A42485973 51 where: “Y1” is the year, expressed as a number, in which the first day of the Calculation Period falls; “Y2” is the year, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls; “M1” is the calendar month, expressed as a number, in which the first day of the Calculation Period falls; “M2” is the calendar month, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls; “D1” is the first calendar day, expressed as a number, of the Calculation Period, unless (i) that day is the last day of February or (ii) such number would be 31, in which case D1 will be 30; and “D2” is the calendar day, expressed as a number, immediately following the last day included in the Calculation Period, unless (i) that day is the last day of February but not the Maturity Date or (ii) such number would be 31, in which case D2 will be 30; (g) if “Actual/Actual-ICMA” is specified in the relevant Final Terms: (i) if the Calculation Period is equal to or shorter than the Determination Period during which it falls, the actual number of days in the Calculation Period divided by the product of (x) the actual number of days in such Determination Period and (y) the number of Determination Periods in any year; and (ii) if the Calculation Period is longer than one Determination Period, the sum of: (A) the actual number of days in such Calculation Period falling in the Determination Period in which it begins divided by the product of (a) the actual number of days in such Determination Period and (b) the number of Determination Periods in any year; and (B) the actual number of days in such Calculation Period falling in the next Determination Period divided by the product of (a) the actual number of days in such Determination Period and (b) the number of Determination Periods in any year, where: “Determination Period” means the period from and including a Determination Date in any year to but excluding the next Determination Date; and “Determination Date” means the date specified as such in the relevant Final Terms or, if none is so specified, the Interest Payment Date; and (h) if “Actual/Actual Canadian Compound Method” is specified in the relevant Final Terms, it means, in respect of an Interest Amount other than a Fixed Coupon Amount or Broken Amount, the actual number of days in the relevant period from and including the date from which interest begins to accrue to but excluding the date on which it falls due, divided by 365. “Euro-zone” means the region comprising of member states of the European Union that adopt the single currency in accordance with the Treaty establishing the European Community as amended. “Interest Accrual Period” means the period beginning on (and including) the Interest Commencement Date and ending on (but excluding) the first Interest Period Date and each


 
A42485973 52 successive period beginning on (and including) an Interest Period Date and ending on (but excluding) the next succeeding Interest Period Date. “Interest Amount” means: (a) in respect of an Interest Accrual Period, the amount of interest payable per Calculation Amount for that Interest Accrual Period and which, in the case of Fixed Rate Instruments, and unless otherwise specified in the relevant Final Terms, shall mean the Fixed Coupon Amount or Broken Amount specified in the relevant Final Terms as being payable on the Interest Payment Date ending the Interest Period of which such Interest Accrual Period forms part; and (b) in respect of any other period, the amount of interest payable per Calculation Amount for that period. “Interest Commencement Date” means the Issue Date or such other date as may be specified in the relevant Final Terms. “Interest Determination Date” means, with respect to a Rate of Interest and Interest Accrual Period, the date specified as such in the relevant Final Terms or, if none is so specified, (a) the first day of such Interest Accrual Period if the Specified Currency is Sterling or (b) the day falling two Business Days in London prior to the first day of such Interest Accrual Period if the Specified Currency is neither Sterling nor Euro or (c) the day falling two TARGET Business Days prior to the first day of such Interest Accrual Period if the Specified Currency is Euro. “Interest Payment Date” means the date or dates specified as such in, or determined in accordance with the provisions of, the relevant Final Terms and, if a Business Day Convention is specified in the relevant Final Terms, as the same may be adjusted in accordance with the relevant Business Day Convention. “Interest Period” means the period beginning on (and including) the Interest Commencement Date and ending on (but excluding) the first Interest Payment Date and each successive period beginning on (and including) an Interest Payment Date and ending on (but excluding) the next succeeding Interest Payment Date unless otherwise specified in the applicable Final Terms. “Interest Period Date” means each Interest Payment Date unless otherwise specified in the relevant Final Terms. “ISDA Definitions” means the 2006 ISDA Definitions as published by the International Swaps and Derivatives Association, Inc. “Rate of Interest” means the rate of interest payable from time to time in respect of this Instrument and that is either specified on, or calculated in accordance with the provisions of, the relevant Final Terms. “Redemption Amount” means, as appropriate, the Final Redemption Amount, the Early Redemption Amount (Tax), the Optional Redemption Amount (Call), the Optional Redemption Amount (Put), the Early Termination Amount or such other amount in the nature of a redemption amount as may be specified in, or determined in accordance with the provisions of the relevant Final Terms. “Reference Banks” means, in the case of a determination of LIBOR, the principal London office of four major banks in the London inter-bank market, in the case of a determination of EURIBOR, the principal Euro-zone office of four major banks in the Euro-zone inter-bank market and in the case of a determination of CDOR, four major Canadian Schedule I chartered banks, in each case selected by the Issuer. “Reference Rate” means the rate specified as such in the relevant Final Terms.


 
A42485973 53 “Relevant Screen Page” means such page, section, caption, column or other part of a particular information service as may be specified in the relevant Final Terms. “Specified Currency” means the currency specified as such in the relevant Final Terms or, if none is specified, the currency in which the Instruments are denominated. “TARGET System” means the Trans-European Automated Real-Time Gross Settlement Express Transfer (known as TARGET2) System which was launched on 19 November 2007 or any successor to it. 3.9 Calculation Agent The Issuer shall procure that there shall at all times be one or more Calculation Agents if provision is made for them in the relevant Final Terms and for so long as any Instrument is outstanding. Where more than one Calculation Agent is appointed in respect of the Instruments, references in these Conditions to the Calculation Agent shall be construed as each Calculation Agent performing its respective duties under these Conditions. If the Calculation Agent is unable or unwilling to act as such or if the Calculation Agent fails duly to establish the Rate of Interest for an Interest Period or Interest Accrual Period or to calculate any Interest Amount, Final Redemption Amount, Early Redemption Amount or Optional Redemption Amount, as the case may be, or to comply with any other requirement, the Issuer shall (with the prior approval of the Trustee) appoint a leading bank or financial institution engaged in the interbank market (or, if appropriate, money, swap or over-the-counter index options market) which is most closely connected with the calculation or determination to be made by the Calculation Agent (acting through its principal London office or any other office actively involved in such market) to act as such in its place. The Calculation Agent may not resign its duties without a successor having been appointed as specified in this paragraph. 3.10 Benchmark Discontinuation This Condition 3.10 applies only where Screen Rate Determination is specified in the relevant Final Terms as the manner in which the Rate of Interest is to be determined. 3.10.1 Independent Adviser Notwithstanding Conditions 3.2.3(b)(ii) and 3.2.3(b)(iii), if the Issuer determines that a Benchmark Event has occurred in relation to an Original Reference Rate when any Rate of Interest (or any component part thereof) remains to be determined by reference to such Original Reference Rate, the Issuer shall use its reasonable endeavours to appoint and consult with an Independent Adviser, as soon as reasonably practicable, to advise the Issuer in determining a Successor Rate, failing which an Alternative Rate (in accordance with Condition 3.10.2) and, in either case, an Adjustment Spread and any Benchmark Amendments (in accordance with Condition 3.10.4). In making such determination and any other determination pursuant to this Condition 3.10, the Issuer shall act in good faith and in a commercially reasonable manner. In the absence of fraud, the Independent Adviser shall have no liability whatsoever to the Trustee, the Paying Agents, or the Instrumentholders for any advice given to the Issuer in connection with any determination made by the Issuer, pursuant to this Condition 3.10. If the Issuer fails to determine a Successor Rate or, failing which, an Alternative Rate in accordance with this Condition 3.10.1 prior to the date three Business Days prior to the relevant Interest Determination Date, the Rate of Interest applicable to the next succeeding Interest Accrual Period shall be equal to the Rate of Interest last determined in relation to the Instruments in respect of the immediately preceding Interest Accrual Period. If there has not been a first Interest Payment Date, the Rate of Interest shall be the initial Rate of Interest. Where a different Margin or Maximum or Minimum Rate of


 
A42485973 54 Interest is to be applied to the relevant Interest Accrual Period from that which applied to the last preceding Interest Accrual Period, the Margin or Maximum or Minimum Rate of Interest relating to the relevant Interest Accrual Period shall be substituted in place of the Margin or Maximum or Minimum Rate of Interest relating to that last preceding Interest Accrual Period. For the avoidance of doubt, this paragraph shall apply to the relevant next succeeding Interest Accrual Period only and any subsequent Interest Accrual Periods are subject to the subsequent operation of, and to adjustment as provided in, the first paragraph of this Condition 3.10. 3.10.2 Successor Rate or Alternative Rate If the Issuer, following consultation with the Independent Adviser or acting alone, as the case may be, determines that: (a) there is a Successor Rate, then such Successor Rate and any applicable Adjustment Spread shall subsequently be used in place of the Original Reference Rate to determine the Rate of Interest (or the relevant component part thereof) for all future payments of interest on the Instruments (subject to the operation of this Condition 3.10); or (b) there is no Successor Rate but that there is an Alternative Rate, then such Alternative Rate and any applicable Adjustment Spread shall subsequently be used in place of the Original Reference Rate to determine the Rate of Interest (or the relevant component part thereof) for all future payments of interest on the Instruments (subject to the operation of this Condition 3.10). 3.10.3 Adjustment Spread The Adjustment Spread (or the formula or methodology for determining the Adjustment Spread) shall be applied to the Successor Rate or the Alternative Rate (as the case may be). If the Issuer, following consultation with the Independent Adviser is unable to determine the quantum of, or a formula or methodology for determining, such Adjustment Spread, then the Successor Rate or Alternative Rate (as applicable) will apply without an Adjustment Spread. 3.10.4 Benchmark Amendments If any Successor Rate or Alternative Rate and, in either case, any applicable Adjustment Spread is determined in accordance with this Condition 3.10 and the Issuer, following consultation with the Independent Adviser, determines (i) that amendments to these Terms and Conditions, the Agency Agreement and/or the Trust Deed are necessary to ensure the proper operation of such Successor Rate or Alternative Rate and/or (in either case) any applicable Adjustment Spread (provided that the amendments do not, without the consent of the Calculation Agent, impose more onerous obligations upon it or expose it to any additional duties, responsibilities or liabilities or reduce or amend the protective provisions attached to it) (such amendments, the “Benchmark Amendments”) and (ii) the terms of the Benchmark Amendments, then the Issuer shall, subject to giving notice thereof in accordance with Condition 3.10.5, without any requirement for the consent or approval of Instrumentholders, vary these Conditions, the Agency Agreement and/or the Trust Deed to give effect to such Benchmark Amendments with effect from the date specified in such notice. At the request of the Issuer, but subject to receipt by the Trustee and the Issuing and Paying Agent of a certificate signed by two Directors of the Issuer pursuant to Condition 3.10.5, the Trustee and the Issuing and Paying Agent shall (at the expense and direction of the Issuer), without any requirement for the consent or approval of the Instrumentholders, be obliged to concur with the Issuer in using its reasonable endeavours


 
A42485973 55 to effect any Benchmark Amendments (including, inter alia, by the execution of a deed supplemental to or amending the Trust Deed) and the Trustee and the Issuing and Paying Agent shall not be liable to any party for any consequences thereof, provided that the Trustee and the Issuing and Paying Agent shall not be obliged so to concur if in the opinion of the Trustee or the Issuing and Paying Agent doing so would impose more onerous obligations upon it or expose it to any additional duties, responsibilities or liabilities or reduce or amend the rights and/or the protective provisions afforded to it in these Conditions and/or any documents to which it is a party (including, for the avoidance of doubt, any supplemental trust deed) in any way. In connection with any such variation in accordance with this Condition 3.10.4, the Issuer shall comply with the rules of any stock exchange on which the Instruments are for the time being listed or admitted to trading. 3.10.5 Notices, etc. Any Successor Rate, Alternative Rate, Adjustment Spread and the specific terms of any Benchmark Amendments determined under this Condition 3.10 will be notified promptly by the Issuer to the Trustee, the Calculation Agent, the Paying Agents and, in accordance with Condition 13, the Instrumentholders. Such notice shall be irrevocable and shall specify the effective date of the Benchmark Amendments, if any. No later than notifying the Trustee and the Issuing and Paying Agent of the same, the Issuer shall deliver to the Trustee and the Issuing and Paying Agent a certificate signed by two Directors of the Issuer: (a) confirming (i) that a Benchmark Event has occurred, (ii) the Successor Rate or, as the case may be, the Alternative Rate, (iii) any applicable Adjustment Spread and (iv) the specific terms of the Benchmark Amendments (if any), in each case as determined in accordance with the provisions of this Condition 3.10; and (b) certifying that the Benchmark Amendments (if any) are necessary to ensure the proper operation of such Successor Rate or Alternative Rate and (in either case) any applicable Adjustment Spread. The Trustee and the Issuing and Paying Agent shall be entitled to rely on such certificate (without enquiry or liability to any person) as sufficient evidence thereof. The Successor Rate or Alternative Rate and the Adjustment Spread and the Benchmark Amendments (if any) specified in such certificate will (in the absence of manifest error in the determination of the Successor Rate or Alternative Rate and the Adjustment Spread and the Benchmark Amendments (if any) and without prejudice to the Trustee’s and the Issuing and Paying Agent’s ability to rely on such certificate as aforesaid) be binding on the Issuer, the Trustee, the Calculation Agent, the Paying Agents and the Instrumentholders. 3.10.6 Survival of Original Reference Rate Without prejudice to the obligations of the Issuer under Condition 3.10.1, 3.10.2, 3.10.3 and 3.10.4, the Original Reference Rate and the fallback provisions provided for in Condition 3.2.3 will continue to apply unless and until the Issuer determines that a Benchmark Event has occurred and the relevant Paying Agent has been notified of the Successor Rate or the Alternative Rate (as the case may be), and any Adjustment Spread and Benchmark Amendments, in accordance with Condition 3.10.5. 3.10.7 Definitions As used in this Condition 3.10:


 
A42485973 56 “Adjustment Spread” means either (a) a spread (which may be positive, negative or zero) or (b) a formula or methodology for calculating a spread, in each case to be applied to the Successor Rate or the Alternative Rate (as the case may be) and is the spread, formula or methodology which: (a) in the case of a Successor Rate, is formally recommended in relation to the replacement of the Original Reference Rate with the Successor Rate by any Relevant Nominating Body; or (if no such recommendation has been made, or in the case of an Alternative Rate) (b) the Issuer, following consultation with the Independent Adviser or acting alone, as the case may be, determines is customarily applied to the relevant Successor Rate or the Alternative Rate (as the case may be) in international debt capital markets transactions to produce an industry-accepted replacement rate for the Original Reference Rate; or (if the Issuer determines that no such spread is customarily applied) the Issuer, following consultation with the Independent Adviser or acting alone, as the case may be, determines is recognised or acknowledged as being the industry standard for over-the-counter derivative transactions which reference the Original Reference Rate, where such rate has been replaced by the Successor Rate or the Alternative Rate (as the case may be). “Alternative Rate” means an alternative benchmark or screen rate which the Issuer following consultation with the Independent Adviser, determines is customarily applied in international debt capital markets transactions for the purposes of determining floating rates of interest (or the relevant component part thereof) in the same Specified Currency as the Instruments. “Benchmark Amendments” has the meaning given to it in Condition 3.10.4. “Benchmark Event” means: (1) the Original Reference Rate ceasing to be published for a period of at least five Business Days or ceasing to exist; or (2) a public statement by the administrator of the Original Reference Rate that it has ceased or that it will cease publishing the Original Reference Rate permanently or indefinitely (in circumstances where no successor administrator has been appointed that will continue publication of the Original Reference Rate); or (3) a public statement by the supervisor of the administrator of the Original Reference Rate that the Original Reference Rate has been or will be permanently or indefinitely discontinued; or (4) a public statement by the supervisor of the administrator of the Original Reference Rate as a consequence of which the Original Reference Rate will be prohibited from being used either generally, or in respect of the Instruments; or (5) the making of a public statement by the supervisor of the administrator of the Original Reference Rate that the Original Reference Rate is or will be (or is or will be deemed by such supervisor to be) no longer representative of its relevant underlying market; or (6) it has or will become unlawful for any Paying Agent, the Calculation Agent or the Issuer to calculate any payments due to be made to any Instrumentholders using the Original Reference Rate, provided that the Benchmark Event shall be deemed to occur (a) in the case of sub- paragraphs (2) and (3) above, on the date of the cessation of publication of the Original


 
A42485973 57 Reference Rate or the discontinuation of the Original Reference Rate, respectively, (b) in the case of sub-paragraph (4) above, on the date of the prohibition of use of the Original Reference Rate and (c) in the case of sub-paragraph (5) above, on the date with effect from which the Original Reference Rate will no longer be (or will be deemed by the relevant supervisor to no longer be) representative of its relevant underlying market and which is specified in the relevant public statement, and, in each case, not the date of the relevant public statement. “Independent Adviser” means an independent financial institution of international repute or an independent financial adviser with appropriate expertise appointed by the Issuer at its own expense and notified in writing to the Trustee. “Original Reference Rate” means the originally-specified benchmark or screen rate (as applicable) used to determine the Rate of Interest (or any component part thereof) on the Instruments or, if applicable, any other Successor or Alternative Rate (or any component part thereof) determined and applicable to the Instruments pursuant to the earlier operation of Condition 3.10. “Relevant Nominating Body” means, in respect of a benchmark or screen rate (as applicable): (i) the central bank for the currency to which the benchmark or screen rate (as applicable) relates, or any central bank or other supervisory authority which is responsible for supervising the administrator of the benchmark or screen rate (as applicable); or (ii) any working group or committee sponsored by, chaired or co-chaired by or constituted at the request of (a) the central bank for the currency to which the benchmark or screen rate (as applicable) relates, (b) any central bank or other supervisory authority which is responsible for supervising the administrator of the benchmark or screen rate (as applicable), (c) a group of the aforementioned central banks or other supervisory authorities or (d) the Financial Stability Board or any part thereof. “Successor Rate” means a successor to or replacement of the Original Reference Rate which is formally recommended by any Relevant Nominating Body. 4 Redemption, Purchase and Options 4.1 Final Redemption Unless previously redeemed, purchased and cancelled as provided below, this Instrument will be redeemed at its Final Redemption Amount (which, unless otherwise provided, is its nominal amount) on the Maturity Date specified in the relevant Final Terms. 4.2 Redemption for Taxation Reasons If, on the occasion of the next payment in respect of the Instruments the Issuer satisfies the Trustee immediately before the giving of the notice referred to below that it would be unable to make such payment without having to pay additional amounts as described in Condition 6, and such requirement to pay such additional amounts arises by reason of a change in the laws of the United States of America or any political sub-division of the United States of America or any authority in or of the United States of America having power to tax or in the interpretation or application of the laws of the United States of America or any political sub-division of the United States of America or any authority in or of the United States of America having power to tax or in any applicable double taxation treaty or convention, which change becomes effective on or after the date on which agreement is reached to issue the first Tranche of the Instruments, and such


 
A42485973 58 requirement cannot be avoided by the Issuer taking reasonable measures (such measures not involving any material additional payments by, or expense for, the Issuer), the Issuer may, at its option, at any time, having given not less than 30 nor more than 45 days’ notice to the Instrumentholders in accordance with Condition 13, redeem all, but not some only, of the Instruments at their Early Redemption Amount together with interest accrued to the date of redemption provided that the date fixed for redemption shall not be earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay such additional amounts or make such withholding or deduction, as the case may be, were a payment in respect of the Instruments then due. Prior to the publication of any notice of redemption pursuant to this Condition 4.2, the Issuer shall deliver to the Trustee a certificate signed by two directors of the Issuer stating that the requirement referred to above cannot be avoided by the Issuer taking reasonable measures available to it and the Trustee shall be entitled to accept such certificate as sufficient evidence of the satisfaction of the condition precedent set out above in which event it shall be conclusive and binding on Instrumentholders. 4.3 Purchases The Issuer and any of its Subsidiaries may at any time purchase Instruments in the open market or otherwise at any price. “Subsidiary” means any corporation a majority of the outstanding voting stock of which is owned, directly or indirectly, by the Issuer. 4.4 Early Redemption 4.4.1 Zero Coupon Instruments (a) The Early Redemption Amount payable in respect of any Zero Coupon Instrument upon redemption of such Instrument pursuant to Condition 4.2 or upon it becoming due and payable as provided in Condition 8 shall be the Amortised Face Amount (calculated as provided below) of such Instrument. (b) Subject to the provisions of sub-paragraph (c) below, the Amortised Face Amount of any such Instrument shall be the scheduled Final Redemption Amount of such Instrument on the Maturity Date discounted at a rate per annum (expressed as a percentage) equal to the Amortisation Yield (which, if none is specified in the relevant Final Terms, shall be such rate as would produce an Amortised Face Amount equal to the issue price of the Instruments if they were discounted back to their issue price on the Issue Date) compounded annually. (c) If the Early Redemption Amount payable in respect of any such Instrument upon its redemption pursuant to Condition 4.2 or, if applicable, Condition 4.5 or upon it becoming due and payable as provided in Condition 8, is not paid when due, the Early Redemption Amount due and payable in respect of such Instrument shall be the Amortised Face Amount of such Instrument as defined in sub-paragraph (b) above, except that such sub-paragraph shall have effect as though the reference in that sub-paragraph to the date on which the Instrument becomes due and payable was replaced by a reference to the Relevant Date as defined in Condition 6. The calculation of the Amortised Face Amount in accordance with this sub- paragraph shall continue to be made (as well after as before judgment) until the Relevant Date, unless the Relevant Date falls on or after the Maturity Date, in which case the amount due and payable shall be the scheduled Final Redemption Amount of such Instrument on the Maturity Date together with any interest that may accrue in accordance with Condition 3.2. Where such calculation is to be made for a period of less than one year, it shall be made on the basis of the Day Count Fraction specified in the relevant Final Terms.


 
A42485973 59 4.4.2 Other Instruments The Early Redemption Amount payable in respect of any Instrument (other than Instruments described in Condition 4.4.1), upon redemption of such Instrument pursuant to this Condition 4.4 or upon it becoming due and payable as provided in Condition 8, shall be the Final Redemption Amount unless otherwise specified in the relevant Final Terms. 4.5 Redemption at the Option of the Issuer and Exercise of Issuer’s Options 4.5.1 If (i) Residual Holding Call Option is specified in the relevant Final Terms, and (ii) if at any time the Residual Holding Percentage or more of the aggregate nominal amount of Instruments originally issued shall have been redeemed or purchased and cancelled, the Issuer shall have the option to redeem such outstanding Instruments in whole, but not in part, at their Residual Holding Redemption Amount. Unless otherwise specified in the relevant Final Terms, the Residual Holding Redemption Amount will be calculated by the Calculation Agent by discounting the outstanding nominal amount of the Instruments and the remaining interest payments (if applicable) to the Maturity Date by a rate per annum (expressed as a percentage to the nearest one hundred thousandth of a percentage point (with halves being rounded up)) equal to the Benchmark Yield, being the yield on the Benchmark Security at the close of business on the third Business Day prior to the date fixed for such redemption, plus the Benchmark Spread. Where the specified calculation is to be made for a period of less than one year, it shall be calculated using the Benchmark Day Count Fraction. The Issuer will give not less than 15 nor more than 30 days’ irrevocable notice to the Instrumentholders and the Trustee of any such redemption pursuant to this Condition 4.5.1. 4.5.2 If Call Option is specified in the relevant Final Terms, the Issuer may, unless an Exercise Notice has been given pursuant to Condition 4.6, on giving not less than 15 nor more than 30 days’ irrevocable notice to the Instrumentholders (or such other notice period as may be specified in the relevant Final Terms), redeem, or exercise any Issuer’s option in relation to, all or, if so provided, some of such Instruments on any Optional Redemption Date(s) or Option Exercise Date, as the case may be. Any such redemption of Instruments shall be at their Optional Redemption Amount together with interest accrued to but excluding the date fixed for redemption. Any such redemption or exercise must relate to Instruments of a nominal amount at least equal to the minimum nominal amount (if any) permitted to be redeemed specified in the relevant Final Terms and no greater than the maximum nominal amount (if any) permitted to be redeemed specified in the relevant Final Terms. All Instruments in respect of which any such notice is given shall be redeemed, or the Issuer’s option shall be exercised, on the date specified in such notice in accordance with this Condition. In the case of a partial redemption or a partial exercise of the Issuer’s option, the notice to Instrumentholders shall also specify the nominal amount of Instruments drawn and the holder(s) of such Instruments, to be redeemed, which shall have been drawn in such place as the Trustee may approve and in such manner as it deems appropriate, subject to compliance with any applicable laws, listing authority and stock exchange requirements. 4.5.3 If Make-whole Redemption Option is specified in the relevant Final Terms as applicable, the Issuer may, unless an Exercise Notice has been given pursuant to Condition 4.6, on giving not less than 15 nor more than 30 days’ irrevocable notice to the Instrumentholders (or such other notice period as may be specified in the relevant Final Terms), redeem, or exercise any Issuer’s option in relation to, all or, if so provided, some of such Instruments on any Make-whole Redemption Date(s). Any such redemption of Instruments shall be at


 
A42485973 60 an amount equal to the higher of the following, in each case together with interest accrued to but excluding the date fixed for redemption: (i) the nominal amount of the Instrument; and (ii) the nominal amount of the Instrument multiplied by the price (as reported in writing to the Issuer and the Trustee by a financial adviser (the “Financial Adviser”) appointed by the Issuer and approved by the Trustee) and confirmed in writing by the Issuer to the Trustee expressed as a percentage (rounded to the nearest five decimal places, 0.000005 being rounded upwards) at which the Gross Redemption Yield (as defined below) on the Instruments on the Determination Date specified in the Final Terms is equal to the Gross Redemption Yield at the Quotation Time specified in the relevant Final Terms on the Determination Date of the Reference Bond specified in the relevant Final Terms (or, where the Financial Adviser advises the Trustee that, for reasons of illiquidity or otherwise, such Reference Bond is not appropriate for such purpose, such other government stock as such Financial Adviser may recommend) plus any applicable Redemption Margin specified in the Final Terms. Any such redemption or exercise must relate to Instruments of a nominal amount at least equal to the minimum nominal amount (if any) permitted to be redeemed specified in the relevant Final Terms and no greater than the maximum nominal amount (if any) permitted to be redeemed specified in the relevant Final Terms. All Instruments in respect of which any such notice is given shall be redeemed, or the Issuer’s option shall be exercised, on the date specified in such notice in accordance with this Condition. In the case of a partial redemption or a partial exercise of an Issuer’s option, the notice to Instrumentholders shall also contain the serial numbers of the Instruments to be redeemed, which shall have been drawn in such place as the Trustee may approve and in such manner as it deems appropriate, subject to compliance with any applicable laws, listing authority and stock exchange requirements. In this Condition: “Gross Redemption Yield” means a yield calculated in accordance with generally accepted market practice at such time, as advised to the Trustee by the Financial Adviser. 4.6 Redemption at the Option of Instrumentholders If Put Option is specified in the relevant Final Terms, the Issuer shall, at the option of any Instrumentholder, upon such Instrumentholder giving not less than 15 nor more than 30 days’ notice to the Issuer (or such other notice period as may be specified in the relevant Final Terms) redeem such Instrument on the Optional Redemption Date(s) (as specified in the relevant Final Terms) at its Optional Redemption Amount (as specified in the Final Terms) together with interest accrued to the date fixed for redemption. To exercise such option (which must be exercised on an Option Exercise Date) the holder must deposit the Certificate representing the Instrument(s) with the Registrar or any Transfer Agent at its specified office, together with a duly completed option exercise notice (“Exercise Notice”) in the form obtainable from any Paying Agent, the Registrar or any Transfer Agent (as applicable) within the Instrumentholders’ Option Period (as specified in the Final Terms). No Instrument so deposited and option exercised may be withdrawn (except as provided in the Agency Agreement) without the prior consent of the Issuer. 4.7 Cancellation


 
A42485973 61 All Instruments redeemed pursuant to any of the foregoing provisions will be cancelled forthwith. All Instruments purchased by or on behalf of the Issuer or any of its Subsidiaries may, at the option of the Issuer be held by or may be surrendered for cancellation, but may not be resold and when held by the Issuer or any of its Subsidiaries shall not entitle the holder to vote at any meeting of Instrumentholders and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of Instrumentholders or for the purposes of Condition 10. Instruments may be surrendered for cancellation by surrendering the Certificate representing such Instruments to the Registrar and, in each case, if so surrendered, shall, together with all Instruments redeemed by the Issuer, be cancelled forthwith. 5 Payments 5.1 Payments in respect of Instruments Payments of principal in respect of Instruments shall be made against presentation and surrender of the relevant Certificates at the specified office of any of the Transfer Agents or of the Registrar and in the manner provided in paragraph (ii) below. Interest on Instruments shall be paid to the person shown on the Register at the close of business on the fifteenth day before the due date for payment thereof (the “Record Date”). Payments of interest on each Instrument shall be made in the relevant currency by cheque drawn on a bank and mailed to the holder (or to the first named of joint holders) of such Instrument at its address appearing in the Register. Upon application by the holder to the specified office of the Registrar or any Transfer Agent before the Record Date, such payment of interest may be made by transfer to an account in the relevant currency maintained by the payee with a bank. 5.2 Payments subject to Fiscal Laws etc. All payments are subject in all cases to (i) any applicable fiscal or other laws, regulations and directives, but without prejudice to the provisions of Condition 6 and (ii) any withholding or deduction required pursuant to an agreement described in Section 1471 (b) of the U.S. Internal Revenue Code 1986 (the “Code”) or otherwise imposed pursuant to Sections 1471 to 1474 (inclusive) of the Code, any United States Treasury Regulations or agreements thereunder, any official interpretations thereof, any successor, substitute or similar legislation or law or any law implementing an intergovernmental approach thereto. No commission or expenses shall be charged to the Instrumentholders in respect of such payments. 5.3 Appointment of Agents The Issuing and Paying Agent, the Paying Agents and the Calculation Agent initially appointed by the Issuer and their respective specified offices are listed below. The Issuing and Paying Agent, the Paying Agents, the Registrar, the Transfer Agents and the Calculation Agent act solely as agents of the Issuer and do not assume any obligation or relationship of agency or trust for or with any holder. The Issuer reserves the right at any time with the approval of the Trustee to vary or terminate the appointment of the Issuing and Paying Agent, any other Paying Agent, the Registrar, any Transfer Agent or the Calculation Agent and to appoint additional or other Paying Agents or Transfer Agents, provided that the Issuer shall at all times maintain (a) an Issuing and Paying Agent, (b) a Paying Agent having its specified office in a major European city, (c) a Calculation Agent where the Conditions so require one, (d) so long as the Instruments are listed on any stock exchange or admitted to listing by any other relevant authority, a Paying Agent having a specified office in such place as may be required by the rules and regulations of any other relevant stock exchange or other relevant authority and (e) a Registrar and a Transfer Agent. As used in these Conditions, the terms “Issuing and Paying Agent”, “Calculation Agent”, “Registrar”, “Transfer Agent” and “Paying Agent” include any additional or replacement Issuing and Paying Agent, Calculation Agent, Registrar, Transfer Agent or Paying Agent appointed under this Condition.


 
A42485973 62 Notice of any such change or any change of any specified office shall promptly be given to the Instrumentholders in accordance with Condition 13. 5.4 Non-business days If any date for payment in respect of any Instrument is not a business day, the holder shall not be entitled to payment until the next following business day nor to any interest or other sum in respect of such postponed payment. In this paragraph, “business day” means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for business in the place in which the specified office of the Registrar is located, in such jurisdictions as shall be specified as “Financial Centres” in the relevant Final Terms and: 5.4.1 (in the case of a payment in a currency other than Euro) where payment is to be made by transfer to an account maintained with a bank in the relevant currency, on which foreign exchange transactions may be carried on in the relevant currency in the principal financial centre of the country of such currency; or 5.4.2 (in the case of a payment in Euro) which is a TARGET Business Day. 6 Taxation All payments of principal and interest by or on behalf of the Issuer in respect of the Instruments will be made without withholding or deduction for or on account of, any present or future taxes or duties of whatever nature imposed or levied by or on behalf of the United States of America or any political sub- division of the United States of America or any authority in or of the United States of America having power to tax, unless such withholding or deduction is compelled by law. In that event, the Issuer will pay such additional amounts of principal and interest as will result in the payment to the Instrumentholders of the amounts which would otherwise have been receivable in respect of the Instruments had no withholding or deduction been made, except that no such additional amounts shall be payable in respect of any Instrument (or the Certificate representing it) presented for payment: (a) by or on behalf of, a person who is liable to such taxes or duties in respect of such Instrument (or the Certificate representing such Instrument) by reason of having some connection with the United States of America other than the mere holding of such Instrument (or the Certificate representing such Instrument); or (b) by or on behalf of a person who would not be liable or subject to such deduction or withholding by making a declaration of non-residence or other claim for exemption to a tax authority; or (c) more than 30 days after the Relevant Date except to the extent that the holder would have been entitled to such additional amounts on presenting the same (or in respect of which the Certificate representing it is presented) for payment on such 30th day; or (d) by a holder which is or was a controlled foreign corporation, personal holding company or passive foreign investment company with respect to the United States or a corporation that accumulates earnings to avoid United States federal income tax; or (e) if such tax is an estate, inheritance, gift, sales, transfer or personal property tax or any similar tax, assessment, or governance charge; or (f) by or on behalf of a holder which is or has been (i) a “10 per cent. shareholder” of the obligor of the Instruments as defined in Section 871(h)(3) of the Code or any successor provisions, (ii) a bank receiving such interest pursuant to a loan agreement entered into in the ordinary course of its trade or business as described in section 881(c)(3)(A) of the Code, or (iii) a controlled foreign corporation within the meaning of section 957 of the Code that is related to the Issuer within the meaning of section 864(d)(4) of the Code; or


 
A42485973 63 (g) by or on behalf of a holder who would have been able to avoid such withholding or deduction by satisfying any statutory or procedural requirements (including, without limitation, the provision of information or a United States Internal Revenue Service Form W-8 or Form W-9 (or a successor form)); or (h) in the case of any combination of items (a) to (g) above. Notwithstanding the foregoing, no additional amounts shall be payable for or on account of (i) any taxes, duties, assessments or governmental charges that are imposed otherwise than by deduction or withholding from payments made under or with respect to the Instruments, (ii) any taxes, duties, assessments or governmental charges that are imposed on or with respect to any payment on an Instrument to an Instrumentholder who is a fiduciary, partnership, limited liability company, or person other than the Beneficial Owner of such payment to the extent that the Beneficial Owner with respect to such payment (or portion thereof) would not have been entitled to the additional amounts had the payment (or the relevant portion thereof) been made directly to such Beneficial Owner and (iii) any deduction or withholding imposed or required pursuant to an agreement described in Section 1471(b) of the Code, or otherwise imposed pursuant to Sections 1471 through 1474 of the Code (or any regulations thereunder or official interpretations thereof) or an intergovernmental agreement between the United States of America and another jurisdiction facilitating the implementation thereof (or any fiscal or regulatory legislation, rules or practices implementing such an intergovernmental agreement). As used in clause (ii) above, “Beneficial Owner” means the person who is required by the laws of the relevant tax jurisdiction to include the payment in income for tax purposes. As used in these Conditions, “Relevant Date” in respect of any Instrument means the date on which payment in respect of it first becomes due or (if any amount of the money payable is improperly withheld or refused) the date on which payment in full of the amount outstanding is made or (if earlier) the date on which notice is duly given to the Instrumentholders in accordance with Condition 13 that, upon further presentation of the Instrument being made in accordance with the Conditions, such payment will be made, provided that payment is in fact made upon such presentation. References in these Conditions to (a) “principal” shall be deemed to include any premium payable in respect of the Instruments, all Final Redemption Amounts, Early Redemption Amounts, Optional Redemption Amounts, Amortised Face Amounts and all other amounts in the nature of principal payable pursuant to Condition 4 or any amendment or supplement to it, (b) “interest” shall be deemed to include all Interest Amounts and all other amounts payable pursuant to Condition 3 or any amendment or supplement to it and (c) “principal” and/or “interest” shall be deemed to include any additional amounts which may be payable under this Condition or any undertaking given in addition to or in substitution for it under the Trust Deed. 7 Prescription Claims against the Issuer for payment in respect of the Instruments shall be prescribed and become void unless made within 10 years (in the case of principal) or five years (in the case of interest) from the appropriate Relevant Date in respect of them. 8 Events of Default If any of the following events (each an “Event of Default”) occurs and is continuing, the Trustee at its discretion may, and if so requested by the holders of at least one-quarter in nominal amount of the Instruments then outstanding or if so directed by an Extraordinary Resolution shall (subject in each case to being indemnified and/or secured and/or prefunded to its satisfaction), give notice to the Issuer at its registered office that the Instruments are, and they shall accordingly immediately become due and repayable at their Redemption Amount together with accrued interest (if any) to the date of payment:


 
A42485973 64 (a) Non-Payment there is default for more than 30 days in the payment of any principal or interest due in respect of the Instruments; or (b) Breach of Other Obligations there is default in the performance or observance by the Issuer of any other obligation or provision under the Trust Deed or the Instruments (other than any obligation for the payment of any principal or interest in respect of the Instruments) which default is incapable of remedy or, if in the opinion of the Trustee capable of remedy, is not remedied within 90 days after notice of such default shall have been given to the Issuer by the Trustee; or (c) Cross-Acceleration if (i) any other present or future Relevant Indebtedness of the Issuer or a Principal Subsidiary becomes due and payable prior to its stated maturity by reason of any actual event of default or (ii) any amount in respect of such Relevant Indebtedness is not paid when due or, as the case may be, within any applicable grace period, provided that the aggregate amount of the Relevant Indebtedness in respect of which one or more of the events mentioned above in this paragraph (c) have occurred equals or exceeds U.S.$200,000,000; or (d) Winding-up a resolution is passed, or a final order of a court in the United States of America is made and, where possible, not discharged or stayed within a period of 90 days, that the Issuer be wound up or dissolved; or (e) Enforcement Proceedings attachment is made of the whole or substantially the whole of the assets or undertakings of the Issuer and such attachment is not released or cancelled within 90 days or an encumbrancer takes possession or an administrative or other receiver or similar officer is appointed of the whole or substantially the whole of the assets or undertaking of the Issuer or an administration or similar order is made in relation to the Issuer and such taking of possession, appointment or order is not released, discharged or cancelled within 90 days; or (f) Insolvency the Issuer ceases to carry on all or substantially all of its business or is unable to pay its debts; or (g) Bankruptcy the Issuer is adjudged bankrupt or insolvent by a court of competent jurisdiction in the United States of America, provided that in the case of paragraph (b) the Trustee shall have certified that in its opinion such event is materially prejudicial to the interests of the Instrumentholders. For the purposes of this Condition 8, “Principal Subsidiary” means Niagara Mohawk Power Corporation, The Brooklyn Union Gas Company, KeySpan Gas East Corporation, Massachusetts Electric Company, National Grid USA, The Narragansett Electric Company and New England Power Company, and includes any successor entity thereto or any member of the group of companies comprising NGNA and each of its subsidiary undertakings (the “Group”) which the Auditors have certified to the Trustee as being a company to which all or substantially all of the assets of a Principal Subsidiary are transferred, provided that any such company shall cease to be a Principal Subsidiary for the purpose of this Condition if at any time the Issuer, or any Subsidiary of the Issuer, ceases to control (as defined below) such company.


 
A42485973 65 In the event that all or substantially all of the assets of a Principal Subsidiary are transferred to a member of the Group as described above, the transferor of such assets shall cease to be deemed to be a Principal Subsidiary for the purposes of this Condition. For the purposes of this Condition 8, “control” of a company means holding more than 50 per cent. of the issued or allotted ordinary shares in such company and “Auditors” means the auditors of NGNA or such other firm of accountants as may be nominated by NGNA. 9 Enforcement The Trustee may, at its discretion and without further notice, institute such proceedings against the Issuer as it may think fit to enforce any obligation, condition or provision binding on the Issuer under the Instruments or under the Trust Deed, but shall not be bound to do so unless: (a) it has been so directed by an Extraordinary Resolution or in writing by the holders of at least one- quarter of the principal amount of the Instruments outstanding; and (b) it has been indemnified to its satisfaction. No Instrumentholder shall be entitled to institute proceedings directly against the Issuer unless the Trustee, having become bound to proceed as specified above, fails to do so within a reasonable time and such failure is continuing. 10 Meetings of Instrumentholders, Modifications and Substitution 10.1 Meetings of Instrumentholders The Trust Deed contains provisions for convening meetings of Instrumentholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution (as defined in the Trust Deed) of a modification of any of these Conditions or any provisions of the Trust Deed. An Extraordinary Resolution duly passed at any such meeting shall be binding on Instrumentholders (whether or not they were present at the meeting at which such resolution was passed) except that any Extraordinary Resolution proposed, inter alia, (a) to amend the dates of maturity or redemption of the Instruments or any date for payment of interest on the Instruments, (b) to reduce or cancel the nominal amount of or any premium payable on redemption of the Instruments, (c) to reduce the rate or rates of interest in respect of the Instruments or to vary the method or basis of calculating the rate or rates or amount of interest or the basis for calculating any Interest Amount in respect of the Instruments, (d) if a Minimum and/or a Maximum Rate of Interest is shown on the face of the Instrument, to reduce any such Minimum and/or Maximum Rate of Interest, (e) to vary any method of calculating the Final Redemption Amount, the Early Redemption Amount or the Optional Redemption Amount, (f) to take any steps that as specified in this Instrument may only be taken following approval by an Extraordinary Resolution to which the special quorum provisions apply, and (g) to modify the provisions concerning the quorum required at any meeting of Instrumentholders or the majority required to pass the Extraordinary Resolution will only be binding if passed at a meeting of the Instrumentholders (or at any adjournment of that meeting) at which a special quorum (as defined in the Trust Deed) is present. A resolution in writing signed by the holders of not less than 95 per cent. in nominal amount of the Instruments will be binding on all Instrumentholders. The Issuer may convene a meeting of the holders of any or all Instruments issued pursuant to the Agency Agreement and not forming a single series with the Instruments to which meeting the provisions referred to above apply as if all such Instruments formed part of the same series, provided that the proposals to be considered at such meeting affect the rights of the holders of the Instruments of each series attending the meeting in identical respects (save insofar as the Conditions applicable to each such series are not identical). 10.2 Modification of the Trust Deed


 
A42485973 66 The Trustee may agree, without the consent of the Instrumentholders to (a) any modification of any of the provisions of the Trust Deed that is of a formal, minor or technical nature or is made to correct a manifest error, and (b) any other modification (except as mentioned in the Trust Deed), and any waiver or authorisation of any breach or proposed breach, of any of the provisions of the Trust Deed that is in the opinion of the Trustee not materially prejudicial to the interests of the Instrumentholders. Any such modification, authorisation or waiver shall be binding on the Instrumentholders and, if the Trustee so requires, such modification shall be notified to the Instrumentholders as soon as practicable. In addition, the Trustee shall be obliged to concur with the Issuer in effecting any Benchmark Amendments in the circumstances and as otherwise set out in Condition 3.10 without the consent of the Instrumentholders. Any such modification shall be binding on Instrumentholders and, unless the Trustee otherwise agrees, the Issuer shall cause notice of such modification to be given to the Instrumentholders as soon as practicable thereafter. 10.3 Substitution The Trust Deed contains provisions permitting the Trustee to agree, subject to such amendment of the Trust Deed and such other conditions as the Trustee may require, but without the consent of the Instrumentholders, to the substitution of any other company in place of the Issuer or of any previous substituted company, as principal debtor under the Trust Deed and the Instruments. In the case of such a substitution the Trustee may agree, without the consent of the Instrumentholders, to a change of the law governing the Instruments and/or the Trust Deed provided that such change would not in the opinion of the Trustee be materially prejudicial to the interests of the Instrumentholders. 10.4 Entitlement of the Trustee In connection with the exercise of its functions (including but not limited to those referred to in this Condition) the Trustee shall have regard to the interests of the Instrumentholders as a class and shall not have regard to the consequences of such exercise for individual Instrumentholders and the Trustee shall not be entitled to require, nor shall any Instrumentholder be entitled to claim, from the Issuer any indemnification or payment in respect of any tax consequence of any such exercise upon individual Instrumentholders. 11 Replacement of Certificates If a Certificate is lost, stolen, mutilated, defaced or destroyed, it may be replaced, subject to applicable laws, listing authority and stock exchange regulations, at the specified office of the Registrar or such other Paying Agent or Transfer Agent, as the case may be, as may from time to time be designated by the Issuer for the purpose and notice of whose designation is given to Instrumentholders, in each case on payment by the claimant of the fees and costs incurred in connection with that replacement and on such terms as to evidence, security and indemnity (which may provide, inter alia, that if the allegedly lost, stolen or destroyed Certificate is subsequently presented for payment there shall be paid to the Issuer on demand the amount payable by the Issuer in respect of such Certificates and otherwise as the Issuer may require. Mutilated or defaced Certificates must be surrendered before replacements will be issued. 12 Further Issues The Issuer may from time to time without the consent of the Instrumentholders create and issue further instruments having the same terms and conditions as the Instruments and so that such further issue shall be consolidated and form a single series with such Instruments. References in these Conditions to the Instruments include (unless the context requires otherwise) any other instruments issued pursuant to this Condition and forming a single series with the Instruments. Any such further instruments forming a single series with Instruments constituted by the Trust Deed or


 
A42485973 67 any deed supplemental to it shall, and any other instruments may (with the consent of the Trustee), be constituted by the Trust Deed. The Trust Deed contains provisions for convening a single meeting of the Instrumentholders and the holders of instruments of other series if the Trustee so decides. 13 Notices Notices to the Instrumentholders shall be mailed to them at their respective addresses shown in the Register and shall be deemed to have been given on the fourth weekday (being a day other than a Saturday or a Sunday) after the date of mailing. 14 Indemnification of Trustee The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility, including but not limited to provisions relieving it from any obligation to (a) appoint an independent financial adviser and (b) take proceedings to enforce repayment unless indemnified to its satisfaction. The Trustee is entitled to enter into business transactions with the Issuer or any of its subsidiary undertakings, parent undertakings, joint ventures or associated undertakings without accounting for any profit resulting from these transactions and to act as trustee for the holders of any other securities issued by the Issuer or any of its subsidiary undertakings, parent undertakings, joint ventures or associated undertakings. 15 Contracts (Rights of Third Parties) Act 1999 No person shall have any right to enforce any term or condition of the Instruments under the Contracts (Rights of Third Parties) Act 1999. 16 Governing Law and Jurisdiction 16.1 Governing Law The Instruments and any non-contractual obligations arising out of or in connection with the Instruments are governed by, and shall be construed in accordance with, English law. 16.2 Jurisdiction The courts of England have exclusive jurisdiction to settle any dispute (a “Dispute”) arising from or connected with the Instruments. The Issuer agrees that the courts of England are the most appropriate and convenient courts to settle any Dispute and, accordingly, that it will not argue to the contrary. Nothing in this Condition 16 prevents the Trustee or any Instrumentholder from taking proceedings relating to a Dispute (“Proceedings”) in any other courts with jurisdiction. To the extent allowed by law, the Trustee or Instrumentholders may take concurrent Proceedings in any number of jurisdictions. 16.3 Process Agent The Issuer has irrevocably appointed National Grid plc at its registered office for the time being, currently at 1-3 Strand, London WC2N 5EH as its agent in England to receive, for it and on its behalf, service of process in any Proceedings in England. Nothing herein or in the Trust Deed shall affect the right to serve process in any other manner permitted by law.


 
A42485973 68 17 Transfers of Instruments (a) Transfers of Instruments One or more Instruments may be transferred upon the surrender (at the specified office of the Registrar or any Transfer Agent) of the Certificate representing such Instruments to be transferred, together with the form of transfer endorsed on such Certificate (or another form of transfer substantially in the same form and containing the same representations and certifications (if any), unless otherwise agreed by the Issuer), duly completed and executed and any other evidence as the Registrar or such Transfer Agent may reasonably require. In the case of a transfer of part only of a holding of Instruments represented by one Certificate, a new Certificate shall be issued to the transferee in respect of the part transferred and a further new Certificate in respect of the balance of the holding not transferred shall be issued to the transferor. All transfers of Instruments and entries on the Register will be made subject to the detailed regulations concerning transfers of Instruments scheduled to the Agency Agreement. The regulations may be changed by the Issuer with the prior written approval of the Registrar and the Trustee. A copy of the current regulations will be made available by the Registrar to any Instrumentholder upon request. (b) Exercise of Options or Partial Redemption In the case of an exercise of an Issuer’s or Instrumentholders’ option in respect of, or a partial redemption of, a holding of Instruments represented by a single Certificate, a new Certificate shall be issued to the holder to reflect the exercise of such option or in respect of the balance of the holding not redeemed. In the case of a partial exercise of an option resulting in Instruments of the same holding having different terms, separate Certificates shall be issued in respect of those Instruments of that holding that have the same terms. New Certificates shall only be issued against surrender of the existing Certificates to the Registrar or any Transfer Agent. In the case of a transfer of Instruments to a person who is already a holder of Instruments, a new Certificate representing the enlarged holding shall only be issued against surrender of the Certificate representing the existing holding. (c) Delivery of New Certificates Each new Certificate to be issued pursuant to Conditions 17(a) or (b) shall be available for delivery within three business days of receipt of the form of transfer or Exercise Notice and surrender of the Certificate for exchange. Delivery of the new Certificate(s) shall be made at the specified office of the Transfer Agent or of the Registrar (as the case may be) to whom delivery or surrender of such form of transfer, Exercise Notice or Certificate shall have been made or, at the option of the holder making such delivery or surrender as aforesaid and as specified in the relevant form of transfer, Exercise Notice or otherwise in writing, be mailed by uninsured post at the risk of the holder entitled to the new Certificate to such address as may be so specified, unless such holder requests otherwise and pays in advance to the relevant Transfer Agent the costs of such other method of delivery and/or such insurance as it may specify. In this Condition 17(c), “business day” means a day, other than a Saturday or Sunday, on which banks are open for business in the place of the specified office of the relevant Transfer Agent or the Registrar (as the case may be). (d) Transfers Free of Charge Transfers of Certificates on registration, transfer, exercise of an option or partial redemption shall be effected without charge by or on behalf of the Issuer, the Registrar or any Transfer Agent, but upon payment of any tax or other governmental charges that may be imposed in relation to it (or the giving of such indemnity as the Registrar or the relevant Transfer Agent may require).


 
A42485973 69 (e) Closed Periods No Instrumentholder may require the transfer of an Instrument to be registered (i) during the period of 15 days ending on the due date for redemption of that Instrument, (ii) during the period of 15 days prior to any date on which Instruments may be called for redemption by the Issuer at its option pursuant to Condition 4.5, (iii) after any such Instrument has been called for redemption or (iv) during the period of seven days ending on (and including) any Record Date.


 
A42485973 70 Schedule 3 Provisions for Meetings of Instrumentholders Interpretation 1 In this Schedule: 1.1 references to a meeting are to a meeting of Instrumentholders of a single Series of Instruments issued by the Issuer and include, unless the context otherwise requires, any adjournment; 1.2 references to “Instruments” and “Instrumentholders” are only to the Instruments of the Series in respect of which a meeting has been, or is to be, called, and to the holders of these Instruments, respectively; 1.3 “agent” means a holder of a voting certificate or a proxy for, or representative of, an Instrumentholder; 1.4 “Alternative Clearing System” means any clearing system (including without limitation CDS or The Depositary Trust Company (“DTC”)) other than Euroclear or Clearstream, Luxembourg; 1.5 “Electronic Consent” has the meaning set out in paragraph 25; 1.6 “Extraordinary Resolution” means a resolution passed at a meeting duly convened and held in accordance with this Trust Deed by a majority of at least 75 per cent. of the votes cast; 1.7 “voting certificate” means a certificate issued in accordance with paragraphs 5, 6, 7 and 14; 1.8 “Written Resolution” means a resolution in writing signed by the holders of not less than 95 per cent. in nominal amount of the Instruments outstanding; 1.9 references to persons representing a proportion of the Instruments are to Instrumentholders or agents holding or representing in the aggregate at least that proportion in nominal amount of the Instruments for the time being outstanding; and 1.10 where Instruments are held in Euroclear or Clearstream, Luxembourg or an Alternative Clearing System, references herein to the deposit or release or surrender of Instruments shall be construed in accordance with the usual practices (including in relation to the blocking of the relevant account) of Euroclear or Clearstream, Luxembourg or such Alternative Clearing System. Powers of meetings 2 A meeting shall, subject to the Conditions and without prejudice to any powers conferred on other persons by this Trust Deed, have power by Extraordinary Resolution: 2.1 to sanction any proposal by the Issuer or the Trustee for any modification, abrogation, variation or compromise of, or arrangement in respect of, the rights of the Instrumentholders against the Issuer whether or not those rights arise under this Trust Deed;


 
A42485973 71 2.2 to sanction the exchange or substitution for the Instruments of, or the conversion of the Instruments into, shares, bonds or other obligations or securities of the Issuer or any other entity; 2.3 to assent to any modification of this Trust Deed or the Instruments proposed by the Issuer or the Trustee; 2.4 to authorise anyone to concur in and do anything necessary to carry out and give effect to an Extraordinary Resolution; 2.5 to give any authority, direction or sanction required to be given by Extraordinary Resolution; 2.6 to appoint any persons (whether Instrumentholders or not) as a committee or committees to represent the Instrumentholders’ interests and to confer on them any powers or discretions which the Instrumentholders could themselves exercise by Extraordinary Resolution; 2.7 to approve a proposed new Trustee and to remove a Trustee; 2.8 to approve the substitution of any entity for the Issuer (or any previous substitute) as principal debtor under this Trust Deed; and 2.9 to discharge or exonerate the Trustee from any liability in respect of any act or omission for which it may become responsible under this Trust Deed or the Instruments, provided that the special quorum provisions in paragraph 13 shall apply to any Extraordinary Resolution (a “special quorum resolution”) for the purpose of sub-paragraph 2.2 or 2.8, any of the proposals listed in Condition 10.1 or any amendment to this proviso. Convening a meeting 3 The Issuer or the Trustee may at any time convene a meeting. If it receives a written request by Instrumentholders holding at least 10 per cent. in nominal amount of the Instruments of any Series for the time being outstanding and is indemnified to its satisfaction against all costs and expenses, the Trustee shall convene a meeting of the Instrumentholders of that Series. Every meeting shall be held at a time and place approved by the Trustee. 4 At least 21 days’ notice (exclusive of the day on which the notice is given or deemed to be given and of the day of the meeting) shall be given to the Instrumentholders. A copy of the notice shall be given by the party convening the meeting to the other parties. The notice shall specify the day, time and place of meeting and, unless the Trustee otherwise agrees, the nature of the resolutions to be proposed and shall explain how Instrumentholders may appoint proxies or representatives, obtain voting certificates and use block voting instructions and the details of the time limits applicable. Cancellation of meeting 5 A meeting that has been validly convened in accordance with paragraph 3 above, may be cancelled by the person who convened such meeting by giving at least 5 days’ notice (exclusive of the day on which the notice is given or deemed to be given and of the day of the meeting) to the Instrumentholders (with a copy to the Trustee where such meeting was convened by the Issuer or to the Issuer where such meeting was convened by the Trustee). Any meeting cancelled in accordance with this paragraph 5 shall be deemed not to have been convened.


 
A42485973 72 Arrangements for voting 6 If a holder of an Instrument wishes to obtain a voting certificate in respect of it for a meeting, he must deposit it for that purpose at least 48 hours before the time fixed for the meeting with a Paying Agent or to the order of a Paying Agent with a bank or other depositary nominated by the Paying Agent for the purpose. The Paying Agent shall then issue a voting certificate in respect of it. 7 A voting certificate shall: 7.1 be a document in the English language; 7.2 be dated; 7.3 specify the meeting concerned and the serial numbers of the Instruments deposited; and 7.4 entitle, and state that it entitles, its bearer to attend and vote at that meeting in respect of those Instruments. 8 Once a Paying Agent has issued a voting certificate for a meeting in respect of an Instrument, it shall not release the Instrument until either: 8.1 the meeting has been concluded; or 8.2 the voting certificate has been surrendered to the Paying Agent. 9 9.1 A holder of an Instrument may, by an Instrument in writing in the form available from the specified office of a Transfer Agent in the English language executed by or on behalf of the holder and delivered to the Transfer Agent at least 24 hours before the time fixed for a meeting, appoint any person (a “proxy”) to act on his behalf in connection with that meeting. A proxy need not be an Instrumentholder. 9.2 A corporation which holds an Instrument may, by delivering to a Transfer Agent at least 24 hours before the time fixed for a meeting a certified copy of a resolution of its directors or other governing body (with, if it is not in English, a certified translation into English), authorise any person to act as its representative (a “representative”) in connection with that meeting. Chairman 10 The chairman of a meeting shall be such person as the Trustee may nominate in writing, but if no such nomination is made or if the person nominated is not present within 15 minutes after the time fixed for the meeting the Instrumentholders or agents present shall choose one of their number to be chairman, failing which the Issuer may appoint a chairman. The chairman need not be an Instrumentholder or agent. The chairman of an adjourned meeting need not be the same person as the chairman of the original meeting. Attendance 11 The following may attend and speak at a meeting: 11.1 Instrumentholders and agents; 11.2 the chairman;


 
A42485973 73 11.3 the Issuer and the Trustee (through their respective representatives) and their respective financial and legal advisers; and 11.4 the Dealers and their advisers. No one else may attend or speak. Quorum and Adjournment 12 No business (except choosing a chairman) shall be transacted at a meeting unless a quorum is present at the commencement of business. If a quorum is not present within 15 minutes from the time initially fixed for the meeting, it shall, if convened on the requisition of Instrumentholders or if the Issuer and the Trustee agree, be dissolved. In any other case it shall be adjourned until such date, not less than 14 nor more than 42 days later, and time and place as the chairman may decide. If a quorum is not present within 15 minutes from the time fixed for a meeting so adjourned, the meeting shall be dissolved. 13 Two or more Instrumentholders or agents present in person shall be a quorum: 13.1 in the cases marked “No minimum proportion” in the table below, whatever the proportion of the Instruments which they represent; and 13.2 in any other case, only if they represent the proportion of the Instruments shown by the table below. Column 1 Column 2 Column 3 Purpose of meeting Any meeting except one referred to in column 3 Meeting previously adjourned through want of a quorum Required proportion Required proportion To pass a special quorum resolution Two thirds One third To pass any other Extraordinary Resolution A clear majority No minimum proportion Any other purpose 10 per cent. No minimum proportion 14 The chairman, may with the consent of (and shall if directed by) a meeting, adjourn the meeting from time to time and from place to place. Only business which could have been transacted at the original meeting may be transacted at a meeting adjourned in accordance with this paragraph or paragraph 13. 15 At least 10 days’ notice (exclusive of the day on which the notice is given or deemed to be given and of the day of the adjourned meeting) of a meeting adjourned through want of a quorum shall be given in the same manner as for an original meeting and that notice shall state the quorum required at the adjourned meeting. However, no notice need otherwise be given of an adjourned meeting.


 
A42485973 74 Voting 16 Each question submitted to a meeting shall be decided by a show of hands unless a poll is (before, or on the declaration of the result of, the show of hands) demanded by the chairman, the Issuer, the Trustee or one or more persons holding one or more Instruments or voting certificates or representing not less than 2 per cent. of the Instruments. 17 Unless a poll is demanded a declaration by the chairman that a resolution has or has not been passed shall be conclusive evidence of the fact without proof of the number or proportion of the votes cast in favour of or against it. 18 If a poll is demanded, it shall be taken in such manner and (subject as provided below) either at once or after such adjournment as the chairman directs. The result of the poll shall be deemed to be the resolution of the meeting at which it was demanded as at the date it was taken. A demand for a poll shall not prevent the meeting continuing for the transaction of business other than the question on which it has been demanded. 19 A poll demanded on the election of a chairman or on a question of adjournment shall be taken at once. 20 On a show of hands every person who is present in person and who produces a Certificate of which he is the registered holder or a voting certificate or is a proxy or representative has one vote. On a poll every such person has one vote in respect of each integral currency unit of the Specified Currency of such Series of Instruments so produced or represented by the voting certificate so produced or for which he is a proxy or representative. Without prejudice to the obligations of proxies, a person entitled to more than one vote need not use them all or cast them all in the same way. 21 In case of equality of votes the chairman shall both on a show of hands and on a poll have a casting vote in addition to any other votes which he may have. Effect and Publication of an Extraordinary Resolution 22 An Extraordinary Resolution shall be binding on all the Instrumentholders, whether or not present at the meeting, and each of them shall be bound to give effect to it accordingly. The passing of such a resolution shall be conclusive evidence that the circumstances justify its being passed. The Issuer shall give notice of the passing of an Extraordinary Resolution to Instrumentholders within 14 days but failure to do so shall not invalidate the resolution. Minutes 23 Minutes shall be made of all resolutions and proceedings at every meeting and, if purporting to be signed by the chairman of that meeting or of the next succeeding meeting, shall be conclusive evidence of the matters in them. Until the contrary is proved every meeting for which minutes have been so made and signed shall be deemed to have been duly convened and held and all resolutions passed or proceedings transacted at it to have been duly passed and transacted. Written Resolution and Electronic Consent 24 A resolution in writing signed by or on behalf of the holders of not less than 95 per cent. in nominal amount of the Instruments who for the time being are entitled to receive notice of a meeting in accordance with the provisions of this Schedule shall for all purposes be as valid


 
A42485973 75 and effectual as an Extraordinary Resolution passed at a meeting of such Instrumentholders duly convened and held in accordance with the provisions of this Schedule. Subject to the following sentence, a Written Resolution may be contained in one document or in several documents in like form, each signed by or on behalf of one or more of the Instrumentholders. For so long as the Instruments are in the form of a Global Certificate held on behalf of one or more of Euroclear, Clearstream, Luxembourg or an Alternative Clearing System, then, in respect of any resolution proposed by the Issuer or the Trustee: 25 Electronic Consent: where the terms of the resolution proposed by the Issuer or the Trustee (as the case may be) have been notified to the Instrumentholders through the relevant clearing system(s) as provided in sub-paragraph (i) and/or (ii) below, each of the Issuer and the Trustee shall be entitled to rely upon approval of such resolution given by way of electronic consents communicated through the electronic communications systems of the relevant clearing system(s) to the relevant Paying Agent or another specified agent in accordance with their operating rules and procedures by or on behalf of the holders of not less than 95 per cent. in nominal amount of the Instruments outstanding (the “Required Proportion”) (“Electronic Consent”) by close of business on the Relevant Date. The relevant Paying Agent shall confirm the result of voting on any Electronic Consent in writing to the Issuer and the Trustee (in a form satisfactory to the Trustee), specifying (as of the Relevant Date): (i) the outstanding nominal amount of the Instruments and (ii) the outstanding nominal amount of the Instruments in respect of which consent to the resolution has been given in accordance with this provision. The Issuer and the Trustee may act without further enquiry on any such confirmation from the relevant Paying Agent and shall have no liability or responsibility to anyone as a result of such reliance or action. The Trustee shall not be bound to act on any Electronic Consent in the absence of such a confirmation from the relevant Paying Agent in a form satisfactory to it. Any resolution passed in such manner shall be binding on all Instrumentholders, even if the relevant consent or instruction proves to be defective. The Issuer shall not be liable or responsible to anyone for such reliance: (i) When a proposal for a resolution to be passed as an Electronic Consent has been made, at least 14 days’ notice (exclusive of the day on which the notice is given or deemed to be given and of the day on which affirmative consents will be counted) shall be given to the Instrumentholders through the relevant clearing system(s). The notice shall specify, in sufficient detail to enable Instrumentholders to give their consents in relation to the proposed resolution, the method by which their consents may be given (including, where applicable, blocking of their accounts in the relevant clearing system(s)) and the time and date (the “Relevant Date”) by which they must be received in order for such consents to be validly given, in each case subject to and in accordance with the operating rules and procedures of the relevant clearing system(s). (ii) If, on the Relevant Date on which the consents in respect of an Electronic Consent are first counted, such consents do not represent the Required Proportion, the resolution shall be deemed to be defeated. Such determination shall be notified in writing to the other party or parties to the Trust Deed by the relevant Paying Agent. Alternatively, the party proposing such resolution (the “Proposer”) may give a further notice to Instrumentholders in accordance with (i) above that the resolution will be proposed again. Such notice must inform Instrumentholders that insufficient consents were received in relation to the original resolution and the information specified in sub-


 
A42485973 76 paragraph (i) above. For the purpose of such further notice, references to “Relevant Date” shall be construed accordingly. For the avoidance of doubt, an Electronic Consent may only be used in relation to a resolution proposed by the Issuer or the Trustee which is not then the subject of a meeting that has been validly convened in accordance with paragraph 3 above, unless that meeting is or shall be cancelled or dissolved; and 26 Written Resolution: where Electronic Consent is not being sought, for the purpose of determining whether a Written Resolution has been validly passed, the Issuer and the Trustee shall be entitled to rely on consent or instructions given in writing directly to the Issuer and/or the Trustee, as the case may be, (a) by accountholders in the clearing system(s) with entitlements to such Global Certificates and/or, (b) where the accountholders hold any such entitlement on behalf of another person, on written consent from or written instruction by the person identified by that accountholder as the person for whom such entitlement is held. For the purpose of establishing the entitlement to give any such consent or instruction, the Issuer and the Trustee shall be entitled to rely on any certificate or other document issued by, in the case of (a) above, Euroclear, Clearstream, Luxembourg or any other relevant Alternative Clearing System and, in the case of (b) above, the relevant clearing systems and the accountholder identified by the relevant clearing systems for the purposes of (b) above. Any resolution passed in such manner shall be binding on all Instrumentholders, even if the relevant consent or instruction proves to be defective. Any such certificate or other document shall, be conclusive and binding for all purposes. Any such certificate or other document may comprise any form of statement or print out of electronic records provided by the relevant clearing systems in accordance with their usual procedures and in which the accountholder of a particular nominal amount of the Instruments is clearly identified together with the amount of such holding. Neither the Issuer, nor the Trustee shall be liable to any person by reason of having accepted as valid or not having rejected any certificate or other document to such effect purporting to be issued by any such person and subsequently found to be forged or not authentic. A Written Resolution or Electronic Consent shall take effect as an Extraordinary Resolution. A Written Resolution and/or Electronic Consent will be binding on all Instrumentholders, whether or not they participated in such Written Resolution and/or Electronic Consent. Trustee’s Power to Prescribe Regulations 27 Subject to all other provisions in this Trust Deed the Trustee may without the consent of the Instrumentholders prescribe such further regulations regarding the holding of meetings and attendance and voting at them as it in its sole discretion determines including (without limitation) such requirements as the Trustee thinks reasonable to satisfy itself that the persons who purport to make any requisition in accordance with this Trust Deed are entitled to do so and as to the form of voting certificates or block voting instructions so as to satisfy itself that persons who purport to attend or vote at a meeting are entitled to do so. 28 The holder of a Global Certificate shall (unless such Global Certificate represents only one Instrument) be treated as two persons for the purposes of any quorum requirements of a meeting of Instrumentholders. 29 The above provisions of this Schedule shall have effect subject to the following provisions:


 
A42485973 77 29.1 Meetings of Instrumentholders of separate Series will normally be held separately. However, the Trustee may from time to time determine that meetings of Instrumentholders of separate Series shall be held together. 29.2 A resolution that in the opinion of the Trustee affects one Series alone shall be deemed to have been duly passed if passed at a separate meeting of the Instrumentholders of the Series concerned. 29.3 A resolution that in the opinion of the Trustee affects the Instrumentholders of more than one Series but does not give rise to a conflict of interest between the Instrumentholders of the different Series concerned shall be deemed to have been duly passed if passed at a single meeting of the Instrumentholders of the relevant Series provided that for the purposes of determining the votes an Instrumentholder is entitled to cast pursuant to paragraph 20, each Instrumentholder shall have one vote in respect of each whole Euro 1.00 nominal amount of Instruments held, converted, if such Instruments are not denominated in Euro, in accordance with Clause 8.13 (Currency Conversion). 29.4 A resolution that in the opinion of the Trustee affects the Instrumentholders of more than one Series and gives or may give rise to a conflict of interest between the Instrumentholders of the different Series concerned shall be deemed to have been duly passed only if it shall be duly passed at separate meetings of the Instrumentholders of the relevant Series. 29.5 To all such meetings as previously set out all the preceding provisions of this Schedule shall mutatis mutandis apply as though references therein to Instruments and to Instrumentholders were references to the Instruments and Instrumentholders of the Series concerned.


 
A42485973 Signature page to Trust Deed In witness of which this Trust Deed is delivered on the date stated at the beginning. EXECUTED AND DELIVERED AS A DEED BY NATIONAL GRID NORTH AMERICA INC. by:


 


 
11/66374368_14 1 s EXECUTION VERSION Share Purchase Agreement PPL WPD Limited and National Grid Holdings One Plc and National Grid Plc for the sale and purchase of all of the issued shares of PPL WPD Investments Limited March 2021 17 Exhibit 4(b).2


 
11/66374368_14 2 CONTENTS CLAUSE PAGE 1. DEFINITIONS AND INTERPRETATION ....................................................................... 1 2. SALE AND PURCHASE ........................................................................................... 14 3. CONDITIONS ....................................................................................................... 14 4. PERIOD TO COMPLETION ...................................................................................... 21 5. TERMINATION FEE ............................................................................................... 24 6. COMPLETION ....................................................................................................... 25 7. LEAKAGE ............................................................................................................ 27 8. FUNDAMENTAL WARRANTIES................................................................................. 28 9. SELLER WARRANTIES AND SELLER LIABILITY .......................................................... 30 10. BUYER UNDERTAKINGS ........................................................................................ 32 11. INSURANCE ........................................................................................................ 33 12. CONFIDENTIAL INFORMATION ............................................................................... 33 13. ANNOUNCEMENTS ............................................................................................... 34 14. ASSIGNMENT ...................................................................................................... 35 15. COSTS ............................................................................................................... 36 16. EFFECT OF COMPLETION ....................................................................................... 36 17. SELLER RESTRICTIVE COVENANTS ......................................................................... 36 18. POST-COMPLETION UNDERTAKINGS AND SERVICES ................................................. 36 19. EMPLOYEE INCENTIVE ARRANGEMENTS .................................................................. 39 20. FURTHER ASSURANCES ........................................................................................ 40 21. ENTIRE AGREEMENT ............................................................................................. 40 22. VARIATIONS ....................................................................................................... 41 23. WAIVER .............................................................................................................. 41 24. INVALIDITY ......................................................................................................... 41 25. NOTICES ............................................................................................................ 41 26. COUNTERPARTS................................................................................................... 43 27. GOVERNING LAW AND JURISDICTION .................................................................... 43 28. THIRD PARTY RIGHTS ........................................................................................... 44 29. US TAX (ELECTIONS) ........................................................................................... 44 SCHEDULE 1 ................................................................................................................... 47 Seller Warranties ............................................................................................................. 47 SCHEDULE 2 ................................................................................................................... 66 Limitations on Seller Liability ............................................................................................. 66 SCHEDULE 3 ................................................................................................................... 71 Action Pending Completion ................................................................................................ 71 SCHEDULE 4 ................................................................................................................... 74 Permitted Leakage Payments ............................................................................................. 74


 
11/66374368_14 1 THIS AGREEMENT is made on March 2021 BETWEEN: (1) PPL WPD LIMITED (No. 09172857) whose registered office is at Avonbank, Feeder Road, Bristol, BS2 0TB (the "Seller"); (2) NATIONAL GRID HOLDINGS ONE PLC (No. 02367004)) whose registered office is at 1 - 3 Strand, London, WC2N 5EH (the "Buyer"); and (3) NATIONAL GRID PLC (No. 04031152)) whose registered office is at 1 - 3 Strand, London, WC2N 5EH ("National Grid "). THE PARTIES AGREE AS FOLLOWS: 1. DEFINITIONS AND INTERPRETATION 1.1 In this agreement the following words and expressions and abbreviations have the following meanings, unless the context otherwise requires: "£210,000,000 Revolving Credit Facility Agreement" means the facility agreement originally dated 13 January 2016 entered into between WPD plc (as borrower), Mizuho Bank PLC (as facility agent) and certain financial institutions listed therein (as original lenders) relating to a £210,000,000 multi-currency revolving credit facility contained in the Data Room (documents 4.1.2.7, 4.1.2.20, 4.1.2.21, 4.1.2.24 and 4.1.2.25); "£210,000,000 Revolving Credit Facility Agreement Amendment Agreement" means an unconditional amendment agreement in respect of the £210,000,000 Revolving Credit Facility Agreement, to be entered into between WPD plc (as borrower) and Mizuho Bank PLC (as facility agent) which (a) amends clauses 19.5.1 and 19.5.2 (Negative Pledge) of the £210,000,000 Revolving Credit Facility Agreement so that the covenants contained within those clauses apply only to the Borrower, any Distribution Company and any Holding Company of a Distribution Company (to the extent such Holding Company is a member of the Group) (in each case, as defined in the £210,000,000 Revolving Credit Facility Agreement); and (b) confirms that no Default or Event of Default (as defined in the £210,000,000 Revolving Credit Facility Agreement) is outstanding in connection with the amendments made to clauses 19.5.1 and 19.5.2 (Negative Pledge) of the £210,000,000 Revolving Credit Facility Agreement or the existence of any Security Interest or Quasi- Security (as defined in the £210,000,000 Revolving Credit Facility Agreement) over any of the assets of any Holding Company of a Distribution Company that is not a member of the Group (in each case, as defined in the £210,000,000 Revolving Credit Facility Agreement); "£350,000,000 Term Loan Facility Agreement" means the facility agreement dated 26 February 2021 entered into between WPD plc (as borrower), J.P. Morgan AG (as agent) and certain financial institutions listed therein (as original lenders) relating to a £350,000,000 term loan contained in the Data Room (document 4.1.4.5); "£50,000,000 Term Loan Facility Agreement" means the facility agreement originally 7 June 2019 entered into between WPD plc (as borrower) and National Westminster Bank PLC (as agent and original lender) relating to a £50,000,000 term loan facility contained in the Data Room (document 4.1.2.10); "Accounts" means the Locked Box Accounts and the Company Accounts; "Accounts Date" means 31 March 2020; "Accounts Relief" has the meaning given to it in the Tax Deed; 17


 
11/66374368_14 2 "Additional Consideration" means an amount equal to £548,000 per calendar day for the period from (and including) 1 January 2021 to (and including) the date of Completion; "Adverse Recommendation Change" has the meaning given to it in clause 3.4(b); "After-Tax Basis" means when referenced in any indemnity, payment obligation or covenant to pay that, if and to the extent that the amount payable pursuant to such indemnity, obligation or covenant is subject to a deduction or withholding required by law in respect of Tax or is chargeable to any Tax in the hands of the recipient, such amount shall be increased so as to ensure that, after taking into account the amount of Tax required to be deducted or withheld from, and the Tax chargeable on, such amount (including on the increased amount), the recipient of the sum is in the same position as it would have been in had no such deduction, withholding or Tax been payable; "Anti-Bribery and Corruption Laws" means the Bribery Act 2010, the US Foreign Corrupt Practices Act of 1977 or the anti-bribery and corruption laws of any jurisdiction to which any Group Company is subject and in each case any related rules, regulations and guidance; "Anti-hybrid Tax Indemnity Claim" has the meaning given to it in the Tax Deed; "Approved Announcement" means an announcement in the agreed terms; "BEIS" means the Department for Business, Energy and Industrial Strategy; "Business Day" means a day (excluding Saturdays) on which banks generally are open in London and New York for the transaction of normal banking business; "Buyer's Group" means the Buyer and its group undertakings together with any person that directly or indirectly Controls, who is Controlled by or is under common Control of those persons referred to above, and all of them and each of them from time to time as the context admits and "member of the Buyer's Group" shall be construed accordingly; "Buyer's Solicitors" means Herbert Smith Freehills LLP of Exchange House, 12 Primrose Street, London, EC2A 2EG; "Central Networks Group" means the section of the Electricity Supply Pension Scheme known as the Central Networks Group; "Change of Controller Application" means a change of control application from the Buyer and Aztec Insurance Limited in respect of its proposed acquisition of control over the GFSC Regulated Entity pursuant to section 25 of the Insurance Law; "Circular" means the circular to be despatched by National Grid to its shareholders to convene the General Meeting in accordance with the Listing Rules; "Claim" means all and any of a Seller Warranty Claim and a Tax Claim; "CMA" means the UK Competition and Markets Authority; "Code" means the United States Internal Revenue Code of 1986, as amended; "Company" means PPL WPD Investments Limited (No. 10991462) whose registered office is at Avonbank, Feeder Road, Bristol, BS2 0TB; "Company Accounts" means the audited financial statements of the Company for the financial period ended on the Accounts Date included in the Data Room (document 3.1.2.25);


 
11/66374368_14 3 "Completion" means the completion of the sale and purchase of the Shares in accordance with clause 6; "Completion Date" means the date on which Completion occurs; "Conditions" means the conditions set out in clause 3.1; "Confidential Information" means all information relating to any Group Company's business, financial or other affairs (including future plans and targets of any Group Company); "Consideration" means the sum of the Fixed Consideration and the Additional Consideration less any amount of Notified Leakage; "Control" means, in relation to any person (a "Controlled Person"), the ability of another person (such other person, in relation to the first mentioned person, a "Controller"), by virtue of the rights or contracts owned, held or entered into by the Controller or by any other means, to exercise decisive influence over such Controlled Person, in particular by: (a) ownership or the right to use all or part of the assets of such Controlled Person; and/or (b) rights or contracts which confer decisive influence on the composition, voting or decisions of the organs of such Controlled Person, and "Controlled" shall be construed accordingly; "Controllers Exemption Order" means the Financial Services and Markets Act 2000 (Controllers) (Exemption) Order 2009/774; "Co-obligor Agreement" means the fifth supplemental indenture between, amongst others, PPL UK Resources Limited and WPD plc dated 2 January 2019 whereby PPL UK Resources Limited and WPD plc agreed to act as jointly and severally liable co-obligors with respect to the $300,000,000.00 7.375% notes due on 15 December 2028 originally issued by WPD Holdings UK (now dissolved), contained in the Data Room (document 4.1.1.7); "Co-obligor Assignment Agreement" means the sixth supplemental indenture between, amongst others, PPL UK Resources Limited and WPD plc dated 16 December 2020 and pursuant to which PPL UK Resources Limited has assigned its obligations to the Company, contained in the Data Room (document 4.1.1.75); "Cyber Insurance Policies" means all insurance policies held for the benefit of the Seller's Group in which any Group Company has an interest and in respect of which the time limit for notification of claims has not expired as at the Completion Date, covering such Group Company for loss that it may suffer on various cyber events, and where such events occurred prior to the Completion Date when any Group Company was under the management control of the Seller, for example those insurance policies outlined in "Pluto Cyber Program Summary 7 9 2020" (document 15.4.1) and "Pluto DO and Cyber Program Charts 2020" (document 15.4.2) in the Data Room; "CTA 2009" means the Corporation Tax Act 2009; "CTA 2010" means the Corporation Tax Act 2010; "D&O Insurance Policies" means all insurance policies held for the benefit of the Seller's Group in which any Group Company has an interest and in respect of which the time limit for notification of claims has not expired as at the Completion Date, covering its directors and officers for loss that they may suffer on account of claims made against them for an actual or alleged wrongful act committed in their capacity as a director or officer, and where


 
11/66374368_14 4 such wrongful act(s) occurred prior to the Completion Date when any Group Company was under the management control of the Seller, for example those insurance policies outlined in "Pluto DO and Cyber Program Charts 2020" (document 15.4.2) and "Pluto DO Liability Insurance Brochure 1-10-20_Redacted" (document 15.4.3) in the Data Room; "Data Room" means the online data room relating to the Group which is operated by Intralinks under the name "Project Vortex" and made available to the Buyer as at 16:38 (GMT) on 17 March 2021; "Data Room Information" means the materials and information contained in the Data Room, an index of which is appended to the Disclosure Letter; "Defined Benefit Pension Schemes" means: (a) the Western Power Distribution Group of the Electricity Supply Pension Scheme; (b) the Central Networks Group of the Electricity Supply Pension Scheme; (c) the Western Power Utilities Pension Scheme; and (d) the following sections of the Western Power Pension Scheme: (i) the I92 Section; (ii) the 1993 Section; and (iii) the MEPS 2020 Section; "Demand Loan" means the demand loan of up to $125 million between WPD plc (as borrower) and PPL Capital Funding Inc. (as lender) dated 1 April 2015 contained in the Data Room (document 4.1.2.32); "Disclosed" means any fact, matter, event or circumstance which is fairly disclosed in such manner and with sufficient details that a professionally advised buyer would reasonably be expected to be aware of that fact, matter, event or circumstance being disclosed and its scope; "Disclosure Letter" means the letter dated the same date as this agreement together with the attachments thereto addressed by the Seller to the Buyer disclosing exceptions to the Seller Warranties; "Distribution Licences" means, in relation to each of the DNOs, the electricity distribution licence that has come into effect in relation to it pursuant to section 6(1)(c) of the Electricity Act 1989; "Distribution System" means the electricity distribution system managed and operated by a DNO pursuant to the terms of its Distribution Licence; "DNOs" means the four distribution network operators in the Group, namely: (a) Western Power Distribution (South West) plc; (b) Western Power Distribution (South Wales) plc; (c) Western Power Distribution (West Midlands) plc; and (d) Western Power Distribution (East Midlands) plc;


 
11/66374368_14 5 "DP Legislation" means any law, statute, declaration, decree, directive, legislative enactment, order, ordinance, regulation, rule or other binding restriction (as amended, consolidated or re-enacted from time to time) which relates to the protection of individuals with regards to the processing of personal data or to the privacy of electronic communication to which a party is or has been from time to time subject, including without limitation, as applicable the Data Protection Act 2018, the GDPR, the UK General Data Protection Regulation (as defined by the Data Protection Act 2018 and as amended by the Data Protection, Privacy and Electronic Communications (Amendments etc) (EU Exit) Regulations 2019) as incorporated into the laws of the UK by virtue of section 3 of the European Union (Withdrawal) Act 2018, and the Privacy and Electronic Communications (EC Directive) Regulations 2003; EA Technology Group" means the section of the Electricity Supply Pension Scheme known as the EA Technology Group; "EHS" means environmental, and health and safety matters; "EHS Consents" means any material permits, licences, authorisations, registrations, registerable exemptions or consents required under EHS Law for the operation of the business of the relevant Group Company as at the date of this agreement; "EHS Law" means all applicable law, statutes, regulations, subordinate legislation, common law, or order or judgment of any competent court, statutory guidance, codes of practice and the requirements of any EHS Regulatory Authority, in each case, which has the force of law in England and Wales at the date of this agreement and which has as its purpose the protection or prevention of harm to, or the remediation or restoration of, the Environment, or the health and safety of any person (but excluding any such laws relating to (a) town and country or infrastructure planning and (b) electricity or energy markets regulation); "EHS Regulatory Authority" means any EHS governmental authority, agency or department, or with regard to corporate manslaughter offences the police authorities, having authority under or jurisdiction in respect of any EHS Law; "EHS Warranties" means the warranties set out in paragraph 18 of schedule 1; "Electricity Supply Pension Scheme" means the pension scheme established by a resolution of the Electricity Council dated 20 January 1983; "Employees" means any persons employed by or holding office with any Group Company under a contract of employment or service contract, but, for the avoidance of doubt, excluding any individual engaged as a contractor or consultant pursuant to a contract for services with or in respect of any Group Company; "Encumbrance" means any claim, charge, mortgage, lien, pledge, encumbrance, option, equity, power of sale, hypothecation, retention of title, right of pre-emption, right of first refusal or security interest or any other third party right or other security interest or any other agreement, arrangement or obligation to create any of the foregoing; "Environment" means any and all of the following media namely the air, water and land and any living organisms or systems supported by those media; "Ex-Hyder Directors Unfunded Pensions Plan" means the unfunded pension plan concerning certain individuals who had been executives of the Hyder Business; "Ex-Hyder Liability" means the costs associated with the Ex-Hyder Directors Unfunded Pensions Plan; "Ex-Hyder Liability Novation Agreement" means the deed of novation between the Seller, Western Power Distribution (South Wales) plc and the Company dated 10 March


 
11/66374368_14 6 2021 novating the Ex-Hyder Liability from the Seller to the Company, contained in the Data Room (document 2.5.18.14); "FCA" means the United Kingdom Financial Conduct Authority (or any successor body); "FCA Regulated Entity" means Western Power Distribution (South West) plc (registered company number 02366894, firm reference number 720519) which is authorised and regulated by the FCA; "Financial VDD Report" means the financial vendor due diligence report prepared by PricewaterhouseCoopers LLP dated 4 December 2020 and the addendum dated 4 February 2021 in relation to the Transaction contained in the Data Room (documents 21.9 and 24.1); "Fixed Consideration" means £7,790,923,120; "FSMA" means the United Kingdom Financial Services and Markets Act 2000; "GDPR" means the General Data Protection Regulation (EU) 2016/679; on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, repealing Directive 95/46/EC; "General Meeting" means the general meeting of National Grid to be convened to approve the Resolutions; "GFSC" means the Guernsey Financial Services Commission; "GFSC Regulated Entity" means Aztec Insurance Limited (registered company number 22227) which is authorised and regulated by the GFSC; "Group" means the Company and the Subsidiaries and "Group Company" and "member of the Group" means any one of them; "Group Finance Agreements" means the finance arrangements of the Group contained in the Data Room (folders 4.1.1, 4.1.2, 4.1.3 and 4.1.4); "Group Relief" has the meaning given to it in the Tax Deed; "HMRC" means Her Majesty's Revenue and Customs and, where relevant, any predecessor body which carried out part of its functions; "Hyder Business" means the Welsh water and electricity business of Hyder plc and its group, which was acquired by the Group in 2000, including its electricity distribution business, known as Infralec; "IAS Regulation" means EC Regulation No. 1606/2002 of the European Parliament and the Council of 19 July 2002 on the application of international accounting standards; "IFRS" means the international accounting standards, within the meaning of the IAS Regulation, as adopted from time to time by the European Commission in accordance with that regulation; "Insurance Law" means The Insurance Business ( Bailiwick of Guernsey) Law 2002; "Insurance Policy" means the warranty and indemnity insurance policy taken out by the Buyer in connection with the Transaction; "Incentive Schemes" means: (i) the PPL Corporation Amended and Restated 2012 Stock Incentive Plan (documents 8.6.4, 8.6.5, 8.6.9 to 8.6.11, 8.6.20 to 8.6.23, and 8.6.32 in the Data Room); (ii) the PPL Corporation Incentive Compensation Plan for Key Employees


 
11/66374368_14 7 (documents 8.6.2, 8.6.3, 8.6.6 to 8.6.8, 8.6.16 to 8.6.19, and 8.6.40 in the Data Room); the PPL Corporation Short Term Incentive Plan (document 8.6.45 in the Data Room); (iv) the Managerial Results Related Bonus Scheme (documents 8.2.1 and 8.2.4 in the Data Room); and (v) the Phantom Stock Options; "Intellectual Property" means patents, trade marks, service marks and trade names (and the goodwill symbolised by any of the foregoing), Internet domain names, design rights, copyrights (whether registered or not and any applications to register or rights to apply for registration of any of the foregoing), moral rights, rights in inventions, Know-How, trade secrets and other confidential information (whether tangible or intangible), and all other intellectual property rights of a similar or corresponding character or having equivalent or similar effect in any jurisdiction in any part of the world, together with the right to sue for passing off or past infringement of any of the foregoing; "IRS" means the United States Internal Revenue Service; "IT Agreement" means any agreement under which any third party provides an element of, or services relating to, the IT Systems; "IT Systems" means the information technology used in the Group's business including all communications systems, cabling, networks, websites, computer hardware, mobile devices, databases, firmware and software owned, used, leased, licensed or held for use by any Group Company; "Key Employee" means Phil Swift, Ian Williams, Graham Halladay and Alison Sleightholm; "Know-How" means confidential or proprietary industrial, technical or commercial information and techniques in any form (including paper, electronically stored data, magnetic media, files and micro-film) including, drawings, data relating to inventions, formulae, test results, reports, research reports, project reports and testing procedures, shop practices, instruction and training manuals, market forecasts, specifications, quotations, lists and particulars of customers and suppliers, marketing methods and procedures, show-how and advertising copy; "Leakage" means: (a) any dividend, bonus or other distribution of capital or income declared, paid or made (whether in cash or in specie) or any purchase, repurchase, redemption, repayment or return of share or loan capital (or any other relevant securities) by any Group Company to or for the benefit of any member of the Seller's Group; (b) any bonus or award paid or transferred to or for the benefit of any Key Employee, or to any spouse or family member of any such Key Employee, or to any trust of which any such person is a beneficiary; (c) any payments made (including management, monitoring, service or directors' fees) by any Group Company to (or assets transferred to or liabilities assumed, indemnified, or incurred by any Group Company for the benefit of) any member of the Seller's Group or any Seller Connected Person (including with respect to any share capital or other securities of any Group Company); (d) the waiver or release by any Group Company of any economic benefit or amount owed to that Group Company by, or any claims or rights of that Group Company against, any member of the Seller's Group or any Seller Connected Person; (e) the payment by any Group Company of any professional fees or other costs or expenses in connection with the Transaction;


 
11/66374368_14 8 (f) the payment of any fees, costs or Tax incurred or paid by any Group Company as a result of the occurrence of any of those matters set out in paragraphs (a) to (e) above (which shall for the purposes of this paragraph (f) and clause 7 be deemed to have been received by the person receiving the benefit of the matter in question); and (g) the agreement or commitment (whether conditional or not) by any Group Company to do or procure the doing of any of the things set out in paragraphs (a) to (f) above, other than any Permitted Leakage Payment; "Legal VDD Report" means the legal vendor due diligence report prepared by Ashurst LLP dated 15 January 2021 (including all related schedules, appendices and addendums) in relation to the Transaction contained in the Data Room (folder 23); "Listing Rules" means the listing rules made by the FCA under Part VI of FSMA; "Locked Box Accounts" means the audited financial accounts of the WPD Group on a consolidated basis for the financial period ended on the Locked Box Date included in the Data Room (document 3.1.1.25); "Locked Box Date" means 31 March 2020; "London Stock Exchange" means the London Stock Exchange plc; "Long-stop Date" means three months from the date of this agreement or as extended pursuant to clause 3.7 (or such other date as the Buyer and Seller may agree in writing); "Management Accounts" means the: (a) unaudited management accounts of the WPD Group on a consolidated basis for the period from 1 April 2019 and ended on 31 March 2020 included in the Data Room (document 3.2.3.3); (b) unaudited management accounts of the WPD Group on a consolidated basis for the period from 1 April 2020 and ended on 31 October 2020 included in the Data Room (document 3.2.3.4); and (c) unaudited management accounts of the WPD Group on a consolidated basis for the period from 1 November 2020 and ended on 31 January 2021 included in the Data Room (document 3.2.3.5); "Management Bonuses" means any bonuses (other than the Transition Incentive Awards) paid or agreed to be paid by any member of the Group before, on or around Completion to certain members of the Group's management in relation to the Transaction; "Material Commercial Contracts" means the material commercial agreements of the Group, comprising the top 21 agreements (by contract value) whereby a Group Company is the beneficiary of works, services and/or goods, which for the purposes of identification are set out in the "material commercial agreements" list contained in the Data Room (document 6.2.1.25.1); "Material IT Agreement" means each IT Agreement that is of material importance to the conduct of the Group's business contained in the Data Room (folder 14.1.6); "Material IT System" has the meaning given in paragraph 15.1 (Information Technology) of schedule 1 (Seller Warranties);


 
11/66374368_14 9 "Material Permits" means all material licences (including the Distribution Licences), conditions, permits, approvals, authorisations, certificates, confirmations and consents which are necessary for the operation of the Group's business as it is currently operated, other than the EHS Consents; "Merger Notice" means a notice within the meaning of section 96 of the Enterprise Act 2002; "Merger Review" means any inquiry, information request, investigation or other process conducted or proposed to be conducted by the CMA in respect of the Transaction for the purposes of Part 3 of the Enterprise Act 2002, whether following submission by National Grid of a Merger Notice or otherwise, and whether or not the CMA has formally opened an investigation; "Model" means the financial model produced for the purposes of the Transaction and contained in the Data Room (document 21.8); "National Grid Facility Agreement" means the bridge facility agreement dated on or prior to the date hereof entered into between, amongst others, National Grid (as borrower) and Barclays Bank PLC and Goldman Sachs Bank USA (as the Mandated Lead Arrangers); "Notice of Control" means a notice of control from the Buyer in respect of its proposed acquisition of control over the FCA Regulated Entity pursuant to Part XII of FSMA and Article 6A of the Controllers Exemption Order; "Notified Leakage" means the amount of any dividend in respect of the calendar year ending 31 December 2021 which is paid to the Seller prior to the date which is 5 Business Days prior to Completion; "NSI Bill" means the National Security and Investment Bill 2020; "Ofgem" means the Office of Gas and Electricity Markets; "Options Spreadsheet" means the "WPD option to tax" document contained in the Data Room (document 16.8.9); "PAYE" means pay as you earn, the system requiring employers to deduct income tax from employees' salary (or an equivalent withholding system in any overseas jurisdiction); "Pension Funding Obligations" means the obligations of the Group Companies in respect of: (a) the EA Technology Group of the Electricity Supply Pension Scheme; and (b) Electricity Pensions Limited; "Pension Schemes" means: (a) the 2010 Section of the Western Power Pension Scheme; and (b) the Defined Benefit Pension Schemes; "Permitted Leakage Payment" means any of the payments or other matters set out in schedule 4; "Personal Data" has the meaning given in DP Legislation;


 
11/66374368_14 10 "Phantom Stock Options" means the phantom stock options issued to employees under the Group's long-term incentive plan, the details of which are contained in the Data Room (documents 8.2.6 and 8.2.22); "Post-Completion Services Summary" means the "Vortex - Post-Completion Services" document contained in the Data Room (document 22.6); "Properties" means all the freehold and leasehold land owned, used or occupied by a Group Company and as are necessary for the operation of the Group's business as it is currently operated; "Property Rights" means all easements, wayleaves and other similar rights granted or reserved to a Group Company; "Registrar of Companies" means the registrar of companies in England and Wales; "Related Persons" means: (a) in the case of the Seller, any member of the Seller's Group; and (b) in the case of the Buyer any member of the Buyer's Group, and all of them and each of them from time to time as the context admits; "Relevant Regulator" means (a) with respect to the FCA Condition, the FCA, (b) with respect to the GFSC Condition, the GFSC, and (c) with respect to the NSI Condition, the Secretary of State or BEIS; "Relief" has the meaning given to it in the Tax Deed; "Resolutions" has the meaning given to it in clause 3.1(c); "Retained Companies" means PPL UK Resources Limited, PPL WPD Limited and PPL UK Distribution Holdings Limited; "Schedule of Particulars" means the schedule setting out the particulars of each Group Company contained in the Data Room (document 1.1.5); "Secretary of State" means the Secretary of State for Business, Energy and Industrial Strategy; "Seller Connected Persons" means in respect of the Seller, any member of the Seller's Group or any of its or their respective advisers, directors, officers or employees, but (with the exception of Vincent Sorgi, Joseph Bergstein, Gregory Dudkin, Andrew Elmore, Joanna Raphael and Stacy Frey) should not include any Group Company or any of their respective advisers, directors, officers or employees; "Seller Fundamental Warranties" means the warranties set out in clause 8.2; "Seller Fundamental Warranty Claim" means a claim in respect of a breach of the Seller Fundamental Warranties; "Seller Warranties" means the warranties set out in clause 8.2 and schedule 1 (including, for the avoidance of doubt, the Tax Warranties); "Seller Warranty Claim" means a claim in respect of a breach of the Seller Warranties;


 
11/66374368_14 11 “Seller's Account” means the Seller's bank account at Bank of New York Mellon, Account Number: 8033045450, Swift: IRVTUS3N, or such other account as is notified to the Buyer by the Seller not later than 10 Business Days prior to the Completion Date; "Seller's Group" means the Seller, its group undertakings (excluding from Completion the Group Companies) and all of them and each of them from time to time as the context admits and "member of the Seller's Group" shall be construed accordingly (save that, for the purposes of the definition of Leakage, "Seller's Group" and "member of the Seller's Group" shall be deemed to exclude the Group Companies); "Seller's Group Guarantees" means any guarantee, security, indemnity, counter- indemnity, letter of comfort or other commitment or obligation given by or binding on the Seller or any other member of the Seller's Group to any third party in respect of any liability or obligation of any member of the Group; "Seller's Solicitors" means Ashurst LLP of London Fruit & Wool Exchange, 1 Duval Square, London E1 6PW; "Shares" means the entire issued share capital of the Company (being 2,716,100,001 ordinary shares of £1 each); "Standard Commercial Contracts" means all of the Group contracts which have a value equal to or greater than £5 million whereby a Group Company is the beneficiary of works, services and/or goods (which are not Material Commercial Contracts); "Subsidiary" means a subsidiary undertaking of the Company specified in Part B of the Schedule of Particulars and "Subsidiaries" means all those subsidiary undertakings; “Supplementary Circular” has the meaning given to it in clause 3.4(e); "STIP 2021 Award" means a payment to be made to each of the Key Employees by the Group under the PPL Corporation Short Term Incentive Plan included in the Data Room (document 8.6.45) either before or after Completion, such timing for payment to be determined by the Seller's Group in respect of the period between 1 January 2021 and Completion, the value of such payment to each Key Employee to be determined by the Seller's Group; "Tax" or "tax" means: (a) any tax, and any duty, contribution, impost, withholding, levy or charge in the nature of tax, whether domestic or foreign, and includes corporation tax, income tax (including income tax required to be deducted or withheld from or accounted for in respect of any payment), national insurance and social security contributions, apprenticeship levy, capital gains tax, inheritance tax, value added tax, customs, excise and import duties, stamp duty, stamp duty land tax, stamp duty reserve tax, insurance premium tax, air passenger duty, rates and water rates, landfill tax, petroleum revenue tax, advance petroleum revenue tax, gas levy and any other payment whatsoever which any person is or may be or become bound to make to any person and which is or purports to be in the nature of taxation; and (b) all fines, penalties, interest, and surcharges relating in any way with any tax falling within paragraph (a) above (including, for the avoidance of doubt, where imposed as a result of a failure to make any return, comply with any reporting requirements or supply any information in connection with any such taxes); "Tax Claim" means a Tax Deed Claim or a Tax Warranty Claim; "Tax Deed" means a deed of covenant to be entered into between the Buyer and the Seller on the date of Completion;


 
11/66374368_14 12 "Tax Deed Claim" means a claim under clause 2 or clause 9 of the Tax Deed (including, for the avoidance of doubt, an Anti-hybrid Tax Indemnity Claim); "Tax Return" means any return, declaration, computation, report, list, claim for refund, information return or similar statement with respect to any Tax, including any schedule or attachment thereto, and including any amendment thereof or written correspondence in relation thereto; "Tax Warranties" means the warranties set out in paragraph 13 of schedule 1; "Tax Warranty Claim" means a claim for breach of a Tax Warranty; "Taxation Authority" means any local, municipal, governmental, state, federal or fiscal, revenue, customs or excise authority, body, agency or official anywhere in the world competent to impose or administer a liability to Tax, including HMRC and the IRS; "Technical VDD Report" means the technical vendor due diligence report prepared by Ove Arup & Partners International Ltd dated 30 November 2020 in relation to the Transaction contained in the Data Room (document 21.5); "Transaction" means the transaction(s) contemplated by this agreement; "Transaction Documents" means this agreement, the Disclosure Letter and the Tax Deed, together with any other documents referred to in this agreement that have or will be entered into in connection with the Transaction; "Transition Incentive Awards" means the Transaction related bonuses to be paid by the Group to each of the Key Employees in accordance with the Transition Incentive Award Letters; "Transition Incentive Award Letters" means the letters to each of the Key Employees contained in the Data Room (documents 26.11 to 26.14 (inclusive)) and the amendments to such letters contained in the Data Room (documents 26.15 to 26.18 (inclusive)) concerning the Transition Incentive Awards; "UK GAAP" means the United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 101; "Unfunded Pension Arrangements" means: (a) the Ex-Hyder Directors Unfunded Pension Plan; and (b) the Eon UK's Central Networks Business unfunded pension plan; "VATA" means the Value Added Tax Act 1994 and "VAT legislation" means VATA and all regulations and orders made thereunder; "Western Power Distribution Group" means the section of the Electricity Supply Pension Scheme known as the Western Power Distribution Group; "Western Power Pension Scheme" means the pension scheme known as the Western Power Pension Scheme and governed by a definitive trust deed and rules dated 17 December 2012; "Western Power Utilities Pension Scheme" means the pension scheme known as the Western Power Utilities Pension Scheme and governed by a definitive trust deed and rules dated 19 April 2006;


 
11/66374368_14 13 "WPD Group" means WPD plc and its subsidiary undertakings as at the date of this agreement and "WPD Group Company" and "member of the WPD Group" means any one of them; "WPD plc" means Western Power Distribution plc (No. 09223384) whose registered office is at Avonbank, Feeder Road, Bristol, BS2 0TB; "WPUPS Reimbursement Agreement" means the agreement between Western Power Distribution (South Wales) plc and the Seller dated 30 October 2014 pursuant to which all costs relating to the Western Power Utilities Pension Scheme funded by Western Power Distribution (South Wales) plc are reimbursed by the Seller contained in the Data Room (document 9.4.3.2); and "WPUPS Reimbursement Novation Agreement" means the novation agreement between the Seller, Western Power Distribution (South Wales) plc and the Company dated 10 March 2021 novating the WPUPS Reimbursement Agreement pursuant to which the Seller will be released from the obligations under the WPUPS Reimbursement Agreement and the Company will reimburse Western Power Distribution (South Wales) plc for the costs relating to the funding of the Western Power Utilities Pension Scheme, contained in the Data Room (document 2.5.18.1). 1.2 In this agreement unless otherwise specified: (a) reference to a document in the "agreed terms" is a reference to that document in the form approved and for the purposes of identification initialled by or on behalf of the Seller and the Buyer; (b) "includes" and "including" shall mean including without limitation; (c) a "party" means a party to this agreement and includes its permitted assignees (if any); (d) a "person" includes any person, individual, company, firm, corporation, partnership, government, state or agency of a state or any undertaking (whether or not having separate legal personality and irrespective of the jurisdiction in or under the law of which it was incorporated or exists); (e) "subsidiary undertaking", "parent company", "group undertaking" and "undertaking" have the meanings as set out in the Companies Act 2006; (f) reference to any statute, statutory instrument or regulation are to those statutes, statutory instruments or regulations which are applicable to the United Kingdom; (g) reference to a "statute" or "statutory instrument" or "accounting standard" or any of their provisions is to be construed as a reference to that statute or statutory instrument or accounting standard or such provision as the same may have been amended or re-enacted before the date of this agreement; (h) reference to a "clause", "paragraph" or "schedule" is to a clause of, a paragraph of or schedule to this agreement respectively; (i) "writing" includes any methods of representing words in a legible form and except where expressly stated otherwise, shall include email; (j) words denoting the singular shall include the plural and vice versa and words denoting any gender shall include all genders; (k) reference to the time of day is reference to that time in London, England;


 
11/66374368_14 14 (l) reference to $ or dollars is to the lawful currency of the United States; and (m) reference to £ or pounds sterling is to the lawful currency of the United Kingdom. 1.3 The schedules form part of the operative provisions of this agreement and references to this agreement shall, unless the context otherwise requires, include references to the schedules. 1.4 The headings in this agreement are for information only and are to be ignored in construing it. 1.5 Any question of whether a person is connected with another shall be determined in accordance with sections 1122 and 1123 of CTA 2010 (except that in construing sections 1122 and 1123 "control" has the meaning given by section 1124 or section 450 of CTA 2010 so that there is control whenever section 1124 or 450 requires) which shall apply in relation to this agreement as it applies in relation to CTA 2010. 2. SALE AND PURCHASE 2.1 Upon the terms of this agreement and subject to the Conditions, the Seller shall sell and the Buyer shall purchase the Shares with effect from Completion with full title guarantee free from any Encumbrance, together with all accrued benefits and rights attached thereto. 2.2 The consideration for the sale of the Shares shall be the Consideration which shall be satisfied in cash upon Completion in accordance with clause 6.4(b). 2.3 The Seller waives or agrees to procure the waiver of any rights or restrictions conferred upon it or any other person which exist in relation to the transfer of the Shares hereunder under the articles of association of the Company or otherwise. 2.4 The Buyer shall not be obliged to complete the purchase of any of the Shares unless the Seller completes the sale of all of the Shares simultaneously. 2.5 Any payment due in respect of any claim under any Transaction Document shall for all purposes be deemed to be and shall take effect as a reduction in Consideration paid to the person making such payment. 3. CONDITIONS 3.1 Completion is conditional upon the fulfilment of each of the Conditions as follows: (a) either: (i) the FCA has given notice in writing, in accordance with section 189(4) or 189(7) of FSMA that it approves the Buyer, and all other persons who would on Completion become a controller of the FCA Regulated Entity (in each case an "Additional Notice Giver"), acquiring control of the FCA Regulated Entity pursuant to this agreement; or (ii) the assessment period shall have elapsed in accordance with Part XII of FSMA where, within such period the FCA has neither: (A) given such notice that it approves the obtaining by the Buyer and each Additional Notice Giver of control over the FCA Regulated Entity; nor (B) issued a warning notice in response to the Notice of Control,


 
11/66374368_14 15 so that the FCA is treated as having approved the obtaining of control over the FCA Regulated Entity by the Buyer and each Additional Notice Giver pursuant to section 189(6) of FSMA, and for the purposes of this clause 3.1(a), "control" and "controller" shall be defined and construed in accordance with FSMA (the "FCA Condition"); (b) either: (i) the GFSC has given notice in writing that it approves or has no objection to the acquisition of the GFSC Regulated Entity by the Buyer and all other persons who would on Completion become a controller of the GFSC Regulated Entity; or (ii) the assessment period shall have elapsed since the date on which the GFSC received the Change of Controller Application in circumstances such that the GFSC is deemed as having given written approval or confirmation of no objection of the obtaining of control over the GFSC Regulated Entity by the Buyer and all other persons who would on Completion become a controller of the GFSC Regulated Entity pursuant to section 25 of the Insurance Law, and for the purpose of this clause 3.1(b), "controller" shall be defined and construed in accordance with the provisions of the Insurance Law (the "GFSC Condition"); (c) the passing at the General Meeting of ordinary resolutions approving: (i) the purchase of the Shares pursuant to this agreement for the purposes of Chapter 10 of the Listing Rules, or otherwise satisfying the requirement for shareholder approval for the Transaction under Chapter 10 of the Listing Rules; and (ii) an increase in the borrowing limit in National Grid's articles of association (the "Resolutions") (the "Shareholder Approval Condition"); and (d) if the mandatory notification regime proposed in Section 14 of the NSI Bill (whether or not subject to any amendments during the passage of the NSI Bill through the UK Parliament) enters into force prior to Completion and the Buyer concludes (acting reasonably and in consultation with the Seller) that the Transaction must be approved by the Secretary of State in advance of Completion under that mandatory notification regime , the Secretary of State granting such approval or being legally deemed to have done so (with an approval for this purpose including (i) a confirmation that no further action will be taken or (ii) an approval which is subject to conditions or remedies that are imposed by order or are otherwise agreed, provided that Completion is in accordance with the terms of such order or agreement) (the "NSI Condition"), (together, the "Conditions"). 3.2 In relation to the Conditions: (a) the Buyer shall notify in writing the Seller promptly but in any event within one Business Day upon becoming aware that: (i) circumstances have arisen that are reasonably likely to result in one or more of the Conditions not being satisfied prior to the Long-stop Date together with such details of the relevant circumstances as are in the Buyer's possession at the relevant time; or (ii) any Condition has been fulfilled and provide evidence of the same. 3.3 In relation to the FCA Condition, the GFSC Condition and the NSI Condition:


 
11/66374368_14 16 (a) the Buyer undertakes to take all steps within its control (and to procure that any member of the Buyer's Group takes all steps within the control of the Buyer's Group) that are necessary to ensure that the Conditions are fulfilled as soon as possible and, in any event, prior to the Long-stop Date, and in particular, shall: (i) submit all appropriate submissions, notifications and filings in relation to the Transaction to each Relevant Regulator as soon as reasonably practicable and in any event shall: (A) with respect to the FCA Condition, submit a Notice of Control relating to the Transaction to the FCA no later than 25 March 2021; (B) with respect to the GFSC Condition, submit a Change of Controller Application relating to the Transaction to the GFSC no later than 25 March 2021; and (C) if the circumstances described in clause 3.1(d) apply, with respect to the NSI Condition, submit a mandatory notification relating to the Transaction in the required form to the Secretary of State or BEIS (as required) within five (5) Business Days of the date on which the circumstances described in clause 3.1(d) became applicable, subject, in each case, to the Seller having complied with its obligations under clause 3.5; (ii) insofar as legislation deriving from the NSI Bill is not in force as at the date of this agreement but at any point prior to Completion it becomes apparent to the Buyer (acting reasonably) that there is a reasonable likelihood that such legislation will be in force prior to Completion such that the NSI Condition will become applicable, engage with BEIS as soon as possible after such reasonable likelihood arises to: (A) agree all of the information that BEIS wishes or requires to be included in a notification relating to the Transaction, and insofar as possible, agree the form of the notification with BEIS, and (B) insofar as possible, pre-empt any concerns which BEIS or the Secretary of State may have, in each case, with a view to satisfying the NSI Condition (to the extent that it becomes applicable) as soon as practicable following the NSI Bill (whether or not subject to any amendments during the passage of the NSI Bill through the UK Parliament) coming into effect; (iii) promptly (but in any case within one Business Day) notify in writing the Seller and its advisers of any substantive communications with or requests for information from any Relevant Regulator in relation to the Transaction; (iv) notify in writing the Seller and its advisers sufficiently in advance of any substantive document, communication, notification or filing which it proposes to submit or make to any Relevant Regulator in relation to the Transaction and: (A) provide the Seller and its advisers with copies of such substantive documents, communications, notifications or filings in draft form, including any supporting documentation or information reasonably requested by the Seller;


 
11/66374368_14 17 (B) provide the Seller and its advisers with a reasonable opportunity to provide comments on such drafts prior to their submission and (acting reasonably) take account of those comments in good faith; and (C) promptly provide the Seller and its advisers with copies of all communications, documents, notifications and filings in the form submitted to each Relevant Regulator; (v) in the event that any Relevant Regulator indicates that some form of condition, remedy, undertaking or commitment is or is likely to be necessary in order to approve the Transaction and thereby satisfy a Condition, at its own cost and expense, propose, offer, negotiate and agree with each Relevant Regulator such condition, remedy, undertaking or commitment that is within the control of the Buyer or any other member of the Buyer's Group and may be necessary to obtain the relevant approval and satisfy the relevant Condition with respect to the Transaction. For the avoidance of doubt such condition, remedy, undertaking or commitment may involve the sale, divestiture, licence or disposition of any necessary assets, rights or businesses of the Buyer, any other member of the Buyer’s Group, the Company or any other member of the Group (including, for the avoidance of doubt, the Shares or any asset, business or right of any member of the Group), or if acceptable to the Relevant Regulator, may involve an undertaking or commitment on behalf of the Buyer, any other member of the Buyer’s Group, the Company or any other member of the Group to conduct its or their affairs or to behave in a particular manner; and (vi) submit all remedy offers which may be required for the purposes of paragraph (v) above to any Relevant Regulator in a fully reasoned and documented form in accordance with any required procedures and within any required timeframes; (b) unless the Relevant Regulator objects, allow persons nominated by the Seller to attend all meetings and participate in all substantive telephone or other conversations with any Relevant Regulator (save to the extent that the Relevant Regulator expressly requests that the Seller should not be present at the meeting or part or parts of the meeting) and to make oral submissions at such meetings or in such telephone or other conversations; and (c) keep the Seller promptly and fully informed as to the progress of any substantive communications, notifications or filings which are made with a view to obtaining the relevant clearance, consent or approval from the Relevant Regulator, save that in relation to all disclosures under this clause 3.3, confidential or commercially sensitive information may be disclosed on a confidential "counsel to counsel" basis only from the Buyer’s Solicitors to the Seller’s Solicitors. 3.4 In relation to the Shareholder Approval Condition, (a) National Grid shall: (i) unless an Adverse Recommendation Change has occurred and has not been reversed, regularly review with the Seller the progress of the approval by the FCA of the Circular and the satisfaction of the Shareholder Approval Condition; (ii) unless an Adverse Recommendation Change has occurred and has not been reversed, procure that the Circular is despatched to those entitled to receive it, in accordance with the Listing Rules, by the date which is the later of: (A) 1 April 2021; and


 
11/66374368_14 18 (B) the 5th Business Day after (x) a copy of the £210,000,000 Revolving Credit Facility Agreement Amendment Agreement, duly signed by each party to that agreement, has been provided to National Grid or (y) if the Seller has elected that WPD plc will prepay or repay all amounts drawn under the £210,000,000 Revolving Credit Facility and cancel all Commitments (as defined therein, as applicable) in full, confirmation in writing to National Grid’s reasonable satisfaction that such prepayment or repayment and cancellation has occurred, together with any other documentation, announcement, form, notice or circular required for the purpose of seeking approval from National Grid's shareholders to implement the Transaction and which convenes the General Meeting for a date no later than twenty-eight days from the date that the Circular is published, or such other date as the Seller and the Buyer may agree in writing; (iii) unless an Adverse Recommendation Change has occurred and has not been reversed, prior to the General Meeting, solicit votes in favour of the Resolutions and keep the Seller reasonably informed of the number of proxy votes received in favour and the number of proxy votes received against the Resolution (and any abstentions); (iv) unless an Adverse Recommendation Change has occurred and has not been reversed, propose the Resolutions as set out in the notice of the General Meeting accompanying the Circular without amendment and not seek to amend the Resolutions without the prior written consent of the Seller (such consent not to be unreasonably withheld or delayed); (v) unless an Adverse Recommendation Change has occurred and has not been reversed, subject to clause 3.4(c), convene, hold and transact the relevant business at the General Meeting at the time and date specified in the Circular and take such steps as may be necessary in connection therewith; and (vi) once the Resolutions have been approved by the shareholders of National Grid, not propose any resolution or take any action which would result in the Resolutions being revoked or amended, other than if requisitioned to do so by National Grid shareholders in accordance with the Companies Act 2006; (b) unless, in each case, the directors of National Grid determine that despatching the Circular incorporating a unanimous and unqualified recommendation from the directors of National Grid to National Grid's shareholders to vote in favour of the Resolutions to be proposed at the General Meeting, or not altering, modifying or revoking such recommendation (an "Adverse Recommendation Change") would constitute or would be highly likely to constitute a breach of their statutory or fiduciary duties, National Grid shall despatch the Circular incorporating a unanimous and unqualified recommendation from the directors of National Grid to National Grid's shareholders to vote in favour of the Resolutions to be proposed at the General Meeting and National Grid shall not fail to despatch the Circular or alter, modify or revoke such recommendation. National Grid shall obtain and take into account reputable external legal advice in respect of the same prior to an Adverse Recommendation Change and shall (to the extent not prohibited by applicable law) notify the Seller as soon as practicable if the directors of National Grid determine that it is necessary to make an Adverse Recommendation Change and shall provide the Seller with reasonable detail in relation to the reason(s) for such Adverse Recommendation Change (including the matters, events or circumstances giving rise to such determination);


 
11/66374368_14 19 (c) unless an Adverse Recommendation Change has occurred and has not been reversed, National Grid shall not adjourn the General Meeting without the prior written consent of the Seller (not to be unreasonably withheld or delayed) unless it is not possible to seek such consent because the motion to adjourn is only moved at the General Meeting either by shareholders (other than the directors) or by the chairman as required by his fiduciary duties and obligations as chairman of the General Meeting. Notwithstanding any provision of this agreement to the contrary, National Grid may, in its sole discretion (acting reasonably), adjourn, recess or postpone the General Meeting: (i) to the extent required by applicable law; or (ii) if at the time for which the General Meeting is scheduled (as set forth in the Circular) there is an insufficient number of National Grid's shares represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the General Meeting. Unless an Adverse Recommendation Change has occurred and has not been reversed, if the General Meeting is adjourned to a day other than that on which it was originally convened, it shall be adjourned for as short a period as is reasonably practicable (or such longer period as the Seller and National Grid may agree in writing, such agreement not to be unreasonably withheld or delayed); (d) the Seller shall, to the extent such information is within its control or the control of the relevant Group Company, and subject to all applicable law: (i) procure that the Group shall, in a timely manner, provide such information as is reasonably requested by the Buyer or National Grid for the purposes of compliance with the Listing Rules in connection with the production of the Circular (and any supplement or amendment thereto); and (ii) in a timely manner, provide such information relating to the Seller or the Seller's Group as is reasonably requested by the Buyer or National Grid for the purpose of compliance with the Listing Rules in connection with the production of the Circular (and any supplement or amendment thereto), provided that neither the Seller nor any Group Company shall authorise or take any responsibility for the form or content of the Circular (or any part of them); (e) each party shall promptly notify the other parties if it becomes actually aware that any of the information supplied by, or on behalf of, it for the purposes of the Circular contains a misstatement or omission, or otherwise has become false or misleading, in each case in any material respect, or that the Circular contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they are made, not misleading, or otherwise requires an amendment or supplement, and shall supply such information to the others as shall be necessary to correct the misstatement or omission. Without limiting the foregoing, if a party becomes aware of any event or change which is required under the Listing Rules to be set out in an amendment or supplement to the Circular (a "Supplementary Circular") (including as a result of a misstatement or omission of the kind described in the immediately preceding sentence), as applicable, such party shall promptly inform the other parties, and National Grid shall (to the extent required by applicable law): (i) prepare any Supplementary Circular as soon as reasonably practicable following the matter or circumstance giving rise to the requirement to publish that Supplementary Circular; (ii) allow the Seller reasonable opportunity to review and comment on any such Supplementary Circular and take into account any reasonable comments of the Seller;


 
11/66374368_14 20 (iii) use reasonable best efforts to finalise any Supplementary Circular and to obtain approval of the Supplementary Circular from the FCA as soon as reasonably practicable; and (iv) subject to approval of the FCA, publish and (to the extent required) dispatch the Supplementary Circular to its shareholders promptly after receipt of such approval; and (f) each party shall be entitled to terminate this agreement at any time prior to the Long-stop Date by written notice to the other party if the directors of National Grid: (i) fail to include in the Circular a unanimous and unqualified recommendation from the directors of National Grid to National Grid's shareholders to vote in favour of the Resolutions to be proposed at the General Meeting pursuant to clause 3.4(b); or (ii) make an Adverse Recommendation Change, which has not been reversed, prior to the Resolutions being approved. 3.5 In relation to the Conditions, the Seller shall: (a) promptly provide the Buyer and the Relevant Regulators with any information that is reasonably requested by the Buyer or any Relevant Regulator (as applicable) and reasonably required for the purpose of making any filings, submissions and notifications (including for the purposes of responding to requests for further information) in relation to the Transaction; (b) notify in writing the Buyer and its advisers sufficiently in advance of any substantive document or communication which it proposes to submit or make to any Relevant Regulator in relation to the Transaction and: (i) provide the Buyer and its advisers with copies of such substantive documents or communications in draft form, including any supporting documentation or information reasonably requested by the Buyer; (ii) provide the Buyer and its advisers with a reasonable opportunity to provide comments on such drafts prior to their submission and (acting reasonably) take account of those comments; and (iii) provide the Buyer and its advisers with copies of all such communications or documents in the form submitted to a Relevant Regulator; save that in relation to all disclosure under this clause 3.5, confidential or commercially sensitive information may be disclosed on a confidential "counsel to counsel" basis only from the Seller’s Solicitors to the Buyer’s Solicitors. 3.6 The Conditions may only be waived in whole or in part by both the Seller and the Buyer in writing. 3.7 This agreement shall terminate on the Long-stop Date if any of the Conditions have not been fulfilled or waived on or before the Long-stop Date, provided that: (a) the Long-stop Date shall be automatically extended by two months without any action required by any party if, as at the Long-stop Date, the FCA Condition and/or the GFSC Condition have not been satisfied; and (b) the Long-stop Date shall be automatically extended by two months without any action required by any party if, as at the Long-stop Date (including following any extension pursuant to clause 3.7(a)): (i) the circumstances described in clause


 
11/66374368_14 21 3.1(d) apply and the NSI Condition has not been satisfied, and (ii) all other Conditions have been satisfied. 3.8 If this agreement terminates in accordance with clause 3.4(f) or 3.7 then the obligations of the parties shall automatically terminate save that: (a) the rights and liabilities of the parties which have accrued prior to termination; and (b) this clause 3.8 and clauses 5, 9, 10, 11, 12 to 15, and 21 to 28, shall in each case continue to subsist. 4. PERIOD TO COMPLETION 4.1 Subject to clause 4.2, the Seller undertakes with the Buyer to exercise all its rights (including its votes as shareholder in the Company) to procure that each Group Company shall: (a) comply with schedule 3 (but only insofar as schedule 3 expressly provides that its terms are applicable to that Group Company), and save as otherwise approved by the Buyer (such approval not to be unreasonably withheld, conditioned or delayed); (b) operate its business and activities in the usual course in compliance with all laws and regulations applicable to it which are material to the conduct of the business and in substantially the same manner as its business has been carried out on and before the date of this agreement; and (c) take all reasonable steps to preserve and protect its business and assets, in each case, in the period between the date of this agreement and the date on which Completion occurs. 4.2 Clause 4.1 shall not apply in respect of and shall not operate so as to restrict or prevent: (a) if Completion has not occurred by the date falling 20 days prior to the Final Maturity Date (as defined in the £350,000,000 Term Loan Facility Agreement), any member of the Group agreeing an amendment to the £350,000,000 Term Loan Facility Agreement in order to extend the maturity date of the term loan made thereunder or entering into a replacement of the £350,000,000 Term Loan Facility Agreement, provided that such amendment and extension or replacement shall be on substantially the same terms as the £350,000,000 Term Loan Facility Agreement and shall not result in any additional costs, expenses or break fees being incurred or payable by the Group (unless otherwise agreed with the Buyer); (b) WPD plc (i) agreeing an amendment to (or a waiver of any term of) the £210,000,000 Revolving Credit Facility Agreement and/or the £50,000,000 Term Loan Facility Agreement in order to cure or remedy any default or event of default (howsoever described) that is or may be continuing and/or (ii) if any such amendment is not obtained to cure or remedy any default of event of default (howsoever described), prepaying or repaying all amounts drawn under the £210,000,000 Revolving Credit Facility Agreement and/or the £50,000,000 Term Loan Facility Agreement (and cancelling any such facility so prepaid or repaid) and, if any member of the Group so elects, entering into one or more new debt financing arrangements (whether with a third party or a member of the Seller Group) to fund such prepayment or repayment with an aggregate committed amount of not more than the facility or facilities prepaid or repaid and cancelled, provided that (x) any such amendment (or waiver) shall not impose any materially more onerous terms on the Group (or any member of the Group) and shall not result in any additional costs, expenses or break fees being incurred or payable by the Group or (y) any such new debt financing arrangement


 
11/66374368_14 22 entered into shall be on materially no worse terms than the facility or facilities prepaid or repaid and cancelled (unless, in any such case, otherwise agreed with the Buyer) provided that it may be a term of such new debt financing arrangement that it shall be repayable immediately following Completion; (c) any matter reasonably undertaken by any Group Company or member of the Seller's Group in an emergency or disaster situation or other serious incident or circumstance (including, without limitation, taking any measures reasonably required as a result of Covid-19 or any other pandemic) with the bona fide intention of minimising any adverse effect thereof where time is of the essence and seeking the consent of the Buyer might, in the reasonable opinion of the Seller, lead to a material adverse effect on the Group, imminent loss of life, personal injury or destruction of property and provided that the Buyer is promptly notified and kept up to date of such matters; (d) the completion or performance of actions which are reasonably necessary to discharge any obligations undertaken pursuant to any legal or regulatory obligation or pursuant to any contract, arrangement, licence or consent entered into by or relating to any Group Company prior to the date of this agreement; (e) any matter or action expressly provided for in, permitted, or required by the Transaction Documents or the Model, or expenditure provided for in, permitted, or required by the Transaction Documents or the Model; (f) any Permitted Leakage Payment; (g) any matter required in order to ensure that the Group complies with any law or regulation applicable to it or to comply with an official written request by any applicable regulatory authority; (h) any matter undertaken at the written request or with the written consent of the Buyer; and (i) the agreement or commitment (whether conditional or not) by any member of the Group or the Seller's Group (as applicable) to do or procure the doing of any of the things set out in clauses 4.2(a) to (h), in each case, in the period between the date of this agreement and the date on which Completion occurs. 4.3 In the event that the approval of the Buyer is sought for the purpose of clause 4.1, either the Seller or any member of the Group or the Seller's Group may seek such consent by written notice delivered via e-mail to the following persons (and any other persons that the Buyer notifies to the Seller from time to time for this purpose): Attention: The Company Secretary Email: box.Group.CoSec@nationalgrid.com 4.4 The Buyer's approval shall be deemed to have been given to the Seller if such approval has neither been granted nor denied by the Buyer within 10 Business Days of the Buyer having been notified of the request for approval in accordance with clause 4.3. In respect of any amendment to the corporation tax returns for the period ended 31 March 2019, the Buyer acknowledges that the Seller will seek approval shortly before the latest date on which those returns can be filed, being 31 March 2021, and agrees that it will not withhold, condition or delay approval by reason of the limited time to review such returns and will use all reasonable endeavours to approve such returns to enable them to be filed by the latest date on which such returns can be filed, provided that the Seller has bona fide and with reasonable despatch kept the Buyer informed of any material changes to the basis for the


 
11/66374368_14 23 amendments to such corporation tax returns from that of which the Buyer is aware at the date of this agreement as based on the Disclosure Letter and that in any event the amended return is made available to the Buyer on or before Monday 29 March 2021 (during normal business hours). 4.5 Prior to Completion, in relation to any submission to Ofgem to be made by any Group Company in respect of any matter which the Seller considers, acting in good faith, to be of material importance to the business of any Group Company, the Seller shall, and shall procure that the Group Companies shall: (a) provide the Buyer and its advisers with any information that is reasonably requested by the Buyer in relation to such matter; (b) notify in writing the Buyer and its advisers sufficiently in advance of any substantive document or communication which the Seller or any Group Company proposes to submit or make to Ofgem in relation to such matter and: (i) provide the Buyer and its advisers with copies of such substantive documents or communications in draft form, including any supporting documentation or information reasonably requested by the Buyer; (ii) provide the Buyer and its advisers with a reasonable opportunity to provide comments on such drafts prior to their submission and (acting reasonably) consider those comments; and (iii) provide the Buyer and its advisers with copies of all such communications or documents in the form submitted to Ofgem. 4.6 Notwithstanding any other provision of this agreement, in respect of any disclosures required under this agreement (including this clause 4), competitively sensitive information may be disclosed on a confidential “counsel to counsel” basis only from the Seller’s Solicitors to the Buyer’s Solicitors. 4.7 Pending Completion: (a) on reasonable notice by the Buyer to the Seller, the Seller shall procure that the Group Companies shall give the Buyer and any person authorised by it reasonable access to the premises of any Group Company during normal business hours (at the Buyer's cost and expense) so far that it is lawful and permitted under law, regulation and government guidance including with respect to COVID-19; and (b) the Seller shall procure that: (i) monthly management accounts including supporting information are provided to the Buyer, together with any other information reasonably requested by the Buyer in relation to the Group Companies and their businesses from time to time; and (ii) members of the senior management team of the Group shall meet (including by means of telephone, video conference or other audio or audio-visual link or other form of telecommunication) with representatives of the Buyer on a fortnightly basis for the purpose of discussing regulatory matters, progress on IT and cyber matters, transition planning and business performance and providing context to the materials provided to the Buyer pursuant to clause 4.7(b)(i). 4.8 Each party agrees that it will provide all information requested in writing by the other reasonably required to enable the other to comply with its obligations under the Proceeds of Crime Act 2002 and the Money Laundering, Terrorist Financing and Transfer of Funds


 
11/66374368_14 24 (Information on the Payer) Regulations 2017 whether such obligations apply prior to Completion or thereafter. 4.9 The Seller shall: (a) if agreed between the parties, use reasonable endeavours to procure that an amount equal to the Additional Consideration accrued as at the date of such agreement is paid to the Seller as Notified Leakage; and (b) notify the Buyer in writing of any Notified Leakage at least 5 Business Days prior to Completion. 4.10 The Seller confirms that as at the date of this agreement, no Group Company has any liability under the Demand Loan and that all amounts outstanding or payable by the borrower under the Demand Loan (including any principal, interest, fees and costs) have been paid in full and that the Demand Loan has been validly terminated. 5. TERMINATION FEE 5.1 Without prejudice to any other rights or remedies the Seller may have against the Buyer under this agreement or otherwise, but subject to clause 5.2, the Buyer shall pay to the Seller an amount in cash equal to: (a) $150,000,000 (the "Termination Fee") if: (i) this agreement is terminated pursuant to clause 3.4(f), in which case the Termination Fee shall become due and payable five (5) Business Days following service of the notice of termination pursuant to clause 3.4(f); or (ii) (x) an Adverse Recommendation Change occurs and has not been reversed; and (y) the General Meeting is convened and the Resolutions are put to the General Meeting and not passed (or, if adjourned, any such General Meeting which is re-convened), in which case the Termination Fee shall become due and payable five (5) Business Days following the final closing of such General Meeting (or such adjourned General Meeting as applicable); or (iii) an Adverse Recommendation Change occurs and has not been reversed, and the General Meeting has not been held prior to the Long-stop Date, in which case the Termination Fee shall become due and payable five (5) Business Days following the Long-stop Date, (the occurrence of any of those matters set out in paragraphs (i) to (iii) above being a "Termination Fee Event"); or (b) the total amount of all reasonable and documented fees, costs and expenses incurred by the Seller in connection with the preparation, execution and performance of this agreement and the transactions contemplated hereby, in an amount not to exceed $50,000,000 (the "Expenses Fee") if (x) no Adverse Recommendation Change has occurred or has occurred but has been reversed prior to the General Meeting, and (y) the General Meeting is convened and the Resolutions are put to the General Meeting and not passed (or, if adjourned, any such General Meeting which is re- convened), in which case the Expenses Fee shall become due and payable five (5) Business Days following the final closing of such General Meeting (or such adjourned General Meeting as applicable) (an "Expenses Fee Event") provided that at such time the Buyer has received written notice from the Seller describing the fees and expenses which constitute the Expenses Fee in reasonable detail, and if it has not received such notice the Expenses Fee shall be payable five (5) Business Days following such receipt.


 
11/66374368_14 25 5.2 The payment of the: (a) Termination Fee shall be in full and final settlement of any claims, whether present or future and whether known or unknown, which the Seller has or may have against any member of the Buyer’s Group arising out of or in connection with a Termination Fee Event; and (b) Expenses Fee shall be in full and final settlement of any claims, whether present or future and whether known or unknown, which the Seller has or may have against any member of the Buyer’s Group arising out of or in connection with a Expenses Fee Event. 5.3 If the Termination Fee or the Expenses Fee (as applicable) is due under clause 5.1, it will be paid by electronic transfer to the Seller's Account for same day value. Without prejudice to any other rights or remedies the Seller may have against the Buyer under this agreement or otherwise, in no circumstances shall the Buyer be required to pay more than one of the Termination Fee and the Expenses Fee. 5.4 The parties acknowledge that this clause 5 is an integral part of the Transaction, and that without clause 5, the parties would not have entered into this agreement; accordingly, if the Buyer fails to pay, when due under clause 5.1, the Termination Fee or the Expenses Fee (as applicable), then the sums not paid at that time shall bear interest at an annual interest rate of 3% above the base rate of the Bank of England from time to time accruing daily and compounding quarterly from the date such payment was due under this agreement until the date of payment. 5.5 Any references to the amount of the Termination Fee or the Expenses Fee are references to such amount exclusive of VAT chargeable in respect of any supply of goods or services for which such amount may be consideration. The Parties acknowledge that no VAT is expected to arise in respect of the payment of such amounts. In the event that any VAT is chargeable, the amount of such VAT shall be paid in addition to the Termination Fee or the Expenses Fee promptly following production of a valid VAT invoice in respect thereof. 5.6 Where the Expenses Fee is calculated by reference to any fee, cost or expense incurred by the Seller, the relevant fee, cost or expense shall be deemed to include an amount equal to any VAT comprised in that expenditure which is not recoverable by the payee (or the representative member of its VAT group) as input tax under section 25 VATA. 6. COMPLETION 6.1 Completion shall take place at the offices of the Seller's Solicitors (or remotely via the electronic exchange of executed documents) on the fifth Business Day following the day when all of the Conditions have been fulfilled or waived in accordance with clause 3.6, or if the parties agree, acting reasonably, that Completion on such fifth Business Day is impracticable, Completion shall take place on the last Business Day of the month in which the last remaining Condition has been fulfilled or waived (or at such other venue and/or date as the Buyer and Seller may agree in writing). 6.2 On Completion the Seller shall deliver to the Buyer or, in the case of clause 6.2(d), make available to the Buyer at the offices of the Group: (a) transfers in common form relating to all the Shares duly executed by the Seller in favour of the Buyer; (b) share certificates (or an indemnity for lost share certificates in the agreed terms) relating to the Shares each showing the name of the Seller as the registered holder; (c) letters of resignations in the agreed terms in respect of such directors or company secretaries of any Group Company as may be requested by the Buyer in writing at


 
11/66374368_14 26 least five (5) Business Days prior to Completion executed as a deed and waiving all claims against the Company and any Group Company; (d) the certificates of incorporation and statutory books and share certificate books of each Group Company; (e) the Seller's duly executed counterpart of the Tax Deed; and (f) an irrevocable power of attorney from the Seller in the agreed form relating to the exercise of rights in respect of the Shares pending their registration in the name of the Buyer. 6.3 At or prior to Completion (and prior to the taking effect of the resignations of the directors and company secretary referred to in clause 6.2(c)) the Seller shall procure the passing of board resolutions of each Group Company in the agreed terms: (a) (in the case of the Company), subject where necessary to due stamping, sanctioning for registration of the transfers in respect of the Shares and authorising the delivery to the Buyer of share certificates in respect of the Shares; (b) accepting the resignations referred to in clause 6.2(c); and (c) appointing such persons as notified to the Seller by the Buyer in writing at least five (5) Business Days prior to Completion to be the directors and company secretaries of the relevant Group Companies; 6.4 On Completion, the Buyer shall: (a) deliver to the Seller: (i) the Buyer's duly executed counterpart of the Tax Deed; and (ii) duly executed IRS Forms 8023 in the agreed terms, if requested pursuant to clause 29; and (b) pay the Consideration to the Seller by electronic transfer to the Seller's Account for same day value (and the receipt in the Seller's Account of such sum shall be a complete discharge to the Buyer of its obligation to pay such sum to the Seller). 6.5 If in any respect the obligations of the Seller or the Buyer are not complied with on Completion, the Buyer (if it is not in default) or the Seller (if it is not in default) may: (a) defer Completion to a date not more than 28 days after Completion should have taken place but for the said default (and so that the provisions of this clause 6, apart from this clause 6.5(a), shall apply to Completion as so deferred); or (b) proceed to Completion so far as practicable (without prejudice to its rights hereunder); or (c) terminate this agreement without prejudice to (i) the rights and liabilities of the parties which have accrued prior to termination; and (ii) this clause 6.5(c) and clauses 5, 9, 10, 11, 12 to 15, and 21 to 28 which shall in each case continue to subsist, by means of a notice in writing served on the other. 6.6 The Buyer undertakes to procure that the Company (or another member of the Group) pays the second instalment of the Transition Incentive Awards (and, if applicable, any outstanding amounts with respect to the first instalment) in accordance with the Transition


 
11/66374368_14 27 Incentive Award Letters as soon as reasonably practicable and in any event within 30 days of the Completion Date. 6.7 The Seller undertakes that, within 30 days following the date on which the Buyer notifies the Seller that the second instalment of the Transition Incentive Awards (and, if applicable, any outstanding amounts with respect to the first instalment) has been paid in accordance with the Transition Incentive Award Letters, the Seller shall, to the extent that it has not already put the Company in funds for the costs of the Transition Incentive Awards (and the associated Tax) transfer to the Company an amount equal to: (a) the aggregate value of the Transition Incentive Awards (being, for the avoidance of doubt, up to £4,007,232); and (b) any Tax arising as a result from, or otherwise in connection with, the payment of the Transition Incentive Awards (being, for the avoidance of doubt, up to £573,034). 6.8 The Buyer undertakes to the Seller that the Buyer will (at the Buyer's cost) use all reasonable endeavours to procure the release of the Seller and each other relevant member of the Seller's Group from the Seller's Group Guarantees as soon as practicable following Completion, including, without limitation, by providing guarantees or indemnities as reasonably required by the third party beneficiary of the relevant Seller's Group Guarantee. Pending such release, the Buyer undertakes to the Seller (on behalf of itself and as trustee on behalf of each other member of the Seller's Group) to keep the Seller and each other member of the Seller's Group fully indemnified on an After-Tax Basis against all amounts required to be paid by the Seller and each other relevant member of the Seller's Group to any third party pursuant to terms of any Seller's Group Guarantees (and all reasonable third party costs incurred by the Seller’s Group in connection with any such Seller's Group Guarantees). The Seller shall notify the Buyer within 10 Business Days of its (or any Seller’s Group’s) receipt of a demand under a Seller’s Group Guarantee. 6.9 Within 20 days following Completion, the Buyer undertakes that it shall take all steps required to change the name of the Company and any other Group Company which contains the word "PPL" or similar to a name which does not contain the word "PPL" or any word similar thereto. The Buyer shall not use in any commercial manner after the Completion Date the word "PPL" or any word confusingly similar thereto (and will procure the same from each member of the Buyer's Group (including, for the avoidance of doubt, the Company and any other Group Company). 7. LEAKAGE 7.1 The Seller undertakes to the Buyer that since (but excluding) the Locked Box Date until (and including) the Completion Date neither it nor any other member of the Seller's Group (other than the Group Companies) or any Seller's Connected Person has received or will receive any Leakage. 7.2 In the event of any Leakage between (but excluding) the Locked Box Date until (and including) the Completion Date (and subject to written notification to the Seller of the obligation to make such payment within six months of the Completion Date) then the Seller shall on demand by the Buyer pay to the Buyer within 10 Business Days of such demand an amount in cash in immediately available funds equal to such Leakage received or waived by the Seller or any other member of the Seller's Group (other than the Group Companies). 7.3 In the period between the date of this agreement and the Completion Date, the Seller shall promptly notify the Buyer in writing if the Seller becomes aware that any Leakage has occurred or is reasonably likely to occur, including with such notice reasonable details (including quantum) of such Leakage so far as they are known to the Seller. 


 
11/66374368_14 28 7.4 The Seller's obligation to pay such cash amount under clause 7.2 shall be the sole remedy available to the Buyer for any claim arising (directly or indirectly) from a breach of clause 7.1. 7.5 The aggregate maximum liability of the Seller for all breaches by it of the undertaking given by it in clause 7.1 shall not in any circumstances exceed the amount actually received by the Seller at Completion pursuant to this agreement. 7.6 Schedule 2 (other than paragraphs 4, 13 and 15 of schedule 2) shall not apply to any claim under this clause 7. 8. FUNDAMENTAL WARRANTIES 8.1 The Buyer warrants to the Seller that as at the date of this agreement: (a) the Buyer has full capacity, power and authority to execute this agreement and each of the other Transactions Documents to which it is a party, and to assume and perform the obligations expressed to be assumed by it hereunder and thereunder and, save as set out in or contemplated by this agreement, all consents and approvals of any other persons required therefor have been duly obtained; (b) the Buyer is a public limited company duly incorporated, duly organised and validly existing under the laws of its country of incorporation and has been in continuous existence since incorporation; (c) the execution by the Buyer of this agreement and each of the other Transactions Documents to which it is a party, and the performance by the Buyer of its obligations hereunder and thereunder, does not and will not breach any provision of its memorandum and articles of association, by-laws or equivalent constitutional documents, or result in a breach of any laws or regulations in its jurisdiction of incorporation or in any other applicable jurisdiction, or of any order, decree or judgment of any court or any governmental or regulatory authority in its jurisdiction of incorporation or in any other applicable jurisdiction; (d) the obligations expressed to be assumed by the Buyer under this agreement and each of the other Transactions Documents to which it is a party are or will be (as the case may be) legal, valid and enforceable against it in accordance with its terms; (e) no order has been made, petition presented, meeting convened to consider a resolution, or resolution passed, for the winding up or for the appointment of an administrator, liquidator, receiver, or trustee in bankruptcy of the Buyer (and no action has been taken in relation to such appointment), nor is the Buyer the subject of any analogous insolvency, reorganisation or similar proceedings anywhere in the world (or other process whereby the business is terminated and the assets of the Buyer are distributed amongst creditors or shareholders or any other contributors), nor is the Buyer insolvent or unable to pay its debts as they fall due; (f) in connection with the Transaction, the Buyer has not, directly or indirectly, given, promised, offered or authorised, or accepted, requested, received or agreed to receive, any payment, gift, reward, rebate, contribution, commission, incentive, inducement or advantage to or from any person, in contravention of Anti-Bribery and Corruption Laws; and (g) the Buyer is classified as a corporation for U.S. federal income tax purposes.


 
11/66374368_14 29 8.2 Subject to the limitations in schedule 2, the Seller warrants to the Buyer that as at the date of this agreement: (a) the Seller has full capacity, power and authority to execute this agreement and each of the other Transactions Documents to which it is a party, and to assume and perform the obligations expressed to be assumed by it hereunder and thereunder and, save as set out in or contemplated by this agreement, all consents and approvals of any other persons required therefor have been duly obtained; (b) the Seller is a company with limited liability duly incorporated, duly organised and validly existing under the laws of the United Kingdom and has been in continuous existence since incorporation; (c) the execution by the Seller of this agreement and each of the other Transactions Documents to which it is a party, and the performance by the Seller of its obligations hereunder and thereunder, does not and will not breach any provision of its memorandum and articles of association, by-laws or equivalent constitutional documents, or result in a breach of any laws or regulations in its jurisdiction of incorporation or in any other applicable jurisdiction, or of any order, decree or judgment of any court or any governmental or regulatory authority in its jurisdiction of incorporation or in any other applicable jurisdiction; (d) the obligations expressed to be assumed by the Seller under this agreement and each of the other Transactions Documents to which it is a party are or will be (as the case may be) legal, valid and enforceable against it in accordance with its terms; (e) no order has been made, petition presented, meeting convened to consider a resolution, or resolution passed, for the winding up or for the appointment of an administrator, liquidator, receiver, or trustee in bankruptcy of the Seller (and no action has been taken in relation to such appointment), nor is the Seller the subject of any analogous insolvency, reorganisation or similar proceedings anywhere in the world (or other process whereby the business is terminated and the assets of the Seller are distributed amongst creditors or shareholders or any other contributors), nor is the Seller insolvent or unable to pay its debts as they fall due; (f) the Seller is the sole legal and beneficial owner of the Shares; (g) the legal and beneficial holder of the issued share capital of each of WPD plc, WPD Investment Holdings Limited, WPD Distribution Network Holdings Limited and each of the DNOs is as set out in the Schedule of Particulars and in each case such shares are held free from any Encumbrance; (h) in connection with the Transaction, the Seller has not, directly or indirectly, given, promised, offered or authorised, or accepted, requested, received or agreed to receive, any payment, gift, reward, rebate, contribution, commission, incentive, inducement or advantage to or from any person, in contravention of Anti-Bribery and Corruption Laws; (i) the Company has not allotted any shares other than the Shares, the Shares are fully paid or credited as fully paid and there is no Encumbrance in relation to any of the Shares; and (j) other than this agreement, or as set out in the articles of association of the Company, there is no agreement, arrangement or obligation requiring the allotment, sale, transfer, redemption or repayment of, or the grant to a person of the right (conditional or not) to require the allotment, sale, transfer, conversion, redemption or repayment of, a share in the capital of the Company (including an option or right of pre-emption or conversion).


 
11/66374368_14 30 8.3 National Grid warrants to the Seller that as at the date of this agreement: (a) National Grid has full capacity, power and authority to execute this agreement, and to assume and perform the obligations expressed to be assumed by it hereunder and thereunder and, save as set out in or contemplated by this agreement, all consents and approvals of any other persons required therefor have been duly obtained; (b) National Grid is a public limited company duly incorporated, duly organised and validly existing under the laws of its country of incorporation and has been in continuous existence since incorporation; (c) the execution by National Grid of this agreement, and the performance by National Grid of its obligations hereunder, does not and will not breach any provision of its memorandum and articles of association, by-laws or equivalent constitutional documents, or result in a breach of any laws or regulations in its jurisdiction of incorporation or in any other applicable jurisdiction, or of any order, decree or judgment of any court or any governmental or regulatory authority in its jurisdiction of incorporation or in any other applicable jurisdiction; (d) the obligations expressed to be assumed by National Grid under this agreement are or will be (as the case may be) legal, valid and enforceable against it in accordance with its terms; (e) no order has been made, petition presented, meeting convened to consider a resolution, or resolution passed, for the winding up or for the appointment of an administrator, liquidator, receiver, or trustee in bankruptcy of National Grid (and no action has been taken in relation to such appointment), nor is National Grid the subject of any analogous insolvency, reorganisation or similar proceedings anywhere in the world (or other process whereby the business is terminated and the assets of National Grid are distributed amongst creditors or shareholders or any other contributors), nor is National Grid insolvent or unable to pay its debts as they fall due; and (f) in connection with the Transaction, National Grid has not, directly or indirectly, given, promised, offered or authorised, or accepted, requested, received or agreed to receive, any payment, gift, reward, rebate, contribution, commission, incentive, inducement or advantage to or from any person, in contravention of Anti-Bribery and Corruption Laws. 9. SELLER WARRANTIES AND SELLER LIABILITY 9.1 Subject to the limitations in schedule 2, the Seller warrants to the Buyer in the terms of the Seller Warranties (other than the Seller Fundamental Warranties) as at the date of this agreement. 9.2 Subject to the limitations in schedule 2, the Seller warrants to the Buyer in the terms of the Seller Fundamental Warranties as at the Completion Date by reference to the facts and circumstances then subsisting and, for this purpose, the Seller Fundamental Warranties shall be deemed to be repeated at Completion as if any express or implied reference in the Seller Fundamental Warranties to the date of this agreement was replaced by a reference to the date of Completion. 9.3 Subject to clause 9.4, each of the Seller Warranties shall be construed as a separate warranty, and (unless expressly provided to the contrary) shall not be limited by the terms of any of the other Seller Warranties or by any other term of this agreement. 9.4 The Buyer agrees and acknowledges that the Seller does not give any warranties under this agreement in respect of:


 
11/66374368_14 31 (a) Tax except for the Tax Warranties and warranties 11.1 and 11.4; and (b) EHS except for the EHS Warranties, provided that this clause shall not exclude or limit the Buyer's right to make a claim for loss or damages arising in respect of a breach of any other warranty to the extent that such loss or damages comprise any Tax paid or suffered. 9.5 Any Seller Warranty expressed to be given "so far as the Seller is aware" or otherwise qualified by reference to the knowledge of the Seller shall be a reference to the actual knowledge (and expressly excluding from that expression any constructive or imputed knowledge) at the date of this agreement of: (a) Phil Swift, Ian Williams, Graham Halladay, Alison Sleightholm and Sally Jones, in respect of all Seller Warranties other than the Tax Warranties; (b) Julie Hunt in respect only of the Seller Warranties set out in paragraph 6 of schedule 1; (c) Julie Smith and Tony Gaddas in respect only of the Seller Warranties set out in paragraph 7 of schedule 1; (d) Bruce Pollard in respect only of the Seller Warranties set out in paragraph 9 of schedule 1; (e) Bev Dwyer in respect only of the Seller Warranties set out in paragraphs 10 and 11 of schedule 1; (f) Ian Cutter in respect only of the Seller Warranties set out in paragraph 12 of schedule 1; (g) Neil Briggs in respect only of the Tax Warranties; (h) Mike Keay in respect only of the Seller Warranties set out in paragraphs 15 and 16 of schedule 1; (i) Tony Gaddas in respect only of the Seller Warranties set out in paragraphs 14 and 20 of schedule 1; and (j) Lee Wallace in respect only of the Seller Warranties set out in paragraph 18 of schedule 1. 9.6 The Seller shall not be liable in respect of a Seller Warranty Claim (other than a Seller Fundamental Warranty Claim), if and to the extent that any fact, matter, event or circumstance giving rise thereto is Disclosed in the Disclosure Letter, the Data Room Information, the Transaction Documents, the Legal VDD Report, the Financial VDD Report, the Technical VDD Report, or is Disclosed in the Accounts or the Management Accounts. 9.7 The Buyer and the Seller acknowledge and agree that the contents of the Data Room Information, the Transaction Documents, the Legal VDD Report, the Financial VDD Report, the Technical VDD Report and the Accounts and Management Accounts Disclosed to the Buyer shall be treated as within the actual knowledge of the Buyer. 9.8 Without prejudice to any other provision in this agreement or any other Transaction Document that limits the Seller's liability, and subject to clause 7.6, the liability of the Seller under this agreement and all other Transaction Documents shall be limited if and to the extent that the limitations referred to in schedule 2 apply.


 
11/66374368_14 32 9.9 The Buyer must otherwise comply with the conduct of claim requirements set out in schedule 2. 9.10 Where any Seller Warranty is qualified by reference to materiality (including the phrase "in all material respects") such reference shall, unless specified to the contrary, be construed as a reference to materiality in the context of the Group as a whole. 9.11 In relation to any Merger Review: (a) the Seller shall: (i) promptly notify the Buyer of any material communications or documents received from the CMA and provide the Buyer and its advisers with copies of all such communications or documents; (ii) promptly provide the Buyer with any information and/or assistance that is reasonably requested by the Buyer for the purpose of preparing and submitting to the CMA a Merger Notice or otherwise cooperating with and/or responding to a Merger Review; and (iii) promptly and in accordance with any applicable time limit provide to the CMA such information as it may require, including attending any meetings or calls with the CMA or responding to requests for further information as may be necessary; and (b) insofar as the Buyer intends to submit a draft or final Merger Notice to the CMA in advance of Completion, the Buyer shall provide the Seller and its advisers with copies of such Merger Notice in draft form and provide the Seller and its advisers with a reasonable opportunity to provide comments on such draft or final Merger Notice prior to their submission and (acting reasonably) consider those comments (provided that the provision of such comments will not unduly delay any submission to the CMA); save that in relation to all disclosure under this clause 9.11, confidential or commercially sensitive information may be disclosed on a confidential "counsel to counsel" basis only from the Seller’s Solicitors to the Buyer’s Solicitors or (as applicable) from the Buyer's Solicitors to the Seller's Solicitors and nothing in this clause 9.11 shall require a party to share information, documents or communications with the other if prohibited by the CMA from doing so. 10. BUYER UNDERTAKINGS 10.1 The Buyer undertakes (on behalf of itself and as trustee on behalf of its Related Persons) to the Seller (on behalf of itself and as trustee on behalf of its Related Persons) that (in the absence of fraud or fraudulent concealment) neither the Buyer nor its Related Persons: (a) has any rights against; and (b) may make any claim against, the Seller's Related Persons (excluding the Seller) or the respective directors, officers, employees, agents or professional advisers (except to the extent such professional adviser has entered into a reliance letter with the Buyer) of the Seller’s Related Persons (including the Seller) on whom it may have relied before agreeing to any term of, or entering into, this agreement, any other Transaction Document or any other agreement or document referred to therein. 10.2 Neither the Buyer nor National Grid shall, without the prior written consent of the Seller amend, vary or terminate the National Grid Facility Agreement in a manner which would


 
11/66374368_14 33 adversely affect in any way the availability to the Buyer of funds to be used to satisfy its obligations under this agreement. 10.3 The Buyer and National Grid undertake to ensure that commitments in respect of the debt financing made to National Grid pursuant to the National Grid Facility Agreement will be available to National Grid in full so as to enable the Buyer to satisfy its payment obligations under this agreement and such monies will be used by the Buyer to satisfy its payment obligations under this agreement in full. 11. INSURANCE 11.1 The Buyer shall procure that the Insurance Policy is incepted on the date of this agreement. The cost of the Insurance Policy shall be for the sole account of the Buyer. 11.2 In the event of a Seller Warranty Claim (other than a Seller Fundamental Warranty Claim) and/or a Tax Deed Claim (other than the Anti-hybrid Tax Indemnity Claim): (a) the Buyer's first recourse shall be against the amounts available for such claims under the Insurance Policy; and (b) any excess in respect of the amount of all such claims which is not recoverable by the Buyer under the Insurance Policy shall be borne by the Seller up to the maximum liability referred to in paragraph 3(a) of schedule 2, subject to the limitations set out in schedule 2. 11.3 The Buyer acknowledges and agrees that the monetary cap referred to in paragraph 3(a) of schedule 2 shall apply notwithstanding any subsequent non-payment under the Insurance Policy, any vitiation or expiry or termination of the Insurance Policy, any insolvency of the underwriters of the Insurance Policy or any failure of the Buyer to purchase (or otherwise incept) the Insurance Policy. 11.4 The Buyer confirms that the Insurance Policy contains a waiver (in terms which have been approved in writing by the Seller prior to the execution of this agreement) by the underwriters of that policy of all rights of subrogation against the Seller or any other member of the Seller's Group, save in respect of any claim attributable to the fraud or fraudulent misrepresentation on the part of the Seller or any other member of the Seller's Group. The Buyer undertakes not to make, or agree to make, any amendments or variations to the subrogation provisions of the Insurance Policy. 11.5 The Buyer shall deliver to the Seller a certified copy of the Insurance Policy within five Business Days of the Completion Date. 12. CONFIDENTIAL INFORMATION 12.1 Subject to clause 12.3, the Seller undertakes to the Buyer, with effect from Completion, in all respects to keep confidential and not at any time disclose or make known in any other way to anyone whomsoever any Confidential Information. 12.2 Subject to clause 12.3, each party undertakes to the other parties to keep confidential in all respects and not disclose in any way to anyone whomsoever or use for its own or any other person's benefit or to the detriment of the other parties all information received or obtained as a result of entering into or performing this agreement or any other Transaction Document or the Insurance Policy which relates to: (a) the existence, provisions, or subject matter, of this agreement or any other Transaction Document or the Insurance Policy; (b) the negotiations relating to this agreement and the other Transaction Documents or the Insurance Policy;


 
11/66374368_14 34 (c) in the case of the Buyer, the Seller's Group (other than, from Completion, in relation to the Group), and the businesses carried on by, and the affairs of, the Seller's Group; and (d) in the case of the Seller, the Buyer's Group and the businesses carried on by, and the affairs of, the Buyer's Group. 12.3 Each party (and any of their respective Related Persons who pursuant to clause 12.3(d) receive Confidential Information or other information which is otherwise to be treated as confidential under this clause 12) may disclose such Confidential Information or such other information which is otherwise to be treated as confidential under this clause 12 if and to the extent: (a) that the information becomes public knowledge (other than as a result of a breach by the disclosing party of this agreement) including, for the avoidance of doubt, any information contained in any Approved Announcement; (b) required to be disclosed by law or the rules, requirements or regulations of, or at the request of, any competent judicial, regulatory or governmental authority or stock exchange to which any party (or any of their respective Related Persons) is subject (including (without limitation) the London Stock Exchange, the NYSE, the United States Securities and Exchange Commission, the FCA and the Panel on Takeovers and Mergers), and provided such disclosure shall then only be made in accordance with clauses 13(e)(i) and (ii); (c) the disclosure is made to a Taxation Authority and is reasonably required for the efficient management of its Tax affairs; (d) the disclosure is made by a party to any of their respective Related Persons and provided such disclosure is made on terms that such Related Persons undertake to keep such information confidential and that the disclosing party shall be responsible for their failure to do so; (e) the disclosure is made by a party to the directors, officers, employees, agents, insurers, auditors and/or professional advisers of that party or any of its Related Persons on a need to know basis to enable such persons to carry out their duties and on terms that such directors, officers, employees, agents, insurers, auditors and/or professional advisers undertake to keep such information confidential and that the disclosing party shall be responsible for their failure to do so; or (f) that prior written consent to the disclosure has been obtained from the Buyer, in the case where the disclosing party is the Seller or any member of the Seller's Group, or the Seller, in the case where the disclosing party is the Buyer or any member of the Buyer's Group, such consent not to be unreasonably withheld or delayed. 12.4 The restrictions contained in clause 12.2 shall continue to apply for a period of two years after Completion. 13. ANNOUNCEMENTS No party shall (without the prior written consent of the Buyer, in the case where the disclosing party is the Seller or any member of the Seller's Group, or the Seller, in the case where the disclosing party is the Buyer or National Grid, any member of the Buyer's Group (such consent not to be unreasonably withheld or delayed)) issue any press release or any other document or make any public statement or otherwise make any disclosure to any person who is not a party to this agreement relating to any of the matters provided for or


 
11/66374368_14 35 referred to in this agreement, any other Transaction Document or the Insurance Policy or any ancillary matter thereto, unless such disclosure is: (a) solely in respect of the information contained in any Approved Announcement; (b) made in accordance with clauses 12.3(c) to 12.3(f); (c) required by a party to enforce its rights under this agreement or any other relevant Transaction Document or the Insurance Policy; (d) solely containing information which is already in the public domain (other than as a result of a breach by the disclosing party of this agreement); or (e) required to be disclosed by law or the rules, requirements or regulations of, or at the request of, any competent judicial, regulatory or governmental authority or stock exchange to which any party (or any of their respective Related Persons) is subject (including (without limitation) the London Stock Exchange, the NYSE, the United States Securities and Exchange Commission, the FCA and the Panel on Takeovers and Mergers), and disclosure shall then only be made: (i) to the extent lawful and reasonably practicable, after it has taken all such steps as may be reasonable in the circumstances to agree the contents of such announcement with the other parties before making such announcement and provided that any such announcement shall be made only after notice to the other parties, unless giving such prior notice is not reasonably possible or the disclosing party is otherwise prevented from giving such prior notice by applicable law or regulation; and (ii) to the person or persons and in the manner required by law or such authority or stock exchange or as otherwise agreed between the parties. 14. ASSIGNMENT No party shall be entitled to assign, transfer or create any trust in respect of the benefit or burden of any provision of this agreement without the prior written consent of, in the case of assignment by the Seller, the Buyer or, in the case of assignment by the Buyer, the Seller, save that: (a) from Completion, this agreement and the benefits arising under it may be assigned in whole or in part by the Seller to a member of the Seller's Group (provided that if such assignee ceases to be a member of the Seller's Group, this agreement and the benefits arising under it shall be deemed automatically by that fact to have been retransferred to the Seller immediately before the assignee ceases to be a member of the Seller's Group); (b) from Completion, this agreement and the benefits arising under it may be assigned in whole or in part by the Buyer to any member of the Buyer's Group to whom the Buyer transfers any of the Shares (provided that if such assignee ceases to be a member of the Buyer's Group, this agreement and the benefits arising under it shall be deemed automatically by that fact to have been retransferred to the Buyer immediately before the assignee ceases to be a member of the Buyer's Group); and (c) from Completion, this agreement and the benefits arising under it may be assigned or charged in whole or in part by the Buyer to its financial lenders or banks as security for any financing or refinancing or other banking or related facilities in respect of or in connection with the Transaction and such benefits may further be assigned to any other financial institution by way of security for the borrowings made under such agreement or to any person entitled to enforce any such security,


 
11/66374368_14 36 provided that, in the case of an assignment pursuant to either paragraphs (a), (b) or (c) above, the liability of any party to such an assignee shall not be greater than it would have been had such an assignment not taken place, and all the rights, benefits and protections afforded to a party shall continue to apply to the benefit of that party as against the assignee as they would have applied as against the person who is a party to this agreement. 15. COSTS 15.1 Unless expressly otherwise provided in this agreement, each of the parties shall bear its own legal, accountancy and other costs, charges and expenses connected with the sale and purchase of the Shares and the negotiation, execution and implementation of this agreement. 15.2 The Buyer is solely responsible for any stamp duty (or other transfer tax) that is payable on or in relation to this agreement or the other Transaction Documents, the Transaction and any instrument or other agreement contemplated by this agreement or the other Transaction Documents. 16. EFFECT OF COMPLETION The terms of this agreement (insofar as not performed at Completion and subject as specifically otherwise provided in this agreement) shall continue in force after and notwithstanding Completion. 17. SELLER RESTRICTIVE COVENANTS 17.1 Subject to clause 18.3, the Seller shall not, and shall procure that no member of the Seller's Group shall, for a period of two years after Completion either for itself or jointly with or for any other person, directly or indirectly, solicit, employ or engage Neil Briggs or any person who was a Key Employee of any Group Company on Completion. 17.2 Nothing in clause 17.1 shall prohibit the Seller's Group from employing or engaging any person who responds to a recruitment advertisement, or who contacts the Seller's Group on his or her own initiative, or whose employment with the Group has ceased, provided that such response, contact or cessation was not solicited or induced directly or indirectly by the Seller's Group. 18. POST-COMPLETION UNDERTAKINGS AND SERVICES 18.1 The Buyer acknowledges that the Seller may, for itself and other members of the Seller's Group, need reasonable access from time to time after Completion for tax, legal, regulatory or accounting purposes to certain accounting, tax and other records and information held by the members of the Group to the extent such records and information pertain to events occurring prior to Completion (or any tax or accounting period of any member of the Group or the Seller's Group commencing prior to Completion) and, accordingly, the Buyer agrees that it shall, and shall cause the Group to: (a) properly retain and maintain such records until the date that is seven years after Completion; and (b) upon being given reasonable notice by the Seller and subject to the Seller giving such undertaking as to confidentiality as the Buyer shall reasonably require, allow the Seller, any member of the Seller's Group and their respective directors, officers, employees, agents, insurers, auditors, professional advisers and representatives (at the expense of the Seller) from the Completion Date until the date that is seven years after Completion: (i) to inspect, review and make copies of such records and information for and only to the extent necessary for that purpose; and


 
11/66374368_14 37 (ii) (so far as possible) to be given reasonable access to any current or former director, officer, employee, adviser or premises of any of the Group Companies or the Retained Companies. 18.2 The Buyer acknowledges that the Seller may, for itself and other members of the Seller's Group, require certain services from time to time after Completion for tax, regulatory or accounting purposes, and accordingly, the Buyer agrees that it shall, to the extent reasonably practicable, upon being given reasonable notice by the Seller, and shall cause the Group to (in each case for the period from the Completion Date to the date which is two years after Completion (other than in respect of the Seller's rights pursuant to clause 18.2(b)(ii))): (a) provide (on a bona fide basis) such tax, regulatory or accounting services reasonably required to allow any member of the Seller's Group to comply with its tax, regulatory or accounting obligations in connection with the preparation and filing of any US or UK accounts, tax returns or related documentation of the Group Companies or any other member of the Seller's Group for any period commencing on or before Completion as described further in the Post-Completion Services Summary, in each case so far as they relate to or are otherwise required as a result of the retention of the Retained Companies; (b) provide (on a bona fide basis) such services reasonably required by the Seller in connection with: (i) preparing, submitting, agreeing any Tax Return or any related documentation including computations, claims or elections in respect of which the Seller has conduct pursuant to clause 8 (Tax Returns) of the Tax Deed and any associated claims, surrenders and elections, including procuring that the auditors for the time being of the Group provide all reasonable assistance and information in relation thereto; and (ii) the conduct of any claim or dispute under paragraphs 08 or 9 of schedule 2 of this agreement or clauses 4 (Right to Reimbursements and Credits), 5 (Overprovisions), 6 (Refunds) and 7 (Resistance of Claims) of the Tax Deed, and in particular the Buyer shall procure that, while Neil Briggs is employed or otherwise engaged by the Buyer's Group (including the Group), he is made reasonably available to the Seller's Group to carry out day-to-day management of the HMRC Enquiry and any claim for Tax in connection with the HMRC Enquiry (as such terms are defined in the Tax Deed); (c) in connection with the retention of the Retained Companies by the Seller's Group, continue to provide (on a bona fide basis) such reasonable tax, regulatory or accounting services provided to any member of the Seller's Group prior to Completion to the extent such services relate to any event occurring prior to Completion (or any tax or accounting period of any member of the Group or the Seller's Group commencing prior to Completion); and (d) on receipt of a written notice from the Seller, transfer all accounting, tax and other records in relation to the Retained Companies to the Seller. 18.3 The Buyer shall procure that, if Neil Briggs ceases to be employed or otherwise engaged by the Buyer's Group, no member of the Buyer's Group shall in any way prevent, hinder or dissuade Neil Briggs from being employed or engaged by the Seller's Group in respect of the matters set out in this clause 18 or enter into any agreement that may have such an effect. 18.4 The Buyer or its duly authorised agents shall be responsible for and have the conduct of preparing, submitting and agreeing all statutory accounts of the Group Companies and the


 
11/66374368_14 38 Retained Companies for all accounting periods ending on or before 31 March 2021. The Buyer shall use reasonable endeavours to procure that all such accounts shall be prepared, so far as possible, on a basis consistent with previous practice. In connection therewith, the Buyer shall use reasonable endeavours to send to the Seller drafts of the accounts of each Retained Company, and of such Group Companies as may be reasonably required and requested by the Seller, provided such request is made by the Seller to the Buyer no later than 31 May 2021. The Buyer shall use reasonable endeavours to provide such accounts to the Seller at least 45 days before the date such accounts are required by law to be submitted to Companies House. The Buyer shall keep the Seller informed of any material changes to any drafts provided and afford it a reasonable opportunity to comment on such changes. The Seller or its agent shall comment within 14 days of such receipt of such draft accounts and if the Buyer has not received comments within that period, the Seller or its agents shall be deemed to have approved such draft statutory accounts. In respect of the accounts of the Retained Companies, if the Seller or its agents have any comments, the Buyer shall incorporate any comments received provided always that the Buyer will not be required to adopt any comments or submit any document which it does not consider is accurate and complete in all material respects. In respect of the accounts of the Group Companies, the Buyer or its agents shall not unreasonably refuse to adopt any comments of the Seller, provided always that the Buyer will not be obliged to adopt any comments or submit any document which it does not consider is accurate and complete in all material respects or which it reasonably considers to be detrimental to the business of any of the Group Companies. 18.5 Each of the parties acknowledges that in respect of (i) any services provided to the Seller or any other member of the Seller's Group pursuant to clause 18.2, and (ii) the preparation of the accounts in accordance with clause 18.4 the Buyer and any member of the Buyer's Group, including any Group Company following Completion: (a) disclaims any duty of care to the Seller or any member of the Seller's Group (including any of the Retained Companies); and (b) shall not be liable to the Seller or any member of the Seller's Group (including any of the Retained Companies) in respect of any cause of action, save for gross negligence, wilful misconduct and fraud. 18.6 The Seller agrees that it shall: (a) procure that any claims, matters, events or circumstances which arise or which it or any of the Group Companies has become aware of before the Completion Date relating to any of the Group Companies in connection with indemnified coverage under the Cyber Insurance Policies and/or D&O Insurance Policies are validly notified to the relevant insurers; (b) procure that insurance is maintained for a period of six years from the Completion Date covering past and present directors and officers of the Group Companies for loss that they may suffer on account of claims made against them for an actual or alleged wrongful act committed in their capacity as a director or officer of such Group Company prior to the Completion Date on terms which are substantially similar to the D&O Insurance Policies, including as to policy limits; (c) properly retain and maintain copies of the (i) Cyber Insurance Policies until the date that is three years after the Completion Date and (ii) D&O Insurance Policies (including the policies maintained under clause 18.6(b)) until the date that is seven years after the Completion Date; (d) not do or omit to do anything which might render the Cyber Insurance Policies and/or D&O Insurance Policies void or voidable or otherwise compromise a claim or possible


 
11/66374368_14 39 claim by a Group Company under the Cyber Insurance Policies and/or D&O Insurance Policies (including in each case the policies maintained under clause 18.6(b)); and (e) with regards to any existing claim or claims made by any of the Group Companies under the Cyber Insurance Policies and/or D&O Insurance Policies, use reasonable endeavours after the Completion Date to recover all monies due from insurers and pay all monies received to the Company as soon as practical after receipt. 18.7 In the event that the Seller's Group determine that the STIP 2021 Awards are to be paid to the Key Employees after Completion, the Seller's Group shall notify the Buyer by Completion of the date for payment and of the final value of the STIP 2021 Awards (which shall in aggregate be capped at £902,388 (excluding Tax)) and the respective amount to be paid to each Key Employee, and the Buyer shall procure that the Group shall pay the STIP 2021 Awards to each of the Key Employees in the proportions specified by the Seller's Group, and the Group shall withhold, deduct and account for any Tax payable by the Group in connection therewith (including without limitation PAYE, employer's and employee's national insurance contributions and apprenticeship levy), as soon as reasonably practicable following Completion. 19. EMPLOYEE INCENTIVE ARRANGEMENTS 19.1 In respect of the awards granted to the Key Employees under (i) the PPL Corporation Amended and Restated 2012 Stock Incentive Plan and (ii) the PPL Corporation Incentive Compensation Plan for Key Employees, such awards shall vest upon Completion as referred to in the Transition Incentive Award Letters and in accordance with the 2021 award agreements and 2019 and 2020 award amendment agreements under the plans at (i) and (ii), as contained in the Data Room (documents 8.6.2 to 8.6.11) and: (a) the Seller shall confirm to the Company the number of PPL Corporation shares in respect of which such awards vest; and (b) the Seller shall transfer, or procure the transfer, to the Key Employees as soon as reasonably practicable following Completion of the PPL Corporation shares in respect of which such awards vest. 19.2 Where the Group Companies are responsible for withholding income tax and/or employees' national insurance contributions (or any similar liability), to be accounted for to the Taxation Authorities in any jurisdiction, resulting from, or otherwise in connection with, the participation by any of the Key Employees in (i) the PPL Corporation Amended and Restated 2012 Stock Incentive Plan; and (ii) the PPL Corporation Incentive Compensation Plan: (a) the Seller shall provide the Group Companies in a timely manner with sufficient information to enable the Group Companies to fulfil their obligations to the Taxation Authorities in any jurisdiction; (b) the Buyer will procure that the Group Companies will provide the relevant persons at the Seller with all such information as they shall reasonably require for the purpose of ascertaining the amount of income tax and employees' national insurance contributions due to be accounted for in respect of the awards, including but not limited to the Key Employees' income tax rates and employee national insurance rates; and (c) subject to clause 19.2(b) above, the Seller shall withhold, or shall procure the withholding of, from any shares to be delivered to the Key Employees, sufficient to reimburse the Group Companies for the withholding of income tax and/or employees' social security contributions and shall pay or procure the payment of such amount to the Company in a timely manner.


 
11/66374368_14 40 20. FURTHER ASSURANCES Each of the parties shall from time to time upon request from any other party do or procure the doing of all acts and/or execute or procure insofar as each is reasonably able the execution of all such documents and in a form reasonably satisfactory to the party concerned for the purpose of transferring to the Buyer the Shares and otherwise giving the other parties the full benefit of this agreement. 21. ENTIRE AGREEMENT 21.1 Each party on behalf of itself and as agent for each of its Related Persons acknowledges and agrees with the other parties (each such party acting on behalf of itself and as agent for each of its Related Persons) that: (a) the Transaction Documents and the Insurance Policy constitute the entire and only agreement between the parties and their respective Related Persons relating to the subject matter of the Transaction Documents and the Insurance Policy; (b) neither it nor any of its Related Persons has been induced to enter into any Transaction Document and the Insurance Policy in reliance upon, nor has any such party been given, any warranty, representation, statement, assurance, covenant, agreement, undertaking, indemnity or commitment of any nature whatsoever other than as are expressly set out in the Transaction Documents or the Insurance Policy and, to the extent that any of them has been, it (acting on behalf of itself and as agent on behalf of each of its Related Persons) unconditionally and irrevocably waives any claims, rights or remedies which any of them might otherwise have had in relation thereto; and (c) save for any breach of any of the covenants or obligations in clauses 3, 6, 10, 12, 13, 14, 17, 18 and 29 of this agreement and for any breach of any of the covenants or obligations of the Tax Deed (in respect of which the parties acknowledge that damages may not necessarily be an adequate remedy and that equitable remedies (including, without limitation, the remedies of injunction or specific performance) may be available) the only remedies available to it in respect of the Transaction Documents (and, where appropriate, to its Related Persons) are damages for breach of contract and, for the avoidance of doubt, save as provided for in clauses 3.4(f), 3.7, 3.8, and 6.5 neither it (nor its Related Persons, where appropriate) has any other right to rescind or terminate any Transaction Documents either for breach of contract or for negligent or innocent misrepresentation or otherwise, provided that the provisions of this clause 21 shall not exclude any liability which any of the parties or, where appropriate, their respective Related Persons would otherwise have to any other parties or, where appropriate, to their respective Related Persons or any right which any of them may have to rescind this agreement in respect of any statements made fraudulently by any of them prior to the execution of this agreement or any rights which any of them may have in respect of fraudulent concealment by any of them. 21.2 Each of the parties acknowledges to the others, after due and careful consideration, that: (a) it is not entering into this agreement in consequence of or in reliance on any unlawful communication (as defined in section 30(1) of the FSMA) made by the other parties or their respective professional advisers; (b) except as expressly provided in this agreement, it is entering into this agreement solely in reliance on its own commercial assessment and investigation and advice from its own professional advisers; and (c) the other parties are entering into this agreement in reliance on the acknowledgements given in this clause 21.2.


 
11/66374368_14 41 22. VARIATIONS This agreement may be varied only by a document signed by or on behalf of each of the parties. 23. WAIVER 23.1 A waiver of any term, provision or condition of, or consent granted under this agreement shall be effective only if given in writing (which for this purpose does not include email) and signed by the waiving or consenting party and then only in the instance and for the purpose for which it is given. 23.2 No failure or delay on the part of any party in exercising any right, power or privilege under this agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 23.3 No breach of any provision of this agreement shall be waived or discharged except with the express written consent of all the parties. 23.4 Subject to clause 21, the rights and remedies herein provided are cumulative with and not exclusive of any rights or remedies provided by law. 24. INVALIDITY If any provision of this agreement is or becomes invalid, illegal or unenforceable in any respect under the law of any jurisdiction: (a) the validity, legality and enforceability under the law of that jurisdiction of any other provision; and (b) the validity, legality and enforceability under the law of any other jurisdiction of that or any other provision, shall not be affected or impaired in any way. 25. NOTICES 25.1 Any notice, demand or other communication given or made under or in connection with the matters contemplated by this agreement shall be in writing and shall be sent in electronic form (such as email) or delivered by hand or by courier or sent by prepaid first class post (air mail if posted to or from a place outside the United Kingdom): In the case of the Seller: Address: PPL Corporation Office of General Counsel Two North Ninth Street Allentown, PA 18101 Attention: Jennifer McDonough Email: jlmcdonough@pplweb.com With a copy to: Address: Ashurst LLP London Fruit & Wool Exchange 1 Duval Square, London, E1 6PW United Kingdom


 
11/66374368_14 42 Attention: Nick Williamson and Aaron Shute Email: Nick.Williamson@ashurst.com Aaron.Shute@ashurst.com From and after Completion, with copies also to: Address: Skadden, Arps, Slate, Meagher & Flom LLP 1440 New York Avenue N.W. Washington, D.C. 20005-2111 Attention: Pankaj Sinha Email: pankaj.sinha@skadden.com In the case of the Buyer: Address: 1-3 Strand London WC2N 5EH Attention: The Company Secretary Email: box.Group.CoSec@nationalgrid.com With a copy to: Address: Herbert Smith Freehills LLP Exchange House London, E2A 2EG United Kingdom Attention: Caroline Rae Email: Caroline.Rae@hsf.com In the case of National Grid: Address: 1-3 Strand London WC2N 5EH Attention: The Company Secretary Email: box.Group.CoSec@nationalgrid.com With a copy to: Address: Herbert Smith Freehills LLP Exchange House London, E2A 2EG United Kingdom Attention: Caroline Rae


 
11/66374368_14 43 Email: Caroline.Rae@hsf.com and shall be deemed to have been duly given or made as follows: (a) if sent in electronic form, when the sender receives confirmation on its server that the message has been transmitted; (b) if delivered by hand or by courier, upon delivery at the address of the relevant party; (c) if sent by first class post, two Business Days after the date of posting; and (d) if sent by air mail, five Business Days after the date of posting; provided that if, in accordance with the above provisions, any such notice, demand or other communication would otherwise be deemed to be given or made after 5.00 p.m. such notice, demand or other communication shall be deemed to be given or made at 9.00 a.m. on the next Business Day. 25.2 A party may notify the other parties to this agreement of a change to its name, relevant addressee or address for the purposes of clause 25.1 provided that such notification shall only be effective on: (a) the date specified in the notification as the date on which the change is to take place; or (b) if no date is specified or the date specified is less than five Business Days after the date on which notice is given, the date falling five Business Days after notice of any such change has been given. 26. COUNTERPARTS 26.1 This agreement may be executed in any number of counterparts which together shall constitute one agreement. Any party may enter into this agreement by executing a counterpart and this agreement shall not take effect until it has been executed by all parties. 26.2 Delivery of an executed signature page of a counterpart in AdobeTM Portable Document Format (PDF) sent by email shall take effect as delivery of an executed counterpart of this agreement. 27. GOVERNING LAW AND JURISDICTION 27.1 This agreement, and any dispute, controversy, proceedings or claim of whatever nature arising out of or in any way relating to this agreement or its formation (including any non- contractual disputes or claims) shall be governed by and construed in accordance with English law. 27.2 Each of the parties irrevocably agrees that the courts of England shall have exclusive jurisdiction to hear and decide any suit, action or proceedings ("Proceedings"), and/or to settle any disputes ("Disputes"), which may arise out of or in connection with this agreement or its formation and, for these purposes, each party irrevocably submits to the jurisdiction of the courts of England. 27.3 Each party irrevocably waives any objection which it might at any time have to the courts of England being nominated as the forum to hear and decide any Proceedings and to settle any Disputes and agrees not to claim that the courts of England are not a convenient or appropriate forum for any such Proceedings or Disputes and further irrevocably agrees that a judgment in any Proceedings or Disputes brought in any court referred to in this clause


 
11/66374368_14 44 27 shall be conclusive and binding upon the parties and may be enforced in the courts of any other jurisdiction. 28. THIRD PARTY RIGHTS 28.1 Except as expressly provided in this agreement, no person (other than the parties to this agreement) who is given any rights or benefits under this agreement (a "Third Party") shall be entitled to enforce those rights or benefits against the parties in accordance with the Contracts (Rights of Third Parties) Act 1999. 28.2 The third parties referred to in clauses6.7, 10.110, 11.4, 12.3, 17.2, 18.1, 18.2, 18.3, and 21.1 may enforce only those clauses in which they are referred to. 28.3 The parties may amend, vary or terminate this agreement in such a way as may affect any rights or benefits of any Third Party which are directly enforceable against the parties under the Contracts (Rights of Third Parties) Act 1999 without the consent of such Third Party. 28.4 Any Third Party entitled pursuant to the Contracts (Rights of Third Parties) Act 1999 to enforce any rights or benefits conferred on it by this agreement may not veto any amendment, variation or termination of this agreement which is proposed by the parties and which may affect the rights or benefits of the Third Party. 29. US TAX (ELECTIONS) 29.1 The Buyer shall, only if requested by the Seller (in its sole discretion), make such valid and timely elections under Section 338(g) of the Code and under any applicable similar provisions of state or local law with respect to each of the Group Companies for which the Seller makes such request (each election a "Section 338(g) Election", and collectively, the "Section 338(g) Elections"). The parties shall cooperate to prepare and timely file, or procure to be prepared and timely filed, the IRS forms required to be filed in connection with any Section 338(g) Election requested pursuant to this clause 29.1, including any IRS Forms 8023 and IRS Form 8883 and any other required forms or schedules thereto and any similar forms necessary to effectuate the Section 338(g) Elections under applicable state and local laws (collectively, the "Section 338(g) Forms") as soon as reasonably practical following Completion but in any event no later than the fifteenth day of the ninth month following the Completion Date (or, if earlier, the latest date for timely filing the Section 338(g) Forms under applicable law). The Buyer shall provide the Seller with final copies of any such Section 338(g) Forms filed by the Buyer and other documentation confirming their filing including a duly completed notice required under Treasury Regulation Section 1.338- 2(e)(4)(i), not later than 15 days after such forms are filed. 29.2 If any Section 338(g) Election is requested pursuant to clause 29.1, then within 180 days of the Consideration being transferred in accordance with clause 6.4(b), the Seller shall provide or procure to be provided to the Buyer: (a) an allocation, for Tax purposes, of the Consideration paid to the Seller by the Buyer pursuant to this agreement among the assets of the Group in accordance with Sections 338 and 1060 of the Code (the "Target Allocation Schedule") which shall be deemed final; and (b) a complete set of IRS Forms 8883 (and any comparable forms required to be filed under state or local law with respect to Taxes) and any additional data or materials required to be attached to IRS Form 8883 pursuant to the U.S. Treasury Regulations promulgated under Section 338 of the Code which shall be deemed final. 29.3 Each of the Seller and the Buyer shall, and shall cause its respective Related Persons to, take all actions necessary and appropriate to effect and preserve the Section 338(g) Elections in accordance with the provisions of Section 338 of the Code and any applicable U.S. Treasury Regulations (and any comparable provisions of state or local law with respect


 
11/66374368_14 45 to Taxes) or any successor provisions, including (as applicable) the signing and filing in a timely manner of the Section 338(g) Forms and any additional forms. To the extent permissible pursuant to the applicable law, each of the Seller and the Buyer shall (and shall cause its respective Related Persons to) cooperate in the preparation and timely filing of: (a) any corrections, amendments or supplements to the Section 338(g) Forms (including IRS Forms 8023 and IRS Form 8883); and (b) any state or local forms or reports that are necessary or appropriate for purposes of complying with the requirements for making any state or local election that is comparable to the Section 338(g) Election. 29.4 Each of the Seller and the Buyer shall, and shall cause its respective Related Persons to, report the Transaction with regards to the shares of each of the Group Companies pursuant to this agreement for which a Section 338(g) Election was made consistent with such Section 338(g) Election made pursuant to clause 29.1, the Target Allocation Schedule and any Section 338(g) Forms and shall take no position contrary thereto in any Tax Return, or in any proceeding before any Taxation Authority or otherwise. 29.5 The Buyer shall not, and shall cause its Related Persons to not, take any action to modify any of the forms or reports (including any corrections, amendments or supplements thereto) that are required for the making of a Section 338(g) Election after their execution or to modify or revoke any Section 338(g) Election following the filing of the IRS Forms 8023 without the prior written consent of the Seller. 29.6 Except as required as a result of a Section 338(g) Election, the Buyer shall not, and shall cause its Related Persons to not, change the taxable year of any Group Company which includes but does not end on the Completion Date without the prior written consent of the Seller. 29.7 The Buyer shall provide, and shall procure that its Related Persons (including the Group Companies) provides, to the Seller such cooperation, documentation and information as the Seller reasonably may request in (a) determining the amount of "subpart F income" or "global intangible low-taxed income" (as defined in sections 951(a) and 951A of the Code, respectively) for U.S. federal income tax purposes realised by the Seller or any of its Related Persons with respect to the Group Companies for the taxable year that includes the Completion and (b) making a timely election under U.S. Treasury Regulation Section 1.245A-5(e)(3)(i) or any successor provisions to close the taxable year of the Group Companies for U.S. federal tax purposes as at the end of the day on the Completion Date (the "Closing of the Books Election"), including filing all required Tax Returns consistent therewith and not taking any position to the contrary thereto in any Tax Return, or in any proceeding before any Taxation Authority or otherwise. Buyer acknowledges and agrees that none of Buyer or any of its Related Persons will be a U.S. tax resident (within the meaning of Treasury Regulation Section 1.245A-5(e)(3)(i)(C)(2) and -5(i)(29)) that as at the end of the day on the Completion Date owns directly or indirectly any stock of the Group Companies. 29.8 The Buyer shall make, and shall procure that its Related Persons (including the Group Companies) make, their respective employees reasonably available on a mutually convenient basis to provide an explanation of any documents or information so provided. 29.9 The Buyer shall pay to the Seller on an After-Tax Basis an amount equal to all losses, Taxes, damages, liabilities, costs and expenses incurred by Seller or any other member of the Seller’s Group arising from, in connection with or attributable to (a) any failure by the Buyer to make a timely and valid Section 338(g) Election in a manner consistent with this clause 29 or (b) Buyer or any of its Related Persons filing Tax Returns inconsistent with the Closing of the Books Election, including for the avoidance of doubt any additional Tax liability arising from, in connection with or attributable to such failure or filing, to the extent that the same


 
11/66374368_14 46 would not have occurred had a valid Section 338(g) Election been so made or Tax Returns inconsistent with the Closing of the Books Election not been filed, as applicable. .


 
11/66374368_14 47 SCHEDULE 1 Seller Warranties 1. THE COMPANY, THE SHARES AND THE SUBSIDIARIES 1.1 Incorporation and Existence (a) The Company and each of the Subsidiaries are limited companies duly organised and validly existing under the laws of the countries of its incorporation as set out in the Schedule of Particulars and has been in continuous existence since incorporation. (b) The information set out in the Schedule of Particulars is accurate in all material respects. 1.2 The Subsidiaries (a) The Company does not have any subsidiary undertakings other than the Subsidiaries. Each of the Subsidiaries is a wholly-owned subsidiary of the Company and each of the shares of such Group Companies has been properly allotted and issued and is fully paid. (b) There is no Encumbrance in relation to any of the shares held by a Group Company in the capital of any of the Subsidiaries. (c) Other than as set out in the articles of association of the relevant Subsidiary there is no agreement or obligation requiring the allotment, sale, transfer, redemption or repayment of, or the grant to a person of the right (conditional or not) to require the allotment, sale, transfer, conversion, redemption or repayment of, a share in the capital of any of the Subsidiaries (including an option or right of pre-emption or conversion). (d) No Group Company owns any shares or stock in the capital of any company or business organisation other than the Subsidiaries and no Group Company controls or takes part in the management of any other company or business organisation. (e) No order has been made, petition presented, meeting convened to consider a resolution, or resolution passed, for the winding up or for the appointment of an administrator, liquidator, receiver, or trustee in bankruptcy of any Group Company (and no action has been taken in relation to any such appointment), nor is any Group Company the subject of any analogous insolvency, reorganisation or similar proceedings anywhere in the world or any other process whereby the business is terminated and the assets of the company concerned are distributed amongst the creditors or shareholders or any other contributors, nor is any Group Company insolvent or unable to pay its debts as they fall due. 2. CONSTITUTIONAL DOCUMENTS AND RECORDS 2.1 Each Group Company has the power to carry on its business as now conducted. 2.2 The memorandum and articles of association, by-laws or equivalent constitutional documents of each Group Company in the form contained in the Data Room are true and complete. 2.3 The records of all matters and information contained in the registers of members of each Group Company are true and accurate and the Group has not received any written notice or allegation that any of the registers is untrue or inaccurate in any material respect or require rectification.


 
11/66374368_14 48 2.4 The statutory books of each Group Company are up to date in all material respects and are in its possession. 2.5 All resolutions, annual returns and other documents required to be delivered to the Registrar of Companies (or other relevant company registry or other corporate authority in any jurisdiction) by each Group Company have been properly prepared in all material respects and filed. 3. ACCOUNTS 3.1 The Company Accounts give a true and fair view of the assets, liabilities, financial position and state of affairs of the Company as at the Accounts Date and the profits and losses and cash flows of the Company for the period in respect of which they were prepared ending on the Accounts Date. 3.2 The Locked Box Accounts give a true and fair view of the consolidated assets, liabilities, financial position and state of affairs of the WPD Group Companies as at the Locked Box Date and the consolidated profits and losses of the WPD Group Companies for the period in respect of which they were prepared ending on the Locked Box Date. 3.3 The Accounts have been properly prepared and audited in accordance with: (a) in the case of the Company Accounts, UK GAAP; and (b) in the case of the Locked Box Accounts, IFRS, and the Accounts have been prepared in accordance with the Companies Act 2006 and on a basis consistent with: (c) in the case of the Company Accounts, the basis upon which all audited accounts of the Company have been prepared in respect of the two years before the Accounts Date; and (d) in the case of the Locked Box Accounts, the basis upon which all audited accounts of the WPD Group have been prepared in respect of the two years before the Locked Box Date. 3.4 The Management Accounts have been prepared specifically for the purpose of the Transaction and with due care and attention, are free from material error and are not misleading having regard to the purpose for which they were prepared, and show with reasonable accuracy the state of affairs and profit or loss of the WPD Group as at and for the period in respect of which they have been prepared, but it is acknowledged that they are not prepared on a statutory basis and are not audited. 4. CHANGES SINCE THE LOCKED BOX DATE 4.1 Since the Locked Box Date: (a) the Group has carried on its business in the ordinary and usual course and so as to maintain it as a going concern; (b) no Group Company has acquired or disposed of, or agreed to acquire or dispose of, any business at a cost (or with a value) in excess of £30 million; (c) save as set out in the Model, no Group Company has assumed or incurred, or agreed to assume or incur, a liability, obligation or expense, including for capital expenditure, (actual or contingent) in excess of £30 million;


 
11/66374368_14 49 (d) apart from the dividends provided for or disclosed in the Accounts or in this agreement, no dividend or other distribution (as defined for the purposes of Part 23 of the CTA 2010) has been declared, paid or made by any Group Company to any other party than a Group Company; and (e) no debtor owing an aggregate sum to the Group as a whole in excess of £5 million has been released by any Group Company on terms that such debtor pays less than the book value of any debt and no debt in excess of £5 million has been written off or has proved to be irrecoverable to any extent. 5. ASSETS 5.1 Each asset used by the Group (tangible or intangible) that is material to the operation of the Group's business as it is currently operated (together, the "Material Assets") is legally and beneficially owned by a Group Company or is validly leased or licenced to a Group Company and, where capable of possession, is in the possession or control of a Group Company. 5.2 There are no Encumbrances, nor has any Group Company agreed to create any Encumbrances, over any part of any of the Material Assets that are owned by a Group Company. 5.3 No Group Company is owed any money in excess of £2.5 million in aggregate other than debts incurred in the ordinary course of business, intra-Group loans and cash at bank. 6. LIABILITIES AND BORROWINGS 6.1 The total amount borrowed, guaranteed or secured by the Group Companies from its lenders, or contingent liabilities owed to hedge counterparties, does not exceed the limits of the applicable facilities (including the Group Finance Agreements) or limits contained in its articles of association, by-laws or equivalent constitutional documents. 6.2 True, accurate and complete copies of the Group Finance Agreements are contained in the Data Room. 6.3 Except for the Group Finance Agreements, the Group as a whole has no obligation outstanding which exceeds £5 million in aggregate across all Group Companies, for the payment or repayment of monies borrowed, whether present or future, actual or contingent (a “Financial Obligation”), nor have any of them entered into or agreed to enter into any agreement or arrangement the purpose of which is to raise money or provide finance or credit or to guarantee or indemnify any Financial Obligation or to prevent or limit loss in respect of any Financial Obligation. 6.4 No written notice of termination or acceleration (or intention to terminate or accelerate) has been received or given by a Group Company in respect of any Group Finance Agreement and, so far as the Seller is aware, no fact or circumstance has occurred, been alleged in writing to have occurred or will occur as a result of Completion of the Transaction, in each case, as a result of which any lender or hedge counterparty (in the case of a Group Company’s hedging arrangements) would be entitled to terminate or accelerate the relevant Group Finance Agreement or which would otherwise constitute an event of default or give rise to an obligation by a Group Company to repay or to give security under any of the Group Finance Agreements. 6.5 None of the Group Finance Agreements contains any provision entitling any lender to be repaid or require repayment by a Group Company or to terminate or accelerate the relevant Group Finance Agreement as a result of Completion of the Transaction. 6.6 No Group Company is a party to or is liable (including contingently) under a material guarantee, indemnity or other agreement to provide surety in relation to another person's


 
11/66374368_14 50 obligation, other than another Group Company, or has provided a guarantee, indemnity or any form of security in connection with the pension liabilities of any other employer other than the Pension Funding Obligations. 6.7 There are no Seller's Group Guarantees in respect of any liability or obligation of any member of the Group. 7. CONTRACTUAL MATTERS AND COMMERCIAL 7.1 True, accurate and complete copies of all Material Commercial Contracts are contained in the Data Room. 7.2 Each of the Material Commercial Contracts are valid, enforceable and in full force and effect and no Group Company or, so far as the Seller is aware, other party to a Material Commercial Contract is in material breach of such Material Commercial Contract and, so far as the Seller is aware, there is no allegation of a material breach by a Group Company or other party to a Material Commercial Contract. 7.3 No written notice of termination (or intention to terminate) has been received or given by a Group Company in respect of any Material Commercial Contract and, so far as the Seller is aware, no fact or circumstance has occurred, been alleged in writing to have occurred or will occur as a result of Completion of the Transaction, in each case, as a result of which any party to a Material Commercial Contract (other than a Group Company) would be entitled to terminate such Material Commercial Contract. 7.4 None of the Material Commercial Contracts contain any provision entitling any party to a Material Commercial Contract (other than a Group Company) to terminate such Material Commercial Contract as a result of the execution of this agreement or Completion of the Transaction. 7.5 So far as the Seller is aware, all Standard Commercial Contracts have been entered into on terms which are substantially the same as the template terms which have been disclosed to the Buyer in folder 6.2.2 of the Data Room, and have not been entered into on terms which would expose any Group Company to a material liability which is disproportionate to the terms of the relevant Standard Commercial Contract. 7.6 There is, and for the last three years there has been, no agreement or arrangement (including in relation to any loan) to which any Group Company is or was a party and in which any member of the Seller's Group (excluding the Group Companies), a director or former director of any member of the Seller's Group (excluding the Group Companies), or a person connected with any of them is or was interested in any way. 7.7 A copy of the current usual terms and conditions for connection agreements and other standard UK electricity industry agreements commonly used by the DNOs in the ordinary course of the Group’s business have been disclosed to the Buyer and are contained in the Data Room. 7.8 No Group Company: (a) is a party to any material joint venture, consortium or partnership arrangement; or (b) has entered into any contract with a value of more than £5 million which is outside the ordinary course of its business as currently carried on. 8. PERMITS 8.1 True and complete copies of the Material Permits are contained in the Data Room.


 
11/66374368_14 51 8.2 Each of the Distribution Licences held by the DNOs is valid, subsisting and in full force and effect. 8.3 Each of the Material Permits are validly held by a Group Company and in full force and effect and, so far as the Seller is aware, the Group Companies are in compliance with the terms and conditions of the Material Permits in all material respects and there is no material breach or allegation in writing of material breach by a Group Company of their terms and conditions in the past three years. 8.4 So far as the Seller is aware, there are no pending or threatened proceedings or investigations which would materially and adversely affect the Material Permits in any material respect and there is no allegation in writing or, so far as the Seller is aware, fact or circumstance which would be reasonably likely to cause, that any Material Permit would be suspended, cancelled, revoked or otherwise become invalid or that may result in the imposition of a fine or other sanction or material modification of the relevant Material Permit. 9. PROPERTIES 9.1 The documents relating to the Properties and the Property Rights contained in the Data Room are true and accurate. 9.2 Except in any such case as is not, individually or in the aggregate, reasonably likely to materially and adversely affect the operation of the business of the Group, taken as a whole, as presently conducted: (a) the Property Rights and Properties are the only properties and rights and interests in land necessary for the operation of the business of the Group as presently conducted; (b) each of the Properties and the Property Rights is vested in a Group Company, the relevant Group Companies have good and marketable title to the Properties and the relevant Group Company is solely legally and beneficially entitled to the Properties and solely entitled to exercise the Property Rights; (c) no Encumbrance, liberty, right, easement, licence or other arrangement is enjoyed or is in the course of being acquired against the Properties; (d) so far as the Seller is aware, each of the Properties and/or Property Rights has the benefit of all rights and/or where applicable all statutory powers necessary for the continued present use of, access to and enjoyment of the Properties and/or the Property Rights; (e) so far as the Seller is aware, the Properties are not subject to any Encumbrance, licence, lease or agreement for lease, agreements or covenants; (f) none of the Properties or the Property Rights is the subject of any resolution or proposal for compulsory acquisition by or from the local or any other authority; (g) no defect or damage has been discovered in relation to any of the Properties or the equipment the subject of the Property Rights; and (h) the relevant Group Companies hold copies of all of the material title deeds and documents necessary to prove their interest in the Properties and the Property Rights including all necessary consents for the vesting of any leasehold interests in the Properties in the relevant Group Company. 9.3 So far as the Seller is aware:


 
11/66374368_14 52 (a) all of the Properties and Property Rights which either (i) directly form a part of the DNOs’ Distribution Systems as they are currently operated, or (ii) upon, under, over or through which the DNOs’ Distribution Systems as they are currently operated, and any Material Assets connected with the DNOs’ Distribution Systems as they are currently operated, are situated, are either vested in the DNOs or the DNOs have operational control over such Properties and Property Rights such that each DNO complies with the terms of its Distribution Licences; (b) each member of the Group has duly performed, observed and complied with, in each case in all material respects, all covenants, restrictions, exceptions, reservations, conditions, agreements, leases, deeds, statutory and common law requirements, by-laws, orders, planning consents and planning agreements, building regulations and other stipulations and regulations affecting the Properties and the Property Rights and the uses of the Properties and the Property Rights; (c) no notice of any alleged breach of any of the matters listed above nor (where the Property is held leasehold) any notice of forfeiture has been served on any of the Group Companies which (if the alleged breach was confirmed) would materially and adversely affect the Group's ability to operate its business as it is currently operated; (d) none of the Group Companies has waived or acquiesced in any breach of any of the matters listed above by any third party nor made or entered into any collateral assurances, undertakings or concessions in connection therewith which would in each case materially and adversely affect the Group's ability to operate its business as it is currently operated; (e) there are no disputes, actions, claims, proceedings or demands which are subsisting regarding boundaries, easements, covenants or other matters affecting any of the Properties or the Property Rights which would materially and adversely affect the Group's ability to operate its business as it is currently operated; and (f) no notice of action or claim has been served on any of the Group Companies which is subsisting in respect of leasehold property of which (i) it was the original tenant or (ii) it entered into a covenant with the landlord to observe and perform the tenant covenants under that lease which would materially and adversely affect the Group's ability to operate its business as it is currently operated. 9.4 So far as the Seller is aware, the actual existing use of each of the Properties and the Property Rights by the Group Companies is the lawful permitted use and all necessary consents and permissions which authorise such actual existing use have been obtained and are valid, enforceable and in full force and effect with no subsisting breaches of the same. 9.5 So far as the Seller is aware, no development at the Properties or the Property Rights has been carried out in breach of planning law. 9.6 So far as the Seller is aware, no fact or circumstance has occurred, been alleged in writing to have occurred or will occur, as a result of Completion of the Transaction, in each case, as a result of which the Group would be prevented or impeded from operating the Group's business as it is currently operated at the Properties and exercising the Property Rights. 10. EMPLOYMENT 10.1 The Data Room contains true and accurate details of the matters listed below, with all personal data anonymised: (a) the total number of Employees as at 31 December 2020;


 
11/66374368_14 53 (b) the age profile of employees, a summary of staff numbers and work locations, details of the EBA employees’ salary bands and details of notice periods and change of control provisions in respect of all Key Employees; (c) the standard terms and conditions, policies or arrangements, including for the making of any payment or the provision of any benefit on the redundancy, retirement or other termination of employment or services beyond any obligation to make any minimum payment due under relevant legislation, which apply to the Employees and a summary of the contractual benefits provided to Employees; and (d) the employment contracts or service agreements of Key Employees, together with a schedule of all current rates of remuneration and entitlement to benefits of all such individuals. 10.2 True and complete copies of all documents referred to above at 10.1(c), are contained in the Data Room. 10.3 No Group Company has given written notice of termination to, or received written notice of resignation from, any Key Employee. 10.4 The Data Room contains details of all persons who work in the business of the Group Companies other than the Employees, including agency workers and self-employed contractors. 10.5 So far as the Seller is aware, any individuals who provide services to any Group Company pursuant to a consultancy agreement, or pursuant to any contractual arrangement with any Group Company, are not, and have not at any time been considered or treated as, employees of the relevant Group Company. 10.6 All salaries, wages, fees and other benefits (including, for the avoidance of doubt, overtime pay and holiday pay) of all Employees have, to the extent due and payable prior to the date of this agreement, been duly paid or discharged or provided for in the Accounts, together with all related payments to third party benefit providers and relevant authorities. 10.7 No Group Company is under any obligation to make any material change in the basis of remuneration or other benefits paid or provided to any of its Employees. 10.8 There are no terms and conditions in any contract with any Employee pursuant to which such person will be entitled to receive any payment or benefit or such person's rights will change as a direct consequence of the Transaction. 10.9 True, accurate and complete copies of all agreements or arrangements with, or granting recognition to, a trade union, any works council, staff association or other body representing any of the Employees and all material particulars of any requests to negotiate or agree, or any claims to rights to, or any cessation of rights to, information, consultation or collective bargaining arrangements in respect of all or any of such Employees made or occurring within the last two years are contained in the Data Room. 10.10 No industrial action has taken place within the last two years and, so far as the Seller is aware, no industrial action is currently threatened in relation to any Group Company. 10.11 No Group Company is involved or has in the last 12 months been involved in a dispute with any Employee or individual formerly providing services directly or indirectly to such Group Company or any trade union, works council, staff association or other body representing any of the Employees (together, the “Prospective Claimants”) and, so far as the Seller is aware, no fact or circumstance has occurred which would give rise to any such dispute.


 
11/66374368_14 54 10.12 No material claim is outstanding between any Group Company and any Prospective Claimant which is likely to result in a material liability (the meaning of "material" in this context being a value to a Group Company in excess of £1.25 million in aggregate). 10.13 There are no current disciplinary or grievance proceedings or appeals in respect of any Key Employee. 10.14 During the period of 12 months before the date of this agreement, no Group Company has given notice of any redundancies or started redundancy consultations, and no Group Company has any obligation (including any implied obligation which has arisen from past practice) to make a payment on redundancy of any Employee in excess of their statutory redundancy entitlement. 10.15 No Group Company has been party to an actual or alleged relevant transfer for the purposes of the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("Relevant Transfer") or equivalent legislation in other jurisdictions, nor has the Group made or proposed to make any changes to the terms and conditions of employment of any Employee in connection with a Relevant Transfer, in either case during the past two years and nor does any Employee whose employment has so transferred have a right to enhanced benefits on redundancy or early retirement. 11. INCENTIVES 11.1 Other than the Incentive Schemes, the Management Bonuses and the Transition Incentive Awards, there are no outstanding incentive schemes. or arrangements or any entitlements under these schemes or arrangements (whether contractual, discretionary or customary and whether or not approved or otherwise sanctioned by any Taxation Authority) under which any Employee or former Employee may receive: (a) any cash, shares or other benefit by reference to performance (whether individual performance or otherwise) or otherwise; or (b) any cash, shares or other benefit conditional upon Completion. 11.2 No loans have been made to any current, former or proposed Employees (or to any nominees or associates of such Employees) which were made or arranged by any Group Company or member of the Seller's Group and there are no employee benefit trusts, family benefit trusts or similar arrangements established by the Seller's Group under which any current or former Employees (or any nominees or associates of such Employees) may benefit in any form. 11.3 There are no arrangements in place pursuant to which any Group Company is under an obligation to pay to any member of the Seller's Group any amount in connection with the participation by any Employees in any employee incentive scheme operated by any member of the Seller's Group. 11.4 In respect of all awards, options or other interests granted by any member of the Seller's Group over any shares (or similar) to Employees: (a) all relevant laws and regulations have been complied with; (b) all applicable reporting requirements in respect of such awards, options or interests were complied with within the required periods (including, without limitation, registration and annual reporting requirements to HM Revenue & Customs); (c) no notice of any enquiry or similar in respect of any such award, option or interest has been received by the Company from the revenue authority in any jurisdiction; and


 
11/66374368_14 55 (d) the Group Companies and / or the relevant member of the Seller's Group have the right to withhold income tax and employees' national insurance contributions (or any similar liability) resulting from, or otherwise in connection with such awards, options or other interests. 11.5 There will be no outstanding awards, options or other interests outstanding over any Group Company shares following Completion, whether under the Incentive Schemes or otherwise. 12. PENSIONS 12.1 Other than the Pension Schemes, the Unfunded Pension Arrangements, the Pension Funding Obligations, and the state pension schemes, the Group Companies have no obligation to provide retirement, death, disability or life assurance benefits in respect of the present or former Employees and directors of the Group Companies. 12.2 The Pension Schemes (a) True, accurate and complete material particulars of the terms of the Pension Schemes are contained in the Data Room. (b) All payments, contributions, premiums and levies which have become due and payable by the Group Companies that participate in the Pension Schemes prior to the date of this agreement under the Pension Schemes have been duly paid or discharged or provided for in the Accounts. (c) So far as the Seller is aware, the Pension Schemes have been operated in all material respects in compliance with the provisions of their governing documentation, applicable legislation and regulatory requirements and no regulatory or other action, claim or dispute is in progress or pending in connection with the Pension Schemes or otherwise in relation to the provision of retirement or life assurance benefits by a Group Company. (d) In respect of any Pension Scheme which provides money purchase benefits, the current rate at which Group Companies are obliged to contribute in respect of Employees is included in the Data Room. (e) The Pension Schemes are registered schemes within the meaning of Chapter 2 of Part 4 of the Finance Act 2004 and so far as the Seller is aware there is no reason why any of the Pension Schemes could cease to be registered. (f) No employer other than a Group Company has ever participated in any of the Pension Schemes. 12.3 Pension Schemes (a) In respect of the Pension Schemes, the Data Room contains true, accurate and complete copies of: (i) the latest trust deeds and rules (including any subsequent amendments), containing full details of benefits payable; (ii) where Part 3 of the Pensions Act 2004 applies to the Pension Scheme, the latest actuarial valuation and subsequent actuarial reports; (iii) the recovery plan, schedule of contributions, payment schedule and details of all contributions which are or may become payable under the relevant Pension Scheme; (iv) the latest annual report and audited scheme accounts;


 
11/66374368_14 56 (v) the latest statement of investment principles; (vi) membership data; and (vii) all material correspondence from the Pensions Regulator, the Pension Protection Fund, the Information Commissioner and HMRC. (b) The Defined Benefit Pension Schemes are funded in accordance with applicable law and accounting requirements. (c) Other than the Defined Benefit Pension Schemes, the Unfunded Pension Arrangements and the Pension Funding Obligations, the Group Companies have no obligation to provide benefits (other than lump sum death in service benefits) on a basis other than on a money purchase benefits basis (as defined in sections 181 and 181B of the Pension Schemes Act 1993). 12.4 Unfunded Pension Arrangements and Pension Funding Obligations (a) True, accurate and complete material particulars of the Unfunded Pension Arrangements and the Pension Funding Obligations are contained in the Data Room. (b) So far as the Seller is aware, the Unfunded Pension Arrangements have been operated in all material respects in compliance with the provisions of their governing documentation and applicable legislation. So far as the Seller is aware, the Group Companies comply with, and have at all times complied with, the material legal requirements and applicable laws relevant to the Pension Funding Obligations. No regulatory or other action, claim or dispute is in progress or pending, so far as the Seller is aware, in connection with the Unfunded Pension Arrangements or the Pension Funding Obligations. 12.5 General (a) Each Group Company complies and has at all times complied in all material respects with: (i) all legal and regulatory requirements relevant to its participation in the Pension Schemes; (ii) its duties under the Pensions Act 2008 in respect of the Employees who are employed by such Group Company and (iii) (where applicable) its duties under the Electricity (Protected Persons) (England and Wales) Pension Regulations 1990 and the equivalent regulations in Scotland. (b) All lump sum death benefits which may be payable under the Pension Schemes (other than a refund of members' contributions with interest where appropriate) are fully insured and so far as the Seller is aware there is no reason why any policy of insurance may be invalidated or set aside. (c) No Group Company has been issued with a contribution notice, financial support direction or restoration order by the Pensions Regulator in accordance with its powers under sections 38 to 52 of the Pensions Act 2004 and, so far as the Seller is aware, there are no circumstances (including Completion) which could result in such a notice, direction or order being issued to a Group Company. (d) No announcement has been made in the previous 24 months (or is being considered) regarding continuing, introducing or altering the provision of benefits


 
11/66374368_14 57 on retirement, incapacity, ill-health or death in respect of which any Group Company has or could have liability. (e) No event has occurred (or ,so far as the Seller is aware, will occur) before, on or as a result of Completion which could result in any of the Pension Schemes or the Unfunded Pension Arrangements being amended, closed, terminated or wound-up in whole or in part. 13. TAXATION In this paragraph 13 the following words have the following meanings, unless the context otherwise requires: "Effective Date" has the meaning given to it in section 119 of FA 2003; "FA 2003" means the Finance Act 2003; "Land Transaction" has the meaning given to it in section 43 of FA 2003; and "TCGA" means the Taxation of Chargeable Gains Act 1992. 13.1 Each Group Company has duly and punctually paid all material Tax due or imposed to the extent that the same ought to have been paid and is not liable nor has it within the last three years been liable to pay any material penalty or interest in connection therewith. 13.2 Each Group Company has duly and punctually complied in all material respects with its obligations to deduct, withhold or retain amounts of or on account of Tax from any material payments made by it and to account for such amounts to any Taxation Authority and has complied in all material respects with all its reporting obligations to any Taxation Authority in connection with any such material payments made. 13.3 Each Group Company has complied in all material respects with all its duties under all relevant taxation laws and regulations and has in all material respects kept all records, made all returns and supplied all information and given all notices to any Taxation Authority as reasonably requested or required by law within any requisite period and all such returns and information and notices and any statements or disclosures made to any Taxation Authority were and, so far as the Seller is aware, remain true and accurate in all material respects. 13.4 No Taxation Authority has agreed to operate any special arrangement (being an arrangement which is not based on a strict and detailed application of the relevant legislation, statements of practice or extra-statutory concessions published by a Taxation Authority) in relation to any Group Company's Tax affairs. 13.5 Where any clearance or consent for a transaction, scheme or arrangement has been sought from a Taxation Authority by or behalf of a Group Company, that transaction, scheme or arrangement has been implemented strictly in accordance with the terms of such clearance or consent and any conditions attaching to such clearance or consent. 13.6 No Group Company is the subject of, or has during the last three years been the subject of, any non-routine investigation, audit or visit by any Taxation Authority and, so far as the Seller is aware, none are pending or threatened. 13.7 No Group Company is currently, nor during the last four years has been, involved in a dispute with any Taxation Authority where the amount which is the subject of the dispute exceeds £500,000.


 
11/66374368_14 58 13.8 No Group Company will become liable to any Tax (including any Tax imposed pursuant to any provisions in relation to PAYE or national insurance contributions) in consequence of the entering into or completion of this agreement or anything done pursuant to its terms. 13.9 Accounts and Post Accounts Date Events (a) The Accounts make proper provision or reserve in respect of any period ended on or before the Accounts Date for all Tax assessed or liable to be assessed on each Group Company or for which it is accountable at the Accounts Date whether or not any such Group Company has or may have any right of reimbursement against any other person and full provision has been made and shown in the Accounts for deferred taxation in accordance with generally accepted accounting principles including, where relevant, IAS. (b) Since the Accounts Date: (i) no Group Company has been involved in any transaction which has given , or may give rise to any material Tax other than in respect of actual income earned by such Group Company in the course of its trade; (ii) no Group Company has made any material payment of a revenue nature in aggregate exceeding £5 million (or incurred any liability to make any such payment) which could be disallowed as a deduction in computing the taxable profits of such Group Company or as a charge on such Group Company's income; (iii) no Group Company has been involved in any material transaction other than on arm's length terms; (iv) no accounting period (as defined in chapter 2 of part 2 of CTA 2009) of any Group Company has ended as referred to in section 10 of CTA 2009; (v) no disposal has taken place or other event occurred such that any Group Company would be required to bring a disposal value in aggregate exceeding £5 million into account for the purposes of the Capital Allowances Act 2001 or such that a chargeable gain in aggregate exceeding £5 million could or would accrue to any Group Company; and (vi) no Group Company has ceased to be a member of a group (as defined in section 170 of TCGA). 13.10 Corporation Tax (a) No Group Company is party to any loan relationship as defined in part 5 of CTA 2009 which may give rise to material debits or credits (other than in respect of actual interest taxable or deductible on an accruals basis). (b) So far as the Seller is aware, all necessary conditions for all capital allowances within section 1119 of the CTA 2010 claimed by any Group Company were at all material times satisfied and remain satisfied. (c) Each Group Company has always been resident in the territory in which it was incorporated and has never been resident in any other territory or treated as so resident for the purposes of any double Tax agreement nor does any Group Company have a permanent establishment or other taxable presence in any jurisdiction other than that in which it was incorporated. (d) Within the last six years, no Group Company has acquired any asset or liability other than trading stock from any company other than a Group Company belonging at the


 
11/66374368_14 59 time of acquisition to the same group of companies as the relevant Group Company within the meaning of section 170 of TCGA or section 765 of CTA 2009, and no member of any group of companies of which any Group Company is or has at any material time been the principal company (as defined in section 170(2)(b) of TCGA or section 765 of CTA 2009) has so acquired any asset or liability. (e) The Data Room contains particulars of all arrangements relating to the surrender of group relief under part 5 of CTA 2010 to which any Group Company is or has been a party in respect of any accounting period ended on or after 31 March 2017 and under all such arrangements no Group Company is liable to make any payments or repayments to any company other than a Group Company in respect of any relevant surrender of Group Relief. (f) The Company is not nor has it ever been a close company as defined by section 439 of CTA 2010. (g) So far as the Seller is aware, all transactions entered into by a Group Company have been entered into on an arm's length basis and the consideration (if any) which has been charged, received or paid by the relevant Group Company on all transactions entered into by it has been equal to the consideration which would have been expected to be charged, received or paid between independent persons dealings at arm's length. 13.11 Secondary taxation (a) No Group Company is bound by or party to any Tax indemnity, Tax sharing or Tax allocation agreement in respect of which claims would not be time barred. (b) No transaction or event has occurred in consequence of which any Group Company is or may be held liable for any material Tax or deprived of Relief otherwise available to it in consequence of any such liability in respect of material Tax or may otherwise be held liable for or to indemnify any person in respect of any material Tax, where some other company or person is or may become primarily liable for the Tax in question (whether by reason of any such other company being or having been a member of the same group of companies or otherwise). 13.12 Value Added Tax (a) Each Group Company is a registered taxable person for VAT legislation and no Group Company has at any time been treated as a member of a group of companies for such purpose nor has made any application to be so treated and no circumstances exist whereby any Group Company would or might become liable for value added tax as an agent or otherwise by virtue of section 47 of VATA. (b) Each Group Company has within the last three years complied in all material respects with the requirements and provisions of the VAT legislation and has made and maintained materially accurate and up-to-date records, invoices, accounts and other documents required by or necessary for the purposes of the VAT legislation and each Group Company has at all times punctually paid and made all material payments and returns required thereunder. (c) So far as the Seller is aware, the Options Spreadsheet contains details of all options to tax made by any Group Company for the purposes of Part 1 of Schedule 10 of VATA in respect of any material Property (it being acknowledged that the Options Spreadsheet may also contain details of options to tax in respect of other Properties). 13.13 Stamp Duty and Stamp Duty Land Tax


 
11/66374368_14 60 (a) All material documents in the enforcement of which the Group is or may be interested have been duly stamped and since the Accounts Date no Group Company has been a party to any transaction whereby the Group was or is or could become liable to material stamp duty reserve tax. (b) In relation to the Properties no Group Company is or has been party to any Land Transaction in respect of which a Group Company has since the Accounts Date been liable or could at any time after the date of this agreement become liable to pay any material stamp duty land tax under any provisions of any act. (c) No stamp duty land tax (in excess of £1,000,000) shall arise under paragraph 11 of schedule 17A to FA 2003 (cases where assignment of lease treated as grant of lease) on the assignment of any material lease in which a Group Company has an interest. (d) The Group has in its (or its agents') possession, power or control copies of all material stamp duty land tax returns and/or self certificates (as defined in section 79(3)(b) of FA 2003) filed by the Group within the last three years in relation to land in which or in part of which the Group has an interest. (e) The Group does not at the date hereof hold any chargeable interest (as that expression is defined in section 48 of FA 2003) that was acquired by it by an instrument within three years prior to the date hereof, or by way of a Land Transaction with an Effective Date within three years prior to the date hereof, such acquisition (or instrument) having been exempt from stamp duty and/or stamp duty land tax on the basis either that group relief under section 42 of FA 1930, section 11 of the Finance Act (Northern Ireland) 1954, section 151 of FA 1995 or section 62 of or Schedule 7 to FA 2003 applied or that relief under section 76 of FA 1986 applied where, but for any such relief, the stamp duty and/or stamp duty land tax that would have arisen would have been in excess of £1,000,000. 13.14 Anti-avoidance (a) No Group Company is or has ever been party to or otherwise involved in any scheme, arrangement, transaction or series of transactions the main purpose, or one of the main purposes of which was the obtaining of a tax advantage. (b) No Group Company is or has ever been party to any transaction in respect of which disclosure has been made or is required pursuant to Part 7 of the Finance Act 2004 or Schedule 11A to VATA or entered into any tax arrangements that are abusive for the purposes of the General Anti-Abuse Rule (GAAR) in Part 5 of the Finance Act 2013. 14. INTELLECTUAL PROPERTY 14.1 Complete and accurate details of all registered Intellectual Property (and applications for any such right) belonging to the Group (the "Registered Intellectual Property") and all domain names used by any Group Company (the "Domain Names") are contained in sections 13.1 and 13.2 of the Data Room. 14.2 All right, title and interest in and to the Registered Intellectual Property is solely, legally and beneficially owned by a Group Company and the Domain Names are each registered in the name of a Group Company. 14.3 A Group Company either owns all right, title and interest in and to, or has sufficient rights to use, all material registered or unregistered Intellectual Property used in connection with the Group’s business as presently conducted. 14.4 There are no Encumbrances, nor has any Group Company agreed to create any Encumbrances, over any part of the Registered Intellectual Property.


 
11/66374368_14 61 14.5 No member of the Seller’s Group owns or is licensed to use any Intellectual Property used in the Group’s business as presently conducted. 14.6 No Group Company has received any written notice or allegation of any infringement by any Group Company of any Intellectual Property belonging to a third party, or been involved in any infringement, claim, dispute or challenge relating to any third party Intellectual Property, during the last two years (or earlier, to the extent any such issue is not currently resolved) and, so far as the Seller is aware, there are no facts or matters which might give rise to any such proceedings. 14.7 So far as the Seller is aware, no Intellectual Property owned or used by a Group Company has been infringed or misappropriated by a third party, or been subject to any infringement, claim, dispute or challenge, or threat of the same, during the last two years (or earlier, to the extent any such issue is not currently resolved). 15. INFORMATION TECHNOLOGY 15.1 True and accurate material details of all IT Systems, including the Material IT Agreements relating thereto, used in connection with, and that is material to, the operation of the Group's business as it is currently operated (together, the "Material IT Systems") are contained in the Data Room. 15.2 The Material IT Agreements comprise all of the IT Agreements which are of material importance to the operation of the Group’s business as it is currently operated. 15.3 All Material IT Systems are either (i) legally and beneficially owned by a Group Company free from any Encumbrances, or (ii) are validly leased or licensed to a Group Company, and are under the control of a Group Company. 15.4 Reasonable steps have been taken to ensure that the Material IT Systems are in satisfactory working order in all material respects and are functioning adequately in accordance with all applicable specifications. 15.5 So far as the Seller is aware, the Material IT Systems have not suffered any material IT failures in the two years preceding the date of this agreement. 15.6 So far as the Seller is aware, the use of the Material IT Systems for the purposes of the Group's business complies with all reasonable security standards, and adequate data security breach, incident monitoring and business continuity and disaster recovery plans are in place with regard to such use. 15.7 No Material IT Agreement contains any provision entitling any party to a Material IT Agreement (other than a Group Company) to terminate such Material IT Agreement as a result of Completion of the Transaction. 15.8 So far as the Seller is aware: (a) the Material IT Agreements are valid, enforceable and in full force and effect and no Group Company or, so far as the Seller is aware, other party to a Material IT Agreement is in material breach of such Material IT Agreement; (b) there are no disputes under or in relation to a Material IT Agreement; and (c) no written notice terminating a Material IT Agreement has been given or received by any Group Company. 15.9 The Group has possession or control of the source code to all of the software in the Material IT Systems that is bespoke to the Group, or has the right to gain access to such source


 
11/66374368_14 62 code under the terms of a binding agreement with a reputable escrow agent on the agent’s standard terms. 16. CYBER SECURITY 16.1 Each Group Company has in place reasonable technical and organisational measures (including policies, procedures and training on these measures) to manage the ability of its network and information systems to resist, at a reasonable level of confidence, a “Cyber Incident”, being any incident that compromises (or attempts to compromise) the availability, authenticity, integrity or confidentiality of stored or transmitted or processed data of whatever nature, or the systems, networks or other infrastructure on which such data resides, or the related services offered by, or accessible via, those networks and information systems. 16.2 So far as the Seller is aware, each Group Company has in place valid insurance cover against Cyber Incidents or related cyber security risks. 16.3 So far as the Seller is aware, no Group Company has been the subject of any material Cyber Incident (each a "Company Cyber Incident") in the last two years, whether it has been notified to a governmental or other regulatory body or not. 16.4 So far as the Seller is aware, no Group Company has any actual, material threatened or anticipated liability associated with or arising from any Company Cyber Incident in the last two years. 17. COMPLIANCE WITH LAWS AND LITIGATION 17.1 Each Group Company has conducted its business, affairs, operations and dealt with its assets in all material respects in accordance with all legal, regulatory and administrative requirements applicable to it which are material to the conduct of its business in any jurisdiction where it operates its business. 17.2 No Group Company during the two years ending on the date of this agreement has been involved in any civil, criminal, arbitration, administrative or other proceeding in any jurisdiction which is material to the operation of the Group (the meaning of "material" in this context being a value to a Group Company in excess of £5 million in respect of any one claim). 17.3 There is no outstanding judgment, arbitral award or decision of a court, tribunal, arbitrator, administrative or governmental agency against any Group Company which is material to the operation of the Group (the meaning of "material" in this context being a value to a Group Company in excess of £5 million in respect of any one such judgment, arbitral award or decision). 17.4 (a) No civil, criminal, arbitration, administrative, or other proceeding is outstanding, pending or, so far as the Seller is aware, threatened by or against any Group Company, any assets of the Group , so far as the Seller is aware, in respect of which any Group Company is liable to indemnify any third party; and, (b) so far as the Seller is aware, no matter or circumstance exists which might give rise to a civil, criminal, arbitration, administrative or other proceeding in any jurisdiction involving any Group Company, in each case which is material to the operation of the Group (the meaning of "material" in this context being a value to a Group Company in excess of £5 million in respect of any one claim).


 
11/66374368_14 63 17.5 No member of the Group is nor has during the two years ending on the date of this agreement been subject to any investigation, inquiry or disciplinary proceeding (whether judicial, quasi-judicial or otherwise) in any jurisdiction which is material to the operation of the Group (the meaning of "material" in this context being a value to a Group Company in excess of £5 million in respect of any one investigation, inquiry or disciplinary proceeding) and, so far as the Seller is aware, none is pending or threatened and no matter or circumstance exists which might reasonably be expected to give rise to such investigation, enquiry or disciplinary proceeding. 17.6 No Group Company has received any request for information from, any court or governmental authority (including any national competition authority and the Commission of the European Communities and the EFTA Surveillance Authority) under any anti-trust or similar legislation. 17.7 So far as the Seller is aware, no Group Company (nor any Seller company in relation to the business of the Group) has received any State Aid within the meaning of Articles 107 to 109 of the Treaty on the Functioning of the European Union. 18. ENVIRONMENTAL, HEALTH AND SAFETY ("EHS") MATTERS 18.1 So far as the Seller is aware, each Group Company complies and has in the past three years complied in all material respects with all EHS Laws. 18.2 Each Group Company has obtained all EHS Consents required for its business, and, each Group Company complies and has in the past three years complied in all material respects with all EHS Consents. 18.3 Copies of the most up to date version of each of the Group Companies’ EHS Consents, all material correspondence with each EHS Regulatory Authority relating to compliance with EHS Consents and EHS Laws and of each report in the possession or control of any Group Company of intrusive environmental site investigation in respect of properties owned or occupied by any Group Company were made available to Ashurst LLP for the purposes of its vendor legal due diligence review and to Arup for the purposes of its technical vendor due diligence report. 18.4 There are no pending applications made by any Group Company to vary or surrender the whole or any part of its EHS Consents and no Group Company is on notice of a proposed or pending variation or review of its EHS Consents by an EHS Regulatory Authority. 18.5 No Group Company has received written notice from an EHS Regulatory Authority that any EHS Consent will be revoked, suspended or withdrawn within 12 months following Completion. 18.6 There are no civil, criminal or administrative claims, litigation, investigations, prosecutions or other legal proceedings or enforcement action under EHS Law which are currently being brought or which are pending or, so far as the Seller is aware, have been threatened against any Group Company by an EHS Regulatory Authority or any third party and, in each case, which are material to the operation of the Group (the meaning of "material" in this paragraph being a value to a Group Company in excess of £1.25 million in respect of any one claim). 18.7 There is no outstanding judgment, arbitral award or decision of a court, tribunal, arbitrator or governmental agency against any Group Company with regard to any EHS matter and any enforcement notices issued to any Group Company by any EHS Regulatory Authority has been complied with in full. 18.8 No Group Company has in the past three years received formal written notice under EHS Law from an EHS Regulatory Authority alleging that any Group Company is in breach of EHS Law or EHS Consents or imposing or threatening to impose any liability under EHS Law


 
11/66374368_14 64 or in respect of any EHS matter and so far as the Seller is aware, no circumstances exist which may give rise to this kind of action. 18.9 No Group Company has entered into or made an offer to an EHS Regulatory Authority to enter into any enforcement undertaking or if it has entered into an enforcement undertaking it has complied with all of its obligations, and no Group Company has agreed to indemnify, guarantee or otherwise assume the EHS liabilities of any third party other than in the ordinary course of business. 18.10 So far as the Seller is aware, no expenditure of more than £1.25 million in total is required over the next two years so as to: (i) obtain or comply with the conditions of an EHS Consent (including an improvement programme); or (ii) comply with EHS Law in force or effect as at the date of this agreement. 18.11 All current projects with an estimated total expenditure of £1.25m or more for the remediation by Group Companies of contaminated land are included in the Contaminated Land Register (Document 18.5.8.2) in the Data Room. 19. ANTI-BRIBERY AND CORRUPTION 19.1 No Group Company, nor any of their directors, officers or, so far as the Seller is aware, employees, has, directly or indirectly, given, promised, offered or authorised, or accepted, requested, received or agreed to receive, any payment, gift, reward, rebate, contribution, commission, incentive, inducement or advantage to or from any person, in contravention of Anti-Bribery and Corruption Laws. 19.2 The Group has instituted, maintained and monitored policies and procedures designed to ensure continued compliance with Anti-Bribery and Corruption Laws. 20. DATA PROTECTION 20.1 Each Group Company has complied in all material respects in the two years preceding the date of this agreement with, and has in place, the necessary registrations, notifications and procedures to comply in all material respects with the DP Legislation. 20.2 No Group Company has, in the two years preceding the date of this agreement, received: (a) any written notice, request or communication from a regulatory or supervisory authority, or been subject to any enforcement action, in each case relating to a breach or alleged breach of its obligations under the DP Legislation; or (b) any notice, claim, complaint, correspondence or other communication from a data subject or any other person claiming a right to compensation under the DP Legislation, or alleging any breach of the DP Legislation, and, so far as the Seller is aware, there is no fact or circumstance that may lead to any such notice, request, correspondence, communication, claim, complaint or enforcement action. 20.3 So far as the Seller is aware, there are, and in the two years preceding the date of this agreement, there have been, no instances of accidental or unlawful destruction, loss, alteration, unauthorised disclosure of, or access to, Personal Data stored or otherwise processed by a Group Company required to be notified to a regulatory or supervisory authority by DP Legislation.


 
11/66374368_14 65 20.4 All material Personal Data processing activities carried out on behalf of each Group Company by a Processor (as defined in DP Legislation) are carried out under written contracts binding on the Processor with regard to the relevant Group Company and which comply in all material respects with all applicable requirements of the DP Legislation. 21. INSURANCE 21.1 The Data Room contains a true, accurate and complete list of all material and current insurance and indemnity policies in respect of which any Group Company has an interest (together, the "Policies"). 21.2 All premiums due and payable prior to the date of this agreement on each of the Policies have been duly paid and, so far as the Seller is aware, all Policies are in full force and effect and no Group Company has done or omitted to do anything which might render any of those policies void or voidable whether in full or in part. 21.3 True and accurate details of any material claims that are outstanding under each of the Policies in respect of any of the Group Companies are contained in the Data Room. No insurer in respect of each of the Policies has refused or given written notice that it intends to refuse any claim under the Policies. 21.4 So far as the Seller is aware, the Seller and/or each Group Company has validly notified relevant insurers of all claims, matters, events or circumstances which have arisen or which they have become aware of relating to any of the Group Companies in connection with indemnified coverage under the Cyber Insurance Policies and/or D&O Insurance Policies.


 
11/66374368_14 66 SCHEDULE 2 Limitations on Seller Liability 1. MONETARY LIMITS 1.1 The Seller shall not be liable in respect of a Claim (except for a Claim for breach of a Seller Fundamental Warranty or a Tax Deed Claim) unless and until: (a) the aggregate liability of the Seller in respect of that Claim would (but for this paragraph) exceed £1.25 million; and (b) in respect of that Claim (other than a Claim for which liability is already excluded under paragraph (a) above) when aggregated with the aggregate liability of the Seller in respect of all other such Claims exceeds £30 million in which event the Seller shall be liable for the total amount of such Claims and shall not be limited to the excess. 1.2 All amounts which may be deducted from the amount of such Claim by virtue of the operation of the other paragraphs of this schedule 2 shall first be taken into account in order to determine whether the amount of the Claim exceeds the thresholds in paragraph 1.1 above. 2. TIME LIMITS FOR CLAIMS 2.1 The Seller shall not be under any liability in respect of any claim under any Transaction Document and any such claim shall be wholly barred and unenforceable unless written notice of such claim setting out reasonable details of the relevant claim (including the grounds on which such claim is based and, so far as it is known to the Buyer, the likely quantum of such claim) shall have been served upon the Seller by the Buyer: (a) in the case of a Seller Warranty Claim (other than a Seller Fundamental Warranty Claim or a Tax Warranty Claim), by not later than 5.00 p.m. on the date that is three years after the date of Completion; (b) in the case of a Seller Fundamental Warranty Claim, by not later than 5.00 p.m. on the date that is six years after the date of Completion; (c) in the case of a Tax Claim, by not later than 5.00 p.m. on the date that is seven years after the date of Completion; and (d) in the case of any other claim under any Transaction Document (other than a claim under clause 7 to which clause 7.2 applies), by not later than 5.00 p.m. on the date that is three years after the date of Completion. 2.2 Following the giving of notice under paragraph 2.1 in respect of a Claim (other than a Tax Claim): (a) where the Claim arises by reason of a liability of the Buyer or any Group Company which, at the time of service of the notice, is contingent only or otherwise not capable of being quantified, the liability of the Seller shall determine if legal proceedings in respect of such Claim have not been commenced within nine months of such Claim ceasing to be contingent or becoming capable of being quantified; or (b) where the Claim does not fall within paragraph 2.2(a) above, the liability of the Seller shall determine if legal proceedings in respect of such Claim have not been commenced within nine months of the service of such notice.


 
11/66374368_14 67 2.3 For the purpose of this paragraph 2 legal proceedings shall not be deemed to have been commenced unless they have been properly issued and validly served upon the Seller. 3. CAP ON LIABILITY The aggregate liability of the Seller (before any netting off or set off of any liability of the Buyer and including all legal and other costs and expenses) in respect of any claim under any Transaction Document shall not, subject to paragraph 4: (a) in respect of a Seller Warranty Claim (other than a Seller Fundamental Warranty Claim) or a Tax Deed Claim (other than an Anti-hybrid Tax Indemnity Claim), exceed £1.00; (b) in respect of an Anti-hybrid Tax Indemnity Claim, exceed £50 million; and (c) in respect of a Seller Fundamental Warranty Claim and all other claims under any Transaction Document (including, but subject to the limitations therein, any of the Claims referred to in paragraphs (a) and (b) above, but excluding a claim under clause 7 to which clause 7.5 applies) exceed the amount of the Consideration actually received by the Seller. 4. FRAUD The limitations set out in paragraphs 1 to 3 above shall not apply to any claim to the extent that it arises as a result of the fraud or fraudulent concealment by the Seller. 5. OTHER LIMITS 5.1 No liability (whether in contract, tort or otherwise) shall attach to the Seller in respect of any Claim and no liability shall attach to the Seller for any amount by which a Claim is increased (in each case, other than a Tax Claim) to the extent that: (a) the Claim or the events giving rise to the Claim would not have arisen but for an intentional act, or transaction of the Buyer's Group or which the Buyer's Group requested or consented to in writing; (b) the Claim is based upon a liability which is contingent only, unless and until such contingent liability becomes an actual liability or until the same is finally adjudicated; (c) appropriate allowance, provision or reserve in respect of the matter giving rise to the Claim is expressly made in the Accounts or to the extent that the matter giving rise to the Claim is expressly noted in the Accounts; (d) the Claim occurs wholly or partly out of or the amount thereof is increased as a result of: (i) anything expressly provided to be done or omitted to be done pursuant to this agreement or any other Transaction Document; (ii) any change in the accounting principles or practices of the Buyer's Group introduced or having effect after the date of this agreement; (iii) any increase in the rates of taxation made after the date hereof; (iv) any change in law or regulation or extra statutory concession or other regulatory agreement or in its interpretation or administration by the English courts, by HMRC or by any other fiscal, monetary or regulatory authority (whether or not having the force of law), occurring in each case after Completion;


 
11/66374368_14 68 (v) any reorganisation (including a cessation of the whole or any part of any trade) or change in ownership of any member of Buyer's Group after Completion; (e) the loss or damage giving rise to the Claim is recovered by the Buyer's Group under any policy of insurance; or (f) the Claim relates to a claim or liability for taxation and would not have arisen but for any winding-up or cessation after Completion of any business or trade carried on by the Buyer's Group except to the extent that such winding-up or cessation is occasioned by the facts or circumstances giving rise to the Claim. 6. BENEFITS In assessing any liabilities, losses, damages or other amounts recoverable by the Buyer as a result of any claim under any Transaction Document (other than a Tax Claim) there shall be taken into account any benefit accruing to the Buyer's Group including, without prejudice to the generality of the foregoing, any amount of any Relief obtained or obtainable by the Buyer's Group and any amount by which any Tax for which the Buyer's Group is or may be liable to be assessed or accountable is reduced or extinguished, arising directly or indirectly in consequence of the matter which gives rise to such claim but excluding any benefit to the extent it has been taken into account for the purposes of the Insurance Policy by reducing the amount payable to the Buyer or is required to be paid by the Buyer thereunder. 7. RIGHT TO REMEDY No liability will arise in respect of any claim under any Transaction Document (other than a Tax Deed Claim) if such claim is remediable and within the period of 30 days following the Buyer having given written notice thereof to the Seller in accordance with paragraph 2.1, such matter has been remedied to the reasonable satisfaction of the Buyer within the period of 30 days following the date of service of such notice. For the avoidance of doubt, the time period afforded to remedy any such claim under this paragraph 7 shall not operate to prejudice the time limitations applying to such claims under paragraph 2, provided that the Buyer has served notice and (if applicable) commenced legal proceedings within the time periods specified therein. 8. THIRD PARTY CLAIMS 8.1 Paragraph 8.2 shall apply in circumstances where: (a) any claim, allegation, cause of action, proceeding, liability, suit or demand is made or threatened against the Buyer's Group which could reasonably be expected to give rise to a Claim (other than a Tax Claim) by the Buyer against the Seller; (b) the Buyer's Group is or could reasonably be expected to be entitled to make recovery from some other person any sum in respect of any facts, matters, events or circumstances by reference to which the Buyer has or may have a Claim (other than a Tax Claim) against the Seller; or (c) the Seller shall have paid to the Buyer or the Buyer's Group an amount in respect of a Claim (other than a Tax Claim) and subsequent to the making of such payment the Buyer's Group becomes or shall become entitled to recover from some other person (including under the Insurance Policy) a sum which is referable to that payment,


 
11/66374368_14 69 (each, a "Third Party Claim"). 8.2 The Buyer shall and shall procure that the Buyer's Group shall: (a) promptly upon becoming aware of any Third Party Claim give notice and reasonable details in writing to the Seller of that Third Party Claim (to the extent known at the time) and thereafter shall keep the Seller fully informed of all material developments in relation thereto; (b) make or procure to be made available to the Seller, and, if so requested by the Seller, provide copies of, all books of account, records and correspondence of any Group Company relevant to any Third Party Claim and permit the Seller and its advisers to ascertain or extract any information relevant to that Third Party Claim therefrom; and (c) in the case of paragraph 8.1(c) only, promptly repay to the Seller an amount equal to the amount so recovered (including under the Insurance Policy) or, if lower, the amount paid by the Seller to the Buyer, provided that the Buyer shall not be required to take any step or action under this paragraph 8.2 which is not permitted under the Insurance Policy. 9. RIGHTS OF RECOVERY BY BUYER'S GROUP 9.1 The Buyer shall and shall procure that the Buyer's Group shall: (a) promptly inform the Seller in writing of any fact, matter, event or circumstance which comes to the Buyer's notice or to the notice of the Buyer's Group whereby it appears that the Seller is or may be liable to the Buyer under a Claim (other than a Tax Claim) or whereby it appears the Buyer's Group shall become or may become entitled to recover from some other person a sum which is referable to a payment already made by the Seller in respect of such Claim (other than a Tax Claim); and (b) thereafter keep the Seller fully informed of all material developments in relation thereto; provided that: (i) the Buyer shall not be required to take any step or action under this paragraph 9 which is not permitted under the Insurance Policy; and (ii) failure by the Buyer or any member of the Buyer's Group to inform and keep the Seller fully informed or to provide access to the Seller in accordance with paragraphs 9.1(a) and 9.1(b) shall not relieve the Seller from liability except only to the extent that the Seller suffers actual prejudice as a result of such failure. 10. TAX No liability in respect of any Tax Warranty Claim shall become payable: (a) in the case of a Claim for Tax involving an actual payment of tax or the loss or set off of a relief against taxation, prior to the date on which a payment of taxation becomes finally due and payable under or in consequence of the Claim for Tax in question; or (b) in the case of a Claim for Tax involving the loss of or reduction of a right to repayment of taxation, prior to the day on which any repayment or increased repayment of


 
11/66374368_14 70 taxation which, but for such Claim for Tax would have been available, would have been due. 11. BUYER'S KNOWLEDGE The Buyer warrants as at the date of this agreement that it does not have any actual knowledge of any breach of the Seller's Warranties as at the date of this agreement and for the purposes of this paragraph, the Buyer's knowledge shall mean the knowledge of Chris Waters, Deborah Waller, Donald Simpson and Jian Li, in each case after such individuals have made reasonable enquiries of any professional advisers advising the Buyer in connection with the Transaction. 12. MITIGATION Nothing in this agreement shall or shall be deemed to relieve the Buyer or any other member of the Buyer's Group of any common law or other duty to mitigate any loss or damage it has suffered or incurred or may suffer or incur (including, without limitation, enforcing against any person other than the Seller, any rights any member of the Buyer's Group has or may have in respect of the fact, matter, event or circumstance giving rise to a claim under this agreement (other than a Tax Deed Claim and a claim for breach of the Leakage provisions pursuant to clause 7)). 13. CONSEQUENTIAL LOSS The Buyer shall not be entitled to claim for any special, indirect or consequential loss, including (without prejudice to the generality of the foregoing) loss of profits, loss of market share, loss of goodwill or possible business after Completion, whether actual or prospective, even if such loss was reasonably foreseeable. 14. FORECASTS The Buyer acknowledges and agrees that the Seller does not give or make any warranty as to the accuracy of the forecasts, business plans, estimates, projections, statements of intent or statements of honestly expressed opinion provided to the Buyer (however so provided) on or prior to the date of this agreement, including (without limitation) in the Disclosure Letter or the Data Room Information. 15. DOUBLE RECOVERY No liability shall attach to the Seller by reason of any claim under this agreement or any other Transaction Document to the extent that the same loss or damage has been recovered by the Buyer or any other member of the Buyer's Group under any other provision of this agreement or any other Transaction Document or the Insurance Policy, and accordingly the Buyer may only recover from the Seller under this agreement, the other Transaction Documents and the Insurance Policy once only in respect of the same loss or damage suffered.


 
11/66374368_14 71 SCHEDULE 3 Action Pending Completion The Seller shall procure that each of the Company, WPD plc and the DNOs shall: 1. not create, allot, issue, acquire, reduce, repay or redeem any share or loan capital or agree, arrange or undertake to do any of those things, or acquire or agree to acquire an interest in an undertaking; 2. not pass a shareholders' resolution; and 3. not declare, pay or make a dividend or distribution. The Seller shall procure that each Group Company shall: 1. (other than in respect of Company, WPD plc and the DNOs) not create, allot, issue, acquire, reduce, repay or redeem any share or loan capital or agree, arrange or undertake to do any of those things, or acquire or agree to acquire an interest in an undertaking other than to or from another Group Company; 2. (other than in respect of Company, WPD plc and the DNOs) not declare, pay or make a dividend or distribution other than to another Group Company; 3. not make any alteration to its articles of association; 4. give or agree to give any option, right to acquire or call (whether by conversion, subscription or otherwise) or create or agree to create any Encumbrance, in each case in respect of any of its share or loan capital; 5. not acquire or agree to acquire an interest in an undertaking; 6. not acquire or dispose of, or agree to acquire or dispose of, an asset except in the usual course of its trade or assume or incur, or agree to assume or incur, a liability, obligation or expense (actual or contingent) except in the usual course of its trade; 7. not make, or agree to make, capital expenditure exceeding in total £20 million; 8. not create, or agree to create, an Encumbrance over a material asset or redeem, or agree to redeem, an existing Encumbrance over a material asset, other than with respect to the Group Finance Agreements; 9. not take any action or omit to take any action which could reasonably be expected to put a Group Company in breach of any Material Permit obligation; 10. continue each of the Policies (as defined in paragraph 21.1 of schedule 1) and not do or omit to do anything which would make any of the Policies void or voidable; 11. not breach any covenants on its part that are contained in any lease or licence of any property held or occupied by it which would or might result in a liability for a Group Company in excess of £3 million; 12. not enter into, amend the terms of, or terminate any partnership, joint venture or other profit sharing agreement which is material in the context of the Group as a whole, provided that a counterparty's termination of such an agreement shall not be a breach of this paragraph; 13. not make any material change to the management and organisation of the Group or Group Companies or the manner in which they carry on the business;


 
11/66374368_14 72 14. not enter into any transaction with any person otherwise than at arms' length and for full value; 15. not make any proposal for the winding up or liquidation of any Group Company; 16. not enter into a long-term, onerous or unusual agreement, arrangement or obligation which is material in the context of the Group as a whole (which shall include any agreement, arrangement or obligation having an individual value of £15 million or more); 17. not amend (to the detriment of the Group) or terminate an agreement, arrangement or obligation to which it is a party which is material in the context of the Group as a whole (which shall include any agreement, arrangement or obligation having an individual value of £15 million or more); 18. not materially amend, enter into, offer to enter into or terminate or give notice to terminate any terms of employment of any Key Employee (except where required under law or as a result of a breach by any Key Employee of the terms of his or her employment); 19. not amend, or agree to amend, the terms of any schedule of contributions and/or recovery plan applicable to any Pension Scheme, and not take action or fail to take any action which will or may cause a Pension Scheme or Unfunded Pension Arrangement to be amended, closed, terminated or wound-up whether before, on or following Completion; 20. except in the ordinary course and consistent with past practice, not pay any Incentive Scheme, or create or enter into any new incentive or bonus scheme (or arrangement) for Employees, or grant or issue any new awards, interests or bonus under any such scheme (or arrangement), other than (i) the grant of a Management Bonus, subject to the limitations of paragraph 18 of schedule 4, (ii) payment of the STIP 2021 Awards subject to the limitations of paragraph 10 of schedule 4, (iii) the grant of Phantom Stock Options as disclosed in document 8.2.25 in the Data Room; or (iv) any payments in connection with the Transition Incentive Awards, subject to the limitations of paragraph 9 of schedule 4; 21. not amend, or agree to amend, (to the detriment of the Group) the terms of its borrowing or indebtedness in the nature of borrowing or create, incur, or agree to create or incur, borrowing or indebtedness in the nature of borrowing (except pursuant to the Group Finance Agreements where the borrowing or indebtedness in the nature of borrowing does not exceed the amount available to be drawn by each Group Company under those facilities); 22. not give, or agree to give, a guarantee, indemnity or other agreement to secure, or incur financial or other obligations with respect to the Seller's Group's obligations; 23. terminate or interchange any currency hedging arrangements, or any other derivative transaction entered into in order to provide protection against exposure to, or to benefit from, fluctuation in any rate or price, other than where such an arrangement reaches the end of its stated term; 24. not make, revoke or change any Tax election, adopt or change any Tax accounting method, practice or period, grant or request a waiver or extension of any limitation on the period for audit and examination or assessment and collection of Tax, file any amended tax return or settle or compromise any contested Tax liability (save that this paragraph 24 shall not prevent the making or filing of any Tax election or return that relates to the ordinary course of business of the Group and does not result in any actual or contingent Tax liability in excess of £100,000); 25. not make any drawdown under the Demand Loan; and 26. except in the usual course of its trade, not compromise, settle, release, discharge or compound litigation or arbitration proceedings or a liability, claim, action, demand or


 
11/66374368_14 73 dispute, or waive a right in relation to litigation or arbitration proceedings, in each case which is in excess of £1.25 million.


 
11/66374368_14 74 SCHEDULE 4 Permitted Leakage Payments 1. Any payment made in accordance with past practice and without the exercise of discretion in respect of the salary, bonus, pensions contributions, life assurance payments, medical insurance, car allowances, expenses and holiday pay accrued and due to an officer or employee of the Group under and in accordance with such person's contract of employment, service agreement or engagement letter. 2. The following dividend payments for the calendar year ending 31 December 2020: i. £30 million paid in June 2020; ii. £30 million paid in December 2020; and iii. £140 million to be paid in April 2021 (reflecting the balance of dividends for the calendar year ended 31 December 2020). 3. The following dividends-in-specie declared on 31 December 2020 to upstream the benefit of a $200 million receivable due from PPL UK Resources Limited to WPD plc in connection with the $200,000,000 6.42% notes due 2021 issued by PPL UK Resources Limited to WPD plc as set out in the Eurobond assignment – Steps plan and document list included in the Data Room (document 2.4.3) (the "Receivable"): a. a dividend-in-specie of the benefit of the Receivable from WPD plc to the Company; and b. a dividend-in-specie of the benefit of the Receivable from the Company to the Seller, For the avoidance of doubt, the dividends-in-species will only be considered Permitted Leakage, to the extent the loan notes are off-set. 4. Any payment made pursuant to and in accordance with the Incentive Schemes (including any payment to any member of the Seller's Group in relation to the participation of Key Employees in the PPL Corporation Amended and Restated 2012 Stock Incentive Plan or the PPL Corporation Incentive Compensation Plan for Key Employees) and any Tax payable in connection therewith (including without limitation PAYE, employer's and employee's national insurance contributions and apprenticeship levy). 5. The payment of any liability to the extent it was provided for in the Locked Box Accounts. For the avoidance of doubt, any accrual or payment in excess of the liability amount recognised in the Locked Box Accounts shall not constitute Permitted Leakage. 6. Any matter undertaken or any payment made at the written request (or with the written consent) of the Buyer before Completion. 7. Any payments expressly provided for under the terms of this agreement or any of the other Transaction Documents. 8. Any amount of Leakage which is reimbursed or repaid by any member of the Seller's Group to the extent that such reimbursement or repayment shall be increased by the amount of any Tax for which the Group is liable as a result of the reimbursement or repayment after taking into account any Relief arising as a result of the matter giving rise to such Leakage. 9. Any payment in accordance with the terms of the Transition Incentive Award Letters (but, for the avoidance of doubt, not the Management Bonuses) up to a maximum amount of


 
11/66374368_14 75 £4,007,232 and any Tax payable in connection therewith (including without limitation PAYE, employer's and employee's national insurance contributions and apprenticeship levy). 10. Any payment in respect of a STIP 2021 Award up to a maximum amount of £902,388 and any Tax payable in connection therewith (including without limitation PAYE, employer's and employee's national insurance contributions and apprenticeship levy). 11. Any payment in respect of and in an amount equal to any VAT credit or repayment obtained by a Group Company in respect of supplies made by a member of the Seller's Group other than a Group Company save to the extent that any such VAT credit of repayment is an Accounts Relief. 12. Any payment in respect of and in an amount equal to any repayment of Tax obtained by a Group Company in respect of Tax paid on behalf of a member of the Seller's Group other than a Group Company (including without limitation pursuant to any group payment arrangement) save to the extent that any such repayment of Tax is an Accounts Relief. 13. Any payment or any matter expressly provided for under the terms of the WPUPS Reimbursement Agreement and/or the WPUPS Reimbursement Novation Agreement. 14. Any payment or any matter in relation to the Ex-Hyder Liability expressly provided for under the terms of the Ex-Hyder Liability Novation Agreement. 15. Any payment or any matter expressly provided for under the terms of the Co-obligor Agreement and/or the Co-obligor Assignment Agreement. 16. Any payment, including any fees or charges, or any matter expressly provided for under the terms of the Demand Loan and termination thereof 17. Any payment of any Notified Leakage. 18. Any payment or any matter in relation to the Management Bonuses, up to a maximum amount of £374,000 and any Tax payable in connection therewith (including without limitation PAYE, employer's and employee's national insurance contributions and apprenticeship levy). 19. Any payment, including any fees, charges or disbursements, payable to Osborne Clarke LLP in connection with the Transaction up to a maximum amount of £30,000. 20. Any payment, including the repayment of amounts borrowed and interest, fees, charges or other amounts payable, under any debt financing arrangement entered into by any member of the Group with a member of the Seller Group to prepay or repay the £210,000,000 Revolving Credit Facility and/or the £50,000,000 Term Loan Facility Agreement in accordance with clause 4.2(b). 21. Any Tax in respect of or in consequence of any of the matters referred to in paragraphs 1 to 19 above (to the extent that any of those matters do not comprise Tax). 22. Any provision, accrual or charge for any of the matters referred to in paragraphs 1 to 21 above, provided that to the extent that any of such matters referred to in paragraphs 1 to 21 is capped, any such provision, accrual or charge pursuant to this paragraph 22 shall not increase or exceed the relevant cap.


 
17


 
Andrew Agg


 
John Pettigrew


 
1-3 Strand London WC2N 5EH www.nationalgrid.com Ms Paula Rosput Reynolds Mark Williamson 605 Hillside Dr E Senior Independent Director Seattle WA 98112 USA 9 September 2020 Dear Paula Appointment to the Board of National Grid plc (the “Company”). Subject to the approval by the Board of the Company, and subject to agreement of these terms and conditions by you, I am delighted to advise you of the terms and conditions covering your appointment as Non-executive Director and Chair Designate and, subsequently, as Chair of the Company. By accepting this appointment, it is agreed that this is a contract for services and not a contract of employment and you confirm that you are not subject to any restrictions which prevent you from holding office as a director. 1. Appointment 1.1. Your appointment will take effect on 1st January 2021, from which date you will be appointed as Non- executive Director and Chair Designate. We will subsequently agree the timing of your appointment as Chair but this will take place on a date no later than the conclusion of the Company’s Annual General Meeting (“AGM”) scheduled for 26th July 2021. It is possible that your appointment as Chair may be sooner than this if it is mutually agreed. 1.2. Under the Articles you will be obliged to retire at the next AGM but will be eligible for re-election by shareholders at that meeting. Thereafter (and despite anything to the contrary in the Articles) in line with the recommendations of the UK Corporate Governance Code, you will be required to retire at each AGM. On your retirement at any such AGM, you will be eligible for re-election unless the Board determines otherwise, typically not later than the date of notice of any such meeting. 1.3. The Board may require you to resign your roles as Non-executive Director and Chair Designate or Chair at any time, subject to six months’ written notice. 1.4. In the event that shareholders do not support your appointment or other shareholder action terminates your appointment you will not be entitled to receive damages for breach of contract or any other compensation for loss of office. 2. Time Commitment 2.1. You will be expected to devote such time as is necessary for the proper performance of your duties (which we anticipate to be an average of approximately 2 days per week). 2.2. This will include attendance at all Board meetings in the UK and US, the AGM and other general meetings of shareholders, conferring individually with shareholders or groups of shareholders, separate meetings of Non-executive directors where required, and chairing or otherwise participating in, as relevant, meetings of any committees of the Board to which you are appointed or otherwise attend. DocuSign Envelope ID: 0C474D91-661E-4B2B-AE40-63B611D72A5E


 
2 2.3. By confirming this appointment, you have agreed that you are able to allocate sufficient time to meet the expectations of each role to the satisfaction of the Board and that you have disclosed to the Board all material existing time commitments to other paid work. The agreement of the Board should be sought before accepting additional commitments that might affect the time you are able to devote to your role as Chair of the Company. 3. Role and Duties 3.1. As Chair Designate, your duties will be those normally required of a Non-executive Director, but will also include an active involvement in the hand-over of the duties of the Company’s current Chair. 3.2. All Directors, both Non-executive and Executive, have the same general legal responsibilities to the Company. The Board as a whole is collectively responsible for debating and approving the strategic direction of the Company and for promoting the success of the Company for the benefit of its members by directing and supervising the Company's affairs. All Directors must therefore take decisions objectively in the interests of the Company, in compliance with their statutory and fiduciary duties, and not do anything which is harmful to the Company or its business. 3.3. All directors are expected to comply with the Company’s policies, procedures, rules and regulations from time to time in force, including in particular, the Company’s Code of Ethical Business Conduct and its Share Dealing Rules. 3.4. You shall have particular regard to the general duties of directors in Part 10 of the Companies Act 2006, including the duty to promote the success of the Company under which all directors must act in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole. In doing so, as a director, you must have regard (among other matters) to:  the likely consequences of any decision in the long term;  the interests of the Company's employees;  the need to foster the Company's business relationships with suppliers, customers and others;  the impact of the Company's operations on the community and the environment;  the desirability of the Company maintaining a reputation for high standards of business conduct; and  the need to act fairly as between the members of the Company. 3.5. You shall have particular regard to the Financial Reporting Council's UK Corporate Governance Code. You should also have regard to the Revised Guidance on Board Effectiveness, issued by the Financial Reporting Council in July 2018. 3.6. In your role as Chair, your duties will be those normally required of a Non-executive Chair as summarised in Schedule 1 in addition to the general Non-executive director duties referred to in Schedule 2. 3.7. You confirm in particular that you are aware of and have considered your statutory and common law duties in relation to conflicts of interests, and have disclosed any existing roles which may give rise to any conflict of interest. 4. Committees 4.1. This letter refers to your appointment as a Non-executive Director and Chair Designate and to your appointment as Non-executive Chair of the Company. 4.2. You will, upon appointment as Non-executive Director, join the Nominations Committee, which you will chair upon appointment as Chair of the Board. As Chair of the Board, you will participate in key deliberations of the Committees of the Board. 4.3. Terms of Reference of all Board Committees are set out in the Directors’ information pack which will be sent to you shortly. DocuSign Envelope ID: 0C474D91-661E-4B2B-AE40-63B611D72A5E


 
3 5. Fees 5.1. In consideration of your appointment as Non-executive Director and Chair Designate, the Company will pay you a fee of £82,100 per annum pro-rated for the period of this appointment. 5.2. In consideration of your appointment as Non-Executive Chair, the Company will pay you a fee of £700,000 per annum, effective from the date of your appointment as Chair. 5.3. Sub-paragraphs 5.3.1 to 5.3.4 below, shall apply to your fees payable under this clause except where otherwise provided in the Articles: 5.3.1. Your fee is inclusive of service on or chairship, if relevant, of any Board Committee, including your appointment as chair of the Nominations Committee, meetings of which are held on an ad hoc basis. 5.3.2. Your fee(s) will accrue on a daily basis and will be payable on or around the 15th day of each month less any tax and national insurance contributions the Company is obliged to deduct. 5.3.3. Your fee(s) will be subject to review by the Board from time to time, but absent extraordinary circumstances, not before you have completed the initial 3-year term as Chair. 5.3.4. If, for a reason related to your illness, disability or injury, you are unable to carry out your duties, payment of any fee(s) during any period of incapacity will be at the discretion of the Board. 5.4. This letter sets out the only payments you will receive for performing your duties in accordance with this letter. You will not participate in any of the Company’s remuneration or benefit programmes, arrangements, schemes or plans. 5.5. The Company will reimburse you, in accordance with the Articles and any properly documented expenses procedures from time to time in force, for any reasonable expenses properly incurred in performing your duties. Details regarding travel are set out in the Travel Guidelines for Directors document in the Directors information pack, which may change from time to time. 5.6. Any payment or benefit made to you under this letter is subject to and conditional on such approval by the shareholders of the Company as may be required by law. The Company reserves the right to withhold or require repayment of all or part of any such payment or benefit if and to the extent that it is necessary to do so in order to comply with regulatory or legal requirements. 6. Outside interests 6.1. It is accepted and acknowledged that you have business interests other than those of the Company. As a condition to your appointment commencing you are required to declare any such directorships, appointments and interests to the Board in writing. 6.2. You have disclosed your role as a non-executive director of BP plc, GE Inc and BAE plc (“the other companies”) and accordingly you undertake: A. to resign from the board of BAE plc prior to assuming your role at the company; B. to recuse yourself from any involvement in any matter in which the interests of the other companies may come into conflict with the interests of the Company; C. not to receive any papers in relation to any matter in which your role with the other companies may give rise to any conflict of interest; D. not to participate in any board discussion (whether formal or informal) or vote on any matter in which your role with the other companies may give rise to any conflict of interest; and DocuSign Envelope ID: 0C474D91-661E-4B2B-AE40-63B611D72A5E


 
4 E. to ensure that the provisions of Clause 8 shall be complied with such that no Confidential Information provided to you in your capacity as Director or Chair of the Company shall be shared by you with the other companies or used in any way by you in the performance of your role with the other companies. 6.3. In the event that you become aware of any potential conflicts of interest regarding the above business interests, these should be disclosed to the Group General Counsel & Company Secretary as soon as they arise and become known to you. 6.4. Following disclosure of a potential conflict of interest, you agree that you will take appropriate steps to protect the Company and yourself from any actual or perceived conflict of interest and shall agree such appropriate steps with the Board which may include agreeing not to receive papers concerning, discuss with any board member or vote on any specific matters where a potential conflict has arisen and recusing yourself from any involvement in board meetings on specific matters where a potential conflict has arisen. 6.5 If at any time, you are considering acquiring any new business interest (including as described in the letter to you regarding initial disclosures on appointment), you should raise the matter directly with the Chief Executive, Senior Independent Director and Group General Counsel & Company Secretary. Where such interest may give rise to a conflict of interest with the Company or any of its subsidiaries or associate companies, the interest and potential conflict will need to be disclosed to the Board and its prior consent obtained before you undertake such new business interest. . 7. Independent status 7.1. The Board has determined you to be independent according to the provisions of the UK Corporate Governance Code. As an independent Director, it is important that you remain independent in character and judgement. 7.2. If you become aware of anything that may affect, or could appear to affect, this determination of independence, this should be disclosed to the Senior Independent Director and/or the Group General Counsel & Company Secretary as soon as apparent. 8. Confidentiality 8.1. You will, naturally, during your appointment and following its termination not disclose or communicate to any person (except as required by law or in the course of the proper performance of your duties under this letter, or with the consent of the Board) nor use for your own account or advantage any private or confidential information in any form whatsoever relating to the Company or any of its subsidiaries or associate companies (“Confidential Information”) which you obtained during your appointment or otherwise. Additionally, you will use your best endeavours to prevent the unauthorised use or disclosure of any such Confidential Information, other than as required by law or regulatory authority. 8.2. This restriction will continue to apply after your appointment ends without limit in time but will not apply to information which becomes public, unless through unauthorised disclosure by you. After your appointment ends you will return all documents and information (whether written, visual or electronic) under your control which belong to the Company. 8.3. Your attention is also drawn to the requirements under both legislation and regulation together with Company policies and procedures as to the disclosure of ‘inside’ or ‘price sensitive’ information. Consequently, you should avoid making any statements that might risk a breach of these requirements without prior clearance from the Senior Independent Director or the Group General Counsel & Company Secretary. 8.4. Nothing in this clause shall prevent you from disclosing information which you are entitled to disclose under the Public Interest Disclosure Act 1998, provided that the disclosure is made in accordance with the provisions of that Act. DocuSign Envelope ID: 0C474D91-661E-4B2B-AE40-63B611D72A5E


 
5 9. Induction 9.1. You will be provided with a comprehensive, formal and tailored induction to the Company and its businesses based on your experience and background and on which Committees you are to serve. You will also receive a Directors' information pack comprising information on the Company’s businesses and operations together with matters relating to corporate governance and corporate responsibility. We will also arrange various site visits and meetings with senior and middle management and the Company's auditors. We will also arrange meetings with major shareholders and regulators and other government officials as appropriate. 9.2. You are responsible for assessing your own on-going training needs and in compliance with the Company’s obligations under the UK Corporate Governance Code you are responsible for meeting with the other directors regularly to discuss and agree their training and development needs and to understand their views as to the effectiveness of the Board’s stewardship. 10. Review Process 10.1. The performance of individual Directors, the Board and Board Committees is evaluated annually. If, in the interim, there are any matters which cause you concern in relation to your role you should discuss them with the Senior Independent Director as soon as is appropriate. The Senior Independent Director will also regularly review and agree any training and development needs and conduct the annual performance review 11. Directors’ Indemnity and Liability Insurance 11.1. In the event that you are made a party or are threatened to be made a party to any threatened, pending or completed action, suit, investigation, or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that you are or were a director of the Company, the Company shall indemnify you against expenses (including legal fees) actually and reasonably incurred by you in connection with such action, suit or proceeding and against judgments, fines and amounts paid in settlement in connection with such action, suit or proceeding to the fullest extent permitted by the Companies Act 2006 as amended and any other applicable law or regulation, as from time to time in effect. Such right of indemnification shall be without prejudice to any other rights to which you may be entitled and shall be vested as of the first date you are admitted as a Director. The terms and conditions of this indemnity are set out in a separate deed of indemnity entered into or to be entered into between you and the Company. 11.2. The Company has Directors’ and Officers’ liability insurance and currently intends to maintain such cover for the full term of your appointments. A summary of the cover is included in your Directors’ information pack. 12. Independent professional advice 12.1. Occasions may arise when you consider that you need independent professional advice in the furtherance of your duties as a Director. Please advise the Senior Independent Director or the Group General Counsel & Company Secretary should you wish to seek such advice. The Company will reimburse the full cost of expenditure incurred in respect of such advice, in accordance with the UK Corporate Governance Code and any relevant Company policy. 13. Disclosure of interests in transactions and Dealings in Shares 13.1. Under the Companies Act 2006, where a director of a company is in any way, directly or indirectly, interested in a proposed transaction or arrangement with the Company or one that has been entered into by the Company, they must declare the nature and extent of that interest. You may give any such notice at a meeting of the directors, in writing or by general notice. 13.2. During the continuance of your appointments you will be expected to comply (and to procure that your spouse and dependent children comply) where relevant with any rule of law or regulation of any competent authority or of the Company from time to time in force in relation to dealings in shares, debentures and other securities of the Company and unpublished price sensitive information affecting the shares, DocuSign Envelope ID: 0C474D91-661E-4B2B-AE40-63B611D72A5E


 
6 debentures and other securities of the Company. A copy of the Company’s Share Dealing Code will be provided in the Directors’ information pack. 13.3. You should also have regard to, and your appointment is subject to, your duties as a director in light of the Articles, applicable general law, the Companies Act 2006, the Listing, Prospectus, Disclosure and Transparency Rules of the Financial Services Authority, the UK Corporate Governance Code and obligations arising as a result of the Company’s American Depositary Shares being listed on the New York Stock Exchange, as set out in the relevant section of the Directors' information pack. 13.4. The Company currently has no share ownership requirements for its Non-executive Directors, although ownership is encouraged. 14. Governing Law 14.1. The agreement contained in this letter and any non-contractual obligations arising out of or in connection with it shall be governed by, and construed in, accordance with English law and shall be subject to the exclusive jurisdiction of the English courts. I am delighted that you have agreed to accept this appointment to the Board of the Company and I look forward to our building a good working relationship. Please acknowledge receipt and acceptance of the above terms by signing and returning the enclosed copy of this letter. Mark Williamson Senior Independent Director For and on behalf of National Grid plc DocuSign Envelope ID: 0C474D91-661E-4B2B-AE40-63B611D72A5E


 
7 I hereby acknowledge receipt of and accept the terms set out in this letter. Signed ………………………………. Name ………………………………. Dated ……………………………….. DocuSign Envelope ID: 0C474D91-661E-4B2B-AE40-63B611D72A5E Paula Rosput Reynolds 9/9/2020


 
8 Schedule 1 Role of the Chair (based on the July 2018 FRC Revised Guidance on Board Effectiveness) The chair’s role includes:  setting a board agenda primarily focused on strategy, performance, executive management succession, value creation, culture, stakeholders and accountability, and ensuring that issues relevant to these areas are reserved for board decision;  shaping the culture in the boardroom;  encouraging all board members to engage in board and committee meetings by drawing on their skills, experience and knowledge;  fostering relationships based on trust, mutual respect and open communication – both in and outside the boardroom – between Non-executive directors and the executive team; developing a productive working relationship with the chief executive, providing support and advice, while respecting executive responsibility;  providing guidance and mentoring to directors as appropriate;  leading the annual board evaluation, with support from the senior independent director as appropriate, and acting on the results;  considering having regular externally facilitated board evaluations. The chair should ensure that:  adequate time is available for discussion of all agenda items, in particular strategic issues, and that debate is not truncated;  there is a timely flow of accurate, high-quality and clear information;  the board determines the nature, and extent, of the significant risks the company is willing to embrace in the implementation of its strategy;  all directors are aware of and able to discharge their statutory duties;  the board solicits and listens to the views of shareholders, the workforce, customers, regulators and other key stakeholders;  all directors receive a full and tailored induction on joining the board;  all directors continually update their skills, knowledge and familiarity with the company to fulfil their role both on the board and committees;  there is an active process of refreshment of the Board so that it has the expertise it needs to function effectively. DocuSign Envelope ID: 0C474D91-661E-4B2B-AE40-63B611D72A5E


 
9 Schedule 2 Role of Non-Executive directors (extracted from the July 2018 FRC Revised Guidance on Board Effectiveness)  Non-executive directors should, on appointment, devote time to a comprehensive, formal and tailored induction that should extend beyond the boardroom. Initiatives such as partnering a Non-executive director with an executive board member may speed up the process of them acquiring an understanding of the main areas of business activity, especially areas involving significant risk. They should expect to visit operations and talk with managers and non-managerial members of the workforce. A Non-executive director should use these conversations to better understand the culture of the organisation and the way things are done in practice, and to gain insight into the experience and concerns of the workforce.  It is vital that Non-executive directors have sufficient time available to discharge their responsibilities effectively. The time commitment to engage with shareholders and other key stakeholders and get to know the business can be considerable. It is advisable for Non-executive directors to assess the demands of their portfolios and other commitments carefully before accepting new appointments. They should devote time to developing and refreshing their knowledge and skills to ensure that they continue to make a positive contribution to the board and generate the respect of the other directors.  Non-executive directors need to insist on receiving high-quality information sufficiently in advance so that there can be thorough consideration of the issues prior to, and informed debate and challenge at, board meetings. They should seek clarification or amplification from management where they consider the information provided is inadequate or lacks clarity.  It is important that Non-executive directors do not operate exclusively within the confines of the boardroom, but have a good understanding of the business and its relationships with significant stakeholders. Accordingly, it is advisable for them to take opportunities to meet shareholders, key customers and members of the workforce from all levels of the organisation. DocuSign Envelope ID: 0C474D91-661E-4B2B-AE40-63B611D72A5E


 

Exhibit 12.1

RULE 13a-14(a) CERTIFICATION


I, John Pettigrew, certify that:

1.    I have reviewed this annual report on Form 20-F of National Grid plc;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4.     The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d -15(f)) for the company and have:

(a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5.    The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a)     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: 8 June 2021
/s/ John Pettigrew
John Pettigrew
Title: Chief Executive
National Grid plc


Exhibit 12.2

RULE 13a-14(a) CERTIFICATION


I, Andrew Agg, certify that:

1.    I have reviewed this annual report on Form 20-F of National Grid plc;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4.     The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d -15(f)) for the company and have:

(a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5.    The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a)     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: 8 June 2021
/s/ Andrew Agg
Andrew Agg
Title: Chief Financial Officer
National Grid plc


Exhibit 13.1




RULE 13a-14(b) CERTIFICATION


Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18 of the United States Code ) each of the undersigned officers of National Grid plc, a public limited company incorporated under the laws of England and Wales (the “Company”), hereby certifies to such officer’s knowledge, that:

The Annual Report on Form 20-F for the year ending 31 March 2021 (the “Report”) of the Company fully complies with the requirements of section 13(a) or 15 (d) of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: 8 June 2021 /s/ John Pettigrew
John Pettigrew
Title: Chief Executive
National Grid plc
Date: 8 June 2021 /s/ Andrew Agg
Andrew Agg
Title: Chief Financial Officer
National Grid plc

Exhibit 15.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-33094, 333-65968, 333-97249, 333-103768, 333-107727, 333-149828, 333-155527, 333-170716, 333-175852, and 333-184558 on Form S-8 of our reports dated 19 May 2021, relating to the consolidated financial statements of National Grid plc and the effectiveness of National Grid plc’s internal control over financial reporting appearing in this Annual Report on Form 20-F for the year ended 31 March 2021.
/s/ Deloitte LLP
London, United Kingdom
8 June 2021


Exhibit 17.1
Subsidiary Guarantors and Issuers of Guaranteed Securities
Each of the following securities issued by Niagara Mohawk Power Corporation, a wholly owned subsidiary of the Group, is unconditionally and fully guaranteed by National Grid plc:
3.60% preferred shares
3.90% preferred shares

 / /
1